-----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, EdqnsRuMZVv7RtElFHAc8OjVKHyLpnFBsiVE9fJXdbYSv/5tdzzks3b0nb4a0qaD quqHE/AdnyGsc8Kw9D1hzA== 0000950144-98-003732.txt : 19980401 0000950144-98-003732.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950144-98-003732 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NYSE 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: 98580448 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, 1997 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 23, 1998 (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 $974,511,708. 27,502,462 shares of common stock were outstanding as of March 23, 1998, comprised of 25,565,862 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 April 23, 1998 are herein incorporated by reference in Part III. ================================================================================ 2 TABLE OF CONTENTS
PAGE ---- PART I ITEM 1. BUSINESS.................................................... 1 ITEM 2. PROPERTIES.................................................. 12 ITEM 3. LEGAL PROCEEDINGS........................................... 12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 12 ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT........................ 13 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................................... 14 ITEM 6. SELECTED FINANCIAL DATA..................................... 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................... 16 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................................................ 24 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 24 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.................................... 24 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 24 ITEM 11. EXECUTIVE COMPENSATION...................................... 24 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................................. 25 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 25 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K......................................................... 25 ANNEX EXHIBIT 99.1 SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS.................................................. A-1
THIS FORM 10-K AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY BUDGET GROUP, INC. OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY CONSTITUTE "FORWARD LOOKING STATEMENTS" UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF BUDGET GROUP, INC. AND MEMBERS OF ITS MANAGEMENT TEAM, AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING STATEMENTS ARE SET FORTH IN THE SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1 AND ANNEX A TO THIS FORM 10-K, AND ARE HEREBY INCORPORATED BY REFERENCE. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES TO FUTURE OPERATING RESULTS OVER TIME. i 3 PART I ITEM 1. BUSINESS As used in this Report, unless the context otherwise requires: (i) "TEAM" refers to Budget Group, Inc. and its subsidiaries prior to its acquisition of Budget Rent a Car Corporation on April 29, 1997 (the "Budget Acquisition"); (ii) "BRACC" refers to Budget Rent a Car Corporation and its subsidiaries; (iii) the "Company" or "Budget Group" refers to TEAM (including BRACC) after giving effect to the Budget Acquisition; and (iv) the "Budget System" or "Budget" refers to the business of renting cars and trucks and retailing late model vehicles conducted by the Company and its franchisees under the Budget name. In connection with the Budget Acquisition, Team Rental Group, Inc. changed its name to Budget Group, Inc. The Company was incorporated in 1992 under the laws of the State of Delaware. GENERAL The Company, through subsidiary companies and franchisees, operates Budget Car and Truck Rental, the third largest worldwide car and truck rental system with over 3,200 locations and a peak fleet size during 1997 of 283,000 cars, 22,500 trucks and 5,100 pick-ups. The Budget System includes locations in both the airport and local (downtown and suburban) markets in all major metropolitan areas in the United States, in many other small and mid-size U.S. markets and in more than 120 countries worldwide. The Budget System had approximately 509 Company-owned locations in the United States and 71 Company-owned locations outside of the United States at December 31, 1997. In addition, Budget franchisees operated approximately 455 royalty-paying franchise locations in the United States and 2,171 locations internationally at December 31, 1997. Giving effect to the Budget Acquisition as if it had been completed January 1, 1997, for the year ended December 31, 1997, Budget Group's Company-owned locations in the United States accounted for approximately 80% of the Budget System's U.S. vehicle rental revenues, while its Company-owned locations outside the United States accounted for approximately 9% of the Budget System's international vehicle rental revenues. Budget is one of only three vehicle rental systems that offer rental vehicles throughout the world under a single brand name, with locations in Europe, Canada, Latin America, the Middle East, Asia/Pacific and Africa. The Budget System currently maintains more local market rental locations throughout the world than most of its major competitors and is unique among major car rental systems in that it rents trucks in most major markets worldwide. The Budget System's consumer truck rental fleet is the fourth largest in the United States. In addition, the Company owns Cruise America, Inc. ("Cruise America"), one of the largest North American companies specializing primarily in the rental and sale of recreational vehicles with 92 locations; Premier Car Rental LLC ("Premier Car Rental"), which serves the insurance replacement market through a network of 150 locations in 16 major U.S. markets; and Budget Car Sales, Inc., one of the largest independent retailers of late model vehicles in the United States, which operates 26 retail car sales facilities. Budget also owns VPSI, Inc. ("Van Pool Services"), which leases vans for van pooling operations in 28 states; and Budget Airport Parking, which operates airport parking facilities at certain locations. The Company's principal executive offices are located at 125 Basin Street, Suite 210, Daytona Beach, Florida 32114, and its telephone number at that address is (904) 238-7035. INDUSTRY SEGMENT INFORMATION The Company's industry segments are vehicle rentals and retail vehicle sales. The discussion of the Company's business contained herein should be read in conjunction with Note 16 of the Notes to the Consolidated Financial Statements of the Company included in this Report. 4 THE BUDGET ACQUISITION On April 29, 1997, pursuant to a series of stock purchase agreements (the "Stock Purchase Agreements") among TEAM , Ford Motor Company ("Ford"), BRACC and the common stockholder of BRACC, TEAM acquired all of the outstanding capital stock of BRACC for approximately $275 million cash and the issuance to Ford of 4,500 shares of Series A Convertible Preferred Stock of the Company, which were converted into 4,500,000 shares of the Company's Class A Common Stock and sold in a public offering in October 1997. BRACC. In 1960, BRACC began franchising car and truck rental operations serving the downtown and suburban areas of cities in the United States and Canada. Budget established its first major airport location in 1967, but maintained a marketing strategy of offering good value to price-sensitive personal renters. Historically, BRACC operated the broadest distribution system in the industry, with more full-service local market locations in the United States and worldwide than its major competitors and the largest integrated system offering both cars and trucks in most markets worldwide. During the 1980s, BRACC undertook a strategic shift from being structured as a franchising company to functioning as an operating company. For the year ended December 31, 1996, BRACC's 304 company-owned locations in the United States accounted for approximately 61% of the Budget System's vehicle rental U.S. revenues, while its 70 company-owned locations outside the United States accounted for approximately 8.5% of the Budget System's international vehicle rental revenues. At December 31, 1996, Budget franchisees (including TEAM) maintained 652 locations in the United States and 2,182 locations internationally. TEAM. Prior to the Budget Acquisition, TEAM was the largest U.S. Budget franchisee and was one of the largest independent retailers of late model automobiles in the United States. TEAM became a publicly held corporation in August 1994, with 23 locations in four franchise territories, and embarked on a strategy to expand significantly its Budget franchise base by further consolidating Budget franchise operations and to develop a branded retail car sales operation within its Budget franchise territories. Since its initial public offering, TEAM pursued an aggressive growth strategy in both its vehicle rental and retail car sales operations. TEAM added an additional nine Budget franchise territories in that period. With 152 locations as of December 31, 1996, TEAM accounted for approximately 14.8% of the Budget System's 1996 U.S. revenues without giving effect to the Budget Acquisition. Concurrently with the development of its Budget franchise business, TEAM developed or acquired 11 retail car sales facilities. Budget Group. After completing the Budget Acquisition, TEAM changed its name to Budget Group, Inc. At December 31, 1997, Budget Group consisted of 509 Company-owned locations in the United States, including 21 of the 25 largest airport rental markets in the United States. Giving effect to the Budget Acquisition as if it had been completed January 1, 1997, Budget Group accounted for approximately 80% of the Budget System's 1997 U.S. vehicle rental revenues. Accordingly, the Budget Acquisition marked a significant furtherance of the initiative undertaken by BRACC approximately 10 years ago to make the transition from being a franchising company to being an operating company, as well as furtherance of TEAM's strategy of consolidating the Budget System. The Company believes that its increased level of Company-owned operations will enable it to improve the performance of the Budget System and to compete more effectively in both the corporate and consumer segments of the vehicle rental industry. The Company is managed by officers having significant experience with BRACC and TEAM, who utilize operating strategies and systems that have proven most effective for BRACC and TEAM. OTHER DEVELOPMENTS SINCE JANUARY 1997 Possible Ryder TRS Acquisition. On March 4, 1998 the Company announced that it had signed an agreement to acquire Ryder TRS Inc. ("Ryder TRS") by merger (the "Ryder TRS Acquisition"). If the Ryder TRS Acquisition is consummated, Ryder TRS stockholders will receive up to approximately $264 million comprised of $125.0 million in cash, approximately $119 million in Budget Class A Common Stock and up to $20.0 million of contingent additional consideration in return for 100% of the outstanding Ryder TRS stock, subject to adjustment and the other terms and conditions of the related merger agreement. Ryder TRS operates a fleet of approximately 29,000 trucks and vans available for local and one-way rentals from approximately 4,000 locations across the United States. If the Ryder TRS acquisition is completed, the 2 5 Company's combined truck rental fleet will be comprised of approximately 44,000 vehicles. The closing of the Ryder TRS Acquisition is subject to the receipt of the necessary government approvals. For additional information regarding the Ryder TRS Acquisition, see "Possible 1998 Acquisition of Ryder TRS," below. Cruise America. On January 28, 1998, the Company acquired Cruise America, which is one of the largest companies in North America specializing in the rental and sale of recreational vehicles (RVs). Cruise America began rental and sales operations in Miami, Florida in 1972, with an initial strategy to locate rental centers in metropolitan gateway cities which are destinations for large numbers of domestic and international travelers. Since that time, Cruise America has established rental and/or sales locations across the United States and Canada. At December 31, 1997, Cruise America operated a total of 16 Hub offices, 76 Satellite offices and a rental fleet of 2,810 RVs. Besides rentals, Cruise America sells new and used RVs (including vehicles retired from the rental fleet) from its Hub offices. The sales effort is marketed under the name RV DEPOT and for the year ended April 30, 1997, RV sales represented approximately 44% of total revenue. Premier Car Rental. On July 31, 1997, the Company acquired the fleet and certain assets of Premier Car Rental, Inc. for $2.0 million in cash and the refinancing of approximately $85.2 million of Premier Car Rental, Inc.'s outstanding fleet indebtedness. Premier Car Rental provides rental cars for the insurance replacement market and at December 31, 1997 owned and operated approximately 8,500 vehicles from 150 locations in 16 major U.S. markets and had approximately 740 employees. Premier Car Rental has continued to operate under its own trade name. Alliance Agreement with HFS Incorporated. On August 19, 1997, Budget Truck Rental entered into a four-year preferred alliance agreement with Cendant Corp. making Budget the exclusive provider of truck rental services promoted to customers of Coldwell Banker, ERA and Century 21 real estate brands, as well as relocation customers of HFS Mobility Services, Inc. Franchise Acquisitions. In July 1997, the Company acquired the Budget franchise located in Chattanooga, Tennessee for $3.2 million, including approximately $3 million in assets. In September 1997, the Company acquired the St. Louis, Missouri Budget franchisee for approximately $9 million, consisting of $1 million in cash and approximately $8 million in shares of Class A Common Stock. In November 1997, the Company purchased substantially all of the assets of RLB Industries Inc., the Syracuse Budget franchisee, for approximately $1.4 million in cash. THE BUDGET SYSTEM The Company provides consistent system-wide services, a state-of-the-art reservation system and other opportunities to all vehicle rental locations within the Budget System. System Wide Services. The Company provides the Budget System with: (i) national promotion, advertising and public relations; (ii) reservations and information systems; (iii) data processing support; (iv) marketing programs with hotels and airlines; (v) Sears Car and Truck Rental concessions; (vi) a sales staff for marketing to corporate customers and the travel community; (vii) credit card services for commercial customers; (viii) training in local marketing techniques; (ix) operation, training and support; (x) fleet purchasing programs; and (xi) a Company-owned fleet of cars and trucks for one-way rentals. In general, pursuant to its agreements with its franchisees, the Company is required to expend a certain percentage of franchise royalties that it receives on advertising and promotion. In addition, the Company negotiates with automobile manufacturers to develop vehicle acquisition and disposition programs that are available to franchisees as well as to Company-owned locations. The Company facilitates one-way car rentals between approximately 600 selected Company-owned and franchised locations in the United States. This one-way program is also in place for truck rentals at approximately 375 locations. A limited fleet of vehicles owned by the Company is dedicated to supplement the one-way vehicle rental capacity of the participating locations. This program enables the Budget System to operate more fully as an integrated network of locations. Reservations System. The Company operates a state-of-the-art computerized reservation system through WizCom International, Inc. Budget's main reservation facility is located in the Dallas metropolitan 3 6 area and has over 400 employees. Auxiliary centers are located in Toronto, Canada, the United Kingdom, Australia and New Zealand. These centers are linked with the major airline and travel industry reservation systems through the worldwide Budget reservation network. The main reservation facility accepts inquiries and reservations for Budget System locations worldwide on a 24-hour basis, 365 days a year. The reservation centers utilize an extensive database maintained on rates and vehicles available for nearly all Budget System locations, a special database of pertinent information on frequent renters and other information that facilitates the Budget System's business. Sears Car and Truck Rental. In 1970, BRACC 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 900 Budget locations in the United States. MANAGEMENT INTEGRATION The Company is managed by a combination of managers from TEAM and BRACC. Sanford Miller, the Chairman of the Board and Chief Executive Officer of TEAM prior to the Budget Acquisition, is the Chairman of the Board and Chief Executive Officer of the Company. The prior managements of TEAM and BRACC have been integrated to create an effective and experienced management team for the Company which draws upon the knowledge and strengths of the two organizations. The majority of the Company's corporate functions continue to be managed by BRACC personnel. BRACC's primary corporate functions are being centralized in its worldwide headquarters in Lisle, Illinois. TEAM previously maintained a decentralized management structure for its day-to-day rental operations. As part of the Budget Acquisition, TEAM's rental operations are being merged into BRACC's and centralized to achieve cost savings. RENTAL OPERATIONS Budget rents a wide variety of automobiles and trucks, most of which consist of the current and immediately preceding model years. Vehicle 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. Budget also generally offers its customers the convenience of leaving a rented vehicle at a Budget 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. The following table sets forth for the periods indicated the number of owned and franchised locations of Budget in the United States and at international locations and certain other data of Budget Group giving effect to the Budget Acquisition as if it had been completed January 1, 1996 (excludes Premier Car Rental and Van Pool Services):
YEAR ENDED DECEMBER 31, ----------------- 1996 1997 ------- ------- Locations in operation: United States: Company................................................ 452 509 Franchisees............................................ 500 455 ------- ------- Total U.S......................................... 956 964 ======= =======
4 7
YEAR ENDED DECEMBER 31, ----------------- 1996 1997 ------- ------- International: Company................................................... 70 71 Franchisees............................................... 2,182 2,171 ------- ------- Total International............................... 2,252 2,242 ======= ======= Budget System................................... 3,208 3,206 Average fleet size(a)....................................... 235,874 235,603
- --------------- (a) Average fleet size is the number of vehicles (both cars and trucks) owned or leased by Budget each day of the period divided by the number of days in the period. North American Operations. At December 31, 1997, the Company owned and operated 509 Budget locations in the United States, and franchisees owned and operated 455 Budget locations in the United States and 388 Budget locations in Canada. Of the U.S. facilities, 286 primarily serve airport business and 678 serve local market (downtown and suburban) locations. Budget's mix of business consists of approximately 65% in the airport segment and 35% in the local segment. In addition, at December 31, 1997, the Company rented trucks at 286 of its Company-owned locations and 532 of its franchised locations. Budget is in many cases one of five to seven vehicle concessionaires at the airports in which it operates. 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 guaranteed amounts. Concessions are typically awarded by airport authorities every three to five years based upon competitive bids. Budget's concession arrangements 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. International Operations. At December 31, 1997, the Company owned and operated 71 international Budget locations, consisting of 39 European locations (including the Middle East and Africa) and 32 locations in the Asia/Pacific region, and franchisees owned and operated 1,783 international Budget locations, consisting of 1,133 European locations (including the Middle East and Africa), 263 Latin American locations and 387 locations in the Asia/Pacific region. Budget locations can be found in more than 120 countries outside the United States. Budget is recognized as a market leader in Canada, Germany and many Latin American and Caribbean countries. RENTAL VEHICLE PURCHASING Budget participates in a variety of vehicle purchase programs with major domestic and foreign vehicle manufacturers. On average during 1997, 72% of the Company's vehicle purchases consisted of Ford vehicles, 8% of Chrysler vehicles, 11% of Nissan and Toyota vehicles and the remaining 9% of General Motors, Saab and Hyundai vehicles. These percentages vary among the Company's operations and will most likely change from year to year. The average price for automobiles purchased by the Company in 1997 for its rental fleet was approximately $18,675. Budget's principal relationship has historically been with Ford, with an emphasis on products from the Lincoln-Mercury Division of Ford. Concurrently with the Budget Acquisition, the Company entered into a new 10-year Supply Agreement with Ford. Under the new Supply Agreement, the Company agreed (i) to purchase or lease at least 70% of the total number of vehicles leased or purchased by it 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. Under the Supply Agreement, Ford and its affiliates are required to offer to the Company and its affiliates and franchisees, for each model year, vehicles and fleet programs at prices that are competitive with the vehicles and fleet programs of other automobile manufacturers. 5 8 FLEET UTILIZATION AND SEASONALITY Budget's business is subject to seasonal variations in customer demand, with the summer vacation period representing the peak season for vehicle rentals. The general seasonal variation in demand, along with more localized changes in demand at each of the Company's locations, causes the Company to vary its fleet size over the course of the year. For 1997, the Company's average monthly fleet size (excluding Premier Car Rental and Van Pool Services) ranged from a low of 81,400 vehicles in January to a high of 113,100 vehicles in August. Fleet utilization, 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 70.5% in December to 86.5% in August and averaged 79.1% for 1997. RENTAL RELATED PRODUCTS Although the dominant source of the Company's total revenue is time and mileage charges from the rental of vehicles and franchise payments from its franchisees, the Company also generates revenue from intercity drop-off charges and additional driver and airport concession fees and from rental related products such as loss damage waivers, personal accident insurance, personal effects coverage, supplemental liability insurance, other travel related insurance coverages and travel related products. The travel related products from which the Company generates revenue include vehicle upgrades, refueling charges and miscellaneous items such as baby seats, ski racks and cellular phones. MARKETING The Company's promotional and marketing activities are designed to promote Budget as a value service provider and to promote brand loyalty. Budget Group has a field sales force of approximately 60 employees worldwide. The Company's national advertising program is implemented through a variety of media, including national and local television, radio, newspapers, magazines, airline ticket jackets, airline in-flight magazines and strategically located billboards, an Internet site, counter and store collateral materials and merchandise. Budget Group also has cooperative advertising arrangements with airlines, hotels, travel agency consortia and others in the travel industry and participates in a number of airline frequent flyer programs (including United Airlines, Southwest Airlines, Alaska Airlines, Aeromexico and Lufthansa), as well as certain hotel programs, theme park programs and credit card affinity programs. Budget also has a frequent renter program, Awards Plus, which gives renters a strong incentive to bring all of their car rental business to Budget. In addition, the Company has contracts with a number of airlines, hotels and other organizations pursuant to which such organizations agree to recommend Budget's services during their reservation calls and to transfer interested customers to a Budget reservation agent. In addition, in connection with the Budget Acquisition, the Company has undertaken to carry out promotional programs that feature and promote the rental of Ford vehicles. CUSTOMER SERVICE Budget's commitment to delivering a consistently high level of customer service is a critical element of its success and strategy. Each month, over 3,000 Budget customers are randomly surveyed to measure service levels by location. Budget identifies specific areas of achievement and opportunity from these surveys. Areas of improvement are addressed on a system-wide level and standard methods and measures are developed. To drive improvement, the service standards are audited routinely by management and service delivery standards assessors. The major 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 the customer relations department. Monthly reports of the types and number of complaints received are used in conjunction with the customer satisfaction reports by location management as feedback of customer service delivery. Furthermore, Budget participates in the annual J.D. Power and Associates survey process to ensure that competitive levels of performance are achieved. 6 9 INFORMATION TECHNOLOGY The Company's information technology is designed to provide Budget with high quality, cost-effective systems and services on a timely basis. In late 1995, BRACC implemented its 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. The Company's rental counter and back-office system, BEST I, supports both Company-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. The Company's human resources, benefits and payroll interface is supported by a client-server system that automatically feeds to an outsourced payroll system. The Company intends to continue to enhance and consolidate its information technology systems allowing Budget to deliver consistent customer service at all of its locations. FRANCHISING Of the more than 3,200 Budget worldwide locations at December 31, 1997, more than 2,600 were owned and operated by franchisees, and these locations accounted for 5.8% of system-wide revenues for 1997. The Company has franchise locations in more than 120 countries worldwide. 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. The Company considers its relationships with its franchisees to be excellent. It works closely with franchise advisory councils in formulating and implementing sales, advertising and promotion, and operating strategies and meets regularly with these advisors and other franchisees at regional, national and international meetings. The Company has an ongoing growth strategy of adding new franchises worldwide when opportunities arise. Incremental franchises provide the Company with a source of high margin revenue as there are relatively few additional fixed costs associated with fees paid by new franchisees to the Company. The Company's relationship with each Budget franchisee is governed by franchise agreements (the "Franchise Agreements"), which grant to the franchisees certain exclusive territories in which to operate Budget vehicle rental businesses. The Franchise Agreements provide the Company 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 without the consent of the Company. Each franchisee is required to operate each of its franchises in accordance with certain standards contained in the Budget operating manual (the "Operating Manual"). The Company has the right to monitor the operations of franchisees and any default by a franchisee under a Franchise Agreement or the Operating Manual may give the Company 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. 7 10 RENTAL VEHICLE DISPOSITION The Company's operating strategy is to maintain its Budget rental fleet at an average age of five months or less. Approximately 87% of the vehicles purchased for the Budget fleet in model year 1997 were Program Vehicles. These programs currently require that the Program Vehicles be maintained in fleet for a minimum number of months and impose numerous return conditions, including those related to mileage and repair condition. At the time of return to the manufacturer, the Company receives 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 the Company's fleet will be dependent on the availability and attractiveness of manufacturers' repurchase programs, over which the Company has no control. In addition to manufacturers' repurchase programs, the Company disposes of its rental fleet through automobile auctions, sales to wholesalers and internal retail car sales operations. While the disposal of rental vehicles through internal retail car sales operations has been limited to date, management believes that such dispositions may increase as Budget retail car sales operations continue to grow and as management evaluates the mix of Program Vehicles and vehicles not subject to manufacturers' repurchase programs. RETAIL CAR SALES OPERATIONS The Company sells cars, sport utility vehicles and trucks through its retail car sales facilities and is one of the largest independent retailers of late model vehicles in the United States. At December 31, 1997, the Company operated 26 retail car sales facilities in more than 16 markets nationwide. Retail Car Sales Inventory. In 1997, the vehicles sold at Budget retail car sales facilities consisted primarily of 1997 model year automobiles and passenger vans, with some 1996 model year vehicles and very few 1995 model year vehicles. The Company historically has acquired most of its retail car sales inventory at auctions, although it has acquired some cars from its rental fleet. In the future, the Company expects to increase its acquisitions of cars from the disposition of cars used in its rental fleet and to purchase a smaller portion from auctions. Vehicle Pricing and Financing. While many cars display stickers indicating their "blue book" value, customers are permitted to negotiate pricing terms with the sales managers. Various local enterprises provide financing to customers of the Company on a non-exclusive basis. To supplement its sale of vehicles, the Company sells extended service contracts and related consumer products to their customers. Retail Car Sales/Service Facilities. Each of the retail car sales facilities originally operated by TEAM consists of a showroom and an outdoor display area, which together accommodate the on-site display of at least 100 cars and a service area. The service departments operated at each retail car sales facility are responsible for inspecting a car's condition and for providing necessary reconditioning and maintenance services before sale. These services are provided uniformly for its retail car sales facilities in accordance with an inspection checklist developed by the Company. Service departments also provide after-sale service for the Company's customers. The retail car sales facilities originally operated by BRACC are typically smaller than TEAM's car sales facilities and do not include service departments. REGULATORY AND ENVIRONMENTAL MATTERS The Company is subject to foreign, federal, state and local laws and regulations, including those relating to taxing and licensing of vehicles, franchising, consumer credit, environmental protection, retail vehicle sales and labor matters. Environmental Matters. The principal environmental regulatory requirements applicable to the Company's 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 the Company's locations contain petroleum products stored in underground or aboveground tanks. The Company conducts environmental compliance programs designed to maintain compliance with applicable technical and opera- 8 11 tional requirements, including periodic integrity testing of underground storage tanks and providing financial assurance for remediation of spills or releases. The Company believes that its operations currently are in compliance, in all material respects, with such regulatory requirements. However, the Company, as well as those competing entities which own or operate underground storage tanks, must achieve compliance with certain Federal underground storage tank requirements by 1998. The Company believes that the remaining costs of complying with these requirements will be approximately $3 million. The historical and current uses of the Company's 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. The Company also may be subject to requirements related to remediation of Hazardous Substances that have been released to the environment at properties they own or operate, or owned or operated in the past, or at properties to which they 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. The Company may be eligible for reimbursement or payment of remediation costs associated with releases from registered underground storage tanks in states that have established funds to assist in the payment of such remediation costs. Subject to certain deductibles, the availability of funds, the compliance status of the tanks and the nature of the release, these tank funds may be available to the Company for use in remediating releases from their tank systems. Certain of the Company's locations have been the subject of environmental remediation as a consequence of leaks or spills and continue to have some level of environmental impairment that may require further remediation. In connection with the acquisition of certain franchise territories, the sellers of such franchise territories have agreed to pay certain amounts for undisclosed liabilities which would include certain payments for remediation activities at an affected site. In connection with the Budget Acquisition it was determined that approximately 140 BRACC rental facilities contained underground storage tanks. Ford has agreed, subject to certain limitations, to indemnify the Company against losses incurred by the Company arising out of or resulting from breaches by BRACC of BRACC representations and warranties in its Stock Purchase Agreement (including those relating to environmental matters), to the extent such losses are not covered by an insurance policy or a reserve established by BRACC, relating to any action by a third party in connection with environmental matters. Ford's indemnity obligation for environmental and certain other matters is capped at $40.0 million. Ford is not required, however, to indemnify the Company unless such loss exceeds $15,000 and the breach of all representations and warranties (including those relating to environmental matters) has resulted in aggregate losses in excess of $2.0 million, nor is Ford required to pay the first $2.0 million of such aggregate losses (including those relating to environmental matters). Although the potential cost of any necessary remediation at the Company's facilities is not precisely known, it is not expected to exceed $5.0 million over the next three to five years. Franchise Matters. As a franchisor, the Company is 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 the Company's business. The financing activities of the Company's retail car sales operations 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. 9 12 TRADEMARKS The Company owns the Budget trademark which has been registered with the patent and trademark office in the United States and in more than 100 countries, territories and foreign jurisdictions worldwide. The Company considers its name and logo rights to be an important part of its business. EMPLOYEES At December 31, 1997, the Company employed approximately 12,000 persons. At December 31, 1997, approximately 1,350 employees in various locations throughout the United States and approximately three employees outside the United States were subject to collective bargaining agreements. The Company believes that its employee relations are good. COMPETITION The vehicle rental industry is characterized by intense competition, particularly with respect to price and service. In any geographic market, the Company may encounter competition from national, regional and local vehicle rental companies. Budget's main competitors in the rental market are The Hertz Corporation, Avis, Inc., Alamo Rent-A-Car, Inc., National Car Rental System, Inc. and Enterprise Rent-A-Car Company. Premier Car Rental's principal competitors include Enterprise Rent-A-Car Company, Car Temps, Inc., Hertz Local Edition and a range of regional insurance replacement companies. In consumer truck rentals, Budget faces competition from U-Haul International, Inc., Ryder TRS and Penske Truck Rental. There have been occasions when the major vehicle rental companies have been adversely affected by industry-wide price cutting, and TEAM and BRACC have on such occasions lowered their prices in response. The Company will not generally be able to unilaterally raise its prices or to maintain its prices in times of industry price cutting. The retail car sales business is also characterized by intense competition from a range of regional and local car dealerships and other retailers of previously-owned vehicles. Management believes that the Company competes primarily against new car dealers retailing previously-owned cars. The Company's retail car sales facilities are located among similar facilities and, in some instances, together with the Company's rental operations. The entry of large, well-capitalized retailers of late model previously-owned cars may provide Budget Group with significant additional competition. VAN POOLING OPERATIONS Van Pool Services, the Company's commuter van pooling subsidiary, was acquired in February 1996 and maintains offices in 28 cities located in 18 states and the District of Columbia. Founded in 1977, Van Pool Services provides van pooling services to individuals, corporations and municipalities. Pursuant to van pool agreements between the Company and either the volunteer driver, corporation or municipality (the "contracting party"), the contracting party agrees to drive or arrange a van pool which travels a fixed route set by the Company. The Company sets the fees, which are collected by the driver and remitted to the Company. At December 31, 1997, Van Pool Services operated a fleet of approximately 3,700 passenger vans and employed approximately 110 employees. Van Pool Services' principal competitors are Enterprise Rent-A-Car Company and a number of regional and local companies. POSSIBLE 1998 ACQUISITION OF RYDER TRS On March 4, 1998, the Company, Ryder TRS, BDG Corporation, a wholly owned subsidiary of Budget Group ("Sub"), and Questor Partners Fund, L.P., Questor Side-by-Side Partners, L.P. (together with Questor Partners Fund, L.P., "Questor") and Madison Dearborn Capital Partners, L.P. ("Madison", and together with Questor, the "Significant Stockholders") entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") pursuant to which Sub will merge (the "Merger") with and into Ryder TRS, with Ryder TRS as the surviving corporation. As a result of the Merger, Ryder TRS will become a wholly owned subsidiary of the Company. The Merger Agreement was amended by the parties on March 16, 1998. 10 13 Pursuant to the terms of the Merger Agreement, Ryder TRS stockholders will receive up to approximately $264 million, comprised of cash, stock and warrants. The number of shares of the Company's Class A Common Stock to be issued in the Merger and the amount of cash to be paid at the closing will depend on whether the Company obtains stockholder approval for the authorization of additional shares of Class A Common Stock and will be subject to adjustment in certain instances. If such approval is obtained, the merger consideration will consist of 3,605,946 shares of Class A Common Stock (the "Maximum Merger Shares") valued at $32.9955 per share, plus $125.0 million in cash (less any cash payable to holders of options). If such approval is not obtained, the merger consideration will consist of 1,332,909 shares of Class A Common Stock (the "Minimum Merger Shares") plus $200.0 million in cash (less any cash payable to holders of options). In addition, at the closing, the Company will issue warrants ("Warrants") to Ryder TRS stockholders to purchase initially an aggregate of 1,000,000 shares of Class A Common Stock. The Warrants will become exercisable for a period of five years beginning on the thirtieth day (the "Warrant Measurement Date") following the 20-month anniversary of the closing (the "Final Measurement Date"), and the exercise price of the Warrants will be 125% of the Market Value (as defined below) of the Class A Common Stock on the Final Measurement Date. The "Market Value" of the Class A Common Stock as of any date means the volume-weighted average closing prices of the Budget Class A Common Stock for the 30 consecutive trading days prior to and including such date. The Merger Agreement provides that, prior to the Final Measurement Date, a nationally recognized investment banking firm will determine the revised number of shares of Class A Common Stock issuable upon exercise of the Warrants such that the Warrants would have an aggregate value equal to the lesser of (i) $20.0 million and (ii) (x) (A) the aggregate market value of the shares issued in the Merger (computed by multiplying $32.9955 by the number of shares issued in the Merger) (the "Aggregate Share Value") plus (B) $20.0 million minus (y) the Market Value of the shares issued in the Merger on the Final Measurement Date (the "Fill Amount"). The Company will have the right to purchase the Warrants on the Warrant Measurement Date for the Fill Amount, which purchase price may be paid in either Class A Common Stock or cash. The aggregate Fill Amount will be reduced to the extent Ryder TRS stockholders sell shares acquired in the Merger other than to certain specified permitted transferees. In addition to the amount described above, Budget has agreed in the Merger Agreement to make to the Ryder TRS stockholders a payment (the "Make-Whole Payment"), if any, equal to (i) the Aggregate Share Value, minus (ii) the greater of (x) the Market Value of the shares issued in the Merger on the relevant measurement date or (y) the price at which any such shares issued in the Merger were sold prior to the relevant measurement date. The measurement dates will be the 12-month anniversary of the closing with respect to 50% of the shares issued in the Merger and the 20-month anniversary of the closing with respect to the other 50% of the shares issued in the Merger. Budget has the option to make any Make-Whole Payment in cash or shares of Class A Common Stock. Consummation of the Merger is subject to the following conditions: (i) receipt of all necessary governmental approvals; (ii) the granting of early termination or the expiration of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (iii) the absence of governmental actions prohibiting, or seeking to prohibit, the Merger. If the Merger Agreement is terminated in certain circumstances, the Company will be required to pay a fee (the "Termination Fee") to Ryder TRS as follows: (i) if the Merger Agreement is terminated because of the failure to satisfy the closing conditions by November 30, 1998 (as such date may be extended) or because of a final injunction relating to antitrust matters, the Company will be required to pay $7.5 million to Ryder TRS; or (ii) if the Merger Agreement is terminated for any other reason, other than as described in clause (i) above or by the Company if Ryder TRS or any Significant Stockholder has breached any of its representations, warranties or covenants causing damages in excess of $75.0 million and, as a result of such damages, the Company is unable, through good faith efforts, to obtain the financing necessary to fund the cash portion of the merger consideration, the Company will pay at least $20.0 million to Ryder TRS plus any additional damages suffered by Ryder Corporation, not to exceed in the aggregate $75.0 million. To secure the Termination Fee, Credit Suisse First Boston, at the request of the Company and concurrently with the 11 14 execution of the Merger Agreement, issued a letter of credit in the amount of $20.0 million in favor of Ryder TRS, drawable by Ryder TRS in the amounts and under the circumstances described in clauses (i) and (ii) above. The foregoing description is qualified in its entirety by the Merger Agreement, as amended, which is incorporated by reference as Exhibits 2.2 and 2.3 to this Report. ITEM 2. PROPERTIES The Company's headquarters facility consists of 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, a 69,300 square foot reservations center in Carrollton, Texas, which is owned by the Company, a 61,168 square foot leased administrative center in Orlando, Florida, and a 21,600 square foot leased international headquarters facility in Hemel Hempstead, England, a suburb of London. Management believes that these facilities are sufficient for the needs of the Company. BRACC leases substantially all of its U.S. airport and local market rental facilities and operated from 509 rental locations at December 31, 1997. 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 and are generally subject to fixed-term leases with renewal options. Certain of these leases also have purchase options at the end of their terms. ITEM 3. LEGAL PROCEEDINGS Mr. Mirkin, a director of the Company, has been the President and Chief Executive Officer and a general partner of Budget Rent a Car of Southern California, a general partnership ("SoCal"), since 1985. SoCal has a Budget car rental franchise from BRACC for all of Southern California. The Company operates as a subfranchisee of SoCal at many locations in Southern California and pays royalty fees to SoCal based on rental revenues for vehicles other than trucks. The Company pays royalty fees for truck rentals in the Southern California market to Transportation and Storage Associates ("TSA") pursuant to a subfranchise agreement with TSA. TSA and BRACC are named defendants in an action for declaratory relief filed by SoCal on October 14, 1997 in the Superior Court of Los Angeles in which SoCal is seeking a determination as to whether the Company must pay royalties on the rentals of pick-up vehicles to SoCal or to TSA. Additionally, the Company is a named defendant in an action for declaratory relief filed by SoCal on March 23, 1998 in the Superior Court of Los Angeles in which SoCal is seeking a determination, given the existing franchise agreements between SoCal and the Company, as to whether the Company can operate Premier Car Rental locations in Southern California. From time to time, the Company is subject to routine litigation incidental to its business. Recently, the Company terminated the franchise arrangement of its franchisee for Germany based on alleged violations of the terms of the underlying franchise agreement. Such termination is being contested by the franchisee. The Company intends to seek to replace such franchisee with a new franchisee and/or Company-owned locations. The Company is not currently involved in any legal proceeding which it believes would have a material adverse effect upon its financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 12 15 ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information regarding the Company's executive officers:
NAME AGE POSITION(S) WITH THE COMPANY - ---- --- ---------------------------- Sanford Miller......................... 45 Chairman of the Board of Directors, Chief Executive Officer and Director Jeffrey D. Congdon..................... 55 Vice Chairman of the Board of Directors and Director John P. Kennedy........................ 53 Vice Chairman of the Board of Directors and Director Robert L. Aprati....................... 53 Executive Vice President, General Counsel and Secretary Scott R. White......................... 34 Executive Vice President, Corporate Development Michael B. Clauer...................... 41 Senior Vice President and Chief Financial Officer Jeffrey T. Hendrickson................. 53 Senior Vice President
