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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________TO ____________
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COMMISSION FILE NUMBER 0-23962
BUDGET GROUP, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 59-3227576
(State of incorporation) (IRS Employer Identification No.)
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125 BASIN STREET, SUITE 210, DAYTONA BEACH, FL 32114
(Address of Principal Executive Offices -- Zip Code)
Registrant's telephone number, including area code:
(904) 238-7035
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Class A Common Stock, par value $.01 New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the common equity held by non-affiliates of
the Registrant (assuming for these purposes, but without conceding, that all
executive officers and directors are "affiliates" of the Registrant) as of March
24, 2000 (based on the closing sale price of the Registrant's Class A common
stock, par value $.01, as reported on the New York Stock Exchange on such date)
was $162,594,928. 37,410,672 shares of common stock were outstanding as of March
24, 2000, comprised of 35,474,072 shares of the Registrant's Class A common
stock, par value $0.01, and 1,936,600 shares of the Registrant's Class B common
stock, par value $0.01.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 18, 2000 are herein incorporated by reference in
Part III.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 15
Item 3. Legal Proceedings........................................... 16
Item 4. Submission of Matters to a Vote of Security Holders......... 16
Item X Executive Officers of the Registrant........................ 16
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 18
Item 6. Selected Financial Data..................................... 19
Item 7. Management's Discussion and Analysis of Financial Condition
and
Results of Operations..................................... 20
Item 7A Quantitative and Qualitative Disclosures About Market
Risk...................................................... 32
Item 8. Financial Statements and Supplementary Data................. 33
Item 9. Changes in and Disagreements with Accountants on Accounting
and
Financial Disclosure...................................... 33
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 33
Item 11. Executive Compensation...................................... 33
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 33
Item 13. Certain Relationships and Related Transactions.............. 33
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 34
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PART I
In this Report, 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. "BRACC" 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 BRACC and its franchisees. Budget Group,
Inc. is a Delaware corporation organized in 1992.
ITEM 1. BUSINESS
INDUSTRY OVERVIEW
CAR RENTAL
The car rental industry is comprised of two principal markets: general use
(including airport and local market facilities) and insurance replacement.
General use companies serving airport and local markets accounted for
approximately 74% of rental revenue in the United States in 1999, while the
insurance replacement segment accounted for approximately 26% of rental revenue.
General use locations rent vehicles primarily to business and leisure travelers,
while insurance replacement facilities rent primarily to individuals who have
lost the use of their vehicles because of accidents, theft or breakdowns. In
addition to vehicle rental revenue, the industry derives significant revenue
from the sale of related products such as liability insurance, loss damage
waivers and refueling services.
The domestic general use car rental market includes six major companies
which operate airport and local facilities: Alamo, Avis, Budget, Dollar, Hertz
and National. The insurance replacement market is dominated by Enterprise, which
operates primarily non-airport locations. In addition, there are many smaller
companies that operate primarily through non-airport locations. Most of the
major car rental companies in the United States operate through a combination of
corporate-owned and franchised locations.
There were significant changes in the ownership of domestic car rental
companies in 1996 and 1997, as ownership of these companies has shifted in large
part from the major automobile manufacturers to independent ownership. General
Motors sold its 25% stake in Avis to HFS, Inc. in May 1996, and Avis completed
its initial public offering in September 1997. Republic Industries acquired
Alamo in November 1996 and National (which had previously been controlled by
General Motors) in January 1997. In April 1997, Ford sold approximately 20% of
its equity in Hertz in an initial public offering and sold its controlling
interest in BRACC to us. In December 1997, Chrysler sold Dollar and Thrifty
through an initial public offering.
While owned by the automobile manufacturers, car rental companies served as
important outlets through which the manufacturers disposed of their vehicles, in
a period when major labor contracts made it uneconomical for the manufacturers
to limit their production of vehicles, even if they could not be sold through
dealers. There was an oversupply of cars in the rental industry during this
period, with cars being available on favorable terms to many small local car
rental operators, and the manufacturers did not commit sufficient resources to
the development of the car rental systems. Following the ownership changes,
however, the car rental companies have increasingly focused on their own
profitability, although they continue to be parties to supply and repurchase
agreements with the manufacturers.
Since the late 1980's, vehicle rental companies have acquired their fleets
primarily pursuant to repurchase programs with automobile manufacturers. Under
such programs, a car rental company agrees to purchase a specified minimum
number of new vehicles at a specified price, and the manufacturer agrees to
repurchase those vehicles from the car rental company at a future date
(typically, six to nine months after the purchase). The repurchase price paid by
the manufacturer is based upon the capitalized cost of the vehicles less an
agreed-upon depreciation factor and, in certain cases, an adjustment for damage
and excess mileage. These programs limit a car rental company's residual risk
with respect to its fleet and enable the company to determine a substantial
portion of its depreciation expense in advance. We believe these "program"
vehicles constitute a substantial majority of the vehicles in the fleets of U.S.
car rental companies.
The total number of rental vehicles in service in the U.S. has been
estimated at 1.7 million in 1999. The total revenue for the U.S. car rental
industry has been estimated by industry sources at $18.3 billion in 1999,
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an increase of 6.4% over 1998 revenue of $17.2 billion. We believe the factors
driving this industry growth include increases in airline passenger traffic, the
trend toward shorter, more frequent vacations resulting from the number of
households with two wage earners, the demographic trend toward older, more
affluent Americans who travel more frequently and increased business travel. Car
rental companies have also been able to increase the revenue they earn on their
vehicles through the implementation of yield management systems similar to those
utilized by the major airlines.
Customers of the general use vehicle rental companies include (a) business
travelers renting under negotiated contractual agreements between their
employers and the rental company, (b) business and leisure travelers who make
their reservations and may receive discounts through travel, professional or
other organizations, (c) smaller corporate accounts that are provided with a
rate and benefit package that does not require a contractual commitment and (d)
leisure or business travelers with no organizational or corporate affiliation
programs. Business travelers tend to utilize mid-week rentals of shorter
durations, while leisure travelers have greater utilization over weekends and
tend to rent cars for longer periods.
Rental companies in the insurance replacement market enter into contracts
primarily with insurance companies and automobile dealers to provide cars to
their customers whose vehicles are damaged or stolen or are being repaired.
Compared with the general use market, the insurance replacement market is
characterized by longer rental periods, lower daily rates and the utilization of
older and less expensive vehicles.
TRUCK RENTAL
Two primary segments of the truck rental industry are the consumer market
and the light commercial market. The consumer market primarily serves
individuals who rent trucks to move household goods on either a one-way or local
basis. The light commercial market serves a wide range of businesses that rent
light- to medium-duty trucks, which are trucks having a gross vehicle weight of
less than 26,000 pounds, for a variety of commercial applications. Trucks tend
to be configured differently for these two markets, in terms of their size, rear
doors and loading height.
The Consumer Market. We estimate that the consumer truck rental market had
revenue of approximately $2.1 billion for 1999. Industry sources estimate that
truck rentals are used in approximately 31% of household moves, with full
service van lines and owned or borrowed trucks accounting for the balance. We
estimate that in 1999, approximately 31.5% of the consumer market was
attributable to one-way rentals, with the balance attributable to local rentals.
Major companies in the consumer market include U-Haul, Ryder/ Budget and Penske,
which together have a market share of approximately 85% of the one-way market
and 88% of the local market. Generally, one-way rentals generate higher daily
revenue and involve lower transaction costs than local rentals.
The Commercial Market. We estimate that the light commercial truck rental
market had revenue of approximately $1.1 billion in 1999. Customers in the light
commercial market range from small local businesses to large national companies,
which rent trucks primarily for the transportation and delivery of inventory and
packages. We believe that a large part of the increase in the light commercial
truck rental market has been attributable to growth in the number of small
businesses, a trend toward outsourcing and an emphasis on "just-in-time"
inventory management. Major companies in the light commercial truck rental
market include Ryder/Budget, RTR, Rollins, U-Haul and Penske.
BACKGROUND
During the last three years, we substantially increased the size of our
business through two major acquisitions. In April 1997, we purchased BRACC from
Ford Motor Company for approximately $381 million (and assumed or refinanced
approximately $1.4 billion of indebtedness), and in June 1998 we acquired Ryder
TRS for approximately $260 million (and assumed approximately $522 million of
indebtedness).
Prior to the BRACC acquisition, we were the largest Budget franchisee,
having grown our business to $193.1 million in revenue in 1996 principally
through the acquisition or opening of 133 Budget locations from January 1994 to
December 1996. The BRACC acquisition represented a unique opportunity to combine
one
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of the leading worldwide car rental companies with its largest franchisee in
order to increase the level of corporate ownership in the Budget system. A high
level of corporate ownership enables us to: (i) provide more consistent service,
which is important in marketing to corporate accounts; (ii) exercise greater
control over the development and marketing of the Budget brand; and (iii)
realize greater returns from our investment in the Budget brand.
The Ryder TRS acquisition combined our Budget truck rental business, with
its strength in the light commercial market, with Ryder TRS, a leader in the
consumer one-way market. With three national operators in the consumer one-way
truck rental market (following the Ryder TRS acquisition) accounting for
approximately 91% of that market's total revenue, we believe the truck rental
market offers us an excellent opportunity to achieve attractive returns. In
addition, combining our Ryder TRS and Budget Truck Rental operations will allow
us to reduce costs significantly in the areas of fleet management, maintenance,
field operations and administrative overhead.
The BRACC and Ryder TRS acquisitions have positioned us to improve
substantially the performance of one of the world's leading car rental companies
and the nation's second largest consumer truck rental business. By improving our
service quality, investing in our infrastructure and capturing the benefits from
the full integration of our businesses, we intend to enhance our returns on the
significant investments we have made over the last three years.
1999 INITIATIVES
During 1999, Budget undertook a number of initiatives to increase revenue
and reduce costs:
CONSOLIDATION OF CAR RENTAL OPERATIONS -- We integrated Premier Car
Rental, our insurance replacement car rental company, into our Budget Rent
a Car operations and closed the Premier headquarters in Indianapolis. By
combining these operations, BRACC has approximately 460 local market
locations across North America and a combined local market fleet of over
40,000 cars. This consolidation enables BRACC to serve the retail rental
and insurance replacement markets under the Budget brand name from single
points of distribution. BRACC expects that this consolidation will reduce
operating costs, improve asset utilization and expand the product offering
at BRACC car rental locations.
CONSOLIDATION OF TRUCK RENTAL OPERATIONS -- We continued our
integration of the Budget and Ryder TRS truck rental operations and took
steps to consolidate the Budget Truck Group under the North American
Vehicle Operations. In the fourth quarter of 1999, we transitioned the
marketing, human resources and certain other administrative components of
the Budget Truck Group to BRACC's offices in Lisle. We expect the
integration to be completed, including information technology, during 2001.
We believe that these actions will reduce costs going forward.
MARGIN INITIATIVES -- We took a number of steps in 1999 to reduce our
fleet, overhead and administrative costs and improve operating margins. We
continue to integrate and consolidate our car and truck rental operations.
We reached a confidential agreement with our largest vehicle supplier which
should result in lower fleet operating costs. We centralized our
procurement function and signed national and global purchasing contracts
for items such as telecommunications services, auto and truck parts, fuel,
uniforms and forms and commercial print, which should result in annual
savings of $4 million. We also launched a tire retread and flexible
staffing program in early 2000 with estimated annual savings of $2.6
million. Finally, BRACC's new revenue management system, which was
introduced in 1998, has allowed BRACC to better manage its pricing and
fleet mix, resulting in increased utilization and revenue per unit and
higher operating margins.
DISPOSITION OF NON-CORE ASSETS -- During the fourth quarter of 1999,
we announced our intentions to exit the car sales business and dispose of
non-core assets, including Cruise America and VPSI. We entered into a joint
venture to facilitate our exit of the car sales business and currently have
transferred eight locations to the joint venture. We also sold three
locations and closed one location in the fourth quarter of 1999. Budget
Group engaged a financial advisor to assist in the evaluation of potential
sales of
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additional non-core assets and has been approached by strategic and
financial buyers expressing interest in these businesses.
INTERNET INITIATIVES -- We launched several Internet initiatives in
1999 as part of our strategy to increase rental volume and improve
operating margins. These initiatives include "BidBudget", the car rental
industry's first internet bidding process, which was subsequently replaced
with an agreement with priceline.com to provide rentals to airline and
hotel customers as well as "name your price" rental opportunities. We also
implemented an Internet strategy for truck rentals by adding reservation
capabilities to our web site for Ryder TRS truck rentals. Our Internet
initiatives have increased rental reservation volume, and we expect the
Internet to continue to be an important part of our strategy to grow our
rental business.
GROWTH OPPORTUNITIES IN EUROPE -- We expanded our business in Europe
by opening 16 rental operations under the Budget Rent a Car brand name in
Germany, which is the second largest rental car market in the world. We
also opened or acquired 88 new locations in France and 37 new locations in
the United Kingdom. To support our growing European operations, we
installed or will install a new rental counter system with central
invoicing to enhance our level of customer service and provide for better
financial controls over these operations.
RESTRUCTURING AND ONE-TIME CHARGES
In January 2000, we announced that we would take restructuring, one-time
charges and other fourth quarter adjustments of $90 to $95 million, an amount
later increased to $105 million due to an increase in international and
technology related costs. These charges consist primarily of:
- work-force reductions, severance and location closings due to elimination
of redundant functions and operations;
- costs associated with our integration of Premier into the BRACC rental
operations;
- the write-off of software development costs and uncollectable receivables
mainly due to systems conversions; and
- costs related to the integration of acquisitions in Europe and the
deployment of new systems throughout our European operations.
Approximately $20 million of the $105 million in charges are cash charges
which will largely be paid during 2000.
ROADMAP 2000
In conjunction with the announcement of the restructuring and one-time
charges, we outlined a restructuring program -- Roadmap 2000 -- that is designed
to improve the financial performance of Budget Group and enhance stockholder
value. Key elements of this program include:
FOCUS ON CAR AND TRUCK RENTAL -- To sharpen our focus on car and truck
rental, Budget Group will continue the process of selling its non-core
assets, including its car sales business, Cruise America and VPSI. Budget
Group currently expects to close on the sale of two of its new car
dealerships in April 2000 and a third in the second or third quarter of
2000. Budget Group entered into a joint venture to facilitate its exit of
the car sales business as an owner/operator and transition to a franchiser
of used car sales locations, providing back-office support and services in
exchange for franchise fees. At December 31, 1999, Budget Group had 28
franchised Budget Car Sales locations. Budget Group has also received a
number of expressions of interest from both strategic and financial buyers
for Cruise America and VPSI. As a result of the disposition of our non-core
assets, we expect to have additional capital to deploy in our primary
businesses of car and truck rental.
RESTRUCTURING AND CONSOLIDATION OF BUSINESS SYSTEMS -- BRACC will
continue the integration of its truck rental businesses and the
consolidation of those operations into the North American Vehicle
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Operations. The headquarters, field functions and back-office functions
integration is expected to be complete by the end of 2000. We expect that
integration of the information technology systems will be complete in 2001.
In addition, we are evaluating other systems and key business processes to
determine additional areas of cost reductions. The restructuring of our
business units will continue throughout 2000 and 2001.
DEVELOP NEW BUSINESS SEGMENTS -- As a result of improvements in Budget
Rent a Car's service and facilities, corporate account sales increased 20%
in 1999. Corporate contracts typically have higher profit margins and
facilitate a better mix of weekend and weekday rentals. BRACC also
re-entered the tour business segment of the car rental market for the first
time in a number of years, which added incremental revenue and improved our
rental mix through increased utilization and length of rental. BRACC will
continue to target the corporate and tour segments in 2000 and also intends
to pursue expansion in other market segments, such as associations and the
insurance replacement business.
INTERNET INITIATIVES -- The Internet continues to be an important part
of our strategy to increase volume and improve margins. In addition to the
Internet initiatives announced in 1999, in March 2000, we announced a
strategic ten-year alliance with Homestore.com. As a result of this
alliance, Budget Truck Group is the first consumer truck rental company to
initiate a broad-scope Internet strategy for local and one-way truck
rental. Visitors to the Homestore.com website will have access to free
online truck rental quotes, online reservations and online purchase of
boxes and moving supplies from Ryder TRS and Budget Truck Rental. We will
continue to pursue strategic alliances with third parties to fully exploit
this growing and cost-efficient distribution channel in 2000.
CAPITALIZE ON EUROPEAN GROWTH -- We expanded our European operations
in 1999 and will continue to expand our European corporate and franchise
operations. We may strengthen Budget's brand presence, in part, by
acquiring franchises and small rental car companies in key European markets
that have both high out-bound and in-bound growth potential. Target markets
for this expansion include the United Kingdom, Germany, and Italy. We
started the European roll-out of our Fastbreak and Perfect Drive programs
in January 2000. We also intend to leverage our European presence to
increase rental volume in the North American rental operations. In January
2000, we announced a partnership with Europcar to service inbound Europcar
customers into North America, effective March 1, 2000, and intend to
explore additional joint marketing opportunities with Europcar.
STRENGTHEN THE BUDGET BRAND -- Through Fastbreak, our express rental
service, Perfect Drive, the first-of-its-kind customer loyalty program, and
our diverse fleet mix, Budget has successfully differentiated itself by
bringing innovation to the rental car process. In October 1999, we
introduced a new advertising campaign which reflects our diverse product
offerings and excellent customer service. We intend to continue our
emphasis on customer service and to pursue innovative marketing strategies
through the Internet and other media to strengthen the Budget brand.
CAR RENTAL
Our Car Rental segment is comprised of the following operations:
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CAR RENTAL
SEGMENT
OPERATING COMPANY BUSINESS 1999 REVENUE
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(IN MILLIONS)
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Budget Rent a Car (including Worldwide general use car $1,702.8
remaining Premier Car Rental rental operator and franchisor
locations)
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BUDGET RENT A CAR
Through Budget Rent a Car, we operate the third largest car and truck
rental system in the world. Budget is one of only three vehicle rental systems
that offer rental vehicles throughout the world under a single brand name. There
are approximately 3,270 Budget car rental locations. Approximately 29% are
corporate-owned and operated and 71% are operated by franchisees. Approximately
940 locations primarily serve airport
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business and approximately 2,330 are local market (downtown and suburban)
locations. Approximately 50% of our U.S. rentals are leisure related and 50% are
business related.
We currently maintain more local market car rental locations throughout the
world than most of our competitors and are unique among major car rental systems
in that we also rent trucks in most of our major markets. The following charts
present the geographic distribution of Budget rental locations and 1999 Budget
revenue by operating regions, including the United States, Canada, Latin America
and the Caribbean ("LAC"), Europe, the Middle East and Africa ("EMEA") and Asia
and Pacific ("AP"):
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LOCATIONS REVENUE
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(CHART) (CHART)
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U.S. OPERATIONS
Budget Rent a Car revenue in the United States was approximately $1.8
billion in 1999. At December 31, 1999, there are approximately 650
corporate-owned and 550 franchised Budget Rent a Car locations in the United
States, which accounted for approximately $1.4 billion and $360 million of
revenue, respectively.
Of corporate-owned Budget U.S. car rental locations, 23% primarily serve
airport business and 77% are local market (downtown and suburban) facilities.
Approximately 73% of BRACC's U.S. revenue was attributable to the airport
segment and 27% to the local segment in 1999. Approximately 50% of our U.S.
rentals are leisure-related and approximately 50% are business-related.
A summary of certain of the principal operating statistics for our
corporate-owned Budget Rent a Car operations in the United States and Canada is
presented in the table below:
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1998 1999 1999 VS. 1998
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Revenue (in millions)................................. $ 1,215.8 $ 1,343.4 10.5%
Rental days........................................... 30,632,593 33,995,759 11.0
Daily dollar average.................................. $ 39.68 $ 39.52 (0.4)
Utilization........................................... 80.4% 82.8% 3.0
Monthly revenue per vehicle........................... $ 970 $ 996 2.7
Fleet (average)....................................... 104,423 112,429 7.7
Length of rental (average days)....................... 4.1 4.4 7.3
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INTERNATIONAL OPERATIONS
In 1999, Budget Rent a Car international revenue from corporate owned
locations increased 8% to approximately $260.0 million. We re-established
operations in Germany by opening 13 key airport locations and establishing a
head office in Frankfurt. Through acquisitions of small rental car companies and
existing
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franchisees, we increased the number of company-operated locations in France and
the United Kingdom at December 31, 1999 to 118 and 55, respectively, compared to
30 and 18, respectively, in 1998. Budget operates in more than 110 countries and
territories outside the United States and is recognized as a market leader in
Canada, and Latin American and Caribbean countries. At December 31, 1999,
Budget's international car rental operations included approximately 350
corporate-owned locations and 1,880 franchised locations. Of corporate-owned
international facilities, 27% primarily serve airport business and 73% serve
local markets.
We believe that BRACC will grow in the European car rental market by
acquiring strategic locations and other expansion efforts. To support our
expanded European operations, we have installed or will install a new rental
counter system with central invoicing to enhance our level of customer service
and provide for better financial controls over these operations.
A summary of certain of the principal operating statistics for our
corporate-owned international Budget Rent a Car operations in 1999 is presented
below:
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Revenue (in millions)....................................... $260.0
Rental days................................................. 5,404,518
Daily dollar average........................................ $35.29
Utilization................................................. 68.8%
Monthly revenue per vehicle................................. $738
Fleet (average)............................................. 21,525
Length of rental (average days)............................. 5.22
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FLEET
Vehicle Purchasing. We participate in a variety of vehicle purchase
programs with major domestic and foreign vehicle manufacturers. On average
during 1999, 70% of our vehicle purchases consisted of Ford vehicles, 13% Nissan
and Toyota vehicles, 8% Chrysler vehicles and the remaining 9% were from other
manufacturers, including General Motors, Jaguar and Saab. These percentages vary
among our operations and will most likely change from year to year. The average
price for automobiles purchased by us in 1999 for our BRACC car rental fleet was
approximately $18,700.
Our principal vehicle supply relationship has historically been with Ford.
We have a 10-year Supply Agreement with Ford, which went into effect in April
1997. Under the Supply Agreement, we agreed (i) to purchase or lease at least
70% of the total number of vehicles leased or purchased by us in each model year
from Ford and (ii) to purchase or lease at least 80,000 new Ford vehicles in
each model year in the United States. Ford and its affiliates are required to
offer to us and our franchisees, for each model year, vehicles and fleet
programs competitive with the vehicles and fleet programs of other automobile
manufacturers.
Vehicle Disposition. Our strategy is to maintain our car rental fleet at
an average age of five months or less. Approximately 80% of the vehicles
purchased for the BRACC fleet in model year 1999 were program vehicles. The
programs in which we participate currently require that the program vehicles be
maintained in our fleet for a minimum number of months (typically six to nine
months) and impose numerous return conditions, including those related to
mileage and condition. At the time of return to the manufacturer, we receive the
price guaranteed at the time of purchase and are thus protected from
fluctuations in the prices of previously-owned vehicles in the wholesale market
at the time of disposition. The future percentages of program vehicles in our
fleet will be dependent on the availability and attractiveness of manufacturers'
repurchase programs, over which we have no control. In addition to
manufacturers' repurchase programs, we dispose of our rental fleet largely
through automobile auctions and sales to wholesalers.
Of the 136,600 rental cars we sold in 1999, we sold 95,000 back to
manufacturers pursuant to repurchase programs, 37,800 through third-party
channels (such as public auctions)and 3,800 were sold directly to consumers.
Utilization and Seasonality. Our car rental business is subject to
seasonal variations in customer demand, with the summer vacation period
representing the peak season. The general seasonal variation in demand, along
with more localized changes in demand at each of our locations, causes us to
vary our fleet size
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over the course of the year. For 1999, BRACC's average monthly fleet size in
North America ranged from a low of approximately 90,240 vehicles in January to a
high of approximately 113,880 vehicles in August. Fleet utilization for 1999,
which is based on the average number of days vehicles are rented compared to the
total number of days vehicles are available for rent, ranged from 74% in
December to 89% in August and averaged 83%.
Yield Management. In 1998, we implemented a new yield management system
for our car rental business developed in conjunction with Talus, a leading
supplier of such systems. The system uses information from our reservations,
fleet management and other systems to optimize our rental pricing and fleet
utilization. An enhanced version of our yield management system is now
operational in approximately 35 U.S. airport markets. We expect the system will
be implemented in U.S. airports that represent over 90% of our airport revenue
by the end of the third quarter 2000. For 1999, our fleet utilization increased
3.2% when compared to 1998.
MARKETING
General. We rent a wide variety of vehicles, including luxury and
specialty vehicles. Our fleet consists primarily of vehicles from the current
and immediately preceding model year. Rentals are generally made on a daily,
weekly or monthly basis and generally include unlimited mileage. Rental charges
are computed on the basis of the length of the rental or, in some cases, on the
length of the rental plus a mileage charge. Rates vary at different locations
depending on the type of vehicle rented, the local market and competitive and
cost factors. Most rentals are made utilizing rate plans under which the
customer is responsible for gasoline used during the rental. We also generally
offer our customers the convenience of leaving a rented vehicle at a location in
a city other than the one in which it was rented, although, consistent with
industry practices, a drop-off charge or special intercity rate may be imposed.
We facilitate one-way car rentals between approximately 600 corporate-owned and
franchised locations in the United States. This program enables us to operate
more fully as an integrated network of locations.
Customer Service. Our commitment to delivering a consistently high level
of customer service is a critical element of our success and strategy. Each week
internal assessors review three major airports to measure service levels by
location. We identify specific areas of achievement and opportunity from these
assessments. We address areas of improvement on a system-wide level and develop
standard methods and measures. The major focus areas of these assessments
include: (i) speed of rental/return process; (ii) vehicle condition and
availability; (iii) customer interaction, including helpfulness and courtesy;
and (iv) location image. In addition, Budget utilizes a toll-free "800" number
that allows customers to report problems directly to our customer relations
department. We prepare monthly reports of the types and number of complaints
received for use in conjunction with the customer satisfaction reports by
location management as feedback of customer service delivery. Furthermore, we
participate in the annual J.D. Power and Associates survey process to ensure
that competitive levels of performance are achieved.
Marketing Programs. In 1999, we continued the roll-out of our Perfect
Drive and Fastbreak programs. Perfect Drive is an innovative customer loyalty
program launched by Budget in April 1998, that allows members to accumulate
points for renting Budget vehicles, with the points being redeemable for
discounts on future rentals as well as select products offered through vendors
such as Calloway Golf, K2 and Bolle. Fastbreak, launched in August 1998, is an
express service program featuring paperless transactions that is now available
at major airports nationwide.
Internet Initiatives. In 1999, we entered into an agreement with
priceline.com to provide rentals to airline and hotel customers as well as "name
your price" rental opportunities. We also implemented an Internet strategy for
truck rentals by adding reservation capabilities to our www.yellowtruck.com
website for Ryder TRS truck rentals. Budget has agreements to promote its car
rental service with other major Internet portals, including America Online and
Yahoo, and recently announced a strategic alliance with Homestore.com to offer
Budget Truck Rental and Ryder TRS reservations to visitors of the Homestore.com
web site.
Travel Agent Incentives. We estimate that approximately 34% of domestic
car rental revenue is attributable to reservations made through travel agents.
To develop business in this market we have
8
<PAGE> 11
implemented Unlimited Budget, a loyalty incentive program for travel agents. In
conjunction with Carlson Marketing Group and MasterCard, we developed the
Unlimited Budget MasterCard, which is designed around a personal debit card.
Travel agents earn reward points for every eligible U.S. business and leisure
rental completed by their clients, which are deposited in a special debit card
account in the travel agent's name and can be used like cash. We have had great
success with this program, having enrolled over 53,000 travel agents since
September 1997.
Sears Car and Truck Rental. In 1970, we established a contractual
relationship with Sears which allows Budget operating locations to provide car
and truck rentals under the Sears name. Sears Car and Truck Rental customers may
use their Sears charge card for payment of rental charges. Sears Car and Truck
Rental is available at approximately 920 Budget locations in the United States.
FRANCHISING
Of the approximately 3,500 Budget worldwide car and truck locations at
December 31, 1999, more than 70% were owned and operated by franchisees, and
these locations accounted for approximately 44% of Budget system-wide revenue
for 1999. Franchised locations range from large operations in major airport
markets with fleet sizes in excess of 4,000 vehicles and franchise territories
within an entire country to operations in small markets with fleets of fewer
than 50 vehicles.
We consider our relationships with our franchisees to be excellent. We work
closely with franchise advisory councils in formulating and implementing sales,
advertising and promotional, and operating strategies and meet regularly with
these advisors and other franchisees at regional, national and international
meetings. As part of our growth strategy, we seek to add new franchises
worldwide when opportunities arise. Additional franchises provide us with a
source of high margin revenue as there are relatively few additional fixed costs
associated with fees paid by new franchisees to us.
Our relationships with Budget franchisees are governed by franchise
agreements that grant to the franchisees the right to operate Budget vehicle
rental businesses in certain exclusive territories. These franchise agreements
provide us with rights regarding the business and operations of each franchise
and impose restrictions on the transfer of the franchise and on the transfer of
the franchisee's capital stock. Each franchisee is required to operate each of
its franchises in accordance with certain standards contained in the Budget
operating manual. We have the right to monitor the operations of franchisees and
any default by a franchisee under a franchise agreement or the operating manual
may give us the right to terminate the underlying franchise.
In general, the franchise agreements grant the franchisees the exclusive
right to operate a Budget Rent a Car and/or Budget Rent a Truck business in a
particular geographic area for a stated period. Franchise agreements generally
provide for an unlimited number of renewal terms. Upon renewal, the terms and
conditions of franchise agreements (other than with respect to royalty fees) may
be amended from those contained in the existing franchise agreements. The
standard royalty fee payable under franchise agreements is 7.5% of gross rental
revenues in the United States and 5% of gross rental revenues in international
markets, but certain of the franchisees have franchise agreements with different
royalty fee structures.
Pursuant to each franchise agreement, the franchisee must meet certain
guidelines relating to the number of rental offices in the franchised territory,
the number of vehicles maintained for rental and the amount of advertising and
promotion expenditures. In general, each franchise agreement provides that the
franchisee shall not engage in any other vehicle rental business within the
franchise territory during the term of such agreement and for 12 months
thereafter. In addition, franchisees agree not to use the word "Budget" or any
other Budget trademark other than in their Budget vehicle rental businesses.
During 1999, we acquired 2 franchisees in North America in St. Augustine
and Leesburg, Florida, and 5 franchisees abroad -- City Ford Limited, Court
Langley, and Polyshire in England and Budget Nice Group and Group Collinet in
France. We believe that acquisitions of select franchised locations can ensure
consistent quality, pricing and service and makes us more attractive to our
corporate customers who demand consistent rates among all Budget locations.
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<PAGE> 12
OTHER
AIRPORT RENTAL CONCESSIONS
In general, concession fees for airport locations are based on a percentage
of total commissionable revenues (as determined by each airport authority),
subject to minimum annual guarantee amounts. Concessions are typically awarded
by airport authorities every three to five years based upon competitive bids.
Our concession agreements with the various airport authorities generally impose
certain minimum operating requirements, provide for relocation in the event of
future construction and provide for abatement of the minimum annual guarantee in
the event of extended low passenger volume.
INFORMATION TECHNOLOGY
Our information technology is designed to provide us with high quality,
cost-effective systems and services on a timely basis. In late 1995 we
implemented BRACC's state-of-the-art reservation system, which consists of a
highly integrated mainframe system with an intelligent workstation component for
reservation agents, allowing them to access pertinent information in a fast and
user-friendly manner. The reservation system has direct interfaces to the
airline system and captures key corporate and customer information.
BRACC's rental counter and back-office system, BEST I, supports both
corporate-owned and franchisee operations, and its fleet system supports the
financing, accounting and ordering for all brands of vehicles including direct
ordering lines to Ford, Toyota, Chrysler, GM and Isuzu. Our human resources,
benefits and payroll interface is supported by a client-server system that
automatically feeds to an outsourced payroll system. In March 1999, we entered
into a seven-year technology agreement with Computer Sciences Corporation
("CSC") to outsource administration of BRACC's information systems. See the
section in this Item entitled "-- Information Systems." We intend to continue to
enhance and consolidate our information technology systems in order to further
facilitate Budget's delivery of consistent customer service at all of its
locations.
TRUCK RENTAL
Our Truck Rental segment is comprised of the following operations:
<TABLE>
<CAPTION>
TRUCK RENTAL
SEGMENT
1999
OPERATING COMPANY BUSINESS REVENUE
- ----------------- -------- -------------
(IN MILLIONS)
-------------
<S> <C> <C>
Budget Truck Rental Local and one-way consumer and $194.4
light commercial truck rental
operator and franchisor
Ryder TRS Local and one-way consumer 540.5
truck rental operator,
primarily through dealers
</TABLE>
In 1999, our Truck Rental revenue was $734.9 million. We operate a combined
truck rental fleet of over 46,200 Ryder and Budget trucks through a network of
approximately 3,920 corporate-owned, dealer and franchised locations. In June
1998, we purchased Ryder TRS, the second largest provider of truck rentals and
related moving supplies to consumers in the United States. With its fleet of
approximately 29,900 yellow trucks, Ryder has strong brand recognition and
enjoys a high level of satisfaction among consumers. Budget Truck Rental is the
third largest truck rental company in the U.S. and has traditionally been strong
in the light commercial market. Together, Budget Truck Rental and Ryder TRS
comprise approximately 22% of the U.S. truck rental market, second only to
U-Haul's 49% share. With our acquisition of Ryder TRS, we expanded our truck
rental distribution points from approximately 400 to approximately 3,920
combined locations and added new Ryder distribution points to other Budget Group
companies.
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<PAGE> 13
Information on the estimated system-wide fleet size and U.S. locations at
December 31, 1999 and business mix by revenue for the year for Ryder TRS and
Budget Truck Rental is set forth below:
<TABLE>
<CAPTION>
BUSINESS MIX
---------------------
FLEET SIZE LOCATIONS CONSUMER COMMERCIAL
---------- --------- -------- ----------
<S> <C> <C> <C> <C>
Ryder TRS...................................... 29,900 3,290 75% 25%
Budget Truck Rental............................ 16,300 630 50% 50%
------ -----
Totals............................... 46,200 3,920
</TABLE>
TRUCK RENTAL GROUP INTEGRATION
In an effort to generate maximum returns from our truck rental brands, we
undertook the full integration of the Budget and Ryder TRS truck systems,
including management, procurement, maintenance, fleeting, pricing and
reservations. In 1999, we transitioned the marketing, human resources and
certain other administrative functions to BRACC's offices in Lisle, Illinois. We
expect that the integration and consolidation of our Truck Rental operations,
including information technology, will be completed by end of year 2001. This
integration should improve our fleet quality and delivery systems and reduce
overall costs, resulting in improved operating margins.
We replaced approximately 10,200 of the oldest Ryder trucks with new trucks
to create a younger average fleet. The average age of our truck rental fleet is
33 months at December 31, 1999. Utilization of Budget truck facilities for
maintenance of Ryder trucks, an activity previously performed by third parties
at high cost, together with other cost-cutting initiatives, is expected to allow
us to reduce Ryder's costs going forward. We anticipate the resulting higher
utilization and lower maintenance and other costs to lead to higher
profitability.
RYDER TRS
Ryder TRS is the second largest provider of truck rentals and related
moving supplies and services to consumers and light commercial users in the
United States, with a fleet of approximately 29,900 trucks operating through
approximately 3,290 dealers and corporate owned operations at December 31, 1999.
The table below presents certain operating statistics of Ryder TRS:
<TABLE>
<CAPTION>
1999
----------
<S> <C>
Transactions................................................ 2,033,696
Revenue per transaction..................................... $ 251
Monthly revenue per vehicle................................. $ 1,429
Utilization................................................. 48.5%
Daily dollar average........................................ $ 96.85
</TABLE>
Ryder TRS's truck rental services are offered through a national network of
approximately 3,270 dealers and approximately 20 corporate-owned and operated
outlets at December 31, 1999. Dealers have access through their point-of-sale
systems to information concerning inventory levels at all dealers within their
market. Dealerships consist primarily of auto sales and service retailers,
rental centers, self storage centers, car rental locations and other
vehicle-related businesses that are owned by independent parties. In addition to
operating their principal lines of business, these dealers rent our trucks to
consumers, and we pay the dealers a commission on all truck rentals and other
sales and rentals. Dealership agreements generally can be terminated by either
party upon 30 to 90 days prior written notice, depending on dealer tenure.
BUDGET TRUCK RENTAL
Through Budget Truck Rental, we operate the third largest provider of truck
rentals and related moving supplies and services to consumers and light
commercial users in the United States, with a fleet of approximately 16,300
trucks at December 31, 1999. Budget Truck Rental had a 10.6% growth in revenue.
Rental facilities are typically operated in conjunction with Budget Car Rental
locations. At December 31, 1999, we rented Budget trucks at approximately 340
corporate-owned locations and 290 franchised locations.
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<PAGE> 14
The table below presents certain operating statistics of corporate-owned
Budget truck rental operations:
<TABLE>
<CAPTION>
1999
--------
<S> <C>
Transactions................................................ 702,953
Revenue per transaction..................................... $ 271
Monthly revenue per vehicle................................. $ 1,015
Utilization................................................. 55.5%
Daily dollar average........................................ $ 60.17
</TABLE>
VEHICLE ACQUISITION AND DISPOSITION
Budget Truck Group purchases the chassis for its trucks primarily from
Ford, General Motors, Isuzu and Navistar, and purchases the "boxes" (the storage
compartment on the back of the truck) from several companies. Orders are
generally placed in the fall for delivery in time for the busy summer season.
Budget Truck Rental and Ryder TRS consolidated their vehicle purchasing
functions in 1998. We have leveraged our purchasing expertise to buy vehicles on
terms more favorable than either company would be capable of achieving
independently. Budget Truck Group disposes of its used vehicles through several
outlets, including trade-ins through manufacturers and sales through Ryder TRS's
dealers. Budget Truck Group disposes of its trucks throughout the year, with a
larger proportion being sold or traded during the first and fourth quarters.
FLEET UTILIZATION AND SEASONALITY
Truck rentals display seasonality, with generally higher levels of demand
occurring during the summer months and the third quarter typically being our
strongest quarter. On average, approximately 50% of Ryder TRS's annual revenue
is earned from May through September, with August being the strongest month.
Budget Truck Rental experiences the same seasonality; however, its emphasis on
the light commercial market serves to dampen its magnitude.
SUPPLEMENTAL PRODUCTS AND SERVICES
We supplement our Truck Rental business with a range of other products and
services. We rent automobile towing equipment and other moving accessories such
as hand trucks and furniture pads and sell moving supplies such as boxes, tape
and packing materials. We also offer customers a range of liability-limiting
products such as physical damage waivers, personal accident and cargo protection
and supplemental liability protection. These accessory products enhance our
appeal to consumers by offering customers "one-stop" moving services. Ryder TRS
offers comprehensive household goods relocation services to corporate employee
relocation departments through Ryder Move Management.
STORAGE USA JOINT VENTURE
In September 1999, we formed a joint venture with Storage USA, Inc.
("Storage USA") and Storage USA Franchise Corp., an affiliate of Storage USA.
Under the joint venture, Storage USA, which operates 507 self-storage facilities
in 31 states and the District of Columbia, and Budget: (i) brand selected
Storage USA facilities as "Budget Storage USA" and market the new Budget Storage
USA franchise to other independent self-storage operators; (ii) grant Storage
USA the right to offer Budget and Ryder truck rentals at its facilities across
the country; and (iii) share truck rental and self-storage leads received from
the companies' toll-free numbers.
STRATEGIC ALLIANCE WITH HOMESTORE.COM
In March 2000, we announced a strategic ten-year alliance between the
Budget Truck Division and Homestore.com. Homestore.com provides one of the
leading network of sites on the Internet for home and real estate-related
information. Homestore.com's family of web sites enables consumers to shop for
existing homes, look for new homes, find an apartment, research home improvement
matters and find comprehensive moving and relocation information on the
Internet. As a result of this alliance, visitors to the Homestore.com website
will now have access to free online truck rental quotes, online reservations and
online purchase of
12
<PAGE> 15
boxes and moving supplies from Ryder TRS and Budget Truck Rental. Homestore.com
will participate in online and off-line Budget media commitments, including
national yellow page advertising, print, television and radio advertising, and
in-store promotions. In addition, the Budget Truck Group rental fleet will
display the Homestore.com logo. In return for marketing and exclusive branding
services, Homestore.com issued 1,085,271 shares of its common stock to Budget.
DISCONTINUED OPERATIONS
On December 10, 1999, we adopted plans to sell or dispose of our car sales
segments, as well as certain non-core assets and subsidiaries, primarily Cruise
America and VPSI, Inc. The 30 car sales locations are expected to be disposed of
by September 2000, and Cruise America and VPSI, Inc. have estimated disposal
dates of mid-year 2000. The assets of the operations to be sold consist
primarily of vehicles, accounts receivable and property and equipment. See Note
5 to the Company's Consolidated Financial Statements herein.
REGULATORY AND ENVIRONMENTAL MATTERS
We are subject to foreign, federal, state and local laws and regulations,
including those relating to taxing and licensing of vehicles, franchising,
consumer credit, environmental protection, and labor matters.
Environmental Matters. The principal environmental regulatory requirements
applicable to our operations relate to the ownership or use of tanks for the
storage of petroleum products, such as gasoline, diesel fuel and waste oils; the
treatment or discharge of waste waters; and the generation, storage,
transportation and off-site treatment or disposal of waste materials.
Approximately 170 of our facilities contain petroleum products stored in
underground or aboveground tanks. We conduct environmental compliance programs
designed to maintain compliance with applicable technical and operational
requirements, including periodic integrity testing of underground storage tanks
and providing financial assurance for remediation of spills or releases. We
believe that our operations currently are in compliance, in all material
respects, with such regulatory requirements including Federal regulations
governing underground storage tanks that became effective in December 1999.
The historical and current uses of our facilities may have resulted in
spills or releases of various hazardous materials, wastes or petroleum products
("Hazardous Substances") which now, or in the future, could require remediation.
We also may be subject to requirements related to remediation of Hazardous
Substances that have been released to the environment at properties we own or
operate, or owned or operated in the past, or at properties to which we send, or
have sent, Hazardous Substances for treatment or disposal. Such remediation
requirements generally are imposed without regard to fault, and liability for
any required environmental remediation can be substantial.
We have been required to remediate certain of our locations because of
leaks or spills of Hazardous Substances. These locations may require further
remediation. Subject to certain deductibles, the availability of funds, the
compliance status of the tanks and the nature of the release, we may be eligible
for reimbursement or payment of remediation costs associated with releases from
registered underground storage tanks in states that have established funds for
this purpose.
Although we do not know the exact cost of any necessary remediation at our
facilities, we do not expect it to exceed $2.2 million over the next several
years.
Under the terms of the BRACC acquisition in April 1997, which included
approximately 130 BRACC rental facilities containing underground or aboveground
storage tanks, Ford has agreed to indemnify us for certain environmental losses
resulting from environmental conditions at the acquired facilities for a limited
time period and subject to substantial financial limitations.
Ford's indemnity obligation for environmental and certain other matters is
capped at $40.0 million. Ford is required to indemnify us for losses resulting
from breaches by BRACC of the representations and warranties
13
<PAGE> 16
in the BRACC acquisition agreement (including those relating to environmental
matters) to the extent that such losses are not covered by reserves established
by BRACC or any insurance policies and exceed $15,000 individually and $2.0
million in the aggregate. Ford is not required to pay the first $2.0 million of
aggregate losses (including those relating to environmental matters).
Furthermore, in order to be indemnified for such losses, we must notify Ford of
any breach of the representations or warranties in the BRACC acquisition
agreement by April 2000. While the indemnification may cover certain
environmental costs incurred in the future, to date, we have not asserted any
claims against Ford. In addition to the Ford indemnity, when we bought certain
franchise territories, the sellers indemnified us for certain undisclosed
environmental liabilities, including certain remediation costs.
Franchise Matters. As a franchisor, we are subject to federal, state and
foreign laws regulating various aspects of franchise operations and sales. These
laws impose registration and disclosure requirements on franchisors in the offer
and sale of franchises and, in certain states, also apply substantive standards
to the relationship between the franchisor and the franchisee, including those
pertaining to default, termination and nonrenewal of franchises.
Other Matters. Regulations enacted by various federal and state
authorities affect our business. The financing activities of our discontinued
car sales business are subject to federal truth in lending, consumer leasing and
equal credit opportunity regulations, as well as state and local motor vehicle
finance laws, installment finance laws, insurance laws, usury laws, installment
sales laws and other consumer protection regulations.
INFORMATION SYSTEMS
As our ownership of BRACC locations increases and the integration of our
Truck Rental business continues, in addition to an intensified effort to
integrate other core Budget Group companies, centralized control and uniform
administration of our information systems has become increasingly important.
Tight control of all of our information systems, from terminals at the rental
counters to workstations at our office facilities, is necessary to keep
redundancy low and quality consistently high. Accordingly, we have recently
centralized management of all information systems within our Information
Technology group. In March 1999, we entered into a seven-year technology
agreement with CSC to outsource administration of all of BRACC's information
systems, which we believe will result in substantial efficiencies. As part of
the agreement, BRACC's information technology operations, including data
centers, networks, user support, applications and maintenance, will be run and
managed by CSC.
RESERVATIONS SYSTEMS
We operate a state-of-the-art computerized reservation system through
WizCom International, Inc. Our main reservations facility is located in the
Dallas metropolitan area, with 20 additional centers located in other cities,
collectively handling approximately 27.5 million incoming calls in 1999. A
consolidation effort is under way to rationalize smaller reservation centers and
realize benefits of scale. By year-end, we anticipate operating 5 virtual
networked regional reservation centers, including the main facility in Dallas.
In addition to traditional call-in reservations and inquiries, our system
handles millions of inquiries and reservations through links to the major U.S.
airline global distributions systems and other travel agent and travel industry
sources. The system is also linked to the Internet, allowing customers to
receive rate quotes as well as book reservations online. The system currently
handles reservations for Budget Rent a Car in the U.S. as well as for our Budget
Truck Rental operations. Although Ryder TRS currently outsources its
reservations function to an outside vendor, we intend to consolidate its
reservations with the current truck rental reservations now being handled
through our internal reservations system.
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<PAGE> 17
ORLANDO SHARED SERVICES CENTER
In order to realize certain cost efficiencies as well as to ensure that we
are optimally leveraging our substantial resources, we are centralizing key U.S.
back-office support at our shared services center based in Orlando. Functions
currently provided to Budget Group companies through the shared services center
include: payroll; accounts payable and accounts receivable processing; fleet
financing and administration (titling, registration, etc.) support; and other
accounting and audit functions.
TRADEMARKS
We own the Budget trademark and have registered it with the patent and
trademark office in the United States and in more than 100 countries,
territories and foreign jurisdictions worldwide. We consider the Budget name and
logo rights to be an important part of our business.
Budget Group, Inc. has the royalty-free right to use certain Ryder
trademarks, subject to certain restrictions, until October 2006. After October
2001, we must begin co-branding the Ryder brand name with another brand name. In
October 2006, we will no longer be permitted to use the Ryder name in any manner
and will transition the business to the brand name we choose. We also have the
royalty-free right to use the 1-800-GO-RYDER number, subject to certain
restrictions, until October 2009 and the right to use the Ryder signature color
scheme in perpetuity, subject to certain restrictions. Ryder's material
trademarks have been registered with the U.S. Patent and Trademark Office. The
unexpected loss of such trademarks prior to October 2006 could have a material
adverse effect on our business.
COMPETITION
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,
Dollar, 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.
EMPLOYEES
At December 31, 1999, we employed approximately 16,400 persons. At December
31, 1999, approximately 1,800 employees in various locations throughout the
United States were subject to collective bargaining agreements. We believe that
our employee relations are good.
ITEM 2. PROPERTIES
Budget Group's facilities include a 2,500 square foot leased office in
Daytona Beach, Florida. Other significant properties include 149,088 square feet
of leased office space plus 11,400 square feet of space for a data center in
Lisle, Illinois, a suburb of Chicago, from which BRACC operates, of which 25,000
square feet are sub-leased; a 69,300 square foot reservations center in
Carrollton, Texas, which is owned by us; a 38,593 square foot leased
reservations center in Wichita Falls, Texas; a 23,700 square foot leased
reservation center in Lemoore, California; a 61,168 square foot leased
administrative center in Orlando, Florida; a 21,600 square foot leased
international headquarters facility in Hemel Hempstead, England, a suburb of
London; a 66,306 square foot leased headquarters facility in Denver, Colorado
from which Ryder TRS operates, of which 23,000 square feet are on the market to
be sub-leased; three leased Ryder TRS administrative facilities located in
Aurora, Colorado consisting of 21,163 square feet, Miami, Florida consisting of
22,696 square feet, and Norcross, Georgia consisting of 27,349 square feet, of
which 19,000 square feet are sub-leased; and a 12,585 square foot leased office
in Indianapolis, Indiana from which Budget Car Sales and Premier Car Rental
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<PAGE> 18
operated which is on the market to be sub-leased. Management believes that these
facilities are sufficient for our needs.
We operated a total of approximately 1,200 Budget car and truck U.S.
airport and local market rental facilities at December 31, 1999, most of which
are leased. The leased properties are generally subject to fixed-term leases
with renewal options. Certain of these leases also have purchase options at the
end of their terms. The airport facilities are located on airport property owned
by airport authorities or located near the airport in locations convenient for
bus transport of customers to the airport. Most airport facilities include
vehicle storage areas, a vehicle maintenance facility, a car wash, a refueling
station and rental and return facilities. Local market rental facilities
generally consist of a limited parking facility and a rental and return desk.
ITEM 3. LEGAL PROCEEDINGS
The Company terminated the franchise agreement of its franchisee for
Germany in 1997 based on alleged violations of provisions in the underlying
franchise agreement and ceased to provide services, such as reservations and
credit card processing, effective as of October 23, 1998. The former franchisee
has unsuccessfully challenged the termination in the German trial court and in
the court of appeals and is currently challenging this adverse decision in the
German Supreme Court. A ruling from the Supreme Court is expected by the end of
the second quarter of 2000. The former franchisee has ceased to operate under
the Budget Rent a Car name in Germany and the Company has commenced to operate,
and is continuing to develop the Budget Rent a Car business in Germany.
In addition to the foregoing matters, from time to time we are subject to
routine litigation incidental to our business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning each of our
executive officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- ---- --- --------------------------------------------------------
<S> <C> <C>
Sanford Miller....................... 47 Chairman of the Board of Directors, Chief Executive
Officer and Director
Jeffrey D. Congdon................... 56 Vice Chairman of the Board of Directors and Director
David N. Siegel(1)................... 38 President and Chief Operating Officer
Neal S. Cohen(2)..................... 39 Executive Vice President and Chief Financial Officer
Robert L. Aprati..................... 55 Executive Vice President, General Counsel and Secretary
Mark R. Sotir........................ 36 President, North American Vehicle Rental Operations
</TABLE>
- ---------------
(1) Mr. Seigel became President and Chief Operating Officer of Budget effective
as of October 26, 1999.
(2) Mr. Cohen became Executive Vice President and Chief Financial Officer of
Budget effective as of January 10, 2000.
SANFORD MILLER has been Chairman of the Board of Directors, Chief Executive
Officer and a director since April 1994. From August 1991 to August 1994, he was
Vice President of Tranex Rentals of New York, Inc., which operated the Albany
and Rochester, New York Budget franchises, and from December 1991 to August
1994, was Vice President of Capital City Leasing, Inc., which operated the
Richmond, Virginia Budget franchise. From 1989 to 1991, Mr. Miller served as
Director of Marketing, Special Accounts, for BRACC. From 1981 to 1989, Mr.
Miller was an executive officer and principal stockholder of corporations that
owned and operated 30 Budget franchises that were sold to BRACC in 1989. From
1979 to 1981, he was North East Regional Field Operation Manager for BRACC. Mr.
Miller served as President of the American
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<PAGE> 19
Car Rental Association, a nationwide industry trade association, in 1993 and
Chairman of the Licensee Local Market Advisory Board of Budget in 1989 and 1990.
Mr. Miller is also a director of Tranex Credit Corporation, which provides
financing for purchases of previously owned vehicles, AVTEAM, Inc., a global
supplier of aftermarket aircraft engines, engine parts and airframe components,
and Peninsula Bank of Central Florida and is the Chairman of the Board of
College Foundation, Inc., Oswego State University. Mr. Miller is the first
cousin of Ronald D. Agronin, one of our directors.
JEFFREY D. CONGDON has been Vice Chairman of the Board of Directors since
January 1991 and was elected as a director in April 1994. From January 1991 to
March 1998 he also served as Chief Financial Officer. From December 1990 through
March 1999, he was Secretary and Treasurer of Tranex Credit Corporation. From
1980 to 1989, he was an executive officer and principal stockholder of
corporations that owned and operated 30 Budget franchises that were sold to
BRACC in 1989. From 1982 to 1996, Mr. Congdon owned and operated retail new
and/or used vehicle sales operations in Indianapolis, Indiana.
DAVID N. SIEGEL has been President and Chief Operating Officer since
October 26, 1999. From 1995 to his appointment at Budget, he served as President
of Continental Express, a wholly owned subsidiary of Continental Airlines, Inc.
From 1993 to 1995, Mr. Siegel served Continental Airlines, Inc. as Senior Vice
President of Planning, and, previously, as Vice President of Corporate
Development. From 1991 to 1993, Mr. Siegel served as Director of Corporate
Planning for Northwest Airlines. Prior to 1991, Mr. Siegel worked for Bain
&Company, an international strategy consulting firm specializing in business
turnarounds.
NEAL S. COHEN has been Executive Vice President and Chief Financial Officer
since January 10, 2000. From 1991 to his appointment at Budget, Mr. Cohen worked
for Northwest Airlines where his responsibilities included capital markets and
banking, budgeting, tax and risk management, business development and market
planning, and where, most recently, he served as Senior Vice President and
Treasurer. From 1984 to 1991, Mr. Cohen worked for General Motors at its New
York treasurer's office where he held positions in international finance,
banking, financial analysis, and planning.
ROBERT L. APRATI has been Executive Vice President, General Counsel and
Secretary since August 1997, was Senior Vice President, General Counsel and
Secretary of BRACC from January 1988 to July 1997 and was Vice President,
General Counsel and Secretary of BRACC from September 1978 to January 1988.
MARK R. SOTIR has been President, North America, Budget Rent a Car
Corporation since January 1999. Mr. Sotir has served in management positions for
BRACC since April 1995. From August 1998 to January 1999, he was Senior Vice
President, Operations; from June 1997 to August 1998 he was Senior Vice
President, Marketing; from June 1996 to June 1997 he was Vice President,
Marketing; and from April 1995 to June 1996 he was Vice President, Revenue
Management. Prior to joining BRAC, Mr. Sotir was Marketing Manager for The
Coca-Cola Company from August 1994 to April 1995 and was Senior Production
Manager from July 1993 to August 1994.
Each of the above executive officers was elected by the Board of Directors
to hold office until the next annual election of officers and until his
successor is elected and qualified or until his earlier resignation or removal.
17
<PAGE> 20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since April 17, 1997, Budget Group's Class A common stock has been listed
on the New York Stock Exchange under the symbol "BD." Prior to such date, the
Class A common stock was traded in the Nasdaq National Market under the symbol
"TBUD." The following table details the high and low bid information for the
Class A common stock as reported by the Nasdaq National Market or the high and
low sales prices for the Class A common stock as reported by the New York Stock
Exchange, as the case may be, for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1998:
First Quarter............................................. $39.500 $30.000
Second Quarter............................................ 39.000 26.875
Third Quarter............................................. 33.125 17.000
Fourth Quarter............................................ 25.000 11.000
YEAR ENDED DECEMBER 31, 1999:
First Quarter............................................. $16.375 $10.438
Second Quarter............................................ 17.250 10.000
Third Quarter............................................. 12.938 6.875
Fourth Quarter............................................ 9.250 6.000
</TABLE>
On March 24, 2000 (i) the last sale price of the Class A common stock as
reported on the New York Stock Exchange was $4.6875 per share and (ii) there
were 339 holders of record of the Class A common stock and three holders of
record of the Class B common stock. There is no established public trading
market for the Class B common stock.
We have never paid any cash dividends on our common stock, and the Board of
Directors currently intends to retain all earnings for use in our business for
the foreseeable future. Any future payment of dividends will depend upon our
results of operations, financial condition, cash requirements, restrictions
contained in credit and other agreements and other factors deemed relevant by
the Board of Directors.
RECENT SALES OF UNREGISTERED SECURITIES
There were no unregistered sales of equity securities in the fourth quarter
of 1999.
18
<PAGE> 21
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information for each year
in the five-year period ended December 31, 1999. The information presented for
the year ended December 31, 1995, and as of and for the years ended December 31,
1996, 1997, 1998, and 1999 is derived from the audited consolidated financial
statements of Budget Group, which reflect the discontinued operations of the car
sales segment, VPSI, Inc. and Cruise America. The following data should be read
in conjunction with the Consolidated Financial Statements and the notes thereto
and "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED AND AS OF DECEMBER 31,
-------------------------------------------------------------
1995 1996 1997 1998 1999
------ -------- --------- --------- -----------
(IN MILLIONS, EXCEPT OPERATING AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Vehicle rental revenue................... $107.1 $ 193.1 $ 979.2 $ 1,834.8 $ 2,237.3
Total operating revenue.................. 107.1 193.1 1,029.9 1,928.9 2,349.5
Depreciation -- vehicle.................. 27.5 52.5 265.8 467.5 557.9
Operating income......................... 13.7 23.7 165.0 209.1 153.9
Income (loss) from continuing operations
before income taxes.................... 1.0 (1.3) 59.4 19.7 (55.0)
Net income (loss) before extraordinary
item................................... 1.7 7.8 29.8 (3.6) (64.5)
Weighted average
number of shares outstanding:
Basic.................................. 8.0 10.8 20.1 32.1 36.4
Diluted................................ 8.0 11.1 27.9 32.1 36.4
Earnings per common and common equivalent
share:
Basic (before extraordinary item)...... $ 0.21 $ 0.72 $ 1.48 $ (0.12) $ (1.77)
Diluted (before extraordinary item).... 0.21 0.70 1.25 (0.12) (1.77)
Segment Revenue:
Car Rental(a)............................ 107.1(b) 193.1(b) 980.3 1,480.6 1,702.8
Truck Rental(a).......................... n/a(b) n/a(b) 108.3 521.0 734.9
Operating Data:
Car rental data(c):
Average rental days per vehicle........ 250(b) 296 294 302
Average fleet.......................... 8,917(b) 67,914 104,423 112,429
Average monthly revenue per unit....... 1,350(b) 1,038 970 966
Truck rental data:
Average rental days per vehicle........ n/a(b) 205(d) 183(e) 186(e)
Average fleet.......................... n/a(b) 11,148(d) 36,439(e) 45,391(e)
Average monthly revenue per unit....... n/a(b) 1,212(d) 1,268(e) 1,286(e)
Other Data:
EBITDA(f)................................ 43.4 80.3 452.9 726.6 781.2
Depreciation -- vehicle.................. 27.5 52.5 265.8 467.5 557.9
Interest-vehicle, net(g)................. 12.1 21.7 83.0 163.5 182.1
Adjusted EBITDA(f)....................... 3.8 6.1 104.1 95.6 41.2
Total interest expense................... 12.8 25.0 105.6 189.9 227.6
Non-vehicle capital expenditures......... 4.8 3.4 10.9 88.4 106.7
Ratio of Adjusted EBITDA to non-vehicle
interest............................... 5.4x 1.8x 4.6x 3.6x 0.9x
Ratio of net non-vehicle debt to Adjusted
EBITDA(h).............................. 6.4x 6.1x 1.9x NM 9.8x
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Restricted cash(i).............................. $ 67.7 $ 66.3 $ 282.7 $ 421.5 $ 1.1
Total cash...................................... 67.7 112.0 399.8 545.5 58.0
Manufacturer receivables(j)..................... 0.0 13.9 109.1 188.7 105.5
Rental fleet, net............................... 219.4 285.1 2,006.4 2,747.7 3,179.6
Total assets.................................... 401.2 555.6 3,550.9 4.983.3 5,082.5
Vehicle debt.................................... 283.3 320.1 2,264.9 3,389.5 3,176.8
Non-vehicle debt................................ 24.4 83.1 313.1 123.6 460.9
Total debt...................................... 307.7 403.2 2,578.0 3,513.1 3,637.7
Stockholders' equity............................ 65.4 121.2 460.1 652.3 567.5
</TABLE>
- ---------------
(a) Includes revenue from car or truck rentals, as appropriate, and related
products (such as insurance and loss damage waivers).
(b) Truck rental revenue data for the years ended December 31, 1995 and 1996,
cannot be segregated from car rental revenue. Therefore, car rental revenue
data for the years ended December 31, 1995 and 1996, include both car and
truck rental data.
(c) Includes data for Budget Group's North American car rental operations.
(d) Includes data for Budget Truck Rental.
(e) Includes data for Budget Truck Rental and Ryder TRS.
(f) EBITDA from continuing operations consists of income (loss) 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 from continuing operations consists of income
(loss) before taxes plus (i) non-vehicle interest expense (including certain
debt extinguishment costs) and (ii) amortization and non-vehicle
depreciation expense. EBITDA from continuing operations and Adjusted EBITDA
from continuing operations are not presented as, and should not be
considered alternative measures of operating results or cash flows from
operations (as determined in accordance with generally accepted accounting
principles), but are presented because they are widely accepted financial
indicators of a company's ability to incur and service debt. EBITDA from
continuing operations and Adjusted EBITDA from continuing operations reflect
certain administrative expenses not allocated to operating segments.
(g) Consists of vehicle interest, net of interest income on restricted cash.
(h) Net non-vehicle debt consists of non-vehicle debt less unrestricted cash.
(i) Restricted cash consists of funds borrowed under medium term note and
commercial paper programs not invested in rental fleet.
(j) Manufacturer receivables arise from the sale of vehicles to manufacturers
pursuant to guaranteed repurchase programs. These manufacturer receivables,
to the extent they related to vehicles pledged as collateral under our fleet
financing facilities, are also pledged as collateral under those facilities.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made in this Report, and other written or oral
statements made by or on behalf of Budget Group, may constitute "forward-looking
statements" within the meaning of the federal securities laws. Statements
regarding future events and developments and our future performance, as well as
our expectations, beliefs, plans, estimates or projections relating to the
future, are forward-looking statements within the meaning of these laws. All
forward-looking statements are subject to certain risks and uncertainties that
could cause actual events to differ materially from those projected. The
measures to be implemented during 2000, the estimated cost reductions, the
expectations relating to the results of operations for 2000, and the
expectations relating to improvements in the Company's operations are estimates
or expectations which management believes to be reasonable at this time. In
addition, other risks and uncertainties include, among others, integration of
the Premier business operations and realignment of the Ryder TRS business
operations into Budget's North American Rental Operations, successful
implementation of our car sales exit strategies;
20
<PAGE> 23
successful disposition of non-core businesses; seasonality of our business;
competitive factors; impact of the make-whole payment in connection with the
Ryder TRS acquisition; the availability and terms of financing for our business;
our dependence on a principal vehicle supplier; possible changes under
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 recent losses. These factors and conditions could be
substantially different than we currently anticipate, and Budget's business
could be affected by other factors, so that our actual future activities and
results of operations may differ materially from the forward-looking statements
made herein. We believe that these forward-looking statements are reasonable;
however, you should not place undue reliance on such statements. These
statements are based on current expectations and speak only as of the date of
such statements. We undertake no obligations to publicly update or revise any
forward-looking statement, whether as a result of future events, new information
or otherwise. Additional information concerning the risk and uncertainties
listed above and other factors that you may wish to consider are contained below
in this Item under the section entitled "Risk Factors."
GENERAL
All amounts relate to continuing operations unless noted otherwise.
Prior to the acquisition of BRACC, the Company was the largest BRACC
franchisee in the United States and was one of the largest independent retailers
of late model automobiles in the United States. In 1994, we embarked on a
strategy to significantly expand our Budget franchise base and to develop a
branded retail car sales operation within Budget franchise territories.
Beginning in 1996, we began acquiring and expanding into other rental related
businesses. We believe this strategy both leveraged management's experience and
created certain operating efficiencies between complementary businesses.
In 1999, Budget adopted plans to dispose of its non-core assets, primarily
its car sales segment, Cruise America and VPSI, in order to focus on car and
truck rental. The net income (loss) and net assets to be disposed of for these
non-core assets are included in the accompanying consolidated financial
statements under the headings discontinued operations on the consolidated
statements of operations and net assets of discontinued operations on the
consolidated balance sheet. The consolidated financial statements from 1997 and
1998 have been restated to conform with the 1999 presentation. For further
discussion of these plans, see Note 5 to the Company's Consolidated Financial
Statements herein.
The results of operations of the Company for 1997 include the operations of
BRACC from April 29, 1997. The 1997 results of operations reported herein also
include the acquired operations of Premier Car Rental from July 31, 1997, and
the Budget franchise in St. Louis, from September 30, 1997. In connection with
the BRACC acquisition, the Company changed its name to Budget Group, Inc. In
June 1998, we acquired Ryder TRS and the 1998 results of operations reported
herein also include the acquired operations of Ryder TRS from that date. The
1999 results include a $105.4 million charge for one-time and other non
recurring items which consist of work force reductions, consolidation costs to
merge the majority of Premier rental locations into Budget locations and the
write-off of systems development costs and uncollectable accounts receivables
largely associated with the conversion of systems in 1999. For a further
discussion of these transactions, see Notes 1, 3 and 19 to the Company's
Consolidated Financial Statements herein.
The Company is engaged in the business of the daily rental of vehicles,
including cars, trucks and passenger vans (through both owned and franchised
operations).
Revenues primarily consist of:
Vehicle rental -- revenue generated from renting vehicles to customers
including revenue from loss or collision damage waivers, insurance sales
and other products provided at rental locations. Royalty fees and
other -- fees generated from our licensees and other non-vehicle rental
items.
21
<PAGE> 24
Expenses primarily consist of:
Direct vehicle and operating -- includes wages and related benefits,
rent and concessions paid to airport authorities and costs relating to the
operation and rental of revenue earning vehicles including insurance.
Depreciation, vehicle -- depreciation expenses relating to revenue earning
vehicles including net gains or losses on the disposal of such equipment.
Selling, general and administrative -- includes reservation, advertising,
marketing and other related expenses, net of third party reimbursements,
and commissions to travel agents and other third parties. Amortization and
non-vehicle depreciation -- includes amortization of goodwill and other
intangibles as well as depreciation of capitalized assets. Interest and
interest income -- vehicle interest relates to financing of revenue earning
vehicles and vehicle inventory; interest income is primarily earned on
restricted cash.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, the percentage of
operating revenues represented by certain items in the Company's consolidated
statements of operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Vehicle rental revenue.................................... 95.2% 95.1% 95.2%
Royalties and other revenue............................... 4.8 4.9 4.8
----- ----- -----
Total operating revenue......................... 100.0 100.0 100.0
----- ----- -----
Direct vehicle and operating expenses..................... 41.5 38.0 40.0
Depreciation expense -- vehicle........................... 25.7 24.2 23.7
Selling, general and administrative expenses.............. 14.6 23.7 26.8
Amortization and non-vehicle depreciation expenses........ 2.2 2.6 3.0
Restructuring expenses.................................... 0.0 0.7 0.0
----- ----- -----
Operating income.......................................... 16.0 10.8 6.5
Vehicle interest expense.................................. 8.6 9.0 8.0
Non-vehicle interest expense.............................. 2.2 0.9 1.1
Interest income........................................... (0.6) (0.6) (0.3)
Debt extinguishment costs................................. 0.0 0.5 0.0
----- ----- -----
Income (loss) from continuing operations before income
taxes................................................... 5.8 1.0 (2.3)
Provision (benefit) for income taxes...................... 2.7 0.3 (1.0)
Distribution on trust preferred securities................ 0.0 0.5 0.8
----- ----- -----
Income (loss) from continuing operations.................. 3.1% 0.2% (2.1)%
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998.
General Operating Results. Income (loss) from continuing operations for
1999 decreased $54.4 million to a loss of $49.9 million from income of $4.5
million in 1998. The income (loss) from continuing operations per share for 1999
decreased to a loss of $1.37 per diluted share from income of $0.14 per diluted
share in 1998 due to the decrease in earnings, partially offset by an increase
in the average number of shares outstanding. Income (loss) before income taxes
decreased $74.7 million in 1999 to a loss of $55.0 million from income of $19.7
million for 1998. Income (loss) before income taxes in 1999 reflects $105.4
million in charges as mentioned above compared to restructuring and other
non-recurring charges in 1998 of $24.1 million and debt extinguishment costs of
$9.5 million in 1998 largely for Class A common stock issued to induce
conversion of $80.0 million of convertible subordinated notes. Ryder TRS
experienced approximately $29.2 million in losses before taxes for the year
ended December 31, 1999, as compared to earnings of $9.1 million for seven
months ended December 31, 1998.
Operating Revenues. Vehicle rental revenue increased $402.4 million or
21.9% in 1999 to $2,237.3 million from $1,834.8 million in 1998. This increase
was largely due to the full year impact of Ryder's operations, acquired in the
second quarter of 1998, which added a significant number of locations and
vehicles
22
<PAGE> 25
to the Company's operations, an increase in BRACC due to an 11% increase in
volume and a $76.5 million increase in Europe due to volume and the effect of
acquisitions and newly opened locations. Royalty fees and other revenues
increased $18.1 million in 1999 to $112.2 million from $94.1 million in 1998.
These revenues largely represent royalty and other fees from the Company's
franchisees as a result of the BRACC acquisition and revenue from Ryder TRS's
move management service. Ryder TRS revenue increased $194.3 million in total
revenue and $14.5 million in royalty fees and other revenues in 1999 over 1998.
Operating Expenses. Total operating expenses increased $475.8 million in
1999 to $2,195.6 million from $1,719.8 million in 1998. This increase was also
largely due to the full year impact of Ryder TRS's operations versus the seven
month impact in 1998, the fourth quarter non-recurring charges and additional
fleet cost impact for BRACC and international operations in 1999. Ryder TRS's
increase in total operating expenses totaled $200.7 million in 1999.
Direct vehicle and operating expenses increased $206.9 million in 1999 to
$939.1 million from $732.3 million in 1998 reflecting the full year impact of
Ryder TRS, a portion of the one-time and non-recurring charges discussed above
($20.5 million), as well as a reduction in insurance reserves of approximately
$22.0 million in 1998. This reduction was due to changes in actuarial estimates
of losses based on continued favorable trends in the frequency and severity of
accidents as well as changes in claims handling procedures implemented in 1997
and early 1998. Excluding the insurance adjustment, the impact of Ryder TRS and
the non-recurring items, direct vehicle and operating expenses increased
slightly as a percent of total revenue largely due to increases in net vehicle
damage, reconditioning expenses and mileage related penalties of approximately
$8.9 million.
Vehicle depreciation increased $90.4 million in 1999 to $557.9 million from
$467.5 million in 1998 reflecting the full year effect of Ryder TRS's operations
and volume increases in BRACC car rental operations in the U.S. and Europe. As a
percent of rental revenue, vehicle depreciation decreased slightly due to
improved utilization, largely in the U.S.
Selling, general and administrative expenses increased $173.4 million in
1999 to $629.1 million from $455.7 million in 1998. This increase was also
largely due to the one-time and non-recurring items mentioned above of $77.5
million in 1999 and the full year effect of Ryder TRS's operations.
Amortization and non-vehicle depreciation expense increased $19.5 million
in 1999 to $69.5 million from $50.0 million in 1998. This increase was largely
due to intangibles, including goodwill, and property and equipment related to
the acquisition of Ryder TRS in June 1998. We expect a similar increase in 2000
resulting from 1999 capital expenditures. We recorded restructuring expenses in
the fourth quarter of 1998 of $14.4 million largely related to severance and
related costs and location closing expenses. See Notes 1 and 4 to the Company's
Consolidated Financial Statements.
Other (Income) Expense. Other expense, net of interest income, increased
$19.4 million in 1999 to $208.8 million from $189.4 million in 1998. This
increase was due to the financing of fleet and other borrowings related to Ryder
TRS fleet and an increase in interest rates due to our mix in debt and to a
general rise in rates. These increases were partially offset by non-recurring
debt extinguishment costs in 1998.
Provision (Benefit) for Income Taxes. The tax benefit differs from the
statutory rate largely due to the effect of the distributions on trust preferred
securities shown below the provision at its gross amount while the tax benefit
is included in the provision and the impact of state and local income taxes net
of the federal benefit, somewhat offset by the effects of non-deductible
intangible amortization. See Note 13 to the Company's Consolidated Financial
Statements.
Distributions on Trust Preferred Securities. The distributions on trust
preferred securities of $18.8 million in 1999 represents a full year of dividend
payments to holders of these Company obligated mandatorily redeemable securities
issued by a subsidiary of the Company in June 1998. These distributions are
reflected as a minority interest under the above mentioned caption.
Discontinued Operations. On December 10, 1999 we adopted plans to sell or
dispose of our car sales segment, as well as certain non-core assets and
subsidiaries, primarily Cruise America and VPSI. The car
23
<PAGE> 26
sales locations are expected to be disposed of by September 2000, and Cruise
America and VPSI have estimated disposal dates of mid-year 2000. The assets of
the operations to be sold consist primarily of vehicles, accounts receivable and
property and equipment. See Note 5 to the Company's Consolidated Financial
Statements.
During 1999 we accrued $14.3 million, net of income tax benefits, for
losses expected upon disposition of the discontinued operations and estimated
losses through the phase out period. We do not expect any other significant
negative impact on our financial condition or results of operations related to
the discontinued operations, however, the ultimate impact is somewhat dependent
upon the timing and nature of the disposition.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
General Operating Results. Income from continuing operations for 1998
decreased $27.7 million to income of $4.5 million from income of $32.1 million
in 1997. The income from continuing operations per share for 1998 decreased to
$0.14 per diluted share from income of $1.33 per diluted share in 1997 due to
the decrease in earnings, partially offset by an increase in the average number
of shares outstanding. Income from continuing operations before income taxes
decreased $39.7 million in 1998 to $19.7 million from $59.4 million for 1997.
The Company also recognized an extraordinary loss in 1998 of $45.3 million, net
of income tax benefits, related to the early extinguishment of guaranteed senior
notes and Ryder TRS's 10% senior subordinated notes. Income before income taxes
reflects debt extinguishment costs of $9.5 million in 1998 largely for Class A
common stock issued to induce conversion of $80.0 million of convertible
subordinated notes. See Note 9 to the Company's Consolidated Financial
Statements. Ryder TRS contributed approximately $9.1 million in earnings before
taxes for the seven months ended December 31, 1998.
Operating Revenues. Vehicle rental revenue increased $855.7 million in
1998 to $1,834.8 million from $979.2 million in 1997. This increase was largely
due to the full year impact of BRACC's operations, acquired in the second
quarter of 1997 and the Ryder TRS acquisition in the second quarter of 1998,
which added a significant number of locations and vehicles to the Company's
operations. Royalty fees and other revenues increased $43.3 million in 1998 to
$94.1 million from $50.8 million in 1997. These revenues largely represent
royalty and other fees from the Company's franchisees as a result of the BRACC
acquisition and revenue from Ryder TRS's move management service. Ryder TRS
contributed $346.2 million in total revenue and $15.5 million of royalty fees
and other revenues.
Operating Expenses. Total operating expenses increased $854.8 million in
1998 to $1,719.8 million from $864.9 million in 1997. This increase was also
largely due to the addition of BRACC's and Ryder TRS's operations to the
Company's operations. Ryder TRS's operating expenses totaled $308.4 million in
1998. Direct vehicle and operating expenses reflect a reduction in insurance
reserves of approximately $22.0 million in 1998. This reduction was due to
changes in actuarial estimates of losses based on continued favorable trends in
the frequency and severity of accidents as well as changes in claims handling
procedures implemented within the past 18 months. Excluding the insurance
adjustment and the impact of Ryder TRS, direct vehicle and operating expenses
increased slightly as a percent of vehicle rental revenue due to increases in
vehicle damage, reconditioning expenses and mileage related penalties of
approximately $23.4 million on an annualized basis. The increases in
reconditioning and mileage related penalties occurred largely in the latter part
of 1998 due to changes in terms of certain manufacturer's buyback programs.
Selling, general and administrative expenses increased $305.3 million in 1998 to
$455.7 million from $150.4 million in 1997. This increase was also largely due
to the addition of BRACC and Ryder TRS's operations to the Company's operations
and also includes a provision of approximately $3.0 million for bad debts in
1998 related to collection inefficiencies brought about by centralization
efforts largely in international administrative functions. Amortization and
non-vehicle depreciation expense increased $27.8 million in 1998 to $50.0
million from $22.1 million in 1997. This increase was largely due to
intangibles, including goodwill, and property and equipment related to the
acquisitions of BRACC and Ryder TRS and the previously referred to impairment
loss. The Company recorded restructuring expenses in the fourth quarter of 1998
of $14.4 million largely related to severance and related costs and location
closing expenses. See Notes 1 and 4 to the Company's Consolidated Financial
Statements.
24
<PAGE> 27
Other (Income) Expense. Other expense, net of interest income, increased
$83.8 million in 1998 to $189.4 million from $105.6 million in 1997. This
increase was due to the financing of fleet and other borrowings related to the
acquisitions of BRACC and Ryder TRS, net of investment income due to the
increase in restricted cash, and $9.5 million in debt extinguishment costs
related to the conversion of $80.0 million of convertible subordinated notes.
See Note 9 to the Company's Consolidated Financial Statements.
Provision (Benefit) for Income Taxes. The tax provision differs from the
statutory rate largely due to the effect of the distributions on trust preferred
securities shown below the provision at its gross amount while the tax benefit
is included in the provision and changes in valuation allowances somewhat offset
by the effects of non-deductible intangible amortization and the impact of state
and local income taxes net of the federal benefit. See Note 13 to the Company's
Consolidated Financial Statements.
Distributions on Trust Preferred Securities. The distributions on trust
preferred securities of $10.0 million represents dividend payments to holders of
these Company obligated mandatorily redeemable securities issued by a subsidiary
of Budget Group. These distributions are reflected as a minority interest under
the above mentioned caption.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's operations have been funded by cash provided
from operating activities and by financing provided by banks, automobile
manufacturers' captive finance companies, leasing companies and asset-backed
notes. The Company's primary use of cash is the acquisition of new vehicles for
the rental fleet. The indebtedness at December 31, 1999, has interest rates
ranging from 3.55% to 11.20% and the material terms of the financing facilities
are described below. The Company intends to fund its fleet financing
requirements and debt maturities through asset-backed notes and revolving credit
facilities with financial institutions for fleet financing and working capital,
as well as through other similar facilities.
ANALYSIS OF CASH FLOWS
Net cash provided by continuing operations operating activities increased
62.5% to $598.6 million during 1999 from $368.5 million during 1998. Net cash
provided by continuing operating activities during 1998 increased 73.9% from
$211.9 million during 1997. During 1999, we experienced an increase in cash
provided due to an increase of $110.0 million in the non-cash charges component
of our losses related to depreciation and amortization and an increase in
accounts payable and accrued expenses (reflecting the non-recurring charges and
timing on payments to vendors) somewhat offset by an increase in receivables,
prepaid expenses and other assets and the non-cash benefit for income taxes. The
increase in receivables in 1999 reflects the difficulties we experienced in
converting several new systems causing a slow down in the billing and collection
of trade receivables somewhat offset by a lower level of amounts receivable for
vehicle sales reflecting changes in the timing of disposals. In 1997 and 1998,
we experienced increases in cash received from rentals which were offset to some
extent by increases in cash paid to vendors and employees and in interest
expense.
Net cash used in investing activities is primarily attributable to cash
paid to suppliers of revenue earning vehicles and, to a lesser extent, capital
expenditures. This cash use is mainly offset by cash received from the sale of
vehicles (most of which sales were pursuant to manufacturers' vehicle repurchase
programs). Cash received from the sale of vehicles was $2,670.1 million,
$2,404.6 million and $1,671.3 million during 1999, 1998 and 1997, respectively.
Cash paid to suppliers of revenue earning vehicles was $3,713.5 million,
$3,087.2 million and $1,975.0 million during 1999, 1998 and 1997, respectively.
