-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Szkq969o5mi2YwCPS1vPEvWGvrr11uF+5S6deb8fduV0X/I7ACB+AkDLdhPFEPO8 AZS+EFBbaM3TLmc06mqiUw== 0000950144-00-004232.txt : 20000331 0000950144-00-004232.hdr.sgml : 20000331 ACCESSION NUMBER: 0000950144-00-004232 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BUDGET GROUP INC CENTRAL INDEX KEY: 0000922471 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTO RENTAL & LEASING (NO DRIVERS) [7510] IRS NUMBER: 593227576 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-23962 FILM NUMBER: 587367 BUSINESS ADDRESS: STREET 1: 125 BASIN ST STE 210 CITY: DAYTONA BEACH STATE: FL ZIP: 32114 BUSINESS PHONE: 9042387035 MAIL ADDRESS: STREET 1: 125 BASIN STREET CITY: DAYTONA BEACH STATE: FL ZIP: 32114 FORMER COMPANY: FORMER CONFORMED NAME: TEAM RENTAL GROUP INC DATE OF NAME CHANGE: 19940429 10-K 1 BUDGET GROUP, INC. 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-K (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 ____________
COMMISSION FILE NUMBER 0-23962 BUDGET GROUP, INC. (Exact name of registrant as specified in its charter) DELAWARE 59-3227576 (State of incorporation) (IRS Employer Identification No.)
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:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- Class A Common Stock, par value $.01 New York Stock Exchange
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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
PAGE ---- 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
i 3 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, 1 4 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 2 5 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 3 6 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 4 7 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:
CAR RENTAL SEGMENT OPERATING COMPANY BUSINESS 1999 REVENUE ----------------- -------- ------------- (IN MILLIONS) Budget Rent a Car (including Worldwide general use car $1,702.8 remaining Premier Car Rental rental operator and franchisor locations)
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 5 8 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"):
LOCATIONS REVENUE (CHART) (CHART)
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:
1998 1999 1999 VS. 1998 ----------- ----------- ------------- 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
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 6 9 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: 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
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 7 10 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 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. 9 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:
TRUCK RENTAL SEGMENT 1999 OPERATING COMPANY BUSINESS REVENUE - ----------------- -------- ------------- (IN MILLIONS) ------------- 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
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. 10 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:
BUSINESS MIX --------------------- FLEET SIZE LOCATIONS CONSUMER COMMERCIAL ---------- --------- -------- ---------- Ryder TRS...................................... 29,900 3,290 75% 25% Budget Truck Rental............................ 16,300 630 50% 50% ------ ----- Totals............................... 46,200 3,920
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:
1999 ---------- Transactions................................................ 2,033,696 Revenue per transaction..................................... $ 251 Monthly revenue per vehicle................................. $ 1,429 Utilization................................................. 48.5% Daily dollar average........................................ $ 96.85
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. 11 14 The table below presents certain operating statistics of corporate-owned Budget truck rental operations:
1999 -------- Transactions................................................ 702,953 Revenue per transaction..................................... $ 271 Monthly revenue per vehicle................................. $ 1,015 Utilization................................................. 55.5% Daily dollar average........................................ $ 60.17
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 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 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. 14 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 15 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:
NAME AGE POSITION(S) WITH THE COMPANY - ---- --- -------------------------------------------------------- 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
- --------------- (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 16 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 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:
HIGH LOW ------- ------- 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
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 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."
YEAR ENDED AND AS OF DECEMBER 31, ------------------------------------------------------------- 1995 1996 1997 1998 1999 ------ -------- --------- --------- ----------- (IN MILLIONS, EXCEPT OPERATING AND PER SHARE DATA) 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
19 22
1995 1996 1997 1998 1999 ------ ------ -------- -------- -------- 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
- --------------- (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 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 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:
YEAR ENDED DECEMBER 31, ----------------------- 1997 1998 1999 ----- ----- ----- 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)%
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 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 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 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. 25 28 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 26 29 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. 27 30 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. 28 31 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. 29 32 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. 30 33 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 31 34 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. 32 35 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 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:
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 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).
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EXHIBIT NUMBER DESCRIPTION - ------- ----------- 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).
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EXHIBIT NUMBER DESCRIPTION - ------- ----------- 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).
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EXHIBIT NUMBER DESCRIPTION - ------- ----------- 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).