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. Sanford Miller has been the Chairman of the Board of Directors and Chief Executive Officer of the Company since April 1994. From August 1991 to August 1994, he was Vice President of Tranex Rentals of New York, Inc. ("Tranex"), which operated the Albany and Rochester Budget franchises, and from December 1991 to August 1994, was Vice President of Capital City Leasing, Inc. ("Capital City"), which operated the Richmond, Virginia Budget franchise. From 1989 to 1991, Mr. Miller served as Director of Marketing, Special Accounts, for BRACC. From 1981 to 1989, Mr. Miller was an executive officer and principal stockholder of corporations that owned and operated 30 Budget franchises that were sold to BRACC in 1989. From 1979 to 1981, he was North East Regional Field Operation Manager for BRACC. Mr. Miller served as President of the American Car Rental Association, a nationwide industry trade association, in 1993 and Chairman of the Licensee Local Market Advisory Board of the Budget System in 1989 and 1990. Mr. Miller is also a director of MoneyGram Payment Systems, Inc. ("MoneyGram"), a provider of electronic money transfer services, and Tranex Credit Corporation ("Tranex Credit"), a company that provides financing for purchasers of previously owned vehicles. Mr. Miller is the first cousin of Mr. Agronin. Jeffrey D. Congdon was elected as a director in April 1994 and has been Vice Chairman of the Board of Directors since January 1991. From January 1991 to November 1997 he also served as the Company's Chief Financial Officer. Since December 1990, he has been Secretary, Treasurer and a director of Tranex Credit. From 1980 to 1989, he was an executive officer and principal stockholder of corporations that owned and operated 30 Budget franchises that were sold to BRACC in 1989. From 1982 to 1996, Mr. Congdon owned and operated retail new and/or used vehicle sales operations in Indianapolis, Indiana. John P. Kennedy was elected as a director in April 1994 and has been the Vice Chairman of the Board of Directors since May 1997. From August 1994 to May 1997 he was the Company's President and Chief Operating Officer. From November 1991 to August 1994, he was Chairman and President of Metro West, Inc., whose wholly-owned subsidiary previously owned the Company's San Diego airport operations. From November 1990 to November 1991, he was an independent consultant to the vehicle rental industry. From July 1985 to August 1989, he served as President of NYRAC, Inc. d/b/a Budget Rent a Car of Kennedy and La Guardia Airports. From 1968 to 1984, he served in various capacities with Avis, Inc., including Vice President of Operations. Robert L. Aprati has been Executive Vice President, General Counsel and Secretary of the Company since August 1997, was Senior Vice President, General Counsel and Secretary of BRACC from January 1988 13 16 to July 1997 and was Vice President, General Counsel and Secretary of BRACC from September 1978 to January 1988. Mr. Aprati has been a long-standing director and currently is President of the American Car Rental Association. Scott R. White has been Executive Vice President, Corporate Development of the Company since February 1997. From August 1992 to February 1997, he worked in the Investment Banking Department of CSFBC, most recently as a vice president. Mr. White received his J.D. degree from the University of Texas School of Law in May 1992 and is a member of the State Bar of Texas. In addition, he was a financial analyst at The First Boston Corporation from July 1986 to July 1989. Michael B. Clauer has been Senior Vice President and Chief Financial Officer of the Company since November 1997. From April 1996 to November 1997, he served as Senior Director of Finance, Strategy & Planning for the North America National Franchise Business Units of the Pepsi-Cola Company. From September 1994 to April 1996, Mr. Clauer was the Senior Director -- Field Finance for Pepsico International Restaurants, Inc. From June 1992 to September 1994, he served as Senior Director -- Finance, Central Division for Pizza Hut, Inc. Jeffrey T. Hendrickson has been Senior Vice President of the Company since May 1997 and his responsibilities include managing the Company's U.S. vehicle rental operations. From 1994 to 1997, Mr. Hendrickson was Senior Vice President of Brink's Incorporated ("Brink's") responsible for Brink's worldwide air courier services and nationwide ATM services. From 1987 to 1994, Mr. Hendrickson was Executive Vice President of National Car Rental Systems, Inc., from 1985 to 1987 he was Senior Vice President of Basix Corporation and from 1982 to 1985 he served as Vice President of the Chase Manhattan Corporation and President and Director of Chase T/C Service Corp. Prior to joining the Chase Manhattan Corporation Mr. Hendrickson served in various capacities for The Hertz Corporation from 1971 to 1982, including Managing Director of Hertz United Kingdom and Ireland, Vice President -- Operations, Rent-A-Car Division and Corporate Vice President and General Manager, Truck Division. Mr. Hendrickson is a director of Bernard C. Harris Publishing Company, Inc. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Since 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 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, 1997: First Quarter............................................. $29.500 $16.000 Second Quarter............................................ 34.875 19.000 Third Quarter............................................. 37.000 28.188 Fourth Quarter............................................ 37.750 32.500 YEAR ENDED DECEMBER 31, 1996: First Quarter............................................. $10.500 $ 8.250 Second Quarter............................................ 17.500 9.250 Third Quarter............................................. 20.250 12.375 Fourth Quarter............................................ 20.250 15.250
14 17 On March 23, 1998 (i) the last sale price of the Class A Common Stock as reported on the New York Stock Exchange was $38.9375 per share and (ii) there were 185 holders of record of the Class A Common Stock and three holders of record of the Class B Common Stock. 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, restrictions contained in credit and other agreements and other factors deemed relevant by the Board of Directors. RECENT SALES OF UNREGISTERED SECURITIES On November 6, 1998, the Company issued 246,167 shares of Class A Common Stock to stockholders of Budget Rent a Car of St. Louis, Inc. ("BRAC St. Louis") to acquire all of the outstanding stock of BRAC St. Louis. The Company relied on Section 4(2) of the Securities Act of 1933 (the "1933 Act") as its exemption from the registration requirements of the 1933 Act. In 1997, the Company issued options to certain employees and non-employee directors under its stock option plans to purchase an aggregate of 1,432,375 shares of Class A Common Stock and 240,000 shares of Class B Common Stock at exercise prices equal to the fair market values of underlying shares on the date of grant. Such options were issued in reliance on the exemption contained in Rule 701 under the 1933 Act. In 1997, pursuant to the exercise of certain outstanding stock options granted under the Company's stock option plans, the Company issued (i) 96,550 shares of Class A Common Stock for an aggregate purchase price of $1,086,188 and (ii) 164,000 shares of Class B Common Stock for an aggregate purchase price of $1,845,000. These issuances were made in reliance on the exemption contained in Rule 701 under the 1933 Act. 15 18 ITEM 6. SELECTED FINANCIAL DATA The following table presents selected financial data for the Company for the five years ended December 31, 1997:
YEAR ENDED DECEMBER 31, ----------------------------------------------------- 1993 1994 1995 1996 1997 ------- -------- -------- -------- ---------- (IN THOUSANDS EXCEPT PER SHARE AND OPERATING DATA) Statement of Operations Data: Vehicle rental revenue(a)................. $22,321 $ 38,642 $107,067 $223,250 $1,014,105 Retail car sales revenue.................. -- -- 42,662 134,120 239,992 Total operating revenue................... 22,321 38,642 149,729 357,370 1,303,762 Depreciation -- vehicle................... 4,358 7,382 27,476 60,735 278,495 Cost of vehicle sales..................... -- -- 38,021 113,747 205,791 Operating income.......................... 2,450 4,196 14,180 35,267 171,286 Income before income taxes................ 610 426 1,022 7,818 63,301 Net income................................ $ 428 $ 250 $ 337 $ 4,497 $ 36,926 Weighted average common and common equivalent shares outstanding: Basic.................................. (b) 3,704 6,369 9,224 18,494 Diluted................................ (b) 3,704 6,369 9,488 26,245 Earnings per common and common equivalent share: Basic.................................. (b) $ 0.07 $ 0.05 $ 0.49 $ 2.00 Diluted................................ (b) $ 0.07 $ 0.05 $ 0.47 $ 1.60 Operating Data: Rental Data (U.S. only)(c): Locations in operation at period end... 19 63 133 152 509 Rental transactions(d)................. 163,000 276,000 689,000 1,166,000 5,255,000 Retail Car Sales Data: Locations in operation at period end... -- -- 7 11 26 Average monthly vehicles sold.......... -- -- 351 752 1,790 Balance Sheet Data: Revenue earning vehicles, net............. $23,577 $ 97,127 $219,927 $319,257 $2,010,926 Vehicle inventory......................... -- 943 8,938 16,413 34,721 Total assets.............................. 33,325 162,991 386,323 587,223 3,574,815 Fleet debt................................ 23,857 123,779 295,647 360,120 2,291,755 Total debt................................ 28,533 127,187 319,017 455,609 2,610,009 Redeemable preferred stock................ 2,747 -- -- -- -- Common stock warrant...................... -- 2,000 2,000 2,000 -- Stockholders' equity (deficit)............ (1,251) 26,748 39,592 92,001 437,990
- --------------- (a) Includes revenue from vehicle rentals and related products (such as insurance and loss damage waivers). (b) This information is not meaningful as no shares were publicly held prior to August 1994. (c) Does not include data for Van Pool Services or Premier Car Rental. (d) Rounded to the nearest thousand. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Prior to the Budget Acquisition, TEAM was the largest Budget franchisee in the United States and was one of the largest independent retailers of late model automobiles in the United States. In 1994, the Company embarked on a strategy to significantly expand its Budget franchise base and to develop a branded retail car 16 19 sales operation within its Budget franchise territories. This strategy both leveraged management's experience and created certain operating efficiencies between these complementary businesses. The Company's retail car sales business has grown significantly since the opening of the Company's first retail car sales facility in November 1994. The Company added six retail car sales facilities during 1995, with the retail car sales business producing $42.7 million of revenue for 1995 (representing 28.5% of the Company's total historical revenue for the year), and added four facilities during 1996. The retail car sales business produced $134.1 million of revenue in 1996 (representing 37.5% of the Company's total historical revenue for the year). The Company's retail car sales business produced $1.3 million of operating income in 1995 (representing 8.8% of the Company's total operating income) and $1.9 million of operating income in 1996 (representing 5.3% of the Company's total operating income). The Company added 15 retail car sales facilities during 1997, for a total of 26 retail car sales facilities operated by the Company at December 31, 1997. In 1997, the Company's retail car sales business had revenue of $240.0 million (representing 18.4% of the Company's total historical revenue for the year) and an operating loss of $2.4 million reflecting significant costs to upgrade BRACC locations and to open several new locations. At December 31, 1996 and 1997, the retail car sales business represented 8.3% and 2.8% of the Company's total identifiable assets, respectively. See Note 16 of the Notes to the Consolidated Financial Statements of the Company. The 1995 results of operations reported herein include the consolidated operations of the entities comprising the Company at December 31, 1994 and the acquired operations of the Dayton, Ohio, Charlotte, North Carolina, Hartford, Connecticut, and Los Angeles, California Budget franchises from their respective acquisition dates through December 31, 1995. The 1996 results of operations reported herein include the acquired operations of the Phoenix Budget franchise, Van Pool Services and ValCar Rental Car Sales, Inc. ("ValCar") from their respective acquisition dates. On April 29, 1997, the Company acquired the stock of BRACC. The consideration paid by TEAM pursuant to the Stock Purchase Agreements consisted of (i) approximately $275 million in cash and (ii) the issuance to Ford of 4,500 shares of newly created Series A Convertible Preferred Stock of the Company, which were converted into 4,500,000 shares of Class A Common Stock and sold in a public offering on October 1, 1997. 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. 17 20 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, ----------------------- 1995 1996 1997 ----- ----- ----- Vehicle rental revenue...................................... 71.5% 62.5% 77.8% Retail car sales revenue.................................... 28.5 37.5 18.4 Royalties and other revenue................................. -- -- 3.8 ----- ----- ----- Total operating revenue........................... 100.0 100.0 100.0 Direct vehicle and operating expenses....................... 9.2 9.8 9.8 Cost of car sales........................................... 25.4 31.9 15.8 Vehicle depreciation expense................................ 18.4 17.0 21.4 Non-vehicle depreciation expense............................ 0.9 0.7 1.1 Advertising, promotion and selling.......................... 7.9 6.4 7.2 Facilities.................................................. 7.4 5.7 7.3 Personnel................................................... 16.3 14.9 19.0 General and administrative expenses......................... 4.5 3.2 4.6 Amortization of franchise rights............................ 0.5 0.5 0.7 ----- ----- ----- Operating income............................................ 9.5 9.9 13.1 Vehicle interest expense.................................... 9.3 7.1 7.2 Non-vehicle interest expense (income), net.................. (0.5) 0.2 1.1 Nonrecurring expense........................................ -- 0.4 -- ----- ----- ----- Income before income taxes.................................. 0.7 2.2 4.8 Provision for income taxes.................................. 0.5 0.9 2.0 ----- ----- ----- Net income.................................................. 0.2% 1.3% 2.8% ===== ===== =====
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 General Operating Results. Net income for 1997 increased $32.4 million to $36.9 million from $4.5 million in 1996. Diluted earnings per share for 1997 increased to $1.60 per share from $.47 per share in 1996. Income before income taxes increased $55.5 million for 1997 to $63.3 million from $7.8 million for 1996. Operating Revenues. Vehicle rental revenue increased $790.9 million in 1997 to $1,014.1 million from $223.3 million in 1996. This increase was due primarily to the Budget Acquisition which added over 370 locations and over 67,000 vehicles to the Company's operations in the U.S. Revenue from the sales of vehicles increased $105.9 million in 1997 to $240.0 million from $134.1 million in 1996. This increase was due primarily to the addition of 11 car sales operations of BRACC as well as 4 new stores opened by the Company. Royalties and other revenues totaled $49.7 million in 1997 and largely represent royalty and other fees due from the Company's franchisees. Operating Expenses. Total operating expenses increased $810.4 million in 1997 to $1,132.5 million from $322.1 million in 1996. This increase was due to the addition of BRACC's operations to the Company's operations. The cost of vehicles sold increased $92.0 million in 1997 to $205.8 million from $113.7 million in 1996. This increase is reflective of the car sales revenue growth with the addition of BRACC car sales locations and new locations opened by the Company. Amortization expense increased $6.6 million in 1997 to $8.5 million from $1.8 million in 1996. This increase was largely due to intangibles, including goodwill, related to the Budget Acquisition. Changes from 1996 to 1997 in the percent of revenue for expense categories are largely attributable to the increase in vehicle rental operations in relation to car sales operations resulting from the Budget Acquisition. 18 21 Other (Income) Expense. Interest expense, net of interest income, increased $80.5 million in 1997 to $108.0 million from $27.5 million in 1996. This increase was due to the financing of fleet and other borrowings related to the Budget Acquisition, net of investment income due to the increase in cash. Provision for Income Taxes. The provision for income taxes increased $23.1 million in 1997 to $26.4 million from $3.3 million for 1996. The tax provision reflects a full year effective rate of 42% which is higher than the statutory rate largely due to the effects of non-deductible intangible amortization and the impact of state and local income taxes net of the federal benefit. YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 General Operating Results. Net income for 1996 increased $4.2 million, or 1,234.4%, to $4.5 million from $337,000 for 1995. Income before provision for income taxes increased over seven times from $1.0 million in 1995 to $7.8 million for 1996. This increase was due to the Company's acquisition activity and the growth of the Company's car sales operations from seven locations at December 31, 1995 to 11 locations at December 31, 1996. Operating income for 1996 increased $21.1 million, or 148.7%, from $14.2 million for 1995 to $35.3 million for 1996, due primarily to an increase in the vehicle fleet resulting from the acquisitions of the Budget franchises in Arizona and Southern California and Van Pool Services. The daily average rental rate increased slightly to $41.19 in 1996 from $40.75 in 1995. Operating Revenues. Vehicle rental revenues for 1996 increased $116.2 million, or 108.5%, from $107.1 million in 1995 to $223.3 million in 1996. The increase in rental revenues was due primarily to the increase in the size of the Company from operating 133 rental locations in 12 franchise areas at December 31, 1995 to operating 152 locations in 13 franchise territories at December 31, 1996, and to the acquisition of Van Pool Services in February 1996. Revenues from the Company's retail car sales operations increased $91.5 million from $42.7 million in 1995 to $134.1 million in 1996 due to the expansion of the Company's car sales facilities from seven locations at December 31, 1995 to 11 locations at December 31, 1996. Operating Expenses. Operating expenses increased approximately $186.6 million, or 137.6%, to $322.1 million for 1996 as compared to $135.5 million for 1995. The growth of the Company's vehicle rental operations through the acquisitions discussed above was the principal cause of all the increases in the Company's operating expenses. Vehicle depreciation increased approximately $33.3 million, or 121%, in 1996 due to an increase in fleet of 7,800 vehicles. Advertising expenses increased from $11.8 million in 1995 to $23.0 million for 1996 due to the increase in the size of the rental operations and due to the growth of the retail car sales operations from five markets at December 31, 1995 to 11 markets at December 31, 1996. The retail car sales business typically incurs greater advertising expense than the car rental business. Facilities expense increased $9.3 million, or 83.5%, in 1996 as compared to 1995 due to the addition of 19 locations since December 31, 1995. Personnel costs increased approximately 116.6% in 1996 as compared to 1995 due to an increase of approximately 800 employees since December 31, 1995. Other operating expenses increased due to a greater volume of rental business resulting from the 1995 and 1996 acquisitions. Other (Income) Expense, Net. Interest expense, net of interest income, increased from $13.2 million for 1995 to $27.4 million for 1996. Vehicle interest expense increased approximately $11.5 million in 1996 due to the increase in the size of the Company's rental fleet from approximately 7,800 vehicles at December 31, 1995 to approximately 15,600 vehicles at December 31, 1996. Non-vehicle interest (income) expense changed from income of $716,000 in 1995 to $838,000 of expense in 1996. This increase was primarily due to non-vehicle interest paid on financing for the acquisition of the Phoenix Budget franchise. Provision for Income Taxes. The provision for income taxes increased $2.6 million from $685,000 for 1995 to $3.3 million for 1996. The tax provision is calculated at a rate of approximately 42.5%. The increase in provision is due to the enhanced profitability of the Company in 1996 as compared to 1995. 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 and leasing companies. 19 22 The material terms of the Company's financing facilities are described below. The Company's existing indebtedness at December 31, 1997 has interest rates ranging from 5.8% to 10.0%. The Company intends to fund its operations through asset-backed notes and revolving credit facilities with financial institutions for fleet financing and working capital, as well as through other similar facilities and through placements or offerings of additional debt and/or equity securities. At December 31, 1997, the Company had borrowed $2.2 billion under asset-backed notes and a commercial paper facility, which are utilized largely to finance vehicles eligible for certain manufacturers' vehicle repurchase programs. Proceeds from the asset-backed notes that are temporarily unutilized for vehicle financing are maintained in restricted cash accounts with the trustees. The notes are collateralized by the secured vehicles and the restricted cash accounts. Rates on asset-backed notes and the commercial paper facility at December 31, 1997 range from 5.8% to 7.8%. The Company's other vehicle obligations consist of outstanding lines of credit to purchase rental fleet and retail car sales inventory. Collateralized available lines of credit at December 31, 1997 consist of $13.0 million for rental vehicles and $27.0 million for retail car sales inventory with maturity dates through May 1998. Vehicle obligations are collateralized by revenue earning vehicles financed under these credit facilities and proceeds from the sale, lease or rental of rental vehicles and retail car sales inventory. Interest payments for rental fleet facilities are due monthly at annual interest rates ranging from 7.0% to 8.5% at December 31, 1997. Management expects that vehicle obligations will generally be repaid within one year from the balance sheet 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. Net cash provided by operating activities for the twelve months ended December 31, 1997 increased 317.2% to $226.9 million from $54.4 million for the twelve months ended December 31, 1996. Net cash provided by operating activities for 1996 increased 236.8% to $54.4 million from $16.1 million in 1995. In each period, the Company 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 expenses. Net cash used in investing activities for the twelve months ended December 31, 1997 increased 945.6% to $656.7 million from $62.8 million for the twelve months ended December 31, 1996. Net cash used in investing activities is primarily attributed 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 $1,707.5 million, $460.6 million and $293.9 million for 1997, 1996 and 1995, respectively. Cash paid to suppliers of revenue earning vehicles was $2,012.0 million, $517.1 million and $315.9 million for 1997, 1996 and 1995, respectively. The increase in cash paid to suppliers of revenue earning vehicles during 1997 was a result of the increased number of locations due to the Budget Acquisition. The increase in cash paid to suppliers of revenue earning vehicles during 1996 was a result of the increased number of operating locations throughout 1996. Payment for acquisitions, net of cash acquired, amounted to $143.2 million, $5.1 million and $6.5 million for 1997, 1996 and 1995, respectively. Net cash provided by financing activities for the twelve months ended December 31, 1997 increased 815.9% to $536.4 million from $58.6 million for the twelve months ended December 31, 1996, due primarily to proceeds received from the issuance of Class A Common Stock and various notes payable, which was partially offset by the utilization of a portion of these proceeds to purchase BRACC and repay vehicle and non-vehicle debt. Net cash provided by financing activities for 1996 increased 97.6% to $58.6 million from $29.6 million in 1995, due primarily to proceeds received from the issuance of Class A Common Stock and the Series A Convertible Notes, which was partially offset by the utilization of a portion of these proceeds to repay existing vehicle and non-vehicle debt. Fleet Financing Facilities Historically, the Company's operations were partially funded by cash provided from operating activities and by financing provided under asset-backed notes issued under the First, Second and Third Fleet Financing Facilities (collectively, the "Fleet Financing Facilities"). At December 31, 1997, amounts outstanding under 20 23 the Fleet Financing Facilities were comprised of $105.7 million of asset-backed notes issued by the Company's special purpose finance subsidiary, Team Fleet Financing Corporation ("TFFC"), in August 1994 (the "First Fleet Financing Facility"), $30.4 million of asset-backed notes assumed by the Company in connection with the acquisition of the Los Angeles, California Budget franchise in October 1995 (the "Second Fleet Financing Facility") and $176.0 million of asset-backed notes issued by TFFC in December 1996 (the "Third Fleet Financing Facility"). These facilities have been principally utilized to finance Program Vehicles. Proceeds from these facilities that are temporarily unutilized for vehicle financing are maintained in restricted cash accounts with the trustee and are not available for other purposes. The notes issued under these facilities are collateralized by the financed vehicles and the restricted cash accounts, with the vehicles being leased to the Company's operating subsidiaries. The First Fleet Financing Facility is comprised of senior and subordinated notes. The senior notes require monthly interest payments at an annual rate of average LIBOR, as defined, plus 0.75% (6.86% at December 31, 1997). Monthly principal payments of $16.7 million commence in June 1999 with the last payment due in November 1999. The subordinated notes included in the First Fleet Financing Facility require monthly interest payments at an annual rate of average LIBOR, as defined, plus 1.30% (7.41% at December 31, 1997) and are payable in full in December 1999. The Second Fleet Financing Facility is comprised of senior and subordinated notes. The senior notes require monthly interest payments at an annual rate of average LIBOR, as defined, plus 0.60% (6.71% at December 31, 1997). Monthly principal payments of $4.8 million commence in November 1997 with the last payment due in June 1998. The subordinated notes included in the Second Fleet Financing Facility require monthly interest payments at an annual rate of average LIBOR, as defined, plus 1.0% (7.11% at December 31, 1997) and are payable in full in July 1998. The Third Fleet Financing Facility is comprised of senior and subordinated notes. The senior notes require monthly interest payments at an annual rate of 6.65%. Monthly principal payments of $13.8 million commence in 2001 with the last payment due in 2002. The subordinated notes included in the Third Fleet Financing Facility require monthly interest payments at an annual rate of 7.10% and are payable in full in June 2002. Up to $100 million of the Third Fleet Financing may be used to finance vehicles that are not Program Vehicles. April 1997 Fleet Financings The April 1997 Fleet Financings entered into concurrently with the Budget Acquisition provide financing for $1.4 billion of vehicles. The April 1997 Fleet Financings consist of a $900.0 million commercial paper facility and an additional $500.0 million asset-backed note facility. As of December 31, 1997, the Commercial Paper Facility has various interest rates, which range between 5.75% and 6.15%. The asset-backed note facility consists of senior and subordinated notes. The senior notes require monthly interest payments at an annual rate of 7.35%. Monthly principal payments of $39.4 million commence November 2001 with a final payment due in October 2002. The subordinated notes require monthly interest payments at an annual rate of 7.80% and are payable in full in November 2002. Budget Fleet Financing Facility Historically, BRACC's operations were partially funded with cash provided by notes issued by Budget Fleet Finance Corporation (the "BFFC Facility"), which is a special purpose bankruptcy remote corporation. The Company has continued to utilize borrowings under the BFFC Facility to fund its operations. The BFFC Facility consists of $500.0 million of senior notes requiring monthly interest payments at LIBOR plus 0.50% (6.36% at December 31, 1997). Six monthly principal payments of $83.3 million commence in April 1999 with the last payment due in September 1999. The Debt Placements Concurrently with the Budget Acquisition, the Company issued $45.0 million aggregate principal amounts of Series B Convertible Notes, and BRACC issued $165.0 million aggregate principal amount of 21 24 Guaranteed Senior Notes, which are guaranteed by the Company and certain subsidiaries of the Company. The Guaranteed Senior Notes bear interest at a rate of 9.57% and mature in 2007. In addition, the note purchase agreements relating to the Series A Convertible Notes, which had been issued in December 1996, were amended to extend the maturity of the Series A Convertible Notes to April 2007 and conform other terms to the terms of the Series B Convertible Notes. At a conversion price of $20.07 per share, the Series A Convertible Notes are convertible into an aggregate of 3,986,049 shares of Class A Common Stock, bear interest at a rate of 7% and mature in 2007. At a conversion price of $27.96 per share, the Series B Convertible Notes are convertible into 1,609,442 shares of Class A Common Stock, bear interest at a rate of 6.85% and mature in 2007. April 1997 Working Capital Facility Concurrently with the Budget Acquisition, BRACC entered into a $300.0 million, five-year secured credit facility (the "April 1997 Working Capital Facility"), which is guaranteed by the Company. At December 31, 1997, the Company had $238.1 million in letters of credit outstanding under this facility. The following is a summary of the material terms and conditions of the April 1997 Working Capital Facility. The April 1997 Working Capital Facility consists of a five-year senior, secured revolving credit facility in the amount of $300.0 million. The April 1997 Working Capital Facility provides that (i) up to $100.0 million is available for loans, (ii) up to $40.0 million (or equivalent thereof in certain foreign currencies) of such $100.0 million is available under a multi-currency subfacility, (iii) up to $300.0 million is available for letters of credit and (iv) up to $225.0 million of such $300.0 million is available for letters of credits for credit enhancement of commercial paper or similar fleet financing programs. In addition, aggregate letter of credit and loans outstanding under the April 1997 Working Capital Facility are subject to a borrowing base limitation and may not at any time exceed the sum of 85% of eligible receivables (as defined therein), 100% of eligible repurchase vehicles (as defined therein), 85% of eligible non-repurchase vehicles (as defined therein), and 100% eligible cash and cash equivalents (as defined therein). All letters of credit and loans under the April 1997 Working Capital Facility mature on or by the fifth anniversary of the date of the loan agreement. Interest accrues on borrowings outstanding under the April 1997 Working Capital Facility, at the Company's option, at a rate equal to (i) either the higher of (A) the interest rate established by Credit Suisse as its base or prime rate in effect at its principal office in New York City and (B) the federal funds effective rate from time to time plus 0.5% (the higher of these being known as the "ABR") plus the applicable margin for ABR loans (which margin shall range from approximately 0.25% to 1.25%) or (ii) the rate at which Eurocurrency deposits in the relevant denomination currency for one, two, three or six months (as selected by the Company) are offered by Credit Suisse in the relevant interbank Eurocurrency market plus the applicable margin for the Eurocurrency rate (which margin shall range from 1.25% to 2.25%). The April 1997 Working Capital Facility requires the Company to pay the following fees: (i) a commitment fee based on the ratio of adjusted debt to adjusted EBITDA of the Company and ranging from 0.25% to 0.375% per annum; (ii) a letter of credit fee on the aggregate amount available under outstanding letters of credit equal to a rate per annum which is the same as the applicable margin for Eurocurrency loans from time to time in effect; and (iii) a letter of credit fronting fee equal to a rate per annum of 0.125% of the aggregate amount available under each letter of credit issued. The April 1997 Working Capital Facility is secured by (a) a first-priority lien on: (i) the capital stock of BRACC and each direct and indirect subsidiary of BRACC (with respect to the international subsidiaries, no more than 65% of the stock of each subsidiary will be required to be pledged in the event that a pledge of a greater percentage would result in material increased tax or similar liabilities for Budget Group and its subsidiaries on a consolidated basis); (ii) cash and other working capital such as receivables and related contract rights of BRACC and its subsidiaries (other than assets pledged as security in respect of a vehicle financing program); and (iii) all assets included in the borrowing base and (b) as to letters of credit issued as credit and/or liquidity enhancement for the Company's commercial paper program, perfected liens on the assets surrounding the commercial paper issued pursuant to the commercial paper program (which, in the case of credit enhancement, will generally be subordinated). 22 25 The April 1997 Working Capital Facility contains a number of customary affirmative covenants, including covenants which require BRACC and the Company to: deliver financial statements and other reports; pay other obligations; maintain corporate existence; comply with laws and contracts; maintain properties and insurance; maintain books and records; grant the lenders certain inspection rights; provide notices of defaults, litigation and material events; and comply with environmental matters. The April 1997 Working Capital Facility also contains a number of customary negative covenants, including limitations on indebtedness (including preferred stock), liens, guarantee obligations, mergers, consolidations, liquidations and dissolutions, sales of assets, leases, dividends and other payments in respect of capital stock, capital expenditures, investments, loans and advances; payments and modifications of subordinated and other debt instruments, transactions with affiliates, changes in fiscal year; negative pledge clauses; and changes in lines of business. BRACC and the Company are required to meet certain financial covenants, consisting of: (a) a minimum net worth (as defined) of the Company equal to the sum of (i) $294,500 plus 50% of the net income of the Company of each fiscal year commencing with 1997 as shall have been completed on or prior to the time of computation plus 50% of the net equity proceeds (as defined); (b) a maximum leverage ratio (as defined) of 5.60 to 1.00 for the quarter ending December 31, 1997, declining to 3.25 to 1.00 for the quarter ending December 31, 1999 and each fiscal quarter thereafter; and (c) a minimum interest coverage ratio (as defined) of 2.50 to 1.00 for the quarter ending December 31, 1997, increasing to 3.25 to 1.00 for the quarter ending September 30, 1999 and each fiscal quarter thereafter. CHANGE IN FINANCIAL CONDITION Total assets increased $3.0 billion from $587.2 million at December 31, 1996 to $3.6 billion at December 31, 1997. This increase resulted primarily from increases in revenue-earning vehicles of $2.0 billion and intangibles of $460.7 million resulting from the Budget Acquisition. Total liabilities increased $2.6 billion from $493.2 million at December 31, 1996 to $3.1 billion at December 31, 1997 due primarily to an additional $2.3 billion of net borrowings largely to finance the vehicles of BRACC. The increase in stockholders' equity of approximately $346.0 million was largely due to the April 1997 Public Offering and issuance of Series A Convertible Preferred Stock in connection with the Budget Acquisition. INFLATION The increased acquisition cost of vehicles is the primary inflationary factor affecting the Company's operations. Many of the Company's 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 the Company's overall operating costs is not expected to be greater for the Company 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. The Company increases the size of its fleet and work force in the spring and summer to accommodate increased rental activity during these periods and decreases its fleet and work force in the fall and winter. However, many of the Company's operating expenses (such as rent, insurance and administrative personnel) are fixed and cannot be reduced during the fall and winter. The retail car sales business is subject to seasonal effects, with lower sales during the winter months. YEAR 2000 ISSUE The Company has assessed and continues to assess the impact of the year 2000 ("Y2K") on its reporting systems and operations (the "Y2K Issue"). The Y2K Issue exists because many computer systems and applications currently use two-digit date fields to designate a year. As the century date occurs, certain date sensitive systems will recognize the year 2000 as the year 1900 or may not recognize the date at all. This inability to properly treat or recognize the year 2000 may cause computer systems and applications to process critical information incorrectly. 23 26 During 1997, the Company recognized approximately $2.2 million in expenses to modify existing computer systems and applications and estimates that an aggregate of approximately $6.7 million will be incurred in 1998 and 1999 specifically for Y2K modification. The most significant systems undergoing or to undergo modifications are the reservation and rental transaction processing systems. A failure in these systems could cause significant disruption in customer service levels and therefore materially impact the Company's operating results and financial condition. The Company expects to complete all major modification efforts by mid-1999. ENVIRONMENTAL MATTERS The Company has assessed and continues to asses the impact of environmental remediation efforts on its operations. The Company's exposure largely relates to the clean-up and replacement of underground gasoline storage tanks. During 1997, the Company recognized approximately $.7 million in expenses related to remediation efforts and estimates that an aggregate of approximately $3.3 million will be incurred in 1998 and 1999. Based on past experience, management expects 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. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company'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 "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 April 23, 1998 and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information included under the heading "Executive Compensation," including, but not limited to, the subsections entitled "Stock Performance Graph" and "Compensation Committee Report on Executive Compensation" appearing thereunder, of the Proxy Statement for the Annual Meeting of Stockholders to be held on April 23, 1998 is incorporated herein by reference. 24 27 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is included under the heading "Beneficial Ownership of Common Stock" of the Proxy Statement for the Annual Meeting of Stockholders to be held on April 23, 1998 and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is included under the heading "Certain Transactions and Relationships" 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 April 23, 1998 and is incorporated herein by reference. 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. Independent Auditors' Report. Consolidated Balance Sheets December 31, 1996 and 1997. Consolidated Statements of Income for Each of the Three Years in the Period Ended December 31, 1997. Consolidated Statements of Stockholders' Equity for Each of the Three Years in the Period Ended December 31, 1997. Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended December 31, 1997. 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).
25 28
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 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). 3.1 -- Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to Registrant's Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994). 3.2 -- Amendment to Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to Amendment No. 2 to the Registrant's Registration Statement on Form S-1, File No. 333-4507, dated June 28, 1996). 3.3 -- Amendment to Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.3 to the Registrant's Registration Statement on Form S-1, File No. 333-34799, dated September 26, 1997). 3.4 -- By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994). 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). 4.8 -- 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).
26 29
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.8 -- Indenture dated as of December, 1997 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. 33341093, dated November 26, 1997, as amended by Amendment No. 1 to Form S-3 dated January 7, 1998). 4.8 -- Form of 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. 33341093, 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). 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 -- Warrant No. 1-1994, dated as of August 24, 1994, to purchase 175,000 shares of Class A Common Stock, par value $.01 per share, of the Registrant, issued to Budget Rent-a-Car Corporation (incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994). 4.14 -- NationsBank Warrant dated as of April 26, 1996 (incorporated by reference to Exhibit 4.14 to the Registrant's Registration Statement on Form S-1, File No. 333-21691, dated February 12, 1997). 4.15 -- 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). 4.16 -- 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). 4.17 -- 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).
27 30
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.18 -- 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). 4.19 -- 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). 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). 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 -- Promissory Note, dated October 20, 1995, from Team Rental of Southern California, Inc. to Budget Rent-a-Car of Southern California in the principal amount of approximately $4,775,000 (incorporated by reference to Exhibit 10.46 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.9 -- 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). 10.10 -- 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).
28 31
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.11 -- 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). 10.12 -- 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). 10.13 -- 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). 10.14 -- 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). 10.15 -- 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). 10.16 -- 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). 10.17 -- 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). 10.18 -- 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). 10.19 -- 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). *10.20 -- Form of Forbearance Agreement dated as of January 1, 1998 between the Company and each of Messrs. Miller, Congdon and Kennedy. *10.21 -- Form of Executive Agreement dated as of January 1, 1998 between the Company and each of Messrs. Miller, Congdon and Kennedy. *10.22 -- Senior Note Purchase Agreement dated as of April 23, 1997 between Budget Rent a Car Corporation, as Issuer, and the Registrant, as Guarantor. *10.23 -- Credit Agreement dated as of April 29, 1997 among Budget Rent a Car Corporation, as the Borrower, Budget Group, Inc., as a Guarantor, and Certain Financial Institutions, as the Lenders, Credit Suisse First Boston, as a Co-Syndication Agent and the Administrative Agent and NationsBanc Capital Markets, Inc., as a Co-Syndication Agent and the Documentation Agent, as amended by First Amendment to Credit Agreement dated as of October 24, 1997, Amendment and Waiver No. 2 to Credit Agreement dated as of January 28, 1998 and Amendment No. 3 to Credit Agreement dated as of March 13, 1998. 16.1 -- Letter re: Change in Certifying Accountant (incorporated by reference to Exhibit 16 to the Registrant's Current Report on Form 8-K dated November 26, 1996, as amended). *21.1 -- Subsidiaries of the Registrant. *23.1 -- Consent of Arthur Andersen LLP. *23.2 -- Consent of Deloitte & Touche LLP. *27.1 -- Financial Data Schedule -- December 31, 1997 (for SEC use only). *27.2 -- Restated Financial Data. Schedules -- September 30, 1997 (for SEC use only).
29 32
EXHIBIT NUMBER DESCRIPTION - ------- ----------- *27.3 -- Restated Financial Data Schedule -- June 30, 1997 (for SEC use only). *27.4 -- Restated Financial Data Schedule -- March 31, 1997 (for SEC use only). *27.5 -- Restated Financial Data Schedule -- December 31, 1996 (for SEC use only). *27.6 -- Restated Financial Data Schedule -- September 30, 1996 (for SEC use only). *27.7 -- Restated Financial Data Schedule -- June 30, 1996 (for SEC use only). *27.8 -- Restated Financial Data Schedule -- March 31, 1996 (for SEC use only). *27.9 -- Restated Financial Data Schedule -- December 31, 1995 (for SEC use only). *99.1 -- Safe Harbor Compliance Statement for Forward-Looking Statements.
- --------------- * Filed Herewith (B) REPORTS ON FORM 8-K One report on Form 8-K/A was filed during the quarter ended December 31, 1997:
FINANCIAL ITEM REPORTED STATEMENTS FILED DATE OF REPORT ------------- ---------------- ---------------- (i) Update of the report of the independent certified public accountants with respect to the Consolidated Financial Statements that had previously been filed with the Company's Annual Report on Form 10-K for the year ended December 31, 1996 and (ii) update the Pro Forma Financial Statements of the Company that were previously filed as an exhibit to Current Report on Form 8-K dated May 13, 1997............................... Yes(1) December 1, 1997
- --------------- (1) The Company filed Consolidated Financial Statements of Budget Group, Inc. (together with the report of the Independent Certified Public Accountants) as of December 31, 1995 and 1996 and for each of the three years in the period ended December 31, 1996 (incorporated by reference to pages F-10 through F-33 of the Company's Registration Statement on Form S-1 (File No. 333-34799) dated October 1, 1997) and Pro Forma Consolidated Statements of Operations of Budget Group, Inc. for the year ended December 31, 1996 and the six months ended June 30, 1997 (incorporated by reference to pages 20 through 28 of the Company's Registration Statement on Form S-1 (File No. 333-34799) dated October 1, 1997). (C) EXHIBITS Exhibits are listed in Item 14(a). (D) FINANCIAL STATEMENT SCHEDULES Not applicable. 30 33 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, 1998. 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, 1998.