The increase in cash paid to suppliers of revenue earning vehicles during 1998
was primarily the result of the increased number of vehicles in service during
1998 largely due to volume growth for BRACC and the full year impact of Ryder
TRS. Payment for acquisitions, net of cash acquired, amounted to $1.0 million,
$166.6 million and $141.8 million during 1999, 1998 and 1997, respectively.
Ryder TRS was acquired in 1998 and BRACC was acquired in 1997. Capital
expenditures, largely for new rental locations, improvement in service levels
and to upgrade computer hardware and software were $104.4 million, $78.5 million
and $4.8 million for 1999, 1998 and 1997, respectively. We anticipate that
capital expenditures for 2000 will be approximately $50.0 million.
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Net cash provided by financing activities for 1999 decreased 85.9% to
$100.7 million during 1999 from $712.4 million during 1998, primarily due to
increased utilization of restricted cash to fund vehicle purchases and a lower
level of vehicle related financing activity. Net cash provided by financing
activities during 1998 increased 27.9% from $556.9 million in 1997, due
primarily to the proceeds received from the issuance of MTNs and the trust
preferred securities, which was partially offset by the utilization of these
proceeds to repay existing vehicle and non-vehicle debt of Budget Group and
Ryder TRS.
DEBT FACILITIES -- GENERAL
We borrow money directly and through our special purpose fleet financing
subsidiaries, Team Fleet Financing Corporation ("TFFC") and Budget Fleet
Financing Corporation ("BFFC"). Subsidiaries also have various working capital
facilities in place to finance operating activities. At December 31, 1999, we
had $3,637.7 million of indebtedness outstanding, $3,176.8 million of which
represented secured fleet financing and $460.9 million of which represented
non-vehicle indebtedness. At December 31, 1999, we had $378.3 million of
availability under various fleet financing facilities.
RECENT DEBT PLACEMENTS AND RETIREMENTS
In April 1999, the Company issued unsecured senior notes with an aggregate
principal amount of $400.0 million bearing interest at 9.125% due in 2006 (the
"Senior Notes"). The net proceeds from this transaction were primarily used to
repay the outstanding indebtedness under maturing medium-term notes used to
finance revenue earning vehicles and certain other secured indebtedness. The
indenture governing the Senior Notes contains certain covenants which, among
other things, restrict the Company from incurring certain additional
indebtedness, paying dividends or redeeming or repurchasing its capital stock,
consolidating, merging or transferring assets and engaging in sale/leaseback
transactions. In June 1999, the Company exchanged all of the unregistered
initial Senior Notes for registered Senior Notes with identical terms.
In June 1999, the Company issued MTN notes with a principal amount of
$950.0 million bearing interest at rates ranging from 6.70% to 7.85% at December
31, 1999 ("TFFC-99 notes"). These notes have maturity dates from 2001 to 2004.
Both the notes issued in August 1994 ("TFFC-94 notes") and the notes
assumed in the BRACC acquisition ("BFFC-94A notes") were repaid in full in 1999.
These maturities were funded from the Senior Notes and the TFFC-99 notes. See
Notes 3 and 9 to the Company's Consolidated Financial Statements.
FLEET FINANCING FACILITIES
At December 31, 1999, the Company had borrowed $2,726.0 million under
asset-backed MTN's and $273.8 million under a commercial paper ("CP") facility
(collectively "Fleet notes"). The MTN's are comprised of notes issued in
December 1996 ("TFFC-96 notes"), notes issued in April 1997 ("TFFC-97 notes"),
notes issued in conjunction with the acquisition of Ryder TRS ("TFFC-98 notes")
and TFFC-99 notes issued in June 1999. The Fleet notes are utilized largely to
finance vehicles eligible for certain manufacturers' vehicle repurchase programs
and other allowable cars and trucks. Proceeds from the Fleet notes that are
temporarily unutilized for vehicle financing are maintained in restricted cash
accounts with the trustees. The Fleet notes are collateralized by the secured
vehicles, manufacturer receivables and the restricted cash accounts. Interest
rates on the Fleet notes at December 31, 1999, range from 6.07% to 7.85%. In
addition, we entered into a seasonal funding facility in the first quarter of
2000 that expires on June 30, 2000. At March 24, 2000 we had $25.0 million
outstanding under this facility.
Our other vehicle obligations consist of outstanding lines of credit to
purchase rental fleet. Borrowings under collateralized available lines of credit
at December 31, 1999 consist of $8.6 million with maturity dates through 2003.
Vehicle obligations are collateralized by revenue earning vehicles financed
under these credit facilities and proceeds from the sale, lease or rental of
rental vehicles. Interest payments for rental fleet facilities are due monthly
at annual interest rates that range from 3.55% to 11.20% at December 31, 1999.
Management expects that vehicle obligations will generally be repaid within one
year from the balance sheet
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date with proceeds received from either the repurchase of the vehicles by the
manufacturers in accordance with the terms of the manufacturers' vehicle
repurchase programs or from the sales of the vehicles.
MEDIUM TERM NOTES
In June 1999, the Company issued the TFFC-99 notes, which consist of an
aggregate principal balance of $950.0 million and bear interest at rates ranging
from 6.70% to 7.85% at December 31, 1999. The proceeds were primarily used to
repay the outstanding indebtedness under maturing medium term notes. These notes
have maturity dates from 2001 to 2004. Interest on the TFFC-99 notes is payable
monthly.
The $1,100.0 million TFFC-98 notes were entered into concurrently with the
acquisition of Ryder TRS, require monthly interest payments and bear interest at
fixed rates ranging from 6.07% to 6.84% and have maturity dates from 2001 to
2005. Proceeds from the notes were used to refinance Ryder TRS's commercial
paper and to finance certain BRACC vehicles.
The $750.0 million TFFC-97 notes and CP facility were entered into
concurrently with the BRACC acquisition. As of December 31, 1999, the CP has
various interest rates, which ranged between 6.25% and 7.05%. The TFFC-97 note
facility requires monthly interest payments at an annual rate ranging from 7.35%
to 7.80%. The TFFC-97 notes are payable in 2002.
The TFFC-96 notes total $166.0 million with interest rates ranging from
6.65% to 7.10% at December 31, 1999. The TFFC-96 notes are payable beginning in
May 2001 with the last payment due in 2002.
TRUST PREFERRED SECURITIES
In June 1998, the Company issued $300.0 million of 6.25% trust preferred
securities and received approximately $291.0 million in net proceeds. These
funds were used to redeem the guaranteed senior notes and to partially fund the
redemption of Ryder TRS's 10% senior subordinated notes which occurred in July
1998. The trust preferred securities are subject to mandatory redemption upon
the redemption of the underlying debentures due on June 15, 2028. The Company
has the right to defer interest payments due on the subordinated debentures for
up to 20 consecutive quarters which will also cause a deferral of distributions
under the trust preferred securities. See Note 10 to the Consolidated Financial
Statements.
WORKING CAPITAL FACILITY
Concurrent with the acquisition of Ryder TRS, the Company entered into an
amended and restated secured credit facility to increase its size from $300.0
million to $550.0 million. This facility requires monthly interest payments on
the outstanding balance at a rate based on LIBOR plus 2.50% or prime plus 0.75%
(or 8.32% at December 31, 1999) and expires in 2003. The facility is secured
primarily by cash, accounts receivable and vehicles and is subject to certain
covenants, the most restrictive of which require the Company to maintain certain
financial ratios and minimum tangible net worth and restrict the payment of cash
dividends. At December 31, 1999, the Company had $449.5 million in letters of
credit and no debt outstanding under this facility.
The credit facility was amended in the first quarter of 1999 to, among
other things, modify certain financial covenants and permit the issuance of
additional unsecured term notes to fund the maturities of MTN's. We were in
compliance with these financial covenants at December 31, 1999.
CHANGE IN FINANCIAL CONDITION
Total assets increased $99.3 million to $5,082.5 million at December 31,
1999, from $4,983.3 million at December 31, 1998. This increase was largely in
prepaid expenses and other assets of $53.6 million, due to the development of
new software, intangibles of $48.4 million, primarily due to final purchase
price allocations for Ryder TRS, and an increase in the net assets of
discontinued operations of $31.7 million due to opening of additional car sales
locations early in the year, offset by a decrease in cash of $67.1 million.
Restricted cash decreased $420.4 million to fund the increase in vehicles of
$392.6 million. Property and equipment net, increased by $2.5 million due to
investments in vehicle rental and sales locations.
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Total liabilities increased by $183.8 million to $4,223.5 million at
December 31, 1999 from $4,039.8 million at December 31, 1998. This increase was
due to an increase in notes payable of $124.6 million and accounts payable and
accrued expenses of $94.4 million partially offset by a decrease in a reduction
in the Company's deferred tax liability. The increase in notes payable reflects
the issuance of the $400.0 million senior notes and the $950.0 million TFFC-99
notes which was partially offset by the maturities of debt previously mentioned
and a decline in outstanding CP.
INFLATION
The increased acquisition cost of vehicles is the primary inflationary
factor affecting our operations. Many of our other operating expenses are
inflation sensitive with increases in inflation generally resulting in increased
costs of operations. The effect of inflation-driven cost increases on our
overall operating costs is not expected to be greater for us than for its
competitors.
SEASONALITY
Generally, in the vehicle rental industry, revenues increase in the spring
and summer months due to the overall increase in business and leisure travel
during this season. We increase the size of our fleet and workforce in the
spring and summer to accommodate increased rental activity during these periods
and decrease our fleet and workforce in the fall and winter. However, many of
our operating expenses (such as rent, insurance and administrative personnel)
are fixed and cannot be reduced during the fall and winter. As a result of these
patterns, for vehicle rental, the first quarter of each year is typically the
weakest and the third quarter is typically the strongest.
Due to recent, and planned future, expansion of corporate owned rental
operations in Europe, we expect that seasonal fluctuations in operating results
will become more pronounced.
YEAR 2000 ISSUE
The Company had assessed the impact of the year 2000 ("Y2K") on its
reporting systems and operations (the "Y2K Issue") and completed all major
modifications by the end of 1999. The Y2K Issue existed because many computer
systems and applications used two-digit date fields to designate a year.
As of March 2000, the Company has not encountered any Y2K problems that
have adversely affected operations internally or with suppliers or vendors. All
necessary changes identified during the date conversion period were completed on
time and successfully with only minor issues in non-critical applications that
had to be addressed after January 1, 2000. We do not expect any further
significant impact related to the Y2K issue.
The total cost to the Company of the Y2K effort over the three-year period
to identify and correct applications was approximately $11.5 million. Y2K
modifications costs were $2.2 million in 1997, $2.8 million in 1998 and $6.5
million in 1999 and charged to selling, general and administrative expenses in
each of these periods.
ENVIRONMENTAL MATTERS
We have assessed and continue to assess the impact of environmental
remediation efforts on our operations. Our exposure largely relates to the
clean-up and replacement of underground gasoline storage tanks.
During 1999, we recognized approximately $0.7 million in expenses related
to remediation efforts and estimate that an aggregate of approximately $1.9
million will be incurred in 2000 and 2001. Based on past experience, we expect
these estimates will be sufficient to satisfy anticipated costs of known
remediation requirements. However, due to factors such as continuing changes in
the environmental laws and regulatory requirements, the availability and
application of technology, the identification of presently unknown remediation
sites and changes in the extent of expected remediation efforts, estimated costs
for future environmental compliance and remediation are subject to uncertainty
and it is difficult to predict the amount or timing of future remediation
requirements.
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RISK FACTORS
WE HAD A NET LOSS FOR 1999
We incurred a net loss from continuing operations of $49.9 million for
1999. This net loss included one-time, non-recurring and other charges of $71.4
million. The full-year effect of the net loss from discontinued operations was
$14.7 million in 1999. We have experienced net losses in the first quarters of
the past two years, primarily as a result of seasonal factors, and anticipate
that we will have a net loss for the quarter ending March 31, 2000. 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 32.5% of total revenue and 69.9% of
operating income for 1998 and 29.6% of total revenue and 83.0% of operating
income for 1999. 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.
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,
Dollar, 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.
WE MAY NOT SUCCESSFULLY INTEGRATE OUR OPERATIONS
In 1999, we integrated the operations of our Premier Car Rental subsidiary
with the BRACC car rental operations. We also devoted significant resources to
the consolidation and integration of our Budget Truck Rental business with Ryder
TRS and the vertical integration of our Truck Rental Group with our North
American Vehicle Rental Operations; these efforts will continue in 2000.
Completing the integration of these businesses and achieving the anticipated
levels of cost savings involves a number of risks that could affect our
operating results. Integrating these operations has required significant capital
investments. We cannot assure you that we will be able to fully realize the
benefits that we anticipated from the consolidation or our car and truck rental
operations, which could have a significant negative effect on our financial
condition and results of operations.
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WE EXPERIENCED A SIGNIFICANT CHARGE FOR NON-RECURRING ITEMS
In connection with certain restructuring and other initiatives, we
announced that we would take non-recurring and other one-time charges of $105.4
million in the fourth quarter of 1999. We are continuing our examination of our
systems and business processes and cannot assure you that we will not need to
take additional restructuring, one-time charges and adjustments in the future.
In addition, we cannot assure you that we will be able to realize the benefits
that we anticipated from initiatives related to our business operations.
WE MAY NOT SUCCESSFULLY IMPLEMENT OUR CAR SALES EXIT STRATEGIES
We plan to exit the car sales business by selling certain car sales
locations and franchising additional locations. We cannot assure you that we
will be able to successfully implement this exit strategy in a timely manner,
which could have a significant negative effect on our financial conditions and
results of operations.
WE MAY NOT SUCCESSFULLY DISPOSE OF OUR NON-CORE BUSINESSES
We plan to sell our non-core assets, including VPSI and Cruise America, and
assets associated with our car sales business. We cannot assure you that we will
complete these divestitures in a timely manner or that we will realize the
benefits that we anticipate from disposing of these non-core assets, which could
have a negative effect on our financial conditions and results of operations.
OUR OBLIGATION TO DELIVER A MAKE-WHOLE PAYMENT MAY ADVERSELY AFFECT FUTURE
PERFORMANCE
In connection with the Ryder TRS acquisition, we made cash make-whole
payments of $20.9 million in July 1999 and expect to pay up to $40.5 million or
issue approximately 4,260,000 shares (or a combination of cash and shares) in
2000. In March 2000, we repurchased warrants to purchase shares of our common
stock from the former Ryder TRS shareholders for an aggregate purchase price of
$18.5 million in cash. These payments diverted cash from other business
purposes, which may adversely impact our financial condition or results of
operations in the future.
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.
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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, 1999, 68% of BRACC's car 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 AS A RESULT OF 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. This franchise termination is being contested by the
franchisee in the German courts and a ruling is expected by the end of the
second quarter of 2000. As a result of this development, we have experienced an
adverse effect on our business in, and originating from, Germany, and this
adverse effect may continue. 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 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
We have committed significant resources in an effort to expand our
international operations, particularly in Europe. A new rental counter system
and back-office system was developed and was or will be implemented in each of
our owned locations. 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 or an inability to achieve
expected benefits from information systems and acquisitions 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 and 1999, we expended significant capital resources on several
initiatives designed to increase our revenue and reduce our costs, and these
initiatives will continue during 2000. We expect to realize certain cost savings
and other operating efficiencies during 2000 as a result of these and other
initiatives that will be implemented in 2000. Major areas in which we will seek
to reduce our operating expenses include: (i) reductions in administrative,
personnel and overhead expenses; (ii) improvements in operations and
consolidations of our reservations centers; (iii) improvements in vehicle
maintenance procedures; (iv) increased efficiencies in non-vehicle purchasing;
and (v) reduction of vehicle carrying costs through changes in vehicle mix. 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
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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 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.
Each share of 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 owned by these individuals, represents
approximately 42% 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 HAVE A SUBSTANTIAL AMOUNT OF INDEBTEDNESS
We maintain a substantial amount of secured indebtedness to finance our
fleet purchases. At December 31, 1999, we had $3.6 billion of total outstanding
indebtedness, of which $3.2 billion was secured. We had $445 million of
unsecured indebtedness at December 31, 1999, and stockholders' equity of $567.5
million at that date. Notwithstanding our capacity to incur additional secured
and unsecured indebtedness, our substantial indebtedness could have negative
consequences for our business, including the following: (a) limiting our ability
to obtain additional financing in the future; (b) 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; (c) limiting our flexibility
in reacting to changes in our industry and changes in market conditions; (d)
increasing our vulnerability to a downturn in our business; and (e) 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. 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. Such holders could also proceed against their collateral,
which, in the case of the vehicle financing facilities, consists of
substantially all our fleet vehicles.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN CURRENCY EXCHANGE RATE RISK
Our earnings are affected by fluctuations in the value of foreign currency
exchange rates. Approximately 11.9% of our revenue is generated outside the U.S.
The result of a uniform 10% change in the value of the U.S. dollar relative to
currencies of countries where we do business would not be material. We do not
typically hedge any foreign currency risk since the exposure is not significant.
INTEREST RATE RISK
Our outstanding debt consists of vehicle debt, revolving credit facilities,
convertible subordinated debt and other debt which subjects us to the risk of
loss associated with movements in market interest rates.
At December 31, 1999, we had fixed-rate debt totalling $2.8 billion or
76.2% of total outstanding debt. This debt is fixed-rate and, therefore, does
not expose us to the risk of earnings loss due to changes in market interest
rates.
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Our floating-rate debt was $866.7 million or 23.8% of total outstanding
debt at December 31, 1999. A fluctuation of the interest rate by 100 basis
points would change our interest expense by $8.7 million. For a discussion of
the fair value of our indebtedness, see Note 16 to the Company's Consolidated
Financial Statements.
RISK FROM CHANGES IN STOCK PRICES
We are subject to stock price risk arising from make-whole provisions in
connection with certain recent acquisitions. See Notes 3 and 20 to the Company's
Consolidated Financial Statements.
For a discussion of market risk involving our stock option plans, see Note
14 to the Company's Consolidated Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Budget Group's Consolidated Financial Statements appear beginning at page
F-1 in Part IV of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item with respect to directors and
executive officers of the Registrant, except certain information regarding
executive officers which is contained in Part I of this Report pursuant to
General Instruction G, is included under the headings "Item 1 -- Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" of the
Proxy Statement for the Annual Meeting of Stockholders to be held on May 18,
2000 and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information included under the heading "Executive Compensation" in the
subsections entitled "Executive Severance Agreements," "Executive Compensation
Summary Table," "Option Grants During 1999 and Year-End Option Values" and
"Aggregate Option Exercises During 1999 and Year-End Option Values" appearing
thereunder of the Proxy Statement for the Annual Meeting of Stockholders to be
held on May 18, 2000 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included under the heading
"Security Ownership of Certain Beneficial Owners" of the Proxy Statement for the
Annual Meeting of Stockholders to be held on May 18, 2000 and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is included under the subheading
"Certain Relationships and Related Transactions" and under the heading
"Executive Compensation" in the subsection entitled "Compensation Committee
Interlocks and Insider Participation," of the Proxy Statement for the Annual
Meeting of Stockholders to be held on May 18, 2000 and is incorporated herein by
reference.
33
<PAGE> 36
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
1. Financial Statements
Report of Independent Certified Public Accountants.
Consolidated Balance Sheets at December 31, 1998 and 1999.
Consolidated Statements of Operations for each of the Three Years
in the Period Ended December 31, 1999.
Consolidated Statements of Stockholders' Equity for each of the
Three Years in the Period Ended December 31, 1999.
Consolidated Statements of Cash Flows for each of the Three Years
in the Period Ended December 31, 1999.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
Not applicable.
3. Exhibits
The following list of exhibits includes both exhibits submitted with this
Report as filed with the Securities and Exchange Commission and those
incorporated by reference to other filings:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1 -- Plan and Agreement of Merger dated as of November 25, 1997
among Budget Group, Inc., Cruise America, Inc. and CA
Acquisition Corporation (incorporated by reference to
Exhibit 2.1 of Registration Statement on Form S-4, File No.
333-42327, dated December 16, 1997, as amended by Amendment
No. 1 to Form S-4 dated December 29, 1997).
2.2 -- Agreement and Plan of Merger dated as of March 4, 1998 by
and among Budget Group, Inc., BDG Corporation, Ryder TRS
Inc., and certain other parties (incorporated herein by
reference to Exhibit 2.1 to the Company's Form 8-K dated
March 4, 1998).
2.3 -- Amendment No. 1 to Agreement and Plan of Merger dated as of
March 16, 1998 by and among Budget Group, Inc., BDG
Corporation, Ryder TRS, Inc., and certain other parties
(incorporated herein by reference to Exhibit 2.2 to the
Company's Form 8-K dated March 4, 1998).
2.4 -- Common Stock Purchase Agreement, dated as of January 13,
1997, between John J. Nevin and the Registrant (incorporated
by reference to Exhibit 2.7 to the Registrant's Registration
Statement on Form S-1, File No. 333-21691, dated February
12, 1997).
2.5 -- Budget Stock Purchase Agreement, dated as of January 13,
1997, between Budget Rent-a-Car Corporation and Team Rental
Group, Inc. (currently known as Budget Group, Inc.)
(incorporated by reference to Exhibit 2.8 to the
Registrant's Registration Statement on Form S-1, File No.
333-21691, dated February 12, 1997).
2.6 -- Amendment No. 2 to Agreement and Plan of Merger dated as of
June 19, 1998, by and among Budget Group, Inc., BDG
Corporation, Ryder TRS, Inc., and certain other parties
(incorporated by reference to Exhibit 2.3 to the Company's
Current Report on Form 8-K filed on June 30, 1998).
2.7 -- Form of Warrant issued to former Ryder TRS shareholders and
optionholders (incorporated by reference to Exhibit 2.4 to
the Company's Current Report on Form 8-K filed on June 30,
1998).
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
2.8 -- Preferred Stock Purchase Agreement, dated as of January 13,
1997, between Ford Motor Company and the Company
(incorporated by reference to Exhibit 2.9 to the Company's
Registration Statement on Form S-1, File No. 333-21691,
dated February 12, 1997).
2.9 -- Preferred Stockholders Agreement between Ford Motor Company
and the Company (incorporated by reference to Exhibit 2.10
to the Company's Registration Statement on Form S-1, File
No. 333-34799, dated September 26, 1997).
3.1 -- Restated Certificate of Incorporation of the Registrant.
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-4 as filed with the
Commission on May 11, 1999).
3.2 -- Amended and Restated Bylaws of the Registrant (incorporated
by reference to Exhibit 3.2 to the Company's Registration
Statement on Form S-4 as filed with the Commission on May
11, 1999).
4.1 -- Specimen Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Registrant's Registration Statement on
Form S-1, File No. 333-34799, dated September 26, 1997).
4.2 -- Base Indenture between Team Fleet Financing Corporation, as
Issuer, Team Rental Group, Inc., as Servicer and Team
Interestholder, and Bankers Trust Company, as Trustee,
relating to Rental Car Asset Backed Notes (incorporated by
reference to Exhibit 4.1 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994).
4.3 -- Supplemental Indenture relating to Rental Car Asset Backed
Notes (incorporated by reference to Exhibit 4.2 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994).
4.4 -- Base Indenture among BRAC SOCAL Funding Corporation, as
Issuer, BRAC-OPCO, Inc., as Servicer and Retained
Interestholder, and Bankers Trust Company, as Trustee
(incorporated by reference to Exhibit 4.5 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
4.5 -- Series 1995-1 Supplement to Base Indenture among BRAC SOCAL
Funding Corporation, as Issuer, BRAC-OPCO, Inc., as Servicer
and Retained Interestholder, and Bankers Trust Company, as
Trustee (incorporated by reference to Exhibit 4.6 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
4.6 -- Supplement No. 1 to Indenture, dated as of October 20, 1995,
among BRAC SOCAL Funding Corporation, BRAC-OPCO, Inc., Team
Rental of Southern California, Inc. and Bankers Trust
Company, as Trustee (incorporated by reference to Exhibit
4.7 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
4.7 -- Registration Rights Agreement, dated as of August 25, 1994,
among the Registrant, Brian Britton, Jeffrey Congdon,
Richard Hinkle, John Kennedy, Sanford Miller and Richard
Sapia (incorporated by reference to Exhibit 10.23 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994).
4.8 -- Indenture dated as of January 8, 1998 between the Company
and the Chase Manhattan Bank, as Trustee (incorporated
herein by reference from the Company's Registration
Statement on Form S-3, File No. 333-41093, dated November
26, 1997, as amended by Amendment No. 1 to Form S-3 dated
January 7, 1998).
4.9 -- First Amendment to Registration Rights Agreement, dated as
of November 1, 1994, among the Registrant, Brian Britton,
Jeffrey Congdon, Richard Hinkle, John Kennedy, Sanford
Miller and Richard Sapia (incorporated by reference to
Exhibit 10.24 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994).
4.10 -- Letter Agreement, dated as of November 1, 1994, between
Andrew Klein and the Registrant acknowledging that Andrew
Klein is a party to the Registration Rights Agreement, dated
as of August 25, 1994, as amended (incorporated by reference
to Exhibit 10.25 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994).
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
4.11 -- Registration Rights Agreement, dated as of October 20, 1995,
between Team Rental Group, Inc. and Budget Rent-a-Car of
Southern California (incorporated by reference to Exhibit
4.12 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
4.12 -- Registration Rights Agreement, dated as of December 1, 1996,
between Team Rental Group, Inc. and the holders of the
Convertible Subordinated Notes (incorporated by reference to
Exhibit 4.12 to the Registrant's Registration Statement on
Form S-1, File No. 333-21691, dated February 12, 1997).
4.13 -- Amended and Restated Base Indenture dated as of December 1,
1996 among Team Fleet Financing Corporation, as Issuer, Team
Rental Group, Inc., as Servicer and Team Interestholder, and
Bankers Trust Registrant, as Trustee (incorporated by
reference to Exhibit 4.15 to the Registrant's Registration
Statement on Form S-1, File No. 333-21691, dated February
12, 1997).
4.14 -- Series 1996-1 Supplement to the Amended and Restated Base
Indenture dated as of December 1, 1996 among Team Fleet
Financing Corporation, as Issuer, Team Rental Group, Inc.,
as Servicer and Team Interestholder, and Bankers Trust
Company, as Trustee (incorporated by reference to Exhibit
4.16 to the Registrant's Registration Statement on Form S-1,
File No. 333-21691, dated February 12, 1997).
4.15 -- Amended and Restated Master Motor Vehicle Lease Agreement
dated as of December 1, 1996 among Team Fleet Financing
Corporation, as Lessor, Team Rental Group, Inc., as
Guarantor, and certain subsidiaries of Team Rental Group,
Inc., as lessees (incorporated by reference to Exhibit 4.17
to the Registrant's Registration Statement on Form S-1, File
No. 333-21691, dated February 12, 1997).
4.16 -- Motor Vehicle Lease Agreement Series 1996-1 dated as of
December 1, 1996 among Team Fleet Financing Corporation, as
Lessor, Team Rental Group, Inc., as Guarantor, and certain
subsidiaries of Team Rental Group, Inc., as lessees
(incorporated by reference to Exhibit 4.18 to the
Registrant's Registration Statement on Form S-1, File No.
333-21691, dated February 12, 1997).
4.17 -- Registration Rights Agreement, dated as of November 6, 1997,
among the Registrant and the Stockholders of Budget
Rent-a-Car of St. Louis, Inc. (incorporated by reference to
Exhibit 4.7 of the Registrant's Registration Statement on
Form S-3, File No. 333-41093, dated November 26, 1997).
4.18 -- Registrant's Series A Preferred Stock Certificate of
Designations (incorporated by reference to Exhibit 3.4 to
the Registrant's Registration Statement on Form S-1, File
No. 333-34799, dated September 26, 1997).
4.19 -- 1994 Incentive Stock Option Plan (incorporated by reference
to Exhibit 10.27 to the Registrant's Registration Statement
on Form S-1, File No. 33-78274, dated April 28, 1994).
4.20 -- Amendment No. 1 to 1994 Stock Option Plan (incorporated by
reference to Exhibit 10.54 to Amendment No. 2 to the
Registrant's Registration Statement on Form S-1, File No.
333-4507, dated June 28, 1996).
4.21 -- 1994 Director's Plan (incorporated by reference to Exhibit
10.28 to the Registrant's Registration Statement on Form
S-1, File No. 33-78274, dated April 28, 1994).
4.22 -- Budget Rent a Car Corporation SavingsPlus Plan, as Amended
and Restated Effective January 1993 (incorporated by
reference to Exhibit 4.2 to Registrant's Registration
Statement on Form S-8, as filed with the Commission on July
14, 1998).
4.23 -- Amended and Restated Registration Rights Agreement, dated as
of April 29, 1997, between the Company and the holders of
the Convertible Subordinated Notes (incorporated by
reference to Exhibit 4.6 to the Registrant's Registration
Statement on Form S-3, as filed with the Commission on July
17, 1998).
4.24 -- Certificate of Trust of Budget Group Capital Trust
(incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-3, as filed
with the Commission on August 13, 1998).
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
4.25 -- Declaration of Trust of Budget Group Capital Trust dated as
of June 4, 1998, between Budget Group, Inc., The Bank of New
York and the Administrative Trustees named therein
(incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-3, as filed
with the Commission on August 13, 1998).
4.26 -- Amended and Restated Declaration of Trust dated as of June
19, 1998, between Budget Group, Inc., The Bank of New York
(Delaware), The Bank of New York and the Administrative
Trustees named therein (incorporated by reference to Exhibit
4.3 to the Registrant's Registration Statement on Form S-3,
as filed with the Commission on August 13, 1998).
4.27 -- Indenture for HIGH TIDES Debentures Due 2028 dated as of
June 19, 1998 between Budget Group, Inc. and The Bank of New
York (incorporated by reference to Exhibit 4.4 to the
Registrant's Registration Statement on Form S-3, as filed
with the Commission on August 13, 1998).
4.28 -- Form of HIGH TIDES (incorporated by reference to Exhibit 4.6
to the Registrant's Registration Statement on Form S-3, as
filed with the Commission on August 13, 1998).
4.29 -- Form of HIGH TIDES Debentures Due 2028 (incorporated by
reference to Exhibit 4.7 to the Registrant's Registration
Statement on Form S-3, as filed with the Commission on
August 13, 1998).
4.30 -- Guarantee Agreement dated as of June 19, 1998 by Budget
Group, Inc. as Guarantor (incorporated by reference to
Exhibit 4.8 to the Registrant's Registration Statement on
Form S-3, as filed with the Commission on August 13, 1998).
*4.31 -- Series 2000-1 Supplement dated as of February 25, 2000 to
the Amended and Restated Base Indenture dated as of December
1, 1996 among Team Fleet Financing Corporation, as Issuer,
Budget Group, Inc., as the Servicer and the Budget
Interestholder, and Bankers Trust Company, as Trustee
*4.32 -- Master Motor Vehicle Lease Agreement Group II dated as of
February 25, 2000 by an among Team Fleet Financing
Corporation, as Lessor; Budget Rent a Car Systems, Inc.; and
those subsidiaries, affiliates and non-affiliates of Budget
Group, Inc. named on Schedule 1 thereto, as Lessees
10.1 -- Amended and Restated Sublicense Agreement, dated as of
October 20, 1995, between Budget Rent-a-Car of Southern
California and Team Rental of Southern California, Inc.,
along with Corporate Guaranty of Team Rental Group, dated as
of October 20, 1995 (incorporated by reference to Exhibit
10.11 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.2 -- Lease Agreement dated September 1, 1993 between Miller and
Hinkle, a Florida general partnership, and Capital City
Leasing, Inc., as amended by First Amendment dated as of
July 1, 1994 (Henrico County, Virginia) (incorporated by
reference to Exhibit 10.41 to Amendment No. 3 to the
Registrant's Registration Statement on Form S-1, File No.
33-78274, dated August 12, 1994).
10.3 -- Lease Agreement dated June 1, 1994 between Miller and
Hinkle, a Florida general partnership, and Capital City
Leasing, Inc. (Chesterfield County, Virginia) (incorporated
by reference to Exhibit 10.25 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-1, File No.
333-4507, dated June 13, 1996).
10.4 -- Lease Agreement dated as of September 12, 1995 between MCK
Real Estate Corporation, Team Car Sales of Richmond, Inc.
and Team Rental Group, Inc. (incorporated by reference to
Exhibit 10.24 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.5 -- Agreement of Lease dated as of August 31, 1995 between MCK
Real Estate Corporation and Team Rental of Philadelphia,
Inc. (incorporated by reference to Exhibit 10.25 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
</TABLE>
37
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.6 -- Supply Agreement among Ford Motor Company, Team Rental
Group, Inc. and Budget Rent-a-Car Corporation (incorporated
by reference to Exhibit 10.6 to the Registrant's
Registration Statement on Form S-1, File No. 333-21691,
dated February 12, 1997).
10.7 -- Advertising Agreement between Ford Motor Company and Budget
Rent-a-Car Corporation (incorporated by reference to Exhibit
10.7 to the Registrant's Registration Statement on Form S-1,
File No. 333-21691, dated February 12, 1997).
10.8 -- Subordinated Notes Purchase Agreement, dated as of December
1, 1996, by and between the Registrant and the investors
listed therein (incorporated by reference to Exhibit 10.20
of the Registrant's Registration Statement on Form S-1, File
No. 333-21691, dated February 12, 1997).
10.9 -- Subordination Agreement, dated as of October 20, 1995, among
Budget Rent-a-Car of Southern California, BRAC-OPCO, Inc.,
Team Rental Group, Inc. and Team Rental of Southern
California (incorporated by reference to Exhibit 10.49 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.10 -- Shareholders' Agreement, dated as of October 20, 1995, by
and among Team Rental Group, Inc., the holders of the
Company's Class B Common Stock, and Budget Rent-a-Car of
Southern California (incorporated by reference to Exhibit
10.50 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.11 -- 1994 Incentive Stock Option Plan (incorporated by reference
to Exhibit 10.27 to the Registrant's Registration Statement
on Form S-1, File No. 33-78274, dated April 28, 1994).
10.12 -- Amendment No. 1 to 1994 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.54 to Amendment No.
2 to the Registrant's Registration Statement on Form S-1,
File No. 333-4507, dated June 28, 1996).
10.13 -- 1994 Director's Plan (incorporated by reference to Exhibit
10.28 to the Registrant's Registration Statement on Form
S-1, File No. 33-78274, dated April 28, 1994).
10.14 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and Sanford Miller (incorporated by reference to
Exhibit 10.29 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.15 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and John Kennedy (incorporated by reference to
Exhibit 10.30 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.16 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and Jeffrey Congdon (incorporated by reference to
Exhibit 10.31 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.17 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and Ronald Agronin (incorporated by reference to
Exhibit 10.32 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.18 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and Stephen Weber (incorporated by reference to
Exhibit 10.33 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.19 -- Second Amendment to 1994 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.24 to the
Registrant's Registration Statement on Form S-4, File No.
333-49679).
10.20 -- 1997 Amendment to 1994 Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.25 to the
Registrant's Registration Statement on Form S-4, File No.
333-49679).
10.21 -- Registration Rights Agreement dated as of June 19, 1998
between Budget Group Capital Trust, Budget Group, Inc. and
the several Purchasers named herein (incorporated by
reference to Exhibit 10.1 to the Registrant's Registration
Statement on Form S-3, as filed with the Commission on
August 13, 1998).
</TABLE>
38
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.22 -- Remarketing Agreement dated as of June 19, 1998 between
Budget Group, Inc., Budget Group Capital Trust, The Bank of
New York, the Administrative Trustees named therein and the
Remarketing Agent named therein (incorporated by reference
to Exhibit 10.2 to the Registrant's Registration Statement
on Form S-3, as filed with the Commission on August 13,
1998).
10.23 -- Amended and Restated Credit Agreement dated as of June 19,
1998 among Budget Group, Inc., as the Borrower, Certain
Financial Institutions, as the Lenders, Credit Suisse First
Boston, as a Co-Syndication Agent and the Documentation
Agent (incorporated by reference to Exhibit 10.23 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998).
10.24 -- First Amendment to Amended and Restated Credit Agreement
dated September 11, 1998 among Budget Group, Inc., as
Borrower, the Lenders and Credit Suisse First Boston, as
Administrative Agent (incorporated by reference to Exhibit
10.24 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998).
10.25 -- Limited Waiver No. 1 to Amended and Restated Credit
Agreement dated as of December 31, 1998 among Budget Group,
Inc., as Borrower, the Lenders and Credit Suisse First
Boston (incorporated by reference to Exhibit 10.25 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998).
10.26 -- Assignment, Assumption and Amendment Agreement dated as of
June 19, 1998 among Budget Group, Inc., as New Borrower,
Budget Rent A Car Corporation, as Existing Borrower, the
Lenders, Credit Suisse First Boston, as Co-Syndication
Agent, Co-Arranger and Administrative Agent and Nationsbanc
Montgomery Securities LLC, as Co-Syndication Agent,
Co-Arranger and Documentation Agent (incorporated by
reference to Exhibit 10.26 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998).
10.27 -- Form of Executive Severance Agreement dated October 1, 1998
between the Registrant and each of Messrs. Miller, Congdon,
Aprati and White (incorporated by reference to Exhibit 10.27
to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998).
10.28 -- Form of Executive Severance Agreement between the Registrant
and Mr. Sotir (incorporated by reference to Exhibit 10.28 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998).
10.29 -- Transaction Guaranty dated December 15, 1998 by Budget
Group, Inc. in favor of KeyBank National Association
(incorporated by reference to Exhibit 10.29 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998).
10.30 -- Second Amendment to Amended and Restated Credit Agreement
dated March 18, 1999 among Budget Group, Inc., as Borrower,
the Lenders and Credit Suisse First Boston, as
Administrative Agent (incorporated by reference to Exhibit
10.30 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998).
*10.31 -- Form of Executive Severance Agreement dated January 1, 2000
between the Registrant and each of Messrs. Siegel and Cohen
*10.32 -- Employment Letter dated October 22, 1999 between the
Registrant and David N. Siegel
*10.33 -- Employment Letter dated December 3, 1999 between the
Registrant and Neal S. Cohen
*10.34 -- Third Amendment to Amended and Restated Credit Agreement
dated December 22, 1999, among Budget Group, Inc., as
Borrower, the Lenders and Credit Suisse First Boston, as
Administrative Agent.
*10.35 -- Bridge Loan Agreement dated February 25, 2000, among Credit
Suisse First Boston, as Lender; Team Fleet Financing
Corporation, as Borrower; and Budget Group, Inc., as
Servicer.
*21.1 -- Subsidiaries of the Registrant.
*23.1 -- Consent of Arthur Andersen LLP.
*27.1 -- Financial Data Schedule -- December 31, 1999 (for SEC use
only).
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
*27.2 -- Restated Financial Data Schedule -- September 30, 1999 (for
SEC use only)
*27.3 -- Restated Financial Data Schedule -- June 30, 1999 (for SEC
use only)
*27.4 -- Restated Financial Data Schedule -- March 31, 1999 (for SEC
use only)
*27.5 -- Restated Financial Data Schedule -- December 31, 1998 (for
SEC use only)
*27.6 -- Restated Financial Data Schedule -- September 30, 1998 (for
SEC use only)
*27.7 -- Restated Financial Data Schedule -- June 30, 1998 (for SEC
use only)
*27.8 -- Restated Financial Data Schedule -- March 31, 1998 (for SEC
use only)
*27.9 -- Restated Financial Data Schedule -- December 31, 1997 (for
SEC use only)
</TABLE>
- ---------------
* Filed herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December
31, 1999.
(c) Exhibits
Exhibits are listed in Item 14(a).
(d) Financial Statement Schedules
Not applicable.
40
<PAGE> 43
BUDGET GROUP, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Consolidated Balance Sheets at December 31, 1998 and 1999... F-3
Consolidated Statements of Operations for each of the Three
Years in the period ended
December 31, 1999........................................... F-4
Consolidated Statements of Stockholders' Equity for each of
the Three Years in the period ended
December 31, 1999........................................... F-5
Consolidated Statements of Cash Flows for each of the Three
Years in the period ended
December 31, 1999........................................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 44
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Budget Group, Inc.:
We have audited the accompanying consolidated balance sheets of Budget
Group, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1998
and 1999, 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, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Budget Group, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN LLP
Orlando, Florida,
February 28, 2000 (except with
respect to the matter discussed
in Note 20, as to which the date
is March 19, 2000)
F-2
<PAGE> 45
BUDGET GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 124,011 $ 56,886
Restricted cash............................................. 421,467 1,074
Trade and vehicle receivables, net.......................... 397,503 416,218
Revenue earning vehicles, net............................... 2,747,717 3,179,603
Property and equipment, net................................. 213,018 215,530
Prepaid expenses and other assets........................... 172,625 226,190
Intangibles, including goodwill, less accumulated
amortization of $34,839 in 1998 and $59,542 in 1999....... 804,421 852,789
Net assets of discontinued operations....................... 102,500 134,228
---------- ----------
$4,983,262 $5,082,518
========== ==========
</TABLE>
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Notes payable............................................... $3,513,084 $3,637,710
Accounts payable, accrued and other liabilities............. 490,647 585,068
Deferred income taxes....................................... 36,024 757
---------- ----------
Total liabilities................................. 4,039,755 4,223,535
---------- ----------
COMMITMENTS AND CONTINGENCIES (NOTES 12, 14 AND 15).........
COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY.................................. 291,160 291,460
---------- ----------
STOCKHOLDERS' EQUITY
Class A common stock, $0.01 par value, one vote per share,
70,000,000 shares authorized. Shares issued, 34,064,812 in
1998 and 37,353,932 in 1999............................... 341 354
Class B common stock, $0.01 par value, 10 votes per share,
2,500,000 shares authorized, 1,936,600 shares issued (in
1998 and 1999)............................................ 19 19
Additional paid-in capital.................................. 670,089 646,641
Foreign currency translation adjustment..................... (3,412) (446)
Accumulated deficit......................................... (12,677) (77,217)
Treasury stock, at cost (176,867 in 1998 and 160,613 in 1999
shares of Class A common stock)........................... (2,013) (1,828)
---------- ----------
Total stockholders' equity........................ 652,347 567,523
---------- ----------
Total liabilities and stockholders' equity........ $4,983,262 $5,082,518
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 46
BUDGET GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
(IN THOUSANDS, EXCEPT FOR PER
SHARE AMOUNTS)
<S> <C> <C> <C>
OPERATING REVENUE:
Vehicle rental revenue..................................... $ 979,155 $1,834,805 $2,237,254
Royalty fees and other..................................... 50,777 94,070 112,203
---------- ---------- ----------
Total operating revenue.............................. 1,029,932 1,928,875 2,349,457
---------- ---------- ----------
OPERATING EXPENSES:
Direct vehicle and operating............................... 426,617 732,267 939,143
Depreciation - vehicle..................................... 265,831 467,490 557,926
Selling, general and administrative........................ 150,361 455,694 629,052
Amortization and non-vehicle depreciation.................. 22,137 49,952 69,479
Restructuring expenses..................................... -- 14,353 --
---------- ---------- ----------
Total operating expenses............................. 864,946 1,719,756 2,195,600
---------- ---------- ----------
OPERATING INCOME............................................ 164,986 209,119 153,857
---------- ---------- ----------
OTHER (INCOME) EXPENSE:
Vehicle interest expense................................... 88,698 174,794 189,539
Non-vehicle interest expense............................... 22,668 16,521 26,679
Interest income............................................ (5,744) (11,348) (7,397)
Debt extinguishment costs.................................. -- 9,454 --
---------- ---------- ----------
Total other expense, net............................. 105,622 189,421 208,821
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES...................................................... 59,364 19,698 (54,964)
Provision (benefit) for income taxes....................... 27,256 5,241 (23,826)
Distributions on trust preferred securities................ -- 9,957 18,750
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS.................... 32,108 4,500 (49,888)
DISCONTINUED OPERATIONS:
LOSS FROM OPERATIONS OF BUSINESS SEGMENTS TO BE
DISPOSED OF (Net of benefit for income taxes of $1,431 in
1997, $4,984 in 1998 and $200 in 1999)................... (2,334) (8,131) (327)
ESTIMATED LOSS FROM DISPOSAL OF BUSINESS SEGMENTS,
INCLUDING PROVISION FOR OPERATING LOSSES OF $12,160
DURING PHASE OUT PERIOD (Net of benefit for income taxes
of $8,780)............................................... -- -- (14,325)
---------- ---------- ----------
(2,334) (8,131) (14,652)
---------- ---------- ----------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM................. 29,774 (3,631) (64,540)
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT (Net of
benefit for income taxes of $26,602)....................... -- (45,296) --
---------- ---------- ----------
NET INCOME (LOSS)........................................... $ 29,774 $ (48,927) $ (64,540)
========== ========== ==========
Basic earnings per share:
Weighted average number of shares outstanding............... 20,112,000 32,067,000 36,430,000
========== ========== ==========
Income (loss) from continuing operations................... $ 1.60 $ 0.14 $ (1.37)
Loss from operations of business segments to be disposed of
(Net of income taxes).................................... (0.12) (0.26) (0.01)
Estimated loss from disposal of business segments,
including provision for operating losses during phase out
period (Net of income taxes)............................. -- -- (0.39)
---------- ---------- ----------
Net income (loss) before extraordinary item................ 1.48 (0.12) (1.77)
Extraordinary item (Net of income taxes)................... 0.00 (1.41) 0.00
---------- ---------- ----------
Net income (loss).......................................... $ 1.48 $ (1.53) $ (1.77)
========== ========== ==========
Diluted earnings per share:
Weighted average number of shares outstanding............... 27,863,000 32,067,000 36,430,000
========== ========== ==========
Income (loss) from continuing operations................... $ 1.33 $ 0.14 $ (1.37)
Loss from operations of business segments to be disposed of
(Net of income taxes).................................... (0.08) (0.26) (0.01)
Estimated loss from disposal of business segments,
including provision for operating losses during phase out
period (Net of income taxes)............................. -- -- (0.39)
---------- ---------- ----------
Net income (loss) before extraordinary item................ 1.25 (0.12) (1.77)
Extraordinary item (Net of income taxes)................... 0.00 (1.41) 0.00
---------- ---------- ----------
Net income (loss).......................................... $ 1.25 $ (1.53) $ (1.77)
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 47
BUDGET GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
FOREIGN
CONVERTIBLE ADDITIONAL CURRENCY RETAINED TOTAL
PREFERRED COMMON PAID-IN TRANSLATION EARNINGS TREASURY STOCKHOLDERS'
STOCK STOCK CAPITAL ADJUSTMENT (DEFICIT) STOCK EQUITY
----------- ------ ---------- ----------- --------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996..... $ -- $128 $114,891 $ 0 $ 6,476 $ (330) $121,165
Comprehensive income:
Net income................... -- -- -- -- 29,774 --
Foreign currency
translation................ -- -- -- (2,477) -- --
Total comprehensive income..... 27,297
Shares issued in business
combinations............... 105,750 2 8,521 -- -- -- 114,273
Net proceeds from stock
offerings.................. -- 91 188,406 -- -- -- 188,497
Proceeds from exercise of
stock options.............. -- 6 5,663 -- -- -- 5,669
Conversion of preferred
stock...................... (105,750) 45 105,705 -- -- -- --
Proceeds from exercise of
warrants................... -- 2 2,036 -- -- -- 2,038
--------- ---- -------- ------- -------- ------- --------
Balance, December 31, 1997..... -- 274 425,222 (2,477) 36,250 (330) 458,939
Comprehensive loss:
Net loss..................... -- -- -- -- (48,927) --
Foreign currency
translation................ -- -- -- (935) -- --
Total comprehensive loss....... (49,862)
Shares issued in business
combinations............... -- 42 154,316 -- -- -- 154,358
Proceeds from exercise of
stock options.............. -- 1 1,740 -- -- -- 1,741
Conversion of debt........... -- 43 88,811 -- -- -- 88,854
Purchase of treasury stock... -- -- -- -- -- (1,683) (1,683)
--------- ---- -------- ------- -------- ------- --------
Balance, December 31, 1998..... -- 360 670,089 (3,412) (12,677) (2,013) 652,347
Comprehensive loss:
Net loss..................... -- -- -- -- (64,540) --
Foreign currency
translation................ -- -- -- 2,966 -- --
Total comprehensive loss....... -- -- -- -- -- (61,574)
Shares issued in business
combinations............... -- -- 1,017 -- -- -- 1,017
Proceeds from exercise of
stock options.............. -- -- 7 -- -- -- 7
Make-whole payments.......... -- 13 (24,691) -- -- 185 (24,493)
Stock compensation expense... -- -- 219 -- -- -- 219
--------- ---- -------- ------- -------- ------- --------
Balance December 31, 1999...... $ -- $373 $646,641 $ (446) $(77,217) $(1,828) $567,523
========= ==== ======== ======= ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 48
BUDGET GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
Net income (loss)..................................... $ 29,774 $ (48,927) $ (64,540)
Loss from discontinued operations..................... 2,334 8,131 14,652
Extraordinary item (net).............................. -- 45,296 --
----------- ----------- -----------
Income (loss) from continuing operations.............. 32,108 4,500 (49,888)
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by operating
activities:
Depreciation and amortization......................... 287,968 517,442 627,405
Deferred income tax provision (benefit)............... 25,057 (6,518) (35,267)
Stock compensation expense............................ -- -- 219
Debt extinguishment costs............................. -- 9,454 --
Changes in operating assets and liabilities, net of
effects from acquisitions:
Trade and vehicle receivables, net................. (85,105) (55,401) (18,715)
Prepaid expenses and other assets.................. (5,897) (79,614) (19,531)
Accounts payable, accrued and other liabilities.... (42,262) (21,409) 94,421
----------- ----------- -----------
Net cash provided by continuing operating
activities.................................. 211,869 368,454 598,644
----------- ----------- -----------
CASH FLOWS FROM CONTINUING INVESTING ACTIVITIES:
Change in restricted cash............................. (213,715) (130,086) 420,393
Proceeds from sale of revenue earning vehicles........ 1,671,299 2,404,598 2,670,140
Proceeds from sale of property and equipment.......... 10,958 7,725 8,754
Purchases of revenue earning vehicles................. (1,974,960) (3,087,220) (3,713,528)
Purchases of property and equipment................... (4,799) (78,467) (104,430)
Payments for acquisitions, net of cash acquired....... (141,752) (166,660) (1,018)
----------- ----------- -----------
Net cash used in continuing investing
activities.................................. (652,969) (1,050,110) (719,689)
----------- ----------- -----------
CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES:
Net increase (decrease) in commercial paper........... 348,850 (30,955) (566,681)
Proceeds from medium term notes....................... 500,000 1,100,000 950,000
Principal payments on medium term notes............... (9,624) (30,376) (605,682)
Net increase (decrease) in other vehicle
obligations........................................ (665,865) (267,636) 9,720
Net increase (decrease) in working capital
facilities......................................... -- 50,000 (50,000)
Proceeds from other notes payable..................... 205,464 21,945 411,902
Principal payments on other notes payable............. (18,102) (27,359) (24,632)
Proceeds from trust preferred securities.............. -- 291,000 --
Proceeds from equity transactions, net................ 196,204 1,741 7
Purchase of treasury stock............................ -- (1,683) --
Early redemption of notes payable..................... -- (394,234) --
Make-whole payments................................... -- -- (23,932)
----------- ----------- -----------
Net cash provided by continuing financing
activities.................................. 556,927 712,443 100,702
----------- ----------- -----------
Net cash used by discontinued operations................ (44,348) (23,928) (46,380)
----------- ----------- -----------
Effect of exchange rate on cash......................... -- 6 (402)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents.... 71,479 6,865 (67,125)
Cash and cash equivalents, beginning of year............ 45,667 117,146 124,011
----------- ----------- -----------
Cash and cash equivalents, end of year.................. $ 117,146 $ 124,011 $ 56,886
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 49
BUDGET GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Budget Group, Inc. and subsidiaries (the "Company") are engaged in the
business of the daily rental of vehicles, including cars, trucks and passenger
vans (through both owned and franchised operations). On April 29, 1997, pursuant
to stock purchase agreements entered into on January 13, 1997, the Company
completed its acquisition of Budget Rent a Car Corporation ("BRACC") in a
purchase transaction and changed its name (formerly Team Rental Group, Inc.) to
Budget Group, Inc. Prior to the acquisition (the "BRACC Acquisition"), the
Company was the largest United States franchisee of BRACC. On June 19, 1998,
pursuant to an agreement and plan of merger, as amended, entered into March 4,
1998, the Company completed its acquisition of Ryder TRS, Inc. ("Ryder TRS").
In December 1999, the Company implemented formal plans to dispose of its
retail car sales segment and VPSI, Inc. ("VPSI") and Cruise America, Inc.
("Cruise"), respectively. The Company has provided for losses during the phase
out period and on the disposal of the operations and has segregated net assets
from these operations in the accompanying consolidated financial statements.
Prior period statements have been restated to conform with the current year
presentation (see Note 5).
Company-owned vehicle rental operations are located primarily throughout
the United States and Western Europe. The largest concentration (approximately
13%) of vehicle rental assets is located in the highly competitive Florida
market. Franchised vehicle operations are located worldwide. Customers are
mainly business and leisure travelers. No customer accounts for more than 10% of
the Company's revenues.
Principles of Consolidation
The consolidated financial statements include the accounts and operations
of the Company and its majority-owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation. Investments in
less than majority-owned entities are accounted for using the equity method,
under which the Company's share of operating results is reflected in income as
earned and dividends are credited against the investment when received.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management of the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Changes in Accounting Estimates
During 1998, the Company recorded adjustments related to actuarial
estimates of its self-insurance liability. The effect of these adjustments on
income from continuing operations and net income was an increase of $14,200
($0.44 per diluted share).
Cash and Cash Equivalents
The Company considers all highly liquid investments including money market
funds, commercial paper and time deposits purchased with an original maturity of
three months or less to be cash equivalents.
F-7
<PAGE> 50
Restricted Cash
Restricted cash consists of funds borrowed under medium term notes and
commercial paper programs not invested in revenue earning vehicles. Under the
terms of these agreements, any unused funds are required to be maintained in
restricted accounts and are invested in qualified short-term instruments.
Trade and Vehicle Receivables, Net
Trade and vehicle receivables are stated net of the related allowance for
doubtful accounts. The following table reflects the activity in the allowance
for doubtful accounts for the years ended December 31,
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of year................................ $ 3,151 $48,198 $69,040
Provision................................................... 8,189 25,463 32,547
Write-offs.................................................. (8,771) (8,358) (2,550)
Increase due to acquisitions................................ 45,629 3,737 451
------- ------- -------
Balance at end of year...................................... $48,198 $69,040 $99,488
======= ======= =======
</TABLE>
Revenue Earning Vehicles, Net
Revenue earning vehicles are stated at cost less related discounts and
manufacturers' incentives or fair market value at the date of acquisition, as
appropriate, and are depreciated over their estimated economic lives or at rates
corresponding to manufacturers' repurchase program guidelines, where applicable.
Repurchase programs typically require the manufacturers to repurchase the
vehicles after varying time frames at agreed upon prices (subject to defined
condition and mileage standards). Depreciation rates generally range from 1.0%
to 2.5% per month. Management periodically reviews depreciable lives and rates
for adequacy based on a variety of factors including general economic conditions
and estimated holding period of the vehicles. Gains and losses upon the sale of
revenue earning vehicles are recorded as an adjustment to depreciation expense.
Property and Equipment, Net
Property and equipment is recorded at cost or fair market value at the date
of acquisition, as appropriate. Depreciation and amortization are provided on
the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings and leasehold improvements........................ 10-25 years
Furniture, fixtures and office equipment.................... 3-10 years
</TABLE>
The carrying value of property and equipment is reviewed whenever events or
changes in circumstances indicate that the carrying value may not be recoverable
through projected undiscounted future operating cash flows. In the fourth
quarter of 1998, assets of approximately $600 were written off by a charge to
direct vehicle and operating expenses. Although no additional impairment is
indicated at December 31, 1999, the assessment of recoverability will be
impacted if estimated projected undiscounted operating cash flows are not
achieved.
Deferred Financing Fees
Direct costs incurred in connection with the Company's borrowings have been
recorded as a prepaid expense and are being amortized over the terms of the
related loan agreements to interest expense on the straight-line method, which
approximates the effective interest method.
Computer Software Systems
The Company's purchased reservation system and associated applications and
databases have been recorded at fair market value at the date of acquisition.
Costs associated with the internal development of other computer software
systems and system enhancements are capitalized in accordance with AICPA
F-8
<PAGE> 51
Statement of Position 98-1 "Accounting for Costs of Computer Software Developed
or Obtained for Internal Use". Amortization is being provided on the
straight-line method over two to eight years.
Intangibles, Including Goodwill
Intangible assets, including goodwill consist of the following at December
31:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Franchise agreements........................................ $126,922 $122,391
Trade names................................................. 214,936 207,668
Goodwill.................................................... 462,563 522,730
-------- --------
$804,421 $852,789
======== ========
</TABLE>
Identifiable intangible assets primarily arose from the allocation of
purchase prices of businesses acquired. Franchise agreements and trade names
relate to the BRACC and Ryder TRS Acquisitions. Goodwill represents the excess
of the purchase price over the estimated fair value of all identifiable assets
acquired. The intangible assets are amortized over the related estimated useful
lives, which range from 8 to 40 years, using the straight-line method. The
carrying value of intangibles is reviewed whenever events or changes in
circumstances indicate that the carrying value may not be recoverable through
projected undiscounted future operating cash flows. In the fourth quarter of
1998, intangible assets of approximately $3,170 were written off by a charge to
amortization and non-vehicle depreciation expense. Although no additional
impairment is indicated at December 31, 1999, the assessment of recoverability
will be impacted if estimated projected undiscounted operating cash flows are
not achieved.
Net Assets of Discontinued Operations
Net assets of discontinued operations to be disposed of, are separately
classified on the accompanying consolidated balance sheets at December 31, 1998
and 1999, at their estimated net realizable values. Prior year statements have
been restated to conform with the 1999 presentation. Included in this
classification is a 50% investment in a joint venture formed to facilitate the
disposal of used car sales locations.
Environmental Costs
Environmental remediation costs are recorded in accounts payable, accrued
and other liabilities and in direct vehicle and operating expense in the
accompanying consolidated financial statements based on estimates of known
environmental remediation exposures when it becomes probable that a liability
has been incurred. Environmental exposures are largely related to underground
storage tanks. Expenditures are expected to be made over the next three years. A
receivable is recorded for amounts recoverable from third parties when
collection becomes probable.
Self Insurance Liability
The Company is largely self insured with respect to personal and property
liability claims up to specified limits. Third-party insurance is maintained in
limited areas and for claims in excess of those specified limits. A liability in
the amount of $121,680 and $100,149 at December 31, 1998 and 1999, respectively,
which is included in accounts payable, accrued and other liabilities, is
recorded for known claims and for incurred but not reported incidents based on
actuarially computed estimates of expected loss. The liability recorded as a
result of these actuarially computed estimates may experience material changes
from year to year as incurred but not reported incidents become known and known
claims are settled.
The Company maintained letters of credit totaling $69,549 at December 31,
1999, largely in support of its insurance liability in certain states and
supporting the reimbursement of claims paid by third-party claims
administrators.
F-9
<PAGE> 52
Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of assets
and liabilities, as measured by the enacted tax rates currently in effect.
Deferred tax expense is the result of changes in the net deferred tax assets and
liabilities. The effect of a change in tax rates is recognized in the period
that includes the enactment date. Deferred taxes are recognized to the extent
they are expected to be payable upon distribution of earnings of foreign and
unconsolidated subsidiaries.
Translation of Foreign Financial Statements
The financial statements of the Company's foreign affiliates have been
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation".
Accordingly, assets and liabilities of foreign operations are translated at
period-end rates of exchange, with any resulting translation adjustments
reported as a separate component of stockholders' equity and included in
comprehensive net income (loss). Statement of operations accounts are translated
at average exchange rates for the period and gains and losses from foreign
currency transactions are included in net income (loss).
Royalty Fees and Other Revenues
Royalty fees and other revenues largely consist of monthly royalty fees
from franchisees, fees generated from move management services, income before
interest and taxes for insurance products and credit card processing operations,
the Company's share of operating results of equity investees' and revenues
generated from miscellaneous services provided to the Company's franchisees.
Advertising, Promotion and Selling
Advertising, promotion and selling expense, other than direct response
advertising, are charged to expense as incurred. The Company incurred
advertising expense of $26,241, $48,731 and $43,443 in 1997, 1998 and 1999,
respectively.
Derivatives
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", establishes accounting and reporting standards for derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. SFAS No. 137 "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of
Financial Accounting Standards Board ("FASB") Statement No. 133 -- an Amendment
of FASB Statement No. 133" defers the effective date of SFAS No. 133 until
January 2001 for the Company. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Based on its current
limited use of derivatives, the Company expects no material impact on its
financial condition or results of operations upon adoption of SFAS No. 133.
Stock Options
On April 25, 1994, the Company adopted the 1994 Incentive Stock Option Plan
and the 1994 Directors Stock Options Plan. The Company records compensation
expense for stock options under these plans in accordance with Accounting
Principles Board ("APB") Opinion 25. The Company has adopted the pro forma
disclosure requirement provisions of SFAS No. 123.
Earnings Per Share
Basic earnings per share was calculated by dividing net income (loss) from
continuing operations by the weighted average number of common shares
outstanding during the period. Diluted earnings per share was
F-10
<PAGE> 53
calculated by dividing net income (loss) available to common stockholders after
assumed conversion of dilutive securities by the sum of the weighted average
number of common shares outstanding plus all additional common shares that would
have been outstanding if potentially dilutive common shares had been issued. The
following table reconciles the income (loss) and number of shares utilized in
the earnings per share ("EPS") calculations for each of the three years in the
period ended December 31, 1999.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------- ------ --------
<S> <C> <C> <C>
Income (loss) from continuing operations.................... $32,108 $4,500 $(49,888)
Effect of interest, distributions, and loan fee amortization
on convertible securities -- net of income taxes.......... 4,983 -- --
------- ------ --------
Net income (loss) from continuing operations available to
common stockholders after assumed conversion of dilutive
securities................................................ $37,091 $4,500 $(49,888)
======= ====== ========
(000's) (000's) (000's)
Weighted average number of common shares used in basic
EPS....................................................... 20,112 32,067 36,430
Effect of dilutive securities:
Stock options............................................. 704 -- --
Convertible debt.......................................... 7,047 -- --
------- ------ --------
Weighted average number of common shares and dilutive
securities used in diluted EPS............................ 27,863 32,067 36,430
======= ====== ========
</TABLE>
Options to purchase 3,637,317 and 4,043,371 shares of Class A common stock
were outstanding at December 31, 1998 and 1999, respectively, but were not
included in the computation of diluted EPS as any options included in the
calculation would be antidilutive due to the net income (loss) from continuing
operations.
Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 established new standards for reporting and presenting
comprehensive income and its components in a full set of general purpose
financial statements. The Company's only adjustment to arrive at comprehensive
income (loss) is the foreign currency translation adjustment and is presented in
the accompanying consolidated statements of stockholders' equity.
Reclassifications
Certain amounts in the 1997 and 1998 consolidated financial statements have
been reclassified to conform with the current year presentation.
2. PUBLIC STOCK OFFERINGS
The Company sold 8,625,000 shares of Class A common stock on April 29,
1997, (at a price of $21.625 per share) raising proceeds of $174,489, net of
applicable offering costs. An additional 450,000 shares of Class A common stock
were sold on October 1, 1997, (at a price of $33.00 per share) raising net
proceeds of $14,008. The net proceeds of the April offering were used to provide
a portion of the financing for the acquisition of BRACC. The net proceeds of the
October offering were used for working capital purposes.
3. ACQUISITIONS
During 1997, 1998 and 1999, the Company acquired certain Budget franchise
operations, retail vehicle sales operations, BRACC, Ryder TRS, Cruise (a
recreational vehicle rental and sales company), and an insurance replacement car
rental company. The acquisitions have been accounted for under the purchase
method of accounting, except for Cruise which is accounted for as a pooling of
interests, and, accordingly, the Company has allocated the cost of the
acquisitions on the basis of the estimated fair value of the tangible and
F-11
<PAGE> 54
identifiable intangible assets acquired and liabilities assumed. The
accompanying consolidated statements of operations and cash flows reflect the
operations of the acquired companies accounted for as purchases from their
respective acquisition dates.
1997 Acquisitions
BRACC Acquisition -- On January 13, 1997, the Company entered into an
agreement to purchase all of the outstanding shares of BRACC in a purchase
transaction. The cash portion of the purchase price (approximately $275,000) was
partially funded through a stock offering. The Company also issued to Ford Motor
Company ("Ford"), 4,500 shares of Series A convertible, non-voting preferred
stock, each share of which was converted into 1,000 shares of Class A common
stock in a public offering in October 1997. The common shares underlying the
preferred stock had a value of approximately $105,800 for purposes of
determining the purchase price (based on the three-day period beginning January
12, 1997) and $95,200 at the time of issuance. The Company also entered into the
following debt financing transactions concurrently with the BRACC Acquisition:
(i) $165,000 of guaranteed senior notes at a rate of 9.57% maturing in 2007;
(ii) $45,000 of convertible subordinated notes at a rate of 6.85% maturing in
2007; (iii) a variable-rate commercial paper vehicle financing facility in the
amount of $900,000; (iv) a $500,000 asset-backed note vehicle financing facility
maturing in 2001 and 2002, composed of a senior note in the amount of $472,500
bearing interest at a rate of 7.35% and a subordinated note in the amount of
$27,500 bearing interest at a rate of 7.80%; and (v) a $300,000 five-year
secured working capital facility bearing interest at an initial rate of 1.75%
over LIBOR and secured primarily by accounts receivable, cash and unencumbered
vehicles.
Acquisition of Premier Car Rental -- On July 31, 1997, the Company
acquired, through its wholly owned subsidiary, Premier Car Rental LLC
("Premier"), the fleet and certain other assets and assumed certain liabilities
of Premier Car Rental, Inc. for approximately $87,200 consisting of $2,000 in
cash and the refinancing of approximately $85,200 of outstanding indebtedness.
Premier operates as its own brand and serves the insurance replacement market.
During the fourth quarter of 1999, the majority of Premier locations were
converted into Budget Rent a Car locations.
Acquisition of St. Louis Franchise -- In October 1997, the Company
purchased the St. Louis, Missouri Budget franchisee for approximately $9,000,
consisting of $1,000 in cash and 246,167 shares of Class A common stock.
1998 Acquisitions
Make Whole Provisions
The Company has entered into agreements in conjunction with the Ryder TRS
and other acquisitions to guarantee the market value of Class A common stock
issued in conjunction with the acquisitions. A make-whole payment will be
delivered if the price of the stock falls below a specified price during the
measurement periods. The make-whole payments may be made in cash or stock or a
combination of both at the Company's option.
Acquisitions
Acquisition of Cruise -- On January 28, 1998, the Company completed its
acquisition of Cruise in a stock-for-stock merger accounted for as a pooling of
interests. In connection with the merger, the Company issued 1,623,478 shares of
Class A common stock in exchange for all the outstanding common stock of Cruise.
In addition, the Company issued 111,478 options to purchase Class A common stock
in exchange for all of the outstanding options to purchase stock of Cruise.
Acquisition of Ryder TRS -- On June 19, 1998, pursuant to the Agreement and
Plan of Merger, as amended, entered into on March 4, 1998, the Company acquired
all of the outstanding stock of Ryder TRS, based in Denver, Colorado. As
consideration for the Ryder TRS acquisition, the Company issued 3,455,206 shares
of Class A common stock, paid $125,000 in cash and issued warrants to purchase
Class A common stock, the value of which is capped at $19,000. In addition, the
Company agreed to pay Ryder TRS
F-12
<PAGE> 55
stockholders a make-whole payment, which guarantees the market value of the
Class A common stock at approximately $33.00 per share over two 30 day
measurement periods in 1999 and 2000. The Company also assumed approximately
$522,000 of Ryder TRS's debt. The results of Ryder TRS are included in the
Company's results of operations from June 1, 1998, at which time the Company
effectively took control of Ryder TRS.
The Company recorded additional adjustments in connection with the
finalization of the purchase price allocation for the acquisition of Ryder TRS
in the first and second quarters of 1999, the most significant of which was
related to the fair market value of revenue earning vehicles of $34,900.
If the acquisition had occurred at the beginning of the periods presented,
the Company's results of operations would be as shown in the following table.
These unaudited pro forma results are not necessarily indicative of the actual
results of operations that would have occurred had the acquisitions actually
been made at the beginning of the respective periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1998
---------- ----------
(UNAUDITED)
<S> <C> <C>
Operating revenue........................................... $1,936,319 $2,125,637
Net loss from continuing operations......................... (294) (8,376)
EPS -- basic................................................ (0.01) (0.25)
EPS -- diluted.............................................. (0.01) (0.25)
</TABLE>
In connection with the Ryder TRS acquisition, the Company made a cash
make-whole payment of approximately $20,900 in July 1999 and expects to pay up
to $40,500 in 2000.
Other 1998 Acquisitions
Acquisition of Car Dealerships -- Effective in June 1998, the Company
purchased three new car dealerships, two located in Florida and one in Indiana.
The dealerships were acquired for cash or a combination of cash and stock
aggregating $16,000 in cash and the issuance of 445,854 shares of Class A common
stock.
Other 1998 Acquisitions -- The Company completed several small acquisitions
of Budget franchises and other related businesses through December 31, 1998.
These acquisitions are not material either individually or in the aggregate and
the Company does not expect them to have a significant impact on its financial
position or full year results of operations. The franchises were primarily
located in Puerto Rico, Canada, Austria, Spain, New Zealand, Arkansas, Ohio, and
California.
1999 Acquisitions
The Company completed several small acquisitions of Budget franchises and
other related businesses through December 31, 1999. These acquisitions are not
material either individually or in the aggregate and the Company does not expect
them to have a significant impact on its financial position or full year results
of operations. The acquisitions were primarily located in Florida, Virginia,
Ohio, England and France.
4. RESTRUCTURING
The accompanying consolidated financial statements for 1998 include charges
and accruals of approximately $12,800 ($6,700 in personnel expense and $6,100 in
general and administrative expense) related to closings of vehicle rental
locations and the centralization of certain finance and administrative functions
of the Company (the "Restructuring"). In conjunction with the Restructuring,
approximately 375 employees were identified for termination, primarily in
operations, sales, and finance. As of December 31, 1999, all of the affected
employees have been terminated.
F-13
<PAGE> 56
At December 31, 1999, the remaining accruals relating to the Restructuring
totaled approximately $5,200. During 1998 and 1999, amounts paid or utilized
totaled approximately $1,900 and $5,100 respectively and the Company recorded
reductions in the accruals of approximately $800 in 1999.
5. DISCONTINUED OPERATIONS
In December, 1999, the Company adopted plans to sell or dispose of its car
sales segment, as well as certain non-core assets and subsidiaries, primarily
Cruise and VPSI. The 30 car sales locations are expected to be disposed of by
September 2000 and Cruise and VPSI ("Non-core Subsidiaries") have estimated
disposal dates of mid-year 2000. The assets of the operations to be sold consist
primarily of vehicles, accounts receivable and property and equipment. The
consolidated statements for the periods ended December 31, 1997 and 1998 have
been restated to conform with the current year presentation.
Car Sales Segment
Net losses for the Car Sales segment of $10,066 (net of income tax benefits
of $6,169) for the 11 months ended November 30, 1999, are included in the
accompanying consolidated statements of operations under the heading
"Discontinued Operations".
The anticipated loss on the disposal of the car sales segment of $10,569
(net of income tax benefits of $6,478) represents the estimated operating losses
during the phase out period (beginning December 1999) of $5,522 (net of income
tax benefits) and loss on sale of discontinued operations of $5,047 (net of
income tax benefits). Approximately 61% of the operating loss was realized in
1999.
The car sales segment had retail vehicle sales revenue of $218,270,
$512,545 and $574,989 for the years 1997, 1998 and 1999, respectively. Operating
loss was $2,403, $23,376 and $9,756, respectively for the years 1997, 1998 and
1999. These amounts are not included in the revenue or operating income of the
accompanying consolidated statements of operations.
Assets and liabilities of the Car Sales segment to be disposed of, at net
realizable value, consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Cash........................................................ $ 5,504 $ 9,040
Trade and vehicle receivables, net.......................... 19,601 15,725
Vehicle inventory........................................... 69,202 60,285
Property and equipment, net................................. 8,630 12,699
Prepaid expenses and other assets........................... 2,787 3,256
Intangibles including goodwill.............................. 17,438 17,128
-------- --------
Total assets...................................... 123,162 118,133
Notes payable and accounts payable, accrued and other
liabilities............................................... 72,426 82,598
-------- --------
Net assets of discontinued operations..................... $ 50,736 $ 35,535
======== ========
</TABLE>
Cruise and VPSI
Net income for the Non-core Subsidiaries of $9,739 for the 11 months ended
November 30, 1999, are included in the accompanying consolidated statements of
operations under the heading "Discontinued Operations."
The anticipated loss on the disposal of the Non-core Subsidiaries of $3,756
(net of income tax benefits of $2,302) represents the estimated operating losses
during the phase out period of $2,018 (net of income tax benefits of $1,237) and
loss on sale of discontinued operations of $1,738 (net of income tax benefits of
$1,066). Approximately 63% of the estimated operating loss was realized in 1999.
F-14
<PAGE> 57
The Non-core Subsidiaries had revenue of $142,624, $139,634 and $148,781
and operating income of $8,409, $20,533, and $27,605 for the years 1997, 1998
and 1999, respectively. These amounts are not included in the revenue or
operating income of the accompanying consolidated statements of operations.
Assets and liabilities of the Non-core Subsidiaries to be disposed of, at
net realizable value consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Cash........................................................ $ 6,669 $ 7,327
Trade and vehicle receivables, net.......................... 8,078 6,858
Vehicles held for sale...................................... 8,479 3,557
Revenue earning vehicles, net............................... 94,814 128,137
Property and equipment, net................................. 7,671 7,171
Prepaid expenses and other assets........................... 4,436 8,290
-------- --------
Total assets...................................... 130,147 161,340
Notes payable and accounts payable, accrued and other
liabilities............................................... 78,383 62,647
-------- --------
Net assets of discontinued operations............. $ 51,764 $ 98,693
======== ========
</TABLE>
6. REVENUE EARNING VEHICLES, NET
Revenue earning vehicles consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Revenue earning vehicles.................................... $3,071,523 $3,636,387
Less--accumulated depreciation.............................. (323,806) (456,784)
---------- ----------
$2,747,717 $3,179,603
========== ==========
</TABLE>
7. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Land........................................................ $ 47,794 $ 43,677
Buildings and leasehold improvements........................ 126,891 134,613
Furniture, fixtures and office equipment.................... 90,884 117,826
-------- --------
265,569 296,116
Less -- accumulated depreciation and amortization........... (52,551) (80,586)
-------- --------
$213,018 $215,530
======== ========
</TABLE>
8. PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets include purchased software and
capitalized software systems development costs, net of accumulated amortization,
which amounts to approximately $68,920 and $102,819 at December 31, 1998 and
1999, respectively. In addition, prepaid expenses and other assets include the
Company's 20% investment in a foreign rental operation, and a 50% investment in
a truck rental joint venture operating out of Budget Storage USA locations.
The revenue of the Company's investees amounts to less than 10% of
consolidated revenues and the amount of undistributed earnings included in
consolidated retained earnings is not significant.
Due to changes in operating strategy, several computer software projects
with costs of approximately $19,743 were determined not to provide future
benefits and were consequently written off by the Company in 1999 and are
included in selling, general and administrative in the consolidated statements
of operations.
F-15
<PAGE> 58
9. NOTES PAYABLE
Notes payable consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Commercial paper............................................ $ 840,493 $ 273,812
Medium term notes:
Senior.................................................... 2,338,500 2,688,500
Subordinated.............................................. 43,182 37,500
Convertible subordinated notes.............................. 45,000 45,000
Vehicle obligations......................................... 65,844 8,574
Senior notes................................................ -- 400,000
Foreign notes............................................... 102,759 177,833
Working capital note........................................ 50,000 --
Other....................................................... 27,306 6,491
---------- ----------
$3,513,084 $3,637,710
========== ==========
</TABLE>
Debt Covenants
Many of the Company's debt obligations contain restrictive covenants, the
most restrictive of which are contained in the working capital facility. The
Company was in compliance with all covenants as of December 31, 1999.
Recent Debt and Security Placements and Retirements
In April 1999, the Company issued unsecured senior notes with an aggregate
principal amount of $400,000 bearing interest at 9.125% due in 2006 (the "Senior
Notes"). The net proceeds from this transaction were primarily used to repay the
outstanding indebtedness under maturing medium-term notes used to finance
revenue earning vehicles and certain other secured indebtedness. The indenture
governing the Senior Notes contains certain covenants which, among other things,
restrict the Company from incurring certain additional indebtedness, paying
dividends or redeeming or repurchasing its capital stock, consolidating, merging
or transferring assets and engaging in sale/leaseback transactions. In June
1999, the Company exchanged all of the unregistered initial Senior Notes for
registered Senior Notes with identical terms.
In June 1999, the Company issued medium term notes with a principal amount
of $950,000 bearing interest at rates ranging from 6.70% to 7.85% at December
31, 1999 ("TFFC-99 notes"). These notes have maturity dates from 2001 to 2004.
Both the notes issued in August 1994 ("TFFC-94 notes") and the notes
assumed in the BRACC acquisition ("BFFC-94A notes") were repaid in full in 1999.
These maturities were funded from the Senior Notes and the TFFC-99 notes.
Commercial Paper
The $900,000 commercial paper facility (the "CP") that was established in
April 1997, was renewed in April 1999 for $750,000, had an outstanding principal
balance of $840,493 and $273,812 at December 31, 1998 and 1999, respectively,
bears interest at rates ranging from 6.25% to 7.05% at December 31, 1999, and is
secured by the applicable vehicles and vehicle program receivables. Under
limited circumstances, the CP may be repaid by draws under a related, bank
provided liquidity facility ($651,000) or a related letter of credit ($40,000).
The CP is issued periodically with maturities of up to 58 days. It is the
Company's intention and ability to renew the liquidity facility or to obtain
financing under similar terms when the present agreement expires in October
2002. No amounts were drawn under the bank provided liquidity facility or
related letter of credit at December 31, 1999.
F-16
<PAGE> 59
Medium Term Notes
Medium term notes are comprised of TFFC-94 notes, the notes issued in
December 1996 ("TFFC-96 notes"), notes issued in April 1997 ("TFFC-97 notes"),
notes issued in June 1998 ("TFFC-98 notes"), notes issued in June 1999 ("TFFC-99
notes") and the BFFC-94A notes (collectively "MTN notes"). MTN notes are secured
by the underlying vehicles, manufacturer receivables and restricted cash of
$421,467 and $1,074 at December 31, 1998 and 1999, respectively. Under limited
circumstances the MTN notes may be repaid by draws under related letters of
credit amounting to $340,000 at December 31, 1999. No amounts were drawn under
the related letter of credit at December 31, 1999.
The TFFC-94 notes were paid in full in 1999. These notes consisted of
senior notes and subordinated notes with an aggregate principal of $105,682 at
December 31, 1998.
The BFFC-94A notes were repaid in full in 1999. These notes consisted of an
aggregate principal balance of $500,000 at December 31, 1998.
The TFFC-96 notes consist of senior notes and subordinated notes. The
senior notes, with an aggregate principal balance of $166,000 at December 31,
1998 and 1999, bear interest at 6.65% per annum. Monthly principal payments of
$13,833 commence in May 2001 with the last payment due in April 2002. The
subordinated notes, with an aggregate principal balance of $10,000 at December
31, 1998 and 1999, bear interest at 7.10% per annum and are payable in full in
2002. Interest on the TFFC-96 notes is payable monthly.
The TFFC-97 notes consist of senior notes and subordinated notes. The
senior notes, with an aggregate principal balance of $472,500 at December 31,
1998 and 1999, bear interest at 7.35% per annum. Monthly principal payments of
$39,375 commence in October 2001, with the last payment due in September 2002.
The subordinated notes, with an aggregate principal balance of $27,500 at
December 31, 1998 and 1999, bear interest at 7.80% per annum and are payable in
full in 2002. Interest on the TFFC-97 notes is payable monthly.