37 40
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 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).
38 41
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 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).
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EXHIBIT NUMBER DESCRIPTION - ------- ----------- *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)
- --------------- * 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 43 BUDGET GROUP, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- 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
F-1 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 45 BUDGET GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1999
1998 1999 ---------- ---------- (IN THOUSANDS) 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 ========== ==========
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 ========== ==========
See accompanying notes to consolidated financial statements. F-3 46 BUDGET GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31,
1997 1998 1999 ---------- ---------- ---------- (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) 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) ========== ========== ==========
See accompanying notes to consolidated financial statements. F-4 47 BUDGET GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
FOREIGN CONVERTIBLE ADDITIONAL CURRENCY RETAINED TOTAL PREFERRED COMMON PAID-IN TRANSLATION EARNINGS TREASURY STOCKHOLDERS' STOCK STOCK CAPITAL ADJUSTMENT (DEFICIT) STOCK EQUITY ----------- ------ ---------- ----------- --------- -------- ------------- (IN THOUSANDS) 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 ========= ==== ======== ======= ======== ======= ========
See accompanying notes to consolidated financial statements. F-5 48 BUDGET GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
1997 1998 1999 ----------- ----------- ----------- (IN THOUSANDS) 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 =========== =========== ===========
See accompanying notes to consolidated financial statements. F-6 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 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,
1997 1998 1999 ------- ------- ------- 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 ======= ======= =======
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: Buildings and leasehold improvements........................ 10-25 years Furniture, fixtures and office equipment.................... 3-10 years
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 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:
1998 1999 -------- -------- Franchise agreements........................................ $126,922 $122,391 Trade names................................................. 214,936 207,668 Goodwill.................................................... 462,563 522,730 -------- -------- $804,421 $852,789 ======== ========
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 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 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.
YEAR ENDED DECEMBER 31, --------------------------- 1997 1998 1999 ------- ------ -------- 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 ======= ====== ========
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 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 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.
YEAR ENDED DECEMBER 31, ------------------------- 1997 1998 ---------- ---------- (UNAUDITED) 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)
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 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:
1998 1999 -------- -------- 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 ======== ========
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 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:
1998 1999 -------- -------- 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 ======== ========
6. REVENUE EARNING VEHICLES, NET Revenue earning vehicles consist of the following at December 31:
1998 1999 ---------- ---------- Revenue earning vehicles.................................... $3,071,523 $3,636,387 Less--accumulated depreciation.............................. (323,806) (456,784) ---------- ---------- $2,747,717 $3,179,603 ========== ==========
7. PROPERTY AND EQUIPMENT, NET Property and equipment, net, consist of the following at December 31:
1998 1999 -------- -------- 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 ======== ========
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 58 9. NOTES PAYABLE Notes payable consist of the following at December 31:
1998 1999 ---------- ---------- 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 ========== ==========
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 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 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:
YEAR ENDING DECEMBER 31, AMOUNT - ------------------------ ---------- 2000........................................................ $ 457,782 2001........................................................ 1,082,422 2002........................................................ 904,148 2003........................................................ 394,175 2004........................................................ 231,882 Thereafter.................................................. 567,301 ---------- $3,637,710 ==========
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 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 62 Expense for operating leases and airport concession fees consist of the following:
YEAR ENDED DECEMBER 31, ----------------------------- 1997 1998 1999 ------- -------- -------- 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 ======= ======== ========
Future minimum payments under noncancellable leases and concession agreements at December 31, 1999 are as follows:
YEAR ENDING DECEMBER 31, - ------------------------ 2000........................................................ $ 63,354 2001........................................................ 46,481 2002........................................................ 41,050 2003........................................................ 42,724 2004........................................................ 37,391 Thereafter.................................................. 88,697 -------- $319,697 ========
13. INCOME TAXES The provision (benefit) for income taxes consists of the following:
YEAR ENDED DECEMBER 31, ---------------------------- 1997 1998 1999 ------- ------- -------- 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) ======= ======= ========
F-20 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:
YEAR ENDED DECEMBER 31, ---------------------------- 1997 1998 1999 ------- ------- -------- 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) ======= ======= ========
The tax effects of temporary differences that give rise to the deferred tax assets and liabilities at December 31, relate to the following:
1998 1999 -------- -------- 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 ======== ========
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 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:
1998 1999 ------------------ ------------------ DOMESTIC FOREIGN DOMESTIC FOREIGN PLANS PLAN PLANS PLAN -------- ------- -------- ------- 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 ======== ======= ======== =======
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 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:
YEAR ENDED DECEMBER 31, ---------------------------- 1997 1998 1999 ------- ------- -------- 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)
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:
WEIGHTED AVERAGE SHARES EXERCISE PRICE ---------- -------------- 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 ==========
F-23 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.