SIGNATURE TITLE --------- ----- /s/ SANFORD MILLER Chairman of the Board, Chief Executive Officer - ----------------------------------------------------- and Director Sanford Miller /s/ JOHN P. KENNEDY Vice Chairman of the Board and Director - ----------------------------------------------------- John P. Kennedy /s/ JEFFREY D. CONGDON Vice Chairman of the Board and Director - ----------------------------------------------------- Jeffrey D. Congdon /s/ MICHAEL B. CLAUER Senior Vice President and Chief Financial - ----------------------------------------------------- Officer (Principal Financial Officer) Michael B. Clauer /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/ MARTIN P. GREGOR Director - ----------------------------------------------------- Martin P. Gregor /s/ JEFFREY R. MIRKIN Director - ----------------------------------------------------- Jeffrey R. Mirkin /s/ DR. STEPHEN L. WEBER Director - ----------------------------------------------------- Dr. Stephen L. Weber
31 34 INDEX TO FINANCIAL STATEMENTS
PAGE ---- Report of Independent Certified Public Accountants.......... F-2 Independent Auditors' Report................................ F-3 Consolidated Balance Sheets December 31, 1996 and 1997...... F-4 Consolidated Statements of Income for Each of the Three Years in the Period Ended December 31, 1997............... F-5 Consolidated Statements of Stockholders' Equity for Each of the Three Years in the Period Ended December 31, 1997..... F-6 Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended December 31, 1997............... F-7 Notes to Consolidated Financial Statements.................. F-8
F-1 35 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 formerly known as Team Rental Group, Inc.) and subsidiaries as of December 31, 1996 and 1997, and the related consolidated statements of income, stockholders' equity and cash flows for the years then ended. 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. The consolidated statements of income, stockholders' equity and cash flows of Budget Group, Inc. for the year ended December 31, 1995, were audited by other auditors whose report dated April 12, 1996, expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing standards. 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, 1996 and 1997, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Orlando, Florida February 24, 1998 (except with respect to a certain matter discussed in Note 17, as to which the date is March 4, 1998) F-2 36 INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Budget Group, Inc.: We have audited the consolidated statements of income, stockholders' equity and cash flows of Budget Group, Inc. (formerly known as Team Rental Group, Inc.) for the year ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of Budget Group, Inc. for the year ended December 31, 1995 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Indianapolis, Indiana April 12, 1996 F-3 37 BUDGET GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1997
1996 1997 ---------- ------------ (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) ASSETS Cash and cash equivalents................................... $ 50,490 $ 157,007 Restricted cash............................................. 66,336 282,731 Trade and vehicle receivables, net.......................... 31,302 329,356 Vehicle inventory........................................... 16,413 34,721 Revenue earning vehicles, net............................... 319,257 2,010,926 Property and equipment, net................................. 18,502 140,165 Prepaid expenses and other assets........................... 14,030 87,681 Intangibles, including goodwill, less accumulated amortization of $3,285 in 1996 and $11,739 in 1997........ 70,893 532,228 -------- ---------- $587,223 $3,574,815 ======== ========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Notes payable............................................... $455,609 $2,610,009 Accounts payable, accrued and other liabilities............. 30,207 418,438 Deferred income taxes....................................... 7,406 108,378 -------- ---------- Total liabilities................................. 493,222 3,136,825 -------- ---------- COMMITMENTS AND CONTINGENCIES (NOTES 9, 11, 13 AND 17) COMMON STOCK WARRANT........................................ 2,000 -- STOCKHOLDERS' EQUITY Preferred stock, $0.01 par value, 250,000 shares authorized, no shares issued or outstanding........................... -- -- Series A convertible preferred stock, $0.01 par value, 10,000 shares authorized, no shares issued or outstanding............................................... -- -- Class A common stock, $0.01 par value, one vote per share, 17,500,000 (in 1996) and 35,000,000 (in 1997) shares authorized, 9,357,050 (in 1996) and 23,905,070 (in 1997) shares issued............................................. 93 239 Class B common stock, $0.01 par value, 10 votes per share, 2,500,000 shares authorized, 1,936,600 shares issued (in 1996 and 1997)............................................ 19 19 Additional paid-in capital.................................. 89,856 400,099 Foreign currency translation adjustment..................... -- (1,326) Retained earnings........................................... 2,363 39,289 Treasury stock, at cost (36,667 shares of Class A common stock).................................................... (330) (330) -------- ---------- Total stockholders' equity........................ 92,001 437,990 -------- ---------- Total liabilities and stockholders' equity........ $587,223 $3,574,815 ======== ==========
See accompanying notes to consolidated financial statements. F-4 38 BUDGET GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
1995 1996 1997 -------- -------- ---------- (IN THOUSANDS EXCEPT PER SHARE DATA) Operating revenue: Vehicle rental revenue.................................. $107,067 $223,250 $1,014,105 Retail car sales revenue................................ 42,662 134,120 239,992 Royalty fees and other.................................. -- -- 49,665 -------- -------- ---------- Total operating revenue......................... 149,729 357,370 1,303,762 -------- -------- ---------- Operating costs and expenses: Direct vehicle and operating............................ 13,704 35,098 128,408 Depreciation -- vehicle................................. 27,476 60,735 278,495 Depreciation -- non-vehicle............................. 1,341 2,589 14,192 Cost of vehicle sales................................... 38,021 113,747 205,791 Advertising, promotion and selling...................... 11,826 22,983 93,265 Facilities.............................................. 11,121 20,406 95,558 Personnel............................................... 24,515 53,097 247,862 General and administrative.............................. 6,686 11,605 60,451 Amortization............................................ 859 1,843 8,454 -------- -------- ---------- Total operating costs and expenses.............. 135,549 322,103 1,132,476 -------- -------- ---------- Operating income.......................................... 14,180 35,267 171,286 -------- -------- ---------- Other (income) expense: Vehicle interest expense................................ 13,874 25,336 93,796 Non-vehicle interest expense............................ 473 1,501 19,933 Interest income -- restricted cash...................... (1,348) (781) (5,744) Non-recurring bank fees................................. -- 1,275 -- Related party interest expense.......................... 159 118 -- -------- -------- ---------- Total other expense............................. 13,158 27,449 107,985 -------- -------- ---------- Income before income taxes................................ 1,022 7,818 63,301 Provision for income taxes................................ 685 3,321 26,375 -------- -------- ---------- Net income................................................ $ 337 $ 4,497 $ 36,926 ======== ======== ========== Weighted average number of shares outstanding -- basic.... 6,369 9,224 18,494 ======== ======== ========== Basic earnings per share.................................. $ 0.05 $ 0.49 $ 2.00 ======== ======== ========== Weighted average number of shares outstanding --diluted... 6,369 9,488 26,245 ======== ======== ========== Diluted earnings per share................................ $ 0.05 $ 0.47 $ 1.60 ======== ======== ==========
See accompanying notes to consolidated financial statements. F-5 39 BUDGET GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
FOREIGN CONVERTIBLE ADDITIONAL CURRENCY RETAINED TOTAL PREFERRED COMMON PAID-IN TRANSLATION EARNINGS TREASURY STOCKHOLDERS' STOCK STOCK CAPITAL ADJUSTMENT (DEFICIT) STOCK EQUITY ----------- ------ ---------- ----------- --------- -------- ------------- (IN THOUSANDS) BALANCE, JANUARY 1, 1995... $ -- $ 60 $ 29,159 $ -- $(2,471) $ -- $ 26,748 Net income............... -- -- -- -- 337 -- 337 Shares issued in business combinations.......... -- 12 12,825 -- -- -- 12,837 Class A common stock acquired for treasury.............. -- -- -- -- -- (330) (330) --------- ---- -------- ------- ------- ----- -------- BALANCE, DECEMBER 31, 1995..................... -- 72 41,984 -- (2,134) (330) 39,592 Net income............... -- -- -- -- 4,497 -- 4,497 Shares issued in business combinations.......... -- 2 2,725 -- -- -- 2,727 Warrants issued in conjunction with financing............. -- -- 686 -- -- -- 686 Net proceeds from stock offering.............. -- 38 44,402 -- -- -- 44,440 Proceeds from exercise of stock options......... -- -- 59 -- -- -- 59 --------- ---- -------- ------- ------- ----- -------- BALANCE, DECEMBER 31, 1996..................... -- 112 89,856 -- 2,363 (330) 92,001 Net income............... -- -- -- -- 36,926 -- 36,926 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 5,575 -- -- -- 5,581 Foreign currency translation........... -- -- -- (1,326) -- -- (1,326) Conversion of preferred stock................. (105,750) 45 105,705 -- -- -- -- Proceeds from exercise of warrants.............. -- 2 2,036 -- -- -- 2,038 ========= ==== ======== ======= ======= ===== ======== BALANCE, DECEMBER 31, 1997..................... $ -- $258 $400,099 $(1,326) $39,289 $(330) $437,990 ========= ==== ======== ======= ======= ===== ========
See accompanying notes to consolidated financial statements. F-6 40 BUDGET GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
1995 1996 1997 --------- --------- ----------- (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES Net income........................................... $ 337 $ 4,497 $ 36,926 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization..................... 30,578 65,720 301,141 Deferred income tax provision..................... 540 2,479 26,375 Warrants issued in connection with financing...... -- 686 -- Changes in operating assets and liabilities, net of effects from acquisitions: Trade and vehicle receivables, net................ (9,393) (5,910) (91,863) Prepaid expenses and other assets................. 387 (1,350) (7,271) Vehicle inventory................................. (7,995) (3,463) (3,138) Accounts payable, accrued and other liabilities... 1,694 (8,280) (35,319) --------- --------- ----------- Net cash provided by operating activities.... 16,148 54,379 226,851 --------- --------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Change in restricted cash balance.................... (13,271) 1,395 (213,715) Proceeds from sale of revenue earning vehicles....... 293,905 460,550 1,707,500 Proceeds from sale of property and equipment......... -- -- 14,523 Purchases of revenue earning vehicles................ (315,863) (517,079) (2,011,954) Purchases of property and equipment.................. (4,562) (2,608) (9,888) Payment for acquisitions, net of cash acquired....... (6,507) (5,064) (143,164) --------- --------- ----------- Net cash used in investing activities........ (46,298) (62,806) (656,698) --------- --------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from equity transactions, net............... -- 44,499 196,116 Net increase (decrease) in vehicle obligations....... 20,947 (220,901) (700,241) Net increase (decrease) in working capital facilities........................................ 6,890 (9,500) -- Net increase (decrease) in commercial paper.......... (276) (4,900) 348,850 Proceeds from other notes payable.................... 3,399 256,000 710,000 Principal payments on other notes payable............ (925) (4,401) (18,361) Payment of financing fees............................ (76) (2,237) -- Purchase of treasury stock........................... (330) -- -- --------- --------- ----------- Net cash provided by financing activities.... 29,629 58,560 536,364 --------- --------- ----------- Net increase (decrease) in cash and cash equivalents... (521) 50,133 106,517 Cash and cash equivalents, beginning of year........... 878 357 50,490 --------- --------- ----------- Cash and cash equivalents, end of year................. $ 357 $ 50,490 $ 157,007 ========= ========= ===========
See accompanying notes to consolidated financial statements. F-7 41 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 (DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND 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) and the sale of late model used vehicles. 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. Company owned vehicle rental operations are located primarily throughout the United States and Western Europe. The largest concentration (approximately 20%) 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. 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. RESTRICTED CASH Restricted cash consists of funds borrowed under medium term note 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. F-8 42 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 each of the three years in the period ended December 31, 1997:
1995 1996 1997 ------- ------ ------- Balance at beginning of year............................... $ 501 $2,297 $ 4,008 Provision.................................................. 802 552 8,345 Writeoffs.................................................. (1,350) (181) (9,035) Increase due to acquisitions............................... 2,344 1,340 45,629 ------- ------ ------- Balance at end of year..................................... $ 2,297 $4,008 $48,947 ======= ====== =======
VEHICLE INVENTORY Vehicle inventory is stated at the lower of cost (determined based on specific identification) or market. REVENUE EARNING VEHICLES 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 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 Property and equipment is recorded at cost or fair market value at the date of acquisition, as appropriate. Depreciation is being provided on the straight-line method over the following estimated useful lives: Buildings................................................... 10-25 years Equipment, furniture and fixtures........................... 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. Although no impairment is indicated at December 31, 1997, 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. On July 9, 1996, the Company utilized proceeds from its public offering of Class A common stock to repay a $10,000 bridge financing facility it had obtained from a bank in the second quarter of 1996. In conjunction with this bank financing, the Company issued warrants valued at $700, which are included in additional paid-in capital, and paid additional fees of approximately $1,000. As a result of this repayment, the Company wrote off all unamortized fees related to this financing, totaling $1,275. F-9 43 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. Amortization is being provided on the straight-line method over two to eight years. INTANGIBLES, INCLUDING GOODWILL Intangible assets, net, consist of the following at December 31:
1996 1997 ------- -------- Franchise agreements........................................ $ -- $118,000 Trade name.................................................. -- 187,817 Goodwill.................................................... 70,893 226,411 ------- -------- $70,893 $532,228 ======= ========
Identifiable intangible assets primarily arose from the allocation of purchase prices of businesses acquired. Franchise agreements and trade name relate to the BRACC Acquisition. Goodwill represents the excess of the purchase price over the estimated fair value of all identifiable assets acquired. The intangible assets are amortized over 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. Although no impairment is indicated at December 31, 1997, the assessment of recoverability will be impacted if estimated projected undiscounted operating cash flows are not achieved. ENVIRONMENTAL COSTS Environmental remediation costs are recorded in accounts payable, accrued and other liabilities and in facilities 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 approximately $5,000 and $129,644 as of December 31, 1996 and 1997, 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 unused letters of credit amounting to $58,156 at December 31, 1997, largely in support of its insurance liability in certain states and supporting the reimbursement of claims paid by third-party claims administrators. F-10 44 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INCOME TAXES Deferred taxes are recognized to the extent they are expected to be payable upon distribution of earnings of foreign and unconsolidated subsidiaries. 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 which will be in effect when those temporary differences are expected to be recovered or settled. 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. 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 resultant translation adjustments reported as a separate component of stockholders' equity. Income statement accounts are translated at average exchange rates for the period and gains and losses from foreign currency transactions are included in net income. ROYALTY FEES AND OTHER REVENUES Royalty fees and other revenues largely consist of monthly royalty fees from franchisees, income before interest and taxes for insurance product 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 $2,347, $6,912 and $34,096 in 1995, 1996 and 1997, respectively. DERIVATIVES Premiums paid for purchased interest rate cap agreements are amortized to interest expense over the terms of the cap. Unamortized premiums are included in prepaid expenses and other assets in the accompanying consolidated balance sheets. Accounts receivable under cap agreements are accrued with a corresponding reduction of interest expense. There were no such agreements outstanding at December 31, 1997. Gains and losses on foreign exchange contracts and futures related to qualifying hedges of firm commitments or anticipated transactions are deferred and are recognized in income when the hedged transaction occurs. There were no such contracts outstanding at December 31, 1997. The Company does not engage in speculative derivatives. EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share". SFAS No. 128 established new standards for computing and presenting earnings per share ("EPS"). Specifically, SFAS No. 128 replaces the presentation of primary EPS with a presentation of basic EPS, requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with F-11 45 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS was calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS was calculated by dividing net income 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 net income and number of shares utilized in the EPS calculations for each of the three years in the period ended December 31, 1997 (share information in thousands):
YEAR ENDED DECEMBER 31, ------------------------- 1995 1996 1997 ------ ------ ------- Net income.................................................. $ 337 $4,497 $36,926 Effect of interest and loan fee amortization on convertible securities -- net of income taxes......................... -- -- 4,983 ------ ------ ------- Net income available to common stockholders after assumed conversion of dilutive securities......................... $ 337 $4,497 $41,909 ====== ====== ======= Weighted average number of common shares used in basic EPS....................................................... 6,369 9,224 18,494 Effect of dilutive securities: Stock options............................................. -- 264 704 Convertible securities.................................... -- -- 7,047 ------ ------ ------- Weighted average number of common shares and dilutive potential common stock used in diluted EPS................ 6,369 9,488 26,245 ====== ====== =======
Options to purchase approximately 77,000 shares of Class A common stock were outstanding at December 31, 1997, but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the stock for the period. STOCK OPTIONS In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation", which encourages, but does not require, companies to adopt the fair value based method of accounting for stock-based employee compensation plans. Under the fair value based method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. Companies are also permitted to continue to account for such transactions under Accounting Principles Board ("APB") Opinion No. 25, but are required to disclose, on a pro forma basis, net income and earnings per share, as if the fair value based method of accounting had been applied. Effective January 1, 1996, the Company elected to adopt only the disclosure requirements of SFAS No. 123. Accordingly, the Company will continue to account for stock-based employee compensation under APB Opinion No. 25. RECLASSIFICATIONS Certain amounts in the 1995 and 1996 consolidated financial statements have been reclassified to conform with the current year presentation. F-12 46 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (2) PUBLIC STOCK OFFERINGS The Company sold 3,821,007 shares of Class A common stock on July 2, 1996, at $13.00 per share to investors in a public offering resulting in gross proceeds of $49,673 to the Company. Net proceeds to the Company after offering expenses were $44,440. The net proceeds were used to repay certain outstanding indebtedness and for general corporate purposes. 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 BRACC Acquisition. The net proceeds of the October offering were used for working capital purposes. (3) ACQUISITIONS During 1995, 1996 and 1997, the Company acquired certain Budget franchise operations, retail vehicle sales operations, a commuter van pooling operation, BRACC and an insurance replacement car rental business. The acquisitions have been accounted for under the purchase method of accounting and, accordingly, the Company has allocated the cost of the acquisitions on the basis of the estimated fair value of the tangible and identifiable intangible assets acquired and liabilities assumed. The accompanying consolidated statements of income and cash flow reflect the operations of the acquired companies from their respective acquisition dates. 1995 ACQUISITIONS Acquisition of Dayton Franchise -- In January 1995, the Company purchased all of the outstanding stock of Don Kremer, Inc. located in Dayton, Ohio, for $1,300. The acquisition funding consisted of $650 cash and two notes totaling $650. Acquisition of Charlotte Franchise -- In January 1995, the Company purchased all of the outstanding stock of MacKay Car & Truck Rentals, Inc., located in Charlotte, North Carolina, for approximately $8,405, consisting of cash of $8,277 and 13,483 shares of Class A common stock. Acquisition of Hartford Franchise -- In March 1995, the Company purchased all of the outstanding stock of Rental Car Resources, Inc., located in Hartford, Connecticut, for approximately $1,475 by issuing 157,333 shares of Class A common stock. Acquisition of BRAC-OPCO Franchise -- In October 1995, the Company purchased all of the outstanding stock of BRAC-OPCO, Inc., which operated Budget franchises in the greater Los Angeles area, excluding the vehicle rental operations at Los Angeles International Airport, for approximately $11,234 by issuing 1,050,000 shares of Class A common stock. 1996 ACQUISITIONS Acquisition of VPSI, Inc. ("VPSI") Van Pool Operations -- In February 1996, the Company purchased for a nominal amount all of the outstanding stock of VPSI located in Detroit, Michigan. VPSI provided commuter van pooling services to business commuters in 22 states, and operated a rental fleet of approximately 3,300 vans as of the acquisition date. Acquisition of Phoenix Franchise -- In February 1996, the Company purchased all of the outstanding stock of Arizona Rent-A-Car Systems, Inc., located in Phoenix, Arizona, for approximately $18,000, consisting of cash of approximately $5,000, promissory notes of $10,000 and 272,727 shares of Class A common stock. F-13 47 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Acquisition of ValCar Rental Car Sales, Inc. ("ValCar") -- In August 1996, the Company acquired all of the outstanding stock of ValCar for $400 in cash. ValCar owned and operated four retail vehicle sales facilities in Indianapolis, Indiana, and was formerly owned by a director and officer of the Company. 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 the April stock offering (see Note 2 to consolidated financial statements). The Company also issued to Ford Motor Company 4,500 shares of Series A convertible, non-voting preferred stock, each share of which was converted into 1,000 shares of the Company's Class A common stock. 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 on January 12) and $95,175 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 Premier Car Rental, Inc.'s outstanding fleet indebtedness. Premier operates as its own brand and serves the insurance replacement market. Acquisition of St. Louis Franchise -- On October 1, 1997, the Company purchased all of the outstanding stock of Budget Rent a Car of St. Louis, Inc., located in St. Louis, Missouri, for approximately $9,524, consisting of cash of $1,000 and 246,167 shares of Class A common stock. If the 1996 and 1997 acquisitions had occurred at the beginning of 1996, the Company's results of operations would have been as shown in the following table. The 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 1996.
YEAR ENDED DECEMBER 31, ------------------------ 1996 1997 ---------- ---------- (UNAUDITED) Operating revenue........................................... $1,527,431 $1,676,766 Net income.................................................. 20,676 23,024 EPS -- basic................................................ 1.14 1.07 EPS -- diluted.............................................. 0.90 0.90
F-14 48 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (4) REVENUE EARNING VEHICLES Revenue earning vehicles consist of the following at December 31:
1996 1997 -------- ---------- Revenue earning vehicles.................................... $335,461 $2,276,582 Less -- accumulated depreciation............................ (16,204) (265,656) -------- ---------- $319,257 $2,010,926 ======== ==========
(5) PROPERTY AND EQUIPMENT Property and equipment, net, consist of the following at December 31:
1996 1997 -------- -------- Land........................................................ $ 2,601 $ 26,328 Buildings and leasehold improvements........................ 18,507 97,552 Furniture, fixtures and office equipment.................... 13,167 49,202 -------- -------- 34,275 173,082 Less -- accumulated depreciation and amortization........... (15,773) (32,917) -------- -------- $ 18,502 $140,165 ======== ========
(6) 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 $6,806 at December 31, 1997. In addition, prepaid expenses and other assets include the Company's 20% investment in a foreign rental operation. The revenue of the Company's investee amounts to less than 10% of consolidated revenues and the amount of undistributed earnings included in consolidated retained earnings is not significant. (7) NOTES PAYABLE Notes payable consist of the following at December 31:
1996 1997 -------- ---------- Commercial paper............................................ $ -- $ 871,448 Medium term notes: Senior.................................................... 304,500 1,267,376 Subordinated.............................................. 17,182 44,682 Convertible subordinated notes.............................. 80,000 125,000 Vehicle obligations......................................... 38,438 26,808 Guaranteed senior notes..................................... -- 165,000 Foreign notes............................................... -- 66,781 Note payable to vendor...................................... -- 15,677 Other....................................................... 15,489 27,237 -------- ---------- $455,609 $2,610,009 ======== ==========
F-15 49 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) COMMERCIAL PAPER The $900,000 commercial paper facility (the "Paper") was established in April 1997, bears interest at rates ranging from 5.75% to 6.15% at December 31, 1997, and is secured by the applicable vehicles and vehicle program receivables. Under limited circumstances the Paper may be repaid by draws under a related, bank provided liquidity facility ($825,000) or a related letter of credit ($95,000). The Paper 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 April 1998. No amounts were drawn under the bank provided liquidity facility or related letter of credit at December 31, 1997. MEDIUM TERM NOTES Medium term notes are comprised of notes issued in August 1994 ("TFFC-94 notes"), notes assumed in the acquisition of BRAC-OPCO, Inc. in October 1995 ("OPCO notes"), notes issued in December 1996 ("TFFC-96 notes"), notes issued in April 1997 ("TFFC-97 notes") and notes assumed in the BRACC Acquisition ("BFFC -- 94A notes") (collectively "MTN notes"). MTN notes are secured by the underlying vehicles and restricted cash of $66,336 and $282,731 at December 31, 1996 and 1997, respectively. Under limited circumstances the MTN notes may be repaid by draws under related letters of credit amounting to $85,000 at December 31, 1997. No amounts were drawn under the related letter of credit at December 31, 1997. The TFFC-94 notes consist of senior notes and subordinated notes. The senior notes, with an aggregate principal balance of $100,000 at December 31, 1996 and 1997, bear interest at an average LIBOR rate, as defined, plus 0.75% (6.86% per annum at December 31, 1997). Monthly principal payments of $16,667 commence in June 1999 with the last payment due in November 1999. The subordinated notes, with an aggregate principal balance of $5,682 at December 31, 1996 and 1997, bear interest at an average LIBOR rate, as defined, plus 1.30% (7.41% per annum at December 31, 1997) and are payable in full in December 1999. Interest on the TFFC-94 notes is payable monthly. The BFFC-94A notes consist of an aggregate principal balance of $500,000 at December 31, 1997 and bear interest at an average LIBOR rate, as defined, plus 0.50% (6.36% per annum at December 31, 1997). Interest on the BFFC-94A notes is payable monthly. Monthly principal payments of $83,333 commence in April 1999, with the last payment due in September 1999. The OPCO notes consist of senior notes and subordinated notes. The senior notes, with an aggregate principal balance of $38,500 and $28,876 at December 31, 1996 and 1997, bear interest at an average LIBOR rate, as defined, plus 0.60% (6.71% per annum at December 31, 1997). Monthly principal payments of $4,812 commenced in November 1997 with the last payment due in June 1998. The subordinated notes, with an aggregate principal balance of $1,500 at December 31, 1996 and 1997, bear interest at an average LIBOR rate, as defined, plus 1.0% (7.11% per annum at December 31, 1997) and are payable in full in December 1998. Interest on the OPCO notes is payable monthly. 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, 1996 and 1997, 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, 1996 and 1997, 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, 1997, bear interest at 7.35% per annum. Monthly principal payments of $39,375 commence in November 2001, with the last payment due in October 2002. The F-16 50 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) subordinated notes, with an aggregate principal balance of $27,500 at December 31, 1997, bear interest at 7.80% per annum and are payable in full in 2002. Interest on the TFFC-97 notes is payable monthly. CONVERTIBLE SUBORDINATED NOTES In December 1996, the Company issued convertible subordinated notes with an aggregate principal amount of $80,000 bearing interest at 7.0% per annum due 2003. The term of the notes was extended to 2007 in conjunction with the BRACC Acquisition. At a conversion price of $20.07 per share, the convertible subordinated notes are convertible into 3,986,049 shares of Class A common stock. 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 1,609,442 shares of Class A common stock. VEHICLE OBLIGATIONS Vehicle obligations consist of outstanding lines of credit to purchase rental vehicles and retail car sales inventory. Collateralized lines of credit at December 31, 1997, consist of $13,000 for rental vehicles and approximately $27,000 for retail car sales inventory with maturity dates through May 1998. Vehicle obligations are collateralized by revenue earning vehicles financed under these credit facilities and proceeds from the sale, lease or rental of rental vehicles and retail car sales inventory. Vehicle obligations relating to the rental fleet are generally amortized over 5 to 15 months with monthly principal payments ranging from 2.0% to 3.0% 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 annual interest rates ranging from 7.0% to 8.5% at December 31, 1997. 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. GUARANTEED SENIOR NOTES Concurrent with the BRACC Acquisition, the Company issued $165,000 of guaranteed senior notes. The guaranteed senior notes bear interest at 9.57% per annum, mature in 2007 and are unsecured. The agreement under which the notes were issued includes certain covenants, the most restrictive of which require the Company to maintain certain financial ratios and minimum net worth. At December 31, 1997, the Company was in compliance with all covenants. FOREIGN NOTES The foreign notes primarily provide financing for vehicle purchases and the funding of working capital. At December 31, 1997, approximately $64,885 relates to vehicle debt while $1,896 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 6.55% to 9.0% per annum, and mature from 1998 through 2003. NOTE PAYABLE TO VENDOR The note payable to vendor relates to the Company's license agreement for the reservation system and associated applications and databases. The note bears interest at 6.20% per annum and is due in November 1998. F-17 51 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) WORKING CAPITAL FACILITIES The Company has a $300,000 five-year senior, secured revolving credit facility, bearing interest at an initial rate of 1.75% over LIBOR. At December 31, 1997, the Company had $238,156 in letters of credit outstanding under this facility. The working capital facility is secured by eligible cash, eligible receivables and unencumbered vehicles. The agreement governing the credit facility includes certain convenants, 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, 1997, the Company was in compliance with all convenants. No amounts were drawn on this facility at December 31, 1997. Scheduled aggregate maturities of notes payable at December 31, 1997, are as follows:
YEAR ENDING DECEMBER 31, AMOUNT ------------------------ ---------- 1998........................................................ $1,032,589 1999........................................................ 607,003 2000........................................................ 2,241 2001........................................................ 189,709 2002........................................................ 487,526 Thereafter.................................................. 290,941 ---------- $2,610,009 ==========
(8) RELATED PARTY TRANSACTIONS The Company leases facilities from an entity owned by certain stockholders. Operating lease payments for the years ended December 31, 1995, 1996 and 1997, were $220, $227 and $586, respectively. The entity assigned lease payments from the Company to a bank. At December 31, 1996 and 1997, the Company had a payable to a stockholder and director in the amount of $1,500 which is included in notes payable in the accompanying consolidated balance sheet. The outstanding balance bears interest at prime plus 2.0% (10.50% per annum at December 31, 1997), is unsecured and is payable on demand. Approximately $4,013 and $19,811 of cash and cash equivalents are on deposit with or are being held as agent for the Company by a bank at December 31, 1996 and 1997, respectively. A stockholder and director of the Company served on the bank's board of directors. In connection with the BRAC-OPCO franchise acquisition, the Company entered into a franchise agreement with the seller to pay a royalty of 5% of the monthly gross revenues derived from those operations, as well as the Company's San Diego operations. BRACC had a similar agreement related to the Los Angeles airport. A director of the Company is the Chief Executive Officer and a general partner of the seller. In 1996 and 1997, the Company paid the seller approximately $3,700 and $6,213, respectively, in royalty fees in accordance with these agreements. 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 1997, approximately 73% 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 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 represents at least 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 F-18 52 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) significant portions of the fleet purchases to other manufacturers would require lead time and certain operational changes. As a result, any inability of 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 adverse effect on the Company's financial condition and results of operations. (9) 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 commission fees on behalf of certain licensees. Expense for operating leases and airport concession fees consists of the following:
YEAR ENDED DECEMBER 31, ----------------------------- 1995 1996 1997 ------- ------- ------- Revenue earning vehicles.............................. $ 1,518 $ 1,555 $15,914 Facilities: Minimum rentals..................................... 5,914 14,422 65,320 Contingent rentals.................................. 3,502 3,353 17,615 ------- ------- ------- $10,934 $19,330 $98,849 ======= ======= =======
Future minimum payments under noncancellable leases and concession agreements at December 31, 1997, are as follows:
YEAR ENDING DECEMBER 31, - ------------------------ 1998................................................... $ 49,865 1999................................................... 34,006 2000................................................... 26,635 2001................................................... 20,695 2002................................................... 17,059 Thereafter............................................. 41,406 -------- $189,666 ========
(10) INCOME TAXES The provision for income taxes consists of the following:
YEAR ENDED DECEMBER 31, ------------------------- 1995 1996 1997 ---- ------ ------- Current: Federal................................................. $ -- $ 92 $ -- State................................................... 145 750 502 Foreign................................................. -- -- 816 Deferred.................................................. 540 2,479 25,057 ---- ------ ------- $685 $3,321 $26,375 ==== ====== =======
F-19 53 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The provision for income taxes differs from the amount computed using the statutory federal income tax rate as follows:
YEAR ENDED DECEMBER 31, ----------------------- 1995 1996 1997 ---- ------ ------- Income tax provision at federal statutory rate.............. $348 $2,658 $22,155 Effect of earnings of nontaxable (subchapter S) companies... -- (87) -- Nondeductible portion of amortization of intangibles........ 94 306 2,466 State tax provision, net of federal benefit................. 215 391 1,235 Other....................................................... 28 53 519 ---- ------ ------- $685 $3,321 $26,375 ==== ====== =======
The tax effects of temporary differences that give rise to the deferred tax assets and liabilities at December 31, relate to the following:
1996 1997 ------- -------- Deferred tax assets: Net operating loss carryforwards.......................... $16,846 $ 75,772 Estimated self insurance liability........................ 1,998 51,488 Accrued expenses -- pension............................... -- 8,549 Accounts receivable, principally due to allowance for doubtful accounts...................................... -- 8,570 Business tax credit carryforwards......................... -- 7,114 Foreign tax credit carryforwards.......................... -- 1,930 Alternative minimum tax carryforwards..................... 966 3,759 Foreign tax assets and net operating loss carryforwards... -- 2,319 Non-deductible reserves, accrued expenses and other....... 3,461 14,683 ------- -------- Total gross deferred tax assets................... 23,271 174,184 Less -- valuation allowance....................... (9,515) (72,198) ------- -------- 13,756 101,986 Deferred tax liabilities: Difference between book and tax bases of revenue earning vehicles and property and equipment.................... 19,327 78,977 Intangibles............................................... 1,835 127,878 Other..................................................... -- 3,509 ------- -------- Total gross deferred tax liabilities.............. 21,162 210,364 ------- -------- Net deferred tax liability........................ $ 7,406 $108,378 ======= ========
At December 31, 1997, the Company and its subsidiaries have federal tax loss carryforwards of approximately $205,000 expiring between December 2005 and December 2011. The Company has recorded a valuation allowance for a portion of the acquired net operating loss carryforwards and other credit carryforwards due to the uncertainty of their ultimate realization. Any subsequently recognized tax benefits attributed to the change in the valuation allowance will reduce intangibles. The increase in the valuation allowance during 1996 resulted from an increase related to net operating loss carryforwards and uncertainty regarding their ultimate realization. The increase in the valuation allowance during 1997 resulted from the net operating loss carryforwards and other credit carryforwards acquired in the BRACC Acquisition that will be limited in their use. F-20 54 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (11) PENSION AND OTHER BENEFIT PLANS Substantially all employees in 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 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. 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. 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 75%) on the first 6% 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 $147 and $4,025 in 1996 and 1997, respectively. Each of the Company's domestic defined benefit plan's accumulated benefits exceed the plan's assets at December 31, 1997. 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, 1997:
DOMESTIC FOREIGN PLANS PLAN -------- ------- Actuarial present value of benefit obligations: Vested benefits........................................... $ 29,303 $5,464 Nonvested benefits........................................ 1,033 147 -------- ------ Accumulated benefit obligation.............................. $ 30,336 $5,611 ======== ====== Projected benefit obligation for service rendered to date... $ 30,388 $6,684 Plan assets at fair value, primarily participation in common trust funds............................................... 17,220 9,056 -------- ------ Excess (deficiency) of plan assets over projected benefit obligation................................................ (13,168) 2,372 Unrecognized net asset at transition........................ 1,080 (3) Unrecognized net loss (gain)................................ (6,994) 423 -------- ------ Prepaid (accrued) pension cost.............................. $(19,082) $2,792 ======== ====== Service cost for benefits earned during the period.......... $ 48 $ 537 Interest cost on projected benefit obligation............... 1,383 394 Return on plan assets....................................... (1,213) (754) Net amortization and deferral............................... 730 -- -------- ------ Pension expense............................................. $ 948 $ 177 ======== ======
The weighted-average discount rate used in determining the actuarial present value of the projected benefit obligation for 1997 was 7%. No compensation increase has been assumed as no additional benefits will be earned under the domestic plans. The assumed compensation increase under the Executive Protection Plan and foreign plan was 5% and 4%, respectively. The expected long-term rate of return on plan assets for 1997 was 9.5%. F-21 55 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 and EPS would have been reduced to the following pro forma amounts:
YEAR ENDED DECEMBER 31, ------------------------- 1995 1996 1997 ------ ------ ------- Net income................................... As Reported $ 377 $4,497 $36,926 Pro Forma (36) 3,375 32,381 EPS -- basic................................. As Reported 0.05 0.49 2.00 Pro Forma (0.01) 0.37 1.75 EPS -- diluted............................... As Reported 0.05 0.47 1.60 Pro Forma (0.01) 0.37 1.46
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 1,750,000 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 and are exercisable not less than six months nor more than 10 years after the date of grant. Options granted under the ISO Plan in 1997 become exercisable between 18 and 24 months 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 and are exercisable not less than six months nor more than 10 years after the date of grant. Options granted under the Directors' Plan in 1997 become exercisable six months 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. F-22 56 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A summary of the status of the Company's two stock option plans at December 31, 1995, 1996 and 1997 and activity during the years then ended is presented in the table and narrative below:
WEIGHTED AVERAGE SHARES EXERCISE PRICE --------- -------------- Outstanding -- December 31, 1994............................ 15,000 $ 9.50 Granted................................................... 202,000 9.50 --------- Outstanding -- December 31, 1995............................ 217,000 9.50 Granted................................................... 547,650 11.70 Exercised................................................. (6,200) 9.50 Forfeited................................................. (8,600) 11.13 --------- Outstanding -- December 31, 1996............................ 749,850 11.09 Granted................................................... 1,672,375 22.87 Exercised................................................. (539,350) 10.66 Forfeited................................................. (86,290) 19.25 --------- Outstanding -- December 31, 1997............................ 1,796,585 21.79 =========
As of December 31, 1997, options for 1,556,585 shares and 240,000 shares of Class A and Class B common stock, respectively, remained outstanding under the Company's stock option plans.
1995 1996 1997 ------ ------- ------- Exercisable at end of year -- Shares.................................................... 15,000 247,700 214,700 Weighted average exercise price........................... $9.50 $9.76 $14.36 Weighted average fair value of options granted during the year...................................................... $4.52 $5.48 $10.11
At December 31, 1997, 1,413,285 of the 1,796,585 options outstanding have an exercise price of $22.38 and a remaining contractual life of 9.3 years. Of these options, 60,000 are exercisable. The remaining 383,300 options have exercise prices between $9.50 and $36.44, with a weighted average exercise price of $19.64 and a weighted average remaining contractual life of 8.9 years. Of these options, 154,700 are exercisable with a weighted average exercise price of $11.25. 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 5.89% and an expected life of three years were assumed. For options granted under the Directors' Plan, a risk-free rate of return of 6.63% and an expected life of five years were assumed. Additionally, for each option plan there was no expected dividend yield and an expected volatility of 58%. (12) COMMON STOCK WARRANT Concurrent with the acquisition of the Budget franchise in Philadelphia and in consideration of the abatement of certain future royalty fees to BRACC with respect to the Philadelphia vehicle rental operation and other consideration received from BRACC, the Company issued a warrant to BRACC (the "Common Stock Warrant") to purchase 175,000 shares of Class A common stock. This warrant has been retired in 1997 following the Company's acquisition of BRACC. (13) COMMITMENTS AND CONTINGENCIES 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 F-23 57 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, 1997, the Company has accrued $3,301 for estimated environmental remediation costs and expects to expend approximately $2,600 during 1998. 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. (14) 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 judgement 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, 1996 and 1997, 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, 1996 and 1997, 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, 1996 and 1997, 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. (15) SUPPLEMENTAL CASH FLOW DISCLOSURES In 1995, the Company issued 1,220,816 shares of Class A common stock with a value of $12,837 and notes payable of $650 for the 1995 acquisitions. In 1996, the Company issued 272,727 shares of Class A common stock with a value of $2,727 and notes payable of $10,000 for the 1996 acquisitions. 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 F-24 58 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) preferred stock into 4,500,000 shares of Class A common stock which were sold by the selling stockholder in October 1997. The Company paid interest of $13,764, $26,955 and $101,992 in 1995, 1996 and 1997, respectively. Income taxes of $346, $1,017, and $1,796 were paid in 1995, 1996 and 1997, respectively. On occasion, the Company acquires goods and services in exchange for revenue earning vehicles. During 1997, revenue earning vehicles in the amount of $2,100 were exchanged for goods and services. (16) SEGMENT INFORMATION The Company is engaged in the business of the daily rental of vehicles, principally cars, trucks, and passenger vans, and the retail sale of used vehicles. Segment information for the year ended December 31, 1995, is as follows:
RETAIL VEHICLE SALES VEHICLE RENTAL CONSOLIDATED -------------- -------------- ------------ Sales to unaffiliated customers.................. $ 42,662 $ 107,067 $ 149,729 Depreciation and amortization.................... 193 29,483 29,676 Operating income................................. 1,254 12,926 14,180 Income (loss) before income taxes................ 1,869 (847) 1,022 Identifiable assets.............................. 30,195 356,128 386,323 Capital expenditures -- revenue earning vehicles....................................... -- 315,863 315,863
Segment information for the year ended December 31, 1996, is as follows:
RETAIL VEHICLE SALES VEHICLE RENTAL CONSOLIDATED -------------- -------------- ------------ Sales to unaffiliated customers.................. $134,120 $ 223,250 $ 357,370 Depreciation and amortization.................... 1,482 63,685 65,167 Operating income................................. 1,857 33,410 35,267 Income before income taxes....................... 409 7,409 7,818 Identifiable assets.............................. 48,885 538,338 587,223 Capital expenditures -- revenue earning vehicles....................................... -- 517,079 517,079
Segment information for the year ended December 31, 1997, is as follows:
RETAIL VEHICLE SALES VEHICLE RENTAL CONSOLIDATED -------------- -------------- ------------ Sales to unaffiliated customers.................. $239,992 $1,063,770 $1,303,762 Depreciation and amortization.................... 283 300,858 301,141 Operating income (loss).......................... (2,431) 173,717 171,286 Income (loss) before income taxes................ (1,925) 65,226 63,301 Identifiable assets.............................. 101,213 3,473,602 3,574,815 Capital expenditures -- revenue earning vehicles....................................... -- 2,011,954 2,011,954
(17) SUBSEQUENT EVENTS On January 28, 1998, the Company completed its acquisition of Mesa, Arizona based Cruise America, Inc. ("Cruise") in a stock for stock merger that will be accounted for as a pooling of interests. As a result of the merger, Cruise shareholders received 0.28073 of a share of the Company's Class A common stock for each share of Cruise common stock or a total of approximately 1.77 million shares worth approximately $62,000 as of the acquisition date. In addition, the Company assumed approximately $76,000 of vehicle debt. F-25 59 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) If the acquisition had occurred at the beginning of 1995, the Company's results of operations would have been as shown in the following table. The unaudited pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisition been made at the beginning of 1995. The 1997 amounts include the impact on Cruise of a one-time charge for jury-awarded damages of approximately $8,500, net of income taxes.