The TFFC-98 notes consist of an aggregate principal balance of $1,100,000
at December 31, 1998 and 1999, respectively. The TFFC-98 notes bear interest at
fixed rates ranging from 6.07% and 6.84% and have maturity dates from 2001 to
2005. Interest on the TFFC-98 notes is payable monthly.
The TFFC-99 notes consist of an aggregate principal balance of $950,000 and
bear interest at rates ranging from 6.70% to 7.85% at December 31, 1999. The
proceeds were primarily used to repay the outstanding indebtedness under
maturing medium term notes. These notes have maturity dates from 2001 to 2004.
Interest on the TFFC-99 notes is payable monthly.
Convertible Subordinated Notes
In April 1997, the Company issued convertible subordinated notes with an
aggregate principal amount of $45,000 bearing interest at 6.85% per annum due
2007. At a conversion price of $27.96 per share, the convertible subordinated
notes are convertible into 1,609,436 shares of Class A common stock.
Concurrent with the closing of the Ryder TRS acquisition in June 1998,
$80,000 of 7.00% convertible subordinated notes was exchanged for 4,305,814
shares of Class A common stock, including 319,768 shares issued in lieu of
interest payments which the holders of the convertible subordinated notes
forfeited as a result of the early conversion.
Vehicle Obligations
Vehicle obligations consist of outstanding lines of credit to purchase
rental vehicles. Collateralized lines of credit consist of $65,844 and $8,574 at
December 31, 1998 and 1999, respectively, for rental vehicles and have maturity
dates through 2003. Vehicle obligations are collateralized by revenue earning
vehicles financed under these credit facilities and proceeds from the sale,
lease or rental of these vehicles.
F-17
<PAGE> 60
Vehicle obligations relating to the rental fleet are generally amortized
over 5 to 36 months with monthly principal payments ranging from 2.0% to 2.5% of
the capitalized vehicle cost. When rental vehicles are sold, the related unpaid
obligation is due. Interest payments for rental fleet facilities are due monthly
at an annual interest rate of 7.25% at December 31, 1999. Management expects
vehicle obligations will generally be repaid within one year with proceeds
received from either the repurchase of the vehicles by the manufacturers in
accordance with the terms of the repurchase programs or from the sale of the
vehicles.
Foreign Notes
The foreign notes primarily provide financing for vehicle purchases and the
funding of working capital. At December 31, 1998 and 1999, approximately
$101,471 and $168,460 respectively, relates to vehicle debt, while $1,288 and
$9,373 respectively, relates to the funding of working capital and various other
debt. The foreign notes are largely secured by vehicles, bear interest at rates
ranging from 3.55% to 11.20% per annum and mature from 2000 through 2011.
Working Capital Facility
The Company maintains a $550,000 secured credit facility. This facility
requires monthly interest payments on the outstanding balance at a rate based on
either LIBOR plus 2.50% or prime plus 0.75% (8.32% at December 31, 1999) and
expires in 2003. The facility is secured primarily by cash, accounts receivable
and vehicles and is subject to certain covenants, the most restrictive of which
require the Company to maintain certain financial ratios and minimum tangible
net worth and restrict the payment of cash dividends. At December 31, 1999, the
Company had $449,549 in letters of credit and $0 in working capital borrowings
outstanding under this facility.
Other Notes
The Senior Notes consist of an aggregate principal amount of $400,000 at
December 31, 1999. The Senior Notes bear interest at 9.125% and mature in 2006.
The Company and its subsidiaries had $27,306 and $6,491 of debt outstanding
at December 31, 1998 and 1999, respectively under various other credit
facilities which are used primarily to provide working capital and finance
operating activities.
Schedule of aggregate maturities of notes payable at December 31, are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- ------------------------ ----------
<S> <C>
2000........................................................ $ 457,782
2001........................................................ 1,082,422
2002........................................................ 904,148
2003........................................................ 394,175
2004........................................................ 231,882
Thereafter.................................................. 567,301
----------
$3,637,710
==========
</TABLE>
10. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY
Proceeds from the Company obligated mandatorily redeemable preferred
securities ("trust preferred securities"), which are convertible preferred
stock, were used by the Company's subsidiary to invest in subordinated
debentures of the Company, which represents substantially all of the
subsidiary's assets. The Company ultimately used the proceeds to fund the
redemption of certain of the Company's outstanding indebtedness. The Company has
issued a subordinated guarantee of the subsidiary's obligations under the trust
preferred securities. The 6,000,000 shares of trust preferred securities issued
and outstanding are reflected in the balance sheet as "Company Obligated
Mandatorily Redeemable Securities of Subsidiary", while
F-18
<PAGE> 61
dividends are reflected in the consolidated statements of operations as a
minority interest captioned as "Distributions on trust preferred securities".
The trust preferred securities accrue distributions at a rate of 6.25% per
annum, have a liquidation value of $50 per share, are convertible into the
Company's Class A common stock at the rate of 1.5179 shares of Class A common
stock for each share of trust preferred securities and are subject to mandatory
redemption at 101% of the principal amount plus accrued interest upon the
redemption of the underlying debentures due on June 15, 2028. The Company has
the right to defer interest payments due on the subordinated debentures for up
to twenty consecutive quarters, which will also cause a deferral of
distributions under the trust preferred securities. During a deferral period,
the distributions will accumulate and the Company has agreed, among other
things, not to declare any dividends on its capital stock (subject to certain
exemptions).
11. RELATED PARTY TRANSACTIONS
The Company leases facilities from an entity owned by certain stockholders.
Operating lease payments for the years ended December 31, 1997, 1998, and 1999,
were $1,414, $1,766 and $2,044, respectively. The entity assigned lease payments
from the Company to a bank.
Approximately $19,811, $554 and $4,736 cash and cash equivalents are on
deposit with or being held as agent for the Company by a bank at December 31,
1997, 1998 and 1999, respectively. A stockholder and director of the Company
served on the bank's board of directors.
A director of the Company is a managing director of Credit Suisse First
Boston Corporation ("CSFBC"), an investment banking firm which periodically
performs services for the Company for which it receives compensation. CSFBC and
its affiliates have provided extensive services to the Company in connection
with certain of the Company's debt facilities, acquisitions and public offerings
of securities. Most recently, during 1998 CSFBC acted as lead underwriter in
connection with the offering of 6.25% trust preferred securities of Budget Group
Capital Trust in June 1998 and served as the Company's financial advisor in
connection with the Company's acquisition of Ryder TRS in June 1998, as well as
underwriters of both the Senior Notes in April 1999 and the TFFC-99 notes issued
in June 1999. Fees paid to CSFBC were approximately $25,000 and $20,000 in 1998
and 1999, respectively.
In December 1998, the Company's executive officers participated in the
Company's Executive Share Purchase Program ("the Program"). Under the Program,
executive officers purchased Class A common stock with funds provided by Key
Bank N.A. ("Key Bank"). The Company purchased the Class A common stock on behalf
of the officers in December 1998, prior to the finalization of the loans and was
repaid with the funding of the Key Bank loans in January 1999. Interest on the
loans is due quarterly and paid by the Company to Key Bank and is to be
reimbursed by the officer to the Company from the officer's annual incentive
award. Reimbursement of interest by the officer to the Company will be forgiven
if the price of the Class A common stock or financial results reach certain
performance targets or under other specified circumstances. The Company has
guaranteed the repayment of the officer's principal ($3,275 at December 31,
1999) and interest on the loans.
12. LEASES
The Company leases certain revenue earning vehicles and facilities under
operating leases that expire at various dates. Generally, the facility leases
are subject to payment increases based on cost of living indices and require the
Company to pay taxes, maintenance, insurance and certain other operating
expenses. Certain facility leases require the Company to pay fixed amounts plus
contingent rentals based on gross rental revenues, as defined, and gasoline
sales. In addition, the Company guarantees airport concession fees on behalf of
certain licensees.
F-19
<PAGE> 62
Expense for operating leases and airport concession fees consist of the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Revenue earning vehicles................................ $15,914 $ 30,473 $ 56,461
Facilities:
Minimum rentals....................................... 62,645 72,899 77,463
Contingent rentals.................................... 17,615 38,143 43,194
------- -------- --------
Total......................................... $96,174 $141,515 $177,118
======= ======== ========
</TABLE>
Future minimum payments under noncancellable leases and concession
agreements at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
2000........................................................ $ 63,354
2001........................................................ 46,481
2002........................................................ 41,050
2003........................................................ 42,724
2004........................................................ 37,391
Thereafter.................................................. 88,697
--------
$319,697
========
</TABLE>
13. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Continuing operations
Current:
Federal............................................. $ (11) -- $ 193
State............................................... 502 3,135 2,773
Foreign............................................. 816 1,624 1,734
Deferred............................................... 25,949 482 (28,526)
------- ------- --------
Total continuing operations.................... 27,256 5,241 (23,826)
------- ------- --------
Discontinued operations
Loss from operations................................... (1,431) (4,984) (200)
Estimated loss from disposal........................... -- -- (8,780)
------- ------- --------
Total discontinued operations.................. (1,431) (4,984) (8,980)
------- ------- --------
$25,825 $ 257 $(32,806)
======= ======= ========
</TABLE>
F-20
<PAGE> 63
The provision (benefit) for income taxes differs for income (loss) from
continuing operations from the amount computed using the statutory federal
income tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Income tax provision (benefit) at federal statutory
rate................................................... $20,837 $ 6,894 $(19,237)
Distributions on trust preferred securities.............. -- (3,485) (6,563)
Nondeductible portion of amortization of intangibles..... 2,116 2,931 3,446
Merger and acquisition costs............................. -- 558 --
State tax provision (benefit), net of federal benefit.... 1,006 578 (1,881)
Change in valuation allowance............................ 2,361 (2,375) --
Other.................................................... 936 140 409
------- ------- --------
$27,256 $ 5,241 $(23,826)
======= ======= ========
</TABLE>
The tax effects of temporary differences that give rise to the deferred tax
assets and liabilities at December 31, relate to the following:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $120,183 $201,157
Estimated self insurance liability........................ 64,991 42,300
Accrued expenses-pension.................................. 8,953 6,538
Accounts receivable, principally due to allowance for
doubtful accounts...................................... 9,177 11,493
Business tax credit carryforwards......................... 7,654 6,792
Foreign tax credit carryforwards.......................... 3,306 2,631
Alternative minimum tax carryforwards..................... 3,907 2,970
Foreign tax assets and net operating loss carryforwards... 3,799 2,963
Non-deductible reserves, accrued expenses and other....... 5,993 15,654
-------- --------
Total gross deferred tax assets................... 227,963 292,498
Less-valuation allowance.......................... (56,116) (56,116)
-------- --------
171,847 236,382
Deferred tax liabilities:
Difference between book and tax bases of revenue earning
vehicles and property and equipment.................... 80,459 113,303
Intangibles............................................... 123,943 119,173
Other..................................................... 3,469 4,663
-------- --------
Total gross deferred tax liabilities.............. 207,871 237,139
-------- --------
Net deferred tax liability........................ $ 36,024 $ 757
======== ========
</TABLE>
The Company has federal and state net operating loss carryforwards
available to offset future taxable income. At December 31, 1999, the Company and
its subsidiaries have federal tax loss carryforwards of approximately $529,000
expiring through December 2019. The Company has recorded a valuation allowance
for a portion of the acquired net operating loss carryforwards and other credit
carryforwards due to uncertainty of their ultimate realization. Any subsequently
recognized tax benefits attributed to the change in the valuation allowance will
reduce intangibles.
14. PENSION AND OTHER BENEFIT PLANS
Substantially all employees of the United Kingdom and certain employees in
the U.S. are covered under noncontributory pension plans. Plan benefits are
based on final average compensation. The Company's funding policy for the
domestic plan is to contribute the minimum ERISA contribution required under the
projected unit credit actuarial cost method. The domestic defined benefit
pension plan has been suspended. As a result of this suspension, employees earn
no additional benefits under the plan. The domestic plan is supplemented
F-21
<PAGE> 64
by an unfunded, nonqualified plan providing benefits (as computed under the
benefit formula) in excess of limits imposed by Federal tax law. The cost of the
supplemental plan was approximately $695 in 1997, $604 in 1998 and $594 in 1999.
The Company maintains an unfunded, nonqualified plan providing benefits to
certain of its officers, (the "Executive Protection Plan") based on percentage
of final compensation. The cost of the Executive Protection Plan was
approximately $161 in 1997, $262 in 1998 and $420 in 1999.
The Company also maintains a Savings Plus Plan. Under this plan, an
eligible employee of the Company, or its participating subsidiaries, who has
completed one year of continuous service and enrolls in the plan may elect to
defer from 1% to 15% of specified compensation under a "cash or deferred
arrangement" under Section 401(k) of the Internal Revenue Code, subject to
certain limitations. The Company contributes varying amounts (25% to 50%) on the
first 4% of each participating employee's eligible salary deferrals to various
funds established by the plan, plus an additional contribution at the discretion
of the Board of Directors, based on a percentage of an employee's total cash
compensation. The cost of the plan was approximately $4,025 in 1997, $2,049 and
$1,670 in 1998 and 1999, respectively.
Each of the Company's domestic defined benefit plan's accumulated benefits
exceed the plan's assets at December 31, 1999. The following table sets forth
the domestic and foreign pension plans funded status and amounts recognized in
the Company's consolidated financial statements at December 31, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
------------------ ------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
PLANS PLAN PLANS PLAN
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year............... $ 30,389 $ 6,684 $ 37,353 $14,035
Service cost.......................................... 75 1,465 148 1,766
Interest cost......................................... 2,192 678 2,249 803
Benefits paid......................................... (1,477) (133) (1,532) (397)
Actuarial (gain)/loss................................. 6,174 5,341 (473) 308
-------- ------- -------- -------
Benefit obligation at end of year....................... 37,353 14,035 37,745 16,515
-------- ------- -------- -------
Change in plan assets:
Fair value of plan assets at beginning of year........ 17,220 9,056 17,985 10,702
Actual return on plan assets.......................... 1,180 1,298 2,781 2,051
Employer contributions................................ 1,062 481 3,061 707
Benefits paid......................................... (1,477) (133) (1,532) (397)
-------- ------- -------- -------
Fair value of plan assets at end of year................ 17,985 10,702 22,295 13,063
-------- ------- -------- -------
Funded Status........................................... (19,368) (3,333) (15,450) (3,452)
Unrecognized prior service cost......................... 1,012 (3) 944 (3)
Unrecognized net (gain)/loss............................ (906) 4,987 (2,273) 3,846
-------- ------- -------- -------
Prepaid (accrued) pension cost.......................... $(19,262) $ 1,651 $(16,779) $ 391
======== ======= ======== =======
Components of net periodic pension cost:
Service cost.......................................... $ 75 $ 1,465 $ 148 $ 1,766
Interest cost......................................... 2,192 678 2,249 803
Expected return on assets............................. (1,442) (795) (1,508) (910)
Amortization of prior service cost.................... 68 306 68 261
Actuarial gain........................................ (30) -- -- --
-------- ------- -------- -------
Total expense................................. $ 863 $ 1,654 $ 957 $ 1,920
======== ======= ======== =======
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation for 1998 and 1999 was 5.75%.
No compensation increase has been assumed, as no additional benefits will be
earned under the domestic plans. The assumed compensation increase under the
Executive
F-22
<PAGE> 65
Protection Plan and foreign plan for 1998 and 1999 was 6.00%. The expected
long-term rate of return on plan assets for 1998 and 1999 was 8.50%.
Stock Options
On April 25, 1994, the Company adopted the 1994 Incentive Stock Option Plan
(the "ISO Plan") and the 1994 Directors' Stock Option Plan (the "Directors'
Plan"). The Company accounts for these plans under APB Opinion No. 25 under
which no compensation cost has been recognized. Had compensation cost been
determined consistent with SFAS No. 123, the Company's net income (loss) and EPS
would have been changed to the following pro forma amounts:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C> <C>
Net income (loss) from continuing
operations................................. As Reported $32,108 $ 4,500 $(49,888)
Pro Forma 27,523 (8,977) (60,373)
EPS -- Basic................................. As Reported 1.60 0.14 (1.37)
Pro Forma 1.37 (0.28) (1.66)
EPS -- Diluted............................... As Reported 1.33 0.14 (1.37)
Pro Forma.. 1.17 (0.28) (1.66)
</TABLE>
The calculated pro forma compensation cost may not be representative of
that to be expected in future years.
The ISO Plan provides for the issuance of up to 4,500,000 shares of Class A
or Class B common stock to key employees. The ISO Plan stock options may be
either incentive stock options or nonqualified options, vest between 12 and 48
months and expire ten years after the date of grant. The exercise price of
incentive stock options may not be less than the fair market value of the
underlying shares at the date of grant. The exercise price for nonqualified
options may not be less than 85% of the fair market value of the underlying
shares or, if greater, the book value of the underlying shares at the date of
grant.
The Directors' Plan provides for the issuance of shares of Class A common
stock to directors of the Company who are not employees of the Company. The
Directors' Plan stock options are nonqualified, vest six months following the
date of grant and expire ten years after the date of grant. The exercise price
of the nonqualified options under the Directors' Plan is the fair market value
of the underlying shares at the date of grant.
A summary of the status of the Company's two stock option plans at December
31, 1997, 1998 and 1999, and activity during the years then ended is presented
in the table and narrative below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
---------- --------------
<S> <C> <C>
Outstanding -- December 31, 1996............................ 867,504 11.29
Granted................................................... 1,674,480 22.87
Exercised................................................. (547,632) 10.66
Forfeited................................................. (86,290) 19.25
----------
Outstanding -- December 31, 1997............................ 1,908,062 21.27
Granted................................................... 2,090,700 25.99
Exercised................................................. (136,995) 12.68
Forfeited................................................. (224,450) 20.02
----------
Outstanding -- December 31, 1998............................ 3,637,317 24.38
Granted................................................... 1,774,700 9.86
Exercised................................................. (702) 10.68
Forfeited................................................. (1,367,944) 23.48
----------
Outstanding -- December 31, 1999............................ 4,043,371 18.34
==========
</TABLE>
F-23
<PAGE> 66
As of December 31, 1999, options for 3,378,371 shares and 665,000 shares of
Class A and Class B common stock, respectively, remained outstanding under the
Company's stock option plans.
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- ----------
<S> <C> <C> <C>
Exercisable at end of year --
Shares.............................................. 326,178 616,350 1,419,584
Weighted average exercise price..................... $ 13.85 $ 22.51 $ 22.82
Weighted average fair value of options granted during
the year............................................ $ 10.07 $ 15.38 $ 5.90
</TABLE>
At December 31, 1999, the options outstanding have exercise prices and
contractual lives as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Shares................................... 785,300 743,260 488,390 963,100 500,000
Exercise price........................... 30.88 22.38 17.88 11.00 6.19
Contractual life remaining............... 8.2 7.3 8.7 9.2 9.8
</TABLE>
The remaining 563,321 options have exercise prices between $6.31 and
$37.07, with a weighted average exercise price of $19.25 and a weighted average
remaining contractual life of 8.4 years. Of these options, 222,902 are
exercisable with a weighted average exercise price of $23.73.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model. For options granted under the ISO Plan,
a weighted average risk-free rate of return of 5.90%, 5.42% and 5.05% and
expected lives of three, five and five years were assumed for 1997, 1998 and
1999, respectively. For options granted under the Directors' Plan, a risk-free
rate of return of 6.63%, 5.50% and 4.75% and expected lives of five, seven and
seven years were assumed for 1997, 1998 and 1999, respectively. Additionally,
for each option plan there was no expected dividend yield and an expected
volatility of 65.7%.
15. COMMITMENTS AND CONTINGENCIES
For many years, Ford has been BRACC's principal supplier of vehicles and
held an equity interest in the Company from the time of the BRACC Acquisition
through October 6, 1997. The number of vehicles purchased from Ford has varied
from year to year. In model year 1998 and 1999, more than 70% of BRACC's U.S.
vehicle purchases were comprised of Ford vehicles. Under the terms of the supply
agreement that was entered into concurrently with the BRACC Acquisition, the
Company agreed to purchase or lease Ford vehicles in such a quantity that the
percentage of new Ford vehicles purchased or leased by the Company in the United
States, Canada, and other countries outside the European Union represent 70% of
the total new vehicle acquisitions by the Company, with a minimum quantity of at
least 80,000 vehicles in the United States in each model year. Given the volume
of vehicles purchased from Ford by the Company, shifting significant portions of
the fleet purchases to other manufacturers would require lead time and certain
operational changes. As a result, any inability by Ford to supply the Company
with the planned number and types of vehicles, any significant decline in the
quality and customer satisfaction with respect to Ford vehicles or any failure
of the parties to reach an agreement on the terms of any purchases could have a
material effect on the Company's financial condition and results of operations.
The Company agreed to pay Ford, on September 1, 1998, and on each
anniversary through September 1, 2004, an annual royalty equal to the greater of
(i) one percent of net vehicle revenue of BRACC locations owned prior to the
Budget Acquisition for the prior model year, or (ii) a specified minimum amount
(equal to $9,900 for the September 1, 1998, annual royalty payment and subject
to adjustment for each annual period thereafter, based upon changes in the
consumer price index). The minimum royalty payable with respect to each model
year will be reduced by a stated amount for each Ford vehicle purchased by the
Company and its affiliates and franchisees in excess of 123,000 Ford vehicles.
The aggregate of all royalties paid to Ford over the term of the agreement is
subject to a limit of $100,000. For the years ended September 1, 1998 and 1999,
no amounts were due to Ford under this royalty agreement.
Litigation
The Company terminated the franchise agreement of its franchisee for
Germany in 1997 based on alleged violations of provisions in the underlying
franchise agreement and ceased to provide services, such as reservations and
credit card processing, effective as of October 23, 1998. The former franchisee
has
F-24
<PAGE> 67
unsuccessfully challenged the termination in the German trial court and in the
court of appeals and is currently challenging this adverse decision in the
German Supreme Court. A ruling from the Supreme Court is expected by the end of
the second quarter of 2000. The former franchisee has ceased to operate under
the Budget Rent a Car name in Germany and the Company has commenced to operate,
and is continuing to develop the Budget Rent a Car business in Germany.
Litigation arising in the normal course of business is pending against the
Company. Management believes that the Company has meritorious defenses to all
significant litigation and that the ultimate outcome of the litigation will not
have a material adverse effect on the Company's consolidated financial position
or results of operations.
Environmental Matters
The Company has recorded amounts, which in management's best estimate will
be sufficient to satisfy anticipated costs of known remediation requirements. At
December 31, 1999, the Company has accrued $2,154 for estimated environmental
remediation costs and expects to expend approximately $1,505 during 2000.
Amounts receivable from third parties for reimbursement of remediation
expenditures are not significant.
Due to factors such as continuing changes in the environmental laws and
regulatory requirements, the availability and application of technology, the
identification of presently unknown remediation sites and changes in the extent
of expected remediation efforts, estimated costs for future environmental
compliance and remediation are subject to uncertainty and it is difficult to
predict the amount or timing of future remediation requirements. The Company
does not expect such future costs to have a material adverse effect on the
Company's consolidated financial position or results of operations.
16. FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosure about Fair Value of Financial Instruments". The estimated fair value
amounts are determined by the Company using available market information and
appropriate valuation methodologies. However, considerable judgment is required
in interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts the
Company could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amount.
Cash and Cash Equivalents, Restricted Cash, Trade and Vehicle Receivables and
Accounts Payable, Accrued and Other Liabilities
The carrying amounts of these financial assets and liabilities at December
31, 1998 and 1999 approximate fair value because of the short maturity of these
instruments.
Notes Payable
The carrying amount of a portion of the Company's notes payable
approximates fair market value at December 31, 1998 and 1999, since the debt is
at floating interest rates. The carrying amount of the Company's fixed-rate
notes payable approximates fair value at December 31, 1998 and 1999, due to the
recent issuance of such debt or because such notes do not have terms that differ
materially from those currently available to the Company.
17. SUPPLEMENTAL CASH FLOW DISCLOSURES
In 1997, the Company issued 4,746,167 shares of Class A common stock with a
value of $114,274 for the 1997 acquisitions. These amounts reflect the
conversion of 4,500 shares of Series A convertible, non-voting preferred stock
into 4,500,000 shares of Class A common stock which were sold by the selling
stockholder in October 1997.
F-25
<PAGE> 68
In 1998, the Company issued 5,716,800 shares of Class A common stock with a
value of $179,497 for the 1998 acquisitions.
In 1999, the Company issued 77,076 shares of Class A common stock with a
value of $1,017 for the 1999 acquisitions.
The Company paid interest of $105,622, $189,077 and $201,887 in 1997, 1998
and 1999, respectively.
Income taxes of $1,796, $4,014 and $4,507 were paid in 1997, 1998 and 1999,
respectively.
On occasion, the Company acquires goods and services in exchange for
revenue earning vehicles. During 1997, 1998 and 1999, revenue earning vehicles
in the amount of $2,100, $5,587 and $2,725 respectively, were exchanged for
goods and services.
A make-whole payment is delivered if the price of the stock issued in
certain purchases falls below a specified price during the measurement periods.
During 1999 make-whole payments were made in conjunction with Ryder TRS, Compact
Rent a Car Limited, United Leasing, Inc. Auto Rental Systems, Inc., Carson
Chrysler Plymouth Dodge Eagle Jeep, Inc. and Warren Wooten Ford, Inc. for
$23,932 in cash and 1,348,266 shares of Class A common stock with a value of
approximately $17,651.
During 1998, the early extinguishment of the guaranteed senior notes and
the Ryder TRS 10% senior subordinated notes resulted in the pretax write-off of
deferred financing fees of $18,264. This has been included in the extraordinary
item, net of tax benefits, in the accompanying consolidated statements of
operations.
Concurrent with the closing of the Ryder TRS acquisition in June 1998,
$80,000 of 7.00% convertible subordinated notes were exchanged for 4,305,814
shares of Class A common stock, including 319,768 shares issued in lieu of
future interest payments which the holders of the notes forfeited as a result of
the early conversion. The 319,768 shares issued to induce conversion of the
notes were recorded at their fair value of $8,854 and reflected in debt
extinguishment costs in the accompanying consolidated statements of operations.
18. SEGMENT INFORMATION
The Company is engaged in the business of the daily rental of vehicles,
principally cars, trucks, and passenger vans. Segments are determined by product
line and business activity.
The Car Rental segment includes BRACC, Budget Rent a Car International,
Inc., and Premier. The Truck Rental segment includes BRACC and Ryder TRS.
Segment information for the year ended December 31, 1997 is as follows:
<TABLE>
<CAPTION>
CORPORATE
CAR TRUCK AND
RENTAL RENTAL ELIMINATIONS CONSOLIDATED
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Operating revenue.......................... $980,322 $108,269 $(58,659) $1,029,932
Depreciation and amortization.............. 250,857 29,485 7,626 287,968
Operating income (loss).................... 138,816 29,833 (3,663) 164,986
Income (loss) from continuing operations
before income taxes...................... 48,950 19,257 (8,843) 59,364
</TABLE>
<TABLE>
<CAPTION>
DOMESTIC FOREIGN CONSOLIDATED
-------- -------- ------------
<S> <C> <C> <C>
Operating revenue..................................... $918,874 $111,058 $1,029,932
Long-lived assets..................................... 650,422 8,569 658,991
</TABLE>
F-26
<PAGE> 69
Segment information for the year ended December 31, 1998 is as follows:
<TABLE>
<CAPTION>
CORPORATE
CAR TRUCK AND
RENTAL RENTAL ELIMINATIONS CONSOLIDATED
---------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Operating revenue........................ $1,480,557 $520,951 $(72,633) $1,928,875
Depreciation and amortization............ 397,374 103,267 16,801 517,442
Operating income(loss)................... 163,423 75,218 (29,522) 209,119
Income (loss) from continuing operations
before income taxes.................... 26,836 27,143 (34,281) 19,698
</TABLE>
<TABLE>
<CAPTION>
DOMESTIC FOREIGN CONSOLIDATED
---------- -------- ------------
<S> <C> <C> <C>
Operating revenue................................... $1,753,144 $175,731 $1,928,875
Long-lived assets................................... 1,071,318 19,776 1,091,094
</TABLE>
Segment information for the year ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
CORPORATE
CAR TRUCK AND
RENTAL RENTAL ELIMINATIONS CONSOLIDATED
---------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Operating revenue........................ $1,702,786 $734,877 $(88,206) $2,349,457
Depreciation and amortization............ 450,652 160,430 16,323 627,405
Operating income (loss).................. 119,468 57,512 (23,123) 153,857
Income (loss) from continuing operations
before income taxes.................... (66,193) (30,144) 41,373 (54,964)
</TABLE>
<TABLE>
<CAPTION>
DOMESTIC FOREIGN CONSOLIDATED
---------- -------- ------------
<S> <C> <C> <C>
Operating revenue................................... $2,089,497 $259,960 $2,349,457
Long-lived assets................................... 1,104,574 72,870 1,177,444
</TABLE>
Foreign operations include rental and royalty revenues primarily from
Europe, Australia and New Zealand.
19. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table is a summary of quarterly information for the years
ended December 31, 1998 and 1999 (in thousands except per share data).
<TABLE>
<CAPTION>
1998 1999
----------------------------------------- ------------------------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
----------------------------------------- ------------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31 MARCH 31 JUNE 30 SEPT 30 DEC 31(3)
-------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenue..................... $343,341 $448,152 $627,764 $509,618 $493,205 $588,463 $694,597 $573,192
Operating income (loss)............... 36,412 52,308 146,120 (25,721) 12,680 79,403 127,703 (65,929)
Income (loss) from continuing
operations.......................... (708) 1,091 56,157 (52,040) (19,718) 16,081 29,830 (76,081)
Average shares outstanding
-- basic........................... 27,445 29,499 35,942 35,928 35,856 35,902 36,768 37,175
Income (loss) from continuing
operations per share-basic (1)...... (0.02) 0.04 1.56 (1.45) (0.55) 0.45 0.81 (2.05)
Average shares outstanding --
diluted............................. 27,445 30,243 47,016 35,928 35,856 46,818 47,485 37,175
Income (loss) from continuing
operations per share-diluted (1).... (0.02) 0.04 1.27 (1.45) (0.55) 0.42 0.70 (2.05)
Market price of stock (2)
High.............................. 39.50 39.00 33.125 25.00 16.375 17.25 12.9375 9.25
Low............................... 30.00 26.875 17.00 11.00 10.4375 10.00 6.875 6.00
</TABLE>
- ---------------
(1) Income (loss) per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share does not
equal the total for the year.
(2) On March 23, 2000, (i) the closing sale price of the Class A common stock as
reported on the New York Stock Exchange was $4.625 per share and (ii) there
were approximately 339 holders of record of the Class A common stock and
three holders of record of the Class B common stock.
F-27
<PAGE> 70
(3) In the quarter ended December 31, 1999, the Company recorded a $105.4
million charge for one-time and other items which consisted primarily of
severance benefits related to work force reductions, consolidation costs to
merge the majority of Premier rental locations into Budget locations and the
write-off of systems development costs and uncollectable accounts receivable
largely associated with the conversion of systems in 1999.
As of April 17, 1997, the Company's Class A common stock has been listed on
the New York Stock Exchange under the symbol "BD". Prior to such date, the
Company's Class A common stock was traded in the NASDAQ National Market under
the symbol "TBUD". The table details the high and low bid information for the
Class A common stock as reported by the NASDAQ National Market or the high and
low sales prices for the Class A common stock as reported by the New York Stock
Exchange, as the case may be, for the periods indicated.
The Company has never paid any cash dividends on its common stock, and the
Board of Directors currently intends to retain all earnings for use in the
Company's business for the foreseeable future. Any future payment of dividends
will depend upon the Company's results of operations, financial condition, cash
requirements and other factors deemed relevant by the Board of Directors.
20. SUBSEQUENT EVENT
On March 19, 2000, the Company repurchased warrants to purchase shares of
its common stock from the former owners of Ryder TRS shareholders for an
aggregate purchase price of approximately $18,500 in cash.
F-28
<PAGE> 71
SIGNATURES
Pursuant to requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 30th day of
March, 2000.
BUDGET GROUP, INC.
(Registrant)
By: /s/ SANFORD MILLER
------------------------------------
Sanford Miller
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant and
in the capacities indicated on March 30, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ SANFORD MILLER Chairman of the Board, Chief Executive
- -------------------------------------------- Officer and Director
Sanford Miller
/s/ JEFFREY D. CONGDON Vice Chairman of the Board and Director
- --------------------------------------------
Jeffrey D. Congdon
/s/ NEAL F. COHEN Chief Financial Officer (Principal Financial
- -------------------------------------------- Officer)
Neal Cohen
/s/ THOMAS L. KRAM Vice President, Controller (Principal
- -------------------------------------------- Accounting Officer)
Thomas L. Kram
/s/ RONALD D. AGRONIN Director
- --------------------------------------------
Ronald D. Agronin
/s/ JAMES F. CALVANO Director
- --------------------------------------------
James F. Calvano
/s/ F. PERKINS HIXON, JR. Director
- --------------------------------------------
F. Perkins Hixon, Jr.
/s/ MARTIN P. GREGOR Director
- --------------------------------------------
Martin P. Gregor
/s/ JOHN P. KENNEDY Director
- --------------------------------------------
John P. Kennedy
/s/ DR. STEPHEN L. WEBER Director
- --------------------------------------------
Dr. Stephen L. Weber
</TABLE>
<PAGE> 1
EXHIBIT 4.31
SERIES 2000-1 SUPPLEMENT
dated as of February 25, 2000
to the
AMENDED AND RESTATED BASE INDENTURE
dated as of December 1, 1996
among
TEAM FLEET FINANCING CORPORATION,
the Issuer
BUDGET GROUP, INC.
the Servicer
BUDGET GROUP, INC.,
the Budget Interestholder
and
BANKERS TRUST COMPANY,
the Trustee
<PAGE> 2
Series 2000-1 Supplement, dated as of February 25, 2000 (as amended,
supplemented or otherwise modified from time to time in accordance with the
terms hereof and of the Base Indenture referred to below, this "Supplement"),
among Team Fleet Financing Corporation, a Delaware corporation ("TFFC" or the
"Issuer"), Budget Group, Inc. ("Budget"), a Delaware corporation formerly known
as Team Rental Group, Inc. ("Team"), as the Servicer (in such capacity, the
"Servicer"), Budget, as the holder of the Budget Interest (in such capacity,
the "Budget Interestholder") and Bankers Trust Company, a banking corporation
organized and existing under the laws of the State of New York, as Trustee (the
"Trustee") under the Amended and Restated Base Indenture, dated as of December
1, 1996, among TFFC, Team and the Trustee (as amended, supplemented or
otherwise modified from time to time, exclusive of Supplements creating a new
Series of Notes, the "Base Indenture").
PRELIMINARY STATEMENT
WHEREAS, Sections 2.2 and 12.1 of the Base Indenture provide, among
other things, that TFFC, the Servicer and the Trustee may at any time and from
time to time enter into a supplement to the Base Indenture for the purpose of
authorizing the issuance of one or more Series of Notes.
WHEREAS, all conditions precedent as set forth in such Sections with
respect to entering into a supplement to the Base Indenture have been
satisfied.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DESIGNATION
(a) There is hereby created a Series of Notes to be issued in one
class pursuant to the Base Indenture and this Supplement and such Series of
Notes (as defined below) shall be designated generally as the Variable Funding
Rental Car Asset Backed Note, Series 2000-1 and is referred to as the "Series
2000-1 Note."
(b) The proceeds from the sale of and Increases in respect of the
Series 2000-1 Note shall be deposited in the Series 2000-1 Collection Account,
and such proceeds shall be available to TFFC and used (i) on and after the
Series 2000-1 Issuance Date, to finance the acquisition by the Issuer and the
Lessees of, or to refinance, Financed Vehicles and Eligible Receivables and
(ii) on and after the Series 2000-1 Issuance Date, to acquire Lessor-Owned
Vehicles manufactured by certain Eligible Manufacturers.
<PAGE> 3
(c) The Series 2000-1 Note is a Segregated Series of Notes (as more
fully described in the Base Indenture) and is hereby designated as a "Group II
Series of Notes". Accordingly, the Series 2000-1 Note (and each other Group II
Series of Notes) shall be secured solely by the Group II Collateral and any
other collateral designated as security for the Series 2000-1 Note (and, as
applicable, any other Group II Series of Notes) under this Supplement or any
other Supplement and will not be secured by any other collateral. The Issuer
may from time to time issue additional Segregated Series of Notes that the
related Series Supplements will indicate are entitled to share, together with
the Series 2000-1 Note, the Group II Collateral and any other collateral
designated as security for the Group II Series of Notes under this Supplement
or any other related Series Supplement (the Series 2000-1 Note and any such
additional Segregated Series, each, a "Group II Series of Notes" and,
collectively, the "Group II Series of Notes"). Accordingly, all references in
this Supplement to "all" Series of Notes (and all references in this Supplement
to terms defined in the Base Indenture that contain references to "all" Series
of Notes) shall, unless the context otherwise requires, refer solely to all
Group II Series of Notes.
(d) If, notwithstanding the provisions of clause (c) above, the Series
2000-1 Note is deemed by any court to be secured by collateral other than the
Group II Collateral and any other collateral designated as security for the
Series 2000-1 Note (and, as applicable, any other Series of Group II Notes)
under this Supplement or any other Supplement ("Non-Group II Collateral"), then
the interest of the Series 2000-1 Noteholders in such Non-Group II Collateral
shall be subordinate in all respects to the interest of the Noteholders of the
Series to which such Non-Group II Collateral was pledged by the terms of the
Indenture. The following shall govern the interpretation and construction of
the provisions of this Supplement: (i) this Supplement is intended to
constitute a subordination agreement under New York law and for purposes of
Section 510(a) of the Bankruptcy Code, (ii) the subordination provided for in
this Supplement is intended to and shall be deemed to constitute a "complete
subordination" under New York law, and, as such, shall be applicable whether or
not the Issuer or any Series 2000-1 Noteholder is a debtor in a case (a
"bankruptcy case") under the Bankruptcy Code (or any amended or successor
version thereof), (iii) (A) any reference to the Series 2000-1 Note shall
include all obligations of the Issuer now or hereafter existing under each such
Series 2000-1 Note, whether for principal, interest, fees, expenses or
otherwise, and (B) without limiting the generality of the foregoing, "interest"
owing on the Series 2000-1 Note shall expressly include any and all interest
accruing after the commencement of any bankruptcy case or other insolvency
proceeding where the Issuer is the debtor, notwithstanding any provision or
rule of law (including, without limitation, 11 U.S.C. ss.ss. 502, 506(b) (1994)
(or any amended or successor version thereof)) that might restrict the rights
of any holder of an interest in the Series 2000-1 Note, as against the Issuer
or any one else, to collect such interest, (iv) "payments" prohibited under the
subordination provisions of this Supplement shall include any distributions of
any type, whether cash, other debt instruments, or any equity instruments,
regardless of the source thereof, and (v) the holder of any interest in the
Series 2000-1 Note retains such
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holder's right, under 11 U.S.C. ss. 1126 (1994) (or any amended or successor
version thereof), to vote to accept or reject any plan of reorganization
proposed for the Issuer in any subsequent bankruptcy of the Issuer; provided,
however, that, regardless of any such vote or of the exercise of any other
rights such holder (or its agents) may have under the Bankruptcy Code, and
without limiting the generality of the other clauses of this clause (d), any
distributions that such holder is to receive on account of such holder's
interest in the Series 2000-1 Note under any such plan of reorganization, from
the Issuer, from any collateral, from any guarantor, or from any other source
shall be subordinated in right of payment as set forth herein and shall instead
be distributed in the order of priority set forth herein.
ARTICLE 2
DEFINITIONS
Section 2.1. Incorporation of Schedule 1, etc. All capitalized terms
not otherwise defined herein shall have the meaning set forth therefor in
Schedule 1 to the Base Indenture, as amended, supplemented or otherwise
modified from time to time in accordance with the terms of the Base Indenture.
All Article, Section or Subsection references herein shall refer to Articles,
Sections or Subsections of the Base Indenture, except as otherwise provided
herein. Unless otherwise stated herein, as the context otherwise requires or if
such term is otherwise defined in the Base Indenture, each capitalized term
used or defined herein shall relate only to the Series 2000-1 Note and not to
any other Series of Notes issued by TFFC.
Section 2.2. Defined Terms. The following words and phrases, unless
otherwise defined in the Bridge Loan Agreement then in effect, shall have the
following meanings with respect to the Series 2000-1 Note and the definitions
of such terms are applicable to the singular as well as the plural form of such
terms and to the masculine as well as the feminine and neuter genders of such
terms:
"Accounts" means the Collection Account, the Group II Collection
Account, the Series 2000-1 Collection Account, the Series 2000-1 Distribution
Account and each collection account for each other Group II Series of Notes.
"Accrued Amounts" means, with respect to any Group II Series of Notes
(or any class of such Series of Notes), on any date of determination, the sum
of (i) accrued and unpaid interest on the Notes of such Series of Notes (or the
applicable class thereof), (ii) the portion of the accrued and unpaid Monthly
Servicing Fee (and any Supplemental Servicing Fee) allocated to such Series of
Notes (or the applicable class thereof) pursuant to the Indenture on such date,
and (iii) the product of (A) all other accrued and unpaid fees and expenses of
the Issuer on such date, and (B) a fraction, the numerator of which is the
Invested Amount of such Series of Notes (or the applicable class thereof) on
such date and the denominator of which is the aggregate Invested Amount of all
Series of Notes including non-segregated Series of Notes) on such date.
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"Additional Distribution Date" has the meaning specified in Section
5.3(b)(ii).
"Additional Fees" means, with respect to any Series 2000-1 Interest
Period, the aggregate amount of fees, if any, under the Bridge Loan Agreement
then in effect which have accrued during such Series 2000-1 Interest Period and
which are payable by TFFC in respect of the Series 2000-1 Note, in each case
solely to the extent such fees are not included in the calculation of the
Series 2000-1 Note Rate for any Series 2000-1 Interest Period.
"Advance" has the meaning specified in the Bridge Loan Agreement.
"Aggregate Asset Amount" means, with respect to the Group II Series of
Notes, for any date of determination, the sum, rounded to the nearest $100,000,
of (i) the Aggregate Group II Repurchase Asset Amount and (ii) cash and
Permitted Investments on deposit in the Collection Account and Group II
Collection Account allocable to the Group II Series of Notes.
"Aggregate Principal Balance" means, for any date of determination the
aggregate unpaid principal amount of the Outstanding Series 2000-1 Note as of
such date.
"Aggregate Group II Repurchase Asset Amount" means, for any date of
determination, the sum (without duplication), rounded to the nearest $100,000,
of (i) the Net Book Value of all Group II Repurchase Vehicles leased under the
Group II Master Lease as of such date and not turned in to the Manufacturer
thereof pursuant to its Repurchase Program or not otherwise sold or deemed to
be sold under the Related Documents, plus (ii) all amounts receivable as of
such date from Manufacturers under Repurchase Programs with respect to Group II
Repurchase Vehicles turned in to such Manufacturers pursuant to any such
Repurchase Program or delivered to an authorized auction, pursuant to any
Repurchase Program, other than any such amounts which have become Losses, plus
(iii) all Auction Receivables due with respect to the disposition of Group II
Repurchase Vehicles as of such date from any Auction Dealer with respect to
Group II Repurchase Vehicles, other than any such amounts which have become
Losses, plus (iv) the aggregate amount of Eligible Receivables as of such date,
other than any such amounts which have become Losses, plus (v) with regard to
Group II Repurchase Vehicles that have been turned in to the Manufacturer or
otherwise sold, any accrued and unpaid Base Rent under the Group II Master
Lease with respect to such Group II Repurchase Vehicles (net of amounts set
forth in clauses (ii), (iii) and (iv) above), other than any such amounts which
have become Losses.
"Asset Amount Deficiency" with respect to the Series 2000-1 Notes
shall mean a Series 2000-1 Asset Amount Deficiency and with respect to any
other Group II Series of Notes, shall have the meaning specified in the related
Series Supplement.
"Auction Dealer" means a Manufacturer-approved auction dealer under an
Eligible Repurchase Program which is a guaranteed depreciation program.
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"Auction Receivable" means a legal, valid and binding receivable due
from an Auction Dealer to TFFC or a Lessee in respect of Group II Vehicles sold
at an auction conducted by or through or arranged by the Manufacturer pursuant
to its Eligible Repurchase Program which is a guaranteed depreciation program.
"Base Amount" means, as of any date of determination, the sum of the
Net Book Values of all Financed Vehicles leased under the Finance Lease as of
such date, each such Net Book Value calculated as of the first day contained
within both the calendar month in which such date of determination occurs and
the Vehicle Term for the related Financed Vehicle, plus all accrued and unpaid
Monthly Base Rent thereunder as of such date.
"Base Indenture" has the meaning set forth in the preamble.
"BRACC" means Budget Rent A Car Corporation, a Delaware corporation.
"Bridge Loan Agreement" means the Bridge Loan Agreement, dated as of
February 25, 2000, among TFFC, as borrower, Budget, as servicer and Credit
Suisse First Boston, New York Branch, as lender, as such agreement may be
amended, supplemented, amended and restated or otherwise modified from time in
accordance with the terms thereof.
"Budget" has the meaning set forth in the preamble.
"Budget Interest" means the transferable indirect interest in TFFC's
assets held by the Budget Interestholder to the extent relating to the Group II
Collateral, including the right to receive payments with respect to such
collateral in respect of the Budget Interest Amount.
"Budget Interest Amount" means, on any date of determination, the
amount, if any, by which the Aggregate Asset Amount at the end of the day
immediately prior to such date of determination exceeds the Required Asset
Amount at the end of such day.
"Budget Interest Percentage" means, on any date of determination, when
used with respect to Group II Collections that are Principal Collections,
Recoveries, Losses and other amounts, an amount equal to one hundred percent
(100%) minus the sum of (i) the invested percentages for all outstanding Group
II Series of Notes including all classes of such Series of Notes and (ii) the
available subordinated amount percentages for all Group II Series of Notes that
provide for credit enhancement in the form of overcollateralization, in each
case as such percentages are calculated on such date with respect to Group II
Collections that are Principal Collections, Recoveries, Losses and other
amounts, as applicable.
"Budget Interestholder" means Budget, as owner of all outstanding
capital stock of TFFC or any permitted successor or assign.
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"Casualty Payment" has the meaning specified in Section 6 of the Group
II Master Lease.
"Collateral" means the Group II Collateral, the Series 2000-1
Collateral.
"Collections" means Group II Collections and all other Series 2000-1
Collections.
"Consolidated Subsidiary" means, at any time, with respect to Budget,
any Subsidiary or other entity the accounts of which would be consolidated with
those of Budget, in its consolidated financial statements as of such time.
"Daily Interest Amount" means, for any day in a Series 2000-1 Interest
Period, an amount equal to (a) the product of (i) the Series 2000-1 Note Rate
for such Series 2000-1 Interest Period and (ii) the aggregate unpaid principal
amount of the Series 2000-1 Note as of the close of business on such date,
divided by (b) 360.
"Decrease" means a Voluntary Decrease or a Mandatory Decrease, as
applicable.
"Deposit Date" has the meaning specified in Section 5.2 of this
Supplement.
"Determination Date" means the second Business Day prior to each
Distribution Date.
"Disposition Date" means, with respect to any Group II Repurchase
Vehicle, (i) if such Group II Vehicle was sold at auction or returned to a
Manufacturer for repurchase, pursuant to the applicable Repurchase Program, the
date on which such Group II Vehicle was sold at auction or accepted for return
by such Manufacturer or its agent and, in each case, the Depreciation Charges
ceased to accrue pursuant to such Repurchase Program, or (ii) if such Group II
Vehicle was sold to any Person (other than to a Manufacturer pursuant to such
Manufacturer's Repurchase Program or to a third party through an auction
conducted by or through or arranged by the Manufacturer pursuant to its
Repurchase Program), the date on which title to the Group II Repurchase Vehicle
was transferred in connection with such sale.
"Disposition Proceeds" means the net proceeds (other than the
Repurchase Price or Guaranteed Payments payable by the related Manufacturer
pursuant to an Eligible Repurchase Program) from the sale or disposition of
Group II Vehicles to any Person, whether at auction or otherwise; provided,
however, that Disposition Proceeds shall not include Termination Payments.
"Distributions" means (i) contributions, loans or other distributions
made by Budget to a profit sharing or pension plan not made in the ordinary
course of the operation of such Plan and (ii) all fees, rents and other
compensation or payments paid or made by Budget or its Subsidiaries to any
stockholder of Budget except for such fees, rents or other compensation or
payments paid or made in exchange for actual services rendered to Budget on an
arm's length basis by such stockholder.
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"Distribution Date" means, with respect to the Series 2000-1 Note, the
25th day of each calendar month or, if such day is not a Business Day, the next
succeeding Business Day, commencing March 27, 2000.
"Eligible Manufacturer" means an Eligible Repurchase Manufacturer.
"Eligible Receivable" means a legal, valid and binding receivable (a)
due from any Eligible Repurchase Manufacturer or Auction Dealer under an
Eligible Repurchase Program to TFFC, a Lessee or a creditor of TFFC or such
Lessee, (b) in respect of a Group II Repurchase Vehicle purchased by such
Eligible Repurchase Manufacturer or sold at an auction pursuant to an Eligible
Repurchase Program, which absent such purchase or sale, would have constituted
an Eligible Repurchase Vehicle with respect to which either (i) the Lien of the
Trustee was noted on the Certificate of Title at the time of purchase or
refinancing or (ii) such Group II Vehicle was (x) owned by and titled in the
name of a Lessee prior to the date such Person became a Lessee pursuant to
Section 23 of the Group II Master Lease and (y) refinanced by TFFC under the
Group II Master Lease pursuant to the initial Vehicle Order of such Lessee
thereunder, and (c) the right to payments in respect of which has been assigned
by the payee thereof to the Trustee for the benefit of the Secured Parties;
provided that no amount receivable from an Eligible Repurchase Manufacturer or
Auction Dealer under an Eligible Repurchase Program shall be an Eligible
Receivable if such amount remains unpaid more than ten (10) days after (i) the
Repurchase Program Payment Due Date in respect of such Group II Vehicle, in the
case of amounts receivable from an Eligible Repurchase Manufacturer or (ii) the
Disposition Date in respect of such Group II Vehicle, in the case of amounts
due from an Auction Dealer.
"Eligible Repurchase Manufacturer" means each Manufacturer listed on
Exhibit B to this Supplement and any other Manufacturer that (a) has an
Eligible Repurchase Program, (b) has been approved by each Enhancement
Provider, if any, for the Group II Series of Notes and (c) with respect to
which Rating Agency Confirmation (for all Group II Series of Notes) the
addition of such Manufacturer as an Eligible Repurchase Manufacturer; provided,
however, that upon the occurrence of a Manufacturer Event of Default with
respect to such Manufacturer, such Manufacturer shall no longer qualify as an
Eligible Repurchase Manufacturer.
"Eligible Repurchase Program" means, at any time, a Repurchase Program
(as defined in this Supplement) offered by an Eligible Repurchase Manufacturer
(a) pursuant to which the Repurchase Price (or the price guaranteed to be
received at an auction conducted by or within the requirements established by
such Manufacturer) is at least equal to the Capitalized Cost of each Group II
Vehicle, minus all Depreciation Charges accrued with respect to such Group II
Vehicle prior to the date that the Group II Vehicle is submitted for repurchase
or auction, minus Excess Mileage Charges, minus Excess Damage Charges and minus
any other charges specified in such Repurchase Program, (b) that cannot be
amended or terminated with respect to any Group II Vehicle after the purchase
of that Group II Vehicle, and (c) with respect to any Group II Repurchase
Vehicle of such Manufacturer that is leased or proposed to be leased under the
Group II Master Lease, the benefits of which Repurchase Program
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<PAGE> 9
have been collaterally assigned to the Trustee pursuant to an Assignment
Agreement acknowledged in writing by such Manufacturer and applicable to the
model year of such Group II Repurchase Vehicle, and TFFC (and the Trustee on
behalf of TFFC) has been provided with an opinion of counsel or officer's
certificate reasonably satisfactory to the Trustee that the Trustee and TFFC
can enforce the applicable Manufacturer's obligations thereunder; provided,
however, that with respect to a Repurchase Program for any model year beginning
with 2000 and thereafter, if any Group II Series of Notes is then being rated
by Standard & Poor's or Moody's, TFFC shall have received (i) confirmation by
Standard & Poor's or Moody's, as the case may be, that the acquisition of Group
II Vehicles pursuant to such Repurchase Program will not result in the
reduction or withdrawal of any rating issued by Standard & Poor's or Moody's in
respect of such Series of Notes, and (ii) if there is a major change to a
Repurchase Program during a model year, Rating Agency Confirmation that the
acquisition of Group II Vehicles pursuant to such Repurchase Program will not
result in a reduction or withdrawal of any rating issued by each Rating Agency
in respect of such Series of Notes.
"Eligible Repurchase Vehicle" means any automobile, van or light truck
(a) which at the time of purchase or financing by TFFC is eligible under an
Eligible Repurchase Program, (b) which is owned by TFFC (other than a
Refinanced Vehicle), and (c) with respect to which either (i) the Trustee is
noted as the first lienholder on the Certificate of Title therefor or (ii) the
Certificate of Title has been submitted to the appropriate state authorities
for such notation; provided, however, if the actions provided in clause (i) or
(ii) are not sufficient in any state to cause the Trustee's Lien upon such
Group II Vehicle to be a perfected first Lien, then in order for a Group II
Vehicle titled in such state to be an "Eligible Repurchase Vehicle," such
action as is required to cause the Trustee's Lien to be a perfected first Lien
shall have been taken by the Servicer.
"Enhancement Percentage" means (for purposes of determining the Series
2000-1 Required Asset Amount) on any day, 15%.
"Excess Amounts" has the meaning specified in Section 5.2(d)(vi) of
this Supplement.
"Excluded Payments" means the following amounts payable to TFFC or a
Lessee pursuant to the Repurchase Programs: (i) all incentive payments payable
to TFFC or a Lessee to purchase Group II Vehicles under the Repurchase
Programs, (ii) all amounts payable to TFFC or a Lessee as compensation for the
preparation by TFFC or a Lessee of newly delivered Group II Vehicles under the
Repurchase Programs and (iii) all amounts payable to TFFC or a Lessee in
reimbursement for warranty work performed by TFFC or a Lessee on the Group II
Vehicles under the Repurchase Programs.
"Finance Lease" has the meaning specified in Annex B to the Group II
Master Lease.
"Financed Vehicle" means an Eligible Repurchase Vehicle that is (a)
acquired by a Lessee and financed by TFFC on or after the Lease Commencement
Date under the Finance Lease, (b) a Refinanced Vehicle, (c) a Texas Vehicle or
(d) a Hawaii Vehicle.
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"Group II Collateral" has the meaning specified in Section 3.1(a) of
this Supplement.
"Group II Collection Account" has the meaning specified in Section
5.1(a) of this Supplement.
"Group II Collections" means (a) all payments made under the Group II
Master Lease, (b) all Disposition Proceeds, Repurchase Prices and Guaranteed
Payments on Group II Vehicles, (c) any insurance proceeds or other payments
with respect to the Group II Vehicles and (d) all amounts earned on Permitted
Investments allocable to or arising out of investment of funds on deposit in
the Group II Collection Account; provided that, in the case of amounts in
clauses (b) and (c), such amounts shall be allocated to the Group II Vehicles
in accordance with the terms hereof and the Servicer's normal practices and
procedures for determining and allocating vehicle proceeds.
"Group II Interest Collections" means on any date of determination (a)
the aggregate amount of Group II Collections in the Group II Collection Account
which represent (i) Monthly Variable Rent, Monthly Finance Rent or Monthly
Supplemental Rent accrued under the Group II Master Lease, or (ii) any amounts
earned on Permitted Investments in the Collection Account and the Group II
Collection Account which constitute Group I Collateral, and (b) amounts earned
on Permitted Investments in the Group II Collection Account (or any subaccount
thereof), which, in the case of clauses (a)(ii) and (b) above, are available
for distribution on such date.
"Group II Invested Amount" means, as of any date of determination, an
amount equal to the aggregate of the Invested Amounts of all Group II Series of
Notes.
"Group II Master Lease" means the Master Motor Vehicle Lease
Agreement, Group II, dated as of February 25, 2000, among TFFC, as lessor,
certain subsidiaries and affiliates of Budget and certain non-affiliates of
Budget, as lessees, and Budget, as guarantor, as amended, supplemented or
otherwise modified from time to time.
"Group II Principal Collections" means all Group II Collections other
than Group II Interest Collections.
"Group II Repurchase Vehicle" means a passenger automobile, van or
light truck that is leased under the Group II Master Lease and is subject to an
Eligible Repurchase Program at the time of its leasing under the Group II
Master Lease.
"Group II Series of Notes" has the meaning specified in Article 1 of
this Supplement.
"Group II TFFC Agreements" has the meaning specified in Section
3.1(a)(i) of this Supplement.
"Group II Vehicles" means Group II Repurchase Vehicles.
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"Hawaii Vehicle" means a Group II Vehicle acquired by TFFC on or after
the Lease Commencement Date for lease in the State of Hawaii.
"Increase" has the meaning specified in Section 4.2(a) of this
Supplement.
"Increase Date" means the date on which an Increase occurs.
"Initial Fleet" means the Group II Vehicles owned and titled in the
name of TFFC or a Lessee on, and leased under the Group II Master Lease as of,
the Series 2000-1 Issuance Date.
"Initial Invested Amount" means the aggregate initial principal amount
of the Series 2000-1 Note, which is $25,000,000.
"Interest Reset Date" means the first day of the applicable Series
2000-1 Interest Period.
"Invested Amount" means, with respect to each Series of Notes, the
amount specified in the applicable supplement.
"Late Return Payment" has the meaning specified in Section 12 of the
Group II Master Lease.
"Lease Collateral" has the meaning specified in Section 2(b) of the
Group II Master Lease.
"Lender" means Credit Suisse First Boston, New York Branch, as lender
under the Bridge Loan Agreement, and its successors and assigns in such
capacity.
"Lessor-Owned Vehicle" means any Eligible Repurchase Vehicle other
than a Financed Vehicle, that is acquired by TFFC and leased by TFFC to any of
the Lessees under Annex A to the Group II Master Lease.
"Losses" means, on any date of determination, the sum of all Series
2000-1 Repurchase Losses.
"Manufacturer Receivable" means an amount due from a Manufacturer
under a Repurchase Program in respect of or in connection with a Group II
Repurchase Vehicle being turned back to such Manufacturer.
"Mandatory Decrease" has the meaning specified in Section 4.3(a).
"Master Lease Advance" has the meaning specified in Section 2.1(a) of
the Group II Master Lease.
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"Maximum Lease Commitment" means, on any date of determination, the
sum of (i) the maximum face amount of the Series 2000-1 Note, plus (ii) the
Series 2000-1 Available Subordinated Amount on such date, plus the aggregate
Net Book Values of all Group II Vehicles leased under the Group II Master Lease
as of such date which were acquired, financed, or refinanced with funds other
than proceeds of the Series 2000-1 Note or the Series 2000-1 Available
Subordinated Amount, plus (iv) any amounts held in the Budget Distribution
Account that TFFC commits on or prior to such date to invest in new Group II
Vehicles (as evidenced by an Officers' Certificate of TFFC) in accordance with
the terms of the Group II Master Lease and the Indenture.
"Monthly Principal Allocation" has the meaning specified in Section
5.5(a).
"Monthly Base Rent" has the meaning specified in Section 9(a) of Annex
A and in Section 6(a) of Annex B to the Group II Master Lease.
"Monthly Supplemental Payment" has the meaning specified in Section
6(b) of Annex B to the Group II Master Lease.
"Moody's" means Moody's Investors Service, Inc.
"Net Book Value" means, with respect to any Group II Vehicle being
leased under the Group II Master Lease (a) as of any date of determination
during the period from the Vehicle Lease Commencement Date for such Group II
Vehicle to but excluding the Determination Date with respect to the Related
Month in which such Vehicle Lease Commencement Date occurs (such Determination
Date, the "Initial Determination Date" for such Group II Vehicle), the
Capitalized Cost of such Group II Vehicle, (b) as of the Initial Determination
Date for such Group II Vehicle, (i) the Capitalized Cost for such Group II
Vehicle minus (ii) the aggregate Depreciation Charges accrued with respect to
such Group II Vehicle through the last day of the Related Month in which the
Vehicle Lease Commencement Date for such Group II Vehicle occurred, or (c) as
of any Determination Date after the Initial Determination Date, (i) the Net
Book Value of such Group II Vehicle as calculated on the immediately preceding
Determination Date minus (ii) the aggregate Depreciation Charges accrued with
respect to such Group II Vehicle during the Related Month (through the last day
thereof). After the Initial Determination Date, on any day which is not a
Determination Date, the Net Book Value of a Group II Vehicle shall be the Net
Book Value calculated for such Group II Vehicle on the most recent
Determination Date.
"Note Interest Shortfall" with respect to the Series 2000-1 Note, has
the meaning specified in Section 5.4.
"Operating Lease" has the meaning specified in Annex A to the Group II
Master Lease.
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"Permitted Investments" means negotiable instruments or securities
maturing on or before the related Distribution Date represented by instruments
in bearer or registered or in book entry form which evidence (i) obligations
the full and timely payment of which is to be made by or is fully guaranteed by
the United States of America; (ii) demand deposits, time deposits in, or
certificates of deposit issued by, any depositary institution or trust company
incorporated under the laws of the United States of America or any state
thereof and subject to supervision and examination by Federal or State banking
or depositary institution authorities; provided, however, that at the time of
the investment or contractual commitment to invest therein, the certificates of
deposit or short-term deposits, if any, or long-term unsecured debt obligations
(other than such obligation whose rating is based on collateral or on the
credit of a Person other than such institution or trust company) of such
depositary institution or trust company shall have a credit rating from
Standard & Poor's of A-1 and from Moody's of at least P-1, in the case of
certificates of deposit or short-term deposits, or a rating from Standard &
Poor's not lower than AA or from Moody's not lower than Aa3, in the case of
long-term unsecured debt obligations; (iii) commercial paper having, at the
time of the investment or contractual commitment to invest therein, a rating
from Standard & Poor's of at least A-1 and from Moody's of at least P-1; (iv)
demand deposits or time deposits which are fully insured by the Federal Deposit
Insurance Corporation; (v) bankers, acceptances issued by any depositary
institution or trust company described in clause (ii) above; (vi) investments
in money market funds rated AAm or AAmG by Standard & Poor's or otherwise
approved in writing by Standard & Poor's and a comparable rating from Moody's
or otherwise approved in writing by Moody's; (vii) Eurodollar time deposits
having a credit rating from Standard & Poor's of A-1 and from Moody's of at
least P-1; (viii) repurchase agreements involving any of the Permitted
Investments described in clauses (i) and (vii) above and the certificates of
deposit described in clause (ii) above which are entered into with a depository
institution or trust company, having a commercial paper or short-term
certificate of deposit rating of A-1 by Standard & Poor's and at least P-1 by
Moody's; and (ix) any other instruments or securities approved in writing by
the Requisite Noteholders or, if any Group II Series of Notes is then being
rated by one or more Rating Agencies, with respect to which the Rating Agencies
confirm in writing that such investment in such instruments or securities will
not adversely affect any ratings with respect to any Group II Series of Notes
or the Commercial Paper Notes (if any).
"Permitted Liens" is defined in Section 29.3 of the Group II Master
Lease.
"Principal Shortfall" has the meaning specified in Section 5.5(a) of
this Supplement.
"Pro Rata Share" means, with respect to a Lessee, the ratio (expressed
as a percentage) of (i) the aggregate Net Book Value of Group II Vehicles
leased by such Lessee divided by (ii) the aggregate Net Book Value of all Group
II Vehicles leased under the Group II Master Lease.
"Rating Agencies" means, each nationally-recognized rating agency then
currently requested to rate the Series 2000-1 Note or, as the context requires,
any Group II Series of Notes or class thereof.
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"Rating Agency Confirmation" means on any date written confirmation by
each Rating Agency that the proposed action, amendment, waiver or modification
will not result in a downgrading or withdrawal of the then current rating of
the Series 2000-1 Note (or, if the context requires, any Group II Series of
Notes or any class thereof); provided, however, that if no Rating Agency is
then currently rating the Series 2000-1 Note (or, if the context requires, any
Group II Series of Notes) at the request of the Issuer or Budget, the written
approval of such proposed action, amendment, waiver or modification by the
Requisite Noteholders shall constitute Rating Agency Confirmation for all
purposes hereof.
"Recoveries" means, for any Related Month, the sum of Series 2000-1
Repurchase Recoveries.
"Refinanced Vehicles" has the meaning specified in Section 2.1 of the
Group II Master Lease.
"Related Documents" means the collective reference to the documents
referred to in clause (i) of the definition of Related Documents in Schedule 1
to the Base Indenture, the Group II Master Lease and the Bridge Loan Agreement.
"Repurchase Program" means a program pursuant to which a Manufacturer
has agreed with a Lessee, Budget or TFFC to repurchase or guarantee the auction
sale price of Group II Vehicles manufactured by it or one of its Affiliates
during a specified time period.
"Repurchase Program Payment Due Date" means, with respect to any
payment due from a Manufacturer or auction dealer in respect of a Group II
Repurchase Vehicle disposed of pursuant to the terms of the related Repurchase
Program, the thirtieth (30th) day after the Disposition Date for such Group II
Vehicle.
"Required Asset Amount" means with respect to the Series 2000-1 Note,
at any date of determination, the sum of (i) the Invested Amounts for all Group
II Series of Notes that do not provide for Enhancement in the form of
overcollateralization plus (ii) with respect to all Group II Series of Notes
that provide for Enhancement in the form of overcollateralization, the sum of
(a) the Invested Amounts for all such Series of Notes, plus (b) the available
subordinated amounts required to be maintained as part of the minimum
enhancement amount for all such Series of Notes.
"Requisite Noteholders" means Series 2000-1 Noteholders holding more
than 50% of the Series 2000-1 Invested Amount.
"Series 2000-1 Accrued Interest Account" has the meaning specified in
Section 5.1(b) of this Supplement.
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"Series 2000-1 Aggregate Asset Amount" means, with respect to the
Series 2000-1 Note, for any date of determination, an amount, rounded to the
nearest $100,000, equal to the sum of (a) the Series 2000-1 Invested Percentage
of the Aggregate Group II Repurchase Asset Amount, plus (b) cash and Permitted
Investments on deposit in the Series 2000-1 Collection Account and on deposit
in the Collection Account and Group II Collection Account allocable to the
Series 2000-1 Note.
"Refinancing Schedule" has the meaning set forth in Section 2.1 of the
Group II Lease.
"Series 2000-1 Asset Amount Deficiency" with respect to the Series
2000-1 Note will occur if, at any time, the Series 2000-1 Required Asset Amount
exceeds the Series 2000-1 Aggregate Asset Amount.
"Series 2000-1 Available Subordinated Amount" means for any date of
determination, the excess of (a) the sum of (i) the Series 2000-1 Available
Subordinated Amount for the preceding Determination Date (or, in the case of
the initial Determination Date, as of the Series 2000-1 Issuance Date), (ii)
the Series 2000-1 Available Subordinated Amount Incremental Recoveries for the
Related Month and (iii) any other additional amounts contributed by TFFC or
Budget to the Series 2000-1 Collection Account or otherwise for allocation to
the Series 2000-1 Available Subordinated Amount since the preceding
Determination Date (or, in the case of the first Determination Date, since the
Series 2000-1 Issuance Date) pursuant to Section 5.2(d)(iv), over (b) the sum
of (i) the Series 2000-1 Available Subordinated Amount Incremental Losses for
the Related Month and (ii) any amounts withdrawn from the Series 2000-1
Collection Account and allocated to the Budget Distribution Account; provided,
however, that the Series 2000-1 Available Subordinated Amount for the period
from the Series 2000-1 Issuance Date to the first Determination Date shall be
$3,750,000.
"Series 2000-1 Available Subordinated Amount Incremental Losses" means
for any Related Month, the sum of all Losses that became Losses during such
Related Month and which were allocated to the Series 2000-1 Available
Subordinated Amount pursuant to Section 5.2(c) hereof.
"Series 2000-1 Available Subordinated Amount Incremental Recoveries"
means, for any Related Month, the sum of all Recoveries that became Recoveries
during such Related Month and which were allocated to the Series 2000-1
Available Subordinated Amount pursuant to Section 5.2(c) hereof.
"Series 2000-1 Carrying Charges" means, as of any day, (i) the
aggregate of all Trustee fees, servicing fees (other than supplemental
servicing fees) and other fees and expenses and indemnity amounts, if any,
payable by TFFC or the Servicer under the Indenture, the Bridge Loan Agreement
or the other Related Documents which have accrued with respect to the Series
2000-1 Note during the Related Month or, in the case of such servicing fees and
in the case of any commitment fees or other fees and expenses that are
calculated in respect of the related Series 2000-1 Interest Period (however
denominated) and arise under the Bridge Loan Agreement, that have accrued
during the related Series
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2000-1 Interest Period, plus (ii) without duplication, all amounts payable by
the Lessees pursuant to Section 14 of the Group II Master Lease which have
accrued during the Related Month.
"Series 2000-1 Collateral" has the meaning specified in Section 3.1(b)
of this Supplement.
"Series 2000-1 Collections" means the sum of (a) the Series 2000-1
Invested Percentage of all Group II Collections constituting Group II Principal
Collections and Recoveries and (b) all Series 2000-1 Interest Collections.
"Series 2000-1 Collection Account" is defined in Section 5.1(a) of
this Supplement.
"Series 2000-1 Credit Support Amount" means, for any date of
determination, the Series 2000-1 Available Subordinated Amount on such date.
"Series 2000-1 Credit Support Deficiency" means, with respect to any
date of determination, either (a) the amount, if any, by which the Series
2000-1 Minimum Credit Support Amount exceeds the Series 2000-1 Credit Support
Amount or (b) as the context requires, that the Series 2000-1 Minimum Credit
Support Amount exceeds the Series 2000-1 Credit Support Amount.
"Series 2000-1 Distribution Account" has the meaning specified in
Section 5.7(a) of this Supplement.
"Series 2000-1 Interest Allocation" has the meaning specified in
Section 5.2(a)(i) of this Supplement.
"Series 2000-1 Interest Collections" means on any date of
determination, the Series 2000-1 Invested Percentage (as of such date) of the
Group II Interest Collections.
"Series 2000-1 Interest Period" means a period from and including a
Distribution Date to but excluding the next succeeding Distribution Date;
provided, however, that the initial Series 2000-1 Interest Period shall be from
the Series 2000-1 Issuance Date to but excluding the initial Distribution Date
with respect to the Series 2000-1 Notes.
"Series 2000-1 Invested Amount" means, when used with respect to any
date, an amount equal to (a) the Initial Invested Amount minus (b) the amount
of principal payments made to Series 2000-1 Noteholders and Decreases on or
prior to such date minus (c) all Losses allocated to the Series 2000-1 Invested
Amount on or prior to such date plus (d) all Recoveries allocated to the Series
2000-1 Invested Amount on or prior to such date plus (e) all Increases on or
prior to such date.
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"Series 2000-1 Invested Percentage" means, on any date of
determination:
(i) when used with respect to Principal Collections during
the Series 2000-1 Revolving Period and when used with respect to
Losses, Recoveries, cash on deposit in the Collection Account and
other amounts at all times, the percentage equivalent of a fraction,
the numerator of which shall be an amount equal to the sum of (x) the
Series 2000-1 Invested Amount and (y) the Series 2000-1 Available
Subordinated Amount, in each case as of the end of the second
preceding Related Month or, until the end of the second Related Month,
as of the Series 2000-1 Issuance Date, and the denominator of which
shall be the greater of (A) the Aggregate Asset Amount as of the end
of the second preceding Related Month or, until the end of the second
Related Month, as of the Series 2000-1 Issuance Date, and (B) as of
the same date as in clause (A), the sum of the numerators used to
determine (i) invested percentages for allocations with respect to
Principal Collections (for all Group II Series of Notes including all
classes of such Series of Notes) and (ii) available subordinated
amount percentages for allocations with respect to Principal
Collections (for all Group II Series of Notes that provide for credit
enhancement in the form of overcollateralization); and
(ii) when used with respect to Principal Collections, during
the Series 2000-1 Rapid Amortization Period, the percentage equivalent
of a fraction, the numerator of which shall be an amount equal to the
sum of (x) the Series 2000-1 Invested Amount and (y) the Series 2000-1
Available Subordinated Amount, in each case as of the end of the
Series 2000-1 Revolving Period, and the denominator of which shall be
the greater of (A) the Aggregate Asset Amount as of the end of the
second preceding Related Month and (B) as of the same date as in
clause (A), the sum of the numerators used to determine (i) invested
percentages for allocations with respect to Principal Collections (for
all Group II Series of Notes including all classes of such Series of
Notes) and (ii) available subordinated amount percentages for
allocations with respect to Principal Collections (for all Group II
Series of Notes that provide for credit enhancement in the form of
overcollateralization).
(iii) when used with respect to Group II Interest
Collections, the percentage equivalent of a fraction the numerator of
which shall be the Accrued Amounts with respect to the Series 2000-1
Notes on such date of determination and the denominator of which shall
be the aggregate Accrued Amounts with respect to the Group II Series
of Notes on such date of determination.
"Series 2000-1 Investor Monthly Servicing Fee" means, on any
Distribution Date, one-twelfth of 1.0% of the Series 2000-1 Invested Amount as
of the preceding Distribution Date (or, in the case of the initial Distribution
Date, the Series 2000-1 Issuance Date).
"Series 2000-1 Issuance Date" means February 25, 2000.
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"Series 2000-1 Limited Liquidation Event of Default" means, so long as
such event or condition continues, (a) any event or condition of the type
specified in Section 6(a) of this Supplement that continues for thirty (30)
days (without double counting the one (1) Business Day cure period provided for
in said Section 6(a)); provided, however, that such event or condition shall
not constitute a Series 2000-1 Limited Liquidation Event of Default if (i)
within such thirty (30) day period, TFFC or Budget shall have contributed a
portion of the Budget Interest to the Series 2000-1 Available Subordinated
Amount sufficient to cure the Series 2000-1 Credit Support Deficiency and (ii)
the Requisite Noteholders shall have consented to such cure in writing or (b)
all principal and interest of the Series 2000-1 Note is not paid in full on or
before the Series 2000-1 Termination Date.
"Series 2000-1 Maximum Invested Amount" shall have the meaning set
forth in Section 4.1 hereof.
"Series 2000-1 Minimum Credit Support Amount" means, as of any date,
with respect to the Series 2000-1 Note on any day, 15% of the product of a
dollar amount equal to (1) the Aggregate Principal Balance of the Series 2000-1
Notes as of such date, minus (2) the aggregate amount of cash and Permitted
Investments in the Series 2000-1 Collection Account on such date.
"Series 2000-1 Monthly Supplemental Servicing Fee" means, on any
Distribution Date, the product of (a) the Supplemental Servicing Fee accrued on
such date and (b) a fraction, the numerator of which shall be the Series 2000-1
Invested Amount on such Distribution Date and the denominator of which shall be
the sum (without duplication) of (i) the aggregate of the invested amounts for
all outstanding Series of Notes (including non-segregated Series) on such
Distribution Date plus (ii) the aggregate of all Budget Interest Amounts
(including available subordinated amounts, if any) for all outstanding Series
of Notes (including non-segregated Series).
"Series 2000-1 Noteholder" means a Person in whose name the Series
2000-1 Note is registered in the Note Register.
"Series 2000-1 Note Interest" means, with respect to any Distribution
Date, the sum of the Daily Interest Amounts for each day in the related Series
2000-1 Interest Period, plus all previously accrued and unpaid Series 2000-1
Note Interest (together with interest on such unpaid amounts, to the extent
permitted by law, at the Series 2000-1 Note Rate), plus all accrued Series
2000-1 Carrying Charges due to the Series 2000-1 Noteholders in respect of such
Series 2000-1 Interest Period (or any prior Series 2000-1 Interest Period) and
unpaid as of such Distribution Date.
"Series 2000-1 Note Rate" has the meaning specified in the Bridge Loan
Agreement. The Lender will notify the Trustee and the Servicer in writing on
each Determination Date regarding the Series 2000-1 Note Rate for the related
Series 2000-1 Interest Period.
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"Series 2000-1 Note" means the Variable Funding Rental Car Asset
Backed Note executed by TFFC and authenticated and delivered by or on behalf of
the Trustee, substantially in the form of Exhibit A. A definitive Series 2000-1
Note shall have such insertions and deletions as are necessary or appropriate
to give effect to the provisions of Section 2.18 of the Base Indenture.
"Series 2000-1 Principal Allocation" shall mean, on any date, the
amount allocated to Series 2000-1 Collections pursuant to clause (a) of the
definition thereof.
"Series 2000-1 Rapid Amortization Period" means the period beginning
at the close of business on the Business Day immediately preceding the day on
which an Amortization Event is deemed to have occurred with respect to the
Series 2000-1 Note and ending upon the earlier to occur of (i) the date on
which the Series 2000-1 Note is fully paid and (ii) the termination of the
Indenture.
"Series 2000-1 Repurchase Losses" means, with respect to any Related
Month, the sum of (without duplication) (a) the aggregate amount of payments in
respect of Monthly Base Rent and Monthly Supplement Payments that have become
due to the Lessor under the Group II Master Lease in respect of Group II
Repurchase Vehicles that are not paid to TFFC or the Trustee prior to the
expiration of the respective grace periods, if any, provided for in the Group
II Master Lease for the making of such payments, but only if such grace
periods, if any, expire (or, with respect to any payment for which there is no
grace period, only if such payment is due) during such Related Month, (b) the
amounts owed by each Manufacturer under an Eligible Repurchase Program with
respect to Group II Repurchase Vehicles that are Lessor-Owned Vehicles or with
respect to Eligible Receivables, to the extent, in either case, that any such
amount remains unpaid after 90 days from the Turnback Date for the related
Group II Vehicle, but only if such 90-day period expires during such Related
Month and (c) the amounts owed by each Auction Dealer in connection with an
Eligible Repurchase Program with respect to Group II Repurchase Vehicles that
are Lessor-Owned Vehicles, to the extent that any such amount remains unpaid
more than 10 days after the sale of the related Vehicle, but only if such
10-day period expires during such Related Month.
"Series 2000-1 Repurchase Recoveries" means, with respect to any
Related Month, the sum of (without duplication) all amounts received during
such Related Month by TFFC or the Trustee (including deposits into the
Collection Account) from any source (other than Enhancement) in respect of
Series 2000-1 Repurchase Losses, as determined by the Servicer consistent with
its methods of tracking and allocating to vehicles and Series, Disposition
Proceeds, Guaranteed Payments, Repurchase Prices, insurance proceeds and other
proceeds of such Group II Vehicles.
"Series 2000-1 Required Asset Amount" means, at any time, the quotient
of (a) the Aggregate Principal Balance of the Series 2000-1 Notes at such time
divided by (b) an amount equal to (i) one hundred percent minus (ii) the
Enhancement Percentage at such time.
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"Series 2000-1 Revolving Period" means the period from and including
the Series 2000-1 Issuance Date to the commencement of the Series 2000-1 Rapid
Amortization Period.
"Series 2000-1 Termination Date" means the June 2001 Distribution Date.
"Servicer" means Budget Group, Inc. or any successor servicer
hereunder.
"Termination Payments" has the meaning specified in Section 11.3 of
the Group II Master Lease.
"Termination Value" means, with respect to any Group II Vehicle, as of
any date, an amount equal to (i) the Capitalized Cost of such Group II Vehicle
minus (ii) all Depreciation Charges accrued with respect to such Group II
Vehicle prior to such date.
"Texas Vehicle" means a Group II Vehicle acquired by TFFC on or after
the Lease Commencement Date for lease in the State of Texas.
"TFFC Agreements" means the collective reference to the documents
referred to in clause (i) of the definition of TFFC Agreements in Schedule 1 to
the Indenture and the Group II TFFC Agreements.
"TFFC Obligations" means all principal and interest, at any time and
from time to time, owing by TFFC on the Series 2000-1 Note and all costs, fees
and expenses payable by, or obligations of, TFFC under the Indenture and the
Related Documents.
"Turnback Date" means, with respect to any Group II Repurchase
Vehicle, the date on which such Group II Vehicle is accepted for return by a
Manufacturer or its agent pursuant to its Repurchase Program and the
Depreciation Charges cease to accrue pursuant to its Repurchase Program.