1997 1998 1999 -------- -------- ---------- 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
At December 31, 1999, the options outstanding have exercise prices and contractual lives as follows: 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
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 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 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:
CORPORATE CAR TRUCK AND RENTAL RENTAL ELIMINATIONS CONSOLIDATED -------- -------- ------------ ------------ 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
DOMESTIC FOREIGN CONSOLIDATED -------- -------- ------------ Operating revenue..................................... $918,874 $111,058 $1,029,932 Long-lived assets..................................... 650,422 8,569 658,991
F-26 69 Segment information for the year ended December 31, 1998 is as follows:
CORPORATE CAR TRUCK AND RENTAL RENTAL ELIMINATIONS CONSOLIDATED ---------- -------- ------------ ------------ 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
DOMESTIC FOREIGN CONSOLIDATED ---------- -------- ------------ Operating revenue................................... $1,753,144 $175,731 $1,928,875 Long-lived assets................................... 1,071,318 19,776 1,091,094
Segment information for the year ended December 31, 1999 is as follows:
CORPORATE CAR TRUCK AND RENTAL RENTAL ELIMINATIONS CONSOLIDATED ---------- -------- ------------ ------------ 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)
DOMESTIC FOREIGN CONSOLIDATED ---------- -------- ------------ Operating revenue................................... $2,089,497 $259,960 $2,349,457 Long-lived assets................................... 1,104,574 72,870 1,177,444
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).
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) -------- -------- -------- -------- -------- -------- -------- --------- 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
- --------------- (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 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 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.
SIGNATURE TITLE --------- ----- /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
EX-4.31 2 SERIES 2000-1 SUPPLEMENT 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 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. 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 -2- 4 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. -3- 5 "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. -4- 6 "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. -5- 7 "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. -6- 8 "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 -7- 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. -8- 10 "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. -9- 11 "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. -10- 12 "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. -11- 13 "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. -12- 14 "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. -13- 15 "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 -14- 16 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. -15- 17 "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. -16- 18 "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. -17- 19 "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. -18- 20 "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. -19- 21 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; -20- 22 (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; -21- 23 (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 -22- 24 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 -23- 25 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 -24- 26 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. -25- 27 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 -26- 28 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: -27- 29 (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: -28- 30 (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 -29- 31 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 -30- 32 (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. -31- 33 (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. -32- 34 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. -33- 35 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- 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- 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- 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.
CORRESPONDING SERIES BASE INDENTURE TERMS 2000-1 SUPPLEMENT TERMS -------------------- ----------------------- 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
-37- 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 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. 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 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 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 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 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 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 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 48 INCREASES AND DECREASES
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A-9 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 50 EXHIBIT B TO SERIES 2000-1 SUPPLEMENT List of Approved Manufacturers Ford Motor Company Saab Cars USA, Inc. Toyota Motor Sales USA, Inc. 51 TABLE OF CONTENTS
PAGE 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
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 EX-4.32 3 MASTER MOTOR VEHICLE AGREEMENT, DATED 02/25/00 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. 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: 3 TABLE OF CONTENTS
PAGE 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
4 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
-ii- 5 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
-iii- 6 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
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 -iv- 7 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 -v- 8 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 -3- 9 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 -4- 10 (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 -5- 11 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. -6- 12 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: -7- 13 (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; -8- 14 (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 -9- 15 (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. -10- 16 (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 -11- 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 -12- 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 -13- 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. -14- 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 -15- 21 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. -16- 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). -17- 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 -18- 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 -19- 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: -20- 26 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 -21- 27 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 -22- 28 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. -23- 29 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 -24- 30 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 -25- 31 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 -26- 32 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; -27- 33 (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 -28- 34 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: -29- 35 (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 -30- 36 (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. -31- 37 (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 -32- 38 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 -33- 39 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 -34- 40 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 -35- 41 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. -36- 42 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 -37- 43 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 -38- 44 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 -39- 45 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; -40- 46 (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. -41- 47 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; -42- 48 (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. -43- 49 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 -44- 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 -45- 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. -46- 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 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 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 -1- 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 -2- 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 -3- 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 -4- 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 -5- 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- 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 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- 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- 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- 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- 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- 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. 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 68 Telecopier: 630-955-7808 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 70 Telecopier: 630-955-7808 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) 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 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: 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 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: 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 77 Consented to by: BUDGET GROUP, INC. By: ----------------------------- Name: Title: C-3 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. 79 IN WITNESS WHEREOF, the Seller has executed this Bill of Sale as of _______________, 20___. [SELLER] By: ----------------------------- Name: Title: 80 SCHEDULE 1 TO BILL OF SALE VEHICLES
VIN NET BOOK VALUE --- -------------- ------------- -------------- $ Total: ==============
EX-10.31 4 FORM OF SEVERANCE AGREEMENT 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 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 2 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 3 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 4 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 5 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 6 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 7 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 8 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. 9 10 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 10 11 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 EX-10.32 5 EMPLOYMENT LETTER, DAVID N. SIEGEL 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. 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. 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:
MONTH OF AVERAGE STOCK PRICE NOVEMBER OF NOT LESS THAN -------- ------------------- 2000 $14.00 2001 $21.00 2002 $28.00 2003 $35.00
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. 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:
AMOUNT OF STOCK SOLD REPAYMENT AMOUNT DUE TO BGI -------------------- --------------------------- 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
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. 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 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 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 EX-10.33 6 EMPLOYMENT LETTER, NEAL F. COHEN 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. 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. 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:
Month of Average Stock Price November of not less than -------- ------------------- 2000 $14.00 2001 $21.00 2002 $28.00 2003 $35.00
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: 4 Neal Stuart Cohen December 3, 1999 Page 4 of 7
Amount of Stock Sold Repayment Amount Due to BGI -------------------- --------------------------- 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
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. 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 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. 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 EX-10.34 7 THIRD AMENDMENT TO CREDIT AGREEMENT 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; 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- 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- 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- 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:
FISCAL QUARTER RATIO -------------- ----- 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
(c) by deleting the table in clause (c) of such Section in its entirety and substituting therefor the following: -5- 6
FISCAL QUARTER RATIO -------------- ----- 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
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- 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- 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. -8- 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 -9- 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 -10- 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. -11- 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] -12- 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 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 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 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 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 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 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 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 EX-10.35 8 BRIDGE LOAN AGREEMENT 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 2 TABLE OF CONTENTS
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
3 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
4 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