YEAR ENDED DECEMBER 31, -------------------------------- 1995 1996 1997 -------- -------- ---------- (UNAUDITED) Operating revenue........................................... $239,482 $447,808 $1,411,436 Net income.................................................. 1,712 7,751 29,774 EPS -- basic................................................ 0.21 0.72 1.48 EPS -- diluted.............................................. 0.21 0.70 1.25
On March 4, 1998, the Company entered into an Agreement and Plan of Merger, as amended (the "Merger Agreement"), to acquire all of the outstanding stock of Ryder TRS Inc. ("Ryder TRS"), based in Denver, Colorado, for approximately $264,000 of cash, Class A common stock and warrants, subject to adjustment and the other terms and conditions of the Merger Agreement. In addition, the Company will assume approximately $266,000 of fleet debt and $175,000 of other debt. The acquisition will be accounted for under the purchase method of accounting. (18) SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following table is a summary of quarterly information for the years ended December 31, 1996 and 1997 (in thousands except per share data):
1996 1997 --------------------------------------- ----------------------------------------- THREE MONTHS ENDED THREE MONTHS ENDED --------------------------------------- ----------------------------------------- MARCH 31 JUNE 30 SEPT 30 DEC 31 MARCH 31 JUNE 30 SEPT 30 DEC 31 -------- ------- -------- ------- -------- -------- -------- -------- Operating revenue........... $65,794 $93,734 $101,492 $96,350 $102,448 $306,321 $482,446 $412,547 Operating income............ 7,254 10,842 15,162 2,009 8,160 29,100 90,614 43,412 Net income (loss)........... 1,277 2,246 4,640 (3,666) 848 2,653 28,953 4,472 Average shares outstanding -- basic...... 7,256 7,430 10,919 11,253 11,257 17,147 19,961 25,405 Earnings (loss) per share -- basic(1).................. 0.18 0.30 0.42 (0.33) 0.08 0.15 1.45 0.18 Average shares outstanding -- diluted .......................... 7,256 7,569 11,175 11,253 11,257 20,832 30,936 26,420 Earnings (loss) per share -- diluted(1)................ 0.18 0.30 0.42 (0.33) 0.08 0.13 0.98 0.17 Market price of stock(2) High...................... 10.50 17.50 20.25 20.25 29.50 34.875 37.00 37.75 Low....................... 8.25 9.25 12.375 15.25 16.00 19.00 28.188 32.50
- --------------- (1) Earnings per share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share do not equal the total for the year. (2) On March 23, 1998, (i) the closing sale price of the Class A common stock as reported on the New York Stock Exchange was $38.938 per share and (ii) there were approximately 185 holders of record of the Class A common stock and three holders of record of the Class B common stock. 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". Market price data in the above table is based on F-26 60 BUDGET GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, restrictions in credit and other agreements and other factors deemed relevant by the Board of Directors. F-27 61 ANNEX A EXHIBIT 99.1 PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS As used herein, unless the context otherwise requires, (i) "TEAM" refers to Budget Group, Inc. and its subsidiaries prior to its acquisition of Budget Rent a Car Corporation on April 29, 1997 (the "Budget Acquisition"); (ii) "BRACC" refers to Budget Rent a Car Corporation and its subsidiaries; (iii) the "Company" or "Budget Group" refers to TEAM (including BRACC) after giving effect to the Budget Acquisition; and (iv) "Budget" refers to the business of renting cars and trucks and retailing late model vehicles conducted by the Company and its franchisees under the Budget name. In passing the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), Congress encouraged public companies to make "forward-looking statements" by creating a safe harbor to protect companies from securities law liability in connection with forward-looking statements. The Company intends to qualify both its written and oral forward-looking statements for protection under the Reform Act and any other similar safe harbor provisions. "Forward-looking statements" are defined under the Reform Act. Generally, forward-looking statements include expressed expectations of future events and the assumptions on which the expressed expectations are based. All forward-looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties which could cause actual events or results to differ materially from those projected. Due to those uncertainties and risks, the investment community is urged not to place undue reliance on written or oral forward-looking statements of the Company. The Company undertakes no obligation to update or revise this Safe Harbor Compliance Statement for Forward-Looking Statements (the "Safe Harbor Statement") to reflect future developments. In addition, the Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. The Company provides the following risk factor disclosure in connection with its continuing effort to qualify its written and oral forward-looking statements for the safe harbor protection of the Reform Act and any other similar safe harbor provisions. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include the following: ACQUISITIONS; ABILITY TO IMPLEMENT GROWTH STRATEGY The Company's recent growth is largely attributable to acquisitions and the Company intends to continue to pursue the acquisition of businesses that the Company believes would complement or expand its existing businesses. Acquisitions involve a number of risks that could adversely affect the Company's operating results, including (i) the diversion of management's attention; (ii) the assimilation of the operations and personnel of acquired businesses; (iii) the amortization of acquired intangible assets; (iv) the assumption of potential liabilities, disclosed or undisclosed, associated with the businesses acquired, which liabilities may exceed the amount of indemnification available from the seller; (v) the risk that the financial and accounting systems utilized by the businesses acquired will not meet the Company's standards; (vi) the risk that the businesses acquired will not maintain the quality of services that the Company has historically provided; (vii) the dilutive effect of the use of the Company's capital stock as consideration for acquisitions; and (viii) the inability to attract and retain qualified management. There can be no assurance that the Company will consummate future acquisitions, including the acquisition of Ryder TRS Inc. ("Ryder TRS"), on satisfactory terms, if at all, that adequate financing will be available on terms acceptable to the Company, if at all, or that any acquired operations will be successfully integrated or that such operations will ultimately have a positive impact on the Company, its financial condition or results of operations. A-1 62 In addition to pursuing growth through acquisitions, management is undertaking internal growth initiatives to increase the Company's revenues and improve its profitability by, among other things enhancing its operations outside the United States, expanding its retail car sales operations, adding car rental locations in its existing markets, adding truck rental locations and expanding its truck rental fleet, and increasing its marketing efforts to corporate accounts. Management expects the Company to realize certain cost savings and other operating efficiencies as a result of the implementation of its business strategy. Increasing the revenues of the Company, and realizing cost savings and other operating efficiencies, could be affected by a number of factors beyond the Company's control, such as general economic conditions, increased operating costs of vehicles and regulatory developments. Each of these initiatives will involve risks to the Company, and there can be no assurance that the Company will be successful in growing its business or that the Company will achieve the expected cost savings and other operating efficiencies. In addition, the Company's substantial leverage could affect its success in growing its business. INTEGRATION OF BUDGET ACQUISITION The Budget Acquisition was significantly larger than any of TEAM's previous acquisitions and the combination and integration of the respective operations of TEAM and BRACC are of a substantially greater scale than previously undertaken by either company. The difficulties of managing such combination and integration are increased by the necessity of coordinating the operations of geographically diverse organizations, of integrating different strategies and operating systems, of integrating management and operating personnel from both companies and of managing a worldwide franchise system. The success of the Company following the Budget Acquisition depends on the ability of the Company's management team to: (i) manage a significantly larger organization; (ii) maintain and further develop relationships with Budget franchisees; and (iii) conduct operations on a worldwide basis. There can be no assurance that the Company's management team will be able to successfully manage the combined operations of TEAM and BRACC. An inability to successfully manage the integration of TEAM and BRACC would have a material adverse effect on the Company's results of operations and financial condition. SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT; INTEREST RATE RISK The Company has substantial indebtedness and significant debt service requirements. As of December 31, 1997, the Company's total indebtedness was approximately $2,600 million (representing approximately 73% of its total capitalization), of which approximately $2,300 million represented senior secured indebtedness for the purchase of vehicles and approximately $300 million represented non-vehicle indebtedness (representing 8.9% of its total capitalization, excluding fleet debt). As of December 31, 1997, the Company had $346.8 million of incremental availability under its vehicle financing facilities to finance the purchase of fleet vehicles. The degree to which the Company is leveraged has important consequences for holders of the Company's Class A Common Stock, including the following: (i) the ability of the Company to obtain additional financing in the future, whether for working capital, fleet purchases, acquisitions or other purposes, may be impaired; (ii) a substantial portion of the Company's cash flow from operations is required to be dedicated to the payment of principal and interest on its indebtedness, thereby reducing funds available to the Company for other purposes; (iii) the Company's flexibility in planning for or reacting to changes in market conditions may be limited; (iv) the Company may be more vulnerable in the event of a downturn in its business; and (v) because a substantial portion of its indebtedness bears interest at floating rates, any increase in prevailing interest rates will result in an increase in interest expense incurred by the Company, which could have an adverse effect on its results of operations. The ability of the Company to meet its debt service obligations will depend on its future operating performance and financial results, which will be subject in part to factors beyond the control of the Company. Although management believes that the Company's cash flow will be adequate to meet its interest and principal payments, there can be no assurance that the Company will continue to generate earnings in the future sufficient to cover its fixed charges. If the Company is unable to generate earnings in the future sufficient to cover its fixed charges and is unable to borrow sufficient funds under its existing credit lines or from other sources, it may be required to refinance all or a portion of its existing indebtedness or to sell all or a A-2 63 portion of its assets. There can be no assurance that refinancing would be possible, nor can there be any assurance as to the timing of any asset sales or the proceeds which the Company could realize therefrom. In addition, the terms of certain indebtedness of the Company restrict the ability of the Company to sell assets and the use of the proceeds therefrom. If for any reason, including a shortfall in anticipated operating results or proceeds from asset sales, the Company were unable to meet its debt service obligations, it would be in default under the terms of its indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all such indebtedness immediately due and payable, including accrued and unpaid interest, and to terminate their commitments (if any) with respect to funding obligations under such indebtedness. In addition, such holders could proceed against their collateral, which, in the case of the fleet financing facilities, consists of substantially all the Company's fleet. The Company's results of operations depend significantly on prevailing levels of interest rates because of the large amount of debt it incurs to purchase vehicles. In addition, the Company is exposed to increases in interest rates because a substantial portion of its debt bears interest at floating rates. At December 31, 1997, approximately 62.4% of the Company's average debt bore interest at floating rates. The amount of the Company's financing costs affects the amount the Company and Budget franchisees must charge their customers to be profitable. AVAILABILITY OF FINANCING The Company depends on third-party financing to purchase its fleet vehicles. Continued availability of such financing on favorable terms is critical to the Company's operations. A majority of the Company's indebtedness is incurred in connection with major vehicle manufacturers' vehicle repurchase programs. As a result, a significant change in the credit quality of the vehicle manufacturers, particularly Ford Motor Company ("Ford"), would significantly affect the Company's ability to obtain such financing on favorable terms. In addition, certain events, such as a material increase in damage to vehicles, could reduce the value of the collateral securing the Company's fleet financing facilities and cause the acceleration of the repayment of such facilities. An inability of the Company to obtain vehicle financing on favorable terms would have a material adverse effect on the Company's financial condition and results of operations. There can be no assurance that the sources of financing utilized by the Company or alternative financing will remain or become available to the Company or that such financing will be available on terms acceptable to the Company. COMPETITION The vehicle rental industry is characterized by intense competition, particularly with respect to price and service. In any geographic market, the Company may encounter competition from national, regional and local vehicle rental companies. Budget's main competitors in the car rental market are The Hertz Corporation, Avis, Inc., Alamo Rent-A-Car, Inc., National Car Rental System, Inc. and Enterprise Rent-A-Car Company. In consumer truck rentals, Budget faces competition primarily from U-Haul International, Inc., Penske Truck Rental and Ryder TRS. Premier Car Rental LLC's principal competitors include Enterprise Rent-A-Car Company, Car Temps, Inc., Hertz Local Edition and a range of regional insurance replacement companies. There have been occasions when the major vehicle rental companies have been adversely affected by industry-wide price cutting, and the Company has on such occasions lowered its prices in response. The Company will not generally be able to unilaterally raise its prices or to maintain its prices in times of industry-wide price cutting. The retail car sales industry also is characterized by intense competition, consisting primarily of local new car dealerships selling new and late model used cars. In addition to local dealerships, the Company may face competition from retailers such as CarMax and AutoNation that compete on the basis of large inventory size, no-haggle pricing and after-sale service. A-3 64 RESTRICTIONS IMPOSED BY INDEBTEDNESS The terms of the Company's indebtedness include a number of significant covenants that, among other things, restrict the ability of the Company to dispose of assets, incur additional indebtedness, create liens, repay other indebtedness, pay dividends, make certain investments or acquisitions, repurchase or redeem capital stock, engage in mergers or consolidations, or engage in certain transactions with affiliates, and otherwise restrict corporate activities. There can be no assurance that such restrictions will not adversely affect the Company's ability to finance its future operations or capital needs or to engage in other business activities that may be in the interest of the Company. In addition, the terms of certain of such indebtedness also require the Company to comply with certain financial tests. The ability of the Company to comply with such covenants may be affected by events beyond the Company's control. A breach of any of these covenants or the inability of the Company to comply with the required financial ratios could result in a default under such indebtedness. In the event of any such default, the lenders under such indebtedness could elect to declare all borrowings outstanding under such indebtedness, together with accrued interest and other fees, to be due and payable, to require the Company to apply all of its available cash to repay such borrowings or to prevent the Company from making scheduled debt service payments. If the Company were unable to repay any such borrowings when due, the lenders could proceed against their collateral. If the indebtedness of the Company under such collateralized indebtedness or other indebtedness were to be accelerated, there can be no assurance that the assets of the Company wold be sufficient to repay such indebtedness in full. There can be no assurance that the Company will be able to comply with the covenants included in its debt agreements in the future or that it would be able to obtain any necessary waivers of those covenants. POTENTIAL CHANGES IN MANUFACTURERS' REPURCHASE PROGRAMS Approximately 87% of the vehicles purchased by the Company in model year 1997 were eligible for repurchase by specified automobile manufacturers at fixed prices on designated dates pursuant to such manufacturers' vehicle repurchase programs ("Program Vehicles"). The availability of Program Vehicles limits a car rental company's risk of a decline in residual value at the time of disposition and enables it to fix its depreciation expense in advance. Vehicle depreciation is the largest cost factor in the Company's vehicle rental operations. Management believes that manufacturers' repurchase programs enable the manufacturers to stimulate fleet sales in times of weak consumer demand for new automobiles. In response to strong U.S. consumer demand for passenger vehicles in 1993 and 1994, the major U.S. automobile manufacturers reduced the number of vehicles subject to repurchase programs and the financial incentives associated with these programs. U.S. consumer demand for passenger vehicles began to weaken during the second quarter of 1995, and this weakness continued through 1996. In response to these market conditions, there was an increase in the availability of repurchase programs with respect to 1996 model year vehicles, particularly repurchase programs for imported vehicles, and these programs have continued for 1997 model year vehicles. However, the Company could be adversely affected if automobile manufacturers reduce the availability of Program Vehicles, related incentives or increase the guaranteed depreciation. DEPENDENCE ON PRINCIPAL SUPPLIER Ford has been and continues to be the Company's principal supplier of vehicles. The Company has agreed to purchase or lease Ford vehicles in such 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 represents at least 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 of 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 adverse effect on the Company's financial condition and results of operations. A-4 65 SEASONALITY The third quarter, during the peak summer travel months, has historically been the strongest quarter of the year for the Company. As a result, any occurrence that disrupts travel patterns during the summer period could have a material adverse effect on the Company's annual performance. COSTS OF REGULATORY AND ENVIRONMENTAL COMPLIANCE The Company is subject to various foreign, federal, state and local laws and regulations that affect the conduct of its operations, including those relating to 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 remediation. There can be no assurance that compliance with these laws and regulations or the adoption of modified or additional laws and regulations will not require material expenditures by the Company or otherwise have a material adverse effect on its results of operations or financial condition. RISKS OF INTERNATIONAL OPERATIONS The Company's international vehicle rental operations are subject to certain risks, including 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. There can be no assurance that any of these factors will not have a material adverse effect on the Company's results of operations or financial condition. DEPENDENCE ON PRINCIPAL EXECUTIVE OFFICERS The Company's existing operations and continued future development are dependent in part on the active participation of Messrs. Miller, Kennedy and Congdon. The loss of the services of one or more of these individuals could have a material adverse effect on the Company. The Company has no employment agreements or covenants not to compete with any of its executive officers or significant employees. SUBSTANTIAL VOTING POWER BY PRINCIPAL EXECUTIVE OFFICERS The Company has two classes of Common Stock: Class A Common Stock, holders of which are entitled to one vote per share, and Class B Common Stock, holders of which are entitled to ten votes per share. Messrs. Miller, Kennedy and Congdon own all outstanding shares of Class B Common Stock, which together with the Class A Common Stock owned by such individuals, represents over 45% of the combined voting power of both classes of Common Stock. As a result, such officers are able to exert substantial influence over the election of the Company's Board of Directors, thereby increasing the probability that members elected by them will continue to direct the business, policies and management of the Company. POTENTIAL ANTI-TAKEOVER EFFECTS OF CHARTER AND BYLAW PROVISIONS; POSSIBLE ISSUANCE OF PREFERRED STOCK Certain provisions of Delaware law, the Company's Amended and Restated Certificate of Incorporation and the Company's Bylaws could delay or impede the removal of incumbent directors and could make it more difficult for a third party to acquire, or could discourage a third party from attempting to acquire, control of the Company. Such provisions could limit the price that certain investors might be willing to pay in the future for shares of the Class A Common Stock. In addition, shares of preferred stock may be issued by the Board of Directors without stockholder approval on such terms and conditions, and having such rights, privileges and preferences, as the Board of Directors may determine. The rights of the holders of the Class A Common Stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The Company has no current plans to issue any shares of preferred stock. A-5 66 YEAR 2000 The Company has assessed and continues to assess the impact of the year 2000 ("Y2K") on its reporting systems and operations (the "Y2K Issue"). The Y2K Issue exists because many computer systems and applications currently use two-digit date fields to designate a year. As the century date occurs, certain date sensitive systems will recognize the year 2000 as the year 1900 or may not recognize the date at all. This inability to properly treat or recognize the year 2000 may cause computer systems and applications to process critical information incorrectly. During 1997, the Company has recognized approximately $2.2 million to modify existing computer systems and applications and estimates that approximately $6.7 million will be incurred in 1998 and 1999 specifically for Y2K modification. The most significant systems undergoing or to undergo modifications are the reservation and rental transaction processing systems. A failure in these systems could cause significant disruption in customer service levels and therefore materially impact the Company's operating results and financial condition. The Company expects to complete all major modification efforts in mid-1999. A-6 EX-10.20 2 FORM OF FORBEARANCE AGREEMENT 1 EXHIBIT 10.20 BUDGET GROUP, INC. 4225 Naperville Road Lisle, Illinois 60532-3662 January 14, 1998 Budget Group, Inc. 4225 Naperville Road Lisle, Illinois 60532-3662 Attention: Robert L. Aprati Executive Vice President, General Counsel and Secretary Re: Class B Common Stock Dear Bob: The undersigned, Sanford Miller, Jeffrey Congdon and John Kennedy (collectively, the "Class B Stockholders"), are the beneficial and record owners of an aggregate of 1,936,600 shares of Class B common stock, par value $.01 per share ("Class B Common Stock"), of Budget Group, Inc. ("Budget"), which shares of Class B Common Stock represent all of the issued and outstanding shares of Class B Common Stock. The Class B Stockholders are also the holders of options to purchase an aggregate of 240,000 shares of Class B Common Stock. Each share of Class B Common Stock is convertible at any time, at the option of the holder, into one share of Class A common stock, par value $.01 per share ("Class A Common Stock"), of Budget, and the shares of Class B Common Stock shall automatically convert into shares of Class A Common Stock in the event the beneficial or record ownership of such Class B Common Stock is transferred to any person or entity that is not then a record or beneficial holder of shares of Class B Common Stock. The Board of Directors of Budget has determined that it is advisable and in the best interests of Budget to enter into an agreement with the Class B Stockholders regarding the conversion of the Class B Common Stock into shares of Class A Common Stock. In consideration of the mutual promises and agreements contained herein, the Class B Stockholders hereby covenant and agree with Budget that the Class B Stockholders will not (i) convert the shares of Class B Common Stock held by them (or any shares of Class B Common Stock issuable to the Class B Stockholders upon the exercise of options or otherwise) into shares of Class A Common Stock or (ii) take any action that would result in the automatic conversion of shares of Class B Common Stock into shares of Class A Common Stock until the earlier to occur of (x) the effective date of an amendment to Budget's Amended and Restated Certificate of Incorporation to increase the number of shares of Class A Common Stock that Budget is authorized to issue and (y) May 31, 1998. 2 This letter agreement will be governed by and construed and enforced in accordance with the laws of the State of Illinois, without giving effect to the conflicts of law principles thereof. This letter agreement may be executed in one or more counterparts, each of which shall for purposes be deemed to be an original and all of which shall constitute one and the same instrument. If the foregoing is in accordance with your understanding of our agreements, please sign and return to us a counterpart hereof, whereupon this letter and your acceptance shall represent binding agreement among you and ourselves. Very truly yours, /s/ Sanford Miller - ------------------------------------ Sanford Miller /s/ Jeffrey Congdon - ------------------------------------ Jeffrey Congdon /s/ John Kennedy - ------------------------------------ John Kennedy Accepted and agreed as of the 1st day of January, 1998: BUDGET GROUP, INC. By: /s/ Robert L. Aprati --------------------------------- Robert L. Aprati Executive Vice President, General Counsel and Secretary EX-10.21 3 FORM OF EXECUTIVE AGREEMENT 1 EXHIBIT 10.21 BUDGET GROUP, INC. EXECUTIVE AGREEMENT This Executive Agreement ("Agreement") is dated as of January 1, 1998, and is entered into by and between ______________ ("Executive") and Budget Group, Inc.("Budget"). Executive and Budget hereby agree to the following terms and conditions: 1. Purpose of Agreement. The purpose of this Agreement is to provide that Executive may become entitled to receive additional benefits in the event of his 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 his 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 he 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. 1 2 (b) Notwithstanding any other provision of this Agreement, unless Executive executes a Release Agreement (prepared by Budget, and substantially in the form set forth in Exhibit I) within 21 days after a Qualifying Termination and receipt of the Release Agreement (and does not revoke the Release Agreement within 7 days after signing it), (1) no benefits under Section 6 or Section 7(d), (e), (f) or (g) 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 35 days after the Release Agreement is provided to Executive or until the Release Agreement is signed and subsequently revoked (if earlier), and (3) this Agreement shall be of no further force and effect. Notwithstanding anything in this Agreement to the contrary, if Executive executes the Release Agreement and then fails or refuses to comply with his obligations as provided for in Sections 2 and 3 of the Release Agreement, or violates any of his representations and warranties as 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) Whether or not a Change in Control occurs, 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 (including status, offices, titles and reporting requirements), authority, duties or responsibilities as they existed in their most significant form immediately prior to the above-referenced assignment or any other action by Budget which results in a material diminution in such position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as they existed in their most significant form immediately prior to the above- 2 3 referenced 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 action not taken in bad faith and 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, including office and support staff, or paid vacations (excluding changes by Budget with respect to any such benefits which both (A) apply to all executives and (B) provide Executive with other benefits which are substantially equivalent in the aggregate to the prior benefit package), or (iii) if a Change in Control occurs, incentive payments made pursuant to any incentive program (which shall be deemed to be reduced if the annual incentive payments are less than the average annual incentive payments for the three fiscal years preceding the Change in Control); provided that, (x) an isolated, insubstantial, and inadvertent reduction in an element of Executive's total compensation not occurring in bad faith and 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 occurs (the determination of whether the increase is counterbalancing shall be determined by Executive in good faith); and (b) Whether or not a Change in Control occurs, Executive is involuntarily terminated without "Cause" during the term of this Agreement. For purposes of this Section, "Cause" shall mean (1) a material act or acts of dishonesty by Executive in connection with his employment; (2) conviction of a felony or other crime involving moral turpitude; or (3) Executive's willful or gross negligent failure to perform Executive's duties if such failure results in demonstrable injury or damage to Budget. (c) Executive terminates his employment for any reason whatsoever, including termination due to death or disability, 3 4 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 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. 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 September 1, 1997 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 full fiscal years preceding the Termination Date (provided that, if Executive was not employed for three full fiscal years, the incentive payments and bonuses shall be based on the number of full fiscal years during which Executive was employed); 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 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: 4 5 (a) Receive his base salary and a pro rata portion of his 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 his participation (and, where applicable, participation of his 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, his 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 determined in the same manner as for any other executive participants). Thereafter, Executive (or his 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 his 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 his 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 his 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. 5 6 (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, his spouse, if any, may continue to use one (1)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 he has the Vehicles, as well as primary automobile liability coverage in 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 tax preparation and financial planning services through the Completion Date, which services shall be provided by a vendor of Budget's choice. (g) 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 his estate if he has no surviving spouse. 6 7 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 affiliate 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 380G(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 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, 7 8 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) 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 directly from Budget or a corporation controlled by Budget (the "Budget Group"), except that an acquisition by virtue of the exercise of a conversion privilege shall not be considered within this paragraph unless the converted security was itself acquired directly from the Budget Group, (2) any acquisition by the Budget Group, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Budget Group or (4) 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 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 8 9 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 his 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 9 10 otherwise, and to reduce the amount of any payment hereunder by 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 December 31, 2000 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 prior to that 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 laws of Florida shall govern its validity and interpretation in the performance by the parties hereto of their respective duties and obligations hereunder. 14. Entire Agreement. Except as provided in a written benefit plan of Budget, 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 10 11 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. 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 ______________________ 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 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, his 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) is invalid, then this Agreement and the Release Agreement shall be null and void. 11 12 (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 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 --------------------------------- 12 13 EXHIBIT I RELEASE AGREEMENT THIS RELEASE AGREEMENT (hereinafter "Agreement") is made and entered into by and between Budget Group, Inc. and its parent and subsidiaries (hereinafter "Budget") and the undersigned (hereinafter "Executive"), and shall be effective as of the date of its execution. FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: 1. That Budget shall, in full discharge of any and all of its obligations to Executive, pay to Executive the benefits set forth in the executive agreement between Budget and Executive ("Executive Agreement"). 2. That in consideration for entering into this Agreement, and for the monies and benefits described in Section 1 above, Executive: (a) Except as specifically provided in Sections 7(b) and 7(d) of the Executive Agreement, waives any right to vacation and/or holiday pay and, in addition, waives any right to incentive compensation, including without limitation incentive compensation under the Annual and the Long Term Incentive Plans. (b) Agrees to cooperate fully with Budget to assure a smooth transition of responsibilities and projects and to otherwise provide Budget with his full and complete cooperation and assistance for one year after the Termination Date. Such cooperation and assistance shall be provided by Executive at his reasonable convenience and shall not require more than three (3) consecutive days, or more than ten (10) cumulative days, without payment by Budget of some form of reasonable compensation to Executive and/or Executive's future employer for such excess time; provided, however, that such cooperation and assistance may be obtained by subpoena served upon Executive if such a subpoena is required or deemed necessary by Budget as a result of the actions of any future employer of Executive. Executive shall cooperate and assist Budget by providing and communicating to, or for the benefit of, the I-1 14 senior management of Budget or their designated representatives, any and all knowledge or information acquired by Executive during, or as a result of, his employment with Budget. Such cooperation and assistance shall include, without limitation, the provision of any such information or knowledge to Budget's accountants or attorneys in preparation of or during the course of any audit process or legal procedure in which Budget may be, or may become, involved. Any travel, lodging and out-of-pocket expenses incurred by Executive in fulfilling this obligation shall be reimbursed to Executive by Budget upon Executive's submission to Budget of an expense report and receipts, as appropriate. (c) Agrees that, during the period from the date of this Agreement through the Completion Date, he will not, without the prior written consent of Budget, make or cause to be made any oral or written statements to any person, firm, corporation, or governmental or other entity which reflect negatively on Budget or on its directors, officers, employees, affiliates and related companies, or which could reasonably be understood to be detrimental to the business interests of Budget or to its directors, officers, employees, affiliates and related companies. (d) Agrees to make the Vehicles available for periodic inspection and/or replacement as Budget may request from time to time and to return such Vehicles or any replacement Vehicles to Budget on or before the Completion Date; provided, however, that if Executive relocates to another city, Budget will reasonably cooperate with Executive in allowing the inspection, replacement, and/or return of the Vehicles to take place at the nearest Budget owned and operated rental location. (e) Agrees that all other perquisites that had been available to him as a member of Budget senior management, including but not limited to social and professional memberships and gasoline and parking reimbursement, shall terminate as of the Termination Date. Notwithstanding the foregoing, Executive may continue to use, at his sole cost I-2 15 and expense, the mobile phones currently in the Vehicles. (f) Agrees to refrain, at any time and in any manner, from disclosing any trade secret of Budget or other confidential and proprietary business information and material respecting Budget's business of which Executive has knowledge, where such trade secret or other confidential and proprietary business information and material was gained from the files or business operations of Budget or from Executive otherwise giving assistance to another, where such disclosure or assistance could be prejudicial to Budget or its business, or is in any way related to any controversy and/or litigation in which Budget is or may become involved. Notwithstanding the foregoing, Executive may comply with a court order or subpoena compelling such disclosure or assistance. (g) Agrees to deliver to Budget, at the time of the execution of this Agreement, all non-public documents and materials that relate to Budget, if any, in Executive's possession, custody, or control; provided, however, that Executive may keep all documents concerning Budget's insurance plans, all documents concerning his receipt of wages and benefits while employed at Budget, and any documents Budget agrees at its discretion he may keep. (h) Agrees that the terms and conditions of this Agreement are, collectively and individually, totally confidential and shall forever be kept totally confidential and shall not in any manner or for any reason be disclosed by Executive without the express prior written consent of Budget, except (x) to members of his family, his attorneys, and his accountants on a "need to know" basis, (y) to the Internal Revenue Service, and (z) to anyone pursuant to a court order or subpoena compelling such disclosure. This Agreement may be introduced in any proceeding to enforce the Agreement. Such introduction shall be pursuant to an appropriate order of confidentiality consistent with the terms of this Section 2(h). If disclosure of this Agreement is compelled pursuant to service of a subpoena on I-3 16 Executive, then Executive shall immediately provide written notice to Budget and shall not make any such disclosure for ten (10) business days in order to give Budget an opportunity to seek an appropriate protective order, unless disclosure is required sooner than ten (10) business days by court order, rule, or regulation, in which case disclosure will not be made by Executive before the time required by such court order, rule, or regulation. 3. In further consideration of the payments and benefits provided in this Agreement, and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Executive hereby knowingly, voluntarily, and willingly releases, discharges, and covenants not to sue Budget and its affiliated and related companies, past and present, as well as each of their directors, officers, employees, shareholders, representatives, attorneys, agents, insurers, assigns, and successors, past and present (collectively hereinafter referred to as the "RELEASEES"), from and with respect to any and all accounts, actions, contracts, agreements, obligations, causes of action and claims whatsoever, whether known or unknown, suspected or unsuspected, in law or in equity, which Executive, and his heirs, executors, administrators, successors, assigns, dependents, descendants, and attorneys ever had, now have, or hereafter can, shall, or may have against the RELEASEES, for, upon, or by reason of any matter, cause, or thing whatsoever from the beginning of the world to the date of this Agreement, including without limitation any and all claims (a) arising out of or in any way related to Executive's employment with Budget or his separation from Budget; (b) arising out of or in any way related to any claims for race, national origin, age, sex, religious, disability, or other form of employment discrimination, including without limitation any claims under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, as amended, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, as amended, the Family and Medical Leave Act of 1993, the National Labor Relations Act, as amended, and the Illinois Human Rights Act, or any other federal, state or local law, statute, ordinance, or administrative regulation; or (c) for severance pay, bonus, commission, sick leave, holiday pay, vacation I-4 17 pay, life insurance, disability, health or medical insurance, or any other fringe benefits; provided, however, that nothing in this Section will affect any rights provided for in this Agreement. 4. Executive represents and warrants that he has not filed or caused to be filed any complaints, charges or lawsuits with any court or government agency relating to his employment with Budget or his separation from Budget or to any claims being released by him in this Agreement, and that he will not file or authorize or cause to be filed on his behalf any such complaints, charges, or lawsuits at any time hereafter relating to his employment with Budget or his separation from Budget or to any claims being released by him in this Agreement. 5. Executive represents and warrants that he has not assigned or transferred to any person not a party to this Agreement any claim being released by this Agreement, or any part or portion of such claim, and that he shall defend, indemnify, and hold harmless Budget from and against any claim (including the payment of attorneys' fees and costs actually incurred whether or not litigation is commenced) based on or in connection with or arising out of any such assignment or transfer. 6. Executive represents and warrants that during his employment with Budget, he has at all times and in all respects conformed to and complied with the policies and procedures of Budget and has not engaged in any conduct which may be reasonably construed as materially detrimental or embarrassing to Budget, including without limitation gross neglect or willful misconduct in the performance of his duties, fraud, misappropriation, theft, or dishonesty. 7. Notwithstanding anything in this Agreement to the contrary, if Executive fails or refuses to comply with his obligations as provided for in Sections 2 and 3 of this Agreement, or violates any of his representations and warranties as provided for in Sections 4, 5, and 6 of this Agreement, Budget's obligations as provided for in this Agreement and the Executive Agreement shall immediately cease and terminate. 8. This Agreement shall be interpreted, construed, and enforced under the laws of the State of Florida. I-5 18 9. Executive and Budget expressly agree that, except to the extent this Agreement imposes obligations upon the parties, this Agreement shall never, at any time, for any purpose whatsoever, be considered as an admission of liability or responsibility of the parties. 10. 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 Daytona Beach, Florida 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 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. The arbitrator shall award the prevailing party costs and expenses, including attorneys' fees, associated with any such arbitration. If the arbitrator determines that (x) Budget has breached this Agreement and (y) Budget was unjustified in failing to make the payments required under this Agreement to Executive, Budget shall pay to Executive, 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 (and the Executive Agreement). 11. (a) The parties agree that Section 3(b) of the Executive Agreement and Sections 2 through 6 of the Release Agreement are a material part of this Agreement. The parties believe that all provisions of the Executive Agreement (including Section 3(b)) and the Release Agreement are legal, binding and fully enforceable. (b) If Section 3(b) of the Executive Agreement or Section 2, 3, 4, 5 or 6 of the Release Agreement (or any material part thereof) is invalid, then this Release Agreement and the Executive 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 enforceable in other respect, such invalidity, illegality or unenforceability I-6 19 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 for such other provision as will most nearly accomplish the intent of the parties to the extent permitted by the applicable law. 12. Except as provided in a written benefit plan of Budget, this Agreement (and the Executive Agreement) constitute the entire agreement between the parties respecting the benefits due Executive, and 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. 13. This Agreement may be executed in counterparts, and each counterpart, when executed, shall have the effect of a signed original. Photographic copies of such signed counterparts may be used in lieu of the original for any purpose. 14. EXECUTIVE EXPRESSLY AGREES THAT HE HAS CAREFULLY READ THIS AGREEMENT, HAS BEEN PROVIDED WITH THE OPPORTUNITY TO CONSULT WITH AN ATTORNEY BEFORE ENTERING INTO THIS AGREEMENT, AND FULLY UNDERSTANDS THE FINAL AND BINDING EFFECT OF THE TERMS AND PROVISIONS CONTAINED IN THIS AGREEMENT. FURTHER, EXECUTIVE REPRESENTS AND AGREES THAT THE ONLY PROMISES MADE TO HIM ARE THOSE STATED ABOVE AND THAT EXECUTIVE IS SIGNING THIS AGREEMENT VOLUNTARILY AND WITHOUT PRESSURE OR COERCION BY BUDGET OR ITS OFFICERS, AGENTS, EXECUTIVES, DIRECTORS, OR ANYONE ELSE ACTING ON THEIR BEHALF. 15. SPECIAL NOTICE TO EXECUTIVE (AS REQUIRED BY LAW FOR EXECUTIVES AGED 40 AND OLDER): (a) You should consult with an attorney prior to signing this Agreement and regarding your release of claims as provided in this Agreement. (b) You were given a copy of this Agreement and you represent that you have been given a period of twenty-one (21) days (or forty-five (45) days if I-7 20 part of a group termination) after receipt of the initial copy of this Agreement to consider the terms of this Agreement before you sign it, and that you elect to execute this Agreement on this date. (c) You are entitled, within 7 days after you sign this Agreement, to revoke the release and discharge provided for in Section 3 above as it relates to any claim you may have under the Age Discrimination in Employment Act, as amended and the Agreement will not become effective or enforceable until the revocation period has expired; provided, however, that such revocation will cancel this Agreement and the Executive Agreement in their entirety. 16. Capitalized terms not defined herein shall be defined in accordance with the Executive Agreement. IN WITNESS WHEREOF, the parties, intending to be legally bound, have executed this Agreement as of the date set forth herein. BUDGET GROUP, INC. EXECUTIVE - ------------------------------------ --------------------------------- Date: Date: ------------------------------- ----------------------------- I-8 EX-10.22 4 SENIOR NOTE PURCHASE AGREEMENT 1 EXHIBIT 10.22 =============================================================================== BUDGET RENT A CAR CORPORATION, as Issuer TEAM RENTAL GROUP, INC., as Guarantor (to be renamed BUDGET GROUP, INC.) 9.57% Guaranteed Senior Notes due 2007 ------------------------------------------------- SENIOR NOTE PURCHASE AGREEMENT ------------------------------------------------- Dated as of April 25, 1997 =============================================================================== 2 Table of Contents
Page ---- 1. THE NOTES AND GUARANTEES; THE ACQUISITION, ETC.................................................................1 1.1. The Notes...........................................................................................1 1.2. The Guarantees......................................................................................1 1.3. The Acquisition and the Transactions................................................................2 2. SALE AND PURCHASE OF NOTES.....................................................................................3 3. CLOSING........................................................................................................3 4. CONDITIONS TO CLOSING..........................................................................................4 4.1. Representations and Warranties......................................................................4 4.2. Performance; No Default.............................................................................4 4.3. Compliance Certificates.............................................................................4 4.4. Opinions of Counsel.................................................................................5 4.5. Subsidiary Guarantees...............................................................................5 4.6. Purchase Permitted by Applicable Law, etc...........................................................5 4.7. Sale of Notes to Other Purchasers...................................................................6 4.8. Payment of Special Counsel Fees.....................................................................6 4.9. Private Placement Number............................................................................6 4.10. Changes in Corporate Structure.....................................................................6 4.11. Contemporaneous Transactions.......................................................................6 4.12. Proceedings and Documents..........................................................................7 5. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS.................................................................8 5.1. Organization; Power and Authority...................................................................8 5.2. Authorization, etc..................................................................................8 5.3. Disclosure..........................................................................................9 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates....................................9 5.5. Financial Statements...............................................................................10 5.6. Compliance with Laws, Other Instruments, etc.......................................................11 5.7. Governmental Authorizations, etc...................................................................11 5.8. Litigation; Observance of Agreements, Statutes and Orders..........................................12 5.9. Taxes..............................................................................................12 5.10. Title to Property; Leases.........................................................................13 5.11. Licenses, Permits, etc............................................................................13 5.12. Compliance with ERISA.............................................................................13 5.13. Private Offering by the Obligors..................................................................15 5.14. Use of Proceeds; Margin Regulations...............................................................15
3 5.15. Existing Debt; Future Liens.......................................................................16 5.16. Foreign Assets Control Regulations, etc...........................................................16 5.17. Status Under Certain Statutes.....................................................................16 5.18. Environmental Matters.............................................................................16 5.19. Solvency..........................................................................................18 5.20. Other Transaction Documents.......................................................................18 6. REPRESENTATIONS OF THE PURCHASER..............................................................................19 6.1. Purchase of Notes..................................................................................19 6.2. Source of Funds....................................................................................19 7. INFORMATION AS TO OBLIGORS....................................................................................21 7.1. Financial and Business Information.................................................................21 7.2. Officer's Certificate..............................................................................25 7.3. Inspection.........................................................................................26 8. PREPAYMENT OF THE NOTES.......................................................................................27 8.1. Required Prepayments...............................................................................27 8.2. Optional Prepayments...............................................................................27 8.3. Prepayment in Connection with a Change of Control..................................................28 8.4. Allocation of Partial Prepayments..................................................................29 8.5. Maturity; Surrender, etc...........................................................................29 8.6. Purchase of Notes..................................................................................29 8.7. Make-Whole Amount..................................................................................29 9. AFFIRMATIVE COVENANTS.........................................................................................31 9.1. Compliance with Law................................................................................31 9.2. Insurance..........................................................................................32 9.3. Maintenance of Properties..........................................................................32 9.4. Payment of Taxes and Claims........................................................................32 9.5. Corporate Existence, etc...........................................................................33 9.6. Lines of Business..................................................................................33 9.7. Additional Subsidiary Guarantees...................................................................34 10. NEGATIVE COVENANTS...........................................................................................34 10.1. Incurrence of Non-Vehicle Debt; Subsidiary Debt...................................................34 10.2. Liens............................................................................................ 36 10.3. Limitation on Sale and Leaseback Transactions.....................................................39 10.4. Maintenance of Consolidated Shareholders' Equity..................................................40 10.5. Asset Sales.......................................................................................40 10.6. Merger, Consolidation, Amalgamation, etc..........................................................41 10.7. Restricted Payments...............................................................................43 10.8. Transactions with Affiliates......................................................................43 11. EVENTS OF DEFAULT............................................................................................44