"Vehicle Lease Commencement Date" has the meaning specified in Section
3.2 of the Group II Master Lease.
"Voluntary Decrease" has the meaning specified in Section 4.3(b).
"VFR" with respect to the Group II Master Lease, is defined in
Paragraph 9 of Annex A to the Group II Master Lease and in Paragraph 6 of Annex
B to the Group II Master Lease.
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EXHIBIT 4.31
ARTICLE 3
SECURITY; REPORTS; COVENANT
Section 3.1 Grant of Security Interest.
(a) To secure the Group II Series of Notes and the TFFC Obligations,
TFFC hereby pledges, assigns, conveys, delivers, transfers and sets over to the
Trustee, for the benefit of the Group II Noteholders and the holder of the
Budget Interest (the Group II Noteholders and the holder of the Budget Interest
being referred to in this Section 3.1 as the "Secured Parties"), and hereby
grants to the Trustee, for the benefit of the Secured Parties, a security
interest in all of TFFC's right, title and interest in and to all of the
following assets, property and interests of TFFC (other than as specified
below) whether now owned or hereafter acquired or created (all of the foregoing
being referred to as the "Group II Collateral"):
(i) the rights of TFFC under the Group II Master Lease
(including rights against any guarantor of obligations of the Lessees
thereunder) and any other agreements relating to the Group II Vehicles
to which TFFC is a party other than the Repurchase Programs
(collectively, the "Group II TFFC Agreements"), including, without
limitation, all monies due and to become due to TFFC from Budget and
the Lessees under or in connection with the Group II TFFC Agreements,
whether payable as rent, guaranty payments, fees, expenses, costs,
indemnities, insurance recoveries, damages for the breach of any of
the Group II TFFC Agreements or otherwise, and all rights, remedies,
powers, privileges and claims of TFFC against any other party under or
with respect to the Group II TFFC Agreements (whether arising pursuant
to the terms of such Group II TFFC Agreements or otherwise available
to TFFC at law or in equity), including the right to enforce any of
the Group II TFFC Agreements as provided in the Indenture and to give
or withhold any and all consents, requests, notices, directions,
approvals, extensions or waivers under or with respect to the Group II
TFFC Agreements or the obligations of any party thereunder;
(ii) (A) all Group II Repurchase Vehicles owned by TFFC or
the Lessees as of the Series 2000-1 Issuance Date and all Group II
Repurchase Vehicles acquired by TFFC or the Lessees or refinanced by
TFFC during the term of the Indenture, and all Certificates of Title
with respect to such Group II Vehicles, (B) all Liens and property
from time to time purporting to secure payment of any of the
obligations or liabilities of the Lessees or Budget arising under or
in connection with the Group II Master Lease, together with all
financing statements filed in favor of, or assigned to, TFFC
describing any collateral securing such obligations or liabilities,
and (C) all guarantees, insurance and other agreements or arrangements
of whatever character from time to time supporting or securing payment
of such obligations and liabilities of the Lessees or Budget pursuant
to the Group II Master Lease;
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(iii) all right, title and interest of TFFC in, to and under
any Repurchase Programs relating to, and all monies due and to become
due in respect of, the Group II Repurchase Vehicles purchased from the
Manufacturers under or in connection with the Repurchase Programs
whether payable as Group II Repurchase Vehicle repurchase prices or
guaranteed payments, auction sale prices, fees, expenses, costs,
indemnities, insurance recoveries, damages for breach of the
Repurchase Programs or otherwise;
(iv) (A) the Collection Account and the Group II Collection
Account, (B) all funds on deposit therein allocable to Group II
Vehicles from time to time, (C) all certificates and instruments, if
any, representing or evidencing any or all of the Collection Account
and the Group II Collection Account or the funds on deposit therein
allocable to Group II Vehicles from time to time, and (D) all
Permitted Investments made at any time and from time to time with the
moneys allocable to Group II Vehicles in the Collection Account or the
Group II Collection Account (including in each case income thereon),
including, without limitation, any and all accounts, certificates,
instruments and investments constituting "investment property" as
defined in the UCC as in effect from time to time in the State of New
York; and
(v) all proceeds of any and all of the foregoing including,
without limitation, payments under insurance (whether or not-the
Trustee is the loss payee thereof) and cash, but not including (for
the avoidance of doubt) payments under consumer rental agreements;
provided, however, the Group II Collateral shall not include (x) any Excluded
Payments or (y) the Budget Distribution Account, any funds on deposit therein
from time to time, any certificates or instruments, if any, representing or
evidencing any or all of the Budget Distribution Account or the funds on
deposit therein from time to time, or any Permitted Investments made at any
time and from time to time with the moneys in the Budget Distribution Account
(including the income thereon).
(b) To further secure the TFFC Obligations with respect to the Series
2000-1 Note (but not any other Series of Notes), TFFC hereby pledges, assigns,
conveys, delivers, transfers and sets over to the Trustee for the benefit of
the Series 2000-1 Noteholders (but not any other Series of Notes), and hereby
grants to the Trustee for the benefit of the Series 2000-1 Noteholders, a
security interest in all of TFFC's right, title and interest in and to all of
the following assets, property and interests in property, whether now owned or
hereafter acquired or created (all of the foregoing being referred to as the
"Series 2000-1 Collateral"):
(i) the Series 2000-1 Collection Account and the Series
2000-1 Distribution Account;
(ii) all funds on deposit in the Series 2000-1 Collection
Account and the Series 2000-1 Distribution Account from time to time;
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(iii) all certificates and instruments, if any, representing
or evidencing any or all of the Series 2000-1 Collection Account and
the Series 2000-1 Distribution Account or the funds on deposit therein
from time to time;
(iv) all Permitted Investments made at any time and from time
to time with moneys in the Series 2000-1 Collection Account or the
Series 2000-1 Distribution Account; and
(v) all proceeds of any and all of the foregoing, including,
without limitation, cash.
(c) The Trustee, on behalf of the Group II Noteholders or the Series
2000-1 Noteholders, as applicable, acknowledges the foregoing grant, accepts
the trusts under this Supplement in accordance with the provisions of the
Indenture and this Supplement and agrees to perform its duties required in this
Supplement to the best of its abilities to the end that the interests of the
Series 2000-1 Noteholders or, as applicable, the Group II Noteholders may be
adequately and effectively protected. The Group II Collateral shall secure the
Notes included in the Group II Series of Notes. The Series 2000-1 Collateral
shall secure the Series 2000-1 Note.
Section 3.2 Reports. Not later than the second business Day
immediately preceding each Distribution Date, the Servicer shall furnish to the
Trustee and each Series 2000-1 Noteholder a Monthly Servicer's Certificate and
a Fleet Report with respect to the Group II Collateral.
ARTICLE 4
INITIAL ISSUANCE AND INCREASES AND DECREASES OF
SERIES 2000-1 INVESTED AMOUNT OF SERIES 2000-1 NOTE
Section 4.1. Issuance in Definitive Form. Pursuant to Section 2.18 of
the Base Indenture, upon request by the Lender, TFFC hereby consents to the
issuance of the Series 2000-1 Note in the form of a Definitive Note. The Series
2000-1 Note shall be sold to the Lender in reliance on an exemption from the
registration requirements of the Securities Act, and shall be issued in the
form of one or more Definitive Notes, in fully registered form without interest
coupons, substantially in the form attached hereto as Exhibit A, with such
legends as may be applicable thereto, duly executed by TFFC and authenticated
by the Trustee as provided in Section 2.4 of the Base Indenture, in an
aggregate stated principal amount of up to $270,000,000 (the "Series 2000-1
Maximum Invested Amount").
Section 4.2 Procedure for Increasing the Invested Amount.
(a) Subject to satisfaction of the conditions precedent set forth in
subsection (b) of this Section 4.2 (as evidenced by an Officer's Certificate of
the Servicer delivered to the Trustee), on the Series 2000-1 Issuance Date,
TFFC may issue the Series 2000-1 Note in the stated amount described in
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Section 4.1, the initial aggregate principal amounts of which will be equal to
the Initial Invested Amount. Such Series 2000-1 Note shall be issued to the
Lender. On the Series 2000-1 Issuance Date and thereafter on each Increase Date
during the Revolving Period, TFFC may, upon request by Budget under the Group
II Master Lease and upon not less than one Business Day's prior written notice
by TFFC to the Lender (such notice specifying the applicable Increase Date),
increase the Series 2000-1 Invested Amount (each such increase referred to as
an "Increase") by issuing, at par, additional Series 2000-1 Invested Amount of
the Series 2000-1 Note in amounts that satisfy the following requirements: (i)
the portion of the Increase represented by additional Series 2000-1 Invested
Amount shall be such that the Series 2000-1 Credit Support Amount shall at
least equal the Series 2000-1 Minimum Credit Support Amount after giving effect
to such Increase in the Series 2000-1 Invested Amount and the application of
the proceeds thereof to leasing Group II Vehicles; and (ii) no Series 2000-1
Asset Amount Deficiency will result from such Increase. Satisfaction of the
above conditions shall be evidenced by the delivery of a certificate from the
Servicer to such effect. Proceeds from any Increase shall be deposited into the
Series 2000-1 Collection Account and allocated in accordance with Article 5
hereof. Upon each Increase, the Trustee shall, or shall cause the Note
Registrar to, indicate in the Note Register such Increase.
(b) The Series 2000-1 Invested Amount may be increased pursuant to
subsection (a) above only upon satisfaction of each of the following conditions
(as evidenced by an Officers' Certificate delivered by TFFC to the Trustee)
with respect to each proposed Increase:
(i) The amount of such Increase shall be equal to or greater
than $100,000;
(ii) After giving effect to such Increase, the Series 2000-1
Invested Amount shall not exceed the Series 2000-1 Maximum Invested
Amount;
(iii) There shall not then exist, nor shall such Increase
result in the occurrence of, (x) an Amortization Event, a Liquidation
Event of Default or a Series 2000-1 Limited Liquidation Event of
Default, or (y) an event or occurrence, which, with the passing of
time or the giving of notice thereof, or both, would become an
Amortization Event, a Liquidation Event of Default or a Series 2000-1
Limited Liquidation Event of Default;
(iv) All conditions precedent (1) to the acquisition of
additional Group II Vehicles under the Group II Master Lease and (2)
to the making of Advances under the Bridge Loan Agreement shall have,
in each case, been satisfied;
(v) TFFC (with respect to Lessor-Owned Vehicles) or the
applicable Lessee (with respect to Financed Vehicles) shall have good
and marketable title to each Group II Vehicle purchased by it with the
proceeds of the Series 2000-1 Note, free and clear of all Liens and
encumbrances, other than any Permitted Liens. Each Repurchase Program
shall be in full force
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and effect, and shall be enforceable against the related Manufacturer
in accordance with its terms;
(vi) Each Lessee shall have granted to TFFC, for the benefit
of the Trustee, and TFFC shall have granted to the Trustee, in each
case for the benefit of the Series 2000-1 Noteholders, a first
priority security interest in all Group II Vehicles now or hereafter
purchased, financed or refinanced by TFFC with the proceeds of the
Series 2000-1 Note or with any contributions of capital made by Budget
in favor of TFFC;
(vii) TFFC shall have granted to the Trustee a first priority
security interest in its right, title and interest in and to the Group
II Master Lease, the Group II Collateral and the Series 2000-1
Collateral;
(viii) The Trustee shall have received a copy of each
Repurchase Program under which Group II Vehicles will be or have been
purchased and are proposed to be included in the Aggregate Asset
Amount and an Officer's Certificate, dated the Series 2000-1 Issuance
Date, and duly executed by an Authorized Officer of TFFC, certifying
that each such copy is true, correct and complete as of the Series
2000-1 Issuance Date;
(ix) All representations and warranties set forth in Article
7 of the Base Indenture and in Section 27 of the Group II Master Lease
shall be true and correct on and as of the date of such Increase as if
made on and with respect to the date of such Increase; and
(x) With respect to the initial Increase only, the Servicer
shall have calculated the Series 2000-1 Available Subordinated Amount
and the Trustee shall have confirmed receipt of such written
calculation.
Section 4.3 Decreases.
(a) Mandatory Decreases. Whenever the Series 2000-1 Credit Support
Amount is less than the Series 2000-1 Minimum Credit Support Amount, then, on
the Distribution Date immediately following discovery of such deficiency, TFFC
shall decrease the Series 2000-1 Invested Amount of the Series 2000-1 Note by
the amount necessary, so that after giving effect to all Decreases of the
Series 2000-1 Invested Amount on such Distribution Date, no such deficiency
shall exist (each reduction of the Series 2000-1 Invested Amount pursuant to
this Section 4.3(a), a "Mandatory Decrease"). Upon such discovery, TFFC shall
deliver notice of any such Mandatory Decreases to the Trustee.
(b) Voluntary Decreases. Upon at least one Business Day's prior
irrevocable notice to the Lender and the Trustee in writing, TFFC may
voluntarily prepay, on any Distribution Date during the Series 2000-1 Revolving
Period, all or a portion of the Series 2000-1 Invested Amount in accordance
with the procedures set forth herein (including, without limitation, in Section
5.5(c) hereof) and, as
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applicable, in the Bridge Loan Agreement (each reduction of the Series 2000-1
Invested Amount pursuant to this Section 4.3(b), a "Voluntary Decrease");
provided, that all voluntary Decreases pursuant to this Section 4.3(b) shall be
allocated such that (1) the Series 2000-1 Credit Support Amount after giving
effect to such Decrease is not less than the Series 2000-1 Minimum Credit
Support Amount. Each such Decrease shall be in a minimum principal amount of
$100,000.
(c) Upon receipt by a Responsible Officer of the Trustee of written
notice that a Decrease has been completed, the Trustee shall, or shall cause
the Note Registrar to, indicate in the Note Register such Decrease. The amount
of any Decrease shall not exceed the amount on deposit in the Series 2000-1
Collection Account and available for distribution to Series 2000-1 Noteholders
in respect of principal on the Series 2000-1 Note on the date specified in the
related notice of Decrease referred to in clauses (a) and (b) above, as
applicable.
ARTICLE 5
SERIES 2000-1 ALLOCATIONS
Any provisions of Article 5 of the Base Indenture which allocate and apply
Collections shall continue to apply irrespective of the issuance of the Series
2000-1 Note. Sections 5.1 through 5.5 of the Base Indenture shall be read in
their entirety as provided in the Base Indenture, provided that for purposes of
the Series 2000-1 Note, clause (d) of Section 5.2 of the Base Indenture shall
be modified, as it applies to the Series 2000-1 Note, as permitted by Section
12.1(f) of the Base Indenture and shall read as follows:
(d) Sharing Collections. To the extent that Principal Collections that
are allocated to the Series 2000-1 Note on a Distribution Date are not needed
to make payments of principal to Series 2000-1 Noteholders or required to be
deposited in the Series 2000-1 Distribution Account on such Distribution Date,
such Principal Collections may, at the written direction of the Servicer, be
applied to cover principal payments due to or for the benefit of Noteholders of
other Group II Series of Notes. Any such reallocation will not result in a
reduction of the Aggregate Principal Balance or in the Invested Amount of the
Series 2000-1 Note.
In addition, for purposes of Section 5.2(a) of the Base Indenture, the
Servicer, in its capacity as such under the Group II Master Lease, shall (to
the extent practicable) cause all Collections allocable to Group II Collateral
in accordance with the Indenture to be paid directly into the Collection
Account and all Collections allocable to the Series 2000-1 Collateral to be
paid directly into the Series 2000-1 Collection Account.
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Article 5 of the Base Indenture (except for Sections 5.1 through 5.5
thereof, subject to the proviso in the first paragraph of this Article 5 and
subject to the immediately preceding sentence) shall read in its entirety as
follows and shall be applicable only to the Series 2000-1 Note:
Section 5.1 Establishment of the Group II Collection Account, Series
2000-1 Collection Account and Series 2000-1 Accrued Interest Account.
(a) The Trustee acknowledges that it has established and maintains a
segregated trust account for the benefit of holders of Notes from the Group II
Series of Notes (the "Group II Collection Account"). The Trustee will also
establish and maintain a segregated trust account for the benefit of the Series
2000-1 Noteholders (the "Series 2000-1 Collection Account"). Amounts on deposit
in the Group II Collection Account and the Series 2000-1 Collection Account
shall be invested in accordance with Sections 5.1(d) and (f) of the Base
Indenture.
(b) The Trustee will establish and maintain an administrative
sub-account within the Series 2000-1 Collection Account (such sub-account, the
"Series 2000-1 Accrued Interest Account").
(c) All Group II Collections shall initially be deposited into the
Collection Account and, on each Business Day, shall be allocated to and
deposited in the Group II Collection Account.
(d) All Group II Collections that are deposited on any Business Day in
the Group II Collection Account and that are Series 2000-1 Collections shall on
each such Business Day be allocated to and deposited in the Series 2000-1
Collection Account. All amounts received in respect of the Series 2000-1
Collateral shall be allocated to and deposited in the Series 2000-1 Collection
Account.
(e) Any amounts in the Group II Collection Account not allocated to
the Series 2000-1 Collection Account or another series-specific collection
account under the supplements for the other Group II Series of Notes shall be
allocated by the Trustee at the written direction of the Servicer to the Budget
Distribution Account in an amount equal to (x) the applicable Budget Interest
Percentage (as of such date) of the aggregate amount of Group II Collections
that are Principal Collections received on such date, minus (y) any amounts,
other than Servicing Fees, which have been withheld by the Master Servicer
pursuant to Section 5.2(c) of the Base Indenture to the extent such amounts
withheld under Section 5.2(c) of the Base Indenture represent all or part of
the Budget Interest Amount; and
Section 5.2 Allocations with Respect to the Series 2000-1 Note. The
proceeds from the sale of the Series 2000-1 Note , together with any funds
deposited with TFFC by Budget, in its capacity as the Budget Interestholder,
will initially be delivered by or on behalf of TFFC to the Trustee in the
Series 2000-1 Collection Account. On each Business Day on which Collections or
the proceeds of any Increase are deposited into the Group II Collection Account
and allocated to the Series 2000-1 Collection Account or deposited in the
Series 2000-1 Collection Account (each such date, a "Deposit
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Date"), the Servicer will direct the Trustee in writing to allocate all amounts
allocated to or deposited in the Series 2000-1 Collection Account in accordance
with the provisions of this Section 5.2.
(a) Allocations During the Revolving Period. During the Series 2000-1
Revolving Period, the Servicer will direct the Trustee in writing to allocate,
prior to 1:00 p.m. (New York City time) on each Deposit Date, all amounts
deposited into the Series 2000-1 Collection Account as set forth below:
(i) allocate to the Series 2000-1 Accrued Interest Account,
from the Series 2000-1 Interest Collections received on such date, an
amount, as stated in such Servicer direction, equal to the Series
2000-1 Note Interest and all other Series 2000-1 Carrying Charges
accrued and unpaid as of such date less any funds on deposit on such
date in the Series 2000-1 Accrued Interest Account (the "Series 2000-1
Interest Allocation"); provided, however, that if on any Deposit Date
the Series 2000-1 Interest Collections allocated to the Series 2000-1
Collection Account on such date exceed the Series 2000-1 Interest
Allocation as of such date, then the amount of such excess shall be
retained on deposit in the Series 2000-1 Collection Account and shall
be available on such Deposit Date for application in accordance with
clauses (ii) through (v) below;
(ii) to the extent a Mandatory Decrease is required under
Section 4.3(a), allocate to the Series 2000-1 Distribution Account for
the payment of the Series 2000-1 Invested Amount, the amount, as
stated in such Servicer direction, necessary for such Mandatory
Decrease;
(iii) make available to TFFC an amount, as stated in such
Servicer direction, equal to any Master Lease Advances that are in
accordance with the requirements of and conditions precedent under the
Group II Master Lease;
(iv) allocate to the Series 2000-1 Distribution Account the
amount, as stated in such Servicer direction, of any Voluntary
Decreases in the Series 2000-1 Invested Amount to be made in
accordance with Section 4.3(b) hereof;
(v) the amounts remaining in the Series 2000-1 Collection
Account on such Deposit Date after application pursuant to clauses
(i), (ii), (iii) and (iv) above shall be retained on deposit and shall
be available on such Deposit Date and/or on future Deposit Dates for
application in accordance with this Section 5.2 or otherwise in
accordance with this Article 5.
(b) Allocations During the Series 2000-1 Rapid Amortization Period.
During the Series 2000-1 Rapid Amortization Period, the Servicer will direct
the Trustee in writing to allocate all Series 2000-1 Collections prior to 1:00
p.m. (New York City time) on any Deposit Date, as set forth below:
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(i) allocate to the Series 2000-1 Accrued Interest Account
or retain on deposit in the Series 2000-1 Collection Account for
application in accordance with clause (ii) below, as and to the extent
provided in Section 5.2(a)(i) above;
(ii) allocate to the Series 2000-1 Collection Account an
amount equal to the Series 2000-1 Principal Allocation for such day,
which amount shall be used to make principal payments in respect of
the Series 2000-1 Note; and
(c) Additional Allocations for All Periods. The Servicer will direct
the Trustee in writing to allocate the amounts set forth below as follows:
(x) Monthly, for each Distribution Date, allocate to the
Series 2000-1 Note an amount, as stated in such Servicer direction,
equal to the Series 2000-1 Invested Percentage (as of such date) of
the aggregate amount of Losses for the Related Month in the following
manner:
(i) First, reduce the Series 2000-1 Available
Subordinated Amount by the amount of such Losses until the
Series 2000-1 Available Subordinated Amount has been reduced
to zero; and
(ii) Second, any such Losses remaining after making
the allocations, withdrawals and claims under clause (i)
above will be allocated, as stated in such Servicer
direction, to reduce the Series 2000-1 Invested Amount.
(y) Monthly, for each Distribution Date, allocate to the
Series 2000-1 Note an amount, as stated in such Servicer direction,
equal to the Series 2000-1 Invested Percentage (as of such date) of
the aggregate amount of Recoveries for the Related Month in the
following manner:
(i) First, allocate all such Recoveries to
reinstate the Series 2000-1 Invested Amount, to the extent
the Series 2000-1 Invested Amount has been reduced pursuant
to Section 5.2(c)(x)(ii) above;
(ii) Second, allocate all remaining Recoveries
after making the allocations in clause (i) above up to the
amount, as stated in such Servicer direction, necessary to
reinstate the Series 2000-1 Available Subordinated Amount to
the Series 2000-1 Required Subordinated Amount; and
(iii) Third, the remainder of such Recoveries after
making the allocations in (i) and (ii) above shall constitute
profits of TFFC.
(d) Allocation Adjustments. Notwithstanding the foregoing provisions
of this Section 5.2:
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(i) provided the Series 2000-1 Rapid Amortization Period
has not commenced, amounts retained in the Series 2000-1 Collection
Account that are not required to make payments under the Series 2000-1
Note pursuant hereto may, as and to the extent permitted in the
related Supplements, be used to pay the principal amount of other
Group II Series of Notes that are then in amortization and, after such
payment, any remaining funds may, at TFFC's option, be (A) used to
finance, refinance or acquire Group II Vehicles, to the extent
Eligible Vehicles have been requested by any of the Lessees under the
Group II Master Lease or (B) transferred, on any Distribution Date, to
the Budget Distribution Account, to the extent that the Budget
Interest Amount equals or exceeds zero after giving effect to such
payment and so long as no Series 2000-1 Credit Support Deficiency or
Series 2000-1 Asset Amount Deficiency exists or would result
therefrom; provided, however, that funds remaining after the
application of such funds to the payment of the principal amount of
other Group II Series of Notes that are in amortization and to the
financing, refinancing or acquisition of Group II Vehicles may be
transferred to the Budget Distribution Account on a day other than a
Distribution Date if the Servicer furnishes to the Trustee an
Officer's Certificate to the effect that such transfer will not cause
any of the foregoing deficiencies to occur either on the date that
such transfer is made or, in the reasonable anticipation of the
Servicer, on the next Distribution Date. Funds in the Team
Distribution Account shall, at the option of TFFC, be available to
finance, refinance or acquire Group II Vehicles, to the extent
Eligible Vehicles have been requested by any of the Lessees under the
Group II Master Lease, or for distribution to the Budget
Interestholder (including any advances made under the Subordinated
Note);
(ii) in the event that the Servicer is not Budget or an
Affiliate of Budget or if a Servicer Default has occurred and is
continuing, the Servicer shall not be entitled to withhold any amounts
pursuant to Section 5.2(c) of the Base Indenture and the Trustee shall
deposit amounts payable to Budget in the Collection Account pursuant
to the provisions of Section 5.2 of the Base Indenture on each Deposit
Date;
(iii) any amounts withheld by the Servicer and not deposited
in the Collection Account pursuant to Section 5.2(c) of the Base
Indenture shall be deemed to be deposited in the Collection Account
and allocated to the Group II Collection Account and the Series 2000-1
Collection Account, as applicable, on the date such amounts are
withheld for purposes of determining the amounts to be allocated
pursuant to this Section 5.2;
(iv) TFFC may, from time to time in its sole discretion,
increase the Series 2000-1 Available Subordinated Amount by (A) (x)
transferring funds to the Series 2000-1 Collection Account or (y)
allocating to the Series 2000-1 Available Subordinated Amount Eligible
Vehicles theretofore allocated to the Budget Interest, and (B)
delivering to the Servicer and the Trustee an Officers' Certificate
setting forth the amount of such transferred funds or the Net Book
Value of such Eligible Vehicles, as the case may be, stating that such
transferred funds or Eligible Vehicles, as applicable, shall be
allocated to the Series 2000-1 Available Subordinated
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Amount and, in the case of Eligible Vehicles, affirming with respect
to such Eligible Vehicles the representations and warranties set forth
in Section 7.14 of the Base Indenture (and an Opinion of Counsel to
the same effect); provided, however, TFFC shall have no obligation to
so increase the Series 2000-1 Available Subordinated Amount;
(v) in the event that the Series 2000-1 Credit Support Amount
is reduced to less than the Series 2000-1 Minimum Credit Support
Amount, an Amortization Event and a Series 2000-1 Limited Liquidation
Event of Default shall be deemed to have occurred with respect to the
Series 2000-1 Note only if, after any applicable grace period, either
the Trustee, by written notice to the Issuer, or the Required
Noteholders, by written notice to the Issuer and the Trustee, declare
that an Amortization Event has occurred; provided, however, (i) the
Issuer may prevent an Amortization Event from occurring if, within one
(1) Business Day after the occurrence of such Series 2000-1 Credit
Support Deficiency, the Series 2000-1 Available Subordinated Amount is
increased by an amount sufficient, in the aggregate, to eliminate such
Series 2000-1 Credit Support Deficiency; provided, however, the amount
of such contribution (together with the sum of the amounts of all
prior contributions) shall not exceed the Series 2000-1 Available
Subordinated Amount Maximum Increase, and (ii) the Issuer may prevent
a Series 2000-1 Limited Liquidation Event of Default from occurring if
within the thirty (30) day period after the occurrence of such Series
2000-1 Credit Support Deficiency, (x) the Series 2000-1 Available
Subordinated Amount is increased by an amount sufficient to eliminate
such Series 2000-1 Credit Support Deficiency and (y) the Rating Agency
Confirmation condition is satisfied;
(vi) if, on any Distribution Date during the Series 2000-1
Revolving Period, a Mandatory Decrease shall be required under Section
4.3(a) of this Supplement and the amounts allocated to the Series
2000-1 Invested Amount under Section 5.2(a)(ii) are less than the
amount of such required Decrease, then, in such event, any funds on
deposit in the collection accounts or excess funding accounts for
other Group II Series of Notes issued and outstanding under the
Indenture which amounts are not allocable to the Budget Interest and
are in excess of the amounts necessary to be on deposit in each such
account in order that (x) no Asset Amount Deficiency occur with
respect to any such Series, (y) no shortfall in the required level of
enhancement occur with respect to any such Series, including any
portion of such enhancement that is required to be in liquid funds,
and (z) no Amortization Event for any such Series or event that with
the giving of notice or passage of time would become an Amortization
Event occur with respect to any such Group II Series of Notes (such
amounts as are set forth in clauses (i) and (ii) of this subparagraph
(G) being referred to herein as "Excess Amounts") shall, in each such
case, be deposited into the Series 2000-1 Distribution Account as
Principal Collections in an aggregate amount up to the amount of any
such deficiency and shall be used, in accordance with Section 5.5, to
reduce the Series 2000-1 Invested Amount; and
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(vii) if, on any Distribution Date during the Series 2000-1
Rapid Amortization Period, the Monthly Principal Allocation under
Section 5.2(b)(ii) is insufficient to reduce the Series 2000-1
Invested Amount to zero, then, in such event, any funds constituting
Excess Amounts shall, in each such case, be deposited into the Series
2000-1 Distribution Account as Principal Collections in an aggregate
amount up to the amount of any such deficiency and shall be used, in
accordance with Section 5.5, to reduce the Series 2000-1 Invested
Amount.
Section 5.3 Payments from the Series 2000-1 Accrued Interest Account.
On each Determination Date or Additional Distribution Date, as provided below,
the Servicer shall instruct the Trustee or the Paying Agent in writing to
withdraw, and on such Distribution Date or Additional Distribution Date, as
applicable, the Trustee or the Paying Agent, acting in accordance with such
written instructions, shall withdraw the amounts required to be withdrawn from
the Series 2000-1 Accrued Interest Account pursuant to Sections 5.3(a), (b) and
(c) below (after giving effect to the allocations on such date pursuant to
Section 5.2) in respect of all funds available from Collections processed since
the preceding Distribution Date and allocated to the holders of the Series
2000-1 Note.
(a) Successor Servicer Fees. On each Determination Date on which
Budget is not the Servicer, and before any deposits required to be made on the
related Distribution Date to the Series 2000-1 Distribution Account have been
made, the Servicer shall instruct the Trustee and the Paying Agent in writing
as to the amount to be withdrawn from the Series 2000-1 Accrued Interest
Account to the extent funds are available and processed since the preceding
Distribution Date in respect of an amount equal to (i) the Series 2000-1
Investor Monthly Servicing Fee (and any Series 2000-1 Monthly Supplemental
Servicing Fee) accrued since the preceding Distribution Date, plus (ii) all
accrued and unpaid Series 2000-1 Investor Monthly Servicing Fees (and any
Series 2000-1 Monthly Supplemental Servicing Fees) in respect of previous
periods, minus (iii) the amount of any Series 2000-1 Investor Monthly Servicing
Fees (and Series 2000-1 Monthly Supplemental Servicing Fees) withheld by the
Servicer since the preceding Distribution Date pursuant to Section 5.2(c) of
the Base Indenture. On such Distribution Date, the Trustee shall withdraw such
amount from the Series 2000-1 Accrued Interest Account and remit such amount to
the Servicer.
(b) Note Interest with respect to the Series 2000-1 Note. (i) On each
Determination Date, the Servicer shall instruct the Trustee and the Paying
Agent in writing as to the amount to be withdrawn from the Series 2000-1
Accrued Interest Account, after making all distributions required to be made
pursuant to Section 5.3(a), to the extent funds will be available and processed
from but not including the preceding Distribution Date through the succeeding
Distribution Date in respect of Series 2000-1 Note Interest and Series 2000-1
Carrying Charges. On the Distribution Date related to such Determination Date,
the Trustee shall withdraw from the Series 2000-1 Accrued Interest Account the
amount on deposit therein available for the payment of Series 2000-1 Note
Interest and Series 2000-1 Carrying Charges and deposit such amount in the
Series 2000-1 Distribution Account.
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(ii) On any Business Day during a Series 2000-1 Interest
Period (each such day, an "Additional Distribution Date"), the
Servicer may instruct the Trustee in writing to withdraw from the
Series 2000-1 Accrued Interest Account, and on such Additional
Distribution Date the Trustee, acting in accordance with such
instructions, shall withdraw from the Series 2000-1 Accrued Interest
Account, as directed in writing by the Servicer, all or a portion of
the Series 2000-1 Note Interest that will be due on the first
Distribution Date following such Additional Distribution Date to the
extent that such amount does not exceed the aggregate amount of
Interest Collections processed since the preceding Distribution Date
and allocated to the Series 2000-1 Noteholders (less any portion
thereof previously paid to the Series 2000-1 Noteholders during such
period pursuant to this Section 5.2(e)) and shall pay such amounts to
the Series 2000-1 Noteholders in accordance with Section 6.1 of the
Base Indenture.
(c) Servicing Fee. On each Determination Date on which Budget is the
Servicer, the Servicer shall, after giving effect to all distributions required
to be made on the related Distribution Date pursuant to Sections 5.3(a) and (b)
of this Supplement, instruct the Trustee and the Paying Agent in writing as to
the amount to be withdrawn on such Distribution Date from the Series 2000-1
Collection Account to the extent funds are available and processed since the
preceding Distribution Date in respect of an amount equal to (i) the Series
2000-1 Investor Monthly Servicing Fee (and any Series 2000-1 Monthly
Supplemental Servicing Fee) accrued since the preceding Distribution Date, plus
(ii) all accrued and unpaid Series 2000-1 Investor Monthly Servicing Fees (and
any Series 2000-1 Monthly Supplemental Servicing Fees) in respect of previous
periods, minus (iii) the amount of any Series 2000-1 Investor Monthly Servicing
Fees (and Series 2000-1 Monthly Supplemental Servicing Fees) withheld by the
Servicer since the preceding Distribution Date pursuant to Section 5.2(c) of
the Base Indenture. On such Distribution Date, the Trustee shall withdraw such
amount from the Series 2000-1 Collection Account and remit such amount to the
Servicer.
Section 5.4 Payment of Note Interest and Carrying Charges. On each
Distribution Date and Additional Distribution Date, the Paying Agent shall, in
accordance with Section 6.1 of the Base Indenture and the written instruction
of the Servicer received pursuant to Section 5.3(b) hereof, pay to the Series
2000-1 Noteholders from the Series 2000-1 Distribution Account the amount
deposited in the Series 2000-1 Distribution Account for the payment of Series
2000-1 Note Interest pursuant to Section 5.3(b) of this Supplement and, to the
extent that such amount is insufficient to pay all Series 2000-1 Note Interest
and Series 2000-1 Carrying Charges payable on such Distribution Date (the
amount of such insufficiency, a "Note Interest Shortfall"), the Servicer shall
instruct the Trustee in writing to withdraw from the Series 2000-1 Collection
Account the lesser of (i) the amount on deposit in the Series 2000-1 Collection
Account and (ii) the amount of such Note Interest Shortfall. Subject to
Sections 2.15(c) and 6.1(b) of the Base Indenture, all payments of interest and
Series 2000-1 Carrying Charges, and all payments of principal pursuant to
Section 5.5 hereof, made to the Series 2000-1 Noteholder shall be made by wire
transfer to such account as the Series 2000-1 Noteholder of record on the
preceding Record Date shall specify from time to time by notice to the Issuer
and the Paying Agent.
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Section 5.5 Payment of Note Principal; Transfers to Budget
Distribution Account.
(a) Commencing on the first Determination Date after the commencement
of the Series 2000-1 Rapid Amortization Period, the Servicer shall instruct the
Trustee and the Paying Agent in writing as to the amount of Collections
allocated to the Series 2000-1 Note during the Related Month pursuant to
Section 5.2(b)(ii) of this Supplement (such amount, the "Monthly Principal
Allocation"). Commencing on the first Distribution Date after the commencement
of the Series 2000-1 Rapid Amortization Period, to the extent that the Monthly
Principal Allocation is insufficient to pay all principal due in respect of the
Series 2000-1 Note on such Distribution Date (the amount of such insufficiency,
a "Principal Shortfall"), the Servicer shall instruct the Trustee in writing
(a) to withdraw from the Series 2000-1 Collection Account the lesser of (i) the
amount on deposit in the Series 2000-1 Collection Account and (ii) the amount
of such Principal Shortfall and (b) to the extent of any remaining Principal
Shortfall, to apply to the payment thereof Principal Collections with respect
to any other Group II Series of Notes which pursuant to Section 5.2(d) of the
Base Indenture (as modified herein) are available on such Distribution Date to
pay principal of the Series 2000-1 Note (up to the amount of such Principal
Shortfall remaining). The entire principal amount of the Series 2000-1 Note
shall be due and payable on the Series 2000-1 Termination Date.
(b) On each Distribution Date occurring on or after the date a
withdrawal or application is made pursuant to Section 5.5(a) of this
Supplement, the Paying Agent shall, in accordance with Section 6.1 of the Base
Indenture and the written instruction of the Servicer received pursuant to
Section 5.5(a) hereof, pay to the Series 2000-1 Noteholders the amount
deposited in the Series 2000-1 Distribution Account for the payment of
principal pursuant to Section 5.5(a) of this Supplement.
(c) On (x) the Distribution Date on which, or immediately following
the date on which, an allocation is made pursuant to Section 5.2(a)(ii), or (y)
the Business Day specified in the notice of Decrease delivered pursuant to
Section 4.3(b), occurring on or after the date an allocation is made pursuant
to Section 5.2(a)(iv), the Paying Agent shall pay to the Series 2000-1
Noteholders pursuant to the written instruction of the Servicer the amount
deposited in the Series 2000-1 Distribution Account for the payment of
principal pursuant to such Section 5.2(a)(ii) or 5.2(a)(iv), as applicable.
(d) On each Distribution Date, the Servicer shall, as applicable,
instruct the Trustee in writing to instruct the Paying Agent to transfer to the
Budget Distribution Account (i) all funds which are in the Group II Collection
Account that have been allocated to the Budget Distribution Account as of such
Distribution Date and (ii) all funds that were previously allocated to the
Budget Distribution Account but not transferred to the Budget Distribution
Account. On the related Distribution Date, the Trustee or Paying Agent shall,
in accordance with the Servicer's instructions, withdraw such funds from the
Group II Collection Account, as applicable, and deposit them into the Budget
Distribution Account.
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Section 5.6 Servicer's or Budget's Failure to Make a Deposit or
Payment. If the Servicer or Budget fails to make, or give notice or
instructions to make, any payment from or deposit to the Collection Account,
the Group II Collection Account, the Series 2000-1 Collection Account or the
Series 2000-1 Accrued Interest Account required to be made or given by the
Servicer or Budget, respectively, at the time specified in the Indenture
(including applicable grace periods), the Servicer shall, upon request of the
Trustee, promptly provide the Trustee with all information necessary to allow
the Trustee, in the event it elects to do so, to make such a payment. Such
funds shall be applied by the Trustee in the manner in which such payment or
deposit should have been made by the Servicer.
Section 5.7 Series 2000-1 Distribution Account.
(a) Establishment of the Series 2000-1 Distribution Account. The
Trustee shall establish and maintain in the name of the Trustee for the benefit
of the Series 2000-1 Noteholders, or cause to be established and maintained, an
account (the "Series 2000-1 Distribution Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Series 2000-1 Noteholders. The Series 2000-1 Distribution Account shall be
maintained (i) with a Qualified Institution, or (ii) as a segregated trust
account with the corporate trust department of a depository institution or
trust company having corporate trust powers and acting as trustee for funds
deposited in the Series 2000-1 Distribution Account. If the Series 2000-1
Distribution Account is not maintained in accordance with the previous
sentence, the Servicer shall establish a new Series 2000-1 Distribution
Account, within ten (10) Business Days after obtaining knowledge of such fact,
which complies with such sentence, and transfer all cash and investments from
the non-qualifying Series 2000-1 Distribution Account into the new Series
2000-1 Distribution Account. Initially, the Series 2000-1 Distribution Account
will be established with the Trustee. The Trustee shall possess all right,
title and interest in all funds on deposit from time to time in the Series
2000-1 Distribution Account and in all proceeds thereof. The Series 2000-1
Distribution Account Collateral shall be under the sole dominion and control of
the Trustee for the benefit of the Series 2000-1 Noteholders.
(b) Administration of the Series 2000-1 Distribution Account. The
Servicer shall instruct the institution maintaining the Series 2000-1
Distribution Account in writing to invest funds on deposit in the Series 2000-1
Distribution Account at all times in Permitted Investments; provided, however,
that any such investment shall mature not later than the Business Day prior to
the Distribution Date following the date on which such funds were received,
unless any Permitted Investment held in the Series 2000-1 Distribution Account
is held with the Paying Agent, then such investment may mature on such
Distribution Date and such funds shall be available for withdrawal on or prior
to such Distribution Date. The Trustee shall hold, for the benefit of the
Series 2000-1 Noteholders and the Servicer, possession of the negotiable
instruments or securities evidencing the Permitted Investments described in
clause (i) of the definition thereof from the time of purchase thereof until
the time of maturity.
-34-
<PAGE> 36
(c) Earnings from Series 2000-1 Distribution Account. Subject to the
restrictions set forth above, the Servicer shall have the authority to instruct
the Trustee in writing with respect to the investment of funds on deposit in
the Series 2000-1 Distribution Account. All interest and earnings (net of
losses and investment expenses) on funds on deposit in the Series 2000-1
Distribution Account shall be deemed to be on deposit and available for
distribution.
ARTICLE 6
AMORTIZATION EVENTS
In addition to the Amortization Events set forth in Section 9.1 of the
Base Indenture, subject to Section 5.2(a)(v) hereof, the following shall be
Amortization Events with respect to the Series 2000-1 Note (without notice or
other action on the part of the Trustee or any holders of the Series 2000-1
Note) and shall not be subject to waiver:
(a) A Series 2000-1 Credit Support Deficiency shall occur and exist for
more than one (1) Business Day unless during such one (1) Business Day period
the Issuer or the Servicer shall have cured the Series 2000-1 Credit Support
Deficiency in accordance with the terms and conditions of this Supplement;
(b) if all principal and interest of the Series 2000-1 Note is not
paid in full on or before June 30, 2000;
(c) any Related Document is not in full force and effect, or the
Issuer, Budget or the Servicer so asserts in writing;
(d) an "Event of Default" shall have occurred and be continuing under
and as defined in the Group II Master Lease; or
(e) an "Event of Default" shall have occurred and be continuing under
and as defined in the Bridge Loan Agreement.
ARTICLE 7
GENERAL
(a) Repurchase. The Series 2000-1 Note shall be subject to repurchase
by TFFC at its option in accordance with Section 6.3 of the Base Indenture on
any Distribution Date. The repurchase price for the Series 2000-1 Note shall
equal the Aggregate Principal Balance of the Series 2000-1 Note
-35-
<PAGE> 37
(determined after giving effect to any payments of principal and interest and
any Increases or Decreases as of such Distribution Date), plus accrued and
unpaid interest on such Aggregate Principal Balance.
(b) Payment of Rating Agency Fees. TFFC agrees and covenants with the
Servicer to pay all reasonable fees and expenses of the Rating Agencies and to
promptly provide all documents and other information that the Rating Agencies
may reasonably request.
(c) Exhibits. The following exhibits attached hereto supplement the
exhibits included in the Indenture.
Exhibit A: Form of Series 2000-1 Note
Exhibit B: List of Approved Manufacturers
(d) Ratification of Base Indenture. As supplemented by this
Supplement, the Base Indenture is in all respects ratified and confirmed and
the Base Indenture as so supplemented by this Series Supplement shall be read,
taken, and construed as one and the same instrument.
(e) Counterparts. This Supplement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute but one and the same
instrument.
(F) GOVERNING LAW. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PROVISIONS
THEREOF REGARDING CONFLICTS OF LAWS), AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
(g) Amendments. This Supplement may be modified or amended from time
to time in accordance with the terms of the Base Indenture; provided, however,
that if, pursuant to the terms of the Base Indenture or this Supplement, the
consent of the Required Noteholders is required for an amendment or
modification of this Supplement, such requirement shall be satisfied if such
amendment or modification is consented to by Noteholders representing more than
50% of the aggregate outstanding principal amount of the Series 2000-1 Note.
(h) Discharge of Indenture. Notwithstanding anything to the contrary
contained in the Base Indenture, no discharge of the Indenture pursuant to
Section 11.1(b) of the Base Indenture will be effective as to the Series 2000-1
Note without the consent of the Required Noteholders.
(i) Base Indenture Defined Terms. Each of the capitalized terms listed
in the first column below is defined in Schedule 1 to the Base Indenture, as
such term applies to any Segregated Series (including
-36-
<PAGE> 38
Series 2000-1), by reference to the related Supplement. Such terms are defined
in this Series 2000-1 Supplement using the corresponding capitalized terms set
forth in the second column below opposite such Base Indenture terms.
<TABLE>
<CAPTION>
CORRESPONDING SERIES
BASE INDENTURE TERMS 2000-1 SUPPLEMENT TERMS
-------------------- -----------------------
<S> <C>
Aggregate Segregated Repurchase Asset Aggregate Group II Repurchase Asset Amount
Amount
Monthly Servicing Fee Series 2000-1 Monthly Servicing Fee
Repurchase Vehicle Group II Repurchase Vehicle
Segregated Repurchase Vehicle Group II Repurchase Vehicle
Vehicle Group II Vehicle
</TABLE>
-37-
<PAGE> 39
IN WITNESS WHEREOF, TFFC, the Servicer, Budget, as Budget
Interestholder and the Trustee have caused this Supplement to be duly executed
and BRACC has caused this Supplement to be duly acknowledged and agreed to by
their respective officers thereunto duly authorized as of the day and year
first above written.
TEAM FLEET FINANCING CORPORATION,
as Issuer
By: /s/ Mark Bobek
-----------------------------------------
Name: Mark Bobek
Title: President
BUDGET GROUP, INC., as Servicer
By: /s/ Sheri Young
-----------------------------------------
Name: Sheri Young
Title: Vice President
BUDGET GROUP, INC., as Budget Interestholder
By: /s/ Mark Bobek
-----------------------------------------
Name: Mark Bobek
Title: Vice President, Treasurer
BANKERS TRUST COMPANY, as Trustee
By: /s/ Franco Talavera
-----------------------------------------
Name: Franco B. Talavera
Title: Assistant Vice President
<PAGE> 40
EXHIBIT A
TO
SERIES 2000-1 SUPPLEMENT
FORM OF VARIABLE FUNDING NOTE
REGISTERED $__________
No. A-
SEE REVERSE FOR CERTAIN CONDITIONS
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS.
THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF TEAM
FLEET FINANCING CORPORATION, A DELAWARE CORPORATION (THE "COMPANY"), THAT THIS
NOTE IS BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION.
THIS NOTE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED, EXCHANGED OR OTHERWISE
PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE INDENTURE
REFERRED TO HEREIN.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AND SUBJECT
TO INCREASES AND DECREASES AS SET FORTH HEREIN AND IN THE INDENTURE.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE> 41
TEAM FLEET FINANCING CORPORATION
VARIABLE FUNDING RENTAL CAR ASSET BACKED NOTE, SERIES 2000-1
TEAM FLEET FINANCING CORPORATION, a Delaware corporation
(herein referred to as the "Company"), for value received, hereby promises to
pay to Credit Suisse First Boston, New York Branch, a Swiss banking corporation
(the "Noteholder"), or its registered assigns, the principal sum of up to TWO
HUNDRED SEVENTY MILLION DOLLARS ($270,000,000) or, if less the aggregate unpaid
principal amount shown on the schedule attached hereto (and any continuation
thereof), which amount shall be payable in the amounts and at the times set
forth in the Indenture, provided, however, that the entire unpaid principal
amount of this Note shall be due on the Series 2000-1 Termination Date, which
is the June 2001 Distribution Date (unless extended in writing by the parties
to the Indenture and the Noteholder). The Company will pay interest on this
Note at the Series 2000-1 Note Rate. Such interest shall be payable on each
Distribution Date until the principal of this Note is paid or made available
for payment, to the extent funds will be available from Series 2000-1
Collections processed from and including the preceding Distribution Date to but
excluding each such Distribution Date in respect of (a) an amount equal to
interest accrued for the related Series 2000-1 Interest Period, which will be
equal to the sum of the products, for each day during the related Series 2000-1
Interest Period, of (i) the Series 2000-1 Note Rate for such Series 2000-1
Interest Period and (ii) the Series 2000-1 Invested Amount as of the close of
business on such date divided by 360, plus (b) an amount equal to the amount of
any accrued and unpaid Note Interest Shortfall with respect to prior Series
2000-1 Interest Periods, with interest on the amount of such Note Interest
Shortfall at the Series 2000-1 Note Rate for the related Series 2000-1 Interest
Period. The principal amount of this Note shall be subject to Increases and
Decreases on any Distribution Date, and accordingly, such principal amount is
subject to prepayment at any time. Notwithstanding the foregoing, prior to the
Series 2000-1 Termination Date and unless an Amortization Event shall have
occurred, only interest payments on the outstanding principal amount of the
Note are required to be made to the holder hereof. Beginning on the first
Distribution Date following the occurrence of an Amortization Event, subject to
Decreases on any Business Day, the principal of this Note shall be paid in
installments on each subsequent Distribution Date to the extent of funds
available for payment therefor pursuant to the Indenture. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. This Note does not
represent an interest in, or an obligation of, the Servicer or any affiliate of
the Servicer other than the Company.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note. Although a summary of certain provisions of
the Indenture are set forth below and on the reverse hereof and made a part
hereof, this Note does not purport to summarize the Indenture and reference is
made to the Indenture
A-2
<PAGE> 42
for information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Servicer and the Trustee. A copy of the Indenture may be requested from the
Trustee by writing to the Trustee at: Bankers Trust Company, 4 Albany Street,
New York, New York 10006, Attention: Corporate Trust and Agency Group. To the
extent not defined herein, the capitalized terms used herein have the meanings
ascribed to them in the Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-3
<PAGE> 43
IN WITNESS WHEREOF, the Company has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: February 25, 2000 TEAM FLEET FINANCING CORPORATION
By:
--------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes of a series issued under the
within-mentioned Indenture.
BANKERS TRUST COMPANY,
as Trustee
By:
----------------------------
Authorized Signature
A-4
<PAGE> 44
REVERSE OF SERIES 2000-1 NOTE
This Note is one of a duly authorized issue of Notes of the
Company, designated as its Variable Funding Rental Car Asset Backed Notes,
Series 2000-1 (herein called the "Series 2000-1 Notes"), all issued under (i)
an Amended and Restated Base Indenture, dated as of December 1, 1996 (such Base
Indenture, as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof, is herein called the "Base
Indenture"), among the Company, Budget Group, Inc., a Delaware corporation
formerly known as Team Rental Group, Inc. ("Budget"), as servicer and as holder
of the Budget Interest, and Bankers Trust Company, a New York banking
corporation, as trustee (the "Trustee"), and (ii) a Series 2000-1 Supplement,
dated as of February 25, 2000 (the "Series 2000-1 Supplement"), among the
Company, Budget and the Trustee. The Base Indenture and the Series 2000-1
Supplement are referred to herein as the "Indenture". The Series 2000-1 Note is
subject to all terms of the Indenture. All terms used in this Series 2000-1
Note that are defined in the Indenture, as amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof, shall have the
meanings assigned to them in or pursuant to the Indenture, as so amended,
supplemented or otherwise modified.
The Series 2000-1 Note, and all other Notes included in a Group
I Series of Notes, are and will be equally and ratably secured by the Group I
Collateral, and the Series 2000-1 Note is and will be equally and ratably
secured by the Series 2000-1 Collateral, in each case pledged as security
therefor as provided in the Indenture and the Series 2000-1 Supplement.
"Distribution Date" means the 25th day of each month, or, if
any such date is not a Business Day, the next succeeding Business Day,
commencing March 27, 2000.
As described above, the entire unpaid principal amount of this
Series 2000-1 Note shall be due and payable on the Series 2000-1 Termination
Date. Notwithstanding the foregoing, if an Amortization Event, Liquidation
Event of Default or Series 2000-1 Limited Liquidation Event of Default shall
have occurred and be continuing then, in certain circumstances, principal on
the Series 2000-1 Note may be paid earlier, as described in the Indenture. All
principal payments on the Series 2000-1 Note shall be made pro rata to the
Series 2000-1 Noteholders entitled thereto.
Payments of interest on this Series 2000-1 Note due and payable
on each Distribution Date, together with the installment of principal then due,
if any, and any payments of principal made on any Business Day in respect of
any Decreases, to the extent not in full payment of this Series 2000-1 Note,
shall be made by wire transfer to the Holder of record of this Series 2000-1
Note (or any predecessor Series 2000-1 Note) on the Note Register as of the
close of business on each Record Date. Any reduction in the principal amount of
this Series 2000-1 Note (or any predecessor Series 2000-1 Note) effected by any
payments made on any date shall be binding upon all future Holders of this
Series 2000-1 Note and of any Series 2000-1 Note issued upon the registration
of transfer hereof or in exchange hereof or in lieu hereof, whether or not
noted thereon. Final payment of principal
A-5
<PAGE> 45
(together with any accrued and unpaid interest) on this Series 2000-1 Note will
be paid to the Series 2000-1 Noteholder only upon presentation and surrender of
this Series 2000-1 Note at the Corporate Trust Office for cancellation by the
Trustee.
The Company shall pay interest on overdue installments of
interest at the Series 2000-1 Note Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations
set forth therein, the transfer of this Series 2000-1 Note may be registered on
the Note Register upon surrender of this Series 2000-1 Note for registration of
transfer at the office or agency designated by the Company pursuant to the
Indenture, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Registrar duly executed by the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Series 2000-1 Notes of authorized denominations and in the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of transfer
or exchange of this Series 2000-1 Note, but the transferor may be required to
pay a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any such registration of transfer or exchange.
Each Series 2000-1 Noteholder, by acceptance of the Series
2000-1 Note, covenants and agrees that no recourse may be taken, directly or
indirectly, with respect to the obligations of the Trustee, the Company or
Budget on the Series 2000-1 Note or under the Indenture or any certificate or
other writing delivered in connection therewith, against (i) the Trustee, the
Company or Budget in its individual capacity, (ii) any owner of a beneficial
interest in the Company or (iii) any partner, owner, beneficiary, agent,
officer, director or employee of the Trustee, the Company or Budget in its
individual capacity, any holder of a beneficial interest in the Company, Budget
or the Trustee or of any successor or assign of the Trustee or Budget in its
individual capacity, except (a) as any such Person may have expressly agreed
and (b) any such partner, owner or beneficiary shall be fully liable, to the
extent provided by applicable law, for any unpaid consideration for stock,
unpaid capital contribution or failure to pay any installment or call owing to
such entity; provided, however, that nothing contained herein shall be taken to
prevent recourse to, and enforcement against, the assets of the Company for any
and all liabilities, obligations and undertakings contained in the Indenture or
in this Series 2000-1 Note, subject to Section 13.17 of the Base Indenture.
Each Series 2000-1 Noteholder, by acceptance of the Series
2000-1 Note, covenants and agrees that by accepting the benefits of the
Indenture that such Series 2000-1 Noteholder will not for a period of one year
and one day following payment in full of the Series 2000-1 Note institute
against the Company, or join in any institution against the Company of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
under any United States Federal or state bankruptcy or similar law in
connection with any obligations relating to the Series 2000-1 Note, the
Indenture or the Related Documents.
A-6
<PAGE> 46
Prior to the due presentment for registration of transfer of
this Series 2000-1 Note, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name the Series 2000-1 Note (as of
the day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
the Series 2000-1 Note be overdue, and neither the Company, the Trustee nor any
such agent shall be affected by notice to the contrary.
It is the intent of the Company and each Series 2000-1
Noteholder that, for Federal, state and local income and franchise tax purposes
only, the Series 2000-1 Note will evidence indebtedness of the Company secured
by the Collateral. Each Series 2000-1 Noteholder, by the acceptance of the
Series 2000-1 Note, agrees to treat the Series 2000-1 Note for Federal, state
and local income and franchise tax purposes as indebtedness of the Company.
The Indenture permits in certain circumstances, with certain
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders of the
Series 2000-1 Note under the Indenture at any time by the Company with the
consent of the Holders of the Series 2000-1 Note representing more than 50% in
principal amount of the Outstanding Series 2000-1 Note which are affected by
such amendment or modification. The Indenture also contains provisions
permitting the Holders of Series 2000-1 Note representing specified percentages
of the Outstanding Series 2000-1 Note, on behalf of the Holders of the Series
2000-1 Note, to waive compliance by the Company with certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of the Series 2000-1 Note (or any predecessor Series 2000-1 Note) shall
be conclusive and binding upon such Holder and upon all future Holders of the
Series 2000-1 Note and of the Series 2000-1 Note issued upon the registration
of transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent or waiver is made upon the Series 2000-1 Note. The
Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Series 2000-1 Note.
The term "Company" as used in this Series 2000-1 Note includes
any successor to the Company under the Indenture.
The Series 2000-1 Note is issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations set
forth therein.
The Series 2000-1 Note and the Indenture shall be construed in
accordance with the law of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
law.
No reference herein to the Indenture and no provision of the
Series 2000-1 Note or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to
A-7
<PAGE> 47
pay the principal of and interest on the Series 2000-1 Note at the times,
place, and rate, and in the coin or currency herein prescribed, subject to any
duty of the Company to deduct or withhold any amounts as required by law,
including any applicable U.S. withholding taxes.
A-8
<PAGE> 48
INCREASES AND DECREASES
<TABLE>
<CAPTION>
==================================================================================================================
DATE UNPAID INCREASE DECREASE TOTAL SERIES INTEREST PERIOD NOTATION MADE
PRINCIPAL 2000-1 (IF APPLICABLE) BY
AMOUNT NOTE RATE
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
</TABLE>
A-9
<PAGE> 49
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
- ---------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
==========================================================================
(name and address of assignee)
the within Series 2000-1 Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ___________, attorney, to transfer said Series 2000-1
Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: */
--------------- -----------------------------
Signature Guaranteed:
-----------------------------
-------------------
----------------------------
[*] NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Series 2000-1 Note in
every particular, without alteration, enlargement or any change whatsoever.
A-10
<PAGE> 50
EXHIBIT B
TO
SERIES 2000-1 SUPPLEMENT
List of Approved Manufacturers
Ford Motor Company
Saab Cars USA, Inc.
Toyota Motor Sales USA, Inc.
<PAGE> 51
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PRELIMINARY STATEMENT
ARTICLE 1
DESIGNATION
ARTICLE 2
DEFINITIONS
Section 2.1 Incorporation of Schedule 1, etc................................................................... 3
Section 2.2 Defined Terms...................................................................................... 3
ARTICLE 3
SECURITY; REPORTS; COVENANT
Section 3.1 Grant of Security Interest......................................................................... 22
Section 3.2 Reports............................................................................................ 24
ARTICLE 4
INITIAL ISSUANCE AND INCREASES AND DECREASES OF
SERIES 2000-1 INVESTED AMOUNT OF SERIES 2000-1 NOTE
Section 4.1. Issuance in Definitive Form........................................................................ 24
Section 4.2 Procedure for Increasing the Invested Amount....................................................... 25
Section 4.3 Decreases.......................................................................................... 26
ARTICLE 5
SERIES 2000-1 ALLOCATIONS
Section 5.1 Establishment of the Group II Collection Account, Series 2000-1 Collection
Account and Series 2000-1 Accrued Interest Account...................................................... 28
Section 5.2 Allocations with Respect to the Series 2000-1 Note................................................. 29
Section 5.3 Payments from the Series 2000-1 Accrued Interest Account........................................... 33
Section 5.4 Payment of Note Interest and Carrying Charges...................................................... 35
Section 5.5 Payment of Note Principal; Transfers to Budget Distribution Account................................ 35
Section 5.6 Servicer's or Budget's Failure to Make a Deposit or Payment........................................ 36
Section 5.7 Series 2000-1 Distribution Account................................................................. 36
</TABLE>
<PAGE> 52
TABLE OF CONTENTS
CONTINUED
PAGE
ARTICLE 6
AMORTIZATION EVENTS
ARTICLE 7
GENERAL
Exhibit A - Form of Series 2000-1 Note
Exhibit B - List of Approved Manufacturers
A-ii
<PAGE> 1
EXHIBIT 4.32
TEAM FLEET FINANCING CORPORATION,
AS LESSOR
BUDGET GROUP, INC.,
AS GUARANTOR
BUDGET RENT A CAR SYSTEMS, INC.
and those Subsidiaries, Affiliates and Non-Affiliates
of Budget Group, Inc.
named on Schedule 1 hereto,
AS LESSEES
MASTER MOTOR VEHICLE LEASE AGREEMENT
Group II
Dated as of February 25, 2000
AS SET FORTH IN SECTION 25 HEREOF, THE LESSOR HAS ASSIGNED TO THE TRUSTEE (AS
DEFINED HEREIN) CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE.
TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM
IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION) NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE
TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL EXECUTED
COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE
RECEIPT THEREFOR EXECUTED BY THE TRUSTEE ON THE SIGNATURE PAGE THEREOF.
<PAGE> 2
MASTER MOTOR VEHICLE LEASE AGREEMENT - Group II
This Master Motor Vehicle Lease Agreement - Group II (this
"Agreement"), dated as of February 25, 2000, by and among TEAM FLEET FINANCING
CORPORATION, a Delaware corporation ("Lessor"), BUDGET RENT A CAR SYSTEMS, INC.
("Budget Systems"), a Delaware corporation, and those direct or indirect
Subsidiaries (the "Budget Subsidiaries") of Budget Group, Inc., those Affiliates
(other than the Budget Subsidiaries) and non-Affiliates, (such Affiliates and
non-Affiliates the "Non-Budget Lessees") of Budget Group, Inc. and will finance
the acquisition of Financed Vehicles, that are listed on Schedule 1 hereto and
those that become party to this Agreement pursuant to the provisions of Section
23 hereof (individually, each Budget Subsidiary and each Non-Budget Lessee, a
"Lessee" and, collectively, the "Lessees"), and BUDGET GROUP, INC. ("Budget"), a
Delaware corporation formerly known as Team Rental Group, Inc. ("Team"), as
guarantor (Budget in such capacity, the "Guarantor"; the Guarantor, together
with the Lessees, is from time to time referred to as the "Lessee Group").
W I T N E S S E T H:
WHEREAS, the Lessor (such capitalized term, together with all other
capitalized terms used herein, shall have the meaning assigned thereto in
Section 1) intends to refinance the Initial Fleet and to purchase, finance the
purchase of and refinance additional Financed Vehicles that are Eligible
Repurchase Vehicles from one or more Manufacturers with (i) the proceeds
obtained by the issuance from time to time of Group II Series of Notes and (ii)
certain other funds;
WHEREAS, the Lessor has purchased or will purchase Lessor-Owned
Vehicles, and will finance the acquisition of Financed Vehicles, that are Group
II Repurchase Vehicles from Manufacturers through dealers authorized by such
Manufacturers, at auctions conducted by automobile dealers not affiliated with
Budget, from Affiliates of Budget or through other vehicle sales;
WHEREAS, the Lessor desires to lease to the Lessees, and the Lessees
desire to lease from the Lessor, Group II Repurchase Vehicles so acquired,
financed or refinanced by the Lessor for use in the daily vehicle rental
businesses of the Lessees; and
WHEREAS, the Guarantor has, pursuant to Section 24 hereof, guaranteed
the obligations of the Lessees under this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. DEFINITIONS ......................................................................... 3
2. GENERAL AGREEMENT ................................................................... 3
2.1 Leasing of Group II Vehicles................................................... 5
2.2 Right of Lessees to Act as Lessor's Agent ..................................... 6
2.3 Payment of Capitalized Cost by Lessor ......................................... 6
2.4 Non-liability of Lessor ....................................................... 7
2.5 Conditions Precedent........................................................... 8
3. TERM ................................................................................ 11
3.1 Vehicle Term: Group II Repurchase Vehicles .................................... 11
3.2 The "Lease Commencement Date" ................................................. 12
4. RENT AND CHARGES .................................................................... 13
4.1 Payment of Rent ............................................................... 13
4.2 Payment of Monthly Supplemental Payments ...................................... 13
4.3 Payment of Supplemental Rent .................................................. 13
4.4 Payment of Termination Payments, Casualty Payments, and Late Return
Payments ...................................................................... 13
4.5 Late Payment .................................................................. 13
4.6 Prepayments ................................................................... 13
5. INSURANCE ........................................................................... 14
5.1 Personal Injury and Damage .................................................... 14
5.2 Delivery of Certificate of Insurance .......................................... 14
5.3 Changes in Insurance Coverage ................................................. 14
6. CASUALTY OBLIGATION ................................................................. 15
6.1 Casualty ...................................................................... 15
7. VEHICLE USE ......................................................................... 15
8. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND
FINES ......................................................................... 16
9. MAINTENANCE AND REPAIRS ............................................................. 16
</TABLE>
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10. VEHICLE WARRANTIES .................................................................. 17
11. VEHICLE RETURN GUIDELINES ........................................................... 17
11.1 Vehicle Turn-in-Condition ..................................................... 17
11.2 Return ........................................................................ 17
11.3 Termination Payments .......................................................... 18
11.4 Repurchase Price Interest ..................................................... 18
12. DISPOSITION PROCEDURE ............................................................... 18
13. ODOMETER DISCLOSURE REQUIREMENT ..................................................... 18
14. [RESERVED.] ......................................................................... 19
15. GENERAL INDEMNITY ................................................................... 19
15.1 Indemnity by the Lessees ...................................................... 19
15.2 Reimbursement Obligation by the Lessee Group .................................. 20
15.3 Defense of Claims ............................................................. 20
16. ASSIGNMENT .......................................................................... 21
16.1 Right of the Lessor to Assign this Agreement .................................. 21
16.2 Limitations on the Right of the Lessee to Assign this Agreement ............... 21
17. DEFAULT AND REMEDIES THEREFOR. ...................................................... 21
17.1 Lease Events of Default ....................................................... 21
17.2 Effect of Lease Event of Default .............................................. 23
17.3 Rights of Lessor Upon Lease Event of Default, Liquidation Event of Default
or Limited Liquidation Event of Default .................................... 23
17.4 Rights of Trustee Upon Liquidation Event of Default, Limited Liquidation
Event of Default and Non-Performance of Certain Covenants................... 25
17.5 Measure of Damages ............................................................ 26
17.6 Application of Proceeds ....................................................... 27
18. MANUFACTURER EVENTS OF DEFAULT ...................................................... 27
19. LESSEE PARTIAL WIND-DOWN EVENTS ..................................................... 27
20. RESERVED ............................................................................ 28
21. CERTIFICATION OF TRADE OR BUSINESS USE .............................................. 28
</TABLE>
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22. SURVIVAL............................................................................. 28
23. ADDITIONAL LESSEES................................................................... 28
24. GUARANTY............................................................................. 29
24.1 Guaranty....................................................................... 29
24.2 Scope of Guarantor's Liability................................................. 30
24.3 Lessor's Right to Amend this Agreement, Etc.................................... 30
24.4 Waiver of Certain Rights by Guarantor.......................................... 31
24.5 Lessees' Obligations to Guarantor and Guarantor's Obligations to Lessees
Subordinated................................................................ 32
24.6 Guarantor to Pay Lessor's Expenses............................................. 33
24.7 Reinstatement.................................................................. 33
24.8 Pari Passu Indebtedness........................................................ 34
25. RIGHTS OF LESSOR ASSIGNED TO TRUSTEE................................................. 34
26. RIGHT OF LESSEE TO DELEGATE RIGHTS AND OBLIGATIONS HEREUNDER TO GUARANTOR............ 35
27. MODIFICATION AND SEVERABILITY........................................................ 35
28. CERTAIN REPRESENTATIONS AND WARRANTIES............................................... 36
28.1 Due Organization, Authorization, etc........................................... 36
28.2 Financial Information; Financial Condition..................................... 36
28.3 Litigation..................................................................... 37
28.4 Liens.......................................................................... 37
28.5 Employee Benefit Plans......................................................... 37
28.6 Investment Company Act......................................................... 38
28.7 Regulations T, U and X......................................................... 38
28.8 Business Locations; Trade Names; Principal Places of Business Locations........ 38
28.9 Taxes.......................................................................... 38
28.10 Governmental Authorization..................................................... 38
28.11 Compliance with Laws........................................................... 39
28.12 Eligible Vehicles.............................................................. 39
28.13 Supplemental Documents True and Correct........................................ 39
28.14 Accuracy of Information........................................................ 39
29. CERTAIN AFFIRMATIVE COVENANTS........................................................ 39
29.1 Corporate Existence; Foreign Qualification..................................... 40
29.2 Books, Records and Inspections................................................. 40
</TABLE>
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29.3 Insurance...................................................................... 40
29.4 Repurchase Programs............................................................ 40
29.5 Reporting Requirements......................................................... 41
29.6 Taxes and Liabilities.......................................................... 43
29.7 Compliance with Laws........................................................... 43
29.8 Maintenance of Separate Existence.............................................. 43
29.9 Trustee as Lienholder.......................................................... 43
30. CERTAIN NEGATIVE COVENANTS........................................................... 44
30.1 Mergers, Consolidations........................................................ 44
30.2 Other Agreements............................................................... 44
30.3 Liens.......................................................................... 44
30.4 Use of Vehicles................................................................ 45
30.5 Restrictions on Distributions.................................................. 45
31. BANKRUPTCY PETITION AGAINST LESSOR................................................... 45
32. SUBMISSION TO JURISDICTION........................................................... 45
33. GOVERNING LAW........................................................................ 46
34. JURY TRIAL........................................................................... 46
35. NOTICES.............................................................................. 46
36. LIABILITY............................................................................ 47
37. HEADINGS............................................................................. 47
38. EXECUTION IN COUNTERPARTS............................................................ 47
39. EFFECTIVENESS........................................................................ 47
</TABLE>
ANNEX A OPERATING LEASE TERMS
ANNEX B FINANCING LEASE TERMS
SCHEDULE I LESSEES AS OF SERIES 2000-1 CLOSING DATE
SCHEDULE II NOTICE ADDRESSES
SCHEDULE 28.8 BUSINESS LOCATIONS
ATTACHMENT A-1 SCHEDULE OF INITIAL FLEET
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ATTACHMENT A-2 GROUP II VEHICLE ACQUISITION SCHEDULE
ATTACHMENT B FORM OF POWER OF ATTORNEY
ATTACHMENT C FORM OF JOINDER IN LEASE
ATTACHMENT D FORM OF BILL OF SALE
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1. DEFINITIONS. Certain capitalized terms used herein (including the
preamble and the recitals hereto) shall have the meanings ascribed to such
terms in (a) the Definitions List (the "Definitions List") attached as Schedule
1 to the Amended and Restated Base Indenture, dated as of December 1, 1996,
among the Lessor, Team (now known as Budget) and Bankers Trust Company, a New
York banking corporation, as trustee, as such Definitions List may be amended
or modified from time to time in accordance with the provisions of the Base
Indenture, and (b) each Supplement to the Base Indenture relating to a Series
of Notes identified in such Supplement as being a Group II Series of Notes.
Unless the context otherwise requires, terms defined in both the Base Indenture
and one or more of such Series Supplements shall have the meanings assigned to
such terms in the applicable Series Supplements.
2. GENERAL AGREEMENT. (a) As specified in the attachments hereto,
the Lessees and the Lessor intend that this Agreement be (i) an operating lease
with respect to the Lessor-Owned Vehicles and (ii) a financing arrangement with
respect to the Financed Vehicles.
(b) If, notwithstanding the intent of the parties to this Agreement,
this Agreement is characterized by any third party as a financing arrangement
or as otherwise not constituting a "true lease" with respect to the
Lessor-Owned Vehicles, then it is the intention of the parties that this
Agreement, as it applies to the Lessor-Owned Vehicles, shall constitute a
security agreement under applicable law. It is the intention of the parties
that this Agreement, as it applies to the Financed Vehicles, shall in all
events constitute a security agreement under applicable law. In furtherance
thereof, as collateral security for the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of all of the obligations and liabilities of each Lessee to the Lessor
hereunder, whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred (including interest accruing after
the Lease Expiration Date and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization
or like proceeding), which may arise under, out of, or in connection with, this
Agreement and any other document made, delivered or given in connection
herewith, whether on account of rent, principal, interest, reimbursement
obligations, fees, indemnities, costs or expenses (including all fees and
disbursements of counsel to the Lessor or the Trustee that are required to be
paid by such Lessee pursuant to the terms hereof), each Lessee hereby grants to
the Lessor a first priority security interest in all of such Lessee's right,
title and interest, if any, in and to all of the following assets, property and
interests in property, whether now owned or hereafter acquired or created (the
"Lease Collateral"):
(i) the rights of such Lessee under this Agreement, as the
same may be amended, modified or supplemented from time to time in
accordance with its terms, and any other agreements related to or in
connection with this Agreement to which such Lessee is a party (the
"Group II Lessee Agreements"), including, without limitation, (a) all
monies due and to become due to such Lessee from the Guarantor and the
Lessees under or in connection with the Group II Lessee Agreements,
whether payable as rent, guaranty payments, fees, expenses, costs,
indemnities, insurance recoveries, damages for the breach of any of
the Group II Lessee
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Agreements or otherwise, (b) all rights, remedies, powers, privileges
and claims of such Lessee against any other party under or with
respect to the Group II Lessee Agreements (whether arising pursuant to
the terms of such Agreements or otherwise available to such Lessee at
law or in equity), including the right to enforce any of the Group II
Lessee Agreements and to give or withhold any and all consents,
requests, notices, directions, approvals, extensions or waivers under
or with respect to the Group II Lessee Agreements or the obligations
of any party thereunder, (c) all Liens and property from time to time
purporting to secure payment arising under or in connection with the
Group II Lessee Agreements, together with all financing statements
filed in favor of, or assigned to, such Lessee describing any
collateral securing such obligations or liabilities and (d) all
guarantees, insurance and other agreements or arrangements of whatever
character from time to time supporting or securing payment of such
obligations and liabilities of such Lessee pursuant to the Group II
Lessee Agreements;
(ii) all Lessor-Owned Vehicles leased by such Lessee from the
Lessor pursuant to this Agreement which, notwithstanding that this
Agreement is intended to convey only a leasehold interest in such
Lessor-Owned Vehicles, are determined to be owned by such Lessee, and
all Certificates of Title with respect to such Lessor-Owned Vehicles;
(iii) all Financed Vehicles leased by such Lessee from the
Lessor pursuant to this Agreement, and all Certificates of Title with
respect to such Group II Vehicles;
(iv) all right, title and interest of such Lessee in, to and
under any Repurchase Programs and all monies due and to become due
thereunder in respect of (A) Lessor-Owned Vehicles leased under this
Agreement which, notwithstanding that this Agreement is intended to
convey only a leasehold interest in such Lessor-Owned Vehicles, are
determined to be owned by such Lessee, and (B) Financed Vehicles
leased under this Agreement, in each case, whether payable as
Repurchase Prices or Guaranteed Payments;
(v) the Collection Account, the Group II Collection Account
and each other collection account established pursuant to a Series
Supplement with respect to any Group II Series of Notes; (a) all funds
on deposit therein allocable to Group II Vehicles from time to time;
(b) all certificates and instruments, if any, representing or
evidencing any or all of such accounts or the funds on deposit therein
allocable to Group II Vehicles from time to time; and (c) all
investments made at any time and from time to time with the moneys
allocable to Group II Vehicles in such accounts (including income
thereon, including, without limitation, any and all such accounts,
certificates, instruments and investments constituting "investment
property" as defined in the UCC as in effect from time to time in the
State of New York);
(vi) all additional property that may from time to time
hereafter be subjected to the grant and pledge under this Agreement,
as the same may be modified or supplemented from time to time, by such
Lessee or by anyone on its behalf; and
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(vii) all proceeds of any and all of the foregoing including,
without limitation, payments under insurance (whether or not the
Lessor is the loss payee thereof) and cash, but not including (for the
avoidance of doubt) payments under consumer rental agreements.
2.1 Leasing of Group II Vehicles. (a) From time to time, subject to
the terms and provisions hereof, the Lessor agrees to lease to each Lessee, and
each Lessee agrees to lease from the Lessor, subject to the terms hereof, the
Group II Repurchase Vehicles constituting the Initial Fleet, the Refinanced
Vehicles and each additional Lessor-Owned Vehicle and Financed Vehicle
identified in certain vehicle orders (each, a "Group II Vehicle Order")
produced from time to time by a Lessee, listing Eligible Repurchase Vehicles
ordered by such Lessee from Eligible Manufacturers or dealers, for itself or as
agent for the Lessor, pursuant to the terms of any applicable Repurchase
Program or otherwise. Subject to the conditions precedent set forth in Section
2.5 hereof and to compliance with the terms of the related Series Supplements,
the Lessor shall make available to the applicable Lessee (i) financing for the
Financed Vehicles (other than Texas Vehicles and Hawaii Vehicles) and (ii)
Lessor-Owned Vehicles, Texas Vehicles and Hawaii Vehicles for lease to the
Lessees hereunder (each such financing or Lessor-Owned Vehicle made available,
a "Master Lease Advance").
(b) With respect to (i) any lease of Group II Vehicles in the Initial
Fleet, (ii) the refinancing of any other Eligible Repurchase Vehicle owned by
the Lessor or any Lessee (collectively, together with any Group II Vehicles in
the Initial Fleet to be leased under this Agreement (including, without
limitation, any Group II Vehicles previously subject to any other Leases and
refinanced pursuant to this Agreement), the "Refinanced Vehicles"), and/or
(iii) the refinancing of Eligible Receivables, each applicable Lessee shall
make available to the Lessor a schedule as set forth in Attachment A-1 hereto
containing information concerning the Refinanced Vehicles and the Eligible
Receivables, of a scope agreed upon by the Lessor (a "Refinancing Schedule").
(c) With respect to any lease of Group II Vehicles not described in (b)
above, each applicable Lessee shall make available to the Lessor a schedule
containing the information with respect to such Group II Vehicles as is set
forth in Attachment A-2 hereto (each, a "Group II Vehicle Acquisition
Schedule"), or in such form as is otherwise requested by the Lessor. In
addition, each Lessee leasing Vehicles pursuant to such Group II Vehicle Order
agrees to provide such other information regarding such Vehicles as the Lessor
may require from time to time.
(d) The Lessees and the Lessor acknowledge that concurrently with the
execution and delivery of this Agreement, the Lessees specified on Schedule 1
hereto have made available to the Lessor Group II Vehicle Orders to lease
Eligible Repurchase Vehicles currently owned by the Lessor pursuant to this
Agreement, together with the required Group II Vehicle Acquisition Schedules or
Refinancing Schedule, as the case may be, in respect of such Group II Vehicle
Orders.
(e) The Lessor shall lease to the Lessees, and the Lessees shall lease
from the Lessor only Group II Vehicles that are Eligible Repurchase Vehicles.
This Agreement, together with any other
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related documents attached to this Agreement or submitted with a Group II
Vehicle Order or Refinancing Schedule, including without limitation any
documents in connection with an Eligible Repurchase Program (collectively, the
"Supplemental Documents"), will constitute the entire agreement regarding the
leasing of Vehicles by the Lessor to the Lessees hereunder.
2.2 Right of Lessees to Act as Lessor's Agent. The Lessor agrees that
any member of the Lessee Group may act as the Lessor's agent in placing Group
II Vehicle Orders on behalf of the Lessor, as well as filing claims on behalf
of the Lessor for damage in transit, and other Manufacturer delivery claims
related to the Group II Vehicles leased hereunder; provided, however, that the
Lessor may hold the Lessee Group liable for losses due to such member of the
Lessee Group's actions in performing as the Lessor's agent hereunder. In
addition, the Lessor agrees that each Lessee may make arrangements for delivery
of Group II Vehicles to a location selected by the relevant Lessee at such
Lessee's expense. Each Lessee agrees to accept Group II Repurchase Vehicles as
produced and delivered except each Lessee will have the option to reject any
Group II Repurchase Vehicle that may be rejected pursuant to the terms of the
applicable Repurchase Program. The relevant Lessee, acting as agent for the
Lessor, shall be responsible for pursuing any rights of the Lessor with respect
to the return of any Group II Repurchase Vehicle to the Manufacturer pursuant
to the preceding sentence. Any member of the Lessee Group that places a Group
II Vehicle Order for a Group II Repurchase Vehicle pursuant to this Agreement
agrees that all Group II Repurchase Vehicles ordered as provided herein shall
be ordered utilizing the procedures consistent with the applicable Eligible
Repurchase Program.