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; 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 -2- 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 -3- 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. -4- 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). -5- 10 "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 -6- 11 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. -7- 12 "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. -8- 13 "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. -9- 14 "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. -10- 15 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, -11- 16 (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 -12- 17 (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 -13- 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 -14- 19 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, -15- 20 (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 -16- 21 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 -17- 22 (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 -18- 23 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. -19- 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 -20- 25 (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 -21- 26 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: -22- 27 (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 -23- 28 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. -24- 29 (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). -25- 30 (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; -26- 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 -27- 32 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; -28- 33 (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; -29- 34 (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. -30- 35 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; -31- 36 (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 -32- 37 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. -33- 38 (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. -34- 39 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 -35- 40 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. -36- 41 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 -37- 42 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 -38- 43 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- 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- 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: 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 47 EXHIBIT A BASE INDENTURE 48 EXHIBIT B Group II MASTER LEASE 49 EXHIBIT C SERIES 2000-1 SUPPLEMENT 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. 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:
Person to be Paid ------------------------------- Amount to be Transferred Name Account No. $---------- ---------- -----------
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: 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: 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: 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: EX-21.1 9 SUBSIDIARIES OF REGISTRANT 1 EXHIBIT 21.1 LIST OF SUBSIDIARIES OF THE REGISTRANT
JURISDICTION NAMES UNDER WHICH SUBSIDIARY OF INCORPORATION DOING BUSINESS - ---------- ---------------- ----------------- 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
2 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
-3- 3 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
-4- EX-23.1 10 CONSENT OF ARTHUR ANDERSEN 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 EX-27.1 11 FINANCIAL DATA SCHEDULE
5 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. 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 57,960 0 416,218 0 3,179,603 3,653,781 215,530 0 5,082,518 585,825 3,637,710 291,460 0 373 567,150 5,082,518 2,349,457 2,349,457 0 2,195,600 0 0 208,821 (54,964) (23,826) (49,888) (14,652) 0 0 (64,540) (1.37) (1.37) RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE BALANCE SHEET PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON THE BALANCE SHEET
EX-27.2 12 FINANCIAL DATA SCHEDULE / SEPT. 30, 1999
5 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. 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 49,919 0 373,750 0 3,275,229 3,698,398 215,676 0 5,147,636 589,032 3,603,050 291,385 0 372 663,797 5,147,636 1,776,265 1,776,265 0 1,556,479 0 0 150,800 68,986 28,574 26,193 4,243 0 0 30,436 0.72 0.72 RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE BALANCE SHEET PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON THE BALANCE SHEET
EX-27.3 13 FINANCIAL DATA SCHEDULE / JUNE 30, 1999
5 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. 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 291,366 0 350,791 0 3,461,555 4,103,712 215,959 0 5,509,360 517,245 4,055,861 291,309 0 361 644,584 5,509,360 1,081,668 1,081,668 0 989,586 0 0 90,899 1,183 (4,607) (3,637) (3,201) 0 0 (6,838) (0.10) (0.10) RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE BALANCE SHEET PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON THE BALANCE SHEET
EX-27.4 14 FINANCIAL DATA SCHEDULE / MARCH 31, 1999
5 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. 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 155,635 0 285,101 0 3,123,247 3,563,983 215,864 0 4,867,661 506,646 3,438,642 291,235 0 361 630,777 4,867,661 493,205 493,205 0 480,525 0 0 42,769 (30,089) (14,994) (19,718) (3,332) 0 0 (23,050) (0.55) (0.55) RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE BALANCE SHEET PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON THE BALANCE SHEET
EX-27.5 15 FINANCIAL DATA SCHEDULE / DEC. 31, 1998
5 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. 1,000 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 545,478 0 397,503 0 2,747,717 3,690,698 213,018 0 4,983,262 526,671 3,513,084 291,160 0 360 651,987 4,983,262 1,928,875 1,928,875 0 1,719,756 0 0 189,421 19,698 5,241 4,500 (8,131) (45,296) 0 (48,927) 0.14 0.14 RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE BALANCE SHEET PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON THE BALANCE SHEET
EX-27.6 16 FINANCIAL DATA SCHEDULE / SEPT. 30, 1998
5 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. 1,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 467,994 0 287,472 0 2,936,839 3,692,305 198,007 0 4,991,587 607,612 3,372,129 291,085 0 360 720,401 4,991,587 1,419,257 1,419,257 0 1,184,417 0 0 139,465 95,375 33,493 56,540 6,066 (45,296) 0 17,310 1.84 1.62 RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE BALANCE SHEET PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON THE BALANCE SHEET
EX-27.7 17 FINANCIAL DATA SCHEDULE / JUNE 30, 1998
5 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. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 566,391 0 256,114 0 3,130,878 3,953,383 187,902 0 5,183,553 617,878 3,622,589 291,010 0 359 651,717 5,183,553 791,493 791,493 0 702,773 0 0 88,714 6 (1,028) 383 947 (43,296) 0 (43,966) 0.01 0.01 RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE BALANCE SHEET PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON THE BALANCE SHEET
EX-27.8 18 FINANCIAL DATA SCHEDULE / MARCH 31, 1998
5 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. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 51,511 0 250,907 0 2,287,021 2,589,439 143,314 0 3,447,202 541,955 2,448,786 0 0 276 456,185 3,447,202 343,341 343,341 0 306,929 0 0 37,737 (1,325) (617) (708) (2,713) 0 0 (3,421) (0.03) (0.03) RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE BALANCE SHEET PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON THE BALANCE SHEET
EX-27.9 19 FINANCIAL DATA SCHEDULE / DEC. 31, 1997
5 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. 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 399,877 0 314,945 0 2,006,443 2,721,265 129,814 0 3,550,936 512,789 2,578,057 0 0 274 459,816 3,550,936 1,029,932 1,029,932 0 864,946 0 0 105,622 59,364 27,256 32,108 (2,334) 0 0 29,774 1.60 1.33 RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE BALANCE SHEET PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON THE BALANCE SHEET
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