ii 4 12. REMEDIES ON DEFAULT, ETC.....................................................................................47 12.1. Acceleration......................................................................................47 12.2. Other Remedies....................................................................................48 12.3. Rescission........................................................................................48 12.4. No Waivers or Election of Remedies, Expenses, etc.................................................49 13. PARENT GUARANTEE.............................................................................................49 13.1. Guarantee.........................................................................................49 13.2. Subrogation and Contribution......................................................................52 13.3. Continuing Guarantee..............................................................................52 14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES................................................................52 14.1. Registration of Notes.............................................................................52 14.2. Transfer and Exchange of Notes....................................................................53 14.3. Replacement of Notes..............................................................................53 15. PAYMENTS ON NOTES............................................................................................54 15.1. Place of Payment..................................................................................54 15.2. Home Office Payment...............................................................................54 16. EXPENSES, ETC................................................................................................55 16.1. Transaction Expenses..............................................................................55 16.2. Survival..........................................................................................56 17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.................................................56 18. AMENDMENT AND WAIVER.........................................................................................56 18.1. Requirements......................................................................................56 18.2. Solicitation of Holders of Notes..................................................................57 18.3. Binding Effect, etc...............................................................................58 18.4. Notes held by Obligors, etc.......................................................................58 19. NOTICES......................................................................................................58 20. REPRODUCTION OF DOCUMENTS....................................................................................59 21. CONFIDENTIAL INFORMATION.....................................................................................59 22. SUBSTITUTION OF PURCHASER....................................................................................61 23. MISCELLANEOUS................................................................................................61 23.1. Successors and Assigns............................................................................61 23.2. Construction......................................................................................61 23.3. Jurisdiction and Process; Waiver of Jury Trial....................................................62
iii 5 23.4. Indemnification...................................................................................63 23.5. Payments Due on Non-Business Days.................................................................63 23.6. Severability......................................................................................64 23.7. Accounting Terms; Pro Forma Computations..........................................................64 23.8. Counterparts......................................................................................64 23.9. Governing Law.....................................................................................64
Exhibit 1.1 -- Form of 9.57% Guaranteed Senior Note due 2007 Exhibit 1.2 -- Form of Subsidiary Guarantee Exhibit 4.4(a) -- Form of Opinion of Special Counsel for the Parent Exhibit 4.4(b) -- Form of Opinion of Counsel for the Parent Exhibit 4.4(c) -- Form of Opinion of Counsel for the Company Exhibit 4.4(d) -- Form of Opinion of Special Counsel for the Purchasers Schedule A -- Names and Addresses of Purchasers Schedule B -- Defined Terms Schedule 5.3 -- Disclosure Documents Schedule 5.4 -- Subsidiaries Schedule 5.5 -- Financial Statements Schedule 5.8 -- Litigation Schedule 5.11 -- Licenses, etc. Schedule 5.15 -- Existing Debt
iv 6 BUDGET RENT A CAR CORPORATION TEAM RENTAL GROUP, INC. 9.57% Guaranteed Senior Notes due 2007 As of April 25, 1997 TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A: Ladies and Gentlemen: BUDGET RENT A CAR CORPORATION, a Delaware corporation (the "COMPANY"), and TEAM RENTAL GROUP, INC. (to be renamed BUDGET GROUP, INC.), a Delaware corporation (the "PARENT" and, together with the Company, individually an "OBLIGOR" and collectively the "OBLIGORS"), jointly and severally agree with you as follows: 1. THE NOTES AND GUARANTEES; THE ACQUISITION, ETC. 1.1. THE NOTES. The Company has duly authorized the issue and sale of $165,000,000 aggregate principal amount of its 9.57% Guaranteed Senior Notes due 2007 (the "NOTES"), each such note to be in the form set out in Exhibit 1.1. As used herein, the term "NOTES" shall mean all notes originally delivered pursuant to this Agreement and the Other Agreements referred to below and all notes delivered in substitution or exchange for any such note and, where applicable, shall include the singular number as well as the plural. Certain capitalized and other terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. 1.2. THE GUARANTEES. (a) After giving effect to the consummation of the Acquisition described below, the Parent will own beneficially and of record all of the issued and outstanding capital stock of the Company. The Notes and the obligations of the Company under this 7 Agreement and under the Other Agreements will be unconditionally guaranteed by the Parent pursuant to a parent guarantee contained in Section 13 of this Agreement and the Other Agreements (the "PARENT GUARANTEE"). (b) The obligations of the Obligors hereunder and under the Other Agreements (including without limitation under the Parent Guarantee) and the Notes will be unconditionally guaranteed by certain of the Parent's Subsidiaries pursuant to subsidiary guarantees substantially in the form of Exhibit 1.2 (individually a "SUBSIDIARY GUARANTEE" and collectively the "SUBSIDIARY GUARANTEES", which terms shall include after the date of the Closing all additional Subsidiary Guarantees from time to time executed and delivered pursuant to Section 9.7). 1.3. THE ACQUISITION AND THE TRANSACTIONS. Pursuant to the Common Stock Purchase Agreement, dated as of January 13, 1997, between the Parent and John J. Nevin, the Budget Stock Purchase Agreement, dated as of January 13, 1997, between the Company and the Parent and the Preferred Stock Purchase Agreement, dated as of January 13, 1997, between Ford Motor Company ("FORD") and the Parent (as each such Agreement as supplemented and amended to and including the date of this Agreement, collectively, the "STOCK PURCHASE AGREEMENTS"), the Parent agreed to acquire all of the capital stock of the Company and purchase certain Debt of the Company for approximately $275,000,000 in cash and the issuance of shares of a new series of convertible Preferred Stock of the Parent (the "ACQUISITION"). In connection with the Acquisition, (a) the Parent intends to issue Class A Shares pursuant to a registered public offering for gross cash proceeds of at least $150,000,000, (b) the Parent intends to issue $45,000,000 aggregate principal amount of its Series B Convertible Notes pursuant to the Series B Note Purchase Agreements, (c) the Parent intends to amend the terms of its 7.0% Convertible Subordinated Notes due 2003 pursuant to a Supplemental Agreement to the Series A Note Purchase Agreements and to amend and restate the Registration Rights Agreement dated as of December 18, 1996 between the Parent and the holders of the Series A Convertible Notes and to include the holders of the Series B Convertible Notes as parties thereto, (d) the Parent intends to arrange for the refinancing of Debt under various vehicle financing facilities of the Company and its Subsidiaries including, among others, the Liquidity Facility and 2 8 a rental car asset-backed commercial paper program through a special purpose, bankruptcy remote, Wholly Owned Subsidiary of the Company, and (e) the Company, as borrower, and the Parent, as guarantor, intend to enter into a $300,000,000 Revolving Credit Facility (the issuance of the Notes and the transactions described in clauses (a) through (e) above are collectively the "TRANSACTIONS"). 2. SALE AND PURCHASE OF NOTES. Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, at the Closing provided for in Section 3, Notes in the aggregate principal amount specified opposite your name in Schedule A at the purchase price of 100% of the principal amount thereof. Contemporaneously with entering into this Agreement, the Company and the Parent are entering into separate senior note purchase agreements (the "OTHER AGREEMENTS") identical with this Agreement (except for the principal amounts of Notes to be purchased) with each of the other purchasers named in Schedule A (the "OTHER PURCHASERS"), providing for the sale at such Closing to each of the Other Purchasers of Notes in the principal amount specified opposite its name in Schedule A. Your obligation hereunder and the obligations of the Other Purchasers under the Other Agreements are several and not joint obligations and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or non-performance by any Other Purchaser thereunder. 3. CLOSING. The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of Mayer, Brown & Platt, 1675 Broadway, New York, NY 10019, at 10:00 a.m., New York time, at a closing (the "CLOSING") on April 29, 1997 or on such other Business Day thereafter on or prior to May 15, 1997 as may be agreed upon by the Obligors and you and the Other Purchasers. At the Closing the Company will deliver to you the Notes to be purchased by you in the form of a single Note (or such greater number of Notes in denominations of at least $500,000 as you may request) dated the date of the Closing and registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of 3 9 the purchase price therefor by wire transfer of immediately available funds for the account of Budget Rent A Car Corporation to account number 39293601 at Credit Suisse First Boston, New York, New York, ABA number 026009179. If at the Closing the Company shall fail to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. 4. CONDITIONS TO CLOSING. Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions: 4.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Obligors in this Agreement shall (except as affected by the transactions contemplated hereby) be correct when made and at the time of the Closing (including without limitation at the time of the Closing after giving effect to the consummation of the Acquisition and the Transactions). 4.2. PERFORMANCE; NO DEFAULT. Each Obligor shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 5.14) and the consummation of the Acquisition and the Transactions, no Default or Event of Default shall have occurred and be continuing. 4.3. COMPLIANCE CERTIFICATES. (a) Officer's Certificates. Each Obligor shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2, 4.10 and 4.11 have been fulfilled. 4 10 (b) Secretary's Certificates. Each Obligor and Subsidiary Guarantor shall have delivered to you a certificate of its Secretary or an Assistant Secretary certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of this Agreement, the Other Agreements, the Notes and the respective Subsidiary Guarantees, as applicable. 4.4. OPINIONS OF COUNSEL. You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a) from King & Spalding, special counsel for the Parent, and Kenneth M. Lipowitz, counsel to the Parent, and Robert L. Aprati, Senior Vice President and General Counsel of the Company, substantially in the respective forms set forth in Exhibits 4.4(a), 4.4(b) and 4.4(c) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Obligors hereby instruct their counsel to deliver such opinions to you) and (b) from Willkie Farr & Gallagher, your special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(d) and covering such other matters incident to such transactions as you may reasonably request. 4.5. SUBSIDIARY GUARANTEES. A Subsidiary Guarantee, dated as of a date on or before the date of the Closing, shall have been executed and delivered by each Subsidiary identified as a Subsidiary Guarantor in Schedule 5.4 (individually a "SUBSIDIARY GUARANTOR" and collectively the "SUBSIDIARY GUARANTORS") in the form hereinabove recited and shall be in full force and effect. 4.6. PURCHASE PERMITTED BY APPLICABLE LAW, ETC. On the date of the Closing, your purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including without limitation Regulation G, T or X of the Board of Governors of the Federal Reserve System) and (c) not subject you to any tax, penalty or liability under or pursuant to any 5 11 applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. 4.7. SALE OF NOTES TO OTHER PURCHASERS. The Company shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A. 4.8. PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions of Section 16.1, the Obligors shall have paid the reasonable fees, charges and disbursements of your special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing. 4.9. PRIVATE PLACEMENT NUMBER. A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for the Notes. 4.10. CHANGES IN CORPORATE STRUCTURE. Neither Obligor shall have changed its jurisdiction of incorporation or, except for the Acquisition, been a party to any merger or consolidation or succeeded to all or any substantial part of the liabilities of any other entity at any time following the date of the most recent financial statements referred to in Schedule 5.5. 4.11. CONTEMPORANEOUS TRANSACTIONS. Each of the Transaction Documents shall be in full force and effect and none of the Transaction Documents shall have been supplemented, amended or modified (by waiver or otherwise) to any substantial extent without your prior written consent; and the following additional conditions shall have been satisfied: (a) the Parent shall have acquired the outstanding capital stock of the Company to be acquired by it and issued 6 12 to Ford shares of Preferred Stock initially convertible into not more than 4,500,000 Class A Shares, all pursuant to the Stock Purchase Agreements; (b) the Parent shall have issued Class A Shares in a registered public offering and shall have received at least $150,000,000 aggregate gross cash proceeds in respect of such offering; (c) the terms of the Parent's 7.0% Convertible Subordinated Notes due 2003 shall have been amended pursuant to a Supplemental Agreement to the Series A Note Purchase Agreements and the Parent shall have issued $45,000,000 aggregate principal amount of the Series B Convertible Notes pursuant to the Series B Note Purchase Agreements, such documents to be substantially in the respective forms heretofore furnished to you; (d) the Parent and the Company and the other parties thereto shall have entered into the Revolving Credit Facility, in form and substance satisfactory to you, and the Company shall have satisfied the conditions precedent to the initial credit extension thereunder; and (e) the Company and one or more of its Subsidiaries shall have entered into the Liquidity Facility and other arrangements providing for the refinancing of Vehicle Debt as hereinabove described. You shall have received a true and complete copy of each certificate, opinion or other writing then or theretofore delivered to any party to the Transaction Documents pursuant thereto. 4.12. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. 7 13 5. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS. The Obligors jointly and severally represent and warrant to you as hereinafter set forth. Unless the context otherwise requires all representations and warranties set forth herein shall be deemed to be given with respect to the Parent and its Subsidiaries or Significant Subsidiaries, as the case may be, after giving effect to the consummation of the Acquisition and the Transactions on the date of the Closing. 5.1. ORGANIZATION; POWER AND AUTHORITY. Each Obligor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each Obligor has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Other Agreements and (in the case of the Company) the Notes and to perform the provisions hereof and thereof. 5.2. AUTHORIZATION, ETC. This Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). This Agreement has been duly authorized by all necessary corporate action on the part of the Parent and this Agreement constitutes a legal, valid and binding obligation of the Parent enforceable against the Parent in accordance with its terms, except as such enforceability may be limited as aforesaid. 8 14 5.3. DISCLOSURE. The Parent, through its agent, Credit Suisse First Boston Corporation, has delivered to you a copy of a Preliminary Prospectus (subject to completion) dated April 18, 1997 (the "PROSPECTUS") relating to the issue and sale of 6,500,000 Class A Shares in connection with the Acquisition pursuant to a registration statement under the Securities Act. The Prospectus fairly describes, in all material respects, the business and principal properties of the Parent and its Subsidiaries, the Acquisition and the Transactions. This Agreement, the Prospectus, the documents, certificates or other writings delivered to you by or on behalf of the Obligors in connection with the transactions contemplated hereby and described in Schedule 5.3 (together with the Prospectus, the "DISCLOSURE DOCUMENTS"), and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Since December 31, 1996, there has been no change in the financial condition, operations, business, properties or prospects of the Obligors and their respective Subsidiaries, each taken as a whole, except changes disclosed in the Disclosure Documents or in the financial statements listed in Schedule 5.5 and other changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. 5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists of the Parent's (i) Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Parent and each other Subsidiary and whether it is a Subsidiary Guarantor or a Significant Subsidiary, (ii) Affiliates, other than Subsidiaries, and (iii) directors and senior officers, in each case after giving effect to the Acquisition. All Subsidiaries that are not designated as Significant Subsidiaries in Schedule 5.4, if combined into a single Subsidiary, would not constitute a Significant Subsidiary. (b) All of the outstanding shares of capital stock or 9 15 similar equity interests of each Significant Subsidiary shown in Schedule 5.4 as being owned by the Parent and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Parent or another Subsidiary free and clear of any Lien, other than as listed on Schedule 5.4. (c) Each Significant Subsidiary identified in Schedule 5.4 is a corporation duly organized, validly existing and in good standing (to the extent such concepts are recognized in such jurisdictions) under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Significant Subsidiary has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact and, as to each Subsidiary Guarantor, to execute and deliver and perform its obligations under its respective Subsidiary Guarantee. (d) No Significant Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed in Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Significant Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Parent or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Significant Subsidiary. 5.5. FINANCIAL STATEMENTS. Each Obligor has delivered to you copies of the financial statements of each Obligor and its respective Subsidiaries listed in Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of each Obligor and its respective Subsidiaries before giving effect to the Acquisition and the Transactions or the pro forma consolidated financial position of the Parent and its Subsidiaries after giving effect to the Acquisition and the Transactions, as the case may be, as of the 10 16 respective dates specified in such Schedule and the consolidated results or pro forma consolidated results, as the case may be, of their operations and cash flows, as applicable, for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto. 5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution, delivery and performance by the Company of this Agreement and the Notes, by the Parent of this Agreement, by the Subsidiary Guarantors of their respective Subsidiary Guarantees and by the Parent, the Company or any Subsidiary of any Transaction Document to which it is a party, will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company, the Parent or any other Significant Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease or any other material agreement or instrument to which the Company, the Parent or any other Significant Subsidiary is bound or by which the Company, the Parent or any other Significant Subsidiary or any of their respective properties may be bound or affected, (ii) contravene the charter or bylaws of the Company, the Parent or any other Significant Subsidiary, (iii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company, the Parent or any other Significant Subsidiary or (iv) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company, the Parent or any other Significant Subsidiary. 5.7. GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes, by the Parent of this Agreement or by the Subsidiary Guarantors of their respective Subsidiary Guarantees. 11 17 5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS. (a) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of the Obligors, threatened against or affecting the Parent or any Significant Subsidiary or any property of the Parent or any Significant Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority except actions, suits or proceedings (none of which directly or indirectly involves the Acquisition or the Transactions) that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (b) Neither the Parent nor any Significant Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 5.9. TAXES. The Parent and its Significant Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not individually or in the aggregate Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Parent or a Significant Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Parent believes that the charges, accruals and reserves on the books of the Parent and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. 12 18 5.10. TITLE TO PROPERTY; LEASES. The Parent and its Significant Subsidiaries have good and marketable title to their respective real properties and own sufficient title to their respective other properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet listed on Schedule 5.5 or purported to have been acquired by the Parent or any Significant Subsidiary after the date of said balance sheet (except as sold or otherwise disposed of in the ordinary course of business), either before or after giving effect to the Acquisition, in each case free and clear of Liens not permitted by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all Material respects. 5.11. LICENSES, PERMITS, ETC. Except as disclosed in Schedule 5.11, (a) the Parent and its Significant Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, proprietary software, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others; (b) to the best knowledge of the Obligors, no product of the Parent infringes in any Material respect any license, permit, franchise, authorization, patent, copyright, proprietary software, service mark, trademark, trade name or other right owned by any other Person; and (c) to the best knowledge of the Obligors, there is no Material violation by any Person of any right of the Parent or any of its Significant Subsidiaries with respect to any patent, copyright, proprietary software, service mark, trademark, trade name or other right owned or used by the Parent or any of its Subsidiaries. 5.12. COMPLIANCE WITH ERISA. (a) The Obligors and each of their ERISA Affiliates have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to 13 19 result in a Material Adverse Effect. Neither of the Obligors nor any of their ERISA Affiliates has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to any Plan other than such liabilities as would not be individually or in the aggregate Material, and to the Obligors' knowledge, no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by an Obligor or any of its ERISA Affiliates, or in the imposition of any Lien on any of the rights, properties or assets of either Obligor or any of its ERISA Affiliates, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities, except as described in the financial statements included in the Prospectus. The term "BENEFIT LIABILITIES" has the meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE" and "PRESENT VALUE" have the meaning specified in section 3 of ERISA. (c) The Obligors and their ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (d) The expected postretirement benefit obligation (determined as of the last day of the Parent's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Parent and its Subsidiaries is not Material. (e) The execution and delivery of this Agreement and the Parent Guarantee and the issuance and sale of the Notes at the Closing hereunder will not involve any transaction that is 14 20 subject to the prohibitions of section 406 fof ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Obligors in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you. 5.13. PRIVATE OFFERING BY THE OBLIGORS. Neither Obligor nor anyone acting on its behalf has offered the Notes, the Parent Guarantee, the Subsidiary Guarantees or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person other than you, the Other Purchasers and not more than six other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither Obligor nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes or the issuance of the Parent Guarantee or the Subsidiary Guarantees to the registration requirements of Section 5 of the Securities Act. 5.14. USE OF PROCEEDS; MARGIN REGULATIONS. The Company will use the net proceeds of the sale of the Notes to repay Debt of the Company and for general corporate purposes of the Company. No part of the proceeds from the sale of the Notes hereunder will be used, and no part of the proceeds of such Debt was used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation G of the Board of Governors of the Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company or the Parent in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute any of the consolidated assets of the Parent and its Subsidiaries and the Parent does not have any present intention that margin stock will constitute more than 20% of the value of such assets. As used in this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall have the meanings assigned to them in said Regulation G. 15 21 5.15. EXISTING DEBT; FUTURE LIENS. (a) Schedule 5.15 sets forth a complete and correct list of all outstanding Debt of the Parent and its Subsidiaries as of March 31, 1997, and all Debt of the Parent and its Subsidiaries to be outstanding as of the date of the Closing after giving effect to the Acquisition and the Transactions. Neither the Parent nor any Subsidiary is in default, and no waiver of default is currently in effect, in the payment of any principal or interest on any such Debt, and no event or condition exists with respect to any such Debt exceeding $1,000,000 in unpaid principal amount that would permit (or that with the giving of notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in Schedule 5.15, neither the Parent nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.2. 5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. 5.17. STATUS UNDER CERTAIN STATUTES. Neither the Parent nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the Federal Power Act, as amended. 5.18. ENVIRONMENTAL MATTERS. The operations of the Parent and its Subsidiaries comply with all Environmental Laws and all other applicable Requirements of Law concerning environmental health and safety, except where the failure so to comply individually and in the 16 22 aggregate could not reasonably be expected to have a Material Adverse Effect. In addition to and without limiting the foregoing, except for matters that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect: (a) neither the Parent nor any Significant Subsidiary, nor any property or operations currently owned or leased by the Parent or any Significant Subsidiary, is subject to, and no property or operations formerly owned or leased by the Parent or any Significant Subsidiary during such period of ownership or lease were to either Obligor's knowledge subject to, any Order from or agreement with any court, arbitrator or Governmental Authority of competent jurisdiction or subject to any judicial or docketed administrative proceeding respecting (x) any Environmental Law or any other environmental or health or safety Requirement of Law, (y) any action required to clean up, remove, treat or in any other way address Hazardous Materials in the environment or (z) any written claim under any Environmental Law arising from the release or threatened release of Hazardous Materials into the environment; (b) all necessary authorizations, consents, permissions, licenses and agreements required by Environmental Laws (collectively "ENVIRONMENTAL CONSENTS") have been lawfully obtained by the Parent and its Subsidiaries, and all Environmental Consents are valid and subsisting and are in full force and effect; (c) the Parent and its Significant Subsidiaries have complied in all material respects with all conditions attaching to Environmental Consents (whether such conditions are expressly imposed or implied by statute) and neither Obligor is aware of any circumstances which would render it impossible for the Parent or any Significant Subsidiary to comply with such conditions in the future; (d) neither the Parent nor any Significant Subsidiary has received any written notice, Order, correspondence or communication from any Governmental Authority in respect of any Environmental Consent revoking, suspending, modifying or varying the same, or threatening to do so, and neither 17 23 Obligor knows of any reason for any Environmental Consent to be revoked, suspended, modified or varied; (e) neither the Parent nor any Significant Subsidiary has received any written communication in any form from any Governmental Authority in respect of any violation of any Environmental Law; and neither Obligor is aware of any circumstances which would be reasonably expected to give rise to such a communication being received, or of any intention on the part of any competent authority to deliver any such communication; (f) to either Obligor's knowledge, no site owned or occupied by the Parent or any Subsidiary has been used for the deposit of waste during the ownership or occupation of the Parent or any Subsidiary except for such usage in accordance with Environmental Law or pursuant to all requisite material consents thereunder; (g) to either Obligor's knowledge, all Hazardous Materials produced in the course of the businesses of the Parent and its Subsidiaries have been lawfully disposed of; and (h) to either Obligor's knowledge, the Parent and its Subsidiaries have at all times supplied to the competent authorities such information as is required by Environmental Laws, and all such information given was correct at the time such information was supplied. 5.19. SOLVENCY. Each Obligor is, and after giving effect to the issuance of the Notes and the consummation of the Acquisition and the Transactions on the date of the Closing will be, a "solvent institution", as said term is used in Section 1405(c) of the New York Insurance Law, whose "obligations . . . are not in default as to principal or interest", as said terms are used in said Section 1405(c). 5.20. OTHER TRANSACTION DOCUMENTS. The Parent has furnished or otherwise made available to you true and correct copies of the Stock Purchase Agreements and other Transaction Documents to which you are not a party, in each case, in the form of the most recent drafts (which are 18 24 substantially final) or as originally executed, as the case may be, and there have been no amendments or waivers to any such originally executed Transaction Documents or the exhibits or schedules thereto and there will be no substantial changes before execution of any such Transaction Documents not yet executed, or amendments or waivers in respect thereof, in any such case other than those as to which you shall have been advised in writing prior to the Closing. The representations and warranties of the Parent and its Subsidiaries contained in such other Transaction Documents (executed and to be executed) are (or upon execution thereof will be) true and correct. 6. REPRESENTATIONS OF THE PURCHASER. 6.1. PURCHASE OF NOTES. You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. 6.2. SOURCE OF FUNDS. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "SOURCE") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: (a) the Source is an "insurance company general account", as such term is defined in Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995), and there is no plan with respect to which the aggregate amount of such general account's reserves and liabilities for the contracts held by or on behalf of such plan and all other plans maintained by the same employer (and affiliates thereof as defined in section V(a)(1) of PTE 95-60) or by the same 19 25 employee organization (in each case determined in accordance with PTE 95-60) exceeds or will exceed 10% of the total of all reserves and liabilities of such general account (determined in accordance with PTE 95-60, exclusive of separate account liabilities, plus any applicabl surplus) as of the date of the Closing; or (b) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Obligors in writing pursuant to this paragraph (b) at least one Business Day prior to the Closing, no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund and the general conditions in Section III of PTE 90-1 and PTE 91-38 have been satisfied; or (c) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in section V(e) of the QPAM Exemption) owns a 5% or more interest in the Parent and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Obligors in writing pursuant to this paragraph (c) at least one Business Day prior to the Closing; or (d) the Source is a governmental plan; or 20 26 (e) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Obligors in writing pursuant to this paragraph (e) at least one Business Day prior to the Closing; or (f) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such terms in section 3 of ERISA. 7. INFORMATION AS TO OBLIGORS. 7.1. FINANCIAL AND BUSINESS INFORMATION. The Obligors shall deliver to each holder of Notes that is an Institutional Investor: (a) Quarterly Statements -- as soon as available and in any event within 60 days after the end of each quarterly fiscal period in each fiscal year of the Parent (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of (i) consolidating and consolidated balance sheets of the Parent and its Subsidiaries as at the end of such quarter, (ii) consolidating and consolidated statements of income of the Parent and its Subsidiaries for such quarter, and (iii) in the case of the first quarter, consolidated statements of cash flows and changes in shareholders' equity of the Parent and its Subsidiaries for such quarter and, in the case of the second and third quarters, consolidated and consolidating statements of income and consolidated statements of cash flows and changes in shareholders' equity for the portion of the fiscal year ending with such quarter, setting forth in each case (for consolidated statements) in comparative form the consolidated figures for the 21 27 corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer of the Parent as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Parent's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); (b) Annual Statements -- as soon as available and in any event within 105 days after the end of each fiscal year of the Parent, duplicate copies of (i) consolidating and consolidated balance sheets of the Parent and its Subsidiaries as at the end of such year, and (ii) consolidating and consolidated statements of income and consolidated statements of cash flows and changes in shareholders' equity of the Parent and its Subsidiaries for such year, setting forth in each case (for consolidated statements) in comparative form the consolidated figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and such consolidated statements to be accompanied by (A) a report thereon of independent public accountants of recognized national standing, which report shall include an opinion that such consolidated financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and 22 28 (B) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit), provided that the delivery within the time period specified above of the Parent's Annual Report on Form 10-K for such fiscal year (together with the Parent's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission, together with the accountant's certificate described in clause (B) above, shall be deemed to satisfy the requirements of this Section 7.1(b); (c) SEC and Other Reports -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Parent or any Subsidiary generally to its shareholders or to its creditors (other than the Parent or another Subsidiary), and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Parent or any Subsidiary with the Securities and Exchange Commission and of all press releases and other statements made available generally by the Parent or any Subsidiary to the public concerning developments that are Material; (d) Notice of Default or Event of Default -- promptly, and in any event within five days after a Responsible Officer of either Obligor becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or 23 29 taken any action with respect to a claimed default of the type referred to in Section 11(g), a written notice specifying the nature and period of existence thereof and what action the Obligors are taking or propose to take with respect thereto; (e) ERISA Matters -- promptly, and in any event within five days after a Responsible Officer of either Obligor becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Obligors or an ERISA Affiliate propose to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by an Obligor or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by an Obligor or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of an Obligor or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (f) Notices from Governmental Authority -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Parent or any Subsidiary from any federal or state Governmental Authority relating to any 24 30 order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and (g) Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Parent or any of its Subsidiaries or relating to the ability of the Parent to perform its obligations hereunder, the ability of the Company to perform its obligations hereunder and under the Notes or the ability of a Subsidiary Guarantor to perform its obligations under its respective Subsidiary Guarantee, in each case as from time to time may be reasonably requested by any such holder of Notes. Unless at the time the Obligors are subject to Section 13 or 15(d) of the Exchange Act, the Parent shall deliver, with reasonable promptness after a written request therefor by any holder of a Note or a prospective transferee of a Note, information satisfying the requirements of subsection (d)(4)(i) of Rule 144A of the Securities and Exchange Commission under the Securities Act or any similar rule then in effect. 7.2. OFFICER'S CERTIFICATE. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate of a Senior Financial Officer of the Parent setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Obligors were in compliance with the requirements of Sections 10.1 through 10.7, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) Default -- a statement that such Senior Financial Officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review 25 31 of the transactions and conditions of the Parent and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Parent or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Obligors shall have taken or propose to take with respect thereto. 7.3. INSPECTION. The Parent shall permit the representatives of each holder of Notes that is an Institutional Investor: (a) No Default -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Parent, to visit the principal executive offices of the Parent and the Company, to discuss the affairs, finances and accounts of the Parent and its Subsidiaries with the officers of the Parent and the Company, and (with the consent of the Parent, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Parent, which consent will not be unreasonably withheld) to visit the other offices and properties of the Parent and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) Default -- if a Default or Event of Default then exists, at the expense of the Obligors, to visit and inspect any of the offices or properties of the Parent or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants (and by this provision the Parent authorizes said accountants to discuss the affairs, finances and accounts of the Parent and its Subsidiaries), all at such times and as often as may be requested. 26 32 8. PREPAYMENT OF THE NOTES. In addition to the payment of the entire unpaid principal amount of the Notes at the final maturity thereof, the Company will make required, and may make optional, prepayments in respect of the Notes as hereinafter provided. 8.1. REQUIRED PREPAYMENTS. On April 29, 2001 and on each April 29 thereafter to and including April 29, 2006 the Company will prepay $23,575,000 principal amount (or such lesser principal amount as shall then be outstanding) of the Notes, together with accrued interest thereon to the date of such prepayment, without premium and allocated as provided in Section 8.4, provided that upon any partial prepayment of the Notes pursuant to Section 8.2 or 8.3, the principal amount of each required prepayment of the Notes becoming due under this Section 8.1 on and after the date of such prepayment shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment. 8.2. OPTIONAL PREPAYMENTS. The Company may, at its option and upon notice as provided below, prepay at any time all (subject to the last paragraph of this Section 8.2), or from time to time any part of, the Notes (in a minimum amount of $10,000,000 and otherwise in integral multiples of $1,000,000), at the principal amount so prepaid, together with interest accrued thereon to the date of such prepayment, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify the date fixed for such prepayment (which shall be a Business Day), the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of Notes held by such holder to be prepaid (determined in accordance with Section 8.4) and the interest to be paid on the prepayment date with respect to such principal amount being prepaid. Each such notice of prepayment shall be accompanied by a certificate of a Senior Financial Officer of an Obligor as to the estimated Make-Whole Amount due in connection with such 27 33 prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment of Notes, the Company shall deliver to each holder of the Notes a certificate of a Senior Financial Officer of an Obligor specifying the calculation of such Make-Whole Amount as of the specified prepayment date. Notwithstanding the foregoing, until the earlier of (i) a public offering and sale of the Exchange Parent Convertible Notes pursuant to a demand registration under the Registration Rights Agreement and (ii) the prepayment or conversion of all outstanding Parent Convertible Notes, the Company may not make any prepayment of Notes pursuant to this Section 8.2 if, after giving effect thereto, the aggregate unpaid principal amount of the Notes at the time outstanding would be less than $23,000,000. 8.3. PREPAYMENT IN CONNECTION WITH A CHANGE OF CONTROL. Promptly and in any event within five Business Days after the occurrence of a Change of Control, either Obligor will give written notice thereof to the holders of all outstanding Notes, which notice shall (a) refer specifically to this Section 8.3, (b) describe the Change of Control in reasonable detail and specify the Change of Control Prepayment Date and the Response Date (as respectively defined below) in respect thereof and (c) offer to prepay all Notes at the price specified below on the date therein specified (the "CHANGE OF CONTROL PREPAYMENT DATE"), which shall be a Business Day not less than 30 nor more than 60 days after the date of such notice. Each holder of a Note will notify the Company of such holder's acceptance (indicating the aggregate principal amount of Notes to be prepaid) or rejection of such offer by giving written notice of such acceptance or rejection to the Company at least five Business Days prior to the Change of Control Prepayment Date (the "RESPONSE DATE"). The failure by any such holder to respond in writing to such offer on or before the Response Date shall be deemed to be a rejection of such offer by such holder in respect of such Change of Control. On the Change of Control Prepayment Date the Company will prepay all of the Notes held by the holders as to which such offer has been accepted, at the principal amount of each such Note, together with interest accrued thereon to the Change of Control Prepayment Date, plus a premium equal to 1% of such principal amount. 28 34 If any holder of Notes shall reject such offer, such holder shall be deemed to have waived its rights under this Section 8.3 to require prepayment of all Notes held by such holder in respect of such Change of Control but not in respect of any subsequent Change of Control. 8.4. ALLOCATION OF PARTIAL PREPAYMENTS. In the case of each partial prepayment of the Notes pursuant to Section 8.1 or 8.2, the principal amount of the Notes to be prepaid shall be allocated among all the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof. 8.5. MATURITY; SURRENDER, ETC. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount or premium, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount or premium, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company upon request and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. 8.6. PURCHASE OF NOTES. Neither Obligor will, nor will either Obligor permit any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. 8.7. MAKE-WHOLE AMOUNT. The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be 29 35 less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "CALLED PRINCIPAL" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "DISCOUNTED VALUE" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "REINVESTMENT YIELD" means, with respect to the Called Principal of any Note, 0.75% over the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 500" on the Telerate Access Service (or such other display as may replace Page 500 on Telerate Access Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable by interpolation as provided below, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with a maturity 30 36 closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with a maturity closest to and less than the Remaining Average Life. "REMAINING AVERAGE LIFE" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1. "SETTLEMENT DATE" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. 9. AFFIRMATIVE COVENANTS. The Obligors jointly and severally covenant that so long as any of the Notes are outstanding: 9.1. COMPLIANCE WITH LAW. The Parent will and will cause each of its Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including without limitation Environmental Laws, and will obtain and maintain in 31 37 effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.2. INSURANCE. The Parent will and will cause each of its Subsidiaries to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. 9.3. MAINTENANCE OF PROPERTIES. The Parent will and will cause each of its Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Parent or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Parent has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.4. PAYMENT OF TAXES AND CLAIMS. The Parent will and will cause each of its Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and 32 38 assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Parent or any Subsidiary, provided that neither the Parent nor any Subsidiary need pay any such tax or assessment or claim if (i) the amount, applicability or validity thereof is contested by the Parent or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Parent or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Parent or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect. 9.5. CORPORATE EXISTENCE, ETC. Subject to Section 10.6, each Obligor will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 10.5 and 10.6, the Parent will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into the Parent or a Subsidiary) and all rights and franchises (as franchisee) of the Parent and its Subsidiaries unless, in the good faith judgment of the Parent, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. 9.6. LINES OF BUSINESS. The Parent and its Subsidiaries will at all times continue to be engaged solely in the business of (a) renting worldwide for general use passenger automobiles, vans and light trucks, (b) selling in the United States late model automobiles and (c) franchising the foregoing business to other Persons, and other business activities as may be incidental or related to the foregoing (including without limitation the ownership and operation of parking lots, the ownership and rental of recreational vehicles and the ownership and operation of limousine services, taxi fleets or car dealerships). Without limiting the foregoing, the Parent will not engage in any business activity other than its continuing ownership of all of the shares of capital stock of the Company and its compliance with its obligations under this Agreement and the other Transaction Documents. 33 39 9.7. ADDITIONAL SUBSIDIARY GUARANTEES. Concurrently with the initial incurrence of any Debt by any Subsidiary of the Parent (as a direct obligor or guarantor) under the Revolving Credit Facility or under any extension, renewal or replacement of the Revolving Credit Facility (including without limitation by such Subsidiary becoming a guarantor under the Revolving Credit Facility or any such extension, renewal or replacement), the Company will cause such Subsidiary to execute and deliver to the holders of the Notes a Subsidiary Guarantee in the form hereinabove recited and will furnish each such holder with a counterpart of such executed Subsidiary Guarantee, together with an opinion of King & Spalding or other counsel reasonably satisfactory to the Required Holders (which opinion shall be reasonably satisfactory to the Required Holders and may be subject to customary exceptions, qualifications and limitations under the circumstances) to the effect that such Subsidiary Guarantee has been duly authorized, executed and delivered by such Subsidiary and is valid, binding and enforceable in accordance with its terms; provided, however, that the Company will not permit any Subsidiary to incur such Debt (as a direct obligor or guarantor) unless the holders of the Notes shall have received assurances reasonably satisfactory to the Required Holders that, as between the lenders under the Revolving Credit Facility or such extension, renewal or replacement and the holders from time to time of the Notes, all Debt of such Subsidiary under the Revolving Credit Facility or such extension, renewal or replacement and under its respective Subsidiary Guarantee is and shall be (except to the extent such Debt is secured) pari passu with the Debt of such Subsidiary under its Subsidiary Guarantee. 10. NEGATIVE COVENANTS. The Obligors jointly and severally covenant that so long as any of the Notes are outstanding: 10.1. INCURRENCE OF NON-VEHICLE DEBT; SUBSIDIARY DEBT. (a) The Parent will not and will not permit any Subsidiary to create, assume, incur, guarantee or otherwise become liable in respect of any Non-Vehicle Debt unless immediately after giving effect thereto and to the application of the proceeds of such Non-Vehicle Debt 34 40 (i) the Pro Forma Non-Vehicle Interest Coverage Ratio is at least (A) 2.0 to 1 on any date of determination to and including December 31, 1999 and (B) 3.0 to 1 on any date thereafter, and (ii) the Non-Vehicle Leverage Ratio does not exceed (A) 6.3 to 1 on any date of determination to and including December 31, 1998, (B) 5.0 to 1 on any date thereafter to and including December 31, 1999 (C) 4.0 to 1 on any date thereafter to and including December 31, 2000, (D) 3.5 to 1 on any date thereafter to and including December 31, 2001 and (E) 3.0 to 1 on any date thereafter. (b) The Parent will not permit any Subsidiary (other than the Company) to create, assume, incur, guarantee or otherwise become liable in respect of any Non-Vehicle Debt except (i) Debt secured by Liens permitted by clauses (a) through (m) of Section 10.2, (ii) Debt owing to the Company or another Wholly-Owned Subsidiary, (iii) Debt of a Subsidiary outstanding as of the date such Subsidiary was acquired or otherwise becomes a Subsidiary (and not created in anticipation thereof), and (iv) other Debt, provided that immediately after giving effect to the incurrence of such other Debt the sum (without duplication) of (A) the aggregate amount of Debt (including Capitalized Lease Obligations) of the Parent and its Subsidiaries secured by Liens permitted by Section 10.2(n) plus (B) the aggregate amount of Non-Vehicle Debt of all Subsidiaries (other than the Debt of the Company and Debt permitted by subclause (i), (ii) or (iii) above) plus (C) the aggregate Attributable Debt in connection with all sale and leaseback transactions of the Parent and its Subsidiaries entered into after the date of the Closing in accordance with the provisions of Section 10.3(d), does not exceed 15% of Consolidated Adjusted Assets. For purposes of this Section 10.1(b), a Subsidiary shall be deemed to have incurred Debt in respect of any obligation previously owed to the Parent or to a Wholly-Owned Subsidiary on the date the obligee ceases for any reason to be the Parent or a Wholly-Owned Subsidiary. 