2.3 Payment of Capitalized Cost by Lessor. (a) Upon invoicing of any
Group II Vehicle by the Manufacturer or other seller thereof, the Lessor shall
make a Master Lease Advance hereunder to pay to the Manufacturer, dealer or
other seller of such Group II Vehicle (or to reimburse the applicable Lessee
for) the costs and expenses incurred by the Lessor or such Lessee, as
applicable, in connection with the acquisition of such Group II Vehicle as
established by the invoice delivered in connection with such Group II Vehicle
(the "Capitalized Cost"); provided that solely in the case of the Initial
Fleet, any other Refinanced Vehicle, and any Eligible Receivable, the Lessor
shall make Master Lease Advances to pay to the applicable owner thereof (x) the
aggregate Net Book Value as of the Vehicle Lease Commencement Date of the
Initial Fleet and/or the Refinanced Vehicles, as applicable, and (y) the face
amount of the Eligible Receivables being refinanced on the Vehicle Lease
Commencement Date. The relevant Lessee shall be responsible for all damage in
transit and shall pay all applicable costs and expenses of freight, packing,
handling, storage, shipment and delivery of such Group II Vehicle to the extent
that the same have not been included within the Capitalized Cost.
(b) Each Master Lease Advance made by the Lessor with respect to a
Repurchase Vehicle shall be in an amount not exceeding the Net Book Value of
such Repurchase Vehicle. The aggregate amount of Master Lease Advances
outstanding at any time shall not exceed the Maximum Lease Commitment.
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2.4 Non-liability of Lessor. The Lessor shall not be liable to any of
the Lessees for any failure or delay in obtaining Group II Vehicles or making
delivery thereof. AS BETWEEN THE LESSOR AND EACH LESSEE, ACCEPTANCE FOR LEASE
OF THE Group II VEHICLES SHALL CONSTITUTE SUCH LESSEE'S ACKNOWLEDGMENT AND
AGREEMENT THAT SUCH LESSEE HAS FULLY INSPECTED SUCH Group II VEHICLES, THAT THE
Group II VEHICLES ARE IN GOOD ORDER AND CONDITION AND ARE OF THE MANUFACTURE,
DESIGN, SPECIFICATIONS AND CAPACITY SELECTED BY THE LESSEE, THAT SUCH LESSEE IS
SATISFIED THAT THE SAME ARE SUITABLE FOR THIS USE AND THAT THE LESSOR IS NOT A
MANUFACTURER, AN AGENT OF A MANUFACTURER, OR OTHERWISE ENGAGED IN THE SALE OR
DISTRIBUTION OF Group II VEHICLES, AND HAS NOT MADE AND DOES NOT HEREBY MAKE
ANY REPRESENTATION, WARRANTY OR COVENANT, EXPRESS OR IMPLIED, WITH RESPECT TO
MERCHANTABILITY, CONDITION, QUALITY, DURABILITY OR SUITABILITY OF THE VEHICLE
IN ANY RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES OR USES OF SUCH
LESSEE, OR ANY WARRANTY THAT THE LEASED VEHICLES WILL SATISFY THE REQUIREMENTS
OF ANY LAW OR ANY CONTRACT SPECIFICATION, OR ANY OTHER REPRESENTATION, WARRANTY
OR COVENANT OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT THERETO
AND AS BETWEEN THE LESSOR AND SUCH LESSEE, SUCH LESSEE AGREES TO BEAR ALL SUCH
RISKS AT ITS SOLE COST AND EXPENSE. EACH LESSEE SPECIFICALLY WAIVES ALL RIGHTS
TO MAKE CLAIMS AGAINST THE LESSOR AND ANY LEASED VEHICLE FOR BREACH OF ANY
WARRANTY OF ANY KIND WHATSOEVER AND, AS TO THE LESSOR, SUCH LESSEE LEASES THE
VEHICLES "AS IS." The Lessor shall not be liable for any failure or delay in
delivering any Vehicle ordered for lease pursuant to this Agreement, or for any
failure to perform any provision hereof, resulting from fire or other casualty,
natural disaster, riot, strike or other labor difficulty, governmental
regulation or restriction, or any cause beyond the Lessor's direct control. IN
NO EVENT SHALL THE LESSOR BE LIABLE FOR ANY INCONVENIENCES, LOSS OF PROFITS OR
ANY OTHER CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES, WHATSOEVER OR HOWSOEVER
CAUSED, WHETHER RESULTING FROM ANY DEFECT IN OR ANY THEFT, DAMAGE, LOSS OR
FAILURE OF ANY VEHICLE, OR OTHERWISE AND THERE SHALL BE NO ABATEMENT OF RENT
BECAUSE OF THE SAME.
2.5 Conditions Precedent. The agreement of the Lessor under this
Agreement to make available any Master Lease Advance for the acquisition of any
Lessor-Owned Vehicle for lease to a Lessee and to make available any Master
Lease Advance for the acquisition of any Texas Vehicles and Hawaii Vehicles or
the refinancing of any Refinanced Vehicle for lease to a Lessee, is subject to
the terms and conditions of the Base Indenture and to the following conditions
precedent as of the Vehicle Lease Commencement Date for such Vehicle:
(a) Limitations on the Acquisition of Certain Vehicles.
Unless waived by the Required Noteholders as specified in the related Series
Supplements:
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(i) the quotient (expressed as a percentage) obtained
by dividing (x) the aggregate Net Book Value of all Group II
Repurchase Vehicles manufactured by any Manufacturer and
leased under this Agreement as of such date after giving
effect to the inclusion of such Vehicle under this Agreement)
by (y) the greater of (A) the Group II Aggregate Asset Amount
as of such date (after giving effect to the inclusion of such
Vehicle under this Agreement) and (B) the sum of the Group II
Invested Amount as of such date plus the available
subordinated amounts for all Group II Series of Notes as of
such date, shall not exceed the Maximum Manufacturer
Percentage (if any) for any Group II Series of Notes;
(ii) if the Maximum Manufacturer Percentage for any
Group II Series of Notes (as calculated in clause (i), above)
has been exceeded on or prior to such date prior to giving
effect to the inclusion of such Vehicle (the amount of such
excess, the "Excess"), such Excess shall not increase after
giving effect to the inclusion of such Vehicle;
(iii) after giving effect to the inclusion of such
Vehicle under this Agreement, (A) the Credit Support Amount
for any Group II Series of Notes shall not be less than the
Minimum Credit Support Amount for such related Series and (B)
the Letter of Credit Amount for any Group II Series of Notes
shall not be less than the Required Letter of Credit Amount
for such Series; and
(iv) after giving effect to the inclusion of such
Vehicle under this Agreement, there shall not be a failure or
violation of any other conditions, requirements, or
restrictions with respect to the leasing of Eligible Vehicles
under this Agreement as is specified in the related Series
Supplement.
(b) No Default. No Potential Lease Event of Default or Lease
Event of Default shall have occurred and be continuing on such date or
would result from the making of such Master Lease Advance or the lease
of such Vehicle.
(c) Leases of Initial Fleet and other Refinanced Vehicles.
Only in connection with the leasing of Refinanced Vehicles (including
the Initial Fleet) and related Eligible Receivables on or after the
Lease Commencement Date, to evidence the refinancing of such
Refinanced Vehicles and related Eligible Receivables and the
conveyance of a security interest in such Refinanced Vehicles and
related Eligible Receivables to the Trustee, the applicable Lessees
shall have made available to the Lessor on or prior to the applicable
Vehicle Lease Commencement Date the following:
(i) a Refinancing Schedule concerning such
Refinanced Vehicles and related Eligible Receivables being refinanced
on such Vehicle Lease Commencement Date;
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(ii) a report of the results of a search of the
appropriate records of the county (as applicable) and state
in which each such Lessee's principal place of business is
located, which shall show no Liens or other security
interests (other than Permitted Liens) with respect to such
Vehicles and the related Repurchase Programs or, in the event
that such search reveals any non-permitted Lien or security
interest, there shall be delivered to the Lessor and the
Trustee a termination of such Lien or security interest
together with appropriate UCC termination statements or UCC
partial releases thereof; provided that, with respect only to
Refinanced Vehicles and Eligible Receivables to be leased
hereunder on the Series 2000-1 Issuance Date, the Lessee
shall have until the close of business on March 10, 2000 to
deliver such report and terminations or partial releases;
(iii) confirmation from each lender holding a
security interest in any such Refinanced Vehicle or Eligible
Receivable stating unconditionally (A) that, if any sums are
to be paid to such lender in connection with the lease of
such Refinanced Vehicle and the refinancing of the related
Eligible Receivables, such lender has been paid the full
amount due to it in connection with such refinancing and (B)
that any Lien or security interest of such lender in such
Refinanced Vehicle and/or Eligible Receivables, as
applicable, has been released; provided that, with respect
only to Refinanced Vehicles and Eligible Receivables to be
leased hereunder on the Series 2000-1 Issuance Date, the
Lessee shall have until the close of business on March 10,
2000 to deliver such confirmation and release;
(iv) a fully executed assignment agreement granting
and assigning to the Trustee (to the extent not already
granted and assigned) a first priority security interest in
each such Refinanced Vehicle and Eligible Receivable, the
related Repurchase Programs, if any, and any other Group II
Collateral relating to such Refinanced Vehicles and Eligible
Receivables;
(v) delivery to the Lessor for filing in the
appropriate filing office fully executed UCC-1 Financing
Statements necessary to perfect (if not already perfected)
the interests of the Trustee in such Refinanced Vehicles and
Eligible Receivables;
(vi) with respect to any Vehicle in the Initial
Fleet, if the Trustee is not noted as lienholder on the
Certificate of Title for such Vehicle, delivery to the
Trustee of a Lienholder Nominee Agreement executed and
delivered by the named lienholder;
(vii) with respect to any Vehicle in the Initial
Fleet, if the Lessor is not noted as the titleholder on the
Certificate of Title for such Vehicle, delivery to the
Trustee of a Vehicle Title Nominee Agreement executed and
delivered by the named titleholder; and
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(viii) an Officer's Certificate stating that all the
conditions precedent under this Agreement to the leasing of
such Refinanced Vehicles and financing of such Eligible
Receivables under this Agreement have been satisfied,
including a representation that each such receivable is an
Eligible Receivable and that the Lien of the Trustee (or a
Nominee) has been noted on the Certificate of Title for each
such Vehicle or such other actions to cause the Trustee's
Lien to be a perfected first Lien have been taken by the
Servicer.
(d) Leases of Financed Vehicles. Only in connection with each
lease of a Financed Vehicle after the Lease Commencement Date, to
evidence the acquisition or financing of such Financed Vehicle by the
Lessor and the conveyance of a security interest in such Financed
Vehicles to the Trustee, the Lessee thereof shall have delivered to
the Lessor on or prior to the applicable Vehicle Lease Commencement
Date, a Group II Vehicle Order (including a Group II Vehicle
Acquisition Schedule) with respect to all Financed Vehicles to be
leased to such Lessee by the Lessor on the date specified therein.
(e) Leases of Lessor-Owned Vehicles. Only in connection with
the lease of any Lessor-Owned Vehicle (other than Vehicles in the
Initial Fleet) to be leased on or after the Lease Commencement Date,
to evidence the leasing of such Lessor-Owned Vehicle under this
Agreement, the applicable Lessee shall have delivered to the Lessor on
or prior to the applicable Vehicle Lease Commencement Date, the
following:
(i) a Group II Vehicle Order (including a Group II
Vehicle Acquisition Schedule) with respect to all
Lessor-Owned Vehicles to be leased to such Lessee by the
Lessor on the Lease Commencement Date;
(ii) UCC termination statements terminating, or UCC
partial releases releasing, any security interests and other
Liens (other than Permitted Liens) in favor of any Person
with respect to each Lessor-Owned Vehicle identified in such
Group II Vehicle Order (and any related Repurchase Programs).
(f) Eligible Vehicle. Each Vehicle to be leased hereunder
on such date shall be an Eligible Vehicle.
(g) Repurchase Vehicles. The Lessor (if such Vehicle is a
Lessor-Owned Vehicle, a Texas Vehicle or a Hawaii Vehicle) or the
applicable Lessee (if such Vehicle is a Financed Vehicle other than a
Texas Vehicle or a Hawaii Vehicle) shall have delivered to the Trustee
(i) a fully executed Assignment Agreement covering such Vehicle, (ii)
the related Repurchase Program (which shall be an Eligible Repurchase
Program), and (iii) any other Group II Collateral relating to such
Vehicle.
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(h) Series Supplement. The leasing of such Group II Vehicle
shall not be prohibited by the provisions of a Series Supplement for a
Group II Series of Notes.
(i) Other Conditions. The applicable Lessee shall have
complied with the applicable provisions of Sections 2.1 and 2.3 of
this Agreement.
Each Lessee hereby agrees that each such delivery of a Group II
Vehicle Order or Refinancing Schedule shall be deemed hereunder to constitute a
representation and warranty by it, to and in favor of the Lessor and the
Trustee, that all the conditions precedent to the acquisition and leasing of
the Vehicles identified in such Group II Vehicle Order or Refinancing Schedule
have been satisfied as of the date of such Group II Vehicle Order or
Refinancing Schedule.
3. TERM.
3.1 Vehicle Term: Group II Repurchase Vehicles. The "Vehicle Lease
Commencement Date" for each Group II Repurchase Vehicle and Eligible Receivable
shall mean the day referenced as such in the Group II Vehicle Acquisition
Schedule or Refinancing Schedule with respect to such Group II Repurchase
Vehicle or Eligible Receivable but in no event beyond the date that funds are
expended by the Lessor to acquire such Group II Repurchase Vehicle or Eligible
Receivable. The "Vehicle Term" with respect to each Group II Repurchase Vehicle
shall extend from the Vehicle Lease Commencement Date through the earliest of
(i) the Turnback Date for such Group II Repurchase Vehicle, (ii) the date the
Vehicle is sold to a third party through any means other than an auction
conducted by or through or arranged by the Manufacturer pursuant to its
Repurchase Program and the funds in respect of such sale are received by the
Trustee in the Group II Collection Account (from such third party or from any
member of the Lessee Group on behalf of such third party), (iii) if such
Vehicle becomes a Casualty, the date funds in the amount of the Net Book Value
thereof are received by the Trustee in the Group II Collection Account from the
applicable Lessee, (iv) the date that such Vehicle is purchased by the
applicable Lessee pursuant to paragraph 6 or 7 of Annex A and the Vehicle
Purchase Price with respect to such purchase (and any unpaid Monthly Base Rent
and Monthly Variable Rent with respect to such Vehicle) is received by the
Trustee in the Group II Collection Account and (v) the maximum vehicle lease
term of the Operating Lease and the Financing Lease, as applicable, as
specified in, respectively, paragraph 5 of each of Annex A and Annex B to this
Agreement (the earliest of such five dates being referred to as the "Vehicle
Lease Expiration Date"). The Lessor and each Lessee agree that each Lessee
shall use its commercially reasonable efforts to deliver each Group II
Repurchase Vehicle to the related Manufacturer or the designated auction site,
as applicable, (a) not prior to the end of the minimum holding period specified
in the related Repurchase Program (prior to which the Lessor may not deliver
such Group II Repurchase Vehicle without penalty (the "Minimum Term")) and (b)
not later than the end of the maximum holding period (after which the Lessor
may not return such Group II Repurchase Vehicle which is a Lessor-Owned Vehicle
without penalty (the "Maximum Term")); provided, however, if for any reason, a
Lessee fails to deliver a Group II Repurchase Vehicle which is a Lessor-Owned
Vehicle to the applicable Manufacturer or designated auction site during the
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<PAGE> 17
time period between the expiration of the Minimum Term and the expiration of
the Maximum Term, such Lessee shall be obligated to purchase such Group II
Repurchase Vehicle from the Lessor on the first Due Date after the expiration
of the Maximum Term for an amount equal to the Vehicle Purchase Price with
respect to such Group II Repurchase Vehicle. Each Lessee will pay the
equivalent of the Rent for the Minimum Term for Group II Repurchase Vehicles
which are Lessor-Owned Vehicles and are returned before the Minimum Term,
regardless of actual usage, unless a Vehicle is a Casualty which will be
treated in accordance with Section 6 hereof or unless the Lessor immediately
leases such Group II Repurchase Vehicle to another Lessee under this Agreement
or to a lessee under another Lease relating to another Series under the Base
Indenture.
3.2 The "Lease Commencement Date" shall mean the earlier of (i) the
date of the issuance of the Series 2000-1 Notes as the first Group II Series of
Notes or (ii) the date of the Vehicle Lease Commencement Date for the first
Vehicle leased by a Lessee hereunder. The "Lease Expiration Date" shall mean
the later of (i) the date of the payment in full of all Series of Notes
included in the Group II Series of Notes and all outstanding Carrying Charges
and (ii) the Vehicle Lease Expiration Date for the last Group II Vehicle leased
by a Lessee hereunder. The "Term" of this Agreement shall mean the period
commencing on the Lease Commencement Date and ending on the Lease Expiration
Date.
4. RENT AND CHARGES. Each Lessee will pay Rent as set forth in this
Section 4:
4.1 Payment of Rent. On each Due Date, each Lessee shall pay to the
Lessor the aggregate of all Rent that has accrued during the Related Month with
respect to the Vehicles leased by such Lessee under this Agreement, as provided
in the related Lease Annexes.
4.2 Payment of Monthly Supplemental Payments. On each Due Date, each
Lessee shall pay to the Lessor the Monthly Supplemental Payments that have
accrued during the Related Month with respect to the Financed Vehicles leased
by such Lessee under this Agreement, as provided in paragraphs 6 and 8 of Annex
B to this Agreement.
4.3 Payment of Supplemental Rent. On each Due Date, each Lessee shall
pay to the Lessor such Lessee's pro rata share (on the basis of the aggregate
Net Book Value of Group II Vehicles leased by such Lessee during the Related
Month) of the Monthly Supplemental Rent due on such Due Date. "Monthly
Supplemental Rent" with respect to each Due Date shall equal (x) the accrued
interest on all Outstanding Notes included in the Group II Series of Notes for
the Related Month, plus (y) the Carrying Charges for the Related Month
allocable to any Group II Series of Notes, minus (z) the aggregate of all
Monthly Variable Rent and Monthly Finance Rent accrued with respect to the
Related Month for all Group II Vehicles leased hereunder.
4.4 Payment of Termination Payments, Casualty Payments, and Late Return
Payments. On each Due Date, each Lessee shall pay to the Lessor all Casualty
Payments, Termination Payments and
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<PAGE> 18
Late Return Payments that have accrued with respect to the Group II Vehicles
leased by such Lessee under this Agreement, as provided in, respectively,
Sections 6.1, 11.3 and 12.
4.5 Late Payment. In the event the relevant Lessee fails to remit
payment of any amount due on or before the Due Date, the amount not paid will
be considered delinquent and such Lessee will pay a late charge equal to the
product of (a) the VFR plus 1% and (b) the delinquent amount for the period
from the Due Date until such delinquent amount is received by the Trustee.
4.6 Prepayments. To the extent provided in Paragraph 9(b)(iii) of Annex
A and Paragraph 6(d) of Annex B, a Lessee may prepay to the Lessor, in whole or
in part, the Rent or other payments accrued during the Related Month with
respect to any Group II Vehicles leased by such Lessee under this Agreement.
5. INSURANCE. Budget represents that it shall at all times maintain
insurance coverage for each Lessee in accordance with the applicable state law
requirements and other requirements as set forth below. Each Non-Budget Lessee
represents that it shall at all times maintain insurance coverage for itself in
full force and effect in accordance with the appropriate states' requirements
and other requirements as set forth below. Budget, each Lessee and each
Non-Budget Lessee agree that the Lessor shall be entitled to the benefits of
any such insurance at all times during the term of this Lease.
5.1 Personal Injury and Damage. Subject to applicable state and other
requirements, Budget and each Non-Budget Lessee may self-insure against
personal injury and damage claims arising from the use of the Vehicles as well
as damage to Group II Vehicles.
5.2 Delivery of Certificate of Insurance. Within 10 days after (i) the
Closing Date with respect to each Series of Notes included in the Group II
Series of Notes or (ii) with respect to any additional party becoming a
"Lessee" hereunder pursuant to the provisions of Section 23 hereof, within 10
days after such party becomes a "Lessee," hereunder), Budget, on behalf of the
Lessees, and each Non-Budget Lessee shall deliver to the Lessor a certificate
of insurance naming the Lessor and the Trustee as additional insured as to the
items referenced by Section 5.1 hereinabove or a written statement to the
effect that such Lessee is self insuring. Such insurance shall not be changed
or canceled except as provided below in Section 5.3.
5.3 Changes in Insurance Coverage. No changes shall be made in any of
the foregoing insurance unless the prior written consent of the Lessor and the
Trustee are first obtained. The Lessor may grant or withhold its consent to any
proposed change in such insurance in its sole discretion. The Trustee shall be
required to grant its consent to any proposed change in such insurance upon
compliance with the following conditions:
(i) The Guarantor or the applicable Non-Budget Lessee shall
deliver not less than 30 days prior written notice of any proposed
change in such insurance to the Trustee and each
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<PAGE> 19
Rating Agency, which notice shall contain a certification of a
reputable insurance broker that is not affiliated with any member of
the Lessee Group that the insurance program maintained by Budget, on
behalf of the Lessees, and by each Non-Budget Lessee (after the taking
effect of such proposed change) comports with industry standards for
Persons engaged in the business of renting similar vehicles and having
net worth and operating income similar to that of such member of the
Lessee Group; and
(ii) So long as a Rating Agency is then currently requested to
rate any Group II Series of Notes or any class thereof, the Guarantor
shall furnish to the Trustee a letter from each Rating Agency with
respect to the outstanding Notes in the Group II Series of Notes to
the effect that such proposed change in insurance will not cause a
reduction in or a withdrawal of such rating.
6. CASUALTY OBLIGATION.
6.1 Casualty. If a Group II Vehicle becomes a Casualty, then the Lessee
that is leasing such Group II Vehicle will (i) promptly notify the Lessor
thereof and (ii) in the case of a Lessor-Owned Vehicle, promptly, but in no
event later than the first Due Date after the end of the Related Month in which
such Group II Vehicle becomes a Casualty, pay to the Lessor the Net Book Value
of each such Group II Vehicle that is a Group II Repurchase Vehicle (such
payment, a "Casualty Payment"). Upon payment by the Lessee to the Lessor of the
Casualty Payment for any Group II Vehicle that has become a Casualty (i) if
such Vehicle is a Lessor-Owned Vehicle, the Lessor shall cause title to such
Group II Vehicle to be transferred to the relevant Lessee to facilitate
liquidation of such Group II Vehicle by the Lessee, (ii) such Lessee shall be
entitled to any physical damage insurance proceeds applicable to such Group II
Vehicle, and (iii) the Lien of the Trustee on such Group II Vehicle shall be
released by the Servicer.
7. VEHICLE USE. So long as no Lease Event of Default, Liquidation
Event or Limited Liquidation Event of Default has occurred and so long as no
Lessee Partial Wind-Down Event has occurred with respect to the relevant Lessee
(subject, however, to Paragraph 7 of Annex A), such Lessee may use Group II
Vehicles leased hereunder in the regular course of business of such Lessee.
Such use shall be confined primarily to the United States, with limited use in
Canada and Mexico; provided, however, that the principal place of business or
rental office of such Lessee with respect to the Group II Vehicles is located
in the United States. The relevant Lessee shall promptly and duly execute,
deliver, file and record all such documents, statements, filings and
registrations, and take such further actions as the Lessor, the Servicer or the
Trustee shall from time to time reasonably request in order to establish,
perfect and maintain the Lessor's title to and interest in the Group II
Vehicles and the related Certificates of Title as against such Lessee or any
third party in any applicable jurisdiction and to establish, perfect and
maintain the Trustee's Lien on the Group II Vehicles and the related
Certificates of Title as a perfected first Lien in any applicable jurisdiction.
Each Lessee may, at the relevant Lessee's sole expense, change the place of
principal location of any Group II Vehicles.
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<PAGE> 20
Notwithstanding the foregoing, no change of location shall be undertaken unless
and until (i) all actions necessary to maintain the Lien of the Trustee on such
Group II Vehicles and the related Certificates of Title shall have been taken
and (ii) all legal requirements applicable to such Group II Vehicles shall have
been met or obtained. Following a Lease Event of Default, Lessee Partial
Wind-Down Event, or, with respect to the Group II Repurchase Vehicles, a
Manufacturer Event of Default, and upon the Lessor's request, the relevant
Lessee shall advise the Lessor in writing where all Group II Vehicles leased by
such Lessee as of such date are principally located. The Lessee shall not
knowingly use any Group II Vehicles, or knowingly permit the same to be used,
for any unlawful purpose. Each Lessee shall use reasonable precautions to
prevent loss or damage to Group II Vehicles. Each Lessee shall comply with all
applicable statutes, decrees, ordinances and regulations regarding acquiring,
titling, registering, leasing, insuring and disposing of Group II Vehicles and
shall take reasonable steps to ensure that drivers of such Group II Vehicles
are duly licensed to drive in accordance with applicable law. Each Lessee and
the Lessor agree that each Lessee shall perform, at its own expense, such
Vehicle preparation and conditioning services with respect to Group II Vehicles
purchased by the Lessor from the Manufacturers as are customary. The Lessor,
the Trustee or any authorized representative of the Lessor or the Trustee may
during reasonable business hours from time to time, without disruption of each
Lessee's business, subject to applicable law, inspect Group II Vehicles and
registration certificates, Certificates of Title and related documents covering
Group II Vehicles wherever the same shall be located. Group II Vehicles leased
hereunder may be subleased by the applicable Lessee to any other Lessee listed
on Schedule 1 to this Agreement or added as a Lessee pursuant to Section 23 of
this Agreement; provided, however, that neither the original Lessee nor the
Guarantor shall be released from any of its obligations in respect of any Group
II Vehicle so subleased.
8. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND FINES. The
Lessee Group, at its expense, shall be responsible for proper registration and
licensing of Group II Vehicles, and titling of Group II Vehicles in the name of
the Lessor (in the case of Lessor-Owned Vehicles, Texas Vehicles and Hawaii
Vehicles) or the applicable Lessee (in the case of all Financed Vehicles other
than Texas Vehicles and Hawaii Vehicles), in each case with the Lien of the
Trustee noted thereon, and, where required, shall have Group II Vehicles
inspected by any appropriate Governmental Authority; provided, however, that
notwithstanding the foregoing, all Certificates of Title shall at all times
remain in the custody of the Servicer in accordance with the provisions of the
Base Indenture. The Lessee leasing such Group II Vehicle shall be responsible
for the payment of all registration fees, title fees, license fees, traffic
summonses, penalties, judgments and fines incurred with respect to any Group II
Vehicle during the Vehicle Term for such Group II Vehicle or imposed during the
Vehicle Term for such Group II Vehicle by any Governmental Authority or any
court of law or equity with respect to Group II Vehicles in connection with the
relevant Lessee's operation of Group II Vehicles, and the Lessor, in its
discretion, may, but shall not be obligated to, pay any such amounts on the
Lessee's behalf if the Lessee's failure to pay the same interferes with the
free transferability or saleability of such Group II Vehicle or impairs the
ability to transfer clear title to such Group II Vehicle; and any such amounts
paid by the Lessor will be reimbursed within 30 days of the Lessor notifying
such Lessee of such payment. The Lessor agrees to execute a power of attorney
in the form of Attachment
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B hereto (each, a "Power of Attorney"), and such other documents as may be
necessary in order to allow the Lessees to title, register and dispose of the
Lessor-Owned Vehicles and the Texas Vehicles and Hawaii Vehicles; provided,
however, that possession of all Certificates of Title shall at all times remain
with the applicable Servicer in accordance with the provisions of the Base
Indenture and each Lessee acknowledges and agrees that, with respect to the
Lessor-Owned Vehicles, it has no right, title or interest in or with respect to
any Certificate of Title. Notwithstanding anything herein to the contrary, the
Lessor may terminate such Power of Attorney as provided in Section 19 hereof.
9. MAINTENANCE AND REPAIRS. Each Lessee shall pay for all maintenance
and repairs to keep Group II Vehicles in good working order and condition, and
will maintain Group II Vehicles as required in order to keep the Manufacturer's
warranty in force, and in the case of Group II Repurchase Vehicles, shall
comply with all requirements of the related Repurchase Program to the extent
necessary to maintain the eligibility of such Group II Vehicles. Each Lessee
will return Group II Vehicles to an authorized Manufacturer facility or the
relevant Lessee's Manufacturer authorized warranty station for warranty work.
Each Lessee will comply with any Manufacturer's recall of any Group II Vehicle.
Each Lessee will pay, or cause to be paid, all usual and routine expenses
incurred in the use and operation of Group II Vehicles including, but not
limited to, fuel, lubricants, and coolants. Any such expenses not paid by, or
on behalf of, the relevant Lessee may, after 30 days notice to such Lessee, be
paid by the Lessor and any expenses incurred by the Lessor on such Lessee's
behalf for maintenance, repair, operation or use of Group II Vehicles by such
Lessee will be promptly reimbursed (in any event no later than the next monthly
Due Date following such notice) by such Lessee to the Lessor in the amount paid
by the Lessor. No Lessee shall make any material alterations to any Group II
Vehicles without the prior consent of the Lessor. Any improvements or additions
to any Lessor-Owned Vehicle shall become and remain the property of the Lessor,
except that any addition to such a Group II Vehicle made by the relevant Lessee
shall remain the property of such Lessee if it can be disconnected from the
Group II Vehicle without impairing the functioning or resale value thereof,
other than any function or value provided by such addition or improvement.
10. VEHICLE WARRANTIES. If a Group II Vehicle is covered by a
Manufacturer's warranty, each Lessee, during the Vehicle Term, shall have the
right to make any claims under such warranty which the Lessor could make and to
receive related proceeds directly. As provided in Section 2.4, the Lessor makes
no warranty or representation whatsoever, express or implied, with respect to
any Group II Vehicle.
11. VEHICLE RETURN GUIDELINES.
11.1 Vehicle Turn-in-Condition. As used herein "vehicle turn-in
condition" with respect to each Group II Repurchase Vehicle will be determined
in accordance with the related Repurchase Program. Group II Repurchase Vehicles
not meeting the applicable Repurchase Program's vehicle turn-in condition
guidelines will be purchased by the relevant Lessee in accordance with the
Casualty procedure set forth in Section 6.1.
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<PAGE> 22
11.2 Return. Each Lessee will return each Group II Repurchase Vehicle
(other than a Casualty) to the nearest related Manufacturer official auction or
other facility designated by such manufacturer at the relevant Lessee's sole
expense prior to the expiration of the Maximum Term for such Group II Vehicle.
Each Lessee agrees that the Group II Repurchase Vehicles will be in vehicle
turn-in condition as specified in the applicable Repurchase Program. Any
rebates or credits applicable to the unexpired term of any license plates for a
Group II Repurchase Vehicle shall inure to the benefit of the relevant Lessee.
11.3 Termination Payments. Upon receipt of (i) payment of the
Repurchase Price or Guaranteed Payment with respect to each Group II Repurchase
Vehicle from the Manufacturer (or the receipt of payment of the Repurchase
Price of each Group II Repurchase Vehicle through an auction conducted by or
through a Manufacturer), the Lessor will charge the relevant Lessee for any
Excess Damage Charges, Excess Mileage Charges or early turnback surcharges as
determined by the Manufacturer or its agent in accordance with the applicable
Repurchase Program or (ii) the net proceeds from the sale of any Group II
Repurchase Vehicle, the Lessor will charge the relevant Lessee for any damage
charges or mileage charges as determined by the Lessor in its reasonable
judgment (any such charges in (i) or (ii) are referred to as a "Termination
Payment"). The provisions of this Section 11.3 will survive the expiration or
earlier termination of the Term.
11.4 Repurchase Price Interest. The applicable Lessee shall pay to the
Lessor, as part of the Monthly Base Rent, interest accrued at a rate equal to
the VFR on the Repurchase Price of each Group II Repurchase Vehicle for the
period between the Turnback Date for such Group II Vehicle and receipt of such
Repurchase Price by the Lessor from the Manufacturer ("Repurchase Price
Interest"). The provisions of this Section 11.4 will survive the expiration or
earlier termination of the Term.
12. DISPOSITION PROCEDURE. Each Lessee will comply with the
requirements of law and the requirements of the Repurchase Programs in
connection with, among other things, the delivery of Certificates of Title and
documents of transfer signed as necessary in connection with the sale of any
Group II Vehicle to a third party or the return of any Group II Repurchase
Vehicle in accordance with an Eligible Repurchase Program. In addition, with
respect to the return of a Group II Repurchase Vehicle to a Manufacturer or the
delivery of a Group II Repurchase Vehicle to an authorized auction site, the
Lessee thereof shall also deliver a signed Condition Report and signed odometer
statement to be submitted with such Group II Repurchase Vehicle and accepted by
the Manufacturer or its agent at the time of Group II Repurchase Vehicle return
or delivery, as applicable. If a Group II Repurchase Vehicle is not returned to
the Manufacturer and accepted by the Manufacturer, or delivered to (and
accepted by) an authorized auction site, prior to the expiration of the Maximum
Term with respect to such Group II Repurchase Vehicle, the relevant Lessee
shall purchase such Group II Repurchase Vehicle for the appropriate Vehicle
Purchase Price and pay the Lessor such amount (such amount, the "Late Return
Payment") within 15 days after the end of the Maximum Term (together with any
Repurchase Price Interest accrued from the last day of the Maximum Term to the
date that such payment is received by the Lessor).
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<PAGE> 23
13. ODOMETER DISCLOSURE REQUIREMENT. Each Lessee agrees to comply with
all requirements of law and all Repurchase Program requirements in connection
with the transfer of ownership of any Group II Vehicle by the Lessor,
including, without limitation, the submission of any required odometer
disclosure statement at the time of any such transfer of ownership.
14. [RESERVED.]
15. GENERAL INDEMNITY.
15.1 Indemnity by the Lessees. Each member of the Lessee Group agrees
jointly and severally to indemnify and hold harmless the Lessor and the
Lessor's directors, officers, agents and employees (collectively, the
"Indemnified Persons"), against any and all claims, demands and liabilities of
whatsoever nature and all costs and expenses relating to or in any way arising
out of:
15.1.1 the ordering, delivery, acquisition, title on
acquisition, rejection, installation, possession, titling, retitling,
registration, re-registration, custody by the Lessee Group of title
and registration documents, use, nonuse, misuse, operation,
deficiency, defect, transportation, repair, control or disposition of
any Group II Vehicle leased hereunder or to be leased hereunder
pursuant to a request by the relevant Lessee. The foregoing shall
include, without limitation, any liability (or any alleged liability)
of the Lessor to any third party arising out of any of the foregoing,
including, without limitation, all legal fees, costs and disbursements
arising out of such liability (or alleged liability);
15.1.2 all (i) federal, state, county, municipal, foreign or
other fees and taxes of whatsoever nature, including but not limited
to license, qualification, registration, franchise, sales, use, gross
receipts, ad valorem, business, property (real or personal), excise,
motor vehicle, and occupation fees and taxes, and all federal, state
and local income taxes (including any taxes which are payable by the
Lessor as a result of it being a member of the consolidated Lessee
Group), and penalties and interest thereon, whether assessed, levied
against or payable by the Lessor or otherwise, with respect to any
Group II Vehicle or the acquisition, purchase, sale, rental, use,
operation, control, ownership or disposition of any Group II Vehicle
or measured in any way by the value thereof or by the business of,
investment in, or ownership by the Lessor with respect thereto and
(ii) documentary, stamp, filing, recording, mortgage or other taxes,
if any, which may be payable by the Lessor in connection with this
Agreement or the other Related Documents;
15.1.3 any violation by the relevant member of the Lessee
Group of this Agreement or of any Related Documents to which such
member of the Lessee Group IIs a party or by which it is bound or any
laws, rules, regulations, orders, writs, injunctions, decrees,
consents, approvals, exemptions, authorizations or licenses of any
governmental or public body or authority and all other requirements
having the force of law applicable at any time to any
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<PAGE> 24
Group II Vehicle or any action or transaction by such member of the
Lessee Group with respect thereto or pursuant to this Agreement;
15.1.4 all-out-of-pocket costs of the Lessor (including the
fees and out-of-pocket expenses of counsel for the Lessor) in
connection with the execution, delivery and performance of this
Agreement and the other Related Documents, including, without
limitation, overhead expenses and any and all fees of the Trustee, all
fees payable in connection with any Enhancement for the benefit of the
Holders of Notes included in the Group II Series of Notes, any and all
fees of the Servicer under the Base Indenture (to the extent
attributable to any Group II Series of Notes), fees, if any, payable
to the Rating Agencies in connection with their rating of any Group II
Series of Notes or any class thereof and any underwriting or placement
agency fees, if any, incurred in connection with the sale of any Group
II Series of Notes or any class thereof;
15.1.5 all out-of-pocket costs and expenses (including
reasonable attorneys, fees and legal expenses) incurred by the Lessor,
the Trustee or the Holders of Notes included in the Group II Series of
Notes in connection with the administration, enforcement, waiver or
amendment of this Agreement and any other Related Documents and all
indemnification obligations of the Lessor under the Related Documents;
and
15.1.6 all costs, fees, expenses, damages and liabilities
(including, without limitation, the fees and out-of-pocket expenses of
counsel) in connection with, or arising out of, any claim made by any
third party against the Lessor for any reason (including, without
limitation, with respect to Group II Repurchase Vehicles in connection
with any audit or investigation conducted by a Manufacturer under its
Repurchase Program).
15.2 Reimbursement Obligation by the Lessee Group. Each member of the
Lessee Group shall forthwith upon demand reimburse the Lessor for any sum or
sums expended with respect to any of the foregoing, or shall pay such amounts
directly upon request from the Lessor; provided, however, that, if so requested
by the relevant member of the Lessee Group, the Lessor shall submit to such
member of the Lessee Group a statement documenting any such demand for
reimbursement or prepayment. To the extent that the relevant member of the
Lessee Group IIn fact indemnities the Lessor under the indemnity provisions of
this Agreement, such member of the Lessee Group shall be subrogated to the
Lessor's rights in the affected transaction and shall have a right to determine
the settlement of claims therein. The foregoing indemnity as contained in this
Section 15 shall survive the expiration or earlier termination of this
Agreement or any lease of any Group II Vehicle hereunder.
15.3 Defense of Claims. Defense of any claim referred to in this
Section 15 for which indemnity may be required shall, at the option and request
of the Indemnified Person, be conducted by the relevant member of the Lessee
Group. The relevant member of the Lessee Group will inform the Indemnified
Person of any such claim and of the defense thereof and will provide copies of
material
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<PAGE> 25
documents relating to any such claim or defense to such Indemnified Person upon
request. Such Indemnified Person may participate in any such defense at its own
expense provided such participation does not interfere with the relevant member
of the Lessee Group's assertion of such claim or defense. The relevant member
of the Lessee Group agrees that no Indemnified Person will be liable to such
member of the Lessee Group for any claim caused directly or indirectly by the
inadequacy of any Group II Vehicle for any purpose or any deficiency or defect
therein or the use or maintenance thereof or any repairs, servicing or
adjustments thereto or any delay in providing or failure to provide such or any
interruption or loss of service or use thereof or any loss of business, all of
which shall be the risk and responsibility of such member of the Lessee Group.
The rights and indemnities of each Indemnified Person hereunder are expressly
made for the benefit of, and will be enforceable by, each Indemnified Person
notwithstanding the fact that such Indemnified Person is either no longer a
party to (or entitled to receive the benefits of) this Agreement, or was not a
party to (or entitled to receive the benefits of) this Agreement at its outset.
Except as otherwise set forth herein, nothing herein shall be deemed to require
the relevant member of the Lessee Group to indemnify the Lessor for any of the
Lessor's acts or omissions which constitute gross negligence or willful
misconduct. This general indemnity shall not affect any claims of the type
discussed above which the relevant member of the Lessee Group may have against
the Manufacturer.
16. ASSIGNMENT.
16.1 Right of the Lessor to Assign this Agreement. The Lessor shall
have the right to finance the acquisition and ownership of Group II Vehicles by
selling or assigning its right, title and interest in moneys due from each
Lessee and any third party under this Agreement; provided, however, that any
such sale or assignment shall be subject to the rights and interest of the
relevant Lessee in such Vehicles, including but not limited to such Lessee's
right of quiet and peaceful possession of the Lessor-Owned Vehicles as set
forth in Section 12 of Annex A to this Agreement, and under this Agreement.
16.2 Limitations on the Right of the Lessee to Assign this Agreement.
No Lessee shall, except as provided in the Base Indenture, without prior
written consent of the Lessor and the Trustee, assign this Agreement or any of
its rights hereunder to any other party; provided, however, the relevant Lessee
may rent vehicles under the terms of such Lessee's normal daily rental
programs. Any purported assignment in violation of this Section 16.2 shall be
void and of no force or effect. Nothing contained herein shall be deemed to
restrict the right of any Lessee to acquire or dispose of, by purchase, lease,
financing, or otherwise, motor vehicles that are not subject to the provisions
of this Agreement.
17. DEFAULT AND REMEDIES THEREFOR.
17.1 Lease Events of Default. Any one or more of the following will
constitute an event of default (a "Lease Event of Default") as that term is
used herein:
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17.1.1 Payment Default. There occurs (i) a default in the
payment of any Monthly Base Rent and the continuance thereof for a
period of two Business Days, (ii) a default in the payment of any
Monthly Variable Rent, Monthly Finance Rent, Monthly Supplemental Rent
or Monthly Supplemental Payment, and the continuance thereof for five
Business Days or (iii) a default and continuance thereof for five
Business Days after notice thereof by the Lessor or the Trustee to the
Lessee Group IIn the payment of any amount payable under this
Agreement (other than amounts described in clause (i) or (ii) above);
17.1.2 Unauthorized Assignment. Any unauthorized assignment
or transfer of this Agreement by any member of the Lessee Group
occurs;
17.1.3 Breach of Contract. Subject to the provisions of
Section 19 hereof regarding Lessee Partial Wind-Down Events, the
failure of the Lessee Group to observe or perform any material
covenant, condition, agreement or provision hereof (other than one
described in Section 17.1.1, 17.1.2 or 17.1.9), including, but not
limited to, usage and maintenance, and such default continues for more
than 30 days after the earlier to occur of (a) the date a Responsible
Officer of the Lessee obtains knowledge of such default or (b) the
date written notice thereof is delivered by the Lessor or the Trustee
to such Lessee; provided, however, that if such failure cannot
reasonably be cured within such 30 day period, no Lease Event of
Default shall result therefrom so long as, within such 30 day period,
such Lessee (i) commences to cure same, (ii) delivers written notice
to the Lessor and the Trustee notifying the Lessor and the Trustee of
such default and setting forth the steps such Lessee intends to take
in order to cure such default and (iii) thereafter diligently
prosecutes such cure to completion and completely cures such default
on or before the 50th day after the earlier of the dates set forth in
clause (a) and clause (b) above;
17.1.4 Breach of Representation or Warranty. Subject to the
provisions of Section 19 hereof regarding Lessee Partial Wind-Down
Events, if any representation or warranty made by the Lessee Group
herein proves untrue in any material respect as of the date of the
issuance or making thereof and is not cured within 30 days after
notice thereof from the Lessor or the Trustee to the Lessee Group;
17.1.5 Event of Bankruptcy. Subject to the provisions of
Section 19 hereof regarding Lessee Partial Wind-Down Events, an Event
of Bankruptcy occurs with respect to any member of the Lessee Group;
17.1.6 Default Under Another Lease. A Lease Event of Default
occurs under the Amended and Restated Motor Vehicle Lease Agreement,
dated as of December 1, 1996, the Motor Vehicle Lease Agreement,
Series 1997-1, dated as of April 1, 1997, the Motor Vehicle Lease
Agreement, Series 1997-2, dated as of April 29, 1997, the Amended and
Restated
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Master Motor Vehicle Lease Agreement Group I, dated as of June 19,
1998 or any other Lease with respect to which Budget is a guarantor;
17.1.7 Required Credit Support Amount. The Credit Support
Amount for any Group II Series of Notes shall be less than the Minimum
Credit Support Amount for such Series and such condition shall
continue to exist for more than one Business Day; or
17.1.8 Letter of Credit Reimbursement Agreement. An event of
default occurs under the Letter of Credit Reimbursement Agreement for
any Group II Series of Notes which continues beyond any applicable
cure period specified in such Letter of Credit Reimbursement
Agreement.
17.1.9 Release of Liens on Refinanced Vehicles. Any
condition precedent specified in the proviso to Section 2.5(c)(ii) or
the proviso to Section 2.5(c)(iii) is not satisfied on or before the
close of business on March 10, 2000.
17.2 Effect of Lease Event of Default. If (i) a Lease Event of Default
described in Section 17.1.1, 17.1.2, 17.1.5, 17.1.7 or 17.1.8 shall occur, then
the Monthly Base Rent, Casualty Payments, the Monthly Supplemental Payments
(calculated as if all Financed Vehicles had become a Casualty for the Related
Month), the Monthly Variable Rent and Monthly Finance Rent (calculated as if
the full amount of interest, principal and other charges under all Outstanding
Group II Series of Notes were then due and payable in full), the Monthly
Supplemental Rent (calculated as if the full amount of interest, principal and
other charges under all Outstanding Group II Series of Notes were then due and
payable in full) shall, automatically, without further action by the Lessor or
the Trustee, become immediately due and payable or (ii) any other Lease Event
of Default or any Liquidation Event of Default shall occur, the Lessor or the
Trustee may declare the Rent (calculated as described in clause (i) above) to
be due and payable, whereupon such Rent (as so calculated) shall, subject to
Section 17.5, become immediately due and payable.
17.3 Rights of Lessor Upon Lease Event of Default, Liquidation Event
of Default or Limited Liquidation Event of Default. If a Lease Event of
Default, Limited Liquidation Event of Default or Liquidation Event of Default
shall occur, then the Lessor at its option may:
(i) Proceed by appropriate court action or actions, either at
law or in equity, to enforce performance by the Lessee Group (or such
member(s) thereof against which the Lessor determines to exercise its
remedies hereunder) of the applicable covenants and terms of this
Agreement or to recover damages for the breach hereof calculated in
accordance with Section 17.5; or
(ii) By notice in writing to the Lessee Group (or such
member(s) thereof against which the Lessor determines to exercise its
remedies hereunder) following the occurrence of a Lease
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Event of Default, terminate this Agreement in its entirety (or in
respect only of the applicable member(s) thereof) and/or the right of
possession hereunder of the Lessee Group (or the applicable member(s)
thereof) as to the Group II Vehicles, and the Lessor may direct
delivery by the Lessee Group (or the applicable member(s) thereof) of
documents of title to the Group II Vehicles, whereupon all rights and
interests of the Lessee Group (or the applicable member(s) thereof) to
the Group II Vehicles will cease and terminate (but the Lessee Group
(or the applicable member(s) thereof) will remain liable hereunder as
herein provided; provided, however, the Lessee Group's liability will
be calculated in accordance with Section 17.5); and thereupon, the
Lessor or its agents may peaceably enter upon the premises of the
applicable Lessee(s) or other premises where the Group II Vehicles may
be located and take possession of them and thenceforth hold, possess
and enjoy the same free from any right of the Lessee Group (or the
applicable member(s) thereof), or their successors or assigns, to use
the Group II Vehicles for any purpose whatsoever, and the Lessor will,
nevertheless, have a right to recover from the Lessee Group (or the
applicable member(s) thereof) any and all amounts which under the
terms of Section 17.2 (as limited by Section 17.5) of this Agreement
may be then due. The Lessor will provide the Lessee Group (or the
applicable member(s) thereof) with written notice of the place and
time of the sale at least five days prior to the proposed sale, which
shall be deemed commercially reasonable, and any Lessee may purchase
the Group II Vehicle(s) at the sale. Each and every power and remedy
hereby specifically given to the Lessor will be in addition to every
other power and remedy hereby specifically given or now or hereafter
existing at law, in equity or in bankruptcy and each and every power
and remedy may be exercised from time to time and simultaneously and
as often and in such order as may be deemed expedient by the Lessor;
provided, however, that the measure of damages recoverable against the
Lessees will in any case be calculated in accordance with Section
17.5. All such powers and remedies will be cumulative, and the
exercise of one will not be deemed a waiver of the right to exercise
any other or others. No delay or omission of the Lessor in the
exercise of any such power or remedy and no renewal or extension of
any payments due hereunder will impair any such power or remedy or
will be construed to be a waiver of any default or any acquiescence
therein. Any extension of time for payment hereunder or other
indulgence duly granted to the Lessee Group (or the applicable
member(s) thereof) will not otherwise alter or affect the Lessor's
rights or the obligations hereunder of the Lessee Group (or the
applicable member(s) thereof). The Lessor's acceptance of any payment
after it will have become due hereunder will not be deemed to alter or
affect the Lessor's rights hereunder with respect to any subsequent
payments or defaults herein; or
(iii) By notice in writing to the Lessee Group (or such
member(s) thereof against which the Lessor determines to exercise its
remedies hereunder), terminate the Power of Attorney.
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17.4 Rights of Trustee Upon Liquidation Event of Default, Limited
Liquidation Event of Default and Non-Performance of Certain Covenants.
(i) If a Liquidation Event of Default, a Limited Liquidation
Event of Default or a Manufacturer Event of Default, shall have
occurred and be continuing, the Lessor and the Trustee, to the extent
provided in the Base Indenture, shall have the rights against the
Guarantor, each Lessee, each Manufacturer in connection with any
Manufacturer Event of Default and the Collateral provided in the Base
Indenture (including, without limitation, in connection with a
Manufacturer Event of Default, the rights granted under Section 9.3 of
the Base Indenture) upon a Liquidation Event of Default or Limited
Liquidation Event of Default, including the right to take possession
of all Group II Vehicles immediately from the Lessees.
(ii) With respect to Group II Repurchase Vehicles, if the
Guarantor or any Lessee shall default in the due performance and
observance of any of its obligations under Section 29.3, 29.4,
29.5(iv), 29.8, 30.3 or 30.4 hereof, and such default shall continue
unremedied for a period of 30 days after notice thereof shall have
been given to the Guarantor by the Lessor, the Lessor or the Trustee,
as assignee of the Lessor's rights hereunder, shall have the ability
to exercise all rights, remedies, powers, privileges and claims of the
Guarantor or any Lessee against the Manufacturers under or in
connection with the Repurchase Programs with respect to (i) Group II
Repurchase Vehicles that the Guarantor or any Lessee has determined to
turn back to the Manufacturers under such Repurchase Programs and (ii)
whether or not the Guarantor or any Lessee shall then have determined
to turn back such Group II Repurchase Vehicles, any such Group II
Repurchase Vehicles for which the applicable Repurchase Period will
end within one week or less.
(iii) Upon a default in the performance (after giving effect
to any grace periods provided herein) by the Guarantor or any Lessee
of its obligations hereunder to keep the Group II Vehicles free of
Liens and to maintain the Trustee's Lien perfected on the Group II
Collateral, the Trustee shall have the right to take actions
reasonably necessary to correct such default with respect to the
subject Group II Vehicles including the execution of UCC financing
statements with respect to Repurchase Programs and other general
intangibles, and the completion of Vehicle Perfection and
Documentation Requirements on behalf of the Guarantor or the Lessee,
as applicable.
(iv) Upon the occurrence of a Liquidation Event of Default or
Limited Liquidation Event of Default, the Guarantor and each Lessee
will return any Group II Repurchase Vehicles to the related
Manufacturer in accordance with the instructions of the Lessor.
(v) Upon the occurrence of a Liquidation Event of Default or
Limited Liquidation Event of Default, the Lessor shall have the right
to dispose of those Group II Repurchase Vehicles not accepted by the
related Manufacturer under the applicable Repurchase Program pursuant
to
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clause (iv) above. In addition, the Lessor shall have all of the
rights, remedies, powers, privileges and claims vis-a-vis the
Guarantor or any Lessee, necessary or desirable to allow the Trustee
to exercise the rights, remedies, powers, privileges and claims given
to the Trustee pursuant to Section 9.2 and Section 9.3 of the Base
Indenture and the Guarantor and each Lessee acknowledges that it has
hereby granted to the Lessor all of the rights, remedies, powers,
privileges and claims granted to the Trustee pursuant to Article 9 of
the Base Indenture and that, under certain circumstances set forth in
the Base Indenture, the Trustee may act in lieu of the Lessor in the
exercise of such rights, remedies, powers, privileges and claims.
17.5 Measure of Damages. If a Lease Event of Default, Liquidation Event
of Default or Limited Liquidation Event of Default occurs and the Lessor or the
Trustee exercises the remedies granted to the Lessor or the Trustee under this
Article 17, the amount that the Lessor shall be permitted to recover shall be
equal to:
(i) all Rent under this Agreement (calculated as provided in
Section 17.2); plus
(ii) any damages and expenses, including reasonable attorneys'
fees and expenses (and including net after-tax losses of federal and
state income tax benefits to which the Lessor would otherwise be
entitled under this Agreement), which the Lessor or the Trustee will
have sustained by reason of the Lease Event of Default, Liquidation
Event of Default or Limited Liquidation Event of Default, together
with reasonable sums for such attorneys' fees and such expenses as
will be expended or incurred in the seizure, storage, rental or sale
of the Vehicles or in the enforcement of any right or privilege
hereunder or in any consultation or action in such connection; plus
(iii) all other amounts due and payable under this Agreement;
plus
(iv) interest on amounts due and unpaid under this Agreement
at the VFR plus 1% from time to time computed from the date of the
Lease Event of Default, Liquidation Event of Default or Limited
Liquidation Event of Default or the date payments were originally due
the Lessor under this Agreement or from the date of each expenditure
by the Lessor which is recoverable from the Lessees pursuant to this
Section 17, as applicable, to and including the date payments are made
by the Lessees; minus
(v) an amount equal to all sums realized by the Lessor or the
Trustee from the liquidation of the Group II Vehicles leased hereunder
(whether by receipt of payment from the Manufacturers under Repurchase
Programs, from sales of Group II Vehicles to third parties, or
otherwise).
17.6 Application of Proceeds. The proceeds of any sale or other
disposition pursuant to Section 17.3 or 17.4 shall be applied in the following
order: (i) to the reasonable costs and expenses
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incurred by the Lessor in connection with such sale or disposition, including
any reasonable costs associated with repairing any Group II Vehicles, and
reasonable attorneys' fees in connection with the enforcement of this
Agreement, (ii) to the payment of outstanding Rent (such payments to be applied
first to outstanding Monthly Variable Rent and Monthly Finance Rent, then to
outstanding Monthly Supplemental Rent, then to outstanding Monthly Base Rent,
(iii) to the payment of all other amounts due hereunder, and (iv) any remaining
amounts to the Lessor, or such Person(s) as may be lawfully entitled thereto.
18. MANUFACTURER EVENTS OF DEFAULT. Upon the occurrence of any of the
following events (each, a "Manufacturer Event of Default") with respect to any
Manufacturer, the relevant Lessee on behalf of the Lessor (a) shall no longer
place Group II Vehicle Orders from such Manufacturer (each, a "Defaulting
Manufacturer") for any additional Group II Vehicles and (b) shall cancel any
Group II Vehicle Order with such Defaulting Manufacturer to which a VIN has not
been assigned as of the date such Manufacturer Event of Default occurs:
18.1 The failure of such Manufacturer to pay any amount when due
pursuant to the related Repurchase Program with respect to a Repurchase Vehicle
which was leased under any Lease and turned in to such Manufacturer or
delivered to an authorized auction site pursuant to the related Repurchase
Program; provided, however, that such failure continues for more than 90 days
following the Turnback Date such that the aggregate of any such amounts not
paid for more than 90 days are in the aggregate in excess of $40,000,000 net of
amounts that are the subject of a good faith dispute as evidenced in writing by
either a member of the Lessee Group or the Manufacturer questioning the
accuracy of the amounts paid or payable in respect of certain Group II
Repurchase Vehicles tendered for repurchase, or delivered to an authorized
auction site, under a Repurchase Program.
18.2 The termination of such Manufacturer's Repurchase Program.
18.3 The occurrence of an Event of Bankruptcy with respect to such
Manufacturer.
18.4 Such Manufacturer is no longer an Eligible Manufacturer.
18.5 The Repurchase Program of a Manufacturer shall no longer be an
Eligible Repurchase Program.
19. LESSEE PARTIAL WIND-DOWN EVENTS. Upon the occurrence of any of the
events described in Sections 17.1.4, 17.1.5, or 17.1.6 with respect to any
member (such member, the "Defaulting Lessee") of the Lessee Group other than
the Guarantor (a "Lessee Partial Wind-Down Event"), then such Defaulting Lessee
shall (a) no longer place Group II Vehicle Orders for additional Group II
Vehicles and (b) shall cancel Group II Vehicle Orders for Vehicles; provided,
however, that if a Group II Vehicle Order has been placed for a Lessor-Owned
Vehicle and the related Manufacturer has assigned a VIN as of the date such
Lessee Partial Wind-Down Event occurs, then such Group II
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Vehicle Order will not be canceled. In the case of a Lessee Partial Wind-Down
Event, the Lessor may (i) exercise any right or remedy in respect only of such
Defaulting Lessee provided for pursuant to the provisions of Section 17.3 or
17.4 hereof and (ii) terminate the Power of Attorney with respect to such
Defaulting Lessee.
20. RESERVED.
21. CERTIFICATION OF TRADE OR BUSINESS USE. Each Lessee hereby warrants
and certifies, under penalties of perjury, that (1) such Lessee intends to use
the Lessor-Owned Vehicles leased by such Lessee hereunder in a trade or
business of such Lessee, and (2) such Lessee has been advised that it will not
be treated as the owner of such Lessor-Owned Vehicles for federal income tax
purposes.
22. SURVIVAL. In the event that, during the term of this Agreement, any
member of the Lessee Group becomes liable for the payment or reimbursement of
any obligations, claims or taxes pursuant to any provision hereof, such
liability will continue, notwithstanding the expiration or termination of this
Agreement, until all such amounts are paid or reimbursed by such Lessee.
23. ADDITIONAL LESSEES. Any Affiliate of or direct or indirect
Subsidiary of the Guarantor (each, a "Guarantor Subsidiary") or any party that
is not an Affiliate of the Guarantor (each, a "Non-Affiliate") shall, with the
consent of the Guarantor, have the right to become a "Lessee" under and
pursuant to the terms of this Agreement by complying with the provisions of
this Section 23. In the event a Guarantor Subsidiary or Non-Affiliate desires
to become a "Lessee" under this Agreement, then the Guarantor and such party
shall execute and deliver to the Lessor and the Trustee:
(i) a Joinder in Lease Agreement in the form attached hereto
as Attachment C (each, a "Joinder in Lease");
(ii) the certificate of incorporation for such party, duly
certified by the Secretary of State of the jurisdiction of such
party's incorporation, together with a copy of the by-laws of such
party, duly certified by a Secretary or Assistant Secretary of such
party;
(iii) copies of resolutions of the Board of Directors of such
party authorizing or ratifying the execution, delivery and
performance, respectively, of those documents and matters required of
it with respect to this Agreement, duly certified by the Secretary or
Assistant Secretary of such party;
(iv) a certificate of the Secretary or Assistant Secretary of
such party certifying the names of the individual or individuals
authorized to sign the Joinder in Lease and the other Related
Documents to be executed by it, together with samples of the true
signatures of each such individual;
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(v) a good standing certificate for such party in the
jurisdiction of its incorporation and the jurisdiction of its
principal place of business;
(vi) a written search report from a Person satisfactory to the
Lessor and the Trustee listing all effective financing statements that
name such party as debtor or assignor, and that are filed in the
jurisdictions in which filings were made pursuant to clause (vii)
below, together with copies of such financing statements, and tax and
judgment Lien search reports from a Person satisfactory to the Lessor
and the Trustee showing no evidence of Liens filed against such party
that purport to affect any Group II Vehicles leased hereunder or any
Collateral under the Base Indenture;
(vii) evidence of the filing of proper financing statements
on Form UCC-1 naming such party, as debtor, and the Lessor as secured
party covering the collateral described in Section 2(b) hereof;
(viii) an Officers' Certificate and an opinion of counsel each
stating that such joinder by such party complies with this Section 23
and that all conditions precedent herein provided for relating to such
transaction have been complied with or waived in accordance herewith;
(ix) Rating Agency Confirmation that such party becoming a
"Lessee" under this Agreement will not cause a failure to meet the
Rating Agency Condition; and
(x) any additional documentation that the Lessor or the
Trustee may require to evidence the assumption by such party of the
obligations and liabilities set forth in this Agreement.
Upon satisfaction of the foregoing conditions and receipt by such Guarantor
Subsidiary or Non-Affiliate of the applicable Joinder in Lease executed by the
Lessor, such Guarantor Subsidiary or Non-Affiliate shall for all purposes be
deemed to be a "Lessee" for purposes of this Agreement (including, without
limitation, the Guaranty) and shall be entitled to the benefits and subject to
the liabilities and obligations of a Lessee hereunder.
24. GUARANTY.
24.1 Guaranty. In order to induce the Lessor to execute and deliver
this Agreement and to lease Group II Vehicles to the Lessees, and in
consideration thereof, the Guarantor hereby (i) unconditionally and irrevocably
guarantees to the Lessor the obligations of the Lessees (including, without
limitation, any additional Lessees pursuant to Section 23) to make any payments
required to be made by them under this Agreement, (ii) agrees to cause the
Lessees to duly and punctually perform and observe all of the terms,
conditions, covenants, agreements and indemnities of the Lessees under this
Agreement, and (iii) agrees that, if for any reason whatsoever, any Lessee
fails to so perform and
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observe such terms, conditions, covenants, agreements and indemnities, the
Guarantor will duly and punctually perform and observe the same (the
obligations referred to in clauses (i) through (iii) above are collectively
referred to as the "Guaranteed Obligations"). The liabilities and obligations
of the Guarantor under the guaranty contained in this Section 24 (this
"Guaranty") will be absolute and unconditional under all circumstances. This
Guaranty shall be a guaranty of payment and not of collection, and the
Guarantor hereby agrees that it shall not be required that the Lessor or the
Trustee assert or enforce any rights against any of the Lessees or any other
person before or as a condition to the obligations of the Guarantor pursuant to
this Guaranty.
24.2 Scope of Guarantor's Liability. The Guarantor's obligations
hereunder are independent of the obligations of the Lessees, any other
guarantor or any other Person, and the Lessor may enforce any of its rights
hereunder independently of any other right or remedy that the Lessor may at any
time hold with respect to this Agreement or any security or other guaranty
therefor. Without limiting the generality of the foregoing, the Lessor may
bring a separate action against the Guarantor without first proceeding against
any of the Lessees, any other guarantor or any other Person, or any security
held by the Lessor, and regardless of whether the Lessees or any other
guarantor or any other Person is joined in any such action. The Guarantor's
liability hereunder shall at all times remain effective with respect to the
full amount due from the Lessees hereunder. The Lessor's rights hereunder shall
not be exhausted by any action taken by the Lessor until all Guaranteed
Obligations have been fully paid and performed. The liability of the Guarantor
hereunder shall be reinstated and revived, and the rights of the Lessor shall
continue, with respect to any amount at any time paid on account of the
Guaranteed Obligations which shall thereafter be required to be restored or
returned by the Lessor upon the bankruptcy, insolvency or reorganization of any
of the Lessees, any other guarantor or any other Person, or otherwise, all as
though such amount had not been paid.
24.3 Lessor's Right to Amend this Agreement, Etc. The Guarantor
authorizes the Lessor, at any time and from time to time without notice and
without affecting the liability of the Guarantor hereunder, to: (a) alter the
terms of all or any part of the Guaranteed Obligations and any security and
guaranties therefor including without limitation modification of times for
payment and rates of interest; (b) accept new or additional instruments,
documents, agreements, security or guaranties in connection with all or any
part of the Guaranteed Obligations; (c) accept partial payments on the
Guaranteed Obligations; (d) waive, release, reconvey, terminate, abandon,
subordinate, exchange, substitute, transfer, compound, compromise, liquidate
and enforce all or any part of the Guaranteed Obligations and any security or
guaranties therefor, and apply any such security and direct the order or manner
of sale thereof (and bid and purchase at any such sale), as the Lessor in its
discretion may determine; (e) release any Lessee, any guarantor or any other
Person from any personal liability with respect to all or any part of the
Guaranteed Obligations; and (f) assign its rights under this Guaranty in whole
or in part.
24.4 Waiver of Certain Rights by Guarantor. The Guarantor hereby
waives each of the following to the fullest extent allowed by law:
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(a) any defense based upon:
(i) the unenforceability or invalidity of any
security or other guaranty for the Guaranteed Obligations or
the lack of perfection or failure of priority of any security
for the Guaranteed Obligations;
(ii) any act or omission of the Lessor or any other
Person that directly or indirectly results in the discharge
or release of any of the Lessees or any other Person or any
of the Guaranteed Obligations or any security therefor;
provided that the Guarantor's liability in respect of this
Guaranty shall be released to the extent the Lessor
voluntarily releases such Lessee or other Person from any
obligations with respect to any of the foregoing; or
(iii) any disability or any other defense of any
Lessee or any other Person with respect to the Guaranteed
Obligations, whether consensual or arising by operation of
law or any bankruptcy, insolvency or debtor-relief
proceeding, or from any other cause;
(b) any right (whether now or hereafter existing) to require
the Lessor, as a condition to the enforcement of this Guaranty, to:
(i) accelerate the Guaranteed Obligations;
(ii) give notice to the Guarantor of the terms, time
and place of any public or private sale of any security for
the Guaranteed Obligations; or
(iii) proceed against any Lessee, any other
guarantor or any other Person, or proceed against or exhaust
any security for the Guaranteed Obligations;
(c) all rights of subrogation, all rights to enforce any
remedy that the Lessor now or hereafter has against any Lessee or any
other Person, and any benefit of, and right to participate in, any
security now or hereafter held by the Lessor with respect to the
Guaranteed Obligations;
(d) presentment, demand, protest and notice of any kind,
including without limitation notices of default and notice of
acceptance of this Guaranty;
(e) all suretyship defenses and rights of every nature
otherwise available under New York law and the laws of any other
jurisdiction; and
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(f) all other rights and defenses the assertion or exercise
of which would in any way diminish the liability of the Guarantor
hereunder.
24.5 Lessees' Obligations to Guarantor and Guarantor's Obligations to
Lessees Subordinated. Until all of the Guaranteed Obligations have been paid in
full, the Guarantor agrees that all existing and future debts, obligations and
liabilities of the Lessees to the Guarantor or the Guarantor to any of the
Lessees (hereinafter collectively referred to as "Subordinated Debt") shall be
and hereby are expressly subordinated to the prior payment in full of the
Guaranteed Obligations on the terms set forth in clauses (a) through (e) below,
and the payment thereof is expressly deferred in right of payment to the prior
payment in full of the Guaranteed Obligations. For purposes of this Section
24.5, to the extent the Guaranteed Obligations consist of the obligation to pay
money, the Guaranteed Obligations shall not be deemed paid in full unless and
until paid in full in cash.
(a) Upon any distribution of assets of the Guarantor or any
Lessee upon any dissolution, winding up, liquidation or reorganization
of such Lessee, whether in bankruptcy, insolvency, reorganization or
receivership proceedings, or upon an assignment for the benefit of
creditors or any other marshaling of the assets and liabilities of the
Guarantor or such Lessee, or otherwise:
(i) the holders of the Guaranteed Obligations shall
be entitled to receive payment in full of the Guaranteed
Obligations before the Guarantor or the Lessee, as the case
may be, is entitled to receive any payment on account of the
Subordinated Debt;
(ii) any payment by, or distribution of assets of,
the Guarantor or such Lessee of any kind or character,
whether in cash, property or securities, to which such Lessee
or the Guarantor would be entitled except for this
subordination shall be paid or delivered by the Person making
such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee, or otherwise,
directly to the Trustee, for the benefit of the holders of
the Guaranteed Obligations to be held as additional security
for the Guaranteed Obligations in an interest bearing account
until the Guaranteed Obligations have been paid in full; and
(iii) if, notwithstanding the foregoing, any payment
by, or distribution of assets of, the Guarantor or such
Lessee of any kind or character, whether in cash, property or
securities, in respect of any Subordinated Debt shall be
received by such Lessee or the Guarantor before the
Guaranteed Obligations are paid in full, such payment or
distribution shall be held in trust in an interest bearing
account of the Guarantor or such Lessee, as appropriate, and
immediately paid over in kind to the holders of the
Guaranteed Obligations until the Guaranteed Obligations have
been paid in full.
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(b) The Guarantor authorizes and directs each Lessee and each
Lessee authorizes and directs the Guarantor to take such action as may
be necessary or appropriate to effectuate and maintain the
subordination provided herein.
(c) No right of any holder of the Guaranteed Obligations to
enforce the subordination herein shall at any time or in any way be
prejudiced or impaired by any act or failure to act on the part of the
Guarantor, any Lessee, the Lessor or any other Person or by any
noncompliance by the Guarantor, any Lessee, the Lessor or any other
Person with the terms, provisions and covenants hereof or of the
Related Documents regardless of any knowledge thereof that any such
holder of the Guaranteed Obligations may have or be otherwise charged
with.
(d) Nothing express or implied herein shall give any Person
other than the Lessees, the Lessor, the Trustee and the Guarantor any
benefit or any legal or equitable right, remedy or claim hereunder.
(e) If the Guarantor shall institute or participate in any
suit, action or proceeding against any Lessee or any Lessee shall
institute or participate in any suit, action or proceeding against the
Guarantor, in violation of the terms hereof, such Lessee or the
Guarantor, as the case may be, may interpose as a defense or dilatory
plea this subordination, and the holders of the Guaranteed Obligations
are irrevocably authorized to intervene and to interpose such defense
or plea in their name or in the name of such Lessee or the Guarantor,
as the case may be.
24.6 Guarantor to Pay Lessor's Expenses. The Guarantor agrees to pay to
the Lessor, on demand, all costs and expenses, including attorneys' and other
professional and paraprofessional fees, incurred by the Lessor in exercising
any right, power or remedy conferred by this Guaranty, or in the enforcement of
this Guaranty, whether or not any action is filed in connection therewith.
Until paid to the Lessor, such amounts shall bear interest, commencing with the
Lessor's demand therefor, at the VFR plus 1%.
24.7 Reinstatement. This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time payment of any of the amounts
payable by any Lessee under this Agreement is rescinded or must otherwise be
restored or returned by the Lessor, upon an event of bankruptcy, dissolution,
liquidation or reorganization of any member of the Lessee Group or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, any member of the Lessee Group or any
substantial part of their respective property, or otherwise, all as though such
payment had not been made.
24.8 Pari Passu Indebtedness. The Guarantor (i) represents and warrants
that, as of the date hereof, the obligations of the Guarantor under this
Guaranty will rank pari passu with any existing unsecured indebtedness of the
Guarantor and (ii) covenants and agrees that from and after the date
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hereof the obligations of the Guarantor under this Guaranty will rank pari
passu with any unsecured indebtedness of the Guarantor incurred after the date
hereof.
25. RIGHTS OF LESSOR ASSIGNED TO TRUSTEE. Notwithstanding anything to
the contrary contained in this Agreement, each member of the Lessee Group
acknowledges that the Lessor has assigned all of its rights under this
Agreement to the Trustee for the benefit of the Holders of Notes included in
the Group II Series of Notes. Accordingly, each member of the Lessee Group
agrees that:
(i) Subject to the terms of the Base Indenture, the Trustee
shall have all the rights, powers, privileges and remedies of the
Lessor hereunder and the Guarantor's and the relevant Lessee's
obligations hereunder shall not be subject to any claim or defense
which the Guarantor or such Lessee may have against the Lessor (other
than the defense of payment actually made). Specifically, each member
of the Lessee Group agrees that, upon the occurrence of an
Amortization Event with respect to any Group II Series of Notes or,
subject to the provisions of Section 19 hereof, a Lessee Partial
Wind-Down Event or, with respect to Group II Repurchase Vehicles, a
Manufacturer Event of Default, the Trustee may exercise (for and on
behalf of the Lessor) any right or remedy against any member of the
Lessee Group provided for herein and no member of the Lessee Group
will interpose as a defense that such claim should have been asserted
by the Lessor;
(ii) Upon the delivery by the Trustee of any notice to any
member of the Lessee Group stating that a Manufacturer Event of
Default, an Amortization Event or Lessee Partial Wind-Down Event with
respect to such Lessee has occurred, such member of the Lessee Group,
will, if so requested by the Trustee, treat the Trustee or the
Trustee's designee for all purposes as the Lessor hereunder and in all
respects comply with all obligations under this Agreement that are
asserted by the Trustee as the successor to the Lessor hereunder,
irrespective of whether such member of the Lessee Group has received
any such notice from the Lessor; provided, however, the Trustee shall
in no event be liable to any Lessee for any action taken by it in its
capacity as successor to the Lessor other than actions that constitute
negligence or willful misconduct;
(iii) Each member of the Lessee Group acknowledges that
pursuant to the Base Indenture the Lessor has irrevocably authorized
and directed such member of the Lessee Group to, and each such member
of the Lessee Group shall, make payments of Rent hereunder (and any
other payments hereunder) directly to the Trustee for deposit in the
Collection Account established by the Trustee for receipt of such
payments pursuant to the Base Indenture and such payments shall
discharge the obligation of such member of the Lessee Group to the
Lessor hereunder to the extent of such payments. Upon written notice
to the relevant member of the Lessee Group of a sale or assignment by
the Trustee of its right, title and interest in moneys due under this
Agreement to a successor Trustee, such member of the Lessee Group
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shall thereafter make payments of all Rent (and any other payments
hereunder) to the party specified in such notice; and
(iv) Upon request made by the Trustee at any time, each member
of the Lessee Group will take such actions as are requested by the
Trustee to assist the Trustee in maintaining the Trustee's perfected
security interest in the Group II Vehicles leased under this
Agreement, the Certificates of Title with respect thereto, the Group
II Collateral pursuant to the Base Indenture and the collateral
granted to the Lessor pursuant to Section 2(b) (such grant of
collateral to be effective as of the date of this Agreement, but only,
with respect to the Operating Lease, in the event that this Agreement
is recharacterized as described in such Section 2(b)).
26. RIGHT OF LESSEE TO DELEGATE RIGHTS AND OBLIGATIONS HEREUNDER TO
GUARANTOR. If and for so long as the Guarantor is acting as the Servicer under
the Base Indenture, any Lessee shall be permitted to delegate to the Guarantor
(acting in such capacity) its rights and obligations under this Agreement,
including, without limitation, its servicing rights and obligations under
Sections 8 and 9 hereof. No such delegation of rights or obligations shall,
however, operate in any manner to release any such delegating Lessee from any
of its obligations under this Agreement.
27. MODIFICATION AND SEVERABILITY. The terms of this Agreement will not
be waived, altered, modified, amended, supplemented or terminated in any manner
whatsoever except by written instrument signed by the Lessor and each Lessee
and consented to in writing by the Trustee, each Enhancement Provider with
respect to any Group II Series of Notes and, if the Series 2000-1 Notes are
still outstanding, the Lender in respect thereof. If any part of this Agreement
is not valid or enforceable according to law, all other parts will remain
enforceable. The Lessor shall provide prompt written notice to each Rating
Agency, and to the Lender or Note Purchaser for each Group II Series of Notes,
of any such waiver, modification or amendment. Notwithstanding the foregoing
provisions of this Section 27, the Lessor, the Lessees and the Guarantor may,
at any time and from time to time, without the consent of the Trustee or any
Enhancement Provider, enter into any amendment, supplement or other
modification to this Agreement to cure any apparent ambiguity or to correct or
supplement any provision in this Agreement that may be inconsistent with any
other provision herein; provided, however, that (i) any such action shall not
have a materially adverse effect on the interests of any Enhancement Provider
for a Group II Series of Notes based upon an Opinion of Counsel and an
Officers' Certificate of the Lessor and each Lessee addressed to the Trustee
and (ii) a copy of such amendment, supplement or other modification is
furnished to the Trustee, each Enhancement Provider with respect to any Group
II Series of Notes in accordance with the notice provisions of the related
Series Supplement not later than ten days prior to the execution thereof by the
Lessor, the Lessees and the Guarantor.
28. CERTAIN REPRESENTATIONS AND WARRANTIES. Each Lessee represents and
warrants to the Lessor and the Trustee as to itself, as to each other Lessee
and as to the Group II Vehicles leased by it hereunder (except that any Person
becoming a Lessee hereunder pursuant to
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Section 23 hereof does not represent and warrant as to any Lessee that is not
an Affiliate thereof), and the Guarantor represents and warrants to the Lessor
and the Trustee as to itself and as to each Lessee, that as of the date hereof
(or, with respect to each Group II Series of Notes issued after the date
hereof, the Closing Date with respect to such Series of Notes):
28.1 Due Organization, Authorization, etc. The Guarantor and each
Lessee is a corporation duly organized and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and is duly
qualified and in good standing in each jurisdiction where, because of the
nature of its activities or properties, the failure so to qualify would have a
Material Adverse Effect on such Lessee or the Guarantor, as applicable. The
execution, delivery and performance by the Guarantor and each Lessee of this
Agreement and the other Related Documents to be executed and delivered by it
are within its corporate powers, have been duly authorized by all necessary
corporate action (including, without limitation, shareholder approval, if
required), have received all necessary governmental and other consents and
approvals (if any shall be required), and do not and will not contravene or
conflict with, or create a default, breach, Lien or right of termination or
acceleration under, any Requirement of Law or Contractual Obligation binding
upon it, other than such default, breach, Lien or right of termination or
acceleration which does not have a Material Adverse Effect on the Guarantor or
such Lessee, as applicable. This Agreement and each other Related Document to
be executed and delivered by it are (or when executed and delivered will be)
the legal, valid, and binding obligations of the Guarantor or such Lessee,
enforceable against the Guarantor or such Lessee, as the case may be, in
accordance with their respective terms, subject to bankruptcy, insolvency and
other laws affecting the enforcement of creditors' rights. Each Lessee (other
than the Non-Budget Lessees) is a direct or indirect Subsidiary of the
Guarantor.
28.2 Financial Information; Financial Condition. All balance sheets,
all statements of operations, of stockholders' equity and of cash flow, and
other financial data (other than projections and the financial statements
referred to in clause (b) below) which have been or shall hereafter be
furnished to the Lessor or the Trustee for the purposes of or in connection
with this Agreement or the Related Documents have been and will be prepared in
accordance with GAAP and do and will present fairly the financial condition of
the entities involved as of the dates thereof and the results of their
operations for the periods covered thereby. Such financial data include the
following financial statements and reports which have been, or shall be,
furnished to the Lessor and the Trustee on or prior to such Closing Date:
(a) the audited consolidated balance sheets of Budget and each
Non-Budget Lessee as of December 31, 1998 and the related statements
of operations, stockholders' deficit and cash flows for the fiscal
year ending on such date; and
(b) (i) the unaudited pro forma consolidated balance sheets of
Budget and the Budget Subsidiaries and statement of operations,
accompanied by an Officers' Certificate verifying the accuracy and
completeness thereof signed by an Authorized Officer of the Guarantor,
for the
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most recently ended calendar quarter ending March 31, June 30,
September 30 or December 31, as applicable, and (ii) the unaudited pro
forma consolidated balance sheets of each Non-Budget Lessee and
statement of operations, accompanied by an Officers' Certificate
verifying the accuracy and completeness thereof signed by an
Authorized Officer of such Non-Budget Lessee, for the most recently
ended calendar quarter ending March 31, June 30, September 30 or
December 31, as applicable.
28.3 Litigation. Except for claims which are fully covered by insurance
provided by a Person who is not an Affiliate of Budget and for which adequate
reserves have been set aside in accordance with GAAP, no claims, litigation
(including, without limitation, derivative actions), arbitration, governmental
investigation or proceeding or inquiry is pending or, to the best of the
Guarantor's or such Lessee's knowledge, threatened against the Guarantor or any
Lessee which would, if adversely determined, have a Material Adverse Effect on
the Guarantor or such Lessee, as applicable.
28.4 Liens. The Group II Vehicles leased under this Agreement are free
and clear of all Liens other than (i) Permitted Liens and (ii) Liens in favor
of the Trustee for the benefit of Group II Noteholders and/or any related
Enhancement Provider. The Trustee has obtained, and will continue to obtain, as
security for the liabilities under the Indenture and the Group II Series of
Notes, a first priority perfected Lien on all Group II Vehicles leased under
this Agreement. Except as otherwise permitted under the Indenture, all Vehicle
Perfection and Documentation Requirements with respect to all Group II Vehicles
leased under this Agreement on or after the date hereof have and will continue
to be satisfied.