35 41 10.2. LIENS. The Parent will not and will not permit any Subsidiary to create, assume, incur or suffer to exist any Lien upon or with respect to any property other than Vehicles and Excluded Receivables (as such term is defined in the Revolving Credit Facility as in effect on the date of the Closing) relating to the financing of Vehicles, whether now owned or hereafter acquired, provided that nothing in this Section 10.2 shall prohibit (a) Liens on any airport concession agreements or permits to secure Debt incurred in the ordinary course of business to finance tenant improvements used in connection with concession agreements or permits subject to such Lien; (b) Liens on claims against persons renting vehicles, persons damaging vehicles or persons issuing applicable insurance coverage for such persons arising under insurance policies entered into in the ordinary course of business consistent with past practice; (c) Liens securing the Revolving Credit Facility (including any Swaps entered into thereunder), provided that such Liens shall not cover any property or assets other than as described in Schedule 5.15; (d) other Liens in respect of property of the Parent or a Subsidiary existing on the date of the Closing or arising under an agreement in effect on the date of the Closing, in each case as described in Schedule 5.15; (e) Liens in respect of property (including Capital Lease Obligations) acquired by the Parent or a Subsidiary after the date of the Closing, which are existing at the time of acquisition of such property or created at the time of or within 180 days after the acquisition of such property to secure Non-Vehicle Debt assumed or incurred to finance all or any part of the purchase price or the completion of construction of such property, provided that in any such case (i) no such Lien shall extend to or cover any other property of the Parent or such Subsidiary, as the case may be, and 36 42 (ii) the aggregate principal amount of Debt secured by all such Liens in respect of any such property shall not exceed the cost of such property and any improvements then being financed; (f) in the case of any Person that after the date of the Closing becomes a Subsidiary or is consolidated with or merged with or into the Parent or a Subsidiary or sells, leases or otherwise disposes of all or substantially all of its property to the Parent or a Subsidiary, Liens existing at the time such Person becomes a Subsidiary or is so consolidated or merged or effects such sale, lease or other disposition of property (and not created in anticipation thereof), provided that in any such case no such Lien shall extend to or cover any other property of the Parent or such Subsidiary, as the case may be; (g) Liens securing Non-Vehicle Debt owed by a Subsidiary to the Company or to a Wholly-Owned Subsidiary; (h) any Lien relating to any extension, renewal or replacement of any Non-Vehicle Debt secured by a Lien permitted by clauses (a) through (g) above, provided in each case that the outstanding principal amount (or then accreted value) of Non-Vehicle Debt secured thereby is not increased and such Lien does not extend to or cover any other property except as otherwise permitted by this Section 10.2; (i) Liens arising in favor of the United States government or any state thereof or any foreign government or any political subdivision of any of the foregoing to secure partial, progress, advance or other payments pursuant to any contract or statute; (j) Liens incurred or deposits made in the ordinary course of business (and not created in connection with the incurrence of Debt) in connection with workers' compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, bids, leases, government contracts, performances and return of money bonds and similar obligations; (k) Liens incidental to the normal conduct of the business of the Parent or any Subsidiary or the ownership of its property (including without limitation minor survey 37 43 exceptions, title defects, minor encumbrances, easements, reservations, rights of others for rights-of-way, zoning or other restrictions as to the use of real property), which are not created in connection with the incurrence of Debt and which do not individually or in the aggregate materially adversely affect the value or usefulness of such property in the operation of the business of the Parent and its Subsidiaries taken as a whole; (l) Liens for taxes, assessments or other governmental charges which are not yet due and payable or the payment of which is not at the time required by Section 9.4; (m) Liens of or resulting from any judgment rendered by a court of competent jurisdiction properly reserved (other than judgments and awards which if not discharged would result in a Default under Section 11(j)), the appeal of which the Parent or a Subsidiary is prosecuting in good faith and by appropriate proceedings; and (n) Liens which would otherwise not be permitted by clauses (a) through (h) of this Section 10.2, securing additional Non-Vehicle Debt of the Company or another Subsidiary, provided that after giving effect thereto the sum (without duplication) of (i) the aggregate amount of Debt (including Capitalized Lease Obligations) of the Parent and its Subsidiaries secured by such Liens permitted by this Section 10.2(n) plus (ii) the aggregate amount of Non-Vehicle Debt of Subsidiaries (other than the Company and Debt permitted by subclauses (i), (ii) and (iii) of Section 10.1(b)) plus (iii) the aggregate Attributable Debt in connection with all sale and leaseback transactions of the Parent and its Subsidiaries entered into after the date of the Closing in accordance with the provisions of Section 10.3(d), does not exceed 15% of Consolidated Adjusted Assets. For purposes of this Section 10.2 any Lien existing in respect of property at the time such property is acquired or in respect of property of a Person at the time such Person is acquired, consolidated or merged with or into the Parent or a Subsidiary shall be deemed to have been created at that time. Notwithstanding the foregoing, the Parent will not and will not permit any Subsidiary to create, assume or suffer to 38 44 exist any Lien upon or with respect to any trademarks, software systems, reservations systems or other intellectual property (or rights in respect of any thereof), whether now owned or hereafter acquired. 10.3. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Parent will not and will not permit any Subsidiary to sell, lease, transfer or otherwise dispose of (collectively, a "TRANSFER") any asset (other than Vehicles) on terms whereby the asset or a substantially similar asset is or may be leased or reacquired by the Parent or any Subsidiary, unless either (a) the lease is between the Company and another Wholly-Owned Subsidiary or between such other Wholly-Owned Subsidiaries, or (b) the Company or a Subsidiary could create a Lien under clauses (c) through (h) of Section 10.2 on such asset to secure Non-Vehicle Debt in an amount at least equal to the Attributable Debt in respect of such transaction, or (c) the net proceeds realized from the transfer are applied by the Company within 180 days after the receipt thereof to (i) the repayment of unsubordinated Non-Vehicle Debt of the Company or the Parent (which repayment may, but need not, include prepayment of Notes pursuant to Section 8.2 and shall, in case of a prepayment of the Revolving Credit Facility, result in the permanent reduction of the commitments of the lenders thereunder by an amount at least equal to the principal amount repaid) or (ii) the purchase of non-current assets for use in the business of the Company, or (d) after giving effect to such transaction and the incurrence of Attributable Debt in respect thereof, the sum (without duplication) of (i) the aggregate amount of Debt (including Capitalized Lease Obligations) of the Parent and its Subsidiaries secured by such Liens permitted by Section 10.2(n) plus (ii) the aggregate amount of Non-Vehicle Debt of Subsidiaries (other than Debt of the Company and Debt permitted by subclauses (i), (ii) and (iii) of Section 10.1(b)) plus (iii) the aggregate Attributable Debt in connection with all sale and leaseback transactions of the Parent and its Subsidiaries entered into after the date of the Closing (other than transactions permitted by clauses 39 45 (a), (b) and (c) above), does not exceed 15% of Consolidated Adjusted Assets. Notwithstanding the foregoing, the Parent will not and will not permit any Subsidiary to enter into any transaction covered by this Section involving any trademarks, software systems, reservations systems or other intellectual property (or rights in respect of any thereof), whether now owned or hereafter acquired. 10.4. MAINTENANCE OF CONSOLIDATED SHAREHOLDERS' EQUITY. The Parent will not at any time permit Consolidated Shareholders' Equity to be less than the sum of (a) $294,500,000 plus (b) 50% of Consolidated Net Income for each fiscal year (beginning with the fiscal year ending on December 31, 1997) for which Consolidated Net Income is positive. 10.5. ASSET SALES. The Parent will not and will not permit any Subsidiary to, directly or indirectly, sell, transfer, lease (as lessor), otherwise dispose of any property or assets (an "ASSET SALE") other than (a) Asset Sales in the ordinary course of business; or (b) other Asset Sales, provided that in each case (i) immediately before and after giving effect thereto, (A) no Default or Event of Default shall have occurred and be continuing, and (B) the Company would be permitted to incur at least $1 of additional Non-Vehicle Debt under Section 10.1(a), and (ii) the aggregate net book value of property or assets disposed of in such Asset Sale and all other Asset Sales by the Parent and its Subsidiaries during the immediately preceding twelve months does not exceed 15% of Consolidated Adjusted Assets (as of the last day of the quarterly accounting period ending on or most recently prior to the last day of such twelve month period), and provided further that for purposes of clause (ii) above there shall be excluded the net book value of property or 40 46 assets disposed of in an Asset Sale if and to the extent such Asset Sale is made for cash, payable in full upon the completion of such Asset Sale, and an amount equal to the net proceeds realized upon such Asset Sale is applied by the Parent or such Subsidiary, as the case may be, within 180 days after the effective date of such Asset Sale (x) to reinvest (through capital expenditures or acquisitions) in property or assets for use in the business of the Parent and its Subsidiaries or (y) to repay unsubordinated Non-Vehicle Debt of the Company or the Parent (which repayment may, but need not, include prepayment of Notes pursuant to Section 8.2 and shall, in case of a repayment of the Revolving Credit Facility, result in the permanent reduction of the commitments of the lenders thereunder by an amount at least equal to the principal amount repaid) or, in the case of Asset Sales of Vehicles, to repay Vehicle Debt. Nothing in this Section 10.5 shall limit the ability of the Parent to distribute shares of capital stock of any Subsidiary to the shareholders of the Parent, provided that such distribution is permitted by Section 10.7 and after giving effect of such action the Parent owns beneficially at least 80% of the capital stock of such Subsidiary. 10.6. MERGER, CONSOLIDATION, AMALGAMATION, ETC. The Parent will not and will not permit the Company or any Subsidiary Guarantor to consolidate, amalgamate or merge with any other corporation or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person except: (a) a Subsidiary Guarantor may consolidate, amalgamate or merge with any other corporation or convey or transfer all or substantially all of its assets to (i) a solvent corporation organized and existing under the laws of the United States or any State thereof, provided that (x) the continuing, surviving, successor or acquiring corporation (the "SURVIVING CORPORATION"), shall have (A) executed and delivered to each holder of a Note its assumption of the due and punctual performance and observance of the all obligations of such Subsidiary 41 47 Guarantor under its Subsidiary Guarantee and (B) caused to be delivered to each holder of a Note an opinion of counsel reasonably satisfactory to the Required Holders to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof, and (y) immediately before and after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing and the Company would be permitted to incur at least $1 of additional Non-Vehicle Debt under Section 10.1(a), or (ii) any Person in an Asset Sale involving all of the outstanding stock or all or substantially all of the assets of such Subsidiary, in either case subject to the limitations of Section 10.5; (b) the Company may consolidate, amalgamate or merge with any other corporation or convey or transfer all or substantially all of its assets to a solvent corporation organized and existing under the laws of the United States or any State thereof, provided that (i) the surviving corporation (if not the Company) shall have (A) executed and delivered to each holder of a Note its assumption of the due and punctual performance and observance of all obligations of the Company under this Agreement, the Other Agreements and the Notes and (B) caused to be delivered to each holder of a Note an opinion of counsel reasonably satisfactory to the Required Holders to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof, and (ii) immediately before and after giving effect to such transaction, (A) no Default or Event of Default shall have occurred and be continuing and (B) the Company would be permitted to incur at least $1 of additional Non-Vehicle Debt under Section 10.1(a); and (c) the Parent may consolidate, amalgamate or merge with any other corporation or convey or transfer all or 42 48 substantially all of its assets to a solvent corporation organized and existing under the laws of the United States or any State thereof, provided that (i) the surviving corporation (if not the Parent) shall have (A) executed and delivered to each holder of a Note its assumption of the due and punctual performance and observance of all obligations of the Parent under this Agreement and the Other Agreements (including without limitation the Parent Guarantee) and (B) caused to be delivered to each holder of a Note an opinion of counsel reasonably satisfactory to the Required Holders to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof, and (ii) immediately before and after giving effect to such transaction, (A) no Default or Event of Default shall have occurred and be continuing and (B) the Company would be permitted to incur at least $1 of Non-Vehicle Debt under Section 10.1(a). Notwithstanding the foregoing, any Subsidiary may consolidate, amalgamate or merge with the Company (provided the Company is the surviving corporation) or any other Wholly-Owned Subsidiary or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to the Company or any other Wholly-Owned Subsidiary. 10.7. RESTRICTED PAYMENTS. The Parent will not, directly or indirectly, make or declare any Restricted Payment unless after giving effect to any such action, (a) no Default or Event or Default shall have occurred and be continuing, and (b) the Company would be permitted to incur at least $1 of additional Non-Vehicle Debt under Section 10.1(a). 10.8. TRANSACTIONS WITH AFFILIATES. The Parent will not and will not permit any Subsidiary to enter into directly or indirectly any Material transaction or Material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate 43 49 (other than the Parent or the Company or a Wholly-Owned Subsidiary), except upon fair and reasonable terms no less favorable to the Parent or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate. As used in this Section, "MATERIAL" means material to (i) the Parent, (ii) the Company or (iii) the Parent and its Subsidiaries taken as a whole. 11. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall exist if any of the following conditions or events shall occur and be continuing: (a) default in the payment of any principal or Make-Whole Amount or premium, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) default in the payment of any interest on any Note, and such default shall have continued for more than 10 days after such payment becomes due and payable; or (c) default in the performance of or compliance with any term contained in Section 7.1(d), 10.1, 10.2, 10.3, 10.5, 10.6, 10.7 or 10.8; or (d) default in the performance of or compliance with any term contained in Section 10.4, and such default shall have continued for a period of 30 days after a Responsible Officer of either Obligor obtains knowledge thereof (if and so long as the Parent is proceeding diligently and in good faith, by issuing equity securities or otherwise, to remedy such default during such 30-day period); or (e) default in the performance of or compliance with any term contained in this Agreement (other than those referred to in paragraphs (a), (b), (c) and (d) of this Section 11) and such default is not remedied within 30 days after a Responsible Officer of either Obligor obtains knowledge of such default; or (f) any representation or warranty made in writing by or on behalf of either Obligor or any Subsidiary Guarantor or by any officer of either Obligor or any Subsidiary Guarantor in this Agreement or any Subsidiary Guarantee or in any writing furnished in connection herewith or therewith 44 50 proves to have been false or incorrect in any material respect on the date as of which made; or (g) (i) the Parent or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or interest on any Debt (other than the Notes) that is outstanding in an aggregate principal amount of at least $10,000,000 beyond any period of grace provided with respect thereto, or (ii) the Parent or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Debt in an aggregate outstanding principal amount of at least $10,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Debt has become, or has been declared (or one or more Persons are entitled to declare such Debt to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Debt to convert such Debt into equity interests), (x) the Parent or any Subsidiary has become obligated to purchase or repay Debt before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $10,000,000, or (y) one or more Persons have the right to require the Parent or any Subsidiary to purchase or repay such Debt; or (h) the Parent or any Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or 45 51 (i) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Parent or any Subsidiary, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Parent or any such Subsidiary, or any such petition shall be filed against the Parent or any such Subsidiary and such petition shall not be dismissed within 60 days; or (j) a final judgment or judgments for the payment of money aggregating in excess of $10,000,000 are rendered against one or more of the Parent and its Subsidiaries which judgments are not, within 60 days after entry thereof, bonded, paid, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or (k) the Parent Guarantee or any Subsidiary Guarantee shall cease to be in full force and effect as an enforceable instrument or the Parent or any Subsidiary Guarantor (or any Person at its authorized direction or on its behalf) shall assert in writing that the Parent Guarantee or the Subsidiary Guarantee of such Subsidiary Guarantor, as the case may be, is unenforceable in any material respect; or (l) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Parent or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $10,000,000, (iv) the Parent or any ERISA 46 52 Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or (v) the Parent or any ERISA Affiliate withdraws from any Multiemployer Plan; and any such event or events described in clauses (i) through (v) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect; or (m) the Company shall cease to be a Wholly-Owned Subsidiary of the Parent. As used in Section 11(l), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms in section 3 of ERISA. 12. REMEDIES ON DEFAULT, ETC. 12.1. ACCELERATION. (a) If an Event of Default with respect to the Parent or the Company described in paragraph (h) or (i) of Section 11 has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, the Required Holders may at any time at its or their option, by notice or notices to the Company, declare all the Notes at the time outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of 47 53 which are hereby waived. The Obligors acknowledge, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. 12.2. OTHER REMEDIES. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. 12.3. RESCISSION. At any time after any Notes have been declared due and payable pursuant to paragraph (b) or (c) of Section 12.1, the Required Holders, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount or premium, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount and premium, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than the non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 18, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 48 54 12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Obligors under Section 16, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including without limitation reasonable attorneys' fees, expenses and disbursements. 13. PARENT GUARANTEE. 13.1. GUARANTEE. (a) Guaranteed Obligations. The Parent hereby unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, (i) the punctual payment when due, whether at stated maturity, by prepayment, by acceleration or otherwise, of all obligations of the Company arising under this Agreement, the Other Agreements and the Notes, whether for principal, interest (including without limitation interest on any overdue principal, Make-Whole Amount and premium, if any, and interest at the rate specified in the Notes and interest accruing or becoming owing both prior to and subsequent to the commencement of any bankruptcy, reorganization or similar proceeding involving either Obligor), Make-Whole Amount and premium, if any, fees, expenses, indemnification or otherwise, and (ii) the due and punctual performance and observance by the Company of all covenants, agreements and conditions on its part to be performed and observed under this Agreement, the Other Agreements and the Notes. The obligations guaranteed by this Parent Guarantee are sometimes called the "GUARANTEED OBLIGATIONS". 49 55 Without limiting the generality of the foregoing, this Parent Guarantee guarantees, to the extent provided herein, the payment of all amounts which constitute part of the Guaranteed Obligations and would be owed by any other Person to any holder of a Note but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Person. (b) Guarantee Absolute. This Parent Guarantee constitutes a present and continuing guarantee of payment and not of collectibility and the Parent guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of this Agreement, the Other Agreements and the Notes, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any holder of a Note with respect thereto. The obligations of the Parent under this Parent Guarantee are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against the Parent to enforce this Parent Guarantee, irrespective of whether any action is brought against the Company or any other Person liable for the Guaranteed Obligations or whether the Company or any other such Person is joined in any such action or actions. The liability of the Parent under this Parent Guarantee shall be primary, absolute, irrevocable, and unconditional irrespective of: (i) any lack of validity or enforceability of any Guaranteed Obligation, this Agreement, the Other Agreements, the Notes, any Subsidiary Guarantee or any agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from this Agreement, the Other Agreements, the Notes, any Subsidiary Guarantee or this Parent Guarantee; (iii) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure by the Parent or other Person liable, or any other guarantee, for all or any of the Guaranteed Obligations; 50 56 (iv) any manner of application of collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral or any other assets of the Company or any other Subsidiary; (v) any change, restructuring or termination of the corporate structure or existence of the Company or any other Subsidiary; or (vi) any other circumstance (including without limitation any statute of limitations) that might otherwise constitute a defense, offset or counterclaim available to, or a discharge of, the Company or the Parent. This Parent Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any holder of a Note, or any other Person upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made. (c) Waivers by the Parent. The Parent hereby irrevocably waives, to the extent permitted by applicable law: (i) promptness, diligence, presentment, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Parent Guarantee; (ii) any requirement that any holder of a Note or any other Person protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against the Company or any other Person or any collateral; (iii) any defense, offset or counterclaim arising by reason of any claim or defense based upon any action by any holder of a Note; (iv) any duty on the part of any holder of a Note to disclose to the Parent any matter, fact or thing relating to the business, operation or condition of any Person and its assets now known or hereafter known by such holder; and (v) any rights by which it might be entitled to require suit on an accrued right of action in respect of any 51 57 of the Guaranteed Obligations or require suit against the Company or the Parent or any other Person. 13.2. SUBROGATION AND CONTRIBUTION The Parent shall not assert, enforce, or otherwise exercise (a) any right of subrogation to any of the rights, remedies, powers, privileges or liens of any holder of a Note or any other beneficiary against the Company or any other obligor on the Guaranteed Obligations or any collateral or other security, or (b) any right of recourse, reimbursement, contribution, indemnification, or similar right against the Company, and the Parent hereby waives any and all of the foregoing rights, remedies, powers, privileges and the benefit of, and any right to participate in, any collateral or other security given to any holder of a Note or any other beneficiary to secure payment of the Guaranteed Obligations, until such time as the Guaranteed Obligations have been paid in full. 13.3. CONTINUING GUARANTEE This Parent Guarantee is a continuing guarantee of payment and performance and shall (a) remain in full force and effect until payment in full of the Guaranteed Obligations and all other amounts payable under this Parent Guarantee, (b) be binding upon the Parent, its successors and assigns and (c) inure to the benefit of and be enforceable by any holder of a Note and its successors, transferees and assigns. 14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 14.1. REGISTRATION OF NOTES. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. 52 58 14.2. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), within five Business Days thereafter the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $500,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, such Note may be in a denomination of less than $500,000. You agree that the Company shall not be required to register the transfer of any Note to any Person (other than your nominee) or to any separate account maintained by you unless the Obligors receive from the transferee a representation to the Obligors (and appropriate information as to any separate accounts or other matters) to the same or similar effect with respect to the transferee as is contained in Section 6.2 or other assurances reasonably satisfactory to the Obligors that such transfer does not involve a prohibited transaction (as such term is used in Section 5.12(e). You shall not be liable for any damages in connection with any such representations or assurances provided to the Obligors by any transferee. 14.3. REPLACEMENT OF NOTES. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such 53 59 Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or any other Institutional Investor, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, within five Business Days thereafter the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. 15. PAYMENTS ON NOTES. 15.1. PLACE OF PAYMENT. Subject to Section 15.2, payments of principal, Make-Whole Amount and premium, if any, and interest becoming due and payable on the Notes shall be made at the principal office of Citibank, N.A. in New York City. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in New York City or the principal office of a bank or trust company in New York City. 15.2. HOME OFFICE PAYMENT. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 15.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount and premium, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably 54 60 promptly after any such request, to the Company at the principal executive office of the Parent or at the place of payment most recently designated by the Company pursuant to Section 15.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 14.2. The Company will afford the benefits of this Section 15.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 15.2. 16. EXPENSES, ETC. 16.1. TRANSACTION EXPENSES. Whether or not the transactions contemplated hereby are consummated, the Obligors jointly and severally agree to pay all reasonable costs and expenses (including reasonable attorneys' fees of your special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes or any Subsidiary Guarantee (whether or not such amendment, waiver or consent becomes effective), including without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes or any Subsidiary Guarantee, or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes or any Subsidiary Guarantee, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Parent, the Company or any other Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Obligors will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you). 55 61 In furtherance of the foregoing, on the date of the Closing the Obligors will pay or cause to be paid the reasonable fees and disbursements and other charges (including estimated unposted disbursements and other charges as of the date of the Closing) of your special counsel which are reflected in the statement of such special counsel submitted to either Obligor on or prior to the date of the Closing. The Obligors will also pay, promptly upon receipt of supplemental statements therefor, reasonable additional fees, if any, and disbursements and other charges of such special counsel in connection with the transactions hereby contemplated (including disbursements and other charges unposted as of the date of the Closing to the extent such disbursements and other charges exceed estimated amounts paid as aforesaid). 16.2. SURVIVAL. The obligations of the Obligors under this Section 16 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement. 17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of either Obligor pursuant to this Agreement shall be deemed representations and warranties of the Obligors under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Obligors and supersede all prior agreements and understandings relating to the subject matter hereof. 18. AMENDMENT AND WAIVER. 18.1. REQUIREMENTS. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived 56 62 (either retroactively or prospectively), with (and only with) the written consent of the Obligors and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 22, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or change the rate or the time of payment or method of computation of interest or of the Make-Whole Amount or premium, if any, on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 9.7, 11(a), 11(b), 12, 13, 18 or 21 and (c) no amendment of the third paragraph of Section 8.2 shall be effective without the written consent of the holders of all Parent Convertible Notes at the time outstanding. 18.2. SOLICITATION OF HOLDERS OF NOTES. (a) Solicitation. The Obligors will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Obligors will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 18 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) Payment. Neither of the Obligors will directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. 57 63 18.3. BINDING EFFECT, ETC. Any amendment or waiver consented to as provided in this Section 18 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Obligors without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Obligors and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "THIS AGREEMENT" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 18.4. NOTES HELD BY OBLIGORS, ETC. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company, the Parent or any of their respective Affiliates shall be deemed not to be outstanding. 19. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Obligors in writing, 58 64 (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Obligors in writing, (iii) if to the Company, to the Company at 4225 Naperville Road, Lisle, Illinois 60532, to the attention of Steven Worthley, or at such other address as the Company shall have specified to the holder of each Note in writing, or (iv) if to the Parent, to the Parent at 125 Basin Street, Suite 210, Daytona Beach, Florida 32114, to the attention of Steven Worthley, or at such other address as the Parent shall have specified to the holder of each Note in writing. Notices under this Section 19 will be deemed given only when actually received. 20. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. Each Obligor agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 20 shall not prohibit either Obligor or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 21. CONFIDENTIAL INFORMATION. For the purposes of this Section 21, "CONFIDENTIAL INFORMATION" means information delivered to you by or on behalf 59 65 of the Parent or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Parent or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Parent or any Subsidiary or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, officers, trustees, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors whose duties require them to hold confidential the Confidential Information substantially in accordance with the terms of this Section 21, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 21), (v) any Person from which you offer to purchase any security of the Parent (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 21), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the 60 66 rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 21 as though it were a party to this Agreement. On reasonable request by the Obligors in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Obligors embodying the provisions of this Section 21. 22. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Obligors, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 22), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Obligors of notice of such transfer, wherever the word "you" is used in this Agreement, such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. 23. MISCELLANEOUS. 23.1. SUCCESSORS AND ASSIGNS. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including without limitation any subsequent holder of a Note) whether so expressed or not. 23.2. CONSTRUCTION. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent 61 67 of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. 23.3. JURISDICTION AND PROCESS; WAIVER OF JURY TRIAL. (a) Each Obligor irrevocably submits to the non-exclusive in personam jurisdiction of any New York State or federal court sitting in the Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or relating to this Agreement or the Notes. To the fullest extent permitted by applicable law, each Obligor irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the in personam jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. (b) Each Obligor consents to process being served in any suit, action or proceeding of the nature referred to in Section 23.3(a) by mailing a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to such Obligor at its address specified in Section 19 or at such other address of which you shall then have been notified pursuant to said Section. Each Obligor agrees that such service upon receipt (i) shall be deemed in every respect effective service of process upon it in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by applicable law, be taken and held to be valid personal service upon and personal delivery to such Obligor. Notices hereunder shall be conclusively presumed received as evidenced by a delivery receipt furnished by the United States Postal Service or any reputable commercial delivery service. (c) Nothing in this Section 23.3 shall affect the right of any holder of a Note to serve process in any manner permitted by law, or limit any right that the holders of any of the Notes may have to bring proceedings against an Obligor in the courts of any appropriate jurisdiction or to enforce in any 62 68 lawful manner a judgment obtained in one jurisdiction in any other jurisdiction. (D) EACH PARTY HERETO WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE OTHER AGREEMENTS, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH. 23.4. INDEMNIFICATION. Each of the Obligors agrees, to the fullest extent permitted by applicable law, to indemnify, exonerate and hold you and each of your officers, directors, employees and agents (collectively the "INDEMNITEES" and individually an "INDEMNITEE") free and harmless from and against any and all actions, causes of action, suits, losses, liabilities and damages, and expenses in connection therewith, including without limitation reasonable counsel fees and disbursements (collectively the "INDEMNIFIED LIABILITIES") incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to, any transaction financed or to be financed in whole or in part directly or indirectly with proceeds from the sale of any of the Notes or the execution, delivery, performance or enforcement of this Agreement, any other Transaction Document or any instrument contemplated hereby by any of the Indemnitees, except as to any Indemnitee for any such Indemnified Liabilities arising on account of such Indemnitee's gross negligence or willful misconduct; and if and to the extent the foregoing undertaking may be unenforceable for any reason, each of the Obligors agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The obligations of each of the Obligors under this Section shall survive payment or conversion of the Notes. 23.5. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the Notes to the contrary notwithstanding (but without limiting the requirement in Section 8.2 that notice of any optional prepayment specify a Business Day as the date fixed for such prepayment), any payment of principal of or Make-Whole Amount or premium, if any, or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. 63 69 23.6. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the fullest extent permitted by applicable law) not invalidate or render unenforceable such provision in any other jurisdiction. 23.7. ACCOUNTING TERMS; PRO FORMA COMPUTATIONS. All accounting terms used herein which are not expressly defined in this Agreement have the meanings respectively given to them in accordance with GAAP. Except as otherwise specifically provided herein, all computations made pursuant to this Agreement shall be made in accordance with GAAP and all balance sheets and other financial statements with respect thereto shall be prepared in accordance with GAAP. Except as otherwise specifically provided herein, any consolidated financial statement or financial computation shall be done in accordance with GAAP. 23.8. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 23.9. GOVERNING LAW. This Agreement and the Notes shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. 64 70 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By /s/ Gary A. Poliner ------------------------ Title: 65 71 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By /s/ Kevin R. Lorenz ---------------------------------- Title: Director-Private Placements 65 72 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. NEW YORK LIFE INSURANCE COMPANY By /s/ [unreadable] ------------------------- Title: Investment Manager 65 73 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. NEW YORK LIFE INSURANCE COMPANY AND ANNUITY CORPORATION By /s/ [unreadable] ------------------------- Title: Investment Manager 65 74 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY By /s/ [unreadable] ------------------------ Title: Vice President 65 75 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. AMERICAN GENERAL LIFE AND ACCIDENT INSURANCE COMPANY By /s/ Julia S. Tucker ------------------------- Title: Investment Officer 65 76 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. THE VARIABLE ANNUITY LIFE INSURANCE COMPANY By /s/ Julia S. Tucker -------------------------- Title: Investement Officer 65 77 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. THE FRANKLIN LIFE INSURANCE COMPANY By /s/ Julia S. Tucker -------------------------- Title: Investment Officer 65 78 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By /s/ [unreadable] ------------------------ Title: Vice President 65 79 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. AMERICAN LIFE AND CASUALTY INSURANCE COMPANY By /s/ [unreadable] ------------------------ Title: AVP 65 80 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. WESTERN MUTUAL LIFE INSURANCE COMPANY By /s/ [unreadable] ------------------------ Title: AVP 65 81 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. BENEFICIAL STANDARD LIFE INSURANCE COMPANY By /s/ [unreadable] ------------------------ Title: AVP 65 82 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By Lincoln Investment Management, Inc., Its Attorney-In-Fact By /s/ David C. Patch ------------------------ Title: Vice President 83 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. FIRST PENN-PACIFIC LIFE INSURANCE COMPANY By Lincoln Investment Management, Inc., Its Attorney-In-Fact By /s/ David C. Patch ------------------------ Title: Vice President 84 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. THE LINCOLN NATIONAL HEALTH & CASUALTY INSURANCE COMPANY By Lincoln Investment Management, Inc., Its Attorney-In-Fact By /s/ David C. Patch ------------------------ Title: Vice President 85 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. THE TRAVELERS INSURANCE COMPANY By /s/ Pamela Westmoreland ----------------------------------- Title: Assistant Investment Officer 86 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By /s/ John B. Joyce ------------------------ Title: Managing Director 87 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. THE AETNA CASUALTY AND SURETY COMPANY By /s/ Jordan M. Stitzer ------------------------ Title: Vice President 88 If you are in agreement with the foregoing, please sign the form of agreement in the space below provided on a counterpart of this Agreement and return it to the Parent, whereupon the foregoing shall become a binding agreement between you and the Parent. On or before the date of the Closing the Parent will cause the Company to execute counterparts of this Agreement, whereupon the foregoing shall also become a binding agreement between you and the Company. Very truly yours, TEAM RENTAL GROUP, INC. By /s/ [unreadable] ------------------------------------ Title: President BUDGET RENT A CAR CORPORATION By /s/ Stephen G. Worthley ----------------------------------- Title: Vice President & Treasurer The foregoing is hereby agreed to as of the date first above written. METROPOLITAN LIFE INSURANCE By /s/ [unreadable] ------------------------------- Title: Assistant Vice President 89 SCHEDULE A This Schedule A shows the names and addresses of the Purchasers under the foregoing Senior Note Purchase Agreement and the Other Agreements referred to therein and the respective principal amounts of Notes to be purchased by each.
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- NEW YORK LIFE INSURANCE COMPANY $20,000,000 (1) All payments on account of the Notes shall be made by wire or intrabank transfer of immediately available funds prior to 12:00 noon (New York time) on the due date to Morgan Guaranty Trust Company of New York, New York, NY 10015, ABA No. 021-000-238, for credit to the account of New York Life Insurance Company, General Account No. 810-00-000 with sufficient information (including issuer, interest rate, maturity, PPN and whether payment is of principal, premium or interest) to identify the source and application of such funds. (2) Address for advice of any unscheduled or optional payments: New York Life Insurance Company 51 Madison Avenue New York, NY 10010-1603 Attention: Treasury Department, Securities Income Section, Room 209 Telecopy No.: (212) 576-4296 (3) Address for all other communications: New York Life Insurance Company 51 Madison Avenue New York, NY 10010-1603 Attention: Investment Department, Private Finance Group, Room 206 Telecopy No.: (212) 447-4122 with a copy of any notice of Default or Event of Default to: New York Life Insurance Company 51 Madison Avenue New York, NY 10010-1603 Attention: Office of the General Counsel, Investment Section, Room 1104 Telecopy No.: (212) 576-8340 (4) Tax Identification Number: 13-5582869
90
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- NEW YORK LIFE INSURANCE AND ANNUITY $10,000,000 CORPORATION (1) All payments on account of the Notes shall be made by wire or intrabank transfer of immediately available funds prior to 12:00 noon (New York time) on the due date to Chase Manhattan Bank, New York, New York, ABA No. 021-000-021, for credit to the account of New York Life Insurance and Annuity Corporation General Account No. 008-0-57001, with sufficient information (including issuer, interest rate, maturity, PPN and whether payment is of principal, premium or interest) to identify the source and application of such funds. (2) Address for advice of any unscheduled or optional payments: New York Life Insurance and Annuity Corporation c/o New York Life Insurance Company 51 Madison Avenue New York, NY 10010-1603 Attention: Treasury Department, Securities Income Section, Room 209 Telecopy No.: (212) 447-4160 (3) Address for all other communications: New York Life Insurance and Annuity Corporation c/o New York Life Insurance Company 51 Madison Avenue New York, NY 10010-1603 Attention: Investment Department, Private Finance Group, Room 206 Telecopy No.: (212) 447-4122 (4) Tax Identification Number: 13-3044743
A-2 91
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- TEACHERS INSURANCE AND ANNUITY ASSOCIATION $30,000,000 OF AMERICA (1) All payments on account of the Notes shall be made in immediately available funds prior to 12:00 noon (New York time) on the due date by electronic funds transfer through the Automated Clearing House System (identifying each payment as "Budget Group, Inc., PPN 119008A*1, 9.57% Guaranteed Senior Notes due 2007 (principal or interest or premium)") to: The Chase Manhattan Bank ABA No. 021-000-021 New York, New York Account of: Teachers Insurance and Annuity Association of America Account Number: 910-2-766475 On Order of: Budget Group, Inc. (2) Contemporaneous with the above electronic funds transfer payment, written confirmation of each such payment setting forth: (a) the full name, private placement number, interest rate and maturity date of the Notes; (b) allocation of payment between principal, interest, premium and any special payment; and (c) the name and address of the bank from which such electronic funds transfer was sent shall be delivered, mailed or faxed to: Teachers Insurance and Annuity Association of America 730 Third Avenue New York, NY 10017 Attention: Securities Accounting Division Telephone Number: (212) 916-6004 Facsimile Number: (212) 916-6955
A-3 92 (3) All other communications shall be delivered or mailed to: Teachers Insurance and Annuity Association of America 730 Third Avenue New York, NY 10017 Attention: Securities Division, Private Placements Kevin Lorenz Telephone Number: (212) 916-4337 General Telephone Number: (212) 490-9000 Facsimile Number: (212) 916-6581 (4) Taxpayer I.D. Number: 13-1624203 A-4 93
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- THE NORTHWESTERN MUTUAL LIFE $22,500,000 INSURANCE COMPANY (1) All payments on account of the Notes shall be made by wire transfer of immediately available funds to the account of The Northwestern Mutual Life Insurance Company, at Account No. 00-000-027 at Bankers Trust Company, 16 Wall Street, Insurance Unit - 4th Floor, New York, NY 10005, ABA #021-001-033 with sufficient information to identify the source and application of such funds including the PPN: 119008A*1 for the Notes. (2) Address for all notices in respect of payments: 720 East Wisconsin Avenue Milwaukee, WI 53202 Attention: Investment Operations Fax: 414-299-5714 (3) Address for all other communications: 720 East Wisconsin Avenue Milwaukee, WI 53202 Attention: Securities Department Fax: 414-299-7124 (4) Tax Identification No.: 39-0509570
A-5 94
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- JOHN HANCOCK MUTUAL LIFE INSURANCE $8,500,000 COMPANY 5,000,000 (1) All payments on account of the Series B Notes or other obligations in accordance with the provisions thereof shall be made by bank wire transfer of immediately available funds for credit not later than 12 noon, Boston time, to: The First National Bank of Boston, ABA No. 011000390 Boston, MA 02110 Account of: John Hancock Mutual Life Insurance Company Private Placement Collection Account Account Number: 541-55417 On Order of: Budget Rent a Car Corporation PPN: 119008A*1 (2) Contemporaneous with the above wire transfer, advice setting forth: (a) the full name, interest rate and maturity date of the Notes or other obligations, (b) allocation of payment between principal and interest and any special payment, and (c) name and address of the bank (or trustee) from which such wire transfer was sent shall be delivered or mailed to: John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, MA 02117 Attention: Securities Accounting Division T-10
A-6 95 (3) All notices with respect to prepayments, both scheduled and unscheduled, whether partial or in full, and notice of maturity shall be delivered or mailed to: John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, MA 02117 Attention: Securities Accounting Division T-10 (4) All other communications which shall include, but not be limited to, financial statements and certificates of compliance with financial covenants, shall be delivered or mailed to: John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, MA 02117 Attention: Bond and Corporate Finance Department T-57 (5) A copy of foregoing notices relating to change in issuer's name, address or principal place of business or location of collateral and a copy of any legal opinions shall be delivered or mailed to: John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, MA 02117 Attention: Investment Law Division, T-50 (6) Tax Identification No.: 041414660 A-7 96
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- JOHN HANCOCK VARIABLE LIFE INSURANCE $1,500,000 COMPANY (1) All payments on account of the Series B Notes or other obligations in accordance with the provisions thereof shall be made by bank wire transfer of immediately available funds for credit not later than 12 noon, Boston time, to: The First National Bank of Boston, ABA No. 011000390 Boston, MA 02110 Account of: John Hancock Mutual Life Insurance Company Private Placement Collection Account Account Number: 541-55417 On Order of: Budget Rent a Car Corporation PPN: 119008A*1 (2) Contemporaneous with the above wire transfer, advice setting forth: (a) the full name, interest rate and maturity date of the Notes or other obligations, (b) allocation of payment between principal and interest and any special payment, and (c) name and address of the bank (or trustee) from which such wire transfer was sent shall be delivered or mailed to: John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, MA 02117 Attention: Securities Accounting Division T-10
A-8 97 (3) All notices with respect to prepayments, both scheduled and unscheduled, whether partial or in full, and notice of maturity shall be delivered or mailed to: John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, MA 02117 Attention: Securities Accounting Division T-10 (4) All other communications which shall include, but not be limited to, financial statements and certificates of compliance with financial covenants, shall be delivered or mailed to: John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, MA 02117 Attention: Bond and Corporate Finance Department T-57 (5) A copy of foregoing notices relating to change in issuer's name, address or principal place of business or location of collateral and a copy of any legal opinions shall be delivered or mailed to: John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, MA 02117 Attention: Investment Law Division, T-50 (6) Tax Identification No.: 04-2664016 A-9 98
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- AMERICAN GENERAL LIFE AND ACCIDENT $5,000,000 INSURANCE COMPANY (1) All payments by wire transfer of immediately available funds, with sufficient information (including PPN 119008A*1, interest rate, maturity date, interest amount, principal amount and premium amount, if applicable) to identify the source and application of such funds, to: ABA#011000028 State Street Bank and Trust Company Boston, MA 02101 Re: American General Life and Accident Insurance Company AC-0125-934-0 OBI = 119008A*1 and description of payment Fund Number PA 10 (2) All notices of payments and written confirmations of such wire transfers, to: American General Life and Accident Insurance Company and PA 10 c/o State Street Bank and Trust Company Insurance Services Custody (AH2) 1776 Heritage Drive North Quincy, MA 02171 Facsimile Number: (617) 985-4923
A-10 99 (3) All communications (including payment notices), to: American General Life and Accident Insurance Company c/o American General Corporation Attn: Investment Research Department, A37-01 P.O. Box 3247 Houston, TX 77253-3247 Overnight Mail Address: 2929 Allen Parkway Houston, TX 77019-2155 Facsimile Number: (713) 831-1366 (4) Tax I.D. Number: 62-0306330 A-11 100
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- THE VARIABLE ANNUITY LIFE INSURANCE $5,000,000 COMPANY (1) All payments by wire transfer of immediately available funds, with sufficient information (including PPN 119008A*1, interest rate, maturity date, interest amount, principal amount and premium amount, if applicable) to identify the source and application of such funds, to: ABA#011000028 State Street Bank and Trust Company Boston, MA 02101 Re: The Variable Annuity Life Insurance Company AC-0125-821-9 OBI = 119008A*1 and description of payment Fund Number PA 54 (2) All notices of payments and written confirmations of such wire transfers, to: The Variable Annuity Life Insurance Company and PA 54 c/o State Street Bank and Trust Company Insurance Services Custody (AH2) 1776 Heritage Drive North Quincy, MA 02171 Facsimile Number: (617) 985-4923
A-12 101 (3) All communications (including payment notices), to: The Variable Annuity Life Insurance Company c/o American General Corporation Attn: Investment Research Department, A37-01 P.O. Box 3247 Houston, TX 77253-3247 Overnight Mail Address: 2929 Allen Parkway Houston, TX 77019-2155 Facsimile Number: (713) 831-1366 (4) Tax I.D. Number: 74-1625348 A-13 102
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- THE FRANKLIN LIFE INSURANCE COMPANY $5,000,000 (1) All payments by wire transfer of immediately available funds, with sufficient information (including PPN 119008A*1, interest rate, maturity date, interest amount, principal amount and premium amount, if applicable) to identify the source and application of such funds, to: ABA#011000028 State Street Bank and Trust Company Boston, MA 02101 Re: The Franklin Life Insurance Company AC-2492-440-9 OBI = 119008A*1 and description of payment Fund Number PA 37 (2) All notices of payments and written confirmations of such wire transfers, to: The Franklin Life Insurance Company and PA 37 c/o State Street Bank and Trust Company Insurance Services Custody (AH2) 1776 Heritage Drive North Quincy, MA 02171 Facsimile Number: (617) 985-4923 (3) All communications (including payment notices), to: The Franklin Life Insurance Company c/o American General Corporation Attn: Investment Research Department, A37-01 P.O. Box 3247 Houston, TX 77253-3247
A-14 103 Overnight Mail Address: 2929 Allen Parkway Houston, TX 77019-2155 Facsimile Number: (713) 831-1366 (4) Tax I.D. Number: 37-0281650 A-15 104
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- AMERICAN LIFE AND CASUALTY INSURANCE COMPANY $5,000,000 (1) All payments by wire transfer of immediately available funds to: Bankers Trust Company New York, NY ABA #: 021-001-033 DDA #: 00314421 Account #: 99911145 FFC: American Life & Casualty Insurance Company, Account #: 99810 with sufficient information to identify the source and application of such funds, including the PPN: 119008A*1 of the Notes. (2) Address for delivery of securities: Bankers Trust Company 16 Wall Street Fourth Floor, Window 62 Account #: 99911145 FFC: American Life & Casualty Insurance Company, Account #: 99810 (3) Address for all notices: Conseco Capital Management, Inc. c/o American Life & Casualty Insurance Company P.O. Box 1925 Carmel, IN 46032 Attn: Account Documentation Dept. with a copy to: Conseco, Inc. c/o American Life & Casualty Insurance Company P.O. Box 1911 Carmel, IN 46032 Attn: Investment Accounting (4) Tax Identification No.: 45-0103436
A-16 105
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- BENEFICIAL STANDARD LIFE INSURANCE COMPANY $5,000,000 (1) All payments by wire transfer of immediately available funds to: Bankers Trust Company New York, NY ABA #: 021-001-033 DDA #: 00220919 Account #: 99911145 FFC: Beneficial Standard Life Insurance Company, Account #: 99820 with sufficient information to identify the source and application of such funds, including the PPN: 119008A*1 of the Notes. (2) Address for delivery of securities: Bankers Trust Company 16 Wall Street Fourth Floor, Window 62 Account #: 99911145 FFC: Beneficial Standard Life Insurance Company, Account #: 99820 (3) Address for all notices: Conseco Capital Management, Inc. c/o Beneficial Standard Life Insurance Company P.O. Box 1925 Carmel, IN 46032 Attn: Account Documentation Dept. with a copy to: Conseco, Inc. c/o Beneficial Standard Life Insurance Company P.O. Box 1911 Carmel, IN 46032 Attn: Investment Accounting (4) Tax Identification No.: 95-0540891
A-17 106
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- WESTERN NATIONAL LIFE INSURANCE COMPANY $5,000,000 (1) All payments by wire transfer of immediately available funds to: State Street ABA #: 011-000-028 DDA #: 00220919 Account #: 7215-132-7 FFC: Alert # 15 Western National Life, Account #: WE1B with sufficient information to identify the source and application of such funds, including the PPN: 119008A*1 of the Notes. (2) Address for delivery of securities: Chase Bank Acct: State Street Bank & Trust Company 4 New York Plaza Ground Floor/Receive Window New York, NY 10004 Attn: WE1B (3) Address for all notices: Conseco Capital Management, Inc. c/o Alert # 15 Western National Life P.O. Box 1925 Carmel, IN 46032 Attn: Account Documentation Dept. with a copy to: Conseco, Inc. c/o Alert # 15 Western National Life P.O. Box 1911 Carmel, IN 46032 Attn: Investment Accounting and
A-18 107 Western National Life c/o Alert # 15 Western National Life 555 San Felipe, Suite 900 Houston, TX 77056 Attn: Betsy Taylor (4) Tax Identification No.: 75-0770838 A-19 108
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- THE LINCOLN NATIONAL LIFE INSURANCE $7,350,000 COMPANY (1) All payments by wire transfer of immediately available funds to: Bankers Trust Company New York, New York ABA #021001033 Private Placement Processing Account No.: 99-911-145 For the Accounts of: - The Lincoln National Life Insurance Company (UIN) Custody Account No. 98127 - Note in original principal amount of $1,650,000 - The Lincoln National Life Insurance Company (IOB) Custody Account No. 98201 - Note in original principal amount of $800,000 - The Lincoln National Life Insurance Company (IAL) Custody Account No. 98194 - Note in original principal amount of $2,300,000 - The Lincoln National Life Insurance Company (IAD) Custody Account No. 98195 - Note in original principal amount of $800,000 - The Lincoln National Life Insurance Company (GAI) Custody Account No. 98208 - Note in original principal amount of $1,800,000 with sufficient information to identify the source and application of such funds, including the PPN: 119008A*1 of the Notes.