28.5 Employee Benefit Plans. (a) During the 12 consecutive month period
prior to the date hereof (or, with respect to each Series of Notes included in
the Group II Series of Notes after the date hereof, the Closing Date with
respect to such Series of Notes): (i) except for any termination of a Pension
Plan in connection with an acquisition or merger by the Guarantor, which
termination is made in conjunction with the offering by the Guarantor of a
successor Pension Plan, no steps have been taken by the Guarantor or any Lessee
to terminate any Pension Plan and (ii) no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under
Section 302(f)(1) of ERISA in connection with such Pension Plan; (b) no
condition exists or event or transaction has occurred with respect to any
Pension Plan which could result in the incurrence by the Guarantor or any
Lessee or any member of the Controlled Group of fines, penalties or liabilities
for ERISA violations, which in the case of any of the events referred to in
clause (a) above or this clause (b) would have a Material Adverse Effect upon
the Guarantor or such Lessee, as applicable, and (c) neither the Guarantor nor
any Lessee has any material contingent liability with respect to any
post-retirement benefits under a Welfare Plan, other than liability for
continuation coverage described in Subtitle B of Part 6 of Title I of ERISA and
liabilities which would not have a Material Adverse Effect upon the Guarantor
or such Lessee, as applicable.
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28.6 Investment Company Act. Neither the Guarantor nor any Lessee is
an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
28.7 Regulations T, U and X. Neither the Guarantor nor any Lessee is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations T, U and X of the Board of Governors of the Federal
Reserve System).
28.8 Business Locations; Trade Names; Principal Places of Business
Locations. Schedule 28.8 lists each of the locations where each Lessee and the
Guarantor maintains a chief executive office, principal place of business, or
its material books and records with respect to its obligations under this
Agreement; and Schedule 28.8 also lists each Lessee's and the Guarantor's legal
name, each name under or by which each Lessee and the Guarantor conducts its
business, each state in which each Lessee and the Guarantor conducts business
and each state in which each Lessee and the Guarantor has its principal place
of business.
28.9 Taxes. Each of the Guarantor and each Lessee has filed all tax
returns that are required to be filed by it, and has paid or provided adequate
reserves for the payment of all taxes, including, without limitation, all
payroll taxes and federal and state withholding taxes, and all assessments
payable by it that have become due, other than those that are not yet
delinquent or are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP. As of the Closing Date with respect to
each Series of Notes included in Group II , there is no ongoing material audit
(other than routine sales tax audits and other routine audits) or, to the
Guarantor's or any Lessee's knowledge, material tax liability for any period
for which returns have been filed or were due other than those contested in
good faith by appropriate proceedings and with respect to which adequate
reserves have been established and are being maintained in accordance with
GAAP.
28.10 Governmental Authorization. The Guarantor and each Lessee has all
licenses, franchises, permits and other governmental authorizations necessary
for all businesses presently carried on by it (including owning and leasing the
real and personal property owned and leased by it), except where failure to
obtain such licenses, franchises, permits and other governmental authorizations
would not have a Material Adverse Effect on the Guarantor or such Lessee, as
applicable.
28.11 Compliance with Laws. The Guarantor and each Lessee: (i) is not
in violation of any Requirement of Law, which violation would have a Material
Adverse Effect on the Guarantor or such Lessee, as applicable, and to the best
knowledge of the Guarantor and the Lessees, no such violation has been alleged,
(ii) has filed in a timely manner all reports, documents and other materials
required to be filed by it with any Governmental Authority (and the information
contained in each of such filings is true, correct and complete in all material
respects), except where failure to make such filings would not
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have a Material Adverse Effect on the Guarantor or such Lessee, as applicable,
and (iii) has retained all records and documents required to he retained by it
pursuant to any Requirement of Law, except where failure to retain such records
would not have a Material Adverse Effect on the Guarantor or such Lessee, as
applicable.
28.12 Eligible Vehicles. Each Group II Repurchase Vehicle is or will
be, as the case may be, on the Vehicle Lease Commencement Date with respect to
such Group II Repurchase Vehicle, an Eligible Repurchase Vehicle.
28.13 Supplemental Documents True and Correct. All information
contained in any Group II Vehicle Order, Refinancing Schedule or other
Supplemental Document which has been submitted, or which may hereafter be
submitted by a Lessee to the Lessor is, or will be, true, correct and complete.
28.14 Accuracy of Information. All certificates, reports, statements,
documents and other written information furnished to the Lessor or the Trustee
by the Guarantor or any Lessee pursuant to any provision of any Related
Document, or in connection with or pursuant to any amendment or modification
of, or waiver under, any Related Document, shall, at the time the same are so
furnished, be complete and correct in all material respects to the extent
necessary to give the Lessor or the Trustee, as the case may be, true and
accurate knowledge of the subject matter thereof, and the furnishing of the
same to the Lessor or the Trustee, as the case may be, shall constitute a
representation and warranty by the Guarantor and such Lessee made on the date
the same are furnished to the Lessor or the Trustee, as the case may be, to the
effect specified herein.
Each of the foregoing representations and warranties will be deemed to
be remade as of the Closing Date with respect to each Group II Series of Notes.
29. CERTAIN AFFIRMATIVE COVENANTS. Each Lessee covenants and agrees as
to itself and as to each other Lessee (except that any Person becoming a Lessee
hereunder pursuant to Section 23 hereof does not covenant and agree as to any
Lessee that is not an Affiliate thereof), and the Guarantor covenants and
agrees as to itself and as to each Lessee that, until the expiration or
termination of this Agreement, and thereafter until the obligations of such
Lessee or the Guarantor under this Agreement and the Related Documents are
satisfied in full, unless at any time the Lessor and the Trustee shall
otherwise expressly consent in writing, it will (and, in the case of the
Guarantor, will cause each Lessee to):
29.1 Corporate Existence; Foreign Qualification. Do and cause to be
done at all times all things necessary to (i) maintain and preserve the
corporate existence of the Guarantor and each Lessee (it being understood that
subject to Section 30.1(a) each Budget Subsidiary shall remain a direct or
indirect wholly-owned Subsidiary of the Guarantor); (ii) be, and ensure that
each Lessee is, duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction where the nature of its business makes such
qualification necessary and the failure to so qualify would have a
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Material Adverse Effect on the Guarantor or such Lessee, as applicable; and
(iii) comply with all Contractual Obligations and Requirements of Law binding
upon it, except to the extent that the failure to comply therewith would not,
in the aggregate, have a Material Adverse Effect on the Guarantor or such
Lessee, as applicable.
29.2 Books, Records and Inspections. (i) Maintain complete and accurate
books and records with respect to the Group II Vehicles leased by it under this
Agreement; (ii) at any time and from time to time during regular business
hours, and with reasonable prior notice from the Lessor or the Trustee, permit
the Lessor or the Trustee (or such other person who may be designated from time
to time by the Lessor or the Trustee), or its agents or representatives to
examine and make copies of all books, records and documents in the possession
or under the control of the Guarantor or such Lessee relating to the Group II
Vehicles leased under this Agreement including, without limitation, with
respect to Group II Repurchase Vehicles leased hereunder, in connection with
the Trustee's satisfaction of any requests of a Manufacturer performing an
audit under its Repurchase Program; and (iii) permit the Lessor or the Trustee
(or such other person who may be designated from time to time by the Lessor or
the Trustee), or its agents or representatives to visit the office and
properties of the Guarantor or such Lessee for the purpose of examining such
materials, and to discuss matters relating to the Group II Vehicles leased
hereunder or the Guarantor's or such Lessee's performance under this Agreement
with any of the officers or employees of the Guarantor or such Lessee having
knowledge of such matters.
29.3 Insurance. The Guarantor, on behalf of each Budget Subsidiary, and
each Non-Budget Lessee, on its own behalf, subject to applicable state and
other requirements, may self-insure against personal injury and damage claims
arising from the use of the Group II Vehicles as well as damage to Group II
Vehicles. All self-insurance maintained by any member of the Lessee Group shall
be maintained in a financially prudent manner.
29.4 Repurchase Programs. With respect to each Group II Repurchase
Vehicle leased by each Lessee hereunder (a) unless previously purchased by such
Lessee pursuant to this Agreement, turn in such Group II Repurchase Vehicle to
the relevant Manufacturer within the Repurchase Period therefor, (b) dispose of
such Group II Repurchase Vehicle under the applicable Repurchase Program
according to its historical practice and in accordance with the requirements of
such Repurchase Program, and (c) comply with all of its (and the Lessor's)
obligations under the applicable Repurchase Program.
29.5 Reporting Requirements. Furnish, or cause to be furnished to the
Lessor (and the Lessor shall, in the case of clauses (i), (ii) and (iii) below,
forward a copy of the same to each Rating Agency as shall so request in
writing):
(i) Audit Report. (a) As soon as available and in any event
within 110 days after the end of each fiscal year of the Guarantor, a
copy of the consolidated balance sheet of the Guarantor and its
Subsidiaries as at the end of such fiscal year, together with the
related
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statements of earnings, stockholders' equity and cash flows for such
fiscal year, prepared in reasonable detail and in accordance with GAAP
certified by independent certified public accountants of recognized
national standing as shall be selected by the Guarantor; and (b) as
soon as available and in any event within 110 days after the end of
each fiscal year of any Non-Budget Lessee, a copy of the consolidated
balance sheet of such Non-Budget Lessee and its Subsidiaries as at the
end of such fiscal year, together with the related statements of
earnings, stockholders' equity and cash flows for such fiscal year,
prepared in reasonable detail and in accordance with GAAP certified by
independent certified public accountants of recognized national
standing as shall be selected by such Non-Budget Lessee.
(ii) Quarterly Statements. (a) As soon as available, but in
any event within 45 days after the end of each fiscal quarter (except
the fourth fiscal quarter) of the Guarantor, copies of the unaudited
consolidated balance sheet of the Guarantor and its Subsidiaries as at
the end of such fiscal quarter and the related unaudited statements of
earnings, stockholders' equity and cash flows for the portion of the
fiscal year through such fiscal quarter (and as to the statements of
earnings for such fiscal quarter) in each case setting forth in
comparative form the figures for the corresponding periods of the
previous fiscal year, prepared in reasonable detail and in accordance
with GAAP applied consistently throughout the periods reflected
therein and certified by the chief financial or accounting officer of
the Guarantor as presenting fairly the financial condition and results
of operations of the Guarantor and its Subsidiaries (subject to normal
year-end adjustments); and (b) as soon as available, but in any event
within 45 days after the end of each fiscal quarter (except the fourth
fiscal quarter) of any Non-Budget Lessee, copies of the unaudited
consolidated balance sheet of such Non-Budget Lessee and its
Subsidiaries as at the end of such fiscal quarter and the related
unaudited statements of earnings, stockholders' equity and cash flows
for the portion of the fiscal year through such fiscal quarter (and as
to the statements of earnings for such fiscal quarter) in each case
setting forth in comparative form the figures for the corresponding
periods of the previous fiscal year, prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the periods
reflected therein and certified by the chief financial or accounting
officer of such Non-Budget Lessee as presenting fairly the financial
condition and results of operations of such Non-Budget Lessee and its
Subsidiaries (subject to normal year-end adjustments).
(iii) Amortization Events; Lease Events of Default; Wind-Down
Events. As soon as possible but in any event within two Business Days
after the Guarantor or any Lessee has knowledge of the occurrence of
any Amortization Event, Lease Event of Default, Potential Lease Event
of Default, Manufacturer Event of Default, Potential Manufacturer
Event of Default, Lessee Partial Wind-Down Event or Potential Lessee
Partial Wind-Down Event, a written statement of an Authorized Officer
describing such event and the action that the Guarantor or a Lessee,
as the case may be, proposes to take with respect thereto;
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(iv) Monthly Vehicle Statements. On or before the third
Business Day prior to each Due Date, a monthly vehicle statement
(each, a "Monthly Vehicle Statement") in a form acceptable to the
Lessor, which shall specify (a) the vehicle identification numbers
(the "VIN") for the Group II Vehicles leased hereunder during the
Related Month by such Lessee, (b) the Capitalized Cost for Group II
Vehicles that are Lessor-Owned Vehicles, (c) the Net Book Value of
Group II Repurchase Vehicles as of the end of the Related Month, (d)
the VINs for those Group II Vehicles that have been turned back to
Manufacturers pursuant to the applicable Repurchase Program during the
Related Month and the Repurchase Prices therefor and those Group II
Vehicles that have been delivered to a designated auction site
pursuant to the applicable Repurchase Program and the Guaranteed
Payments therefor, or that have been otherwise sold during the Related
Month, (e) those Vehicles that have become Casualties during the
Related Month and their respective Casualty Payment amounts or
Termination Values, as applicable (as calculated immediately prior to
the event causing such Group II Vehicles to become Casualties), (f)
the amount of Disposition Proceeds in respect of Group II Vehicles
sold during the Related Month, (g) the Repurchase Prices received
during the Related Month and any Guaranteed Payments received pursuant
to a Repurchase Program during the Related Month, (h) the aggregate
Depreciation Charges for all Vehicles continuing in the possession of
the Lessees, (i) the total amount of Monthly Base Rent, Monthly
Variable Rent, Monthly Supplemental Payments and Termination Payments
being paid hereunder on such date, (j) information with respect to
each Lessee necessary for the Servicer to compute the Group II
Aggregate Asset Amount with respect to each Series of Notes included
in Group II as of the end of the Related Month, (k) any other charges
owing from, and credits due to, the Lessee submitting such Statement
under this Agreement, (l) the percentage calculated pursuant to
Section 2.5(a)(i) as of the last day of the Related Month, and (m) all
prepayments of Rent received during the Related Month from Guaranteed
Payments, Repurchase Prices and Disposition Proceeds received by the
Lessor during the Related Month from the Manufacturers, auctions and
other Persons, as the case may be;
(v) Monthly Notice of Claims. Monthly, provide to the Lessor
and Moody's (so long as Moody's is then currently requested to rate
any of the Group II Series of Notes), a report of any lawsuits filed
against the Lessor naming the Lessor as defendant in such action;
(vi) Notice of Final Judgment. Promptly, provide to the
Lessor and Moody's (so long as Moody's is then currently requested to
rate any of the Group II Series of Notes), notice of any final
judgment rendered against the Lessor; and
(vii) Other. Promptly, from time to time, such other
information, documents, or reports respecting the Group II Vehicles
leased under this Agreement or the condition or operations, financial
or otherwise, of the Guarantor or the Lessees as the Lessor or the
Trustee may from time to time reasonably request in order to protect
the interests of the Lessor or the Trustee under or as contemplated by
this Agreement or any other Related Document.
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29.6 Taxes and Liabilities. Pay when due all taxes, assessments and
other material (determined on a consolidated basis) liabilities (including,
without limitation, taxes, titling fees and registration fees payable with
respect to Group II Vehicles) except as contested in good faith and by
appropriate proceedings with respect to which adequate reserves have been
established, and are being maintained, in accordance with GAAP if and so long as
forfeiture of any part of the Group II Vehicles leased under this Agreement will
not result from the failure to pay any such taxes, assessments or other material
liabilities during the period of any such contest.
29.7 Compliance with Laws. Comply with all Requirements of Law
related to its businesses if the failure so to comply would have a Material
Adverse Effect on the Guarantor or such Lessee, as applicable.
29.8 Maintenance of Separate Existence. The Guarantor and each Lessee
acknowledges its receipt of a copy of that certain opinion letter issued by
Mayer, Brown & Platt, dated February 25, 2000 and addressing the issue of
substantive consolidation as it may relate to the Guarantor, each Lessee and
the Lessor. The Guarantor and each Lessee hereby agrees to maintain in place
all policies and procedures, and take and continue to take all action,
described in the factual assumptions set forth in such opinion letter and
relating to such Person.
29.9 Trustee as Lienholder. Concurrently with each leasing of a Group
II Vehicle under this Agreement, the Servicer shall indicate on its computer
records that the Trustee as assignee of the Lessor is the holder of a Lien on
such Group II Vehicle pursuant to the terms of the Base Indenture.
30. CERTAIN NEGATIVE COVENANTS. Until the expiration or termination of
this Agreement and thereafter until the obligations of each Lessee and the
Guarantor are paid in full, the Guarantor and each Lessee agrees that, unless
at any time the Lessor and the Trustee shall otherwise expressly consent in
writing, it will not (and, in the case of the Guarantor, will not permit any
Lessee to):
30.1 Mergers, Consolidations. Be a party to any merger or
consolidation, other than: (i) a merger or consolidation of any Subsidiary of
the Guarantor into or with the Guarantor (provided, however, that the Guarantor
is the surviving corporation) or any merger or consolidation of any Subsidiary
of the Guarantor with or into another Subsidiary of the Guarantor, and (ii) a
merger or consolidation of the Guarantor or any Subsidiary into or with another
entity if:
(a) the corporation formed by such consolidation or into or
with which the Guarantor or such Subsidiary is merged shall be a
corporation organized and existing under the laws of the United States
of America or any State or the District of Columbia, and, if the
Guarantor or such Subsidiary is not the surviving entity, shall
expressly assume, by an agreement supplement hereto executed and
delivered to the Trustee, the performance of every covenant and
obligation of the Guarantor or such Subsidiary hereunder and under all
other Related Documents;
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(b) the Guarantor or such Subsidiary has delivered to the
Trustee an officer's certificate and an Opinion of Counsel each
stating that such consolidation or merger and such supplemental
agreement comply with this Section 30.1 and that all conditions
precedent herein provided for relating to such transaction have been
complied with; and
(c) Rating Agency Confirmation shall have been obtained with
respect to such assignment and succession.
30.2 Other Agreements. Enter into any agreement containing any
provision which would be violated or breached by the performance of its
obligations hereunder or under any instrument or document delivered or to be
delivered by it hereunder or in connection herewith.
30.3 Liens. Create or permit to exist any Lien with respect to any
Group II Vehicle leased hereunder now or hereafter existing or acquired, except
Liens in favor of the Lessor or the Trustee (for the benefit of Group II
Noteholders and/or any related Enhancement Provider) or the Secured Parties and
the following Liens to the extent such Liens in the aggregate would not
materially adversely affect the interests of the Lessor or the Trustee or the
Secured Parties under this Agreement or the Base Indenture or the likelihood of
payment of Rent hereunder or the Notes thereunder (herein collectively called
the "Permitted Liens"): (i) Liens for current taxes not delinquent or for taxes
being contested in good faith and by appropriate proceedings, and with respect
to which adequate reserves have been established, and are being maintained, in
accordance with GAAP, (ii) Liens, including judgment Liens, arising in the
ordinary course of business being contested in good faith and by appropriate
proceedings, and with respect to which adequate reserves have been established,
and are being maintained, in accordance with GAAP, (iii) Liens incurred in the
ordinary course of business in connection with worker's compensation,
unemployment insurance or other forms of governmental insurance or benefits,
and (iv) mechanics', materialmen's, landlords', warehousemen's and carriers'
Liens, and other Liens imposed by law, securing obligations arising in the
ordinary course of business that are being contested in good faith and by
appropriate proceedings and with respect to which adequate reserves have been
established, and are being maintained, in accordance with GAAP.
30.4 Use of Vehicles. Knowingly use or allow the Group II Vehicles to
be used in any manner that would (i) make any Group II Repurchase Vehicle
ineligible for repurchase, or for the guarantee by the related Manufacturer of
the resale price thereof, under an Eligible Repurchase Program or (ii) subject
any Group II Vehicles to confiscation.
30.5 Restrictions on Distributions. Following the Lease Commencement
Date, Budget will not, and will not permit any of its Subsidiaries to declare,
pay or make any Distribution (as defined in the Credit Agreement) such as is
consistent with and not in contravention of Section 8.2.6 of the Credit
Agreement.
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31. BANKRUPTCY PETITION AGAINST LESSOR. The Guarantor and each Lessee
hereby covenants and agrees that, prior to the date which is one year and one
day after the payment in full of all Group II Series of Notes, it will not
institute against, or join any other Person in instituting against, the Lessor
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United States or
any state of the United States. In the event that the Guarantor or any Lessee
takes action in violation of this Section 31, the Lessor agrees, for the
benefit of the Noteholders, that it shall file an answer with the bankruptcy
court or otherwise properly contest the filing of such a petition by the
Guarantor or any such Lessee against the Lessor or the commencement of such
action and raise the defense that the Guarantor or any such Lessee has agreed
in writing not to take such action and should be estopped and precluded
therefrom and such other defenses, if any, as its counsel advises that it may
assert. The provisions of this Section 31 shall survive the termination of this
Agreement.
32. SUBMISSION TO JURISDICTION. The Lessor and the Trustee may enforce
any claim arising out of this Agreement in any state or federal court having
subject matter jurisdiction, including, without limitation, any state or
federal court located in the State of New York. For the purpose of any action
or proceeding instituted with respect to any such claim, the Guarantor and each
Lessee hereby irrevocably submits to the jurisdiction of such courts. Each
Lessee hereby irrevocably designates the Guarantor to receive for and on behalf
of such Lessee service of process in New York. The Guarantor and each Lessee
further irrevocably consents to the service of process out of said courts by
mailing a copy thereof, by registered mail, postage prepaid, to the Guarantor
or such Lessee, as the case may be, and agrees that such service, to the
fullest extent permitted by law, (i) shall be deemed in every respect effective
service of process upon it in any such suit, action or proceeding and (ii)
shall be taken and held to be valid personal service upon and personal delivery
to it. Nothing herein contained shall affect the right of the Trustee and the
Lessor to serve process in any other manner permitted by law or preclude the
Lessor or the Trustee from bringing an action or proceeding in respect hereof
in any other country, state or place having jurisdiction over such action. The
Guarantor and each Lessee hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may have or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any such
court located in the State of New York and any claim that any such suit, action
or proceeding brought in such a court has been brought in an inconvenient
forum.
33. GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement. All obligations
of the Guarantor and each Lessee and all rights of the Lessor or the Trustee
expressed herein shall be in
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<PAGE> 50
addition to and not in limitation of those provided by applicable law or in any
other written instrument or agreement.
34. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY, OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED
TRANSACTION, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
35. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission or
similar writing) and shall be given to such party, addressed to it, at its
address or telephone number set forth on Schedule II, or at such other address
or telephone number as such party may hereafter specify for the purpose by
notice to the other party. In each case, a copy of all notices, requests and
other communications that are sent by any party hereunder shall be sent to the
Trustee and Budget, and a copy of all notices, requests and other
communications that are sent by any Lessee or the Guarantor to the Guarantor or
any other Lessee that pertain to this Agreement shall be sent to the Lessor and
the Trustee. Copies of notices, requests and other communications delivered to
the Trustee and/or the Lessor pursuant to the foregoing sentence shall be sent
to the following addresses:
TRUSTEE: Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency
Group/Structured Finance
Telephone: (212) 250-6501
Telecopier: (212) 250-6439
LESSOR: Team Fleet Financing Corporation
4225 Naperville Road
Lisle, Illinois 60535-3662
Attention: Mark Bobek
Telephone: (630) 955-7276
Telecopier: (630) 955-7799
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<PAGE> 51
Each such notice, request or communication shall be effective when received at
the address specified below. Copies of all notices must be sent by first class
mail promptly after transmission by facsimile.
36. LIABILITY. Each member of the Lessee Group shall be held jointly
and severally liable for all of the obligations of each other member of the
Lessee Group hereunder.
37. HEADINGS. Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
38. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together,
shall constitute one and the same Agreement.
39. EFFECTIVENESS. This Agreement shall become effective concurrently
with the issuance of the Series 2000-1 Note as the first Group II Series of
Notes.
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<PAGE> 52
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
it to be executed by their respective officers thereunto duly authorized as of
the day and year first above written.
LESSOR:
TEAM FLEET FINANCING CORPORATION
By: /s/ Mark Bobek
---------------------------------
Name: Mark Bobek
Title: President
LESSEES:
BUDGET RENT-A-CAR SYSTEMS, INC.
NYRAC, INC.
PREMIER CAR RENTAL LLC.
RYDER TRS, INC.
By: /s/ Sheri Young
---------------------------------
Name: Sheri Young
Title: Vice President
GUARANTOR:
BUDGET GROUP, INC.
By: /s/ Mark Bobek
---------------------------------
Name: Mark Bobek
Title: Vice President, Treasurer
RECEIVED THIS FEBRUARY 25, 2000:
BANKERS TRUST COMPANY, as
Trustee
By: /s/ Franco B. Talavera
----------------------------
Name: Franco B. Talavera
Title: Assistant Vice President
<PAGE> 53
ANNEX A
ANNEX
TO THE
MASTER MOTOR VEHICLE LEASE AGREEMENT GROUP II
Dated as of February 25, 2000
among
TEAM FLEET FINANCING CORPORATION,
as Lessor
BUDGET GROUP, INC.,
as Guarantor
and
BUDGET RENT A CAR SYSTEMS, INC.
and those Subsidiaries, Affiliates and Non-Affiliates of Budget Group, Inc.
named on Schedule 1 as Lessees
<PAGE> 54
1. Scope of Annex. This Annex A shall apply only to the acquisition,
leasing and servicing of the Lessor-Owned Vehicles by the Lessor pursuant to
the Agreement, as supplemented by this Lease Annex (collectively, the
"Operating Lease").
2. General Agreement. With respect to the Lessor-Owned Vehicles, the
Lessees and the Lessor intend that the Agreement, as supplemented by this Lease
Annex, is an operating lease and that the relationship between the Lessor and
the Lessees pursuant thereto and hereto shall always be only that of lessor and
lessees, and the Lessees hereby declare, acknowledge and agree that the Lessor
has title to and is the owner of the Lessor-Owned Vehicles. The Lessees shall
not acquire by virtue of the Lease any right, equity, title or interest in or
to any Lessor-Owned Vehicles, except the right to use the same under the terms
of the Operating Lease. The parties agree that the Operating Lease is a "true
lease" for all legal, accounting, tax and other purposes and agree to treat the
Operating Lease, as it applies to the Lessor-Owned Vehicles, as an operating
lease for all purposes, including tax, accounting and otherwise. The parties
will file all federal, state and local tax returns and reports in a manner
consistent with the preceding sentence.
3. Operating Lease Commitment. (1) The Lessor shall, from time to time
on or after the Lease Commencement Date and prior to the Lease Expiration Date,
subject to the terms and conditions of the Agreement, refinance Lessor-Owned
Vehicles that are Refinanced Vehicles and purchase Lessor-Owned Vehicles
identified in Group II Vehicle Orders placed by a Lessee and, simultaneously
therewith, the Lessor shall under the Operating Lease enter into operating
leases with the related Lessee with respect to such Group II Vehicles;
provided, that the aggregate Net Book Value of Lessor-Owned Vehicles leased
hereunder on any date shall not exceed (a) the Maximum Lease Commitment, less
(b) the Base Amount as of such date with respect to the Financing Lease.
4. Reserved.
5. Maximum Vehicle Lease Term. The maximum Vehicle lease term of the
Operating Lease as it relates to each Lessor-Owned Vehicle leased hereunder
shall be from the Vehicle Lease Commencement Date to the date that is 24 months
from the Vehicle Lease Commencement Date; provided that the maximum Vehicle
lease term for any Vehicle may be such longer period with respect to which
Rating Agency Confirmation has been obtained. On the occurrence of such date
for a Group II Vehicle not previously disposed of, the applicable Lessee shall,
(a) on behalf of the Lessor, promptly dispose of such Group II Vehicle in
accordance with the terms hereof and in accordance with any instructions of the
Lessor for such disposition, (b) in each case, provide that Disposition
Proceeds be paid directly to the Collection Account for the benefit of the
Group II Noteholders and (c) pay to the Trustee, in accordance with this
Operating Lease, any other amounts unpaid and owing from such Lessee under the
Lease in respect of such Vehicle.
Annex A
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<PAGE> 55
6. Lessees's Rights to Purchase Vehicles. The related Lessee will have
the option, exercisable during the Vehicle Term with respect to any Lessor-Owned
Vehicle leased by it hereunder, to purchase such Lessor-Owned Vehicle at a
purchase price equal to the greater of (a) the applicable Net Book Value or (b)
the Fair Market Value of the Group II Vehicle (such greater amount, the "Vehicle
Purchase Price," with respect to Group II Repurchase Vehicles, in which event
such Lessee will pay the Vehicle Purchase Price to the Lessor on or before the
Due Date next succeeding such purchase by the Lessee plus all accrued and unpaid
Monthly Base Rent and Monthly Variable Rent with respect to such Vehicle through
the date of such purchase. In addition, each Lessee will have the option,
exercisable with respect to any Manufacturer Receivable related to a
Lessor-Owned Vehicle which was leased by such Lessee under this Agreement, to
purchase such Manufacturer Receivable for a price equal to the amount due from
the Manufacturer under such Manufacturer Receivable, in which event the Lessee
will pay such amount to the Trustee on or before the Due Date next succeeding
such purchase by the Lessee. Upon receipt of such purchase price by the Trustee,
the Lessor, at the request of the Lessee, shall cause title to any such Group II
Vehicle or Manufacturer Receivable, as applicable, to be transferred to the
applicable Lessee, and the Lien of the Trustee on such Group II Vehicle shall be
released thereby.
7. Vehicle Disposition. The Lessees agree that, with respect to
Lessor-Owned Vehicles, each Lessee shall use its commercially reasonable efforts
to return each Group II Repurchase Vehicle to the related Manufacturer (a) not
prior to the end of the Minimum Term for such Vehicle, and (b) not later than
the end of the Maximum Term for such Vehicle; provided, however, if for any
reason, a Lessee fails to deliver such a Group II Repurchase Vehicle to the
applicable Manufacturer for repurchase by the Manufacturer in accordance with
the applicable Repurchase Program, during the time period between the expiration
of the Minimum Term and the expiration of the Maximum Term, such Lessee shall be
obligated to purchase such Group II Repurchase Vehicle as provided in Section 12
of the Agreement. Each Lessee shall, with respect to Lessor-Owned Vehicles
leased by it hereunder, pay the equivalent of the Rent for the Minimum Term for
Group II Repurchase Vehicles returned before the expiration of the Minimum Term,
regardless of actual usage, unless such a Group II Repurchase Vehicle is a
Casualty, which will be handled in accordance with Section 6 of the Agreement.
All Disposition Proceeds due from the disposition of Group II Repurchase
Vehicles pursuant to this Section shall be due and payable to the Lessor. Each
Lessee shall use commercially reasonable efforts to cause all proceeds from the
disposition of Group II Vehicles pursuant to this Section to be paid directly to
the Collection Account; provided that, to the extent that any Lessee receives
any such proceeds directly, it shall deliver such proceeds to the Trustee within
five days of receipt thereof for deposit into the Collection Account.
8. Lessor's Right to Cause Vehicles to be Sold. Notwithstanding
anything to the contrary contained in the Agreement, the Lessor shall have the
right, at any time after the date 45 days prior to the expiration of the Maximum
Term for any Group II Vehicle leased under this Annex A, to require that the
Lessee thereof, and the Lessee shall have the obligation to (a) deliver such
Group II Vehicle to
Annex A
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<PAGE> 56
the Manufacturer for repurchase (if such Group II Vehicle is a Group II
Repurchase Vehicle) or (b) exercise commercially reasonable efforts to arrange
for the sale of such Vehicle to a third party for a price greater than the Net
Book Value thereof (if such Group II Vehicle is a Group II Repurchase Vehicle).
If a sale of the Vehicle to a third party is arranged by the Lessee prior to
the expiration of such Maximum Term in accordance with the foregoing, then the
Lessee shall deliver the Group II Vehicle to the purchaser thereof, the Lien of
the Trustee on the Certificate of Title of such Group II Vehicle shall be
released, and the Lessee shall cause to be delivered to the Lessor the funds
paid for such Vehicle by the purchaser. If the Lessee is unable to arrange for
a sale of a Group II Repurchase Vehicle on or before the 30th day prior to the
expiration of such Maximum Term, then the Lessee shall cease attempting to
arrange for such a sale and shall return such Group II Repurchase Vehicle to
the applicable Manufacturer or purchase such Group II Vehicle as herein
provided. In no event may any Group II Repurchase Vehicle be sold pursuant to
this paragraph 8 (other than pursuant to a Repurchase Program) unless the funds
to be paid to the Lessor arising out of such sale exceed the Net Book Value of
such Group II Vehicle less reasonably predictable Excess Mileage Charges,
Excess Damage Charges and other similar charges imposed by the Manufacturer.
9. Calculation of Rent. Rent shall be due and payable on a monthly
basis as set forth in this paragraph 9:
(a) Certain Definitions. As used herein the following terms have
the following meanings:
"Monthly Base Rent" with respect to each Due Date and each
Lessor-Owned Vehicle leased under this Agreement during the
Related Month shall be the sum of all Depreciation Charges that
have accrued with respect to such Group II Vehicle during the
Related Month.
"Monthly Variable Rent" with respect to each Due Date and
each Lessor-Owned Vehicle leased under this Agreement on any day
during the Related Month shall equal the sum of (a) an amount
equal to the Net Book Value of such Group II Vehicle, with
respect to each Group II Repurchase Vehicle, during the Related
Month multiplied by the VFR for a one year interest period,
multiplied by a fraction, the numerator of which shall be 30 and
the denominator of which shall be 360 and (b) the product of (i)
an amount equal to (x) the sum of all Carrying Charges for each
Group II Series of Notes for the Related Month less (y) any
accrued earnings on Permitted Investments in the Group II
Collection Account which are accrued through the last Business
Day of the Related Month and maturing by the next Distribution
Date and (ii) a fraction, the numerator of which is the Net Book
Value of such Group II Vehicle, with respect to each Group II
Repurchase Vehicle, with respect to each Group II Non-Repurchase
Vehicle, and the denominator of which is the sum of the Net Book
Values of all
Annex A
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<PAGE> 57
Group II Vehicles. In the event the Vehicle Lease Commencement
Date occurs with respect to such Group II Vehicle on a day other
than the last day of a Related Month, the Monthly Variable Rent
for such Group II Vehicle shall be equal to the product of (a)
the Monthly Variable Rent otherwise payable with respect to such
Group II Vehicle, multiplied by (b) a fraction the numerator of
which is 12 and the denominator of which is 360, multiplied by
(c) the number of days in such Related Month from, after and
including such Vehicle Lease Commencement Date through and
including the last day of such Related Month. In the event the
Vehicle Lease Expiration Date occurs with respect to such Vehicle
on a day other than the last day of the Related Month, the
Monthly Variable Rent for such Vehicle shall be equal to the
product of (a) the Monthly Variable Rent otherwise payable with
respect to such Group II Vehicle for the Related Month,
multiplied by (b) a fraction the numerator of which is 12 and the
denominator of which is 360, multiplied by (c) the number of days
in such Related Month from, after and including the first day of
such Related Month through and including the Vehicle Lease
Expiration Date.
"Rent", with respect to Lessor-Owned Vehicles, means Monthly
Base Rent and Monthly Variable Rent.
"VFR" for any period with respect to any Group II Series of
Notes, is an interest rate equal to (i) the amount of interest
accrued during such period with respect to all Group II Series of
Notes divided by (ii) the average daily Invested Amounts of all
such Group II Series of Notes during such period.
(b) Payment of Rent. On each Due Date:
(i) Monthly Base Rent. Each Lessee shall pay to the Lessor
all Monthly Base Rent that has accrued during the Related Month
with respect to each Group II Vehicle leased hereunder by such
Lessee; and
(ii) Monthly Variable Rent. Each Lessee shall pay to the
Lessor all Monthly Variable Rent that has accrued during the
Related Month with respect to each Group II Vehicle leased
hereunder by such Lessee.
(iii) Prepayments. On any date, a Lessee may prepay to the
Lessor, in whole or in part, the Rent or other payments accrued
during the Related Month with respect to any Lessor-Owned
Vehicles leased by such Lessee.
10. Net Lease. THE OPERATING LEASE SHALL BE A NET LEASE, AND THE
LESSEE'S OBLIGATION TO PAY ALL RENT AND OTHER SUMS HEREUNDER SHALL BE
Annex A
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<PAGE> 58
ABSOLUTE AND UNCONDITIONAL, AND SHALL NOT BE SUBJECT TO ANY ABATEMENT OR
REDUCTION FOR ANY REASON WHATSOEVER. The obligations and liabilities of the
Lessees hereunder shall in no way be released, discharged or otherwise affected
(except as may be expressly provided herein including, without limitation, the
right of each Lessee to reject Group II Vehicles pursuant to Section 2.2 of the
Agreement) for any reason, including without limitation: (i) any defect in the
condition, merchantability, quality or fitness for use of the Group II Vehicles
or any part thereof; (ii) any damage to, removal, abandonment, salvage, loss,
scrapping or destruction of or any requisition or taking of the Group II
Vehicles or any part thereof; (iii) any restriction, prevention or curtailment
of or interference with any use of the Group II Vehicles or any part thereof;
(iv) any defect in or any Lien on title to the Group II Vehicles or any part
thereof; (v) any change, waiver, extension, indulgence or other action or
omission in respect of any obligation or liability of the relevant Lessee or the
Lessor; (vi) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to the
relevant Lessee, the Lessor or any other Person, or any action taken with
respect to the Operating Lease by any trustee or receiver of any Person
mentioned above, or by any court; (vii) any claim that the relevant Lessee has
or might have against any Person, including without limitation the Lessor;
(viii) any failure on the part of the Lessor to perform or comply with any of
the terms hereof or of any other agreement; (ix) any invalidity or
unenforceability or disaffirmance of the Operating Lease or any provision hereof
or any of the other Related Documents or any provision of any thereof, in each
case whether against or by the relevant Lessee or otherwise; (x) any insurance
premiums payable by the relevant Lessee with respect to the Group II Vehicles;
or (xi) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether or not the relevant Lessee shall have notice or knowledge of
any of the foregoing and whether or not foreseen or foreseeable. The Operating
Lease shall be noncancelable by the Lessees and, except as expressly provided
herein, each Lessee, to the extent permitted by law, waives all rights now or
hereafter conferred by statute or otherwise to quit, terminate or surrender the
Operating Lease, or to any diminution or reduction of Rent payable by such
Lessee hereunder. All payments by each Lessee made hereunder shall be final
(except to the extent of adjustments provided for herein), absent manifest error
and, except as otherwise provided herein, no Lessee shall seek to recover any
such payment or any part thereof for any reason whatsoever, absent manifest
error. If for any reason whatsoever the Operating Lease shall be terminated in
whole or in part by operation of law or otherwise except as expressly provided
herein, each Lessee shall nonetheless pay an amount equal to each Rent payment
at the time and in the manner that such payment would have become due and
payable under the terms of the Operating Lease as if it had not been terminated
in whole or in part. All covenants and agreements of each Lessees herein shall
be performed at its cost, expense and risk unless expressly otherwise stated.
11. Liens. Except for Permitted Liens, each Lessee shall keep all Group
II Vehicles leased by it free of all Liens arising during the Term. Upon the
Vehicle Lease Termination Date for each Group II Vehicle leased hereunder
should any such Lien exist the Lessor may, in its discretion, remove such Lien
and any sum of money that may be paid by the Lessor in release or discharge
thereof,
Annex A
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<PAGE> 59
including attorneys' fees and costs, will be paid by the Lessee upon
demand by the Lessor. The Lessor may grant security interests in the Group II
Vehicles without consent of the relevant Lessee; provided, however, that if any
such Liens would interfere with the rights of such Lessee under this Agreement,
the Lessor must obtain the prior written consent of such Lessee. Each Lessee
acknowledges that the granting of Liens and the taking of other actions
pursuant to the Indenture and the Related Documents does not interfere with the
rights of such Lessee under this Agreement.
12. Non-Disturbance. So long as a Lessee satisfies its obligations
hereunder, its quiet enjoyment, possession and use of the Group II Vehicles
leased by it hereunder will not be disturbed during the Term subject, however,
to paragraph 8 of this Annex A to the Lease and except that the Lessor and the
Trustee each retains the right, but not the duty, to inspect the Group II
Vehicles without disturbing the ordinary conduct of the Lessees's business.
Upon the request of the Lessor or the Trustee, from time to time, each Lessee
will make reasonable efforts to confirm to the Lessor and the Trustee the
location, mileage and condition of each Group II Vehicle leased by it hereunder
and to make available for the Lessor's or the Trustee's inspection within a
reasonable time period, not to exceed 45 days, such Group II Vehicles at the
location where such Group II Vehicles are normally domiciled. Further, each
Lessee will, during normal business hours and with a notice of three Business
Days, make its records pertaining to the Group II Vehicles available to the
Lessor or the Trustee for inspection at the location where the Lessees's
records are normally domiciled.
13. Certain Risks of Loss Borne by Lessees. Upon delivery of a Group II
Vehicle to a Lessee, as between the Lessor and the Lessees, such Lessee assumes
and bears the risk of loss, damage, theft, taking, destruction, attachment,
seizure, confiscation or requisition and all other risks and liabilities with
respect to such Group II Vehicle, including personal injury or death and
property damage, arising with respect to such Group II Vehicle due to the
manufacture, purchase, acceptance, rejection, delivery, leasing, subleasing,
possession, use, inspection, registration, operation, condition, maintenance,
repair or storage of such Group II Vehicle, howsoever arising.
14. Title. This is an agreement to lease only, and title to the
Lessor-Owned Vehicles will at all times remain in the Lessor's name. The
Lessees will not have any rights or interest in such Group II Vehicles
whatsoever other than the rights of possession and use of such Group II
Vehicles as provided by this Agreement. In addition, each Lessee, by its
execution hereof, acknowledges and agrees that (i) the Lessor is the sole owner
and holder of all right, title and interest in and to the Repurchase Programs
as they relate to the Lessor-Owned Vehicles leased hereunder and (ii) the
Lessee has no right, title or interest in any Repurchase Program as it relates
to any Lessor-Owned Vehicle leased hereunder. To confirm the foregoing, each
Lessees, by its execution hereof, hereby assigns and transfers to the Lessor
any rights that such Lessee may have in respect of any Repurchase Programs as
they relate to the Lessor-Owned Vehicles leased by it hereunder.
* * *
Annex A
-6-
<PAGE> 60
ANNEX B
ANNEX
TO THE
AMENDED AND RESTATED MASTER MOTOR VEHICLE LEASE AGREEMENT
GROUP II
Dated as of February 25, 2000
among
TEAM FLEET FINANCING CORPORATION,
as Lessor
BUDGET GROUP, INC.,
as Guarantor
and
BUDGET RENT A CAR SYSTEMS, INC.
and those Subsidiaries, Affiliates and Non-Affiliates of Budget Group, Inc.
named on Schedule 1 as Lessees
<PAGE> 61
1. Scope of Annex. This Annex B shall apply only to the acquisition or
financing, leasing and servicing of the Financed Vehicles by the Lessor
pursuant to the Agreement, as supplemented by this Lease Annex (collectively,
the "Financing Lease").
2. General Agreement. With respect to the Financed Vehicles, the
Lessees and the Lessor each intend that the Agreement, as supplemented by this
Lease Annex, constitute a financing arrangement and that the relationship
between the Lessor and the Lessees pursuant thereto and hereto shall always be
only that of lender and borrower, and the Lessor hereby declares, acknowledges
and agrees that the ownership of each Financed Vehicle leased hereunder rests
solely with the Lessee thereof subject to the security interest granted
hereunder to the Lessor.
3. Financing Lease Commitment. Subject to the terms and conditions of
the Financing Lease, upon execution and delivery of the Financing Lease, the
Lessor shall (i) on or after the Lease Commencement Date and prior to the Lease
Expiration Date purchase, finance or refinance Financed Vehicles in the Initial
Fleet and other Refinanced Vehicles identified in Refinancing Schedules for a
purchase price equal to the aggregate Net Book Value thereof, and (ii) from
time to time on or after the Lease Commencement Date and prior to the Lease
Expiration Date purchase all other Financed Vehicles identified in Group II
Vehicle Orders placed by the Lessees for a purchase price equal to the
Capitalized Cost thereof, and in each case simultaneously therewith enter into
this Financing Lease with the Lessees with respect to the Financed Vehicles, as
the case may be; provided, that the aggregate outstanding Base Amount of the
Financing Lease shall not on any date exceed (a) the Maximum Lease Commitment,
less (b) the sum of (x) the sum of the Net Book Values of Lessor-Owned Vehicles
leased under the Operating Lease on such date, each such Net Book Value
calculated as of the first day contained within both the calendar month in
which such date of determination occurs and the Vehicle Term for the related
Lessor-Owned Vehicle, plus (y) accrued and unpaid Monthly Base Rent under the
Operating Lease as of such date.
4. Reserved.
5. Maximum Vehicle Lease Term. The maximum vehicle lease term of the
Financing Lease as it relates to each Financed Vehicle leased hereunder shall
be from the Vehicle Lease Commencement Date to the date that is 60 months from
the Vehicle Lease Commencement Date. On the occurrence of such date, each
Lessee shall pay to the Lessor, in accordance with this Financing Lease, any
amounts unpaid and owing under the Agreement and this Lease Annex in respect of
such Group II Vehicle.
6. Calculation of Rent and Monthly Supplemental Payment. Rent and the
Monthly Supplemental Payment shall be due and payable on a monthly basis as set
forth in this Paragraph 6:
(a) Certain Definitions. As used herein the following terms have
the following meanings:
Annex B
-1-
<PAGE> 62
"Monthly Base Rent" with respect to each Due Date and each
Financed Vehicle leased under this Agreement on any day during the
Related Month shall be the sum of all Depreciation Charges that have
accrued with respect to such Group II Vehicle during the Related
Month.
"Monthly Finance Rent" with respect to each Due Date and each
Financed Vehicle subject to this Agreement shall equal the sum of (a)
an amount equal to the Net Book Value of such Group II Vehicle, with
respect to each Group II Repurchase Vehicle, during the Related Month
multiplied by the VFR for a one year interest period, multiplied by a
fraction, the numerator of which shall be 30 and the denominator of
which shall be 360 and (b) the product of (i) an amount equal to (x)
the sum of all Carrying Charges for each Group II Series of Notes for
the Related Month less (y) any accrued earnings on Permitted
Investments in the Group II Collection Account which are accrued
through the last Business Day of the Related Month and maturing by the
next Distribution Date and (ii) a fraction, the numerator of which is
the Net Book Value of such Group II Vehicle, and the denominator of
which is the sum of the Net Book Values of all Group II Vehicles. In
the event the Vehicle Lease Commencement Date occurs with respect to
such Group II Vehicle on a day other than the last day of a Related
Month, the Monthly Finance Rent for such Group II Vehicle shall be
equal to the product of (a) the Monthly Finance Rent otherwise payable
with respect to such Group II Vehicle, multiplied by (b) a fraction
the numerator of which is 12 and the denominator of which is 360,
multiplied by (c) the number of days in such Related Month from, after
and including such Vehicle Lease Commencement Date through and
including the last day of such Related Month. In the event the Vehicle
Lease Expiration Date occurs with respect to such Group II Vehicle on
a day other than the last day of the Related Month, the Monthly
Finance Rent for such Group II Vehicle shall be equal to the product
of (a) the Monthly Finance Rent otherwise payable with respect to such
Group II Vehicle for the Related Month, multiplied by (b) a fraction
the numerator of which is 12 and the denominator of which is 360,
multiplied by (c) the number of days in such Related Month from, after
and including the first day of such Related Month through and
including the Vehicle Lease Expiration Date.
"Rent", with respect to Financed Vehicles, means Monthly Base
Rent, Monthly Finance Rent, Monthly Supplemental Rent and Monthly
Supplemental Payments.
"VFR" for any period with respect to any Group II Series of
Notes, is an interest rate equal to (i) the amount of interest accrued
during such period with respect to all Group II Series of Notes
divided by (ii) the average daily Invested Amounts of all such Group
II Series of Notes during such period.
Annex B
-2-
<PAGE> 63
"Monthly Supplemental Payment" with respect to each Due Date and
all Group II Vehicles that were leased under this Financing Lease on
any day during the Related Month shall be an amount equal to the sum
of (i) the aggregate Termination Values (each as of the date on which
such Financed Vehicle is no longer an Eligible Vehicle, becomes a
Casualty or is sold, as applicable) of all the Financed Vehicles
financed under this Finance Lease at any time during such Related
Month that, without double counting, while so financed are no longer
Eligible Repurchase Vehicles, have suffered a Casualty or are sold by
the Lessee (it being understood that the Lessee has agreed to sell
Financed Vehicles only in a manner consistent with the provisions
hereof and of the Related Documents) to any Person (including the
Lessee) other than to a Manufacturer pursuant to such Manufacturer's
Repurchase Program or to a third party pursuant to an Auction
conducted through a Manufacturer's Repurchase Program, in each case,
during the Related Month, plus (ii) the aggregate Termination Values
(each as of the applicable Disposition Date) of all the Financed
Vehicles financed under this Finance Lease that while so financed were
returned by the Lessee to a Manufacturer or designated auction
pursuant to a Repurchase Program with respect to which (x) the
Repurchase Price or the Guaranteed Payment and Disposition Proceeds
have been paid by such Manufacturer and/or the related auction dealers
during the Related Month, (y) a Manufacturer Event of Default has
occurred or (z) the 90th day after the Turnback Date with respect
thereto has occurred during the Related Month and the Repurchase Price
or Guaranteed Payment has not been received, plus (iii) the aggregate
face amount of all the Manufacturer Receivables financed under this
Finance Lease with respect to which (x) the Repurchase Price or the
Guaranteed Payment and Disposition Proceeds have been paid by such
Manufacturer and/or the related auction dealers during the Related
Month, (y) a Manufacturer Event of Default has occurred or (z) the
90th day after the Turnback Date with respect thereto has occurred
during the Related Month and the amount of such Manufacturer
Receivable has not been received, plus (iv) the aggregate amount of
all Auction Receivables financed under this Finance Lease with respect
to which (x) the amount thereof has been paid by the related Auction
Dealer or (y) the 10th day after the sale of the related Vehicle at
auction has occurred during the Related Month and the amount of the
related Auction Receivable has not been received, minus (v) any
amounts received by the Lessor or the Trustee, or deposited into the
Collection Account, during the Related Month representing (a)
Repurchase Prices and Guaranteed Payments for repurchases or
dispositions of Financed Vehicles or (b) the sales proceeds for sales
of Financed Vehicles financed at the time of such sale under this
Finance Lease to a third party other than to a Manufacturer. Solely
for determining the amounts payable hereunder with respect to a
Financed Vehicle that is a Group II Repurchase Vehicle that became a
Casualty as a result of such Group II Repurchase Vehicle being held
beyond the
Annex B
-3-
<PAGE> 64
Maximum Term applicable thereto, such Group II Vehicle will be deemed
to have become a Casualty upon the date the Maximum Term expires.
(b) Payment of Rent. On each Due Date:
(i) Monthly Base Rent. Each Lessee shall pay to the Lessor all
Monthly Base Rent that has accrued during the Related Month with
respect to each Group II Vehicle leased under the Finance Lease by
such Lessee during the Related Month;
(ii) Monthly Finance Rent. Each Lessee shall pay to the Lessor
all Monthly Finance Rent that has accrued during the Related Month
with respect to each Group II Vehicle leased under the Finance Lease
by such Lessee during the Related Month; and
(iii) Monthly Supplemental Payments. Each Lessee shall pay to the
Lessor the Monthly Supplemental Payments that have accrued during the
Related Month with respect to all Group II Vehicles that were leased
under the Finance Lease on any day during the Related Month; provided,
however, that in the event that the Monthly Supplemental Payment
accrued during a Related Month is a negative dollar amount, such
amount may be netted against other payments to be paid on such Due
Date pursuant to this Paragraph 6.
(c) On the expiration of the Term of the Group II Master Lease, any
remaining Base Amount, plus all other amounts payable by the Lessees under
the Financing Lease shall be immediately due and payable.
(d) On any date, a Lessee may prepay to the Lessor, in whole or in
part, the Rent or other payments accrued during the Related Month with
respect to any Financed Vehicles leased by such Lessee. A Lessee may from
time to time prepay the Base Amount of the Financing Lease with respect to
a Financed Vehicle leased by it hereunder, in whole or in part, on any
date, provided that such Lessee shall give the Lessor and the Trustee not
less than one Business Day's prior notice of any prepayment, specifying the
date and amount of such prepayment, and the Financed Vehicles to which such
prepayment relates.
7. Risk of Loss Borne by Lessees. Upon delivery of each Financed
Vehicle to the Lessee thereof, as between the Lessor and the Lessee thereof,
the Lessee assumes and bears the risk of loss, damage, theft, taking,
destruction, attachment, seizure, confiscation or requisition with respect to
such Group II Vehicle, however caused or occasioned, and all other risks and
liabilities, including personal injury or death and property damage, arising
with respect to such Group II Vehicle or the manufacture, purchase, acceptance,
rejection, ownership, delivery, leasing, subleasing, possession, use,
inspection,
Annex B
-4-
<PAGE> 65
registration, operation, condition, maintenance, repair, storage,
sale, return or other disposition of such Group II Vehicle, howsoever arising.
8. Mandatory Repurchase of Texas Vehicles and Hawaii Vehicles. Prior to
the Vehicle Lease Expiration Date with respect to each Texas Vehicle or Hawaii
Vehicle (other than a Vehicle Lease Expiration Date arising in connection with
the purchase of such Group II Vehicle pursuant to this Paragraph 8) and, prior
to the expiration of the Maximum Term applicable thereto, the Lessee thereof
shall purchase such Texas Vehicle or Hawaii Vehicle (including any such Group
II Vehicle which has become a Casualty) at a purchase price equal to the Net
Book Value of such Group II Vehicle calculated as of the date of purchase (or,
in the case of a Casualty, at a purchase price equal to the Monthly
Supplemental Payments accruing in respect of such Vehicle during the Related
Month in which such Group II Vehicle became a Casualty), which shall be payable
to the Trustee (together with all accrued and unpaid Rent and other payments
due and payable on such Due Date with respect to such Texas Vehicle or Hawaii
Vehicle through the date of such purchase) on or prior to the Due Date next
succeeding such purchase by the Lessee. The Lessor shall cause title to each
Texas Vehicle or Hawaii Vehicle to be transferred to the Lessee thereof, and
the Servicer shall cause the Trustee to cause its Lien to be removed from the
Certificate of Title for such Group II Vehicle, concurrently with or promptly
after such purchase price for such Texas Vehicle or Hawaii Vehicle, as
applicable, (and any such unpaid Rent and payments) is paid by the Lessee to
the Trustee. Notwithstanding anything to the contrary in this Agreement, no
Texas Vehicle or Hawaii Vehicle may be sold or otherwise disposed of (other
than pursuant to Section 17.3 of the Agreement), including by return to its
Manufacturer pursuant to a Repurchase Program, prior to its purchase by the
Lessee thereof pursuant to and in accordance with this Paragraph 8.
9. Lessee's Rights to Purchase Manufacturer Receivables and Auction
Receivables. In addition, each Lessee will have the option, exercisable with
respect to any Manufacturer Receivable or Auction Receivable related to a
Financed Vehicle which was leased by such Lessee under this Agreement, to
purchase such Manufacturer Receivable or Auction Receivable for a price equal
to the amount due from the Manufacturer or Auction Dealer under such
Manufacturer Receivable or Auction Receivable, as applicable, in which event
the Lessee will pay such amount to the Trustee on or before the Due Date next
succeeding such purchase by the Lessee. Upon receipt of such funds by the
Trustee, the Lessor, at the request of the Lessee, shall cause title to any
such Manufacturer Receivable or Auction Receivable, as applicable, to be
transferred to the Lessee, and the Lien of the Trustee in such Manufacturer
Receivable or Auction Receivable, as applicable, will automatically be released
concurrently with or promptly after the purchase price for such Manufacturer
Receivable or Auction Receivable, as applicable (and any unpaid Monthly Base
Rent, unpaid Monthly Variable Rent and other unpaid charges, payments and
amounts), is paid by the Lessee to the Trustee.
* * *
Annex B
-5-
<PAGE> 66
Schedule I
LESSEES AS OF SERIES 2000-1 CLOSING DATE
1. BUDGET RENT-A-CAR SYSTEMS, INC.
2. NYRAC, INC.
3. PREMIER CAR RENTAL LLC
4. RYDER TRS, INC.
<PAGE> 67
Schedule II
NOTICE ADDRESSES
BUDGET RENT-A-CAR SYSTEMS, INC.
Address: 4225 Naperville Road
Lisle, IL
Attention: Mark Bobek
Telephone: 630-955-7276
Telecopier: 630-955-7808
NYRAC, INC.
Address: 4225 Naperville Road
Lisle, IL
Attention: Mark Bobek
Telephone: 630-955-7276
Telecopier: 630-955-7808
PREMIER CAR RENTAL LLC.
Address: 4225 Naperville Road
Lisle, IL
Attention: Mark Bobek
Telephone: 630-955-7276
Telecopier: 630-955-7808
RYDER TRS, INC.
Address: 4225 Naperville Road
Lisle, IL
Attention: Mark Bobek
Telephone: 630-955-7276
<PAGE> 68
Telecopier: 630-955-7808
<PAGE> 69
Schedule 28.8
BUSINESS LOCATIONS
BUDGET RENT-A-CAR SYSTEMS, INC.
Address: 4225 Naperville Road
Lisle, IL
Attention: Mark Bobek
Telephone: 630-955-1900
Telecopier: 630-955-7808
NYRAC, INC.
Address: 4225 Naperville Road
Lisle, IL
Attention: Mark Bobek
Telephone: 630-955-1900
Telecopier: 630-955-7808
PREMIER CAR RENTAL LLC.
Address: 4225 Naperville Road
Lisle, IL
Attention: Mark Bobek
Telephone: 630-955-1900
Telecopier: 630-955-7808
RYDER TRS, INC.
Address: 4225 Naperville Road
Lisle, IL
Attention: Mark Bobek
Telephone: 630-955-1900
<PAGE> 70
Telecopier: 630-955-7808
<PAGE> 71
ATTACHMENT A-1
TO
MASTER MOTOR VEHICLE LEASE AGREEMENT
Group II
SCHEDULE OF INITIAL FLEET
Information on Refinanced Vehicles (including Initial Fleet)
and Eligible Receivables
Refinanced Vehicles (including Initial Fleet)
1 Vehicle Model
2 Vehicle Identification Number (last eight digits) (VIN)
3 Vehicle Lease Commencement Date
4 Capitalized Cost
5 Monthly Base Rent
6 Garaging State
7 Lienholder
8 Amount to pay off existing indebtedness
Eligible Receivables
1 identity of obligor
2 amount of receivable
3 date of origination of receivable
4 vehicle identification number (VIN) of vehicles to which
receivable relates (grouped by obligor)
<PAGE> 72
ATTACHMENT A-2
TO
MASTER MOTOR VEHICLE LEASE AGREEMENT
Group II
Group II VEHICLE ACQUISITION SCHEDULE
Vehicle Order
1 Vehicle Model
2 Vehicle Identification Number (last eight digits) (VIN)
3 Vehicle Lease Commencement Date
4 Capitalized Cost
5 Monthly Base Rent
6 Garaging State
<PAGE> 73
ATTACHMENT B
TO
MASTER MOTOR VEHICLE LEASE AGREEMENT
Group II
FORM OF POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Team Fleet Financing Corporation
does hereby make, constitute and appoint _________________________ its true and
lawful Attorney(s)-in-fact for it and in its name, stead and behalf, to execute
any and all documents pertaining to the titling of motor vehicles in the name
of Team Fleet Financing Corporation, the noting of the Lien of Bankers Trust
Company, as trustee, as the first lienholder on certificates of title, the
correction of any such certificate of title, the licensing and registration of
motor vehicles and the transfer of title to the Manufacturer and to __________.
This power is limited to the foregoing and specifically does not authorize the
creation of any Liens or encumbrances on any of said motor vehicles.
The powers and authority granted hereunder shall, unless sooner
terminated, revoked or extended, cease five years from the date of execution as
set forth below.
IN WITNESS WHEREOF, Team Fleet Financing Corporation has caused this
instrument to be executed on its behalf by its ____________________________
this _____ day of __________, 20__.
TEAM FLEET FINANCING CORPORATION
By:
-----------------------------
Name:
Title:
<PAGE> 74
State of------------------------------)
County of-----------------------------)
Subscribed and sworn before me, a notary public, in and for said
county and state, this __________ day of __________, 20___.
---------------------------------------
Notary Public
My Commission Expires:
-----------------
B-2
<PAGE> 75
ATTACHMENT C
TO
MASTER MOTOR VEHICLE LEASE AGREEMENT
Group II
FORM OF JOINDER IN LEASE
THIS JOINDER IN LEASE AGREEMENT (this "Joinder") is executed as of
__________ ___, 20___, by _______________, a _______________________________
("Joining Party"), and delivered to Team Fleet Financing Corporation, a
Delaware corporation ("TFFC"), as lessor pursuant to the Master Motor Vehicle
Lease Agreement-Group II, dated as of February 25, 2000 (as amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, the "Lease"), among TFFC, Budget Systems, Inc. and those direct
or indirect Subsidiaries and other Affiliates of Budget Group, Inc. ("Budget"),
a Delaware corporation formerly known as Team Rental Group, Inc., that are
listed on Schedule 1 to the Lease and those that become party to the Lease
pursuant to the provisions of Section 23 thereof and those additional parties
that are not direct or indirect Subsidiaries or other Affiliates of Budget that
become parties to the Lease pursuant to the provisions of Section 23 thereof
(individually, a "Lessee" and, collectively, the "Lessees"), and Budget, as
guarantor. Capitalized terms used herein but not defined herein shall have the
meanings provided for in the Lease.
R E C I T A L S:
WHEREAS, the Joining Party is a direct or indirect Subsidiary or other
Affiliate of Budget; and
WHEREAS, the Joining Party desires to become a "Lessee" under and
pursuant to the Lease.
NOW, THEREFORE, the Joining Party agrees as follows:
<PAGE> 76
A G R E E M E N T:
1. The Joining Party hereby represents and warrants to and in favor of
TFFC and the Trustee that (i) [the Joining Party is a direct or indirect
Subsidiary or Affiliate of Budget, (ii)] all of the conditions required to be
satisfied pursuant to Section 23 of the Lease in respect of the Joining Party
becoming a Lessee thereunder have been satisfied, and (iii) all of the
representations and warranties contained in Section 28 of the Lease with
respect to the Lessees are true and correct as applied to the Joining Party as
of the date hereof.
2. The Joining Party hereby agrees to assume all of the obligations of
a "Lessee" under the Lease and agrees to be bound by all of the terms,
covenants and conditions therein.
3. The Joining Party acknowledges its receipt of a copy of that
certain opinion letter issued by Mayer, Brown & Platt, dated February 25, 2000,
and addressing the issue of substantive consolidation as it may relate to the
Guarantor, each Lessee and the Lessor. The Joining Party hereby agrees to
maintain in place all policies and procedures, and take and continue to take
all action, described in the factual assumptions set forth in such opinion
letter and relating to the Lessees or such Joining Party.
4. By its execution and delivery of this Joinder, the Joining Party
hereby becomes a Lessee for all purposes under the Lease. By its execution and
delivery of this Joinder, TFFC acknowledges that the Joining Party is a Lessee
for all purposes under the Lease.
IN WITNESS WHEREOF, the Joining Party has caused this Joinder to be
duly executed as of the day and year first above written.
[Name of Joining Party]
By:
-----------------------------
Name:
Title:
Accepted and Acknowledged by:
TEAM FLEET FINANCING CORPORATION
By:
-----------------------------
Name:
Title:
C-2
<PAGE> 77
Consented to by:
BUDGET GROUP, INC.
By:
-----------------------------
Name:
Title:
C-3
<PAGE> 78
ATTACHMENT D
TO
MASTER MOTOR VEHICLE LEASE AGREEMENT
Group II
FORM OF BILL OF SALE
IN CONSIDERATION OF the payment of $_______________, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, [SELLER], a [state of incorporation] corporation (the "Seller"),
does hereby sell, assign, transfer, convey, grant, bargain, set over, release,
deliver and confirm unto Team Fleet Financing Corporation, a Delaware
corporation (the "Buyer"), its successors and assigns, forever, the entire
right, title and interest of the Seller in, to and under all the Group II
Vehicles listed and described in Schedule 1 attached hereto (the "Vehicles"),
the Seller's interest in Repurchase Programs with respect to the Vehicles, all
moneys due or to become due and all amounts received or receivable with respect
thereto and all proceeds thereof (collectively, the "Transferred Assets").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Amended and Restated Base Indenture
dated as of December 1, 1996, as supplemented or amended by that certain Series
Supplement dated February 25, 2000 among the Buyer, Budget and the Trustee,
among the Buyer, Budget Group, Inc. ("Budget"), a Delaware corporation, as
Servicer and Budget Interestholder, and Bankers Trust Company, a New York
Banking Corporation, as the Trustee (the "Trustee").
The Seller hereby constitutes and appoints the Buyer, its successors
and assigns, the true and lawful attorney of the Seller, with full power of
substitution, in the name of the Buyer or in the name of the Seller, but for
the benefit and at the expense of the Buyer, to collect, demand and receive any
and all Transferred Assets, to collect any accounts receivable included in the
Transferred Assets and to endorse in the name of the Seller any checks or
drafts received in payment thereof and to enforce by appropriate proceedings
any claim, right or title of any kind in or to the Transferred Assets. The
foregoing shall include, without limitation, the right to change the holder of
title on the certificates of title included within the Transferred Assets. The
Seller acknowledges that the foregoing powers are coupled with an interest and
shall be irrevocable by the Seller for any reason.
From and after the date hereof, upon request of the Buyer, the Seller,
at its own expense, shall do such further and other acts and execute such
further and other agreements, assignments, bills of sale, certificates
(including Certificates of Title), powers, instruments and other documents as
the Buyer may deem necessary, desirable or appropriate to vest in the Buyer or
further assure to the Buyer all right, title and interest of the Seller in, to
and under the Transferred Assets.
<PAGE> 79
IN WITNESS WHEREOF, the Seller has executed this Bill of Sale as of
_______________, 20___.
[SELLER]
By:
-----------------------------
Name:
Title:
<PAGE> 80
SCHEDULE 1
TO BILL OF SALE
VEHICLES
<TABLE>
<CAPTION>
VIN NET BOOK VALUE
--- --------------
<S> <C>
------------- --------------
$
Total: ==============
</TABLE>
<PAGE> 1
EXHIBIT 10.31
BUDGET GROUP, INC.
EXECUTIVE AGREEMENT
This Executive Agreement ("Agreement") is dated as of January 1, 2000,
and is entered into by and between [Cohen/Siegel] ("Executive") and Budget
Group, Inc. ("Budget" or "Company"). Executive and Budget hereby agree to the
following terms and conditions:
1. Purpose of Agreement. The purpose of this Agreement is to
provide Executive specified benefits in the event of Executive's termination
under certain circumstances. It is believed that the existence of these
potential benefits will benefit Budget by discouraging turnover among
executives with Agreements, as well as causing such executives to be more able
to respond to the possibility of a "Change in Control" (as defined in Section
9) without being influenced by the potential effect of a Change in Control on
their job security.
2. Other Rights and Obligations. The rights and obligations of
Executive with respect to Executive's employment by Budget shall be whatever
rights and obligations are negotiated between Budget and Executive from time to
time. The existence of this Agreement, which deals only with certain rights and
obligations subsequent to a termination, shall not be treated as raising any
inference with respect to what rights and obligations exist prior to a
termination, or, except as specifically addressed in this Agreement, what
rights and obligations may exist after termination. Further, Executive shall
not, at any time after termination, be obligated to seek other employment in
mitigation of the amounts payable or other benefits provided for under any
provision of this Agreement and the obtaining of any such other employment
shall in no event effect any reduction of Budget's obligation to make the
payments and to provide the benefits required to be made and provided under
this Agreement, except to the extent provided for in Paragraph 7(c)(4).
3. Benefits Payable Upon Qualifying Termination and Execution of
a Release Agreement.
(a) Subject to Section 3(b), if a Qualifying Termination (as defined
in Section 4 below) occurs, the benefits described in Sections 6 and 7,
shall become payable to Executive. In that event, and notwithstanding
Section 11, this Agreement shall remain in effect until Executive receives
the various benefits to which Executive has become entitled under the
terms of this Agreement. If Executive's employment terminates and such
termination is not a Qualifying Termination, then this Agreement shall be
of no further force or effect.
(b) Notwithstanding any other provision of this Agreement, unless
Executive executes a Release Agreement (acceptable to Budget and
substantially in the form set forth in Exhibit I) within 21 days after a
Qualifying Termination (and does not
1
<PAGE> 2
revoke the Release Agreement within 7 days after signing it), (1) no
benefits under Section 6 or Section 7(d), or (f) of this Agreement shall
be paid or provided under any circumstances, (2) the benefits described in
Section 7(c) and (e) shall only be paid or provided for 30 days after a
Qualifying Termination , and (3) this Agreement shall be of no further
force and effect. Notwithstanding anything in this Agreement to the
contrary, if Executive fails or refuses to comply with the obligations
provided for in Sections 2 and 3 of the Release Agreement, or is in
violation of the representations and warranties provided for in Sections
4, 5 and 6 of the Release Agreement, Budget's obligations as provided for
in this Agreement shall immediately cease and terminate.
4. Qualifying Termination. If, during the term of this Agreement,
Executive's employment terminates, such termination shall be considered a
Qualifying Termination if any of the following events occurs:
(a) If Executive voluntarily terminates employment, for Good
Reason, within one year after the event giving rise to Good Reason or
Executive's employment terminates due to death or disability during such
one-year period. For purposes of this Agreement, "Disability" shall be
defined in accordance with Budget's long term disability plan and "Good
Reason" shall mean the occurrence of one of the following events without
Executive's prior written consent:
(1) The assignment to Executive of any duties
inconsistent in any material respect with Executive's
position, authority, duties and responsibilities as they
existed in their most significant form immediately prior to
such assignment or any other action by Budget which results
in a material diminution in such position, authority, duties
and responsibilities as they existed in their most
significant form immediately prior to such action, excluding
for purposes of this paragraph (1), (x) an assignment of
substantially equivalent position, authority, duties and
responsibilities; or (y) an isolated, insubstantial and
inadvertent assignment or action which is remedied by Budget
promptly after receipt of notice thereof given by Executive;
(2) Any reduction in (i) Executive's base salary; (ii)
Executive's ability to participate in or to receive benefits
from (without any incremental cost to Executive) incentive
plans, employee benefit plans, expense reimbursement
policies, or other fringe benefits, excluding changes by
Budget with respect to any such benefits which apply to all
executives; or (iii) incentive payments made pursuant to any
incentive program (which shall be deemed to be reduced
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<PAGE> 3
if the annual incentive payments are less than the average
annual incentive paid to Executive during the term of this
Agreement); provided that, (x) an isolated, insubstantial and
inadvertent reduction in an element of Executive's total
compensation which is promptly remedied after notice by
Executive shall not be deemed a violation of this paragraph
(2), and (y) a reduction in one element of Executive's total
compensation shall not be deemed a violation of this
paragraph (2) if a counterbalancing increase in another
element of Executive's total compensation simultaneously
occurs;
(3) The transfer of Executive's job location from the
metropolitan Chicago area;
(4) A failure of Budget to comply with any of the
material provisions of the Employment Letter with Executive or
any subsequent or other employment arrangements with
Executive, which failure has not been cured within 30 days
after written notice from Executive to Budget.
(b) Executive is involuntarily terminated without "Cause"
during the term of this Agreement. For purposes of this Section, "Cause"
shall mean (1) an act or acts of dishonesty by Executive in connection with
Executive's employment; (2) any significant misconduct with or against
another employee, customer or other person, including conduct involving
moral turpitude, which causes or is likely to cause Budget embarrassment,
liability or damage; or (3) Executive's willful or gross negligent failure
to perform his assigned duties and/or to fulfill his responsibilities; or
(c) Executive terminates Executive's employment for any
reason whatsoever, including termination due to death or disability,
provided that the Termination Date occurs within one year after a Change in
Control occurs.
5. Notice of Termination. Any termination by Executive for Good
Reason, by Budget for Cause, or by Executive without any reason following a
Change in Control (other than termination due to Executive's death or
disability) shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 16. For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the
provision so indicated and (iii) if the date of termination ("Termination
Date") is other than the date of receipt of such notice, specifies the
Termination Date. The Termination Date shall be the date of receipt of the
Notice or such later date specified in the Notice, which shall not be later
than 90 days after the giving of such Notice. The failure by Executive or
Budget to set forth in the Notice
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<PAGE> 4
of Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of Executive or Budget hereunder or
preclude Executive or Budget from asserting such fact or circumstance in
enforcing Executive's or Budget's rights hereunder. If Executive shall disagree
with the Notice of Termination, he may submit the dispute to arbitration in the
manner set forth in paragraph 15 hereafter.
6. Severance Payment. Subject to Section 3(b), in the event of a
Qualifying Termination, Budget shall pay Executive an amount equal to 3 times
the sum of (1) Executive's highest annual base salary rate in effect since
January 1, 2000 plus (2) the greater of i) annual average incentive payments
and bonuses (including those that are performance based, discretionary or
otherwise, but excluding those paid under any long-term incentive and stock
option plans) paid to Executive during the three years preceding the
Termination Date (provided that, if this Agreement has not been effect for
three years, the incentive payments and bonuses shall be based on the incentive
payments and bonuses paid to Executive since January 1,2000); and ii) the
Executive's annual target bonus or incentive opportunity established for the
year in which the Executive's Termination Date occurs. The amounts due
hereunder ("Severance Payment") shall be paid in cash to Executive in a single
lump sum (less applicable payroll deductions) within 30 days of the Termination
Date, and shall be in lieu of any other severance payment that Executive might
otherwise be entitled to from Budget under the terms of any other severance pay
arrangement or employment agreement.
7. Other Benefits. Subject to Section 3(b), in the event of a
Qualifying Termination, Executive shall be entitled to:
(a) Receive Executive's base salary and a pro rata portion of
Executive's target bonus through the Termination Date, less applicable
payroll deductions.
(b) Receive any unused vacation and holiday pay through the
Termination Date, less applicable payroll deductions.
(c) (1) Except as provided by law (including any
nondiscrimination rules) or by the relevant insurance carrier (after
reasonable efforts by the Company to provide coverage), continue
Executive's participation (and, where applicable, participation of
Executive's eligible dependents) in the medical, dental, life and
disability insurance benefit programs of Budget which had been made
available to Executive before the Qualifying Termination. This ability
to participate shall continue for a period of 36 months after the
Termination Date ("Completion Date"); if Executive dies prior to the
Completion Date, Executive's dependents, where applicable, may
continue participation until the Completion Date. In order to so
participate, Executive (or dependents, where applicable) shall pay to
Budget (with grace periods analogous to COBRA) the employee portion of
the cost of such benefits (such portion to be
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<PAGE> 5
determined in the same manner as for any other executive participants).
Thereafter, Executive (or Executive's dependents, where applicable)
shall be entitled to elect COBRA coverage.
(2) If the law or the insurance carrier prevents Executive from
participating in a program described in this clause (c), Budget shall
make monthly cash payments to Executive (or Executive's dependents,
where applicable) equal to 102% of the entire monthly premium
(excluding the employee portion) applicable to such program until the
Completion Date. Executive (or Executive's dependents, where
applicable) shall be permitted to elect COBRA coverage for such
program (if allowed under the program).
(3) When coverage under each applicable plan expires, Executive
(or Executive's dependents, where applicable) shall retain the right
to purchase individual conversion policies with respect to any or all
of the benefits provided under said benefit plans to the maximum
extent permitted by law or by the group insurance policies providing
such benefits.
(4) Notwithstanding anything contained herein to the contrary,
the benefits provided for in this subparagraph (c), shall cease prior
to the Completion Date in the event Executive has available
substantially similar benefits at a comparable cost from a subsequent
employer.
(d) Receive contributions under the Budget Defined Contribution
Retirement Plan and Budget SavingsPlus (401(k)) Plan (the "Retirement
Plans") if required by the terms for the year in which the Qualifying
Termination occurs. In addition, to the extent any contributions to the
Retirement Plans are not made on behalf of Executive, but would have been
made had Executive remained employed until and including the Completion
Date and made the maximum Section 401(k) contributions under the Plan,
Budget shall pay directly to Executive cash in an amount and at the times
consistent with contributions made for other employees of Budget and in
accordance with the guidelines of the Retirement Plans. Other than the
foregoing, Executive is entitled to no other contribution on Executive's
behalf by Budget to any Budget pension or other retirement plan.
(e) Use of two (2) current model year luxury vehicles (the
"Vehicles") through the earlier of the Completion Date or Executive's
death; if Executive dies prior to the Completion Date, Executive's spouse,
if any, may continue to use one such Vehicle through the Completion Date.
During such period, Budget shall (1) provide Executive with collision
(with no deductible if the accident is not the fault of Executive and with
a $250 deductible if the accident is the fault of Executive) and
comprehensive automobile coverage during the time Executive has the
Vehicles, as well as primary automobile liability coverage in
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<PAGE> 6
the amount of $50,000 bodily injury per person, $100,000 bodily injury
per accident and $25,000 property damage per accident, and (2) pay for
reasonable maintenance costs incurred by Executive with respect to the
Vehicles, including but not limited to periodic oil changes.
(f) Receive professional outplacement services, which services
shall be provided by a vendor of Budget's choice.
In the event of Executive's death, any cash payments due hereunder shall be
made to the beneficiary or beneficiaries so designated by Executive in a
writing delivered to the Secretary of Budget. If no such beneficiary has been
so designated, or if no designated beneficiary is in existence at the date of
Executive's death, payment shall be made to Executive's surviving spouse, if
any, or to Executive's estate if Executive has no surviving spouse.
8. Gross Up Provision.
(a) If any payment or benefit received or to be received by
Executive in connection with a Change in Control of Budget or the
termination of Executive's employment (whether payable pursuant to the
terms of this Agreement, a stock option plan or any other plan or
arrangement with Budget or with any person whose actions result in a
Change in Control of Budget or with any person affiliated with Budget or
such person (together with the Severance Payment, the "total payments")
will be subject to the excise tax imposed by Section 4999 of the Code,
Budget will pay to Executive, within 30 days of any payments giving rise
to the excise tax, an additional amount (the "gross up payment") such that
the net amount retained by Executive, after deduction of any excise tax on
the total payments and any federal and state and local income and
employment tax and excise tax on the gross up payment provided for in this
section, will equal the total payments.
(b) For purposes of determining the amount of the gross-up
payment, Executive will be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year that
the payment is to be made, and state and local income taxes at the highest
marginal rate of taxation in the state and locality of Executive's
residence on the date of termination or the date that excise tax is
withheld by Budget, net of the maximum reduction in federal income taxes
that could be obtained by deducting such state and local taxes.
(c) For purposes of determining whether any of the total payments
would not be deductible by Budget and would be subject to the excise
tax, and the amount of such excise tax, (1) total payments will be treated
as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all parachute payments in excess of the base amount within the
meaning of Section 280G(b)(3) will be treated as subject to the excise tax
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<PAGE> 7
unless, in the opinion of tax counsel selected by Budget's independent
auditors prior to the Change in Control and acceptable to Executive, such
total payments (in whole or in part) are not parachute payments, or such
parachute payments in excess of the base amount (in whole or in part) are
otherwise not subject to the excise tax, and (2) the value of any non-cash
benefits or any deferred payment will be determined by Budget's
independent auditors in accordance with Sections 280B(d)(3) and (4) of the
Code.
(d) If the excise tax is subsequently determined to be less than
the amount originally taken into account hereunder, Executive will repay to
Budget, when such reduction in excise tax is finally determined, the
portion of the gross-up payment attributable to such reduction plus
interest on the repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. If the excise tax is determined to exceed the amount originally
taken into account hereunder (including by reason of any payment the
existence or amount of which cannot be determined at the time of the
gross-up payment), Budget will make an additional gross-up payment in
respect of such excess (plus any interest payable with respect to such
excess) when such excess is finally determined.