A-20 109 (2) Address for delivery of securities: Bankers Trust Company 14 Wall Street, 4th Floor, Window #44 New York, NY 10005 Attn: Lorraine Squires, Mail Stop 4049 (3) Address for all notices in respect of payment: Bankers Trust Company Attn: Private Placement Unit P.O. Box 998, Bowling Green Station New York, NY 10274 (4) Address for all other communications: Lincoln Investment Management, Inc. 200 East Berry Street Renaissance Square Fort Wayne, IN 46802 Attn: Investments/Private Placements (5) Tax Identification No.: 35-0472300 A-21 110
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- FIRST PENN-PACIFIC LIFE INSURANCE COMPANY $1,650,000 (I/N/O CUDD & CO) (1) All payments by wire transfer of immediately available funds to: The Chase Manhattan Bank N.A. New York, NY ABA #: 021 00 0021 Chase NYC/CTR/BNF A/C #900-9-000200 For the Account of: First Penn-Pacific Life Insurance Company with sufficient information to identify the source and application of such funds, including the PPN: 119008A*1 of the Notes. (2) Address for delivery of securities: The Chase Manhattan Bank 4 New York Plaza Ground Floor Window New York, NY 10004 For Acct: G05996 First Penn-Pacific Life Insurance Company Attn: Larry Zimmer (3) Address for all notices in respect of payment and all other communications: Lincoln Investment Management, Inc. 200 East Berry Street Renaissance Square Fort Wayne, IN 46802 Attn: Investments/Private Placements (4) Tax Identification No.: 23-2044248
A-22 111
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- LINCOLN NATIONAL HEALTH & CASUALTY $1,000,000 INSURANCE COMPANY (1) All payments by wire transfer of immediately available funds to: The Chase Manhattan Bank N.A. New York, NY ABA #: 021 00 0021 Chase NYC/CTR/BNF A/C #900-9-000200 For the Account of: Lincoln Natl Health & Casualty Ins Company Custody Account No. G06323 with sufficient information to identify the source and application of such funds, including the PPN: 119008A*1 of the Notes. (2) Address for delivery of securities: The Chase Manhattan Bank 4 New York Plaza Ground Floor Window New York, NY 10004 For Acct: G06323 Lincoln Natl Health & Casualty Ins Co Attn: Larry Zimmer (3) Address for all notices in respect of payment and all other communications: Lincoln Investment Management, Inc. 200 East Berry Street Renaissance Square Fort Wayne, IN 46802 Attn: Investments/Private Placements (4) Tax Identification No.: 35-1495207
A-23 112
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- MASSACHUSETTS MUTUAL LIFE INSURANCE $8,750,000 COMPANY (1) All payments on account of the Notes shall be made by crediting in the form of bank wire transfer of Federal or other immediately available funds (identifying each payment as Budget Rent a Car Corporation, 9.57% Guaranteed Senior Notes due 2007, interest and principal) to: Citibank, N.A. 111 Wall Street New York, NY 10043 ABA No. 021000089 For MassMutual Long Term Pool Account No. 4067-3488 Each with telephone advice of payment to the Securities Custody and Collection Department of Massachusetts Mutual Life Insurance Company at (413) 744-3878 (2) All notices and communications to be addressed to: Massachusetts Mutual Life Insurance Company 1295 State Street Springfield, MA 01111 Attn: Securities Investment Division (3) Notices with respect to payments and corporate actions to be addressed as provided in clause (2) above: Attention: Securities Custody and Collection Department F 381 (4) Tax Identification Number: 04-1590850
A-24 113
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- THE TRAVELERS INSURANCE COMPANY $6,250,000 (I/N/O TRAL & CO.) (1) All payments on account of the Notes shall be made by wire transfer of federal or other immediately available funds prior to 12:00 noon (New York time) on the due date to The Travelers Insurance Company--Consolidated Private Placement Account No. 910-2-587434 at The Chase Manhattan Bank, One Chase Plaza, New York, New York 10081, ABA# 021-000021, with sufficient information (including interest rate and maturity) to identify the source and application of such funds, including the PPN: 119008A*1 of the Notes. (2) Address for all notices in respect of payment: One Tower Square Hartford, CT 06183-2030 Attn: Securities Department- Cashier (3) Address for all other communications: One Tower Square Hartford, CT 06183-2030 Attention: Securities Department- Private Placements Telecopy: (203) 954-5243 (4) Tax Identification No.: 06-0566090
A-25 114
Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- THE AETNA CASUALTY AND SURETY COMPANY $5,000,000 (I/N/O TRAL & CO.) (1) All payments on account of the Notes shall be made by wire transfer of federal or other immediately available funds prior to 12:00 noon (New York time) on the due date to The Travelers Insurance Company--Consolidated Private Placement Account No. 910-2-587434 at The Chase Manhattan Bank, One Chase Plaza, New York, New York 10081, ABA# 021-000021, with sufficient information (including interest rate and maturity) to identify the source and application of such funds, including the PPN: 119008A*1 of the Notes. (2) Address for all notices in respect of payment: The Aetna Casualty and Surety Company One Tower Square Hartford, CT 06183-2030 Attn: Securities Department- Cashier - 10PB (3) Address for all other communications: The Aetna Casualty and Surety Company One Tower Square Hartford, CT 06183-2030 Attention: Securities Department- Private Placements-9PB Telecopy: (203) 954-5243 (4) Tax Identification No.: 06-6033504
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Name and Address of Purchaser Principal Amount - ----------------------------- ---------------- METROPOLITAN LIFE INSURANCE COMPANY $7,500,000 (1) All payments on account of the Notes shall be made by wire transfer of Federal or other immediately available funds to its Account No. 002-2-410591 at The Chase Manhattan Bank, Metropolitan Branch, 33 East 23rd Street, New York, NY 10010, ABA #021000021, with sufficient information setting forth (i) the name of the Company, (ii) the maturity date, (iii) the PPN: 119008A*1 of the Notes, (iv) the amount of principal, interest and premium, if any, and (v) the due date of the payment being made. (2) Address for all notices: Metropolitan Life Insurance Company 334 Madison Avenue P.O. Box 633 Convent Station, NJ 07961-0633 Attn: Vice President-Private Placement Unit Telecopy: (201) 254-3050 (3) Tax Identification Number: 13-5581829
A-27 116 SCHEDULE B DEFINED TERMS As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: "ACQUISITION" is defined in Section 1.3. "ADJUSTED EBIT" for any period means Consolidated Net Income plus all amounts deducted in the computation thereof on account of (a) Consolidated Non-Vehicle Interest Charges and (b) income taxes. "ADJUSTED EBITDA" for any period means Adjusted EBIT plus all amounts deducted in the computation of Consolidated Net Income for such period on account of depreciation and amortization expenses not relating to Vehicles. "AFFILIATE" means, at any time, (a) with respect to any Person, any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) with respect to the Parent, any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Parent or any Subsidiary or any corporation of which the Parent and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Parent. "ATTRIBUTABLE DEBT" means, as to any particular lease relating to a sale and leaseback transaction, the total amount of rent (discounted semiannually from the respective due dates thereof at the interest rate implicit in such lease) required to be paid by the lessee under such lease during the remaining term thereof. The amount of rent required to be paid under any such lease for any such period shall be (a) the total amount of the rent payable by the lessee with respect to such period after excluding amounts required to be paid on account of maintenance Schedule B 117 -2- and repairs, insurance, taxes, assessments, utilities, operating and labor costs and similar charges plus (b) without duplication, any guaranteed residual value in respect of such lease to the extent such guarantee would be included in indebtedness in accordance with GAAP. "BASE INDENTURE" is defined in the Revolving Credit Facility as in effect on the date of the Closing. "BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed. "CAPITAL LEASE" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "CAPITALIZED LEASE OBLIGATIONS" means with respect to any Person, all outstanding obligations of such Person in respect of Capital Leases, taken at the capitalized amount thereof accounted for as a liability in accordance with GAAP. "CHANGE OF CONTROL" means such time as (i) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), excluding any "person" or "group" of which Sanford Miller, John D. Kennedy or Jeffrey D. Congdon, or their controlled Affiliates, are a substantial part (and for such purpose Messrs. Miller, Kennedy and Congdon, and their controlled Affiliates, shall not be deemed to be a substantial part of such person or group unless in the aggregate they own beneficially at least 15% of the total then outstanding voting power of the Voting Stock of the Parent), (A) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total then outstanding voting power of the Voting Stock of the Parent or (B) has the right or the ability by voting right, contract or otherwise to elect or designate for election a majority of the entire board of directors of the Parent; (ii) (A) the Parent consolidates with or merges into any other Person or conveys, transfers, sells or leases all or substantially all of its assets as an entirety to any Person or (B) any Person merges into the Parent, in either event pursuant to a transaction in which Voting Stock of the Schedule B 118 -3- Parent representing more than 50% of the total voting power of the Parent outstanding immediately prior to the effectiveness thereof is reclassified or changed into or exchanged for cash, securities or other property; provided that any consolidation, merger, conveyance, transfer, sale or lease between the Parent and any of its Subsidiaries (including without limitation the reincorporation of the Parent in another jurisdiction) shall be excluded from the operation of this clause (ii); (iii) during any period of two consecutive years, (A) individuals who at the beginning of such period constituted the board of directors of the Parent (together with any new directors whose election by such board of directors, or whose nomination for election by the shareholders of the Parent, as the case may be, was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors of the Parent then in office, and (B) Sanford Miller, John D. Kennedy or Jeffrey D. Congdon, or their controlled Affiliates, cease to beneficially own at least 15% of the outstanding voting power of the Voting Stock of the Parent; or (iv) a "Change of Control" under the Convertible Note Agreements or the Revolving Credit Facility shall have occurred. Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred by virtue of the Parent's or any of its employee benefit or stock plan's filing (or being required to file after the lapse of time) a Schedule 13D or 14D-1 (or any successor or similar schedule, form or report under the Exchange Act) as a result of the Parent or any such plan becoming the beneficial owner of shares of capital stock of the Parent entitling such person to exercise a majority of the total voting power of the Voting Stock of the Parent. "CLASS A SHARES" means the Class A Common Stock, $.01 par value per share, of the Parent. "CLOSING" is defined in Section 3. Schedule B 119 -4- "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "COMPANY" means Budget Rent a Car Corporation, a Delaware corporation. "CONFIDENTIAL INFORMATION" is defined in Section 21. "CONSOLIDATED ADJUSTED ASSETS" means, at any date, Consolidated Assets minus assets of the Parent and its Subsidiaries that secure Vehicle Debt (including without limitation cash, short-term investments and receivables relating to Vehicle Debt), and assets that secure the Revolving Credit Facility (including without limitation all assets of the type that could secure the Revolving Credit Facility whether or not actually securing the Revolving Credit Facility on such date). "CONSOLIDATED ASSETS" means, at any date, the total assets of the Parent and its Subsidiaries which would be shown as assets on a consolidated balance sheet of the Parent and its Subsidiaries as of such date prepared in accordance with GAAP, after eliminating all amounts properly attributed to Vehicles and to minority interests, if any, in the stock and surplus of Subsidiaries. "CONSOLIDATED NET INCOME" for any period means the net income (or loss) of the Parent and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, excluding (a) the proceeds of any life insurance policy, (b) any gains arising during such period from (i) the sale or other disposition of any assets (other than current assets), (ii) any write-up of assets, (iii) the acquisition of outstanding securities of the Parent or any Subsidiary, or (iv) any other extraordinary item, (c) any amount representing any interest in the undistributed earnings of any other Person (other than a Subsidiary), (d) any earnings, prior to the date of acquisition, of any Person acquired in any manner, and any earnings of any Subsidiary prior to its becoming a Subsidiary, Schedule B 120 -5- (e) any earnings of a successor to or transferee of the assets of the Parent or a Subsidiary prior to its becoming such successor or transferee, (f) any deferred credit (or amortization of a deferred credit) arising from the acquisition of any Person, and (g) any losses during such period from any sales, dispositions, write-downs, acquisitions or extraordinary items of the types described in clause (b) above (but only to the extent of any gains of such types during such period). "CONSOLIDATED NON-VEHICLE DEBT" means, at any date, all Non-Vehicle Debt of the Parent and its Subsidiaries determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED NON-VEHICLE INTEREST CHARGES" means for any period the sum for the Parent and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, of all amounts on account of interest on Non-Vehicle Debt which would be deducted in computing Consolidated Net Income or capitalized (including imputed interest in respect of Capitalized Lease Obligations and amortization of Debt discount and expense). "CONSOLIDATED SHAREHOLDERS' EQUITY" means the total shareholders' equity of the Parent and its Subsidiaries as determined on a consolidated basis in accordance with GAAP minus (a) any amounts included in shareholders' equity attributable to treasury stock, capital stock subscribed for and unissued and other contra-equity accounts and (b) minority interests, if any, in the stock and surplus of Subsidiaries. "CONSOLIDATED VEHICLE DEBT" means, at any date, all Vehicle Debt of the Parent and its Subsidiaries determined on a consolidated basis in accordance with GAAP. "CONVERTIBLE NOTE AGREEMENTS" means collectively the Series A Note Purchase Agreements and the Series B Note Purchase Agreements and, after an indenture has been executed and delivered by the Parent pursuant to the Series A Note Purchase Agreements and the Series B Note Purchase Agreements, such term shall then include such indenture as supplemented and amended from time to time. "DEBT" with respect to any Person means, at any time, without duplication, Schedule B 121 -6- (a) its liabilities for borrowed money or its mandatory purchase, redemption or other retirement obligations in respect of mandatorily redeemable Preferred Stock, (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business and not overdue but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property), (c) its Capitalized Lease Obligations, (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities), (e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money), (f) Swaps of such Person, and (g) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) above. Debt of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "DEFAULT" means an event or condition the occurrence or existence of which would, with the giving of notice or the lapse of time, or both, become an Event of Default. "DEFAULT RATE" means that rate of interest that is the greater of (i) 11.57% per annum and (ii) 2% above the rate of interest publicly announced by Citibank, N.A. from time to time at its principal office in New York City as its prime rate. Schedule B 122 -7- "ENVIRONMENTAL LAWS" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) that is treated as a single employer together with the Parent (both before and after giving effect to the Acquisition) under section 414 of the Code. "EVENT OF DEFAULT" is defined in Section 11. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time. "EXCHANGE PARENT CONVERTIBLE NOTES" means the Exchange Notes as defined in the Convertible Note Agreements. "FORD" is defined in Section 1.3. "GAAP" means generally accepted accounting principles as in effect from time to time. "GOVERNMENTAL AUTHORITY" means (a) the government of (i) the United States of America or any State or any other political subdivision of any thereof, or (ii) any jurisdiction in which the Parent or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Parent or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. Schedule B 123 -8- "GUARANTY" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Debt, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including without limitation obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Debt or obligation or any property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such Debt or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Debt or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Debt or obligation of the ability of any other Person to make payment of the Debt or obligation; or (d) otherwise to assure the owner of such Debt or obligation against loss in respect thereof. In any computation of the Debt or other liabilities of the obligor under any Guaranty, the Debt or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including without limitation asbestos, urea formaldehyde foam insulation and polycholorinated biphenyls). "HOLDER" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 14.1. Schedule B 124 -9- "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note, (b) any holder of a Note holding (together with one or more of its Affiliates) more than $1,000,000 aggregate principal amount of the Notes then outstanding, or (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "LIEN" means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). "LIQUIDITY FACILITY" means the Liquidity Agreement dated as of April 29, 1997 between Budget Funding Corporation, a special purpose, bankruptcy remote Delaware corporation and a Wholly-Owned Subsidiary of the Company, and Credit Suisse First Boston, as Administrative Agent, and the other lenders named therein, as supplemented and amended from time to time. "MAKE-WHOLE AMOUNT" is defined in Section 8.7. "MATERIAL" means material in relation to the business, operations, affairs, financial condition, assets, properties or prospects of the Parent and its Subsidiaries taken as a whole. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Parent and its Subsidiaries taken as a whole after giving effect to the Acquisition and the Transactions, (b) the ability of the Company to perform its obligations under this Agreement and the Notes or the ability of the Parent to perform its obligations under this Agreement or (c) the validity or enforceability of this Agreement, the Notes, the Parent Guarantee or any Subsidiary Guarantee. "MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). Schedule B 125 -10- "NON-VEHICLE DEBT" means with respect to any Person all Debt of such Person other than Vehicle Debt (but in any event shall include all Debt of such Person in respect of letters of credit or other instruments relating to the issuance of Vehicle Debt); provided that Non-Vehicle Debt shall also include the following obligations (to the extent the same would otherwise be included as Vehicle Debt): the sum of (a) with respect to each Vehicle owned by TFFC or any other SPC and leased to the Company or any Subsidiary of the Company, the amount by which all obligations of the Company or such Subsidiary with respect to such Vehicle, when added to all rental payments previously made by the Company or such Subsidiary and the next regularly scheduled rental payment to be made by the Company or such Subsidiary with respect to such Vehicle, exceeds the aggregate Depreciation Charges (as defined in the Base Indenture) with respect to such Vehicle plus any fair market value adjustment with respect to such Vehicle provided for in the documents relating to the lease of such Vehicle plus (b) with respect to each Vehicle owned by the Company or any Subsidiary of the Company (other than TFFC or another SPC), the amount by which all obligations of the Company or said Subsidiary with respect to such Vehicle exceeds the amount by which (i) the aggregate Capitalized Cost (as defined in the Base Indenture) of such Vehicle exceeds (ii) the aggregate Depreciation Charges (as so defined) accrued with respect to such Vehicle plus any fair market value adjustment with respect to such Vehicle provided for the documents relating to the financing arrangements applicable to such Vehicle. "NON-VEHICLE LEVERAGE RATIO" means as of any date the ratio of (i) Consolidated Non-Vehicle Debt as of such date to (ii) Adjusted EBITDA for the period of four consecutive fiscal quarters ending on or immediately prior to such date. "NOTES" is defined in Section 1.1. "OBLIGORS" is defined in the first paragraph of this Agreement. "OFFICER'S CERTIFICATE" means a certificate of a Senior Financial Officer of an Obligor or of any other officer of an Obligor whose responsibilities extend to the subject matter of such certificate. Schedule B 126 -11- "ORDER" means any written order, writ, injunction, decree, judgment, award, penalty, determination, direction or demand. "OTHER AGREEMENTS" is defined in Section 2. "OTHER PURCHASERS" is defined in Section 2. "PARENT" means Team Rental Group, Inc. (to be renamed Budget Group, Inc. on or about the date of the Closing), a Delaware corporation. "PARENT CONVERTIBLE NOTES" means collectively the Series A Convertible Notes and the Series B Convertible Notes, and such term shall also include the Exchange Parent Convertible Notes under an indenture. "PARENT GUARANTEE" is defined in Section 1.2. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "PERSON" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "PLAN" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Parent or any ERISA Affiliate or with respect to which the Parent or any ERISA Affiliate may have any liability. "PREFERRED STOCK", as applied to any corporation, means shares of such corporation that shall be entitled to preference or priority over any other shares of such corporation in respect of either the payment of dividends or the distribution of assets upon liquidation, or both. "PRO FORMA NON-VEHICLE INTEREST COVERAGE RATIO" means as of any date the ratio of (i) pro forma Adjusted EBIT for the period of four fiscal quarters ending on or immediately prior to such date to (ii) pro forma Consolidated Non-Vehicle Interest Charges for such period; and for purposes of this definition each Schedule B 127 -12- pro forma computation shall include adjustments (without limitation as to other appropriate pro forma adjustments in accordance with generally accepted financial practice, such as adjustments in actual interest costs to give effect to borrowing costs of the acquiring person) giving effect to all acquisitions and dispositions, and all incurrences and refinancings of Debt, made during the period with respect to which such computation is being made as if such acquisitions, dispositions, incurrences or refinancings, as the case may be, were made on the first day of such period , and any such adjustment for earnings with respect to an acquisition shall be based solely upon the amount of reported earnings in accordance with GAAP attributable to the Person or the assets so acquired. "PROPERTY" or "PROPERTIES" means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, inchoate or otherwise. "PROSPECTUS" is defined in Section 5.3. "PTE" is defined in Section 6.2. "QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued on March 13, 1984 by the United States Department of Labor. "REGISTRATION RIGHTS AGREEMENT" means the Amended and Restated Registration Rights Agreement dated as of April 29, 1997 between the Parent and the holders of the Parent Convertible Notes. "REQUIRED HOLDERS" means, at any time, the holders of at least 66 2/3% in unpaid principal amount of the Notes at the time outstanding. "REQUIREMENT OF LAW" means, as to any Person, each law, rule or regulation, including Environmental Laws and ERISA, or Order, decree or other determination of an arbitrator or a court or other Governmental Authority applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "RESPONSIBLE OFFICER" means any Senior Financial Officer of an Obligor and any other officer of an Obligor with responsibility for the administration of the relevant portion of this Agreement. Schedule B 128 -13- "RESTRICTED PAYMENT" means (a) the declaration of any dividend on, or the incurrence of any liability to make any other payment or distribution in respect of, any shares or equity interests of any class of the Parent (other than one payable solely in shares of its common stock), (b) any payment or distribution on account of the purchase, redemption or other retirement of any shares or equity interests of any class of the Parent, or of any warrant, option or other right to acquire such shares or equity interests, and (c) any payment or distribution on account of the principal of or premium, if any, with respect to Debt of the Company, the Parent or any Subsidiary Guarantor that is subordinated to the Notes, the Parent Guarantee or a Subsidiary Guarantee other than mandatory sinking fund or other retirement payments required by the terms thereof. The amount of any Restricted Payment in property shall be deemed to be the greater of its fair value (as determined by the board of directors of the Parent) and its net book value. "REVOLVING CREDIT FACILITY" means the $300,000,000 Credit Agreement dated as of April 29, 1997 among the Company, as borrower, the Parent, as guarantor, the financial institutions listed thereon, as lenders, Credit Suisse First Boston, as co-syndication agent and administrative agent, and NationsBanc Capital Markets, Inc., as co-syndication agent and documentation agent, as supplemented and amended from time to time. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SENIOR FINANCIAL OFFICER" of an Obligor means the chief financial officer, principal accounting officer, treasurer or comptroller of such Obligor. "SERIES A CONVERTIBLE NOTES" means the 7.0% Convertible Subordinated Notes, Series A, due 2007 (originally issued as 7.0% Convertible Subordinated Notes due 2003) of the Parent. "SERIES A NOTE PURCHASE AGREEMENTS" means the several Note Purchase Agreements dated as of December 1, 1996 between the Schedule B 129 -14- Parent and the purchasers named in Schedule I thereto, as supplemented and amended from time to time, relating to the issue and sale of $80,000,000 aggregate principal amount of the Series A Convertible Notes. "SERIES B CONVERTIBLE NOTES" means the 6.85% Convertible Subordinated Notes, Series B, due 2007 of the Parent. "SERIES B NOTE PURCHASE AGREEMENTS" means the several Note Purchase Agreements dated as of April 25, 1997 between the Parent and the Purchasers name in Schedule I thereto, as supplemented and amended from time to time, relating to the issue and sale of $45,000,000 aggregate principal amount of the Series B Convertible Notes. "SIGNIFICANT SUBSIDIARY" means, at any date, any Subsidiary that constitutes a "Significant Subsidiary" of the Parent (after giving effect to the Acquisition), as such term is defined in Rule 1-02(w) of Regulation S-X promulgated under the Securities Act, and in any event shall include the Company and each Subsidiary Guarantor. "SPC" means Budget Funding Corporation, TFFC and any other bankruptcy-remote Subsidiary of the Company formed for the specific purpose of issuing highly-rated commercial paper, medium-term notes or other securities in connection with the financing of Vehicles or for the specific purpose of owning such Vehicles and leasing such Vehicles to the Company and its other Subsidiaries, in each case pursuant to a structured financing or securitization program. "STOCK PURCHASE AGREEMENTS" is defined in Section 1.3. "SUBSIDIARY" means, as to any Person, any corporation or other business entity a majority of the combined voting power of all Voting Stock of which is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries. Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Parent, including the Company. "SUBSIDIARY GUARANTEE" is defined in Section 1.2. "SUBSIDIARY GUARANTOR" is defined in Section 4.5. Schedule B 130 -15- "SWAPS" means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "TFFC" means Team Fleet Financing Corporation, a Delaware corporation and Wholly-Owned Subsidiary of the Company. "TRANSACTIONS" is defined in Section 1.3. "TRANSACTION DOCUMENTS" means this Agreement, the Other Agreements, the Subsidiary Guarantees, the Stock Purchase Agreements, the Series A Note Purchase Agreements, the Series B Note Purchase Agreements, the Registration Rights Agreement, the Underwriting Agreement, the Liquidity Facility and the Revolving Credit Facility. "UNDERWRITING AGREEMENT" means the Underwriting Agreement dated April 23, 1997 between the Company and Credit Suisse First Boston Corporation, ABN AMRO Chicago Corporation, Alex. Brown & Sons Incorporated and McDonald & Company Securities, Inc., as representatives of the several underwriters named in Schedule A thereto, relating to the issuance and sale of Class A Shares pursuant to the public offering described in the Prospectus. "VEHICLE DEBT" means with respect to any Person all Debt relating solely to the financing of any Vehicle and secured thereby (and by related collateral). Any Debt in respect of a Vehicle financed under the Revolving Credit Facility and any obligation included as Non-Vehicle Debt pursuant to the proviso to the definition of the term "Non-Vehicle Debt" shall not be deemed to be Vehicle Debt. Schedule B 131 -16- "VEHICLES" means all existing and hereafter acquired motor vehicle inventory of the Company and its Subsidiaries, consisting of passenger automobiles, light trucks and vans, whether held for sale, lease or rental purposes. "VOTING STOCK" means, with respect to any Person, any shares of stock or other equity interests of any class or classes of such Person whose holders are entitled under ordinary circumstances (irrespective of whether at the time stock or other equity interests of any other class or classes shall have or might have voting power by reason of the happening of any contingency) to vote for the election of a majority of the directors, managers, trustees or other governing body of such Person. "WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Parent and the Parent's other Wholly-Owned Subsidiaries at such time. Schedule B 132 EXHIBIT 1.1 [FORM OF NOTE] BUDGET RENT A CAR CORPORATION 9.57% GUARANTEED SENIOR NOTE DUE 2007 No. [_____] New York, New York $[_______] [Date] PPN: 119008A*1 FOR VALUE RECEIVED, the undersigned, BUDGET RENT A CAR CORPORATION (the "COMPANY"), a Delaware corporation, hereby promises to pay to [_____________________], or registered assigns, the principal sum of [ ] DOLLARS on April 29, 2007, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) from the date hereof on the unpaid balance thereof at the rate of 9.57% per annum, payable semiannually on April 29 and October 29 in each year, until the principal hereof shall have become due and payable, and (b) on any overdue payment of principal, any overdue payment of interest (to the extent permitted by applicable law) and any overdue payment of any premium or Make-Whole Amount (as defined in the Note Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand) at a rate per annum from time to time equal to the greater of (i) 11.57% and (ii) 2% above the rate of interest publicly announced by Citibank, N.A. from time to time at its principal office in New York City as its prime rate. Payments of principal of, interest on and any premium or Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at said principal office of Citibank, N.A. in New York City or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Agreements referred to below. This Note is one of an issue of Senior Notes issued pursuant to separate Senior Note Purchase Agreements dated as of April 25, 1997 (as from time to time amended, the "NOTE AGREEMENTS") between the Company and Team Rental Group, Inc. (to be renamed Budget Group, Inc.) and the respective Purchasers 133 named therein and is entitled to the benefits thereof. This Note is also entitled to the benefits of a Parent Guarantee included in the Note Agreements and certain Subsidiary Guarantees executed and delivered from time to time pursuant to the Note Agreements. Each holder of this Note will be deemed, by its acceptance hereof, to have agreed to the confidentiality provisions set forth in Section 21 of the Note Agreements. This Note is a registered Note and, as provided in the Note Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Agreements. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Agreements, but not otherwise. If an Event of Default, as defined in the Note Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable premium or Make-Whole Amount) and with the effect provided in the Note Agreements. This Note shall be construed and enforced in accordance with, and the rights of the Company and the holder hereof shall be governed by, the laws of the State of New York, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. BUDGET RENT A CAR CORPORATION By --------------------------- Title: 134 EXHIBIT 1.2 GUARANTEE AGREEMENT GUARANTEE AGREEMENT dated as of ______________ made by ________________________, a _________________ corporation (the "GUARANTOR"), in favor of the holders from time to time of the Notes referred to below (collectively the "OBLIGEES"). WHEREAS, Budget Rent a Car Corporation, a Delaware corporation (the "COMPANY"), and Team Rental Group, Inc. (to be renamed Budget Group, Inc.), a Delaware corporation (the "PARENT" and, together with the Company, individually an "OBLIGOR" and collectively the "OBLIGORS"), have entered into several Senior Note Purchase Agreements dated as of April 25, 1997 (as amended or otherwise modified from time to time, collectively the "NOTE AGREEMENTS" and terms defined therein and not otherwise defined herein are being used herein as so defined) with the institutional purchasers listed in Schedule A thereto, providing for the issuance and sale of $165,000,000 aggregate principal amount of the Company's 9.57% Guaranteed Senior Notes due 2007 (the "NOTES"); WHEREAS, the Parent has unconditionally guaranteed the Notes and the obligations of the Company under the Note Agreements pursuant to a parent guarantee (the "PARENT GUARANTEE") contained in Section 13 of the Note Agreements; and WHEREAS, it is a [condition precedent to the purchase of the Notes by such purchasers under/requirement of] the Note Agreements that the Guarantor shall execute and deliver this Guarantee Agreement; NOW, THEREFORE, in consideration of the premises the Guarantor hereby agrees as follows: SECTION 1. Guarantee. The Guarantor unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, A. the punctual payment when due, whether at stated maturity, by prepayment, by acceleration or otherwise, of all obligations of the Obligors arising under the Note Agreements (including without limitation the Parent Guarantee) and the Notes, including all extensions, GUARANTEE AGREEMENT 135 2 modifications, substitutions, amendments and renewals thereof, whether for principal, interest (including without limitation interest on any overdue principal, premium, Make-Whole Amount, and interest at the rate specified in the Notes and interest accruing or becoming owing both prior to and subsequent to the commencement of any proceeding against or with respect to either Obligor under any applicable Debtor Relief Laws as defined below), Make-Whole Amount or premium, if any, fees, expenses, indemnification or otherwise, and B. the due and punctual performance and observance by the Obligors of all covenants, agreements and conditions on their part to be performed and observed under the Note Agreements and the Notes; (all such obligations are called the "GUARANTEED OBLIGATIONS"); provided that the aggregate liability of the Guarantor hereunder in respect of the Guaranteed Obligations shall not exceed at any time the lesser of (1) the amount of the Guaranteed Obligations and (2) the maximum amount for which the Guarantor is liable under this Guarantee Agreement without such liability being deemed a fraudulent transfer under applicable Debtor Relief Laws (as hereinafter defined), as determined by a court of competent jurisdiction. As used herein, the term "DEBTOR RELIEF LAWS" means any applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar debtor relief laws affecting the rights of creditors generally from time to time in effect. The Guarantor also agrees to pay, in addition to the amount stated above, any and all reasonable expenses (including reasonable counsel fees and expenses) incurred by any Obligee in enforcing any rights under this Guarantee Agreement or in connection with any amendment of this Guarantee Agreement. Without limiting the generality of the foregoing, this Guarantee Agreement guarantees, to the extent provided herein, the payment of all amounts which constitute part of the Guaranteed Obligations and would be owed by any other Person to any Obligee but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Person. GUARANTEE AGREEMENT 136 3 SECTION 2. Guarantee Absolute. The obligations of the Guarantor under Section 1 of this Guarantee Agreement constitute a present and continuing guaranty of payment and not of collectibility and the Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Note Agreements and the Notes, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Obligee with respect thereto. The obligations of the Guarantor under this Guarantee Agreement are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Guarantee Agreement, irrespective of whether any action is brought against either Obligor or any other Person liable for the Guaranteed Obligations or whether an Obligor or any other such Person is joined in any such action or actions. The liability of the Guarantor under this Guarantee Agreement shall be primary, absolute, irrevocable, and unconditional irrespective of: A. any lack of validity or enforceability of any Guaranteed Obligation, the Note Agreements, the Parent Guarantee, any Note or any agreement or instrument relating thereto; B. any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from the Note Agreements, the Parent Guarantee, any Note or this Guarantee Agreement; C. any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure by the Guarantor or other Person liable, or any other guarantee, for all or any of the Guaranteed Obligations; D. any manner of application of collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral or any other assets of the Parent or any other Subsidiary; E. any change, restructuring or termination of the corporate structure or existence of the Parent, the Company or any other Subsidiary; or GUARANTEE AGREEMENT 137 4 F. any other circumstance (including without limitation any statute of limitations) that might otherwise constitute a defense, offset or counterclaim available to, or a discharge of, the Parent, the Company or the Guarantor. This Guarantee Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Obligee, or any other Person upon the insolvency, bankruptcy or reorganization of an Obligor or otherwise, all as though such payment had not been made. SECTION 3. Waivers. The Guarantor hereby irrevocably waives, to the extent permitted by applicable law: A. promptness, diligence, presentment, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guarantee Agreement; B. any requirement that any Obligee or any other Person protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against either Obligor or any other Person or any collateral; C. any defense, offset or counterclaim arising by reason of any claim or defense based upon any action by any Obligee; D. any duty on the part of any Obligee to disclose to the Guarantor any matter, fact or thing relating to the business, operation or condition of any Person and its assets now known or hereafter known by such Obligee; and E. any rights by which it might be entitled to require suit on an accrued right of action in respect of any of the Guaranteed Obligations or require suit against the Obligors or the Guarantor or any other Person. SECTION 4. Waiver of Subrogation and Contribution. The Guarantor shall not assert, enforce, or otherwise exercise (A) any right of subrogation to any of the rights, remedies, powers, privileges or liens of any Obligee or any other beneficiary against the Company, the Parent or any other obligor on the Guaranteed Obligations or any collateral or other security, or (B) any right of recourse, reimbursement, GUARANTEE AGREEMENT 138 5 contribution, indemnification, or similar right against the Company or the Parent, and the Guarantor hereby waives any and all of the foregoing rights, remedies, powers, privileges and the benefit of, and any right to participate in, any collateral or other security given to any Obligee or any other beneficiary to secure payment of the Guaranteed Obligations, until such time as the Guaranteed Obligations have been paid in full. SECTION 5. Representations and Warranties. The Guarantor hereby represents and warrants as follows: A. The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. The execution, delivery and performance of this Guarantee Agreement have been duly authorized by all necessary action on the part of the Guarantor. B. The execution, delivery and performance by the Guarantor of this Guarantee Agreement will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Guarantor or any Subsidiary of the Guarantor under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other material agreement or instrument to which the Guarantor or any Subsidiary of the Guarantor is bound or by which the Guarantor or any Subsidiary of the Guarantor or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Guarantor or any Subsidiary of the Guarantor or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Guarantor or any Subsidiary of the Guarantor. C. The Guarantor and the Obligors are members of the same consolidated group of companies and are engaged in related businesses and the Guarantor will derive substantial direct and indirect benefit from the execution and delivery of this Guarantee Agreement. GUARANTEE AGREEMENT 139 6 SECTION 6. Amendments, Etc. No amendment or waiver of any provision of this Guarantee Agreement and no consent to any departure by the Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Required Holders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no amendment, waiver or consent shall, unless in writing and signed by all Obligees, (i) limit the liability of or release the Guarantor hereunder, (ii) postpone any date fixed for, or change the amount of, any payment hereunder or (iii) change the percentage of Notes the holders of which are, or the number of Obligees, required to take any action hereunder. SECTION 7. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing and (A) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (B) by a recognized overnight delivery service (with charges prepaid). Such notice if sent to the Guarantor shall be addressed to the Parent at the address of the Parent set forth in the Note Agreements or at such other address as the Guarantor may hereafter designate by notice to each holder of Notes, or if sent to any holder of Notes, shall be addressed to it as set forth in the Note Agreements. Any notice or other communication herein provided to be given to the holders of all outstanding Notes shall be deemed to have been duly given if sent as aforesaid to each of the registered holders of the Notes at the time outstanding at the address for such purpose of such holder as it appears on the Note register maintained by the Company in accordance with the provisions of Section 14.1 of the Note Agreements. Notices under this Section 7 will be deemed given only when actually received. SECTION 8. No Waiver; Remedies. No failure on the part of any Obligee 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 preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 9. Continuing Guarantee. This Guarantee Agreement is a continuing guarantee of payment and performance and shall (A) remain in full force and effect until payment in GUARANTEE AGREEMENT 140 7 full of the Guaranteed Obligations and all other amounts payable under this Guarantee Agreement, (B) be binding upon the Guarantor, its successors and assigns and (C) inure to the benefit of and be enforceable by the Obligees and their successors, transferees and assigns. SECTION 10. Jurisdiction and Process; Waiver of Jury Trial. The Guarantor irrevocably submits to the non-exclusive in personam jurisdiction of any New York State or federal court sitting in the Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or relating to this Guarantee Agreement. To the fullest extent permitted by applicable law, the Guarantor irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the in personam jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. The Guarantor consents to process being served in any suit, action or proceeding of the nature referred to in this Section by mailing a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to the Guarantor at its address specified in Section 7 or at such other address of which you shall then have been notified pursuant to said Section. The Guarantor agrees that such service upon receipt (i) shall be deemed in every respect effective service of process upon it in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by applicable law, be taken and held to be valid personal service upon and personal delivery to the Guarantor. Notices hereunder shall be conclusively presumed received as evidenced by a delivery receipt furnished by the United States Postal Service or any recognized courier or overnight delivery service. Nothing in this Section 10 shall affect the right of any holder of a Note to serve process in any manner permitted by law, or limit any right that the holders of any of the Notes may have to bring proceedings against the Guarantor in the courts of any appropriate jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction. GUARANTEE AGREEMENT 141 8 THE GUARANTOR WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS GUARANTEE AGREEMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH. SECTION 11. Governing Law. This Guarantee Agreement shall be construed and enforced in accordance with, and the rights of the Guarantor and the Obligees shall be governed by, the laws of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. IN WITNESS WHEREOF, the Guarantor has caused this Guarantee Agreement to be duly executed and delivered as of the date first above written. [GUARANTOR] By ---------------------------- Title: GUARANTEE AGREEMENT 142 EXHIBIT 4.4(a), 4.4(b) and 4.4(c) OPINIONS OF COUNSEL FOR THE OBLIGORS The following opinions are to be provided by counsel for the Obligors (allocated among such counsel as appropriate), subject to customary assumptions, limitations and qualifications. All capitalized terms used herein without definition shall have the meanings ascribed thereto in the Agreements. 1. The Company is a corporation duly organized and validly existing under the laws of the State of Delaware and has all requisite power and authority to own or hold under lease the property it purports to own or hold under lease, to carry on its business as now being conducted and to execute and deliver the Agreements and to perform the provisions thereof. The Company has duly qualified and is authorized to do business in each jurisdiction where such qualification and authorization is necessary. 2. The Parent is a corporation duly organized and validly existing under the laws of the State of Delaware and has all requisite power and authority to own or hold under lease the property it purports to own or hold under lease, to carry on its business as now being conducted and to execute and deliver the Agreements and the Notes and to perform the provisions thereof. The Parent has duly qualified and is authorized to do business in each jurisdiction where such qualification and authorization is necessary. 3. Each Significant Subsidiary so designated in Schedule 5.4 of the Agreements (other than the Company) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, except where the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Significant Subsidiary has all requisite corporate power and authority to own or hold under lease the property it purports to own or hold under lease and to carry on its business as now being conducted and, in the case of the 143 2 Subsidiary Guarantors, to execute and deliver its respective Subsidiary Guarantee and perform the provisions thereof. 4. The Agreements have been duly authorized, executed and delivered by the Obligors and constitute legal, valid and binding agreements of the Obligors, enforceable against the Obligors in accordance with their terms. 5. The Notes being purchased by you today have been duly authorized, executed and delivered by the Company and constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. 6. The Subsidiary Guarantees have been duly authorized, executed and delivered by the respective Subsidiary Guarantors and constitute legal, valid and binding obligations of such Subsidiary Guarantors, enforceable against such Subsidiary Guarantors in accordance with their respective terms. 7. No consent, approval or authorization of, or declaration, registration or filing with, any Governmental Authority is required to be obtained or made as a condition to the validity of the execution and delivery by the Obligors of the Agreements, by the Company of said Notes or by the Subsidiary Guarantors of said Subsidiary Guarantees or for the performance by the Obligors or the Subsidiary Guarantors of their respective obligations thereunder. 8. It was not necessary in connection with the offering, sale and delivery of said Notes, the Parent Guarantee or said Subsidiary Guarantees, under the circumstances contemplated by the Agreements, to register said Notes, the Parent Guarantee or said Subsidiary Guarantees under the Securities Act or to qualify an indenture in respect of the Notes under the Trust Indenture Act of 1939, as amended. 9. The execution, delivery and performance by the Parent of the Agreements, by the Company of the Agreements and the Notes and by the Subsidiary Guarantors of their respective Subsidiary Guarantees will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Significant Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument known to 144 3 such counsel to which the Parent or any Significant Subsidiary is bound or by which the Parent or any Significant Subsidiary or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority applicable to the Parent or any Significant Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Parent or any Significant Subsidiary. 10. Neither the Parent nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, or the Federal Power Act, as amended. 