9. Change in Control. For the purpose of this Agreement, a
"Change in Control" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A as in effect
on the date hereof, under the Securities Exchange Act of 1934, as amended,
provided that, without limitation, such a Change in Control shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange of
Act 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 30% or more of either (1) the then outstanding shares of common
stock of Budget (the "Outstanding Budget Common Stock") or (2) the
combined voting power of then outstanding voting securities of Budget
entitled to vote generally in the election of directors (the "Outstanding
Budget Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (1) any acquisition
by the Budget Group, (2) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Budget Group or (3) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or consolidation,
the conditions described in paragraphs (1) and (2) of subsection (c) of
this Section 9 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board
of Budget (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
who becomes a director subsequent to the date hereof whose election, or
nomination for election by Budget's
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<PAGE> 8
shareholders, was approved by a vote of at least a majority of the
directors of the Incumbent Board (including Board members previously
elected pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; but excluding, for this
purpose, any such individual whose initial assumption of office occurs as
a result of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consent by
or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of Budget of a reorganization,
merger or consolidation (a "transaction"), unless, following such
transaction in each case, (1) more than 80% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
transaction and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Budget Common Stock and
Outstanding Budget Voting Securities immediately prior to such transaction
and (2) no Person (excluding the Budget Group, any employee benefit plan
(or related trust) of Budget Group and any Person beneficially owning,
immediately prior to such transaction, directly or indirectly, 20% or more
of the Outstanding Budget Common Stock or Outstanding Budget Voting
Securities, as the case may be) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding shares of common stock
of the corporation resulting from such transaction or the combining voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors; or
(d) Approval by the shareholders of Budget of (1) a complete
liquidation or dissolution of Budget or (2) the sale or other
disposition of all or substantially all of the assets of Budget, unless
such assets are sold to a corporation and following such sale or other
disposition, the conditions described in paragraphs (1) and (2) of
subsection (c) of this Section 9 are satisfied.
10. Waiver of Invalidity; No Offset.
(a) Inasmuch as the injury caused to Executive in the event
Executive's employment is terminated is difficult or incapable of
accurate estimation at the date of this Agreement, the amounts provided to
be paid hereunder are intended to be severance compensation and not a
penalty, and therefore constitute a good faith forecast of the harm which
might be expected to be caused to Executive. Accordingly, Budget waives
any right to assert against Executive the invalidity of any payment
hereunder by reason of Executive's failure to seek other employment or
otherwise, and to reduce the amount of any payment hereunder by
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<PAGE> 9
reason of any compensation earned by Executive as the result of
employment by another employer after the Termination Date or otherwise.
(b) Budget's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which Budget may have against Executive or others.
11. Term of Agreement. This Agreement shall be effective from the
date hereof through September 30, 2002 and may not be amended or terminated
during such period except pursuant to an instrument in writing executed by all
of the parties hereto. The Board of Directors of Budget may, in its sole
discretion and for any reason, provide written notice of termination (or
amendment), effective as of the then applicable expiration date, to Executive
no later than six (6) months before the expiration date of this Agreement. If
written notice is not so provided, this Agreement shall be automatically
extended for an additional twelve months past the applicable expiration date.
This Agreement shall continue to be automatically extended for an additional
twelve months at the end of such twelve month period and each subsequent twelve
month period unless notice is given in the manner described in this Section.
Notwithstanding the preceding sentences of this Agreement, this Agreement shall
automatically be extended past an otherwise applicable expiration date if a
Change in Control, or an event giving rise to Good Reason, has occurred within
twelve (12) months prior to such expiration date. The extension referred to in
the preceding sentence shall be for one year after the Change in Control, or an
event giving rise to Good Reason. For purposes hereof, the "expiration date"
shall be the last effective date of this Agreement, after having given effect
to all of the extension provisions of this Section.
12. Successors. The rights and obligations of Budget under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of Budget.
13. Governing Law. Except to the extent that federal law is
applicable, this Agreement is made and entered into in the State of Florida,
and the substantive laws of Florida, without regard to conflict of law
provisions, shall govern its validity and interpretation in the performance by
the parties hereto of their respective duties and obligations hereunder.
14. Entire Agreement. This Agreement (and the Release Agreement)
constitute the entire agreement between the parties respecting the benefits due
Executive (and the obligations of Executive) in the event of a Qualifying
Termination, and there are no representations, warranties or commitments, other
than those set forth herein, which relate to such benefits. This is an
integrated agreement. No provision of this Agreement may be amended or waived
except by written agreement signed by the parties.
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15. Arbitration. Any and all controversies, claims or disputes
arising out of or in any way relating to this Agreement shall be resolved by
final and binding arbitration in Chicago, Illinois, before a single arbitrator
licensed to practice law and in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (the "AAA"). The arbitration
shall be commenced by filing a demand for arbitration, along with a statement
of claim setting forth the specifics of the claim sought to be arbitrated, with
the AAA within sixty (60) days after the occurrence of the facts giving rise to
any such controversy, claim or dispute. The arbitrator shall decide all issues
relating to arbitrability. If the arbitrator determines that (x) Budget has
breached this Agreement or (y) Budget was unjustified in failing to make the
payments required under this Agreement to Executive, Budget shall pay to
Executive, Executive's costs and expenses, including attorneys' fees,
associated with any such arbitration proceeding and, as liquidated damages and
not as a penalty, an additional amount equal to 10% of the amount involved in
the arbitration with respect to this Agreement.
16. Notices. Any notice or communications required or permitted to
be given to the parties hereto shall be delivered personally or be sent by
United States registered or certified mail, postage prepaid and return receipt
requested, and addressed or delivered to the last known address of Budget or
Executive, as appropriate, or to such other address as either party may direct
by notice to the other pursuant to this section.
17. Captions. The captions of this Agreement are inserted for
convenience and do not constitute a part hereof.
18. Severability.
(a) The parties agree that Section 3(b) of this Agreement and
Sections 2 through 6 of the Release Agreement are a material part of
this Agreement. The parties believe that all provisions of this Agreement
(including Section 3(b)) and the Release Agreement (if executed and not
revoked within 7 days after execution) are legal, binding and fully
enforceable.
(b) If Section 3(b) of this Agreement or Section 2, 3, 4, 5 or 6
of the Release Agreement (or any material part thereof) are determined
by any court of competent jurisdiction to be invalid by virtue of, or as a
result of, a judicial proceeding initiated by Executive, then this
Agreement and the Release Agreement shall be null and void.
(c) Subject to subsection (b) above, in case any one or more of
the provisions contained in this Agreement shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, but this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein and there shall be deemed substituted such other provision as will
most
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nearly accomplish the intent of the parties to the extent permitted by
the applicable law.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
IN WITNESS HEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first
written above.
BUDGET GROUP, INC.
By ___________________________
EXECUTIVE
______________________________
11
<PAGE> 1
Exhibit 10.32
October 22, 1999
VIA FACSIMILE - 713/666-6162
David N. Siegel
3750 Georgetown Street
Houston, TX 77005
Re: Employment Letter
Dear David:
We are pleased to extend an offer to you to join Budget Group, Inc. ("BGI"). We
believe your background and experience are an excellent match with our business
objectives, and we are pleased that you are considering joining the BGI
management team.
Following is an outline of the terms and conditions relating to your proposed
employment by BGI.
OFFICE AND TITLE
This offer of employment is for the position of President & Chief Operating
Officer of BGI reporting directly to Sanford Miller, BGI's Chairman and Chief
Executive Officer.
RESPONSIBILITIES AND DUTIES
You will have such duties and responsibilities as would be consistent with your
position as President & Chief Operating Officer of BGI.
LOCATION
Your employment with BGI will be based at our corporate office in Lisle,
Illinois.
START DATE
It is anticipated that your start date would be on or about November 15, 1999,
but in no event later than December 1, 1999.
<PAGE> 2
Mr. David Siegel
October 22, 1999
Page 2
SALARY
Your salary will be $500,000 per annum, to be paid bi-weekly and subject to
annual reviews which will be conducted in the first quarter of each calendar
year, beginning in 2001.
SIGN-ON BONUS
On commencement, you will be entitled to receive a signing bonus of $500,000,
which will be subject to normal withholding and all other applicable tax
deductions, as required by law. This signing bonus will be payable by BGI within
60 days of your start date.
SIGN-ON STOCK OPTIONS
You will be granted options for 500,000 shares of BGI stock. You will be granted
these options effective as of your start date and with a strike price equal to
the BGI stock price as of the close of business on the trading day immediately
prior to the day on which you accept this offer of employment by signing and
returning a copy of this Employment Letter. These options will be subject to a
four year vesting schedule (25% per year) and to such other terms and conditions
as are part of the BGI Incentive Stock Option Plan; provided, however, all such
options shall immediately vest in the event you are terminated by BGI, other
than for cause. In such an event, such options shall be exercisable by you for a
period of 60 days following your termination date.
In addition, BGI will offer to you stock options and/or phantom stock options
equal to not less that 400,000 additional shares of BGI stock at a strike price
equal to the BGI stock price as of the close of business on the trading day
immediately preceding the stock option grant, but in no event more than $7.00
per share. In this regard, it would be BGI's intention to issue 400,000 stock
options to you if BGI has the ability to issue such options. However, if BGI
does not have such ability, then BGI will provide you with phantom stock. In
either case, the stock options (actual and/or phantom) will vest over a 4-year
period at the rate of 25% per year; provided, however, all such options shall
immediately vest in the event you are terminated by BGI, other than for cause.
In such an event such options shall be exercisable by you for a period of 60
days following your termination date.
<PAGE> 3
Mr. David Siegel
October 22, 1999
Page 3
LOAN/STOCK PURCHASE
BGI will provide you with an interest free personal loan of $1 million, which is
to be used exclusively for the purchase of BGI stock, on the open market, within
not more than 30 days after receipt of the loan proceeds. In this regard, you
will, within 30 days of your purchase of BGI stock (excluding any trading days
during which the trading window would be closed because of your position as an
insider or otherwise), provide documentation to BGI evidencing such stock
purchase.
The $1 million loan shall be forgiven at the rate of 25% per year over the first
four years of your employment with BGI. Further, BGI will provide you with
additional cash compensation in an amount sufficient to pay, on an after tax
basis, the tax consequences of any imputed interest with respect to the
above-referenced loan.
In addition, BGI will provide you with additional cash compensation in an amount
sufficient to pay, on an after tax basis, the tax consequences of any debt
forgiveness with respect to the above-referenced loan, in the event the average
BGI stock price during the month of November of each of the next succeeding four
years is not less than the stated amount, as follows:
<TABLE>
<CAPTION>
MONTH OF AVERAGE STOCK PRICE
NOVEMBER OF NOT LESS THAN
-------- -------------------
<S> <C>
2000 $14.00
2001 $21.00
2002 $28.00
2003 $35.00
</TABLE>
SIGN-ON BONUS/LOAN REPAYMENT PROVISION
Should you leave BGI's employment voluntarily and without Good Reason (as
hereinafter defined) within 12 months of your start date, the amount received as
a sign-on bonus will be repayable to BGI in full.
Should you leave BGI's employment voluntarily and without Good Reason within 48
months of your start date, the then outstanding principal balance of the loan
amount (after taking account of any loan forgiveness as provided for above) will
be repayable to BGI.
<PAGE> 4
Mr. David Siegel
October 22, 1999
Page 4
Should you sell, within 48 months of your start date, any of the BGI stock
purchased with the loan proceeds, you shall repay to BGI an amount determined in
accordance with the following:
<TABLE>
<CAPTION>
AMOUNT OF STOCK SOLD REPAYMENT AMOUNT DUE TO BGI
-------------------- ---------------------------
<S> <C>
If you sell any stock during An amount equal to the number
the first 12 months of shares sold x original stock
purchase price
If you sell, during the An amount equal to the number
first 24 months, more than of shares sold in excess of 25%
25% of stock purchased x original stock purchase price
If you sell, during the An amount equal to the number
first 36 months, more than of shares sold in excess of 50%
50% of stock purchased x original stock purchase price
If you sell, during the An amount equal to the number
first 48 months, more than of shares sold in excess of 75%
75% of stock purchased x original stock purchase price
</TABLE>
In this regard, you agree that BGI may deduct from your final salary payment or
other amounts due to you from BGI, the full amount owing to BGI, with any
balance to be paid by you within 30 days of your leaving.
However, should BGI decide to terminate your employment, the sign-on bonus and
loan amount shall not be repayable as herein above provided unless your
employment is terminated for "cause." For purposes of this provision, "cause"
shall mean i) an act or acts of dishonesty by you in connection with your
employment; ii) any conduct with or against another employee, customer or other
person, including conduct involving moral turpitude, which causes or is likely
to cause BGI embarrassment, liability or damage, or iii) your willful or gross
negligent failure to perform you assigned duties and/or to fulfill your
responsibilities.
<PAGE> 5
Mr. David Siegel
October 22, 1999
Page 5
PROFESSIONAL INCENTIVE PLAN
You will be part of the Professional Incentive Plan, which is based upon the
achievement of agreed upon company and personal performance targets. This
program will make you eligible to receive up to 150% of your base salary as an
incentive award on an annual basis. You are guaranteed an annual incentive for
2000 and beyond, during your continued employment at BGI, (which guaranteed
annual incentive shall be payable in the first quarter of the following year),
equal to 75% of your base salary as of January 1 of the applicable fiscal year.
For example, your 2000 guaranteed annual incentive will be $375,000 (75% of
$500,000) payable in March 2001.
LONG TERM COMPENSATION PLAN
BGI will provide you with a long term compensation package, which could include,
but shall not be limited to, annual stock option grants, restricted stock, stock
appreciation rights, phantom stock, a long term incentive plan and/or other
forms of cash compensation having an economic value as of the date of grant, in
the aggregate, of $1 million annually.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP)
BGI will create and allow your participation in a SERP or some comparable
retirement program, which shall have an annual economic value of $250,000 with a
5 year vesting schedule.
EXECUTIVE AGREEMENT
BGI shall provide you with a single-trigger Executive Agreement providing for
the payment of base salary plus bonus for a three year period following a
Qualified Termination of your employment with BGI.
COMPANY CARS
You will receive two company cars pursuant to BGI's then current company car
policy.
WELFARE BENEFIT PLANS
Medical, dental, basic life, supplemental voluntary life, voluntary accident,
business travel accident insurance, long term disability and eligible dependent
coverage become effective on your first day of employment, as does your short
term disability coverage
<PAGE> 6
Mr. David Siegel
October 22, 1999
Page 6
and medical/dental reimbursement account if you choose to enroll. Additionally,
you may enroll in BGI's SavingsPlus (401K) Plan, as soon as you become eligible
for participation in that Plan in accordance with the then current eligibility
requirements. If you are currently a member of a qualified 401K Plan, you may be
able to participate in our rollover provision.
RELOCATION REIMBURSEMENT
BGI will reimburse you for all reasonable expenses incurred by you to relocate
you and your family to the Lisle, Illinois area. Such relocation expenses shall
include items such as exploratory trips for you and your wife; the packing,
loading and transportation of household belongings; travel expenses to your new
home for both you and your family; and temporary living expenses for you of not
more than 9 months in duration while you are in the relocation process. On the
other hand, you agree to repay BGI such relocation expenses, on a pro rata
basis, in the event you voluntarily terminate your employment with BGI other
than for Good Reason, or your employment is terminated by BGI for "cause" (as
herein above defined) at any time during the 24 month period immediately
following the conclusion of your relocation.
VACATION
You will be entitled to 15 vacation days beginning in calendar year 2000. In
addition, you will be entitled to such holidays, personal days and/or sick days
which are generally made available to BGI executives.
"GOOD REASON"
For purposes of this Employment Letter "Good Reason" shall mean the occurrence
of one of the following events, without your prior written consent:
- - the assignment to you of any duties inconsistent in any material
respect with your position, authority, duties and responsibilities as
the President and Chief Operating Officer of BGI;
- - any material diminution in your position, authority, duties or
responsibilities as President and Chief Operating Officer of BGI;
- - any reduction in your base salary or other cash compensation or in your
ability to participate in or to receive benefits from any welfare
benefit and/or compensation plans herein provided for, without a
counter-balancing increase in another element of your welfare benefits
and/or total compensation package; or
<PAGE> 7
Mr. David Siegel
October 22, 1999
Page 7
- - relocation from the Chicago metropolitan area, unless such relocation
is to the metropolitan urban area of either Denver, Colorado or
Orlando, Florida.
ACCEPTANCE
Enclosed are two copies of this letter. To signify your acceptance of this
offer, please sign and return one copy for our records.
BOARD APPROVAL
This offer is conditional upon submission to and approval by the Compensation
Committee of the BGI Board of Directors and the affirmative vote of the full
Board of Directors. In this regard, upon our receipt of your countersigned copy
of this offer letter, we will immediately convene a meeting of the Compensation
Committee and/or Board of Directors to seek their approval and/or ratification
of the terms and conditions of your employment package. It is expected that we
would be able to accomplish this within not more than two business days after
receipt of your acceptance.
On a personal note, we look forward to having you join the BGI organization. If
you have any questions regarding this offer letter or any of its contents,
please do not hesitate to contact me at 630-955-7477 or Bob Aprati at
630-955-7571.
Kind regards,
Yours sincerely,
Vicki R. Pyne
Senior Vice President, Human Resources
Received and Accepted:
- --------------------------------------
Date:
---------------------------------
cc: S. Miller, R. Aprati
<PAGE> 1
Exhibit 10.33
December 3, 1999
VIA OVERNIGHT MAIL
Neal Stuart Cohen
3275 Robinson's Bay Road
Deephaven, MN 55391
Re: Employment Letter
Dear Neal:
We are pleased to extend an offer to you to join Budget Group, Inc. ("BGI"). We
believe your background and experience are an excellent match with our business
objectives, and we are pleased that you are considering joining the BGI
management team.
Following is an outline of the terms and conditions relating to your proposed
employment by BGI.
OFFICE AND TITLE
This offer of employment is for the position of Executive Vice President, Chief
Financial Officer of BGI reporting directly to David Siegel, President and Chief
Operating Officer.
RESPONSIBILITIES AND DUTIES
You will have such duties and responsibilities as would be consistent with your
position as Executive Vice President, Chief Financial Officer of BGI.
LOCATION
Your employment with BGI will be based at our corporate office in Lisle,
Illinois.
START DATE
It is anticipated that your start date would be on or after January 1, 2000, but
not later than January 10, 2000.
<PAGE> 2
Neal Stuart Cohen
December 3, 1999
Page 2 of 7
SALARY
Your salary will be $350,000 per annum, to be paid bi-weekly and subject to
annual reviews which will be conducted in the first quarter of each calendar
year, beginning in 2001.
SIGN-ON BONUS
On commencement, you will be entitled to receive a sign-on bonus of $250,000,
which will be subject to normal withholding and all other applicable tax
deductions, as required by law. This sign-on bonus will be payable by BGI on or
about January 15, 2000.
SIGN-ON STOCK OPTIONS
You will be granted options for 250,000 shares of BGI stock pursuant to the 1994
Incentive Stock Option Plan, as amended. You will be granted these options
effective as of your start date and with a strike price equal to $6.875 per
share. These options will be subject to a four year vesting schedule (25% per
year) beginning with your start date (i.e., 62,500 options will vest in December
of 2000 and 62,500 options will vest in December of each subsequent year) and
such options will be subject to such other terms and conditions as are part of
the BGI Incentive Stock Option Plan; provided, however, all such options shall
immediately vest in the event (i) you are terminated by BGI, other than for
"Cause", (ii) you elect to terminate your employment for "Good Reason," or (iii)
you elect to terminate your employment within one year following a "Change in
Control." In such an event, such options shall be exercisable by you for a
period of 60 days following your termination date.
In addition, BGI will offer to you stock options and/or phantom stock options
equal to not less than 125,000 additional shares of BGI stock at the strike
price equal to the BGI stock price as of the close of business on the trading
day immediately preceding the stock option grant, but in no event more than $7
per share. In this regard, it would be BGI's intention to issue 125,000 stock
options to you if BGI has the ability to issue such options. However, if BGI
does not have such ability, then BGI will provide you with phantom stock. In
either case, the stock options (actual and/or phantom) will vest over a 4-year
period at the rate of 25% per year, beginning as of the grant date, which is
expected to be during the first quarter of 2000 (i.e, options will begin to vest
at the rate of 25% per year beginning in the first quarter of 2001, with an
additional 25% per year thereafter); provided, however, all such options shall
immediately vest in the event (i) you are terminated by BGI, other than for
"Cause", (ii) you elect to terminate your employment for "Good Reason," or (iii)
you elect to terminate your employment within one year following a "Change in
Control." In such an event, such options shall be exercisable by you for a
period of 60 days following your termination date.
<PAGE> 3
Neal Stuart Cohen
December 3, 1999
Page 3 of 7
EXECUTIVE STOCK PURCHASE PROGRAM
BGI will provide you with an interest free personal loan of $250,000 which is to
be used exclusively for the purchase of BGI stock, on the open market, within
not more than 30 days after receipt of the loan proceeds. In this regard, you
will, within 30 days of your purchase of BGI stock (excluding any trading days
during which the trading window would be closed because of your position as an
insider or otherwise), provide documentation to BGI evidencing such stock
purchase.
The $250,000 loan shall be forgiven at the rate of 25% per year over the first
four years of your employment with BGI. Further, BGI will provide you with
additional cash compensation in an amount sufficient to pay, on an after tax
basis, the tax consequences of any imputed interest with respect to the
above-referenced loan.
In addition, BGI will provide you with additional cash compensation in an amount
sufficient to pay, on an after tax basis, the tax consequences of any debt
forgiveness with respect to the above-referenced loan, in the event the average
BGI stock price during the month of November of each of the next succeeding four
years is not less than the stated amount, as follows:
<TABLE>
<CAPTION>
Month of Average Stock Price
November of not less than
-------- -------------------
<S> <C>
2000 $14.00
2001 $21.00
2002 $28.00
2003 $35.00
</TABLE>
SIGN-ON BONUS/LOAN REPAYMENT PROVISION
Should you leave BGI's employment voluntarily and without Good Reason (as
hereinafter defined) within 12 months of your start date, the amount received as
a sign-on bonus will be repayable to BGI in full.
Should you leave BGI's employment voluntarily and without Good Reason within 48
months of your start date, the then outstanding principal balance of the loan
amount (after taking account of any loan forgiveness as provided for above) will
be repayable to BGI.
Should you sell, within 48 months of your start date, any of the BGI stock
purchased with the loan proceeds, you shall repay to BGI an amount determined in
accordance with the following:
<PAGE> 4
Neal Stuart Cohen
December 3, 1999
Page 4 of 7
<TABLE>
<CAPTION>
Amount of Stock Sold Repayment Amount Due to BGI
-------------------- ---------------------------
<S> <C>
If you sell any stock during An amount equal to the number
The first 12 months of shares sold x original stock
purchase price
If you sell, during the An amount equal to the number
First 24 months, more than of share sold in excess of 25%
25% of stock purchased x original stock purchase price
If you sell, during the An amount equal to the number
first 36 months, more than of shares sold in excess of 50%
50% of stock purchased x original stock purchase price
If you sell, during the An amount equal to the number
first 48 months, more than of shares sold in excess of 75%
75% of stock purchased x original stock purchase price
</TABLE>
In this regard, you agree that BGI may deduct from your final salary payment or
other amounts due to you from BGI, the full amount owing to BGI, with any
balance to be paid by you within 30 days of your leaving.
However, should BGI decide to terminate your employment or should you elect to
terminate your employment for "Good Reason," the sign-on bonus and loan amount
shall not be repayable as herein above provided unless your employment is
terminated for "Cause".
PROFESSIONAL INCENTIVE PLAN
You will be part of the Professional Incentive Plan, which is based upon the
achievement of agreed upon company and personal performance targets. This
program will make you eligible to receive up to a 100% of your base salary as an
incentive award on an annual basis. You are guaranteed an annual incentive for
2000 of 100% of your base salary (which guaranteed annual incentive shall be
payable in the 1st Quarter of 2001).
In addition, you will be guaranteed an annual incentive for 2001 of 50% of your
base salary, if the long term compensation plan for 2001 does not pay out a
minimum of 50% of base salary. If the long term compensation plan does pay out
as stated above, your annual incentive award for 2001 will be based upon
achievement of company and personal performance targets as provided for in the
company's Professional Incentive Plan.
<PAGE> 5
Neal Stuart Cohen
December 3, 1999
Page 5 of 7
LONG TERM COMPENSATION PLAN
BGI will provide you with a long term compensation plan (which is expected to be
developed during the first quarter of 2000), which could include, but shall not
be limited to, annual stock option grants, restricted stock, stock appreciation
rights, phantom stock, a long term incentive plan and/or other forms of cash
compensation having an economic value as of the date of grant, in the aggregate,
of approximately $350,000 annually.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP)
BGI will create and allow your participation in a SERP or some comparable
retirement program, which shall have an annual economic value of $175,000 with a
5 year vesting schedule.
SEVERANCE
You shall be entitled to severance payments in the amounts and upon those
circumstances as set forth in the Executive Agreement, as attached.
COMPANY CARS
You will receive two company cars pursuant to BGI's then current company car
policy.
WELFARE BENEFIT PLANS
Medical, dental, basic life, supplemental voluntary life, voluntary accident,
business travel accident insurance, long term disability and eligible dependent
coverage become effective on your first day of employment, as does your short
term disability coverage and medical/dental reimbursement account if you chose
to enroll. Additionally, you may enroll in BGI's SavingsPlus (401K) Plan, as
soon as you become eligible for participation in that Plan in accordance with
the then current eligibility requirements. If you are currently a member of a
qualified 401K Plan, you may be able to participate in our rollover provision.
RELOCATION REIMBURSEMENT
BGI will reimburse you for all reasonable expenses incurred by you to relocate
you and your family to the Lisle, Illinois area. Such relocation expenses shall
include items such as closing costs associated with both the sale of your
existing residence and the purchase of your new residence, exploratory trips for
you and your wife; the packing, loading and transportation of household
belongings; travel expenses to your new home
<PAGE> 6
Neal Stuart Cohen
December 3, 1999
Page 6 of 7
for both you and your family; and temporary living expenses for you of not more
than 6 months in duration while you are in the relocation process. On the other
hand, you agree to repay BGI such relocation expenses, on a pro rata basis, in
the event you voluntarily terminate your employment with BGI other than for Good
Reason or due to a Change in Control, or your employment is terminated by BGI
for "cause" (as herein above defined) at any time during the 24 month period
immediately following the conclusion of your relocation.
It is understood and agreed that you will use your best efforts to sell your
current residence; provided, however, in the event you are unable to sell your
residence within a period of 90 days from the date you list the property for
sale, then BGI will purchase such residence at a price equal to its acquisition
cost plus the cost of any fixed improvements.
If and to the extent any relocation reimbursement is deemed to be "taxable
income", BGI will provide a tax gross up for any such income.
VACATION
You will be entitled to 15 vacation days beginning in the calendar year 2000. In
addition, you will be entitled to such holidays, personal days and /or sick
days, which are generally made available to BGI executives.
ENTIRE AGREEMENT
This Employment Letter, when countersigned and returned by you, shall be a valid
and binding agreement on both you and BGI. Further, this Employment Letter and
the attached Executive Agreement, shall constitute the entire agreement between
us with respect to your employment by BGI and it is understood and agreed that
there are no representations, warranties or commitments, other than those set
forth in this Employment Letter or in the Executive Agreement, and that no
provision of either document may be amended, modified or waived except by
written agreement executed by the parties.
ACCEPTANCE
To signify your acceptance of this offer, please sign and return a copy of this
Employment Letter for our records.
APPLICABLE DEFINITIONS
For purposes of this Employment Letter, the terms "Cause," "Change in Control"
and "Good Reason" shall have the meaings ascribed thereto in the Executive
Agreement.
<PAGE> 7
Neal Stuart Cohen
December 3, 1999
Page 7 of 7
INDEMNIFICATION
The composite amended and restated by-laws of BGI as currently in effect provide
for your indemnification as an officer of BGI; those provisions or similar
provisions shall remain in effect during the term of your employment. In
addition, during the term of your employment, BGI will maintain a policy of
director and officer insurance containing reasonable and customary terms for a
company of the size and nature of BGI. On a personal note, we look forward to
having you join the BGI organization. If you have any questions regarding this
offer letter or any of its contents, please do not hesitate to contact me at
630/955-7477.
Kind regards,
Yours sincerely,
Vicki R. Pyne
Senior Vice President, Human Resources
Received and accepted
- ----------------------------------------
Date:
-----------------------------------
cc: S. Miller, D. Siegel, R. Aprati
<PAGE> 1
EXHIBIT 10.34
THIRD AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, dated
as of December 22, 1999 (this "Amendment"), is made by and among BUDGET GROUP,
INC., a Delaware corporation (the "Borrower"), the Lenders (such capitalized
term and all other capitalized terms not otherwise defined herein shall have
the meanings provided for in Article I below) parties hereto and CREDIT SUISSE
FIRST BOSTON, as administrative agent (in such capacity, the "Administrative
Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Agents have heretofore
entered into that certain Amended and Restated Credit Agreement, dated as of
June 19, 1998 (as amended by the First Amendment to Amended and Restated Credit
Agreement dated as of September 11, 1998, the Second Amendment to Amended and
Restated Credit Agreement dated as of March 18, 1999, and as further amended,
supplemented, amended and restated or otherwise modified, the "Credit
Agreement");
WHEREAS, the Borrower desires the ability to incur extraordinary and
non-recurring charges and expenses in an amount not to exceed $125,000,000 in
the aggregate and not have such charges and expenses comprise a deduction in
determining EBITDA and Net Worth;
WHEREAS, the Borrower desires to make Capital Expenditures in Fiscal
Year 1999 in an aggregate amount of up to $110,000,000;
WHEREAS, the Borrower desires (i) to make loans and advances to its
executive officers and directors in an aggregate amount not exceeding
$20,000,000 at any time outstanding in order to enable such executive officers
and directors to purchase common stock of the Borrower and (ii) the ability to
repurchase under certain circumstances up to $5,000,000 of common stock held by
executive officers and directors;
WHEREAS, the Borrower desires the ability to pay and make
Distributions to those Persons that are entitled to receive Contingent
Additional Consideration (as defined in Section 3.4 of the Ryder Merger
Agreement) or the Total Warrant Value (as defined in Section 3.5 of the Ryder
Merger Agreement) in an aggregate amount not to exceed the sum of (i)
$15,000,000 plus (ii) the amount of certain Net Disposition Proceeds resulting
from the sale of assets comprising a Non-Core Business;
<PAGE> 2
WHEREAS, the Borrower desires to shorten the period of notice required
with respect to issuances of Enhancement Letters of Credit that replace then
existing Enhancement Letters of Credit;
WHEREAS, the Borrower has requested that the Lenders amend certain
provisions of the Credit Agreement, including provisions relating to the
transactions and actions described in the preceding five paragraphs; and
WHEREAS, the Required Lenders are willing, on and subject to the terms
and conditions set forth below, to amend the Credit Agreement as provided below
(the Credit Agreement, as amended pursuant to the terms of this Amendment,
being referred to as the "Amended Credit Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Borrower and the Required Lenders hereby agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Definitions. The following terms (whether or not
underscored) when used in this Amendment shall have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Administrative Agent" is defined in the preamble.
"Amended Credit Agreement" is defined in the eighth recital.
"Amendment" is defined in the preamble.
"Borrower" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
SECTION 1.2 Other Definitions. Terms for which meanings are provided
in the Amended Credit Agreement are, unless otherwise defined herein or the
context otherwise requires, used in this Amendment with such meanings.
-2-
<PAGE> 3
ARTICLE II
AMENDMENTS TO CREDIT AGREEMENT
Subject to the satisfaction of the conditions set forth in Article
III, effective as of the date hereof, the Credit Agreement is hereby amended in
accordance with this Article II; except expressly as so amended by this
Amendment, the Credit Agreement shall continue in full force and effect in
accordance with its terms.
SECTION 2.1. Amendment to Section 1.1 of the Credit Agreement.
Section 1.1 of the Credit Agreement ("Defined Terms") is hereby amended as
follows:
(a) by inserting in such Section the following definitions in the
appropriate alphabetical order:
"Permitted 1999/2000 Restructuring Expenses" means
extraordinary and non-recurring expenses or charges occurring or
taken in the fourth Fiscal Quarter of the 1999 Fiscal Year or the
first Fiscal Quarter of 2000 Fiscal Year in an aggregate amount
not exceeding $125,000,000 resulting from (i) the consolidation
of the headquarters of the Ryder and Premier businesses into
BRACC and related severance and other expenditures, (ii) the
establishment of reserves in connection with the Borrower's
European businesses, the write-off of certain software-related
assets, the granting of certain compensation awards to employees
and the closure of unprofitable rental locations and (iii) the
sale of Non-Core Businesses.
"Third Amendment" means the Third Amendment to
Amended and Restated Credit Agreement, dated as of December 22,
1999, among the Borrower, the Lenders parties thereto and the
Agents.
(b) by amending the definition of "Applicable Commitment Fee" set
forth in such Section by adding the following sentence at the end
thereof:
"Notwithstanding anything to the contrary in this definition, the
Applicable Commitment Fee for the period from the date of the
effectiveness of the Third Amendment to the date on which the
Administrative Agent receives the Compliance Certificate for the
Fiscal Quarter ending on or about December 31, 2000 shall not be
reduced to an amount less than 50.0 basis points."
(c) by amending the definition of "Applicable Margin" set
forth in such Section by adding the following sentence at the end
thereof:
"Notwithstanding anything to the contrary in this definition,
the Applicable Margin with respect to any Loan of any type
for the period from the date of the effectiveness of the
Third Amendment to the date on which the Administrative
-3-
<PAGE> 4
Agent receives the Compliance Certificate for the Fiscal
Quarter ending on or about December 31, 2000 shall not be
reduced to an amount less than (x) 250 basis points with
respect to each Loan made or maintained as a Eurocurrency
Loan or (y) 150 basis points with respect to each Loan made
or maintained as an ABR Loan."
(d) by deleting the definition of "Core Business" set forth
in such Section in its entirety and substituting therefor the
following:
"Core Business" means the business of (a) renting
worldwide for general use passenger automobiles and trucks
under the Budget and Ryder brand names and (b) franchising
the foregoing rental business to other Persons.
(e) by amending clause (b) of the definition of "EBITDA" set
forth in such Section by adding the following subclause at the end
thereof:
"plus (vi) Permitted 1999/2000 Restructuring Expenses"
(f) by amending clause (c) of the definition of "EBITDA" set
forth in such Section by adding the following phrase at the end
thereof:
"and extraordinary and non-recurring gains in an amount not
to exceed $125,000,000 in the aggregate since the date of the
Third Amendment";
(g) by amending clause (a) of the definition of Net Worth by
inserting immediately following the phrase "of such Person" the
parenthetical "(without giving effect to any Permitted 1999/2000
Restructuring Expenses)".
SECTION 2.2. Amendment to Section 2.2.2 of the Credit Agreement.
Section 2.2.2 of the Credit Agreement is hereby amended by inserting
immediately following the phrase "to the payment of Contingent Additional
Consideration (as defined in Section 3.4 of the Ryder Merger Agreement)" the
phrase "or the Total Warrant Value (as defined in Section 3.5 of the Ryder
Merger Agreement)".
SECTION 2.3. Amendment to Section 4.1 of the Credit Agreement.
Section 4.1 of the Credit Agreement is hereby amended (i) by inserting
immediately following the initial reference therein to "General Letters of
Credit" the phrase "and Enhancement Letters of Credit to be issued in
replacement of then existing Enhancement Letters of Credit" and (ii) by
inserting in the immediately succeeding line the word "other" immediately
preceding the reference to "Enhancement Letters of Credit".
SECTION 2.4. Amendments to Section 8.2.4 of the Credit Agreement.
Section 8.2.4 of the Credit Agreement is hereby amended as follows:
-4-
<PAGE> 5
(a) by inserting immediately following the phrase "Net Income
of the Borrower" in clause (a) of such Section the parenthetical "(without
giving effect to any Permitted 1999/2000 Restructuring Expenses)";
(b) by deleting the table in clause (b) of such Section in
its entirety and substituting therefor the following:
<TABLE>
<CAPTION>
FISCAL QUARTER RATIO
-------------- -----
<S> <C>
The third Fiscal Quarter of the 4.25:1.00
1998 Fiscal Year
The fourth Fiscal Quarter of 4.00:1.00
the 1998 Fiscal Year
The first Fiscal Quarter of the 6.90:1.00
1999 Fiscal Year
The second Fiscal Quarter of 6.65:1.00
the 1999 Fiscal Year
The third Fiscal Quarter of the 6.45:1.00
1999 Fiscal Year
The fourth Fiscal Quarter of
the 1999 Fiscal Year and
the first, second and third 4.25:1.00
Fiscal Quarters of the 2000
Fiscal Year
The fourth Fiscal Quarter of
the 2000 Fiscal Year and
the first, second and third 3.75:1.00
Fiscal Quarters of the 2001
Fiscal Year
The fourth Fiscal Quarter of
the 2001 Fiscal Year and
each Fiscal Quarter 3.00:1.00
thereafter
</TABLE>
(c) by deleting the table in clause (c) of such Section in
its entirety and substituting therefor the following:
-5-
<PAGE> 6
<TABLE>
<CAPTION>
FISCAL QUARTER RATIO
-------------- -----
<S> <C>
The third Fiscal Quarter of the 3.50:1.00
1998 Fiscal Year
The fourth Fiscal Quarter of the
1998 Fiscal Year and the 3.75:1.00
first and second Fiscal
Quarters of the 1999 Fiscal
Year
The third Fiscal Quarter of the 3.65:1.00
1999 Fiscal Year
The fourth Fiscal Quarter of the 3.75:1.00
1999 Fiscal Year
The first Fiscal Quarter of the 3.05:1.00
2000 Fiscal Year
The second Fiscal Quarter of 3.15:1.00
the 2000 Fiscal Year
The third Fiscal Quarter of the 3.25:1.00
2000 Fiscal Year
The fourth Fiscal Quarter of the
2000 Fiscal Year and the 3.50:1.00
first, second and third Fiscal
Quarters of the 2001 Fiscal
Year
The fourth Fiscal Quarter of the
2001 Fiscal Year and each 4.00:1.00
Fiscal Quarter thereafter
</TABLE>
SECTION 2.5. Amendment to Section 8.2.5 of the Credit Agreement.
Section 8.2.5 of the Credit Agreement is hereby amended by deleting clause (e)
thereof in its entirety and substituting therefor the following:
"(e) Investments in the ordinary course of business in the
form of loans and advances to executive officers and directors of the
Borrower or any of its Subsidiaries to
-6-
<PAGE> 7
finance the purchase of common stock of the Borrower, so long as the
aggregate amount of any such loan or advance does not exceed the
purchase price of such common stock so financed and the proceeds of
such loan or advance are actually used by such executive officers and
directors concurrently with the receipt thereof toward the purchase of
such common stock; provided that the aggregate principal amount of
such loans and advances at any time outstanding does not exceed
$20,000,000;"
SECTION 2.6. Amendments to Section 8.2.6 of the Credit Agreement.
Section 8.2.6 of the Credit Agreement is hereby amended as follows:
(a) by deleting subclause (ii) of the proviso to clause (a)
of such Section in its entirety and substituting therefor the
following:
"(ii) the Borrower may pay and make Distributions to
those Persons that are entitled to receive Contingent
Additional Consideration (as defined in Section 3.4 of the
Ryder Merger Agreement) or the Total Warrant Value (as
defined in Section 3.5 of the Ryder Merger Agreement) from
the Borrower to the extent the aggregate amount to be
expended in respect of such Distributions, when added to the
aggregate amount expended in respect of all other such
Distributions made pursuant to this clause (ii), does not
exceed the sum of (x) $15,000,000 plus (y) the amount of Net
Disposition Proceeds resulting from the sale of the assets of
a Non-Core Business (or of the Capital Stock of a Subsidiary
of the Borrower exclusively engaged in the conduct of a
Non-Core Business) to the extent such Net Disposition
Proceeds were not applied to the acquisition or construction
of property or capital assets to be used in the business of
the Borrower and its Subsidiaries, so long as
(A) such Distributions in respect of such
Contingent Additional Consideration are made in
accordance with the provisions of Section 3.4 of the
Ryder Merger Agreement,
(B) such Distributions in respect of such
Total Warrant Value do not exceed in the aggregate
$19,000,000 and are made in accordance with the
provisions of Section 3.5 of the Ryder Merger
Agreement,
(C) both before and after giving effect to
any such Distribution, no Default shall have
occurred and be continuing,
(D) the making of any such Distribution
does not result in the mandatory redemption of any
Indebtedness of the Borrower and its Subsidiaries or
in a requirement to make an offer to redeem any such
Indebtedness, and
-7-
<PAGE> 8
(E) in the case of any such Distribution,
the Borrower shall have delivered to the
Administrative Agent (1) financial statements
prepared on a pro forma basis to give effect to such
Distribution for the period of four consecutive
Fiscal Quarters ending with the Fiscal Quarter then
last ended for which financial statements and the
Compliance Certificate relating thereto have been
delivered to the Administrative Agent pursuant to
Section 8.1.1 (including Section 8.1.1 of the
Original Credit Agreement) and (2) a certificate of
the Borrower executed by an Authorized Officer of
the Borrower demonstrating that the financial
results reflected in such financial statements would
comply with the requirements of Section 8.2.4 for
the Fiscal Quarter in which such Distribution is to
be made";
(b) by adding the following subclause (iii) to the proviso to
clause (a) of such Section:
"(iii) the Borrower may purchase or redeem
for value any shares of its Capital Stock (together
with options or warrants in respect of any thereof)
held by executive officers or directors of the
Borrower and its Subsidiaries (or any of their
respective estates or beneficiaries under such
estates), in all cases upon the death, disability,
retirement or termination of employment of such
Persons, pursuant to a mandatory repurchase or
redemption provision under the terms of the stock
option plan under which such shares of Capital Stock
(and options or warrants in respect of any thereof)
were issued, so long as (A) both before and after
giving effect to any such purchase or redemption, no
Default shall have occurred and be continuing, and
(B) the aggregate consideration paid for such
purchases and redemptions does not exceed $5,000,000
over the term of this Agreement;"
SECTION 2.7. Amendment to Section 8.2.7 of the Credit Agreement.
Section 8.2.7 of the Credit Agreement is hereby amended by deleting the dollar
amount "$85,000,000" opposite Fiscal Year 1999 and substituting therefor
"$110,000,000".
ARTICLE III
CONDITIONS TO EFFECTIVENESS
This Amendment, and the amendments and modifications contained herein,
shall be and shall become effective as of the date hereof subject to the
satisfaction of each of the conditions set forth in this Article III to the
satisfaction of the Administrative Agent.
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<PAGE> 9
SECTION 3.1. Execution of Counterparts. The Administrative Agent
shall have received counterparts of this Amendment, duly executed and delivered
on behalf of the Borrower and each of the Required Lenders.
SECTION 3.2. Closing Date Certificate. The Administrative Agent
shall have received, with counterparts for each Lender, a certificate, dated
the date hereof, appropriately completed and duly executed and delivered by an
Authorized Officer of the Borrower in which certificate the Borrower shall
agree and acknowledge that the statements made therein shall be deemed to be
true and correct representations and warranties of the Borrower made as of such
date and, at the time such certificate is delivered, such statements shall in
fact be true and correct.
SECTION 3.3. Execution of Affirmation and Consent. The Administrative
Agent shall have received an affirmation and consent in form and substance
satisfactory to it, duly executed and delivered by each Guarantor and any other
Obligor that has granted a Lien pursuant to any Loan Document.
SECTION 3.4. Amendment Fee. The Administrative Agent shall have
received the amendment fees due and payable pursuant to Section 5.4.
SECTION 3.5. Fees and Expenses. The Administrative Agent shall have
received all fees and expenses due and payable pursuant to Section 5.5 (to the
extent then invoiced) and pursuant to the Credit Agreement (including all
previously invoiced fees and expenses).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties. In order to induce the
Required Lenders and the Administrative Agent to enter into this Amendment, the
Borrower hereby represents and warrants to the Administrative Agent, the Issuer
and each Lender, as of the date hereof, as follows:
(a) the representations and warranties set forth in Article
VII of the Credit Agreement (excluding, however, those contained in
Section 7.7 of the Credit Agreement) and in each other Loan Document
are, in each case, true and correct (unless stated to relate solely to
an earlier date, in which case such representations and warranties are
true and correct as of such earlier date);
(b) except as disclosed by the Borrower to the Agents, the
Issuer and the Lenders pursuant to Section 7.7 of the Credit Agreement
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding is pending or, to
the best knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries which might materially
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<PAGE> 10
adversely affect the Borrower=s consolidated business,
operations, assets, revenues, properties or prospects or
which purports to affect the legality, validity or
enforceability of this Agreement, the Notes or any other Loan
Document; and
(ii) no development has occurred in any labor
controversy, litigation, arbitration or governmental
investigation or proceeding disclosed pursuant to Section 7.7
of the Credit Agreement which might materially adversely
affect the consolidated businesses, operations, assets,
revenues, properties or prospects of the Borrower and its
Subsidiaries;
(c) no Default has occurred and is continuing, and neither
the Borrower nor any of its Subsidiaries nor any other Obligor is in
material violation of any law or governmental regulation or court
order or decree; and
(d) this Amendment has been duly authorized, executed and
delivered by the Borrower and constitutes a legal, valid and binding
obligation of the Borrower, enforceable against it in accordance with
its terms, except to the extent the enforceability hereof may be
limited by (i) the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to or affecting the rights and remedies of creditors generally and
(ii) the effect of general principles of equity, whether enforcement
is considered in a proceeding in equity or at law.
SECTION 4.2. Full Disclosure. Except as corrected by written
information delivered to the Agents and the Lenders reasonably prior to the
date on which this representation is made, all factual information heretofore
or contemporaneously furnished by the Borrower in writing to any Agent, the
Issuer or any Lender for purposes of or in connection with this Amendment or
any transaction contemplated hereby is true and accurate in every material
respect and such information is not incomplete by omitting to state any
material fact necessary to make such information not misleading. All
projections delivered to any Agent or any Lender by or on behalf of the
Borrower have been prepared in good faith by the Borrower and represent the
best estimates of the Borrower, as of the date hereof, of the reasonably
expected future performance of the businesses reflected in such projections.
SECTION 4.3. Compliance with Credit Agreement. As of the execution
and delivery of this Amendment, each Obligor is in compliance with all the
terms and conditions of the Credit Agreement and the other Loan Documents to be
observed or performed by it thereunder, and no Default has occurred and is
continuing.
ARTICLE V
MISCELLANEOUS
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<PAGE> 11
SECTION 5.1. Full Force and Effect; Limited Amendment. Except as
expressly amended hereby, all of the representations, warranties, terms,
covenants, conditions and other provisions of the Credit Agreement and the
other Loan Documents shall remain unamended and unwaived and shall continue to
be, and shall remain, in full force and effect in accordance with their
respective terms. The amendments set forth herein shall be limited precisely as
provided for herein to the provisions expressly amended herein and shall not be
deemed to be an amendment to, consent to or modification of any other term or
provision of the Credit Agreement, any other Loan Document referred to therein
or herein or of any transaction or further or future action on the part of the
Borrower or any other Obligor which would require the consent of any of the
Lenders under the Credit Agreement or any of the other Loan Documents.
SECTION 5.2. Loan Document Pursuant to Credit Agreement. This
Amendment is a Loan Document executed pursuant to the Credit Agreement and
shall be construed, administered and applied in accordance with all of the
terms and provisions of the Credit Agreement (and, following the date hereof,
the Amended Credit Agreement). Any breach of any representation or warranty or
covenant or agreement contained in this Amendment shall be deemed to be an
Event of Default for all purposes of the Credit Agreement and the other Loan
Documents.
SECTION 5.3. Further Assurances. The Borrower hereby agrees that it
will take any action that from time to time may be reasonably necessary to
effectuate the amendments contemplated herein.
SECTION 5.4. Amendment Fee. Upon satisfaction of the condition set
forth in Section 3.1, the Borrower shall pay, without setoff, deduction or
counterclaim, a non-refundable amendment fee for the account of each Lender
that has executed and delivered (including delivery by way of facsimile) a copy
of this Amendment to the attention of Mr. Kenneth Suh at Mayer, Brown & Platt,
1675 Broadway, New York, New York 10019 (19th floor), telecopy number
212-262-1910 at or prior to 2:00 p.m., New York time, on December 23, 1999, in
the amount of 1/4 of 1% of such Lender's Commitment. The aggregate amount of
such amendment fee shall be paid at or prior to noon, New York time, on
December 24, 1999 to the Administrative Agent for the pro rata account of the
Lenders entitled to receive such amendment fee.
SECTION 5.5. Fees and Expenses. The Borrower shall pay all reasonable
out-of-pocket expenses incurred by the Administrative Agent in connection with
the preparation, negotiation, execution and delivery of this Amendment and the
documents and transactions contemplated hereby, including the reasonable fees
and disbursements of Mayer, Brown, and Platt, as counsel for the Administrative
Agent.
SECTION 5.6. Headings. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or
interpretation of this Amendment or any provisions hereof.
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<PAGE> 12
SECTION 5.7. Execution in Counterparts. This Amendment may be executed
by the parties hereto in counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 5.8. Cross-References. References in this Amendment to any
Article or Section are, unless otherwise specified or otherwise required by the
context, to such Article or Section of this Amendment.
SECTION 5.9. Successors and Assigns. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
SECTION 5.10. GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers or general partners (or their
respective officers) thereunto duly authorized as of the day and year first
above written.
BUDGET GROUP, INC.
By: /S/ Mark Bobek
--------------------------------------
Name: Mark Bobek
--------------------------------
Title: Vice President and Treasurer
--------------------------------
CREDIT SUISSE FIRST BOSTON, as a Lender and the
Administrative Agent
By: /s/ Robert Hetu
--------------------------------------
Name: Robert Hetu
------------------------------
Title: Vice President
------------------------------
By: /s/ S. Glodowski
--------------------------------------
Name: S. Glodowski
------------------------------
Title: Managing Director
------------------------------
BANK OF AMERICA, N.A.
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
BANK OF HAWAII
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
BANK OF MONTREAL
S-13
<PAGE> 14
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
THE BANK OF NEW YORK
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
THE BANK OF NOVA SCOTIA
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
BANK POLSKA KASA OPIEKI S.A. - PEKAO
S.A. GROUP, NEW YORK BRANCH
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
BANK UNITED
By:
--------------------------------------
S-14
<PAGE> 15
Name:
------------------------------
Title:
------------------------------
PARIBAS
By
--------------------------------------
Name:
------------------------------
Title:
------------------------------
By
--------------------------------------
Name:
------------------------------
Title:
------------------------------
BANQUE WORMS CAPITAL CORPORATION
By
--------------------------------------
Name:
------------------------------
Title:
------------------------------
BHF (USA) CAPITAL CORPORATION
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
S-15
<PAGE> 16
CIBC INC.
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
COMMERZBANK AKTIENGESELLSCHAFT,
CHICAGO BRANCH
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
CREDIT AGRICOLE INDOSUEZ
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
S-16
<PAGE> 17
CREDIT LYONNAIS CHICAGO BRANCH
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSEN AG
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
FLEET BANK, N.A.
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
S-17
<PAGE> 18
THE FUJI BANK, LIMITED
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
CONSECO FINANCE, INC.
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
IMPERIAL BANK
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
By: /S/ W. Jerome McDermott
--------------------------------------
Name: W. Jerome McDermott
------------------------------
Title: Duly Authorized Signatory
------------------------------
NATEXIS BANQUE
By: /s/ Pieter J. van Tulder
--------------------------------------
Name: Pieter J. van Tulder
------------------------------
Title: Vice President and Manager,
Multinational Group
------------------------------
By: /s/ John Rego
--------------------------------------
Name: John Rego
------------------------------
Title: Vice President
------------------------------
S-18
<PAGE> 19
PNC BANK, N.A.
By: /s Douglas S. King
--------------------------------------
Name: Douglas S. King
------------------------------
Title: Vice President
------------------------------
SOUTHERN PACIFIC BANK
By: /s/ Mun Young Kim
--------------------------------------
Name: Mun Young Kim
------------------------------
Title: Vice President
------------------------------
THE SUMITOMO BANK, LIMITED, NEW
YORK BRANCH
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
SUNTRUST BANK CENTRAL FLORIDA, N.A.
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
TORONTO DOMINION (TEXAS), INC.
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
S-19
<PAGE> 20
THE TOYO TRUST & BANKING CO., LTD.
By: /s/ Shinya Kameda
--------------------------------------
Name: Shinya Kameda
------------------------------
Title: Assistant General Manager
------------------------------
International Department
------------------------------
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Richard S. Degrey
--------------------------------------
Name: Richard S. Degrey
------------------------------
Title: Vice President
------------------------------
S-20
<PAGE> 1
EXHIBIT 10.35
BRIDGE LOAN AGREEMENT
dated as of February 25, 2000
AMONG
TEAM FLEET FINANCING CORPORATION,
as the Borrower
BUDGET GROUP, INC.,
as the Servicer
and
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH,
as the Lender
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PAGE
ARTICLE I
DEFINED TERMS
SECTION 1.1. Definitions ................................................2
ARTICLE II
ADVANCES
SECTION 2.1 The Advances................................................10
SECTION 2.2 Borrowing Procedure ........................................11
SECTION 2.3 Maturity of Advances........................................12
SECTION 2.4 Reserved....................................................12
SECTION 2.5 Continuation and Conversion Elections.......................12
SECTION 2.6 Funding ...................................................12
SECTION 2.7 Repayments and Prepayments .................................13
SECTION 2.8 Interest Provisions ........................................14
SECTION 2.9 Fees. ......................................................16
SECTION 2.10 Payments, Computations, etc. ..............................16
SECTION 2.11 Eurodollar Rate Lending Unlawful ...........................16
SECTION 2.12 Deposits Unavailable .......................................16
SECTION 2.13 Increased Eurodollar Advance Costs, etc. ...................16
SECTION 2.14 Funding Losses ............................................17
SECTION 2.15 Increased Capital Costs ....................................18
SECTION 2.16 Taxes .....................................................18
SECTION 2.17 Conditions to the Making of Advances .......................19
SECTION 2.18 Certain Waivers. ..........................................23
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 The Borrower................................................24
SECTION 3.2 Budget Group................................................25
SECTION 3.3 The Lender .................................................25
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV
COVENANTS
SECTION 4.1 Affirmative Covenants.......................................27
SECTION 4.2 Negative Covenants .........................................29
SECTION 4.3 Information as to the Borrower ............................30
SECTION 4.4 Payment of Taxes and Other Claims ..........................30
SECTION 4.5 Indemnification ...........................................31
SECTION 4.6 Maintenance of Separate Existence ..........................32
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.1 Events of Default ..........................................32
SECTION 5.2 Remedies Upon Default.......................................34
SECTION 5.3 No Waiver ..................................................34
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 No Amendments .............................................35
SECTION 6.2 No Waiver; Remedies .......................................35
SECTION 6.3 Binding on Successors and Assigns...........................35
SECTION 6.4 Survival of Agreement.......................................36
SECTION 6.5 Payment of Costs and Expenses...............................36
SECTION 6.6 Characterization as Related Document; Entire Agreement .....37
SECTION 6.7 Notices ....................................................37
SECTION 6.8 Severability of Provisions ................................37
SECTION 6.9 Counterparts................................................37
SECTION 6.10 Governing Law .............................................37
SECTION 6.11 Tax Characterization .......................................37
SECTION 6.12 No Proceedings; Limited Recourse ...........................38
SECTION 6.13 Confidentiality ............................................38
SECTION 6.14 Lender May Act Through Affiliates or Agents ...............39
SECTION 6.15 Other Transactions..........................................39
SECTION 6.16 Independence of Covenants. ................................39
SECTION 6.17 Forum Selection and Consent to Jurisdiction ...............39
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
SECTION 6.18 Waiver of Jury Trial................................40
SECTION 6.19 Third-Party Beneficiaries...........................40
EXHIBIT A - Form of Base Indenture
EXHIBIT B - Form of Group II Master Lease
EXHIBIT C - Form of Series 2000-1 Supplement
EXHIBIT D - Form of Borrowing Request
EXHIBIT E - Form of Closing Date Certificate
EXHIBIT F - Form of Continuation/Conversion Notice
</TABLE>
<PAGE> 5
BRIDGE LOAN AGREEMENT
BRIDGE LOAN AGREEMENT, dated as of February 25, 2000, among CREDIT
SUISSE FIRST BOSTON, NEW YORK BRANCH, a Swiss banking corporation, as lender
(together with its successors and assigns in such capacity, the "Lender"), TEAM
FLEET FINANCING CORPORATION, a Delaware corporation, as borrower (the
"Borrower") and BUDGET GROUP, INC. ("Budget Group"), a Delaware corporation, as
Servicer (the "Servicer").
W I T N E S S E T H:
WHEREAS, the Borrower has entered into (a) an Amended and
Restated Base Indenture, dated as of December 1, 1996 (as amended, supplemented
or otherwise modified from time to time in accordance with the terms thereof,
the "Base Indenture") with Bankers Trust Company, a New York banking
corporation, as trustee (in such capacity, together with any successors in such
capacity, the "Trustee"), and Budget Group, as Servicer (as successor in such
capacity to Team Rental Group, Inc.) and Budget Interestholder (as successor in
such capacity to Team Rental Group, Inc.), a copy of which is attached hereto
as Exhibit A, (b) a Master Motor Vehicle Lease Agreement, Group II, dated as of
February 25, 2000 (as amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof, the "Group II Master Lease") with
Budget Group, as guarantor, and the subsidiaries, affiliates and non-affiliates
of Budget Group named therein as lessees, a copy of which is attached hereto as
Exhibit B, (c) a Supplement to the Base Indenture dated as of February 25, 2000
(as amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof, the "Series 2000-1 Supplement") with the Trustee,
Budget Group, as Servicer and Budget Interestholder, a copy of which is
attached hereto as Exhibit C and (d) certain related documents referred to in
each of the foregoing documents;
WHEREAS, pursuant to the Base Indenture and the Series 2000-1
Supplement, the Borrower will issue the Variable Funding Rental Car Asset
Backed Note, Series 2000-1 (the "Series 2000-1 Note");
WHEREAS, the Borrower wishes to issue the Series 2000-1 Note
in favor of the Lender and obtain the agreement of the Lender to make loans
from time to time (each, an "Advance") for the purchase of Series 2000-1
Invested Amounts, as defined in the Series 2000-1 Supplement, all of which
Advances (other than the Initial Advance) will constitute Increases, as defined
in the Series 2000-1 Supplement, and all of which Advances (including the
Initial Advance) will be evidenced by the Series 2000-1 Note and will
constitute purchases of Series 2000-1 Invested Amounts corresponding to the
amount of such Advances;
<PAGE> 6
WHEREAS, subject to the terms and conditions of this
Agreement, the Lender is willing to make Advances from time to time to fund
purchases of Series 2000-1 Invested Amounts in an aggregate outstanding amount
up to the Maximum Invested Amount until the commencement of the Series 2000-1
Rapid Amortization Period; and
WHEREAS, Budget Group has joined in this Agreement to confirm
certain representations, warranties and covenants made by it as Servicer for
the benefit of the Lender;
NOW, THEREFORE, in consideration of the foregoing premises
and for other good and valuable consideration, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINED TERMS
SECTION 1.1. Definitions. Unless otherwise defined herein or the
context otherwise requires, capitalized terms used in this Agreement, including
its preamble and recitals, have the meanings assigned to them in the Series
2000-1 Supplement or in Schedule 1 to the Base Indenture, and this Agreement
shall be interpreted in accordance with the conventions set forth in Schedule 1
to the Base Indenture; provided, that to the extent any capitalized term used
but not defined herein has a meaning assigned to such term in both the Series
2000-1 Supplement and in Schedule 1 to the Base Indenture, then the meaning
assigned to such term in the Series 2000-1 Supplement shall apply herein,
unless the context requires otherwise. In addition, the following terms shall
have the following meanings that are applicable to the singular as well as the
plural form of such terms and to the masculine as well as the feminine and
neuter genders of such terms:
"ABR Advance" means an Advance which bears interest by reference to
the Alternative Base Rate.
"Advance" has the meaning set forth in the third recital hereto.
"Advance Balance" means, as of any date of determination, an amount
equal to the sum of the then unpaid principal balances of all Advances then
outstanding.
"Agreement" means, on any date, this Bridge Loan Agreement as
originally in effect on the Closing Date and as thereafter from time to time
amended, supplemented, amended and restated, or otherwise modified and in
effect on such date.
"Alternative Base Rate" means, on any date and with respect to all ABR
Advances, a fluctuating rate of interest per annum equal to the higher of
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<PAGE> 7
(a) the Prime Rate for such day; and
(b) the Federal Funds Rate plus 0.50% per annum.
Changes in the rate of interest on that portion of any Advance maintained as an
ABR Advance will take effect simultaneously with each change in the Alternative
Base Rate. The Lender will give notice promptly to the Borrower of changes in
the Alternative Base Rate.
"Amortization Commencement Date" means the date the Series 2000-1
Rapid Amortization Period commences.
"Applicable Margin" means a rate per annum equal to (a) with respect
to any date on or prior to the Amortization Commencement Date, 1.0%, and (b)
with respect to any date thereafter, 2.0%.
"Available Non-Principal Funds" means, with respect to each
Distribution Date, all funds available, pursuant to the terms of the Series
2000-1 Supplement and the Base Indenture, for payment of any amounts (other
than principal amounts) due in respect of the Series 2000-1 Note on such
Distribution Date.
"Available Principal Funds" means, with respect to each Distribution
Date, all funds available, pursuant to the terms of the Series 2000-1
Supplement and the Base Indenture, for repayment of principal in respect of the
Series 2000-1 Note on such Distribution Date.
"Base Indenture" has the meaning set forth in the first recital
hereto.
"Borrower" has the meaning set forth in the preamble hereto.
"Borrowing" means the Advances of the same type and, in the case of
Eurodollar Advances, having the same Interest Period made by the Lender on the
same Business Day and pursuant to the same Borrowing Request in accordance with
Section 2.2.
"Borrowing Request" means an Advance request and certificate duly
executed by an Authorized Officer of the Borrower, substantially in the form of
Exhibit D hereto.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in New
York, New York; and
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<PAGE> 8
(b) relative to the making, continuing, converting, prepaying
or repaying of any Eurodollar Advance, any day described in clause (a)
above on which dealings in U.S. Dollars are carried on in the London
interbank market.
"Capital Stock" means with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock or equity, whether now outstanding or issued after the
date hereof, including all common stock, preferred stock, partnership interests
and member interests.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Closing Date" means February 25, 2000.
"Closing Date Certificate" means a certificate of a duly Authorized
Officer of the Borrower executed and delivered pursuant to Section
2.17(a)(xiii), substantially in the form of Exhibit E hereto.
"Collateral" means the Group II Collateral and the Series 2000-1
Collateral, in each case as defined in the Series 2000-1 Supplement.
"Commission" means the Securities and Exchange Commission.
"Commitment" means the Lender's obligation to make Advances pursuant
to Section 2.1.
"Commitment Termination Date" has the meaning set forth in Section
2.3.
"Continuation/Conversion Notice" means a notice of continuation or
conversion duly executed by an Authorized Officer of the Borrower,
substantially in the form of Exhibit F hereto.
"Commercial Paper Notes" means commercial paper notes issued by an SPC
to fund CP Advances.
"Cost of Funds Rate" means, for any Fixed Period, the sum of (i) the
CP Rate and (ii) the Applicable Margin.
"CP Advance" means an Advance which bears interest at the Cost of
Funds Rate.
"CP Market Disruption Event" means, at any time for any reason
whatsoever, an SPC shall be unable to raise, or shall be precluded or
prohibited from raising, funds through the issuance of Commercial Paper Notes
in the United States commercial paper market at such time.
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<PAGE> 9
"CP Rate" means, for any Fixed Period, a rate per annum equal to the
sum of (i) the rate (or, if more than one rate, the weighted average of the
rates) at which Commercial Paper Notes having a term equal to such Fixed Period
and issued to fund the Series 2000-1 Note may be sold by or on behalf of an
SPC, as notified by the Lender to the Borrower, provided that if such rate is a
discount rate (or rates), then such rate shall be the rate (or, if more than
one rate, the weighted average of the rates) resulting from converting such
discount rate (or rates) to an interest-bearing equivalent rate per annum; plus
(ii) 0.05%.
"Credit Agreement" means the Amended and Restated Credit Agreement
dated as of June 19, 1998 among Budget, as borrower, the lenders named therein,
Credit Suisse First Boston, as co-syndication agent and administrative agent,
and NationsBanc Montgomery Securities LLC, as co-syndication agent and
documentation agent, as such agreement may be amended, supplemented, amended
and restated or otherwise modified from time to time in accordance with the
terms thereof.
"Domestic Office" means the office of the Lender designated as such
below its name on the signature page hereof or such other office of the Lender
within the United States as may be designated from time to time by written
notice from the Lender to the Borrower. The Lender may have separate Domestic
Offices for purposes of making, maintaining or continuing ABR Advances.
"Eligible Assignee" means (a) a commercial bank having total assets in
excess of $500,000,000, (b) a finance company, insurance company or other
financial institution that in the ordinary course of business enters into
transactions of a type similar to that entered into by the Lender under this
Agreement and has total assets in excess of $200,000,000, and whose becoming an
assignee would not constitute a prohibited transaction under Section 4975 of
ERISA, (c) an SPC and (d) any other financial institution satisfactory to the
Borrower, in the case of an institution referred to in clause (a), (b) or (c),
having a long-term unsecured debt rating from Standard & Poor's and Moody's of
not less than BBB- by Standard & Poor's and Baa3 by Moody's; provided, however,
that any Person who does not have either a long-term unsecured rating from
Standard & Poor's or Moody's shall be deemed to have the required rating set
forth above if such rating agency confirms in writing that such Person, if its
long-term unsecured debt obligations were rated, would be assigned such
required rating.
"Enhancement Agent" has the meaning set forth in the first recital
hereto.
"Environmental Laws" means all applicable federal, foreign, state or
local statutes, laws, ordinances, codes, rules, regulations and guidelines
(including consent decrees and administrative orders) relating to public health
and safety and protection of the environment.
"Eurodollar Advance" means an Advance which bears interest, at all
times during the Interest Period applicable thereto, at a fixed rate of
interest determined by reference to the Eurodollar Rate (Reserve Adjusted).
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"Eurodollar Office" means the office of the Lender designated as such
below its name on the signature page hereof or such other office of the Lender
as designated from time to time by written notice from the Lender to the
Borrower, whether or not outside the United States, which shall be making or
maintaining Eurodollar Advances of the Lender hereunder.
"Eurodollar Rate" means, relative to any Interest Period, an interest
rate per annum equal to:
(a) the rate determined by the Lender at approximately 11:00
a.m. (London, England time) two Business Days before the first day of
such Interest Period for delivery on the first day of such Interest
Period by reference to the British Bankers' Association Interest
Settlement Rates for deposits in U.S. Dollars (as set forth by any
service selected by the Lender which has been nominated by the British
Bankers' Association as an authorized information vendor for the
purpose of displaying such rates) for a period equal to such Interest
Period; or
(b) if such rate cannot be determined by the Lender in
accordance with clause (a) above, the average (rounded upward to the
nearest whole multiple of 1/100 of 1% per annum, if such average is
not such a multiple) of the rates per annum at which deposits in U.S.
Dollars are offered by the Eurodollar Office of the Lender in London,
England to prime banks in the London interbank market at or about
11:00 a.m. (London, England time) two Business Days before the first
day of such Interest Period in an amount substantially equal to the
amount of the Eurodollar Advances to be outstanding during such
Interest Period and for a period equal to such Interest Period;
provided that any determination of the Eurodollar Rate for any
Interest Period pursuant to this clause (b) shall be determined by the
Lender on the basis of applicable rates furnished to and received by
the Lender from the Reference Lenders two Business Days before the
first day of such Interest Period.
"Eurodollar Rate (Reserve Adjusted)" means, for any Interest Period,
an interest rate per annum (rounded upward to the nearest 1/100th of 1%)
determined pursuant to the following formula:
Eurodollar Rate = Eurodollar Rate
-------------------------------------
(Reserve Adjusted) 1.00 - Eurodollar Reserve Percentage.
The Eurodollar Rate (Reserve Adjusted) for any Interest Period for Eurodollar
Advances will be determined by the Lender on the basis of the Eurodollar
Reserve Percentage in effect two Business Days before the first day of such
Interest Period.
"Eurodollar Reserve Percentage" means, for any Interest Period, the
reserve percentage (expressed as a decimal) equal to the maximum aggregate
reserve requirements (including all basic, emergency, supplemental, marginal
and other reserves and taking into account any transitional adjustments or
other scheduled changes in reserve requirements) specified under regulations
issued
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from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities," as
currently defined in Regulation D of the F.R.S. Board, having a term
approximately equal or comparable to such Interest Period.
"Event of Default" means any of the conditions or events set forth in
Section 5.1.
"Federal Funds Rate" means, for any day, the per annum rate set forth
in the weekly statistical release designated as H.15(519) or any successor
publication, published by the F.R.S. Board for such day opposite the caption
"Federal Funds (Effective)"; provided, that if on any relevant date such rate
is not yet published in such release, then the Federal Funds Rate for such day
will be the weighted average of the rates on overnight funds transactions with
members of the Federal Reserve System published by the Federal Reserve Bank of
New York for such day (or if such day is not a Business Day, for the next
preceding Business Day); provided that if neither of the foregoing rates is
published for any day which is a Business Day, the Federal Funds Rate will be
the average of the quotations for transactions in overnight federal funds
received on that day by the Lender from three federal funds brokers of
recognized standing selected by it.
"Fee Letter" means that certain fee letter dated the date hereof,
between the Lender and the Borrower, under which the Borrower agrees to pay
certain fees to the Lender in its capacity as the Lender under this Agreement.
"Fixed Period" means a Series 2000-1 Interest Period (as defined in
the Series 2000-1 Supplement); provided that
(i) any Fixed Period in respect of which interest is computed by
reference to the CP Rate may be terminated at the election of
the Lender by notice to the Borrower and the Servicer at any
time upon the occurrence and during the continuance of a CP
Market Disruption Event;
(ii) if at any time any Fixed Period is terminated pursuant to
clause (i) above, the Series 2000-1 Invested Amount
previously allocated to such terminated Fixed Period shall be
allocated to a new Fixed Period to commence on such date and
end on the next succeeding Distribution Date; and
(iii) upon the occurrence and during the continuance of the Series
2000-1 Rapid Amortization Period, any Fixed Period in respect
of which interest is computed by reference to the CP Rate may
be terminated at the election of the Lender by notice to the
Borrower and the Servicer, and upon such election the CP
Advances in respect of which interest was calculated by
reference to such terminated Fixed Period shall be converted
to ABR Advances until payment in full of the Series 2000-1
Note.
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"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"Funding Date" has the meaning set forth in Section 2.2.
"Group II Master Lease" has the meaning set forth in the first recital
hereto.
"Hazardous Material" means
(a) any "hazardous substance," as defined by CERCLA;
(b) any "hazardous waste," as defined by the Resource
Conservation and Recovery Act, as amended; or
(c) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance (including any petroleum
product) within the meaning of any other applicable federal, foreign,
state or local law, regulation, ordinance or requirement (including
consent decrees and administrative orders) relating to or imposing
liability or standards of conduct concerning any hazardous, toxic or
dangerous waste, substance or material, all as amended.
"Hedging Agreement" means, an interest swap agreement, interest rate
cap agreement, interest rate collar agreement, and all other agreements or
arrangements designed to protect a Person against fluctuations in interest
rates, in each case in connection with the payment of interest and fees under
the Series 2000-1 Note.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement, the
parties hereto agree that the rule of ejusdem generis shall not be applicable
to limit a general statement, which is followed by or referable to an
enumeration of specific matters, to matters similar to the matters specifically
mentioned.
"Indemnified Liabilities" has the meaning set forth in Section 4.5.
"Indemnified Parties" has the meaning set forth in Section 4.5.
"Initial Advance" means the Advance made under this Agreement as part
of the initial Borrowing.
"Initial Funding Date" means the date on which the Initial Advance is
made under this Agreement.
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"Interest Period" means, with respect to any Eurodollar Advance, a
period commencing on the date of such Eurodollar Advance and ending on the
thirtieth (30th) day thereafter; provided, however, that
(i) if any such period would otherwise end on a day which is not
a Business Day, the Interest Period shall instead end on the
next succeeding Business Day (but if such extension would
cause the last day of such Interest Period to occur in the
next following calendar month, the last day of such Interest
Period shall occur on the next preceding Business Day); and
(ii) upon the occurrence and during the continuance of the Series
2000-1 Rapid Amortization Period, any Interest Period may be
terminated at the election of the Lender by notice to the
Borrower and the Servicer, and upon such election the
Eurodollar Advances in respect of which interest was
calculated by reference to such terminated Interest Period
shall be converted to ABR Advances or CP Advances until
payment in full of the Series 2000-1 Note.
"Lender" has the meaning set forth in the preamble hereto.
"Liquidity Provider" means, with respect to any SPC, any Person
providing liquidity support for the Commercial Paper Notes of such SPC.
"Maturity Date" has the meaning set forth in Section 2.3.
"Maximum Invested Amount" means $270,000,000.
"Monthly Interest" means, for any Distribution Date, the product of
(i) a fraction, the numerator of which is the number of days in the Series
2000-1 Interest Period most recently ended and the denominator of which is 360,
(ii) the Series 2000-1 Note Rate for the Series 2000-1 Interest Period most
recently ended and (iii) the average daily Advance Balance during the Series
2000-1 Interest Period most recently ended.
"Obligations" means all obligations (monetary or otherwise, whether
absolute or contingent, matured or unmatured, direct or indirect, inchoate or
otherwise, sole, joint, several or joint and several, due or to become due,
heretofore or hereafter contracted or acquired) of the Borrower and each other
Obligor arising under or in connection with this Agreement, the Series 2000-1
Note and each other Related Document.
"Obligor" means, as the context may require, the Borrower and any
other Person (other than the Lender) to the extent such Person is obligated
under, or otherwise a party to, this Agreement or any other Related Document.
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"Participant" has the meaning set forth in Section 6.3(b).
"Potential Event of Default" means, any condition or event which, with
the giving of notice or the lapse of time or both, would reasonably be expected
to become an Event of Default.
"Prime Rate" means the rate of interest most recently announced by the
Lender at its Domestic Office as its "reference rate"; provided, however, that
the Prime Rate is not necessarily intended to be the lowest rate of interest
determined by the Lender in connection with extensions of credit.
"Reference Lenders" means Credit Suisse First Boston, New York Branch,
or, in the event that such bank ceases to be a Lender hereunder at any time,
any other commercial bank designated by the Borrower and approved by the Lender
as constituting a "Reference Lender" hereunder.
"Regulation D" means the rules and regulations under the Securities
Act.
"Release" means a "release," as such term is defined in CERCLA.
"Series 2000-1 Interest Period" has the meaning set forth in the
Series 2000-1 Supplement.
"Series 2000-1 Note" has the meaning set forth in the second recital
hereto.
"Series 2000-1 Note Rate" means the weighted average of the interest
rates payable on the Advances pursuant to Sections 2.8(a) and (b), weighted
based upon the unpaid principal amount, respectively, of the Advances bearing
such interest rates.
"Series 2000-1 Supplement" has the meaning set forth in the first
recital hereto.
"Servicer" has the meaning set forth in the preamble hereto.
"SPC" has the meaning specified in Section 2.6(b).
"Taxes" has the meaning set forth in Section 2.16.
"Trustee" has the meaning set forth in the first recital hereto.
"type" means, relative to any Advance, the portion thereof, if any,
being maintained as an ABR Advance, a CP Advance or a Eurodollar Advance.
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ARTICLE II
ADVANCES
SECTION 2.1 The Advances. (a) Upon the terms and subject to the
conditions of this Agreement and the Series 2000-1 Supplement, the Lender
agrees, upon the Borrower's request, to make Advances from time to time on any
Business Day on or prior to June 30, 2000; provided, that the Lender will not
be required or permitted to make an Advance on any date if, after giving effect
to such Advance and the use of proceeds therefrom, (x) the aggregate
outstanding principal amount of all Advances would exceed the Maximum Invested
Amount, or (y) either (i) a Series 2000-1 Credit Support Deficiency exists or
would exist or (ii) a Series 2000-1 Asset Amount Deficiency exists or would
exist. All Advances shall be allocated pursuant to and in accordance with
Section 5.2 of the Series 2000-1 Supplement. On the terms and subject to the
conditions of this Agreement and the Series 2000-1 Supplement, the Borrower may
from time to time borrow, repay and reborrow Advances.
(b)(i) The Advances shall be evidenced by one or more loan
accounts or records maintained by the Lender in the ordinary course of
business. Absent manifest error, the loan accounts or records
maintained by the Lender shall be conclusive of the amount of the
Advances made by the Lender and the interest and payments thereon. The
failure so to record any such information or any error in so recording
any such information shall not, however, limit or otherwise affect the
actual obligations of the Borrower hereunder or under the Series
2000-1 Note to pay any amount owing with respect to the Advances or
limit or otherwise affect any other Obligations of the Borrower or any
other Obligor.
(ii) The Series 2000-1 Note shall be payable to the order of
the Lender in a maximum principal amount equal to the Maximum Invested
Amount. The Borrower hereby irrevocably authorizes the Lender to make
(or cause to be made) appropriate notations on the grid attached to
the Series 2000-1 Note (or on any continuation of such grid), which
notations, if made, shall evidence, inter alia, the date of, the
outstanding principal of, and the interest rate, Fixed Period and
Interest Period applicable to the Advances evidenced thereby. Such
notations shall be conclusive and binding on the Borrower absent
manifest error; provided, however, that the failure to make any such
notations or any error in making any such notations shall not limit or
otherwise affect the actual obligations of the Borrower hereunder or
under the Series 2000-1 Note to pay any amount owing with respect to
the Advances or limit or otherwise affect any other Obligations of the
Borrower or any other Obligor.
SECTION 2.2 Borrowing Procedure. By delivering a Borrowing Request to
the Lender on or before 11:00 a.m. (New York City time) on a Business Day, the
Borrower may from time to time irrevocably request,
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(a) on such Business Day (but in any event not more than five
Business Days notice) in the case of ABR Advances,
(b) on not less than three (but in any event not more than
five) Business Days notice in the case of Eurodollar Advances, or
(c) on not less than two (but in any event not more than
five) Business Days notice in the case of CP Advances,
that a Borrowing be made in a minimum amount of $1,000,000 and an integral
multiple of $100,000 or, in either case, in the unused amount of the
Commitment. On the terms and subject to the conditions of this Agreement, each
Borrowing shall be comprised of the type of Advance and shall be made on the
Business Day specified in such Borrowing Request (each such day, a "Funding
Date"); provided that, notwithstanding the type of Advance specified in such
Borrowing Request, to the extent that an Advance is provided by an SPC pursuant
to the option referred to in Section 2.6(b), such Advance shall, unless the SPC
otherwise directs, be a CP Advance. The Lender shall notify the Trustee in
writing of the amount deposited or to be deposited by or on behalf of the
Lender into the Series 2000-1 Collection Account on such Business Day. Subject
to the terms and conditions of this Agreement, on or before 3:00 p.m. (New York
City time) on such Business Day, the Lender shall deposit or cause to be
deposited with the Trustee same day funds in an amount equal to the amount of
the requested Borrowing. Such deposit will be made to the Series 2000-1
Collection Account, which the Trustee shall specify from time to time by notice
to the Lender.
SECTION 2.3 Maturity of Advances. Each Advance shall mature and be
payable in full on the June 2001 Distribution Date (the "Maturity Date").
SECTION 2.4 Reserved.
SECTION 2.5 Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Lender on or before 11:00 a.m. (New York
City time) on a Business Day, the Borrower may from time to time irrevocably
elect that all or any portion in an aggregate minimum amount of $1,000,000 and
an integral multiple of $100,000 of any Advances be,
(a) in the case of ABR Advances, on not less than three nor
more than five Business Days prior notice, converted into Eurodollar
Advances; or
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(b) in the case of Eurodollar Advances, on prior notice given
not less than three nor more than five Business Days prior to the end
of the related Interest Period, continued as Eurodollar Advances.
In the absence of delivery of a Continuation/Conversion Notice at least three
Business Days prior to the last day of the related Interest Period for any
Eurodollar Advance, such Eurodollar Advance shall, on such last day,
automatically convert to an ABR Advance. In the absence of delivery of a
Continuation/Conversion Notice, any ABR Advance shall automatically continue as
an ABR Advance. No portion of the principal amount of any Advances outstanding
may be continued as, or be converted into, Eurodollar Advances when any Event
of Default or Potential Event of Default has occurred and is continuing.
SECTION 2.6 Funding. (a) The Lender may, if it so elects, fulfill its
obligation to make or continue or convert Eurodollar Advances hereunder by
causing one of its foreign branches or Affiliates (or an international banking
facility created by the Lender) to make or maintain such Eurodollar Advance;
provided, however, that such Eurodollar Advance shall nonetheless be deemed to
have been made and to be held by the Lender, and the obligation of the Borrower
to repay such Eurodollar Advance shall nevertheless be to the Lender for the
account of such foreign branch, Affiliate or international banking facility. In
addition, the Borrower hereby consents and agrees that, for purposes of any
determination to be made for purposes of Section 2.11, 2.12, 2.13 or 2.14, it
shall be conclusively assumed that the Lender elected to fund all Eurodollar
Advances by purchasing deposits in U.S. Dollars in its Eurodollar Office's
interbank eurodollar market.
(b) Notwithstanding anything to the contrary contained herein, the
Lender may grant to a special purpose funding vehicle (a "SPC"), identified as
such in writing from time to time by the Lender to the Borrower and the
Servicer, the option to provide to the Borrower all or any part of any Advance
that the Lender would otherwise be obligated to make, maintain, continue or
convert pursuant to this Agreement; provided that (i) nothing herein shall
constitute a commitment by any SPC to make, maintain, continue or convert any
Advance, (ii) if an SPC elects not to exercise such option or otherwise fails
to provide all or any part of such Advance, the Lender shall be obligated to
make, maintain, continue or convert such Advance pursuant to the terms hereof.
The making, maintenance, continuation or conversion of an Advance by an SPC
hereunder shall utilize the Commitment of the Lender to the same extent, and as
if, such Advance were made, maintained, continued or converted by the Lender.
Each Advance made by an SPC shall, unless the SPC otherwise directs, be a CP
Advance. In the event that an SPC elects to make all or any portion of an
Advance, such Advance shall nonetheless be deemed to have been made by the
Lender and the obligation of the Borrower to repay such Advance shall
nevertheless be to the Lender for the account of such SPC. Each party hereto
hereby agrees that no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
Lender). In furtherance of the foregoing, each party hereto hereby agrees
(which agreement shall survive the termination of this Agreement) that, prior
to the date that is one year and one day after the payment in full of all
outstanding commercial
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<PAGE> 18
paper or other senior indebtedness of any SPC, it will not institute against,
or join any other person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under the
laws of the United States or any State thereof. In addition, notwithstanding
anything to the contrary contained in this Section 2.6(b), any SPC may (i) with
notice to, but without the prior written consent of, the Borrower and the
Servicer and without paying any processing fee therefor, assign all or a
portion of its interests in any Advances to the Lender or to any financial
institution (consented to by the Borrower and the Servicer) providing liquidity
and/or credit support to or for the account of such SPC to support the funding
or maintenance of Advances and (ii) disclose on a confidential basis any
non-public information relating to its Advances to any rating agency,
commercial paper dealer or provider of any surety, guarantee or credit or
liquidity enhancement to such SPC. This section may not be amended without the
written consent of each SPC.
SECTION 2.7 Repayments and Prepayments. The Borrower shall, upon the
terms and subject to the conditions of the Series 2000-1 Supplement, from
Available Principal Funds, repay in full the unpaid principal amount of each of
the Advances upon the Maturity Date. Prior to the Maturity Date, the Borrower,
upon the terms and subject to the conditions of the Series 2000-1 Supplement,
from Available Principal Funds,
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of any
Advance; provided, however, that
(i) all such voluntary prepayments shall require prior
irrevocable written notice to the Lender and the Trustee received by
the Lender and the Trustee no later than 11:00 a.m. (New York City
time),
(A) on such Business Day in the case of ABR
Advances, or
(B) on not less than three (but in any event not
more than five) Business Days notice in the case of
Eurodollar Advances and CP Advances,
(ii) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $1,000,000 and an integral multiple of
$100,000, and
(iii) to the extent that any portion of a CP Advance is
prepaid, the Borrower shall also pay an amount equal to the interest
(or discount) that will accrue on the Commercial Paper Notes funding
such Advance through the maturity of such Commercial Paper Notes;
(b) shall, on each date on which the Series 2000-1 Credit Support
Amount is less than the Series 2000-1 Minimum Credit Support Amount, make a
mandatory prepayment in an amount such that after giving effect to such
prepayment, the Series 2000-1 Credit Support Amount shall not be less
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than the Series 2000-1 Minimum Credit Support Amount and the Maximum Invested
Amount shall not be less than the aggregate outstanding principal amount of the
Advances;
(c) shall, on any Distribution Date during the Series 2000-1 Rapid
Amortization Period, make a mandatory payment of principal in an amount equal
to the lesser of (i) the Available Principal Funds and (ii) the Aggregate
Principal Balance of the Series 2000-1 Notes.
Each prepayment of any Advances made pursuant to this Section 2.7 shall be
without premium or penalty (except as otherwise specified in this Section 2.7
or as may be required by Section 2.14).
SECTION 2.8 Interest Provisions. Interest on the outstanding principal
amount of Advances shall accrue and be payable in accordance with this Section
2.8.
(a) Rates. Pursuant to an appropriately delivered Borrowing
Request or Continuation/Conversion Notice, the Borrower may elect that
Advances comprising a Borrowing accrue interest at a rate per annum:
(i) on that portion maintained from time to time as
an ABR Advance, equal to the Alternative Base Rate from time
to time in effect; and
(ii) on that portion maintained as a Eurodollar
Advance, during each Interest Period applicable thereto,
equal to the sum of the Eurodollar Rate (Reserve Adjusted)
for such Interest Period plus the Applicable Margin for such
Advance;
provided that, notwithstanding the type of Advance specified in such Borrowing
Request or Continuation/Conversion Notice, to the extent that an Advance is
provided by an SPC pursuant to the option referred to in Section 2.6(b), such
Advance shall, unless such SPC otherwise directs, be a CP Advance and shall
bear interest at the Cost of Funds Rate.
All Eurodollar Advances shall bear interest from and including the
first day of the applicable Interest Period to (but not including) the last day
of such Interest Period at the interest rate determined as applicable to such
Eurodollar Advance.
(b) Post-Maturity Rates. After the date any principal amount
of any Advance is due and payable (whether on the Maturity Date, upon
acceleration or otherwise) and not paid on such date, or after any
other monetary Obligation of the Borrower or any other Obligor, as the
case may be, shall have become due and payable and not be paid on such
date, the Borrower or such other Obligor, as the case may be, shall
pay, but only to the extent permitted by law, interest (after as well
as before judgment) on the aggregate principal amount of all Advances
then outstanding and on such other monetary Obligations at a rate per
annum equal to,
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(i) in the case of the aggregate principal amount of
all Advances then outstanding, the interest rate otherwise
applicable thereto plus an additional margin of 200 basis
points; and
(ii) in the case of such other monetary Obligations
of the Borrower or such other Obligor (other than such
obligations comprised of the principal amount of any
Advance), the Alternative Base Rate from time to time in
effect plus a margin of 200 basis points.
(c) Payment Dates. Interest shall be due and payable from
Available Non-Principal Funds on each Distribution Date in accordance
with the provisions set forth in Section 5.4 of the Series 2000-1
Supplement. In addition, all accrued and unpaid Monthly Interest and
the unpaid principal amount of each Advance will be payable in full on
the Maturity Date unless extended as set forth in Section 2.4.
SECTION 2.9 Fees. The Borrower agrees to pay the fees set forth in the
Fee Letter. All such fees shall be non-refundable.
SECTION 2.10 Payments, Computations, etc. All payments by the Borrower
pursuant to this Agreement, the Series 2000-1 Note or any other Related
Document shall be made by the Borrower to the Lender, without setoff, deduction
or counterclaim, not later than 1:00 p.m. (New York City time) on the date due,
in same day or immediately available funds, to such account as the Lender shall
specify from time to time by notice to the Borrower and the Paying Agent. Funds
received after that time shall be deemed to have been received by the Lender on
the next succeeding Business Day. All interest (including interest on
Eurodollar Advances and CP Advances) and fees shall be computed by the Lender
on the basis of the actual number of days (including the first day but
excluding the last day) occurring during the period for which such interest or
fee is payable over a year comprised of 360 days (or, in the case of interest
on an ABR Advance (other than when calculated with respect to the Federal Funds
Rate), 365 days or, if appropriate, 366 days). Whenever any payment to be made
shall otherwise be due on a day which is not a Business Day, such payment shall
(except as otherwise required by clause (i) of the definition of the term
"Interest Period" with respect to Eurodollar Advances) be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest and fees, if any, in connection with such payment.
SECTION 2.11 Eurodollar Rate Lending Unlawful. If the Lender shall
determine (which determination shall, upon notice thereof to the Borrower, be
conclusive and binding on the Borrower) that the introduction of or any change
in, or in the interpretation of, any law makes it unlawful, or any central bank
or other Governmental Authority asserts that it is unlawful, for the Lender to
make, continue or maintain any Advance as, or to convert any Advance into, a
Eurodollar Advance of a certain type, the obligations of the Lender to make,
continue or maintain any Advance as, or convert any such Advance into, a
Eurodollar Advance shall, upon such determination, forthwith be suspended
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until the Lender shall notify the Borrower that the circumstances causing such
suspension no longer exist, and the Borrower shall immediately convert (in the
manner provided for in Section 2.5) all Eurodollar Advances into ABR Advances
at the end of the then current Interest Periods with respect thereto or sooner,
if required by such law or assertion.
SECTION 2.12 Deposits Unavailable. If the Lender shall have determined
that by reason of circumstances affecting the London interbank market, adequate
means do not exist for ascertaining the interest rate applicable hereunder to
Eurodollar Advances of any type, then, upon notice to the Borrower, the
obligations of the Lender under Section 2.1 to make or continue any Advances
as, or to convert any Advances into, Eurodollar Advances shall forthwith be
suspended until the Lender shall notify the Borrower that the circumstances
causing such suspension no longer exist.
SECTION 2.13 Increased Eurodollar Advance Costs, etc. The Borrower
agrees to reimburse the Lender or its SPC, as applicable, for any increase in
the cost to the Lender or its SPC, as applicable, of, or any reduction in the
amount of any sum receivable by the Lender in respect of, making, continuing or
maintaining (or of its obligation to make, continue or maintain) any Advances
as, or of converting (or of its obligation to convert) any Advances into,
Eurodollar Advances that arise in connection with any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in after the date hereof of, any law or regulation, directive, guideline,
decision or request (whether or not having the force of law) of any court,
central bank, regulator or other Governmental Authority, except for such
changes with respect to increased capital costs and taxes which are governed by
Sections 2.15 and 2.16, respectively; provided, however, that the Borrower
shall not have any obligation to pay any such additional amount under this
Section 2.13 with respect to any day or days unless the Lender shall have
notified the Borrower of its demand within 45 days after the date upon which
the Lender has obtained audited information with respect to the fiscal year of
the Lender in which such day or days occurred. Each such demand shall be
provided to the Lender in writing and shall state, in reasonable detail, the
reasons therefor and the additional amount required fully to compensate the
Lender on an after-tax basis for such increased cost or reduced amount. Such
additional amounts shall be payable by the Borrower directly to the Lender on
the Distribution Date following its receipt of such notice, and such notice
shall, in the absence of manifest error, be conclusive and binding on the
Borrower. Such amounts to be paid by the Borrower shall constitute "Carrying
Charges" within the meaning of the Base Indenture and "Series 2000-1 Carrying
Charges" within the meaning of the Series 2000-1 Supplement.
SECTION 2.14 Funding Losses. In the event the Lender or any SPC shall
incur any loss or expense (including any loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by the
Lender to make, continue or maintain any portion of the principal amount of any
Advance as, or to convert any portion of the principal amount of any Advance
into, a Eurodollar Advance) as a result of
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(a) any conversion or repayment or prepayment of the
principal amount of any Eurodollar Advances on a date other than the
scheduled last day of the Interest Period applicable thereto, whether
pursuant to Section 2.7 or otherwise;
(b) any Advances not being made as Eurodollar Advances in
accordance with the Borrowing Request therefor;
(c) any Advances not being continued as, or converted into,
Eurodollar Advances in accordance with the Continuation/Conversion
Notice therefor; or
(d) any assignment by an SPC of its interest in any Advance
to its Liquidity Provider at a time when Commercial Paper Notes
funding such interest is outstanding;
then the Borrower shall, on the Distribution Date occurring in the calendar
month following its receipt of written notice thereof from the Lender, pay
directly to the Lender such amount as will (in the reasonable determination of
the Lender) reimburse the Lender or such SPC, as applicable, for such loss or
expense. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Borrower. Such amounts to be paid by the Borrower shall constitute
"Carrying Charges" within the meaning of the Base Indenture and "Series 2000-1
Carrying Charges" within the meaning of the Series 2000-1 Supplement.
SECTION 2.15 Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other Governmental Authority after the Closing Date affects or would affect
the amount of capital required or expected to be maintained by the Lender or
any Person controlling the Lender, and the Lender determines (in its sole and
absolute discretion) that the rate of return on its or such controlling
Person's capital as a consequence of the Advances made by the Lender is reduced
to a level below that which the Lender or such controlling Person could have
achieved but for the occurrence of any such circumstance, then, in any such
case upon notice from time to time by the Lender to the Borrower, the Borrower
shall pay directly to the Lender, on the Distribution Date following its
receipts of such notice, additional amounts sufficient to compensate the Lender
or such controlling Person on an after-tax basis for such reduction in rate of
return; provided, however, that the Borrower shall not have any obligation to
pay any such additional amount under this Section 2.15 with respect to any day
or days unless the Lender shall have notified the Borrower of its demand
therefor within 45 days of the date upon which the Lender has obtained audited
information with respect to the fiscal year of the Lender in which such day or
days occurred. A statement of the Lender as to any such additional amount or
amounts (including calculations thereof in reasonable detail) shall, in the
absence of manifest error, be conclusive and binding on the Borrower. In
determining such amount, the Lender may use any method of averaging and
attribution that it (in its sole and absolute discretion) shall deem
applicable. Such
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amounts to be paid by the Borrower shall constitute "Carrying Charges" within
the meaning of the Base Indenture and "Series 2000-1 Carrying Charges" within
the meaning of the Series 2000-1 Supplement.
SECTION 2.16 Taxes. All payments by the Borrower of principal of, and
interest on, the Advances and all other amounts payable hereunder (including
fees) shall be made free and clear of and without deduction for any present or
future income, excise, stamp or franchise taxes and other taxes, fees, duties,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority, but excluding taxes imposed on or measured by the overall net
income, overall receipts or overall assets of the Lender and franchise taxes
imposed on the Lender by the jurisdiction under the laws of which it is
organized or any political subdivision thereof and taxes imposed on or measured
by the overall net income, overall receipts and overall assets of the Lender
and franchise taxes imposed on the Lender by the jurisdiction of the Lender's
Domestic Office or Eurodollar Office, as the case may be, or any political
subdivision thereof (such non-excluded items being called "Taxes"). In the
event that any withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Borrower will
(i) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(ii) promptly forward to the Lender an official receipt or
other documentation satisfactory to the Lender evidencing such payment
to such authority; and
(iii) pay to the Lender (or, if applicable, for its own
account) such additional amount or amounts as is necessary to ensure
that the net amount actually received by the Lender will equal the
full amount the Lender would have received had no such withholding or
deduction been required.
Moreover, if any Taxes are directly asserted against the Lender with respect to
any payment received by the Lender hereunder, the Lender may pay such Taxes and
the Borrower will promptly pay such additional amounts (including any
penalties, interest or expenses) as is necessary in order that the net amount
received by such person after the payment of such Taxes (including any Taxes on
such additional amount) shall equal the amount such person would have received
had no such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the Lender for any
incremental Taxes, interest or penalties that may become payable by the Lender
as a result of any such failure. For purposes of this Section 2.16, a
distribution hereunder by the Lender shall be deemed a payment by the Borrower.
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<PAGE> 24
Upon the request of the Borrower, any lender hereunder (including any
successor or assign of the Lender) that is organized under the laws of a
jurisdiction other than the United States shall, prior to the initial due date
of any payments to such Person hereunder (and to the extent permissible under
then current law), execute and deliver to the Borrower, one or more (as the
Borrower may reasonably request) (i) United States Internal Revenue Service
Form 4224 or Form W-8ECI or (ii) United States Internal Revenue Service Form
1001 or Form W-8BEN or such other forms or documents (or successor forms or
documents), appropriately completed, as may be applicable to establish the
extent, if any, to which a payment to the Lender is exempt from withholding or
deduction of Taxes; provided, that, if any lender delivers either a Form 4224
or Form 1001, such lender must deliver a Form W-8ECI or Form W-8BEN, as
appropriate, to the Borrower on or before December 31, 2000.
SECTION 2.17 Conditions to the Making of Advances. (a) The
effectiveness of this Agreement and the obligation of the Lender to make the
Initial Advance shall be subject to the prior satisfaction of all conditions to
the issuance of the Series 2000-1 Note under the Series 2000-1 Supplement and
under Section 2.2 of the Base Indenture and the delivery to the Lender of each
of the following documents, on or prior to such effectiveness, in form and
substance satisfactory to the Lender:
(i) Series 2000-1 Note. The Series 2000-1 Note duly executed
and delivered by the Borrower and duly authenticated by the Trustee,
in a stated amount of up to the Maximum Invested Amount.
(ii) Series 2000-1 Supplement. The Series 2000-1 Supplement,
dated as of the Closing Date, duly executed by the Borrower, Budget
Group, the Trustee and the Enhancement Agent, and all of the
conditions to the effectiveness thereof and to the issuance of the
Series 2000-1 Note set forth therein shall have been satisfied in all
respects.
(iii) Certificate of Incorporation. The certificate of
incorporation of the Borrower and the Servicer, each duly certified by
the Secretary of State of the jurisdiction of its incorporation,
together with a copy of the by-laws of each of the Borrower and the
Servicer, duly certified by the Secretary or an Assistant Secretary of
the Borrower or the Servicer, as applicable.
(iv) Resolutions. Copies of:
(1) resolutions of the Board of Directors of the
Borrower then in full force and effect authorizing or
ratifying the execution, delivery and performance of this
Agreement, the other Related Documents and those documents
and matters required of it with respect thereto, duly
certified by the Secretary or Assistant Secretary of the
Borrower; and
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(2) resolutions of the Board of Directors of the
Servicer then in full force and effect authorizing or
ratifying the execution, delivery and performance of this
Agreement, the other Related Documents and those documents
and matters required of it with respect thereto, duly
certified by the Secretary or Assistant Secretary of the
Servicer.
(v) Consents. Certified copies of all documents evidencing
any necessary corporate action, consents and governmental approvals
(if any) with respect to this Agreement.
(vi) Incumbency and Signatures. A certificate of the
Secretary or an Assistant Secretary of the Borrower and the Servicer
certifying as to the incumbency and names of the individual or
individuals authorized to sign this Agreement and the other Related
Documents to be executed by such party, together with a sample of the
true signature of each such individual (the Lender may conclusively
rely on each such certificate until formally advised by a like
certificate of any changes therein).
(vii) Opinions of Counsel. Opinions of counsel from counsel
acceptable to the Lender covering such matters as the Lender shall
request and satisfactory in form and substance to the Lender.
(viii) Good Standing Certificates. Certificates of good
standing for the Borrower and the Servicer in the jurisdiction of its
organization and the jurisdiction of its principal place of business.
(ix) Search Reports. A written search report from a Person
satisfactory to the Lender listing all effective financing statements
that name the Borrower or any Lessee as debtor or assignor and that
are filed in the jurisdictions in which filings are required to be
made pursuant to subsection (x) below, together with copies of such
financing statements, and tax and judgment lien search reports from a
Person satisfactory to the Lender showing no evidence of any tax or
judgment liens filed against the Borrower or any Lessee; provided that
the Borrower shall have until the close of business on March 10, 2000
to deliver such reports.
(x) Notation of Liens. Evidence (which, in the case of the
filing of financing statements on form UCC-1, may be telephonic
confirmation of such filing) that all filings (including filings of
financing statements on form UCC-1) and recordings have been
accomplished as may be required by law to establish, perfect, protect
and preserve the rights, titles, interests, remedies, powers,
privileges, licenses and security interest of (a) the Trustee in the
Group II Collateral for the benefit of the Secured Parties, (b) the
Trustee in the Series 2000-1 Collateral for the benefit of the Series
2000-1 Noteholders and (c) the Borrower in the Vehicles, Repurchase
Programs and proceeds thereof (to the extent the Group II Master Lease
is deemed not to constitute an
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operating lease); provided that the Borrower shall have until the
close of business on March 10, 2000 to deliver such evidence.
(xi) Consents, etc. All governmental and third party
approvals and consents necessary in connection with the Advances
(including the execution and delivery of this Agreement and each other
Related Document by each party hereto and thereto and their
performance of their respective obligations hereunder and thereunder)
and continuing operations of the Borrower and the Servicer (after
giving effect to the consummation of the Advances) shall have been
obtained and be in full force and effect (and, to the extent requested
by the Lender, the Lender shall have received true and correct copies
of such approvals and consents) and all applicable waiting periods
shall have expired without any action being taken or threatened by any
competent authority which would restrain, prevent or otherwise impose
adverse conditions on any aspect of the making of any Advances.
(xii) Fees. All fees due and payable pursuant to Section 2.9,
and all reasonable and appropriately invoiced costs and expenses of
the Lender payable by the Borrower in connection with the transactions
contemplated hereby.
(xiii) Closing Date Certificate. The Closing Date Certificate
or any substitute certificate or certificates in scope and substance
satisfactory to the Lender, dated the Closing Date and duly executed
and delivered by an Authorized Officer of the Borrower, in which
certificate the Borrower shall agree and acknowledge that the
statements made therein shall be deemed to be true and correct
representations and warranties of the Borrower made as of such date,
and, at the time such certificate is delivered, such statements shall
in fact be true and correct.
(xiv) Solvency Certificate. A certificate, dated the Closing
Date, and duly executed by a Financial Officer of the Borrower, in
scope and substance satisfactory to the Lender, to the effect that the
Borrower will be solvent after giving effect to the transactions
contemplated by this Agreement.
(xv) Certified Copy of Repurchase Program. A copy of each
Repurchase Program, if any, under which Group II Vehicles will be or
have been purchased for leasing under the Group II Master Lease and an
Officer's Certificate of the Borrower or the applicable Lessee, dated
the Closing Date, certifying that each such copy is true, correct and
complete as of the Closing Date.
(xvi) Additional Conditions. There shall have been satisfied
such other conditions as the Lender shall reasonably request.
(b) All Advances (including the Initial Advance) shall be subject to
the further conditions precedent that:
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(i) the Lender shall have received a completed and duly
executed Borrowing Request therefor in substantially the form attached
hereto as Exhibit D and a completed and duly executed Monthly
Servicer's Certificate and the Monthly Noteholders' Statement, each
for the Related Month immediately preceding the date of such
Borrowing, in each case, no later than 3:00 p.m. New York City time on
the Business Day preceding the Funding Date for such Advance;
(ii) on the Funding Date for such Advance, before and after
giving effect thereto, the following statements shall be true (and the
Borrower, by accepting the amount of such Advance, shall be deemed to
have represented and warranted that):
(A) the representations and warranties of the
Borrower set out in this Agreement;
(B) the representations and warranties of Budget
Group set out in this Agreement; and
(C) the representations and warranties of the
Borrower and Budget Group set out in the Base Indenture and
the other Related Documents,
shall, in each such case, be true and accurate as of the date of the Borrowing
with the same effect as though made on and with respect to that date (unless
specifically stated to relate to an earlier date);
(iii) the Series 2000-1 Rapid Amortization Period has not
commenced;
(iv) no Event of Default or, with respect to the Borrower or
the Servicer, Potential Event of Default has occurred and is
continuing or would result from the making of such Advance;
(v) all conditions specified in Section 2.1 of this
Agreement shall have been satisfied; and
(vi) the Lender shall have received such other documents and
instruments, and the Borrower and the Servicer shall have taken all
such other actions and delivered all such other instruments, documents
and agreements as the Lender shall reasonably request.
The delivery of any Borrowing Request pursuant to Section 2.2 shall
constitute a representation and warranty by the Borrower and the Servicer that
the foregoing statements are true.
Notwithstanding anything in this Agreement to the contrary, the Lender
shall have no obligation to fund an Advance if, as of the Funding Date for such
Advance, the Lender shall have received advice
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of counsel to the effect that funding such Advance would constitute a violation
of law or conflict with any material rule, regulation or order of any state or
federal court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Lender.
SECTION 2.18 Certain Waivers. The Borrower waives presentment, demand
for payment, notice of dishonor and protest, notice of the creation of any of
the Obligations of the Borrower or any other Obligor and all other notices
whatsoever to the Borrower with respect to such Obligations. The Obligations of
the Borrower under this Agreement and the Series 2000-1 Note shall not be
affected by (i) the failure of the Lender or the holder of the Series 2000-1
Note or holders of any such Obligations to assert any claim or demand or to
exercise or enforce (or cause the Trustee to exercise or enforce) any right,
power or remedy against the Borrower or the Collateral or otherwise, (ii) any
extension or renewal for any period (whether or not longer than the original
period) or exchange of any such Obligations or the release or compromise of any
obligation of any nature of any Person with respect thereto, (iii) the
surrender, release or exchange of all or any part of any property (including
the Collateral) securing payment and performance of any such Obligations or the
compromise or extension or renewal for any period (whether or not longer than
the original period) of any obligations of any nature of any Person with
respect to any such property, and (iv) any other act, matter or thing which
would or might, in the absence of this provision, operate to release, discharge
or otherwise prejudicially affect the Obligations of the Borrower.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 The Borrower. The Borrower hereby represents and warrants
to the Lender as of the Closing Date and each Funding Date that each of its
representations and warranties in the Base Indenture, the Group II Master Lease
and the other Related Documents is true and correct (which representations and
warranties are each hereby incorporated herein by reference, with the same
force and effect as if set forth in full herein) and further represents and
warrants that:
(a) Financial Information; Financial Condition. All balance
sheets, all statements of operations, statements of shareholders'
equity and cash flow, and other financial data (other than
projections) which have been or shall hereafter be furnished by the
Borrower to the Lender hereunder have been and will be prepared in
accordance with GAAP (to the extent applicable) and do and will
present fairly the financial condition of the entities involved as of
the dates thereof and the results of their operations for the periods
covered thereby, subject, in the case of all unaudited statements, to
normal year-end adjustments and lack of footnotes and presentation
items.
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(b) Solvency. Both before and after giving effect to the
transactions contemplated by this Agreement and the other Related
Documents, the Borrower is solvent and is not the subject of any
voluntary or involuntary case or proceeding seeking liquidation,
reorganization or other relief with respect to the Borrower or its
debts under any bankruptcy or insolvency law, or of any other event of
the type described in the definition of "Event of Bankruptcy."
(c) Miscellaneous. (i) No Amortization Event, Liquidation
Event of Default or Limited Liquidation Event of Default or event
which, with the giving of notice or the passage of time or both would
constitute any of the foregoing, has occurred and is continuing;
(ii) assuming the Lender is not purchasing with a
view toward further distribution and there has been no
general solicitation or general advertising within the
meaning of the Securities Act, the offer and sale of the
Series 2000-1 Note in the manner contemplated by this
Agreement is a transaction exempt from the registration
requirements of the Securities Act, and the Base Indenture is
not required to be qualified under the Trust Indenture Act of
1939, as amended; and
(iii) attached hereto as Exhibits A, B and C are
true, correct and complete copies of the Base Indenture, the
Group II Master Lease and the Series 2000-1 Supplement,
respectively, and the Borrower has furnished to the Lender
true, accurate and complete copies of all other Related
Documents (including all other series supplements) to which
it is a party as of the Series 2000-1 Issuance Date, all of
which agreements and Related Documents are in full force and
effect and no terms of any such agreements or documents have
been amended, modified or otherwise waived as of the Series
2000-1 Issuance Date.
(d) Principal Place of Business. The Borrower's chief
executive office is located at 4225 Naperville Road, Lisle, Illinois
60535-3662.
(e) Delivery of Assignment Agreements. It has delivered to
the Trustee Assignment Agreements covering all Group II Vehicles to be
financed, refinanced or acquired by it as Group II Repurchase Vehicles during
the term of this Agreement.
SECTION 3.2 Budget Group. Budget Group represents and warrants to the
Lender that:
(a) Accuracy of Representations and Warranties. Each
representation and warranty made by it in the Group II Master Lease
and each Related Document to which it is a party (including any
representations and warranties made by it as Servicer) is true and
correct in all material respects as of the date originally made and as
of the Closing Date (which representations and warranties are each
hereby incorporated herein by reference, with the same force and
effect as if set forth in full herein).
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(b) Financial Information; Financial Condition. The audited
financial statements and schedules of Budget Group and its
Subsidiaries for the period ended September 30, 1999 present fairly in
all material respects the financial position, results of operations
and cash flows of Budget Group at the dates and for the periods to
which they relate and have been prepared in accordance with GAAP
applied on a consistent basis, except as otherwise stated therein.
(c) Delivery of Assignment Agreements. It has delivered to
the Trustee Assignment Agreements covering all Group II Vehicles to be
financed, refinanced or acquired by the Borrower as Group II
Repurchase Vehicles during the term of this Agreement.
SECTION 3.3 The Lender. The Lender represents and warrants to the
Borrower and Budget Group, as of the date hereof (or as of a subsequent date on
which a successor as assignee of the Lender shall become a party hereto), that:
(a) it has had an opportunity to discuss the Borrower's and
Budget Group's business, management and financial affairs, and the
terms and conditions of the proposed purchase, with the Borrower and
Budget Group and their respective representatives;
(b) it is an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act
and has sufficient knowledge and experience in financial and business
matters to be capable of evaluating the merits and risks of investing
in, and is able and prepared to bear the economic risk of investing
in, the Series 2000-1 Note;
(c) it is purchasing the Series 2000-1 Note for its own
account, or for the account of one or more "accredited investors"
within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act that meet the criteria described in
subsection (b) and for which it is acting with complete investment
discretion, for investment purposes only and not with a view to
distribution, subject, nevertheless, to the understanding that the
disposition of its property shall at all times be and remain within
its control;
(d) it understands that the Series 2000-1 Note has not been
and will not be registered or qualified under the Securities Act or
any applicable state securities laws or the securities laws of any
other jurisdiction and is being offered only in a transaction not
involving any public offering within the meaning of the Securities Act
and may not be resold or otherwise transferred unless so registered or
qualified or unless an exemption from registration or qualification is
available, that the Borrower is not required to register the Series
2000-1 Note, and that any transfer must comply with provisions of
Section 2.9 of the Base Indenture;
(e) it understands that the Series 2000-1 Note will bear the
legend set forth in the form of Series 2000-1 Note attached as Exhibit
A to the Series 2000-1 Supplement and be subject to the restrictions
on transfer described in such legend;
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<PAGE> 31
(f) it will comply with all applicable federal and state
securities laws in connection with any subsequent resale by it of the
Series 2000-1 Note;
(g) it understands that the Series 2000-1 Note may be
offered, resold, pledged or otherwise transferred only (A) to the
Borrower, (B) in a transaction meeting the requirements of Rule 144A
under the Securities Act, (C) outside the United States to a foreign
person in a transaction meeting the requirements of Regulation S under
the Securities Act, or (D) in a transaction complying with or exempt
from the registration requirements of the Securities Act and, in each
case, in accordance with any applicable securities laws of any state
of the United States or any other jurisdiction;
(h) if it desires to offer, sell or otherwise transfer,
pledge or hypothecate the Series 2000-1 Note as described in clause
(B) or (D) of the preceding paragraph (g), the transferee of the
Series 2000-1 Note will be required to deliver a certificate and may
under certain circumstances be required to deliver an opinion of
counsel, in each case, as described in the Base Indenture, reasonably
satisfactory in form and substance to the Borrower, that an exemption
from the registration requirements of the Securities Act applies to
such offer, sale, transfer or hypothecation. Upon original issuance
thereof, and until such time as the same may no longer be required
under the applicable requirements of the Securities Act, the
certificate evidencing the Series 2000-1 Note (and all securities
issued in exchange therefor or in substitution thereof) shall bear a
legend substantially in the form that appears on the form of Series
2000-1 Note included in the Series 2000-1 Supplement. The Lender
understands that the registrar and transfer agent for the Series
2000-1 Note will not be required to accept for registration of
transfer the Series 2000-1 Note acquired by it, except upon
presentation of an executed certificate or opinion of counsel, as
described above; and
(i) it will obtain from any purchaser of the Series 2000-1
Note substantially the same representations and warranties contained
in the foregoing paragraphs.
ARTICLE IV
COVENANTS
SECTION 4.1 Affirmative Covenants. The Borrower and Budget Group each
severally covenants and agrees that, until the Series 2000-1 Note has been paid
in full and the obligation of the Lender to make Advances has terminated, it
will:
(a) duly and timely perform all of its covenants and
obligations under each Related Document to which it is a party and,
with respect to Budget Group, the Credit Agreement and each Loan
Document (as defined in the Credit Agreement) to which it is a party
(which
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covenants are each hereby incorporated herein by reference, with the
same force and effect as if set forth in full herein);
(b) at the same time any report, notice or other document is
provided to the Trustee, or caused to be provided, by the Borrower or
Budget Group under the Base Indenture (including, without limitation,
under Sections 8.3, 8.10, 8.11 and/or 8.14 thereof) or the Series
2000-1 Supplement, or by Budget Group to the Borrower under the Group
II Master Lease (including, without limitation, under Section 28.5
thereof), provide the Lender with a copy of such report, notice or
other document; provided, however, that neither Budget Group nor the
Borrower shall have any obligation under this Section 4.1(b) to
deliver to the Lender copies of any (i) Monthly Noteholders'
Statements which relate solely to a series of Notes other than the
Series 2000-1 Note or (ii) vehicle identification number listings;
(c) at any time and from time to time, following reasonable
prior notice from the Lender, and during regular business hours,
permit the Lender, or its agents, representatives or permitted
assigns, access to the offices of Budget Group and the Borrower, as
applicable, (i) to examine and make copies of and abstracts from all
documentation relating to the Collateral on the same terms as are
provided to the Trustee under Section 8.8 of the Base Indenture, as
applicable, and (ii) to visit the offices and properties of Budget
Group and the Borrower for the purpose of examining such materials
described in clause (i) above, and to discuss matters relating to the
Group II Collateral, or the administration and performance of the Base
Indenture, the Series 2000-1 Supplement and the other Related
Documents with any of the officers or employees of Budget Group and/or
the Borrower, as applicable, having knowledge of such matters;
(d) at any time during the Series 2000-1 Rapid Amortization
Period, upon the written request of the Lender in its sole discretion,
provide a Hedging Agreement, in form and substance satisfactory to the
Lender, and pay in full all amounts due and payable from time to time
thereunder;
(e) promptly furnish to the Lender such other information as
the Lender may reasonably request, in such form as the Lender may
reasonably request;
(f) do such further acts and things, and execute and deliver
to the Lender such additional assignments, agreements, powers and
instruments, as the Lender reasonably determines to be necessary to
carry into effect the purposes of this Agreement or to better assure
and confirm unto the Lender its rights, powers and remedies hereunder
or to enforce any right or remedy of the Borrower against the Lessees
or the Guarantor under the Group II Master Lease;
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(g) (i) provide the Lender with at least 30 days prior
written notice of its intention to purchase, finance or refinance
Group II Vehicles manufactured by any new Manufacturer, (ii) provide
the Lender with a copy of the draft Repurchase Program of such
Manufacturer as it then exists at the time of such notice and a copy
of the final Repurchase Program promptly upon its being available and
(iii) certify to the Lender that such new Manufacturer is an Eligible
Manufacturer and, if the Borrower intends to purchase, finance or
refinance Group II Repurchase Vehicles from such Manufacturer, that
such Repurchase Program is an Eligible Repurchase Program at such
time; and
(h) use commercially reasonable efforts (i) to cause each
applicable Lessee to maintain good, legal and marketable title to all
Financed Vehicles that are Group II Vehicles owned by such Lessee,
free and clear of all Liens except for Permitted Liens and (ii) to
cause Borrower to maintain good, legal and marketable title to the
Initial Fleet and all Lessor-Owned Vehicles that are Group II
Vehicles, free and clear of all Liens except for Permitted Liens.
(i) cooperate with the Lender, and each counsel delivering a
legal opinion requested by the Lender or any rating agency delivering
a confirmation of its rating of any Notes issued by the Borrower
pursuant to the Indenture, in providing such information and
certifications and making such changes or amendments to this Agreement
and the Related Documents as such counsel reasonably requests in order
to provide such opinion.
(j) deliver opinions of counsel in form and substance
satisfactory to the Lender with respect to (i) corporate matters of
the Borrower, Budget Group and the Lessees, (ii) Virginia state tax
matters and (iii) matters relating to the Florida general intangibles
tax.
SECTION 4.2 Negative Covenants. The Borrower will not and Budget Group
will cause the Borrower not to:
(a) (i) permit the validity or effectiveness of this Agreement
or of any Lien in favor of the Trustee, the Lessor or the Secured
Parties arising under the Group II Master Lease or the Series 2000-1
Supplement to be impaired, or permit the Lien of the Trustee on behalf
of the Lender or any such other Lien to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations under this Agreement or any
Related Document except as may be expressly permitted hereby, or (ii)
permit the Lien of the Trustee on behalf of the Lender not to
constitute a valid first priority perfected security interest in the
Collateral;
(b) issue or register the transfer of any of its Capital
Stock to any Person other than Budget Group;
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(c) except as may be permitted by the express written
approval of the Lender, merge with or into, enter into any joint
venture or other association with, or consolidate with, any other
Person;
(d) agree, to the extent any consent of the Borrower is
solicited or required by the Manufacturer or any assignor of any
Repurchase Program, to any change in any Repurchase Program that is
reasonably likely to materially adversely affect its rights or the
rights of the Secured Parties with respect to any Group II Vehicle
previously purchased under such Repurchase Program; and
(e) except as contemplated by Section 3.2(a) of the Base
Indenture with respect to the Group II Master Lease or clauses (c)
through (h) of Section 12.1 of the Base Indenture, amend or otherwise
modify the Base Indenture or any Related Document to which it is a
party or grant any waiver or consent thereunder, without the prior
written consent of the Lender.
SECTION 4.3 Information as to the Borrower. The Borrower shall file
with the Lender:
(a) within 15 days after it files them with the Commission,
copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as
the Commission may by rules and regulations prescribe) which the
Servicer is required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act;
(b) immediately upon becoming aware of the existence of any
condition or event which constitutes a Potential Event of Default or
an Event of Default, a written notice describing its nature and period
of existence and what action the Borrower is taking or proposes to
take with respect thereto; and
(c) promptly upon the Borrower's becoming aware of:
(i) any proposed or pending investigation of it by
any Governmental Authority or agency, or
(ii) any pending or proposed court or administrative
proceeding
which involves or may involve the possibility, individually or in the
aggregate, of a material adverse effect on the properties, business,
profits or condition (financial or otherwise) of the Borrower or the
validity or enforceability of the Related Documents, a written notice
specifying the nature of such investigation or proceeding and what
action the Borrower is taking or proposes to take with respect thereto
and evaluating its merits.
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SECTION 4.4 Payment of Taxes and Other Claims. The Borrower will pay
or discharge or cause to be paid or discharged, before any penalty accrues from
the failure to so pay or discharge, (1) all taxes, assessments and governmental
charges levied or imposed upon the Borrower or upon the income, profits or
property (including any property that is part of the Collateral) of the
Borrower and (2) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a Lien upon the property of the Borrower; provided,
however, that the Borrower shall not be required to pay or discharge or cause
to be paid or discharged any such tax, assessment, charge or claim the amount,
applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate provision has been made or where
the failure to effect such payment or discharge is not adverse in any material
respect to the Lender. The Borrower and Budget Group are members of an
affiliated group within the meaning of Section 1504 of the Code which has
filed, and will continue to file, a consolidated return for federal income tax
purposes, and the Borrower shall be included in consolidated federal income tax
returns filed by Budget Group for such affiliated group.
SECTION 4.5 Indemnification. In consideration of the execution and
delivery of this Agreement by the Lender and the extension of the Commitment
hereunder, the Borrower and Budget Group, jointly and severally, hereby
indemnify, exonerate and hold the Lender, each SPC, and each of the officers,
directors, employees and agents of each of them (collectively, the "Indemnified
Parties") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such Indemnified Party is a
party to the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements whether incurred in connection
with actions between or among the parties hereto or the parties hereto and
third parties (collectively, the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Advance,
including all Indemnified Liabilities arising in connection with the
transactions contemplated under the Related Documents;
(b) the entering into and performance of this Agreement and
any other Related Document by any of the Indemnified Parties
(including any action brought by or on behalf of the Borrower as the
result of any determination by the Lender pursuant to Article II not
to fund any Advance; provided that any such action is resolved by
final judgment of a court of competent jurisdiction in favor of such
Indemnified Party);
(c) any investigation, litigation or proceeding related to
any acquisition or proposed acquisition by Budget Group or any of its
Subsidiaries of all or any portion of the Capital Stock or assets of
any Person, whether or not the Lender is party thereto;
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(d) any investigation, litigation or proceeding related to
any environmental cleanup, audit, compliance or other matter relating
to the protection of the environment or the Release by Budget Group or
any of its Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releases from,
any real property owned or operated by Budget Group or any Subsidiary
thereof of any Hazardous Material (including any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under
any Environmental Law), regardless of whether caused by, or within the
control of, Budget Group or such Subsidiary;
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or willful misconduct or a breach by such Indemnified Party
(or its agents or employees or any other Person under its control) of any of
its obligations under this Agreement, as determined by a final judgment of a
court of competent jurisdiction. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower and Budget Group,
jointly and severally, hereby agree to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Provided, however, the indemnification
provided under this Section 4.5 is not intended to create credit recourse to
Budget Group for the Borrower's failure to repay any principal of or interest
on any Advance.
SECTION 4.6 Maintenance of Separate Existence. Each of the Borrower
and Budget Group acknowledges its receipt of a copy of that certain opinion
letter issued by Mayer, Brown & Platt, dated February 25, 2000, and addressing
the issue of substantive consolidation as it may relate to it. Each of the
Borrower and Budget Group hereby agrees to maintain in place all policies and
procedures, and take and continue to take all actions, described in the factual
assumptions set forth in such opinion letter and relating to it.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.1 Events of Default. Each of the following events or
occurrences described in this Section 5.1 shall constitute an "Event of
Default":
(a) Non-Payment of Obligations. The Borrower shall (a) fail
to make a payment of principal of any Advance and such failure shall
continue for one Business Day (with respect to payments due on the
Maturity Date) or for two Business Days (with respect to principal
payments due on any date other than the Maturity Date); or (b) fail to
make a payment of any
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interest on any Advance, any fees or any other amounts payable
hereunder on the date on which such payment is due and such failure
shall continue for five days.
(b) Breach of Warranty. Any representation or warranty made
by the Borrower or Budget Group herein or in any other Related
Document to which it is a party shall have been incorrect as of the
date such representation or warranty is made and such representation
or warranty shall continue to be incorrect for a period of 30 days
after the earlier of (i) the date on which written notice thereof
shall have been given to the Borrower by the Lender and (ii) the date
on which the Borrower or Budget Group obtains actual knowledge
thereof, or any certificate, financial statement or any other material
writing furnished by the Borrower or Budget Group pursuant to this
Agreement or any such other Related Document shall have been incorrect
in any material respect when made (or deemed made) and such
certificate, statement or other writing shall continue to be incorrect
in any material respect for a period of 10 days (other than with
respect to any Officer's Certificate with respect to the Series 2000-1
Aggregate Asset Amount or the absence of a Series 2000-1 Asset Amount
Deficiency, for which such period is one Business Day) after the
earlier of (a) the date on which written notice thereof shall have
been given to the Borrower by the Lender and (b) the date on which the
Borrower or Budget Group obtains actual knowledge thereof.
(c) Non-Performance of Certain Covenants and Obligations. The
Borrower or Budget Group shall default in the due performance and
observance of any of its obligations under Sections 8.15 through 8.25
of the Base Indenture, Section 29 of the Group II Master Lease or
Section 4.2 hereof and such default shall continue unremedied for a
period of ten days after the earlier of (i) the date on which written
notice thereof shall have been given to the Borrower or Budget Group
by the Lender and (ii) the date on which the Borrower or Budget Group
obtains actual knowledge thereof.
(d) Non-Performance of Other Covenants and Obligations. The
Borrower or Budget Group shall default in the due performance and
observance of any covenant or agreement contained herein or in any
other Related Document to which it is a party (other than those
specified in clauses (a), (b) and (c) above or in clause (j) below),
and, in the case of defaults other than with respect to Section 4.3(b)
or 4.3(c), such default shall continue unremedied for a period of 30
days after notice thereof shall have been given to the Borrower or
Budget Group by the Lender or, in the case of Section 4.3(b) or
4.3(c), such default shall continue unremedied for a period of 30 days
after the Borrower or Budget Group initially becomes aware of such
failure to perform or comply with such covenant.
(e) Judgments. Any final and unappealable (or, if capable of
appeal, such appeal is not being diligently pursued or enforcement
thereof has not been stayed) judgment or order for the payment of
money in excess of $100,000, shall be rendered against the Borrower
and such judgment or order shall continue unsatisfied and unstayed for
a period of 60 consecutive days.
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(f) Bankruptcy, Insolvency, etc. The occurrence of any Event
of Bankruptcy with respect to the Borrower, Budget Group or any
Lessee.
(g) Independent Directors. The Borrower shall fail to have at
least one Independent Director (as such term is defined in the
Borrower's then effective certificate of incorporation) on its board
of directors and such failure shall have continued for a period of 30
days.
(h) Enforceability of or Default under Related Documents. (a)
Any of the Related Documents or any portion thereof shall not be in
full force and effect, enforceable in accordance with its terms or the
Borrower, Budget Group or any Manufacturer shall so assert in writing,
(b) any Lease Event of Default shall occur under the Group II Master
Lease, or (c) any Amortization Event with respect to the Series 2000-1
Note, as defined in Section 9.1 of the Base Indenture and Article 7 of
the Series 2000-1 Supplement, shall occur.
(i) Investment Company. The Borrower shall have become an
"investment company" or shall have become under the "control" of an
"investment company" under the Investment Company Act.
(j) Opinions of Counsel. The Borrower shall fail (i) to
provide within 3 Business Days of request by counsel any information
or certification which is reasonably requested by legal counsel as
contemplated in Section 4,1(i), (ii) to cooperate in good faith in
making any change or amendment to this Agreement or any Related
Documents, which is reasonably requested by legal counsel as
contemplated in Section 4,1(i) or (iii) to deliver on or before the
close of business on March 10, 2000 any opinion of counsel required to
be delivered pursuant to Section 4.1(j).
SECTION 5.2 Remedies Upon Default. During the continuance of one or
more Events of Default the Lender may, by notice to the Borrower and the
Trustee, immediately declare the Maturity Date to have occurred and the
principal of the Series 2000-1 Note to be immediately due and payable, together
with all interest thereon and fees, expenses and other amounts owing under this
Agreement, and declare the Commitment hereunder (if not theretofore terminated)
to be terminated; provided that, upon the occurrence of the Event of Default
referred to in Section 5.1(f), such amounts shall immediately and automatically
become due and payable and the Commitment (if not theretofore terminated) shall
immediately and automatically be terminated without any further action by any
Person or entity. Upon such declaration or such automatic acceleration, the
balance then outstanding on the Series 2000-1 Note, all accrued and unpaid
interest thereon and all fees, expenses and other amounts due to the Lender or
an SPC under this Agreement shall become immediately due and payable without
presentation, demand or further notice of any kind to the Borrower, subject to
Section 6.12 hereof.
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SECTION 5.3 No Waiver. The failure to exercise any of the rights and
remedies set forth in this Agreement shall not constitute a waiver of the right
to exercise the same or any other option at any subsequent time in respect of
the same Event of Default or any other Event of Default. The acceptance by the
Lender of any payment hereunder which is less than payment in full of all
amounts due and payable at the time of such payment shall not constitute a
waiver of the right to exercise any of the foregoing rights and remedies at
that time or at any subsequent time or nullify any prior exercise of any such
rights and remedies without the express consent of Lender, except as and to the
extent otherwise provided by law.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 No Amendments. No amendment to or waiver of any provision
of this Agreement, nor consent to any departure by Budget Group or the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Budget Group, the Borrower and the Lender. A copy of any
amendment shall be furnished by the Borrower to the Trustee.
SECTION 6.2 No Waiver; Remedies. Any waiver, consent or approval given
by any party hereto shall be effective only in the specific instance and for
the specific purpose for which given, and no waiver by a party of any breach or
default under this Agreement shall be deemed a waiver of any other breach or
default. No failure on the part of any party hereto to exercise, and no delay
in exercising, any right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right hereunder, or any abandonment or
discontinuation of steps to enforce the right, power or privilege, preclude any
other or further exercise thereof or the exercise of any other right. No notice
to or demand on any party hereto in any case shall entitle such party to any
other or further notice or demand in the same, similar or other circumstances.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
SECTION 6.3 Binding on Successors and Assigns. (a) This Agreement shall
be binding upon, and inure to the benefit of the Borrower, the Servicer and the
Lender and their respective successors and assigns; provided, however, that
neither the Borrower nor the Servicer may assign its rights or obligations
hereunder or in connection herewith or any interest herein (voluntarily, by
operation of law or otherwise) without the prior written consent of the Lender;
and provided, further, that, except as otherwise contemplated in Section 2.6,
the Lender may not transfer, pledge, assign or otherwise encumber its rights or
obligations hereunder or in connection herewith or any interest herein without
the prior written consent of the Borrower (which consent shall not be
unreasonably delayed or withheld and which consent (i) shall be deemed to have
been given in the absence of a written notice delivered by the Borrower to the
Lender, on or before the fifth Business Day after receipt by the Borrower of
the Lender's request for consent, stating, in reasonable detail, the reasons
why the Borrower proposes to
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withhold such consent and (ii) shall not be required if an Event of Default has
occurred and is then continuing), except to an Affiliate thereof which is an
Eligible Assignee or as otherwise permitted under this Section 6.3. Nothing
expressed herein is intended or shall be construed to give any Person other
than the Persons referred to in the preceding sentence any legal or equitable
right, remedy or claim under or in respect of this Agreement.
(b) Notwithstanding any other provision set forth in this Agreement,
the Lender may at any time grant to one or more commercial banks or other
financial institutions (each of such commercial banks and other financial
institutions being herein called a "Participant") a participating interest in
or lien on the Lender's interests in the Advances made hereunder and such
Participant, with respect to its participating interest, shall be entitled to
the benefits of the Lender under this Agreement.
SECTION 6.4 Survival of Agreement. All covenants, agreements,
representations and warranties made herein and in the Series 2000-1 Note
delivered pursuant hereto shall survive the making and the repayment of the
Advances and the execution and delivery of this Agreement and the Series 2000-1
Note and shall continue in full force and effect until all interest and
principal on the Series 2000-1 Note and other amounts owed hereunder have been
paid in full and the commitment of the Lender hereunder has been terminated. In
addition, the obligations of the Borrower under Sections 2.11 through 2.16, 4.5
and 6.5 shall survive the expiration or other termination of this Agreement.
SECTION 6.5 Payment of Costs and Expenses. The Borrower and Budget
Group, jointly and severally, agree to pay on demand all expenses of the Lender
(including the reasonable fees and out-of-pocket expenses of rating agencies,
counsel to the Lender and local counsel, if any, who may be retained by counsel
to the Lender) in connection with
(a) the negotiation, preparation, execution, delivery and
administration of this Agreement and of each other Related Document, including
schedules and exhibits, and any amendments, waivers, consents, supplements or
other modifications to this Agreement or any other Related Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby or thereby are consummated;
(b) the filing, recording, refiling or rerecording of any Related
Document and/or any Uniform Commercial Code financing statements relating
thereto and all amendments, supplements, amendments and restatements and other
modifications to any thereof and any and all other documents or instruments of
further assurance required to be filed or recorded or refiled or rerecorded by
the terms hereof or the terms of any Related Document;
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Related Document; and
(d) the transactions contemplated by this Agreement and any of the
other Related Documents.
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The Borrower and Budget Group, jointly and severally, further agree to pay, and
to save the Lender harmless from all liability for, any stamp, issuance, excise
or other similar taxes which may be payable in connection with the execution or
delivery of this Agreement, the Advances hereunder, the issuance of the Series
2000-1 Note or any other Related Documents. The Borrower and Budget Group,
jointly and severally, also agree to reimburse the Lender upon demand for all
reasonable out-of-pocket expenses (including reasonable attorneys' fees and
legal expenses) incurred by the Lender in connection with (x) the negotiation
of any restructuring or "work-out", whether or not consummated, of any
Obligations and (y) the enforcement of any Obligations.
SECTION 6.6 Characterization as Related Document; Entire Agreement.
This Agreement shall be deemed to be a Related Document for all purposes of the
Base Indenture and the other Related Documents. This Agreement, together with
the Base Indenture, the Series 2000-1 Supplement, the documents delivered
pursuant to Section 2.17 and the other Related Documents, including the
exhibits and schedules thereto, contains a final and complete integration of
all prior expressions by the parties hereto with respect to the subject matter
hereof and shall constitute the entire agreement among the parties hereto with
respect to the subject matter hereof, superseding all previous oral statements
and other writings with respect thereto.
SECTION 6.7 Notices. All communications hereunder shall be in writing
(except that notices pursuant to Sections 2.1, 2.2, 2.5 and 2.7 may be given by
telephone promptly confirmed in writing or by facsimile transmission) and shall
be deemed to have been duly given if personally delivered, sent by overnight
courier or mailed by registered mail, postage prepaid and return receipt
requested, or transmitted by telex or facsimile transmission and confirmed by a
similar mailed writing to any party at the address for that party set forth (a)
on the signature page to this Agreement or (b) to another address as that party
may designate in writing to the Borrower.
SECTION 6.8 Severability of Provisions. Any covenant, provision,
agreement or term of this Agreement that is prohibited or is held to be void or
unenforceable in any jurisdiction shall, as to such provision and that
jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 6.9 Counterparts. This Agreement may be executed in any number
of counterparts (which may include facsimile) and by the different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original, and all of which together shall constitute one and the same
instrument.
SECTION 6.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAWS PRINCIPLES THEREOF
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EXCEPT AS OTHERWISE CONTEMPLATED IN SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK.
SECTION 6.11 Tax Characterization. Each party to this Agreement (a)
acknowledges that it is the intent of the parties to this Agreement that, for
accounting purposes and for all Federal, state and local income and franchise
tax purposes, the Series 2000-1 Note will be treated as evidence of
indebtedness issued by the Borrower, (b) agrees to treat the Series 2000-1 Note
for all such purposes as indebtedness and (c) agrees that the provisions of the
Related Documents shall be construed to further these intentions.
SECTION 6.12 No Proceedings; Limited Recourse. Each of Budget Group
and the Lender (solely in its capacity as such) hereby covenants and agrees
that it will not institute against the Borrower, or join any other Person in
instituting against the Borrower, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding so long as any Notes issued by the
Borrower pursuant to the Base Indenture shall be outstanding or there shall not
have elapsed one year plus one day since the last day on which any such Notes
shall have been outstanding, all as more particularly set forth in Section
13.17 of the Base Indenture and subject to any retained rights set forth
therein. In addition, each of the foregoing parties agree that all fees,
expenses and other costs payable hereunder by the Borrower shall be payable
only to the extent set forth in Section 13.18 of the Base Indenture and that
all other amounts owed to them by the Borrower shall be payable solely from
amounts that become available for payment pursuant to the Base Indenture and
the Series 2000-1 Supplement.
SECTION 6.13 Confidentiality. The Lender shall hold all non-public
information provided to them by Budget Group or any of its Subsidiaries
pursuant to or in connection with this Agreement (excluding any information
that becomes available to the Lender on a nonconfidential basis without
violation of this Section) in accordance with the Lender's customary procedures
for handling confidential information of this nature, but may make disclosure
to any of its examiners, regulators (including the National Association of
Insurance Commissioners), Affiliates, outside auditors, counsel and other
professional advisors in connection with this Agreement or any other Related
Document or as reasonably required by any potential bona fide transferee,
participant or assignee, or in connection with the exercise of remedies under a
Related Document, or as requested by any governmental agency or representative
thereof or pursuant to legal process or in connection with applicable
litigation; provided, however, that unless specifically prohibited by
applicable law or court order, the Lender shall promptly notify the Borrower of
any request by any governmental agency or representative thereof (other than
any such request in connection with an examination of the financial condition
of the Lender by such governmental agency) for disclosure of any such
non-public information and, where practicable, prior to disclosure of such
information; prior to any such disclosure pursuant to this Section 6.13, the
Lender shall require any such bona fide transferee, participant and assignee
receiving a disclosure of non-public information to agree, for the benefit of
Budget Group and its Subsidiaries, in writing to be bound by this Section 6.13;
and to require such Person to require any other Person to whom such Person
discloses such non-public information to be similarly bound by this Section
6.13; and except as may be
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required by an order of a court of competent jurisdiction and to the extent set
forth therein, the Lender shall not be obligated or required to return any
materials furnished by Budget Group or any of its Subsidiaries.
SECTION 6.14 Lender May Act Through Affiliates or Agents. The Lender
may, from time to time, designate one or more Affiliates or agents for the
purpose of performing any action hereunder.
SECTION 6.15 Other Transactions. Nothing contained herein shall
preclude the Lender from engaging in any transaction, in addition to those
contemplated by this Agreement or any other Related Document, with the Borrower
or any of its Affiliates in which the Borrower or such Affiliate is not
restricted hereby from engaging in with any other Person.
SECTION 6.16 Independence of Covenants. All covenants contained in
this Agreement and each other Related Document shall be given independent
effect such that, in the event a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not, unless expressly so provided in such first covenant, avoid the occurrence
of a Potential Event of Default or an Event of Default if such action is taken
or such condition exists.
SECTION 6.17 Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER RELATED DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE LENDER, THE
SERVICER OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
LENDER'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR
OTHER PROPERTY MAY BE FOUND. EACH OF THE BORROWER AND THE SERVICER HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. EACH OF THE BORROWER AND THE SERVICER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH
OF THE BORROWER AND THE SERVICER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
-39-
<PAGE> 44
WHICH SUCH PERSON MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT
THAT THE BORROWER OR THE SERVICER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE) WITH RESPECT TO SUCH PERSON OR THE PROPERTY OF SUCH PERSON, SUCH
PERSON HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF THE OBLIGATIONS OF
SUCH PERSON UNDER THIS AGREEMENT AND THE OTHER RELATED DOCUMENTS.
SECTION 6.18 Waiver of Jury Trial. THE LENDER, THE SERVICER AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER
RELATED DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE LENDER, THE SERVICER OR THE
BORROWER. EACH OF THE BORROWER AND THE SERVICER ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS
AGREEMENT AND EACH SUCH OTHER RELATED DOCUMENT.
SECTION 6.19 Third-Party Beneficiaries. Each SPC and its successors
and assigns shall be a third-party beneficiary to the provisions of this
Agreement, and shall be entitled to rely upon and directly enforce the
provisions of this Agreement.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
-40-
<PAGE> 45
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written:
TEAM FLEET FINANCING CORPORATION,
as Borrower
By: /s/ Mark Bobek
---------------------------------------
Name: Mark Bobek
Title: President
Address:
Telephone:
BUDGET GROUP, INC., as Servicer
By: /s/ Sheri Young
---------------------------------------
Name: Sheri Young
Title: Vice President
Address:
Telephone:
Telecopier:
<PAGE> 46
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as Lender
By: /s/ Anthony Giordano
---------------------------------------
Name: Anthony Giordano
Title: Vice President
By: /s/ Elizabeth Whalen
---------------------------------------
Name: Elizabeth Whalen
Title: Associate
Domestic Office
Address: Eleven Madison Avenue
New York, NY 10010-3629
Attention: Elizabeth Whalen
Telephone: (212) 325-9105
Telecopier: (212) 325-6677
Eurodollar Office
Address: Eleven Madison Avenue
New York, NY 10010-3629
Attention: Elizabeth Whalen
Telephone: (212) 325-9105
Telecopier: (212) 325-6677
<PAGE> 47
EXHIBIT A
BASE INDENTURE
<PAGE> 48
EXHIBIT B
Group II MASTER LEASE
<PAGE> 49
EXHIBIT C
SERIES 2000-1 SUPPLEMENT
<PAGE> 50
EXHIBIT D
FORM OF BORROWING REQUEST
Credit Suisse First Boston,
New York Branch
Eleven Madison Avenue
20th Floor
New York, NY 10010-3629
Attention: Elizabeth Whalen
BORROWING REQUEST
Gentlemen and Ladies:
This Borrowing Request is delivered to you pursuant to Section 2.2 of
the Bridge Loan Agreement, dated as of February 25, 2000 (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
"Bridge Loan Agreement"), among TEAM FLEET FINANCING CORPORATION, a Delaware
corporation (the "Borrower"), BUDGET GROUP, INC. (the "Servicer") and CREDIT
SUISSE FIRST BOSTON, NEW YORK BRANCH (the "Lender"). Unless otherwise defined
herein or the context otherwise requires, terms used herein have the meanings
provided in the Bridge Loan Agreement.
The Borrower hereby requests that an Advance be made in the aggregate
principal amount of $__________ on __________, __ as [a Eurodollar Advance
having an Interest Period expiring on _______](1) [an ABR Advance].
The Borrower hereby acknowledges that, pursuant to Section 2.17 of the
Bridge Loan Agreement, each of the delivery of this Borrowing Request and the
acceptance by the Borrower of the proceeds of the Advances requested hereby
constitute a representation and warranty by the Borrower that, on the date of
the making of such Advances, and before and after giving effect thereto and to
the application of the proceeds therefrom, all statements set forth in Section
2.17(b)(ii) are true and correct in all material respects.
The Borrower agrees that if prior to the time of the Borrowing
requested hereby any matter certified to herein by it will not be true and
correct at such time as if then made, it will immediately so notify the Lender.
Except to the extent, if any, that prior to the time of the Borrowing requested
hereby
- ---------
(1)Fill in next Distribution Date.
<PAGE> 51
the Lender shall receive written notice to the contrary from the Borrower, each
matter certified to herein shall be deemed once again to be certified as true
and correct at the date of such Borrowing as if then made.
Please wire transfer the proceeds of the Borrowing to the Series
2000-1 Collection Account maintained at the financial institutions indicated
respectively:
<TABLE>
<CAPTION>
Person to be Paid
-------------------------------
Amount to be
Transferred Name Account No.
<S> <C> <C>
$---------- ---------- -----------
</TABLE>
The Borrower has caused this Borrowing Request to be executed and
delivered, and the certification and warranties contained herein to be made, by
its duly Authorized Officer this ____ day of __________, ____.
TEAM FLEET FINANCING CORPORATION
By
-------------------------------------
Name:
Title:
<PAGE> 52
EXHIBIT E
FORM OF CLOSING DATE CERTIFICATE
TEAM FLEET FINANCING CORPORATION
CLOSING DATE CERTIFICATE
The undersigned, the ____________ of Team Fleet Financing Corporation,
a Delaware corporation ("TFFC"), pursuant to Section 2.17(a)(xiii) of that
certain Bridge Loan Agreement, dated as of February 25, 2000 (the "Bridge Loan
Agreement"), among TFFC, Budget Group, Inc., and Credit Suisse First Boston,
New York Branch, does hereby certify that as of the date hereof:
1. The representations and warranties of TFFC in the Bridge Loan
Agreement and each of the Related Documents to which TFFC is a party are true
and correct (in all material respects to the extent such representations and
warranties do not incorporate a materiality limitation in their terms) on the
date hereof as though made on and as of the date hereof. TFFC has duly
performed, in all material respects, all obligations required to be performed
by it on or prior to the date hereof, and has satisfied, in all material
respects, all conditions to be satisfied by it, in each case, pursuant to the
terms of the Bridge Loan Agreement and each of the Related Documents to which
TFFC is a party.
2. No Event of Default or, to the best of the undersigned's knowledge
with respect to the Borrower or the Servicer, Potential Event of Default, has
occurred and is continuing.
Capitalized terms used herein and not defined herein shall have the
meaning assigned to such terms in the Bridge Loan Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as
of this __ day of February, 2000.
TEAM FLEET FINANCING CORPORATION
By:
---------------------------------------
Name:
Title:
<PAGE> 53
EXHIBIT F
FORM OF CONTINUATION/CONVERSION NOTICE
Credit Suisse First Boston,
New York Branch
Eleven Madison Avenue
20th Floor
New York, NY 10010-3629
Attention: Elizabeth Whalen
CONTINUATION/CONVERSION NOTICE
Gentlemen and Ladies:
This Continuation/Conversion Notice is delivered to you pursuant to
Section 2.5 of the Bridge Loan Agreement, dated as of February 25, 2000 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Bridge Loan Agreement"), among TEAM FLEET FINANCING CORPORATION, a
Delaware corporation (the "Borrower"), BUDGET GROUP, INC. (the "Servicer") and
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH (the "Lender"). Unless otherwise
defined herein or the context otherwise requires, terms used herein have the
meanings provided in the Bridge Loan Agreement.
The Borrower hereby requests that on ___________ __, 20__,
(1) $_____________ of the presently outstanding principal
amount of the Advances originally made on _________ __, ____ [and
$_____________ of the presently outstanding principal amount of the
Advances originally made on _________ __, ____],
(2) and all presently being maintained as [ABR Advances]
[Eurodollar Advances],
(3) be [converted into] [continued as],
(4) [Eurodollar Advances having an Interest Period of one
month] [ABR Advances].
The Borrower hereby:
<PAGE> 54
(a) certifies and warrants that no Event of Default [or
Potential Event of Default] has occurred and is continuing; and
(b) agrees that if prior to the time of such continuation
or conversion any matter certified to herein by it will not be true
and correct at such time as if then made, it will immediately so
notify the Lender.
Except to the extent, if any, that prior to the time of the continuation or
conversion requested hereby the Lender shall receive written notice to the
contrary from the Borrower, each matter certified to herein shall be deemed to
be certified at the date of such continuation or conversion as if then made.
The Borrower has caused this Continuation/Conversion Notice to be
executed and delivered, and the certification and warranties contained herein
to be made, by its Authorized Officer this ____ day of _________________,
_____.
TEAM FLEET FINANCING CORPORATION
By
----------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION NAMES UNDER WHICH
SUBSIDIARY OF INCORPORATION DOING BUSINESS
- ---------- ---------------- -----------------
<S> <C> <C>
Budget Rent A Car Corporation Delaware
Reservation Services, Inc. Texas
Team Realty Services, Inc. Delaware
Budget Rent A Car of Canada Limited Canada
Team Fleet Services Corporation Delaware
Team Fleet Financing Corporation Delaware
Budget Rent A Car Systems, Inc. Delaware
BRAC SOCAL Funding Corporation Delaware
VPSI, Inc. Delaware
Budget Fleet Finance Corporation Delaware
Budget Funding Corporation Delaware
NYRAC, Inc. New York
Dayton Auto Lease Company, Inc. Delaware
Mosiant Car Sales, Inc. Louisiana
Team Holdings Corporation Illinois
BRAC Reinsurance Company Ltd. Bermuda
Control Risk Corporation Illinois
Philip Jacobs Insurance Agency, Inc. California
BRAC Credit Corporation Delaware
Budget Car Sales, Inc. (formally known as Team Car Sales, Inc.) Indiana
IN Motors VI, LLC Indiana Budget Car Sales
TSC Properties, LLC Indiana
Team Car Sales of Philadelphia, Inc. Delaware Budget Car Sales
Team Car Sales of Richmond, Inc. Delaware Budget Car Sales
Team Car Sales of San Diego, Inc. Delaware
Team Car Sales of Dayton, Inc. Delaware Budget Car Sales
Team Car Sales of Charlotte, Inc. Delaware Budget Car Sales
Team Car Sales of Southern California, Inc. Delaware
Budget Sales Corporation Delaware
Budget Rent a Car International, Inc. Delaware
Budget Rent a Car Expana, S.A. Spain
Budget Rent a Car, Ltd., Ireland England
BRACRENT, S.A. Spain
BTI (U.K.) plc England
Budget Locacao de Veiculos Ltda Brazil
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
Budget Rent a Car Limited New Zealand
Target Rent a Car Limited New Zealand
Budget Lease Management (Car Sales) Limited New Zealand
Budget Rent a Car of Japan, Inc. (formerly BRAC of Japan, Inc.) Delaware
Budget Rent a Car Asia-Pacific, Inc. (formally BRAC RPS, Inc., Delaware
formally Budget Leasing Corporation)
Budget Rent a Car Australia Pty. Limited Australia
Budget Rent a Car Operations Pty. Limited Australia
Societe Financiere et de Participation France
Budget France, S.A. France
Financiere Orix France
S.A. Groupe Collinet France
Budget Nice S.A. France
Cariex Sarl France
B.R.C. S.A. France
Budget Italia S.p.A. Italy
Budget Rent a Car of St. Louis, Inc. Missouri
Premier Car Rental LLC Georgia
Budget Rent a Car Company GmbH Germany
Cruise America, Inc. Florida
BGI Airport Parking, Inc. Delaware
BGI Shared Services, Inc. Delaware
BGI Shared Services, LLC Delaware
Budget Deutschland GmbH Germany
Budget Group Capital Trust Delaware
Ritz Services, Inc. Florida Granada Travel Agency
Ryder TRS, Inc. Delaware
Ryder Truck Rental-One Way, Inc. Delaware
RCTR, Inc. Delaware
Ryder Move Management, Inc. Oregon
Mastering the Move Realty, Inc. Florida
The Move Shop, Inc. Florida
Ryder Relocation Services, Inc. Florida
Budget Storage Corporation Delaware
Carson Chrysler Plymouth Dodge Jeep Eagle, Inc. Indiana
Paul West Ford, Inc. Florida
Warren Wooten Ford, Inc. Florida
Directors Row Management Company, LLC Indiana
ValCar Rental Car Sales, Inc. Indiana
Budget Rent-A-Car of the Midwest, Inc. Missouri
BVM, Inc. Ohio
Vipre B.V. The Netherlands
</TABLE>
-3-
<PAGE> 3
<TABLE>
<S> <C> <C>
Budget Rent a Car Caribe Corporation Delaware
Budget Leasing Ltd. England
BRAC Limited (Scotland) Scotland
Avenir Location S.A. France
Business Rent a Car GmbH Austria
Compact Rent a Car Ltd. Canada
American Land Cruiser, Inc. Florida
American Land Cruisers of California, Incorporated California
Cruise America Leasing, Inc. Florida
Cruise Canada, Inc. Canada
Systems Management Group, Inc. Florida
Triangle Automotive Group LLC Kentucky
Transportation and Storage Associates California
</TABLE>
-4-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into Budget Group,
Inc.'s previously filed Registration Statement File No.'s 333-41093, 333-47079,
333-49819, 333-58477, 333-59049, 333-59385, 333-61429, 333-82501 and 333-82749.
/s/ ARTHUR ANDERSEN LLP
Orlando, Florida
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUDGET GROUP, INC. FOR THE TWELVE MONTH PERIOD ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 57,960
<SECURITIES> 0
<RECEIVABLES> 416,218
<ALLOWANCES> 0<F1>
<INVENTORY> 3,179,603
<CURRENT-ASSETS> 3,653,781
<PP&E> 215,530
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 5,082,518
<CURRENT-LIABILITIES> 585,825
<BONDS> 3,637,710
291,460
0
<COMMON> 373
<OTHER-SE> 567,150
<TOTAL-LIABILITY-AND-EQUITY> 5,082,518
<SALES> 2,349,457
<TOTAL-REVENUES> 2,349,457
<CGS> 0
<TOTAL-COSTS> 2,195,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 208,821
<INCOME-PRETAX> (54,964)
<INCOME-TAX> (23,826)
<INCOME-CONTINUING> (49,888)
<DISCONTINUED> (14,652)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (64,540)
<EPS-BASIC> (1.37)
<EPS-DILUTED> (1.37)
<FN>
<F1>RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE
BALANCE SHEET
<F2>PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON
THE BALANCE SHEET
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUDGET GROUP, INC. FOR THE NINE-MONTH PERIOD ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 49,919
<SECURITIES> 0
<RECEIVABLES> 373,750
<ALLOWANCES> 0<F1>
<INVENTORY> 3,275,229
<CURRENT-ASSETS> 3,698,398
<PP&E> 215,676
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 5,147,636
<CURRENT-LIABILITIES> 589,032
<BONDS> 3,603,050
291,385
0
<COMMON> 372
<OTHER-SE> 663,797
<TOTAL-LIABILITY-AND-EQUITY> 5,147,636
<SALES> 1,776,265
<TOTAL-REVENUES> 1,776,265
<CGS> 0
<TOTAL-COSTS> 1,556,479
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150,800
<INCOME-PRETAX> 68,986
<INCOME-TAX> 28,574
<INCOME-CONTINUING> 26,193
<DISCONTINUED> 4,243
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,436
<EPS-BASIC> 0.72
<EPS-DILUTED> 0.72
<FN>
<F1>RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE
BALANCE SHEET
<F2>PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON
THE BALANCE SHEET
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUDGET GROUP, INC. FOR THE SIX-MONTH PERIOD ENDED JUNE
30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 291,366
<SECURITIES> 0
<RECEIVABLES> 350,791
<ALLOWANCES> 0<F1>
<INVENTORY> 3,461,555
<CURRENT-ASSETS> 4,103,712
<PP&E> 215,959
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 5,509,360
<CURRENT-LIABILITIES> 517,245
<BONDS> 4,055,861
291,309
0
<COMMON> 361
<OTHER-SE> 644,584
<TOTAL-LIABILITY-AND-EQUITY> 5,509,360
<SALES> 1,081,668
<TOTAL-REVENUES> 1,081,668
<CGS> 0
<TOTAL-COSTS> 989,586
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90,899
<INCOME-PRETAX> 1,183
<INCOME-TAX> (4,607)
<INCOME-CONTINUING> (3,637)
<DISCONTINUED> (3,201)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,838)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
<FN>
<F1>RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE
BALANCE SHEET
<F2>PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON
THE BALANCE SHEET
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUDGET GROUP, INC. FOR THE THREE MONTH PERIOD ENDED
MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 155,635
<SECURITIES> 0
<RECEIVABLES> 285,101
<ALLOWANCES> 0<F1>
<INVENTORY> 3,123,247
<CURRENT-ASSETS> 3,563,983
<PP&E> 215,864
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 4,867,661
<CURRENT-LIABILITIES> 506,646
<BONDS> 3,438,642
291,235
0
<COMMON> 361
<OTHER-SE> 630,777
<TOTAL-LIABILITY-AND-EQUITY> 4,867,661
<SALES> 493,205
<TOTAL-REVENUES> 493,205
<CGS> 0
<TOTAL-COSTS> 480,525
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,769
<INCOME-PRETAX> (30,089)
<INCOME-TAX> (14,994)
<INCOME-CONTINUING> (19,718)
<DISCONTINUED> (3,332)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,050)
<EPS-BASIC> (0.55)
<EPS-DILUTED> (0.55)
<FN>
<F1>RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE
BALANCE SHEET
<F2>PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON
THE BALANCE SHEET
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUDGET GROUP, INC. FOR THE TWELVE MONTH PERIOD ENDED
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 545,478
<SECURITIES> 0
<RECEIVABLES> 397,503
<ALLOWANCES> 0<F1>
<INVENTORY> 2,747,717
<CURRENT-ASSETS> 3,690,698
<PP&E> 213,018
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 4,983,262
<CURRENT-LIABILITIES> 526,671
<BONDS> 3,513,084
291,160
0
<COMMON> 360
<OTHER-SE> 651,987
<TOTAL-LIABILITY-AND-EQUITY> 4,983,262
<SALES> 1,928,875
<TOTAL-REVENUES> 1,928,875
<CGS> 0
<TOTAL-COSTS> 1,719,756
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189,421
<INCOME-PRETAX> 19,698
<INCOME-TAX> 5,241
<INCOME-CONTINUING> 4,500
<DISCONTINUED> (8,131)
<EXTRAORDINARY> (45,296)
<CHANGES> 0
<NET-INCOME> (48,927)
<EPS-BASIC> 0.14
<EPS-DILUTED> 0.14
<FN>
<F1>RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE
BALANCE SHEET
<F2>PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON
THE BALANCE SHEET
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUDGET GROUP, INC. FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 467,994
<SECURITIES> 0
<RECEIVABLES> 287,472
<ALLOWANCES> 0<F1>
<INVENTORY> 2,936,839
<CURRENT-ASSETS> 3,692,305
<PP&E> 198,007
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 4,991,587
<CURRENT-LIABILITIES> 607,612
<BONDS> 3,372,129
291,085
0
<COMMON> 360
<OTHER-SE> 720,401
<TOTAL-LIABILITY-AND-EQUITY> 4,991,587
<SALES> 1,419,257
<TOTAL-REVENUES> 1,419,257
<CGS> 0
<TOTAL-COSTS> 1,184,417
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139,465
<INCOME-PRETAX> 95,375
<INCOME-TAX> 33,493
<INCOME-CONTINUING> 56,540
<DISCONTINUED> 6,066
<EXTRAORDINARY> (45,296)
<CHANGES> 0
<NET-INCOME> 17,310
<EPS-BASIC> 1.84
<EPS-DILUTED> 1.62
<FN>
<F1>RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE
BALANCE SHEET
<F2>PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON
THE BALANCE SHEET
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUDGET GROUP, INC. FOR THE SIX MONTH PERIOD ENDED JUNE
30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 566,391
<SECURITIES> 0
<RECEIVABLES> 256,114
<ALLOWANCES> 0<F1>
<INVENTORY> 3,130,878
<CURRENT-ASSETS> 3,953,383
<PP&E> 187,902
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 5,183,553
<CURRENT-LIABILITIES> 617,878
<BONDS> 3,622,589
291,010
0
<COMMON> 359
<OTHER-SE> 651,717
<TOTAL-LIABILITY-AND-EQUITY> 5,183,553
<SALES> 791,493
<TOTAL-REVENUES> 791,493
<CGS> 0
<TOTAL-COSTS> 702,773
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 88,714
<INCOME-PRETAX> 6
<INCOME-TAX> (1,028)
<INCOME-CONTINUING> 383
<DISCONTINUED> 947
<EXTRAORDINARY> (43,296)
<CHANGES> 0
<NET-INCOME> (43,966)
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
<FN>
<F1>RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE
BALANCE SHEET
<F2>PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON
THE BALANCE SHEET
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUDGET GROUP, INC. FOR THE THREE MONTH PERIOD ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 51,511
<SECURITIES> 0
<RECEIVABLES> 250,907
<ALLOWANCES> 0<F1>
<INVENTORY> 2,287,021
<CURRENT-ASSETS> 2,589,439
<PP&E> 143,314
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 3,447,202
<CURRENT-LIABILITIES> 541,955
<BONDS> 2,448,786
0
0
<COMMON> 276
<OTHER-SE> 456,185
<TOTAL-LIABILITY-AND-EQUITY> 3,447,202
<SALES> 343,341
<TOTAL-REVENUES> 343,341
<CGS> 0
<TOTAL-COSTS> 306,929
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,737
<INCOME-PRETAX> (1,325)
<INCOME-TAX> (617)
<INCOME-CONTINUING> (708)
<DISCONTINUED> (2,713)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,421)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
<FN>
<F1>RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE
BALANCE SHEET
<F2>PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON
THE BALANCE SHEET
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUDGET GROUP, INC. FOR THE TWELVE MONTH PERIOD ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 399,877
<SECURITIES> 0
<RECEIVABLES> 314,945
<ALLOWANCES> 0<F1>
<INVENTORY> 2,006,443
<CURRENT-ASSETS> 2,721,265
<PP&E> 129,814
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 3,550,936
<CURRENT-LIABILITIES> 512,789
<BONDS> 2,578,057
0
0
<COMMON> 274
<OTHER-SE> 459,816
<TOTAL-LIABILITY-AND-EQUITY> 3,550,936
<SALES> 1,029,932
<TOTAL-REVENUES> 1,029,932
<CGS> 0
<TOTAL-COSTS> 864,946
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105,622
<INCOME-PRETAX> 59,364
<INCOME-TAX> 27,256
<INCOME-CONTINUING> 32,108
<DISCONTINUED> (2,334)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,774
<EPS-BASIC> 1.60
<EPS-DILUTED> 1.33
<FN>
<F1>RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE
BALANCE SHEET
<F2>PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON
THE BALANCE SHEET
</FN>
</TABLE>