11. None of the transactions contemplated by the Agreements (including without limitation the use of the proceeds from the sale of the Notes) will violate or result in a violation of Section 7 of the Exchange Act, or any regulations issued pursuant thereto, including without limitation Regulations G, T and X of the Board of Governors of the Federal Reserve System (12 CFR, Part 207, Part 220 and Part 224, respectively). 12. There are no actions, suits or proceedings pending, or to the knowledge of such counsel threatened, against or affecting the Parent or any Subsidiary or any property of the Parent or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority, except actions, suits or proceedings which (a) individually do not in any manner draw into question the Acquisition or the Transaction Documents or the validity of the Agreements, the Subsidiary Guarantees or the Notes and (b) in the aggregate could not reasonably be expected to have a Material Adverse Effect. * * * * This opinion is given solely for your benefit, and for the benefit of the institutional investor holders from time to time of the Notes purchased by you today, in connection with the closing held today of the transactions contemplated by the Agreements, and may not be relied upon by any other person for any purpose without our prior written consent. 145 EXHIBIT 4.4(d) FORM OF OPINION OF WF&G April __, 1997 Re: Budget Rent a Car Corporation 9.57% Guaranteed Senior Notes due 2007 To the several Purchasers listed in Schedule A to the within- mentioned Note Agreements Ladies and Gentlemen: We have acted as your special counsel in connection with the issuance by Budget Rent a Car Corporation (the "Company") of its 9.57% Guaranteed Senior Notes due 2007 in an aggregate principal amount of $165,000,000 (the "Notes") and the purchases by you pursuant to the several Senior Note Purchase Agreements made by you with the Company and Team Rental Group, Inc. (the "Parent") under date of April 25, 1997 (the "Note Agreements") of Notes in the respective aggregate principal amounts specified in Schedule A to the Note Agreements. All capitalized terms used herein without definition shall have the meanings ascribed thereto in the Note Agreements. We have examined such corporate records of the Obligors and the Subsidiary Guarantors, agreements and other instruments, certificates of officers and representatives of the Obligors and the Subsidiary Guarantors, certificates of public officials, and such other documents, as we have deemed necessary in connection with the opinions hereinafter expressed. In such examination we have assumed the genuineness of all signatures, the authenticity of documents submitted to us as originals and the conformity with the authentic originals of all documents submitted to us as copies. As to questions of fact material to such opinions we have, when relevant facts were not independently established, relied upon the representations set forth in the Note Agreements 146 -2- and upon certifications by officers or other representatives of the Obligors and the Subsidiary Guarantors. In addition, we attended the closing held today at the office of Mayer, Brown & Platt at which you purchased and made payment for Notes in the respective aggregate principal amounts to be purchased by you, all in accordance with the Note Agreements. Based upon the foregoing and having regard for legal considerations that we deem relevant, we render our opinion to you pursuant to Section 4.4(b) of the Note Agreements as follows: 1. Each of the Obligors is a validly existing corporation in good standing under the laws of the State of Delaware and has the corporate power to execute and deliver the Note Agreements, the Parent Guarantee (in the case of the Parent) and the Notes (in the case of the Company) and to perform its respective obligations thereunder. 2. Each of the Subsidiary Guarantors identified as such in Schedule 5.4 to the Note Agreements is a validly existing corporation in good standing under the laws of its respective jurisdiction of incorporation and has the corporate power to execute and deliver its respective Subsidiary Guarantee and to perform its respective obligations thereunder. [DELAWARE INCORPORATION IS ASSUMED] 3. The Note Agreements have been duly authorized, executed and delivered by the Obligors and the Note Agreements constitute legal, valid and binding agreements of the Obligors, enforceable against the Obligors in accordance with their terms. 4. The Notes being purchased by you today have been duly authorized, executed and delivered by the Company and constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. 5. The Subsidiary Guarantees have been duly authorized, executed and delivered by the respective Subsidiary Guarantors and constitute legal, valid and binding agreements of the respective Subsidiary Guarantors. 6. No consent, approval or authorization of, or declaration, registration or filing with, any New York or Federal Governmental Authority is required to be obtained or made as a 147 -3- condition to the validity of the execution and delivery by the Obligors of the Note Agreements, by the Company of said Notes or by the Subsidiary Guarantors of their respective Subsidiary Guarantees delivered today pursuant to Section 4.5 of the Note Agreements or for the performance by the Company, the Parent or said Subsidiary Guarantors of their respective obligations thereunder. 7. It was not necessary in connection with the offering, sale and delivery of said Notes, the Parent Guarantee or said Subsidiary Guarantees, under the circumstances contemplated by the Note Agreements, to register said Notes, the Parent Guarantee or said Subsidiary Guarantees under the Securities Act of 1933, as amended, or to qualify an indenture in respect of the Notes under the Trust Indenture Act of 1939, as amended. 8. The opinions of even date herewith of King & Spalding, special counsel for the Parent, Kenneth M. Lipowitz, counsel to the Parent, and Robert L. Aprati, Senior Vice President and General Counsel of the Company, delivered to you pursuant to Section 4.4(a) of the Note Agreements, are satisfactory to us in form and scope with respect to the matters specified therein and we believe that you are justified in relying thereon. The opinions expressed above are subject to the exception that (a) the enforceability of any agreement or instrument in accordance with its terms may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors' rights generally and (ii) general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (b) the enforceability of indemnity provisions contained in the Note Agreements may be subject to limitations based upon public policy considerations. We express no opinion as to Section 23.3 of the Note Agreements insofar as said Section relates to (a) the subject matter jurisdiction of the United States District Court for the Southern District of New York to adjudicate any controversy relating to the Note Agreements, the Notes or any other document related thereto, (b) the waiver of inconvenient forum with respect to proceedings in such United States District Court or (c) the waiver of the right to jury trial. 148 -4- We are members of the bar of the State of New York and do not herein intend to express any opinion as to any matters governed by any laws other than Federal laws, the laws of the State of New York and the General Corporation Law of the State of Delaware. This opinion is given solely for your benefit and for the benefit of institutional investor holders from time to time of the Notes purchased by you today, in connection with the closing held today of the transactions contemplated by the Note Agreements, and may not be relied upon by any other person for any purpose without our prior written consent. Very truly yours, 149 SENIOR NOTE PURCHASE AGREEMENT SCHEDULE 5.4 EXISTING SUBSIDIARIES OF THE COMPANY See attached schedules. Significant Subsidiaries: Budget Car Sales, Inc. Budget Rent a Car Systems, Inc. Budget Funding Corporation Budget Fleet Finance Corporation Budget Rent a Car International, Inc. BTI (U.K.) plc Team Fleet Financing Corporation Directors and Officers of the Company: See attachment. Subsidiary Guarantors: See attachment. 150 Existing Subsidiaries of the Company
Name Jurisdiction of Incorporation - ---- ----------------------------- Budget Rent a Car Corporation Delaware Budget Car Sales, Inc. (formerly "Team Car Sales") Indiana Team Car Sales of Charlotte, Inc. Delaware Team Car Sales of Dayton, Inc. Delaware Team Car Sales of Philadelphia, Inc. Delaware Team Car Sales of Richmond, Inc. Delaware Team Car Sales of San Diego, Inc. Delaware Team Car Sales of Southern California, Inc. Delaware ValCar Rental Car Sales, Inc. Indiana IN Motors VI, LLC(1) Indiana TCS Properties, LLC Indiana Budget Rent a Car Systems, Inc. Delaware Budget Funding Corporation Delaware Budget Fleet Finance Corporation Delaware BRAC of New York, Inc. Delaware Long Island Car & Truck Rental, Inc.(2) Delaware NYRAC, Inc. New York Rebound Services, Inc. Delaware Diversified Services, Inc. Delaware Automated Transportation, Inc. California Expert Leasing, Inc. Florida Rapid Rentals, Inc. District of Columbia Moisant Car Sales, Inc. Louisiana
151 Existing Subsidiaries of the Company (Cont'd)
Name Jurisdiction of Incorporation - ---- ----------------------------- Budget Rent a Car of New Orleans, Inc. Louisiana Westeam Enterprises, Inc. California MacKay Car & Truck Rentals, Inc. North Carolina Metro West, Inc. Delaware Lee-Al, Inc. California Dayton Auto Lease Company, Inc. Ohio Don Kremer, Inc. Ohio Arizona Rent a Car Systems, Inc. Delaware Capital City Leasing, Inc. Florida Team Rental of Connecticut, Inc. Delaware Team Rental of Cincinnati, Inc. Delaware Team Rental of Ft. Wayne, Inc. Delaware Fort Wayne Rental Group, Inc. Delaware Team Rental of Philadelphia, Inc. Delaware Team Rental of Pittsburgh, Inc. Delaware Team Rental of Rochester, Inc. Delaware Team Rental of Southern California, Inc. Delaware BRAC SOCAL Funding Corporation Delaware Team Rental of New York, Inc. New York VPSI, Inc. Delaware Team Claims Services, Inc. Florida Budget Rent a Car International, Inc. Delaware Budget Rent a Car Espana, S.A. Spain
152 Existing Subsidiaries of the Company (Cont'd)
Name Jurisdiction of Incorporation - ---- ----------------------------- Budget Rent a Car Ltd., Ireland London, England BRACELET, S.A. Spain Societe Financiere et de Participation Tours, France Budget France, S.A. Tours, France BTI (U.K.) plc London, England BTI (Gatwick) Limited London, England BTI (Stansted) Limited London, England BTI (London) Limited London, England BTI (Marble Arch) Limited London, England BTI (Slough) Limited London, England BTI (Heathrow) Limited London, England Budget Rent a Car Australia Pty. Ltd. Victoria, Australia Budget Rent a Car Pty. Ltd. Victoria, Australia Budget Rent a Car Limited Auckland, New Zealand Budget Rent a Car Operations Pty. Ltd. Victoria, Australia Target Rent a Car Limited Wellington, New Zealand Budget Lease Mgmt (Car Sales) Limited Auckland, New Zealand Budget Locacao de Veiculos Ltda. Sao Paulo, Brazil Budget Rent a Car Asia-Pacific, Inc. Delaware Budget Rent a Car of Japan, Inc. Delaware Budget Rent a Car of Canada Limited Ottawa, Ontario Control Risk Corporation Illinois Philip Jacobs Insurance Agency, Inc. California
153 Existing Subsidiaries of the Company (Cont'd)
Name Jurisdiction of Incorporation - ---- ----------------------------- Reservation Services, Inc. Texas 200-214 N. Michigan Ave, Inc. Illinois BRAC Reinsurance Company, Ltd. Bermuda BBAC Credit Corporation Delaware Compass Computer Services, Inc.(3) Delaware Budget Sales Corporation Delaware Team Fleet Financing Corporation Delaware Team Realty Services, Inc. Delaware Team Fleet Services Corporation Delaware
- ----------------------- (1) 1% owned by Budget Car Sales, Inc.; 1% owned by Budget Rent a Car Corporation, and 98% owned by ValCar Rental Car Sales, Inc. (2) A 72% owned subsidiary of BRAC of New York, Inc. (3) A 50% owned subsidiary of Budget Rent a Car Corporation. 154 SUBSIDIARY GUARANTORS Capital City Leasing, Inc. Dayton Auto Lease Company, Inc. Don Kremer,, Inc. Ft. Wayne Rental Group, Inc. Lee-Al, Inc. Mackay Car & Truck Rentals, Inc. Metro West, Inc. Team Car Sales of Charlotte, Inc. Team Car Sales of Dayton, Inc. Team Car Sales of Philadelphia, Inc. Team Car Sales of Richmond. Inc. Team Car Sales of San Diego, Inc. Team Fleet Services Corporation Team Realty Services, Inc. Team Rental of Cincinnati, Inc. Team Rental of Connecticut, Inc. Team Rental of Philadelphia, Inc. Team Rental of Pittsburgh, Inc. Team Rental of Southern California, Inc. Tranex Rentals of New York, Inc. Westeam Enterprises, Inc. Team Car Sales of Southern California, Inc. Team Rental of Ft. Wayne, Inc. Team Rental of Rochester, Inc. VPSI, Inc. Arizona Rent-A-Car Systems, Inc. IN Motors VI, LLC TCS Properties, LLC Budget Car Sales, Inc. (formerly Team Car Sales, Inc.) ValCar Rental Car Sales, Inc. Budget Rent a Car Systems, Inc. NYRAC, Inc. Diversified Services, Inc. Rapid Rentals, Inc. Budget Rent a Car of New Orleans, Inc. Budget Rent a Car International, Inc. Control Risk Corporation Philip Jacobs Insurance Agency, Inc. Reservation Services, Inc. BRAC Credit Corporation BRAC of New York, Inc. Automated Transportation, Inc. 155 Moisant Car Sales, Inc. Budget Sales Corporation Budget Rent a Car Corporation of Canada Limited EX-10.23 5 CREDIT AGREEMENT 1 EXHIBIT 10.23 U.S. $300,000,000 CREDIT AGREEMENT, dated as of April 29, 1997, among BUDGET RENT A CAR CORPORATION, as the Borrower, BUDGET GROUP, INC. (formerly known as TEAM RENTAL GROUP, INC.), as a Guarantor, and CERTAIN FINANCIAL INSTITUTIONS, as the Lenders, CREDIT SUISSE FIRST BOSTON, as a Co-Syndication Agent and the Administrative Agent, and NATIONSBANC CAPITAL MARKETS, INC., as a Co-Syndication Agent and the Documentation Agent. Arranged By CREDIT SUISSE FIRST BOSTON 2 TABLE OF CONTENTS
Section Page - ------- ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Defined Terms.....................................................................3 1.2. Use of Defined Terms.............................................................41 1.3. Cross-References.................................................................41 1.4. Accounting and Financial Determinations..........................................42 ARTICLE II COMMITMENTS, BORROWING PROCEDURES AND NOTES 2.1. Commitments......................................................................42 2.1.1. Loan Commitment..................................................................42 2.1.2. Commitment to Issue Letters of Credit............................................42 2.1.3. Lenders Not Permitted or Required To Make Loans or Issue Letters of Credit Under Certain Circumstances............................................42 2.2. Reduction of Commitment Amounts..................................................43 2.2.1. Optional.........................................................................43 2.2.2. Mandatory........................................................................44 2.2.3. Corresponding Reductions.........................................................44 2.3. Borrowing Procedure..............................................................44 2.4. Continuation and Conversion Elections............................................45 2.5. Funding..........................................................................46 2.6. Loan Accounts....................................................................46 2.7. Special Provisions for Loans Denominated in Foreign Currencies...................47 2.7.1. Notification of Request..........................................................47 2.7.2. Availability.....................................................................47 2.7.3. Notification of Availability.....................................................47 2.7.4. Consequences of Non-Availability.................................................47 ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES 3.1. Repayments and Prepayments.......................................................47 3.2. Interest Provisions..............................................................50 3.2.1. Rates............................................................................50 3.2.2. Post-Maturity Rates..............................................................50 3.2.3. Payment Dates....................................................................51
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Section Page - ------- ---- 3.2.4. Interest Rate Determination......................................................51 3.3. Fees.............................................................................51 3.3.1. Commitment Fees..................................................................51 3.3.2. Arrangement Fees.................................................................52 3.3.3. Administrative Agent's Fee.......................................................52 3.3.4. Letter of Credit Face Amount Fee.................................................52 3.3.5. Letter of Credit Issuing Fee.....................................................52 3.3.6. Letter of Credit Administrative Fee..............................................52 ARTICLE IV LETTERS OF CREDIT 4.1. Issuance Requests................................................................53 4.2. Issuances and Extensions.........................................................54 4.3. Expenses.........................................................................55 4.4. Other Lenders' Participation.....................................................55 4.5. Disbursements....................................................................56 4.6. Reimbursement....................................................................56 4.7. Deemed Disbursements.............................................................57 4.8. Nature of Reimbursement Obligations..............................................57 4.9. Indemnity........................................................................58 4.10. Borrower's Guaranty of Reimbursement Obligations of its Subsidiaries.............58 4.10.1. Guaranty.........................................................................58 4.10.2. Acceleration of Guaranty.........................................................59 4.10.3. Guaranty Absolute, etc...........................................................59 4.10.4. Reinstatement, etc...............................................................60 4.10.5. Waiver, etc......................................................................61 4.10.6. Postponement of Subrogation, etc.................................................61 4.10.7. Successors, Transferees and Assigns; Transfers of Notes, etc.....................62 4.11. No Bankruptcy Petition Against TFFC..............................................62 ARTICLE V CERTAIN EUROCURRENCY RATE AND OTHER PROVISIONS 5.1. Eurocurrency Rate Lending Unlawful...............................................63 5.2. Deposits Unavailable.............................................................63 5.3. Increased Eurocurrency Loan Costs, etc...........................................63 5.4. Funding Losses...................................................................64 5.5. Increased Capital Costs..........................................................64 5.6. Taxes............................................................................65
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Section Page - ------- ---- 5.7. Payments, Computations, etc......................................................66 5.8. Sharing of Payments..............................................................66 5.9. Setoff...........................................................................67 5.10. Substitution of Lender...........................................................67 ARTICLE VI CONDITIONS PRECEDENT 6.1. Initial Credit Extension.........................................................68 6.1.1. Resolutions, etc.................................................................68 6.1.2. Delivery of Notes................................................................69 6.1.3. Acquisition and Transaction Consummated..........................................69 6.1.4. Payment of Outstanding Indebtedness, etc.........................................69 6.1.5. Delivery of Financial Statements.................................................69 6.1.6. Consents, etc....................................................................70 6.1.7. No Material Adverse Change.......................................................70 6.1.8. Availability Under the Borrowing Base............................................70 6.1.9. Fees and Expenses of the Transaction.............................................70 6.1.10. Business Plan....................................................................70 6.1.11. Closing Date Certificates........................................................71 6.1.12. Guaranty.........................................................................71 6.1.13. Pledge Agreements................................................................71 6.1.14. Security Agreements..............................................................71 6.1.15. Borrowing Base Certificate.......................................................72 6.1.16. Issuance Request.................................................................72 6.1.17. Opinions of Counsel..............................................................72 6.1.18. Closing Fees, Expenses, etc......................................................73 6.2. All Credit Extensions............................................................73 6.2.1. Compliance with Warranties, No Default, etc......................................73 6.2.2. Credit Request...................................................................73 6.2.3. Satisfactory Legal Form..........................................................74 ARTICLE VII REPRESENTATIONS AND WARRANTIES 7.1. Organization, etc................................................................74 7.2. Due Authorization, Non-Contravention, etc........................................75 7.3. Government Approval, Regulation, etc.............................................75 7.4. Validity, etc....................................................................75 7.5. Financial Information; Absence of Undisclosed Liabilities........................76
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Section Page - ------- ---- 7.6. No Material Adverse Change; Absence of Undisclosed Liabilities...................76 7.7. Litigation, Labor Controversies, etc.............................................76 7.8. Subsidiaries.....................................................................77 7.9. Ownership of Properties..........................................................77 7.10. Taxes............................................................................77 7.11. Pension and Welfare Plans........................................................77 7.12. Environmental Warranties.........................................................77 7.13. Intellectual Property............................................................79 7.14. Regulations G, U and X...........................................................80 7.15. Accuracy of Information..........................................................80 7.16. Stock Purchase Agreements and Senior Note Purchase Agreements....................80 7.17. Senior Indebtedness, etc.........................................................80 ARTICLE VIII COVENANTS 8.1. Affirmative Covenants............................................................81 8.1.1. Financial Information, Reports, Notices, etc.....................................81 8.1.2. Compliance with Laws, Material Agreements, etc...................................83 8.1.3. Maintenance of Properties........................................................84 8.1.4. Insurance........................................................................84 8.1.5. Books and Records................................................................84 8.1.6. Environmental Covenant...........................................................85 8.1.7. Use of Proceeds..................................................................85 8.1.8. Foreign Subsidiaries as of the Closing Date......................................86 8.1.9. Future Subsidiaries..............................................................87 8.2. Negative Covenants...............................................................88 8.2.1. Business Activities..............................................................88 8.2.2. Indebtedness.....................................................................88 8.2.3. Liens............................................................................91 8.2.4. Financial Condition..............................................................92 8.2.5. Investments......................................................................94 8.2.6. Restricted Payments, etc.........................................................95 8.2.7. Capital Expenditures, etc........................................................98 8.2.8. Take or Pay Contracts............................................................98 8.2.9. Consolidation, Merger, etc.......................................................98 8.2.10. Asset Dispositions, etc..........................................................98 8.2.11. Modification of Certain Agreements...............................................99 8.2.12. Transactions with Affiliates.....................................................99 8.2.13. Negative Pledges, Restrictive Agreements, etc...................................100 8.2.14. Ability to Amend; Restrictive Agreements........................................100
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Section Page - ------- ---- 8.2.15. Accounting Changes..............................................................101 8.2.16. Tax Sharing Arrangements........................................................101 8.2.17. Activities of the Parent........................................................101 ARTICLE IX EVENTS OF DEFAULT 9.1. Listing of Events of Default....................................................101 9.1.1. Non-Payment of Obligations......................................................101 9.1.2. Breach of Warranty..............................................................102 9.1.3. Non-Performance of Certain Covenants and Obligations............................102 9.1.4. Non-Performance of Other Covenants and Obligations..............................102 9.1.5. Default on Other Indebtedness...................................................102 9.1.6. Judgments.......................................................................102 9.1.7. Pension Plans...................................................................103 9.1.8. Change in Control...............................................................103 9.1.9. Bankruptcy, Insolvency, etc.....................................................103 9.1.10. Impairment of Security, etc.....................................................104 9.2. Action if Bankruptcy............................................................104 9.3. Action if Other Event of Default................................................104 ARTICLE X PARENT GUARANTY 10.1. Guaranty........................................................................105 10.2. Acceleration of Parent Guaranty.................................................105 10.3. Guaranty Absolute, etc..........................................................105 10.4. Reinstatement, etc..............................................................107 10.5. Waiver, etc.....................................................................107 10.6. Postponement of Subrogation, etc................................................107 10.7. Successors, Transferees and Assigns; Transfers of Notes, etc....................108 ARTICLE XI THE AGENTS 11.1. Actions.........................................................................108 11.2. Funding Reliance, etc...........................................................109 11.3. Exculpation.....................................................................109 11.4. Successor.......................................................................109
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Section Page - ------- ---- 11.5. Credit Extensions by Agents.....................................................110 11.6. Credit Decisions................................................................110 11.7. Copies, etc.....................................................................110 ARTICLE XII MISCELLANEOUS PROVISIONS 12.1. Waivers, Amendments, etc........................................................111 12.2. Notices.........................................................................112 12.3. Payment of Costs and Expenses...................................................112 12.4. Indemnification.................................................................113 12.5. Survival........................................................................114 12.6. Severability....................................................................114 12.7. Headings........................................................................114 12.8. Execution in Counterparts, Effectiveness, etc...................................114 12.9. Governing Law; Entire Agreement.................................................114 12.10. Successors and Assigns..........................................................114 12.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes.........115 12.11.1. Assignments.....................................................................115 12.11.2. Participations..................................................................116 12.12. Other Transactions..............................................................117 12.13. Independence of Covenants.......................................................117 12.14. Judgment Currency...............................................................117 12.15. Forum Selection and Consent to Jurisdiction.....................................118 12.16. Waiver of Jury Trial............................................................119
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SCHEDULE I - Disclosure Schedule SCHEDULE II - Lender Information SCHEDULE III - Deposit Banks SCHEDULE IV - Subordinated Intercompany Note Terms SCHEDULE V - Scheduled Letters of Credit EXHIBIT A - Form of Revolving Note EXHIBIT B-1 - Form of Borrowing Request EXHIBIT B-2 - Form of Issuance Request EXHIBIT C - Form of Continuation/Conversion Notice EXHIBIT D - Form of Compliance Certificate EXHIBIT E - Form of Borrowing Base Certificate EXHIBIT F-1 - Form of Parent Pledge Agreement EXHIBIT F-2 - Form of Borrower Pledge Agreement EXHIBIT F-3 - Form of Subsidiary Pledge Agreement EXHIBIT G-1 - Form of Borrower Security Agreement EXHIBIT G-2 - Form of Subsidiary Security Agreement EXHIBIT G-3 - Form of Parent Security Agreement EXHIBIT H - Form of Subsidiary Guaranty EXHIBIT I-1 - Form of Borrower Closing Date Certificate EXHIBIT I-2 - Form of Parent Closing Date Certificate EXHIBIT J - Form of Lender Assignment Agreement EXHIBIT K-1 - Form of Opinion of Special Counsel to the Obligors EXHIBIT K-2 - Form of Opinion of Counsel to the Borrower EXHIBIT K-3 - Form of Opinion of Counsel to the Parent
-vii- 9 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of April 29, 1997, among BUDGET RENT A CAR CORPORATION, a Delaware corporation (the "Borrower"), BUDGET GROUP, INC. (formerly known as Team Rental Group, Inc.), a Delaware corporation (the "Parent"), the various financial institutions as are or may become parties hereto (collectively, the "Lenders"), NATIONSBANC CAPITAL MARKETS, INC. ("NationsBanc"), as a co-syndication agent (in such capacity, a "Co-Syndication Agent") for the Lenders and as the documentation agent (in such capacity, the "Documentation Agent") for the Lenders, and CREDIT SUISSE FIRST BOSTON ("Credit Suisse First Boston"), as a co-syndication agent (in such capacity, a "Co- Syndication Agent" and, together with NationsBanc, collectively, the "Co-Syndication Agents") for the Lenders, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders and as the arranger (in such capacity, the "Arranger"). W I T N E S S E T H: WHEREAS, the Borrower and the Parent are engaged directly and through their various Subsidiaries (capitalized terms used in these recitals to have the meanings set forth in Section 1.1 below) in the business of (a) renting worldwide for general use passenger automobiles, vans and light trucks, (b) selling in the United States late model automobiles and (c) franchising the foregoing business to other Persons; WHEREAS, pursuant to (a) the Stock Purchase Agreement, dated as of January 13, 1997, between the Borrower and the Parent (as so originally executed and delivered, the "Budget Stock Purchase Agreement"), (b) the Preferred Stock Purchase Agreement, dated as of January 13, 1997, between Ford Motor Company and the Parent (as so originally executed and delivered, the "Preferred Stock Purchase Agreement") and (c) the Stock Purchase Agreement, dated as of January 13, 1997, between John J. Nevin and the Parent (as so originally executed and delivered, the "Common Stock Purchase Agreement", and, together with the Budget Stock Purchase Agreement and the Preferred Stock Purchase Agreement, the "Stock Purchase Agreements"), the Parent intends to acquire the Capital Stock of the Borrower and purchase certain Indebtedness of the Borrower for approximately $275,000,000 in cash and the issuance of shares of a new series of non-dividend paying, non-voting convertible preferred stock of the Parent (the "Acquisition"); WHEREAS, in connection with the Acquisition, (a) the Parent intends to issue shares of its Class A Common Stock pursuant to a registered public offering for gross cash proceeds of at least $150,000,000, which proceeds it intends to use to fund, in part, the Acquisition (the "Equity Offering"), (b) the Parent intends to issue its Series B Notes pursuant to a private offering for gross cash proceeds of not greater than $50,000,000, which proceeds it intends to use to fund, in part, the Acquisition (the "Convertible Subordinated Debt Offering"), (c) the Borrower intends to issue its Senior Notes pursuant to a private offering for gross cash proceeds of not greater than $170,000,000 (the "Senior Debt Offering", and, together with the Convertible Subordinated Debt Offering, the "Debt Offerings"), (d) the Parent intends to arrange for the refinancing of approximately $850,500,000 of indebtedness under various vehicle financing facilities of the Borrower and its Subsidiaries pursuant to, among other things, a rental car asset-backed 10 commercial paper program (the "CP Program") through a special purpose, bankruptcy remote, Wholly Owned Subsidiary of the Borrower ("Budget Funding Corporation") and (e) the Parent intends, pursuant to capital contributions, stock transfers, mergers or otherwise, to cause its existing businesses to be conducted after the Acquisition by the Borrower or through Subsidiaries of the Borrower (including existing Subsidiaries of the Parent that become Subsidiaries of the Borrower) (the "Corporate Restructuring", and, together with the Equity Offering, the Debt Offerings, the CP Program and the transactions relating thereto (including transactions relating to the Corporate Restructuring), the "Transaction"); WHEREAS, in connection with the Transaction, the Borrower desires to obtain Commitments from the Lenders pursuant to which (a) Loans will be made to the Borrower from time to time prior to the Loan Commitment Termination Date; and (b) Letters of Credit will be issued by the Issuer for the account of the Borrower and under the several responsibilities of the Lenders from time to time prior to the Letter of Credit Commitment Termination Date; in maximum aggregate principal amount for Loans (after converting all Foreign Currency Loans to the Equivalent thereof in Dollars) at any one time outstanding not to exceed in the aggregate $100,000,000 (provided, however, that the maximum aggregate principal amount for Loans denominated in Foreign Currencies at any one time outstanding shall not exceed in the aggregate the Equivalent of $40,000,000) and in a maximum aggregate Stated Amount for Letters of Credit outstanding, together with the aggregate of all Loans (after converting all Foreign Currency Loans to the Equivalent thereof in Dollars) outstanding at any one time not to exceed in the aggregate $300,000,000; WHEREAS, the Lenders and the Issuer are willing, on the terms and subject to the conditions hereinafter set forth (including Article VI), to extend such Commitments, make such Loans to the Borrower and issue and participate in such Letters of Credit; and WHEREAS, the proceeds (a) of such Loans will be used for general corporate purposes of the Borrower and its Subsidiaries; and (b) of such Letters of Credit will be used by the Borrower and its Subsidiaries (i) as credit and/or liquidity enhancement for commercial paper or similar fleet financing programs (including the CP Program), so long as the aggregate Stated Amount of all Letters of Credit issued for such purpose (the "Enhancement Letters of Credit") and outstanding at one time does not exceed $225,000,000 and (ii) for other general corporate purposes (the "General Letters of Credit"); -2- 11 NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "ABR Loan" means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate. "Account Debtor" is defined in clause (d) of the definition of "Eligible Receivable". "Account Party" means (a) the Borrower, (b) in the case of the CP Enhancement Letter of Credit, Budget Funding Corporation, and (c) any Subsidiary Guarantor or SPC for the account of which a Letter of Credit is issued in accordance with Article IV. "Acquisition" is defined in the second recital. "Acquisition Date" means the date that the Acquisition is consummated. "Adjusted Debt" means, at any time, the sum of (a) Non-Vehicle Debt at such time plus (b) the maximum amount available for drawing under each letter of credit constituting Indebtedness of the Parent or any of its Subsidiaries and which provides credit enhancement or liquidity enhancement to a commercial paper or other fleet financing program (including Enhancement Letters of Credit), whether or not drawn and whether or not any conditions to drawing can then be met at such time. "Adjusted EBITDA" means, for any applicable period, the excess of (a) EBITDA for such period over (b) to the extent added in arriving at such EBITDA, the sum of (i) the aggregate amount of depreciation in respect of Vehicles during such period plus (ii) Vehicle Interest Expense during such period; provided, however, that, in the event any such period would include a Pre-Acquisition Period, Adjusted EBITDA for such Pre-Acquisition Period would equal the sum of (i) in the event such Pre-Acquisition Period would include the Fiscal Quarter ending December 31, 1996, $13,164,000 plus (ii) Adjusted EBITDA for the remainder of such Pre-Acquisition Period (or, if -3- 12 the preceding clause (i) is not applicable, for the entirety of such Pre-Acquisition Period) determined on a pro forma basis after giving effect to consummation of the Transaction in a manner consistent with the pro forma financial statements set forth in the Registration Statement. "Adjusted Leverage Ratio" means, at the end of any Fiscal Quarter, the ratio of (a) Net Adjusted Debt as at the last day of such Fiscal Quarter; to (b) Adjusted EBITDA for the four consecutive Fiscal Quarters ending on the last day of such Fiscal Quarter. "Administrative Agent" is defined in the preamble and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to Section 11.4. "Affiliate" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agents" means the Co-Syndication Agents, the Documentation Agent and the Administrative Agent. "Aggregate Interest Expense" is defined in clause (a) of the definition of "Non-Vehicle Interest Expense". "Agreement" means, on any date, this Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date. "Alternate Base Rate" means, on any date and with respect to all ABR Loans, a fluctuating rate of interest per annum equal to the higher of (a) the rate of interest most recently established by Credit Suisse First Boston at its principal office in New York, New York as its prime rate for Dollar loans; and (b) the Federal Funds Rate most recently determined by the Administrative Agent plus 1/2%. -4- 13 If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Rate for any reason, including the inability of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition of "Federal Funds Rate", the Alternate Base Rate shall be determined without regard to clause (b) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by the Credit Suisse First Boston in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as ABR Loans will take effect simultaneously with each change in the Alternate Base Rate. The Administrative Agent will give notice promptly to the Borrower and the Lenders of changes in the Alternate Base Rate. "Alternate Currency" means, collectively, Australian Dollars and New Zealand Dollars; provided, however, that neither Australian Dollars nor New Zealand Dollars shall constitute an Alternate Currency if any Lender is unable to make Foreign Currency Loans in such currency without suffering any economic, legal or regulatory burden in its sole and absolute discretion. "Applicable Commitment Fee" means, as of any date, a per annum fee on the average daily unused portion of the Commitment Amount determined pursuant to the following pricing grid (expressed in basis points), subject to the provisions of this definition set forth below:
PRICING GRID APPLICABLE ADJUSTED LEVERAGE RATIO COMMITMENT FEE ----------------------- -------------- X >= 2.0 37.5 X >= 1.0, but < 2.0 30.0 X < 1.0 25.0
The Applicable Commitment Fee on the average daily unused portion of the Commitment Amount, at any time from and including the Effective Date to (but not including) the date which is 180 days after the Effective Date, shall be 37.5 basis points per annum at such time. The Applicable Commitment Fee, at any time from and after the date which is 180 days after the Effective Date, on the average daily unused portion of the Commitment Amount, shall be determined pursuant to the Pricing Grid above at such time. At all times that the Applicable Commitment Fee is determined by reference to the Pricing Grid, "X" refers to the Adjusted Leverage Ratio, which ratio shall be determined based upon the Compliance Certificate delivered pursuant to clause (c) of Section 8.1.1 and shall remain in effect until such time as the next Compliance Certificate shall be delivered (and, at such time, the Applicable Commitment Fee shall change based on such next Compliance Certificate); provided, however, that, if any such Compliance Certificate is not delivered to the Administrative Agent on or prior to the date required pursuant to clause (c) of Section 8.1.1, the Applicable Commitment Fee from and -5- 14 including the date on which such Compliance Certificate was required to be delivered to but not including the actual date of delivery of such Compliance Certificate shall conclusively equal the highest Applicable Commitment Fee. "Applicable Margin" means, with respect to any Loan of any type, as of any date, the rate per annum determined pursuant to the following pricing grid (expressed in basis points), subject to the provisions of this definition set forth below:
PRICING GRID EUROCURRENCY LOAN ABR LOAN ADJUSTED LEVERAGE RATIO APPLICABLE MARGIN APPLICABLE MARGIN ----------------------- ----------------- ----------------- X >= 3.5 225 125 X >= 3.0, but < 3.5 200 100 X >= 2.0, but < 3.0 175 75 X >= 1.0, but < 2.0 150 50 X < 1.0 125 25
The Applicable Margin, at any time from and including the Effective Date until the date which is 180 days after the Effective Date, for the Loans shall be 175 basis points as to Eurocurrency Loans and 75 basis points as to ABR Loans at such time. The Applicable Margin, at any time from and after the date which is 180 days after the Effective Date, for Loans, shall be determined pursuant to the Pricing Grid above at such time. At all times that the Applicable Margin is determined by reference to the Pricing Grid, "X" refers to the Adjusted Leverage Ratio, which ratio shall be determined based upon the Compliance Certificate delivered pursuant to clause (c) of Section 8.1.1 and shall remain in effect until such time as the next Compliance Certificate shall be delivered (and, at such time, the Applicable Margin shall change based on such next Compliance Certificate); provided, however, that, if any such Compliance Certificate is not delivered to the Administrative Agent on or prior to the date required pursuant to clause (c) of Section 8.1.1, the Applicable Margin for Loans from and including the date on which such Compliance Certificate was required to be delivered to but not including the actual date of delivery of such Compliance Certificate shall conclusively equal the highest Applicable Margin for Loans set forth above. "Arranger" is defined in the preamble. "Assignee Lender" is defined in Section 12.11.1. "Australian Dollars" and the symbol "A$" means the lawful currency of Australia. "Authorized Officer" means, relative to the Borrower and any other Obligor, those of its officers or managing members (in the case of a limited liability company) whose signatures and -6- 15 incumbency shall have been certified to the Administrative Agent and the Lenders pursuant to Section 6.1.1. "Available" means, in respect of any Foreign Currency and any Lender, that such Foreign Currency is, at the relevant time, readily available to such Lender as deposits in the London or other applicable interbank market in the relevant amount and for the relevant term, is freely convertible into Dollars and is freely transferable for the purposes of this Agreement, but if, notwithstanding that each of the foregoing tests is satisfied (a) such Foreign Currency is, under the then current legislation or regulations of the country of such Foreign Currency (or under the policy of the central bank of such country) or of the Bank of England or the F.R.S. Board, not permitted to be used for the purposes of this Agreement; or (b) there is no, or only insignificant, investor demand for the making of advances having an interest period equivalent to that for the Eurocurrency Loan denominated in an Foreign Currency which the Borrower has requested be made; or (c) there are no policy or other reasons which make it undesirable or impractical for a Lender to make a Eurocurrency Loan denominated in such Foreign Currency available as determined by such Lender in its reasonable discretion; then such Foreign Currency may be treated by any Lender as not being Available. "Available Currency" means, collectively, Dollars, French Francs, Sterling, Swiss Francs and each Alternate Currency. "Base Indenture" means the Amended and Restated Base Indenture, dated as of December 1, 1996, among TFFC, the Parent and Bankers Trust Company, as in effect on the date hereof, subject to such modifications thereto as may be agreed to in the Base Indenture Supplement or by the Required Lenders. "Base Indenture Supplement" means any supplement to the Base Indenture, which supplement is (a) entered into for the purpose of providing Vehicle financing to TFFC pursuant to the issuance by TFFC of a series of Variable Funding Rental Car Asset Backed Notes to the Borrower, which series of notes the Borrower would purchase with proceeds of Loans under this Agreement and which would constitute a "Segregated Series of Notes" (as more fully described in the Base Indenture) and would be pledged (together with all security therefor) to the Administrative Agent for the benefit of the Lenders and (b) together with such documents as the Administrative Agent and the Supermajority Lenders deem appropriate, approved in writing by the Supermajority Lenders. "Borrower" is defined in the preamble. -7- 16 "Borrower Closing Date Certificate" means the closing date certificate executed and delivered by the Borrower pursuant to Section 6.1.11, substantially in the form of Exhibit I-1 hereto. "Borrower Pledge Agreement" means the Pledge Agreement executed and delivered by the Borrower pursuant to Section 6.1.13, substantially in the form of Exhibit F-2 hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Borrower Security Agreement" means the Security Agreement executed and delivered by the Borrower pursuant to Section 6.1.14, substantially in the form of Exhibit G-1 hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Borrowing" means the Loans of the same type and, in the case of Eurocurrency Loans, denominated in the same Available Currency and having the same Interest Period made by all Lenders on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.1. "Borrowing Base Amount" means, at any time, an amount equal to the sum of: (a) 85% of Eligible Receivables at such time; plus (b) 100% of Eligible Cash and Cash Equivalent Investments at such time; plus (c) 100% of Eligible Repurchase Vehicles at such time; plus (d) 85% of Eligible Non-Repurchase Vehicles at such time. "Borrowing Base Certificate" means a certificate duly completed and executed by an Authorized Signatory of the Borrower, substantially in the form of Exhibit E hereto; provided, however, that the Administrative Agent may (a) at any time specify changes to such form for the purpose of monitoring or clarifying the Borrower's compliance with the Borrowing Base Amount; and (b) from time to time review computations of the Borrowing Base Amount submitted by the Borrower pursuant to Section 6.1.15 and clause (f) of Section 8.1.1 and, if in the Administrative Agent's reasonable opinion, the computation in any Borrowing Base Certificate of the Borrowing Base Amount shall not have been computed in accordance with its definition, the Administrative Agent shall have the right to adjust -8- 17 such computation so long as written notice of such adjustment is provided to the Borrower. "Borrowing Request" means a Loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B-1 hereto. "Budget Funding Corporation" is defined in the third recital. "Business Acquisition" means the acquisition, by purchase or otherwise, of all or substantially all of the assets (or any part of the assets constituting all or substantially all of a business or line of business) of any Person, whether such acquisition is direct or indirect, including through the acquisition of the business of, or Capital Stock of, such Person. "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 (b) relative to the making, continuing, converting, prepaying or repaying of any Eurocurrency Loans, any day (i) on which dealings in the relevant currency are carried on in the London interbank market and (ii) in the case of Eurocurrency Loans denominated in an Available Currency other than Dollars or Sterling, on which banks in the country for which such Available Currency is the lawful currency are not authorized or required to be closed. "Canadian Dollars" and the symbol "Cdn$" means the lawful currency of Canada. "Capital Expenditures" means, for any period, the sum of (a) the aggregate amount of all expenditures of the Borrower and its Subsidiaries for fixed or capital assets made during such period which, in accordance with GAAP, would be classified as capital expenditures; and (b) the aggregate amount of all Capitalized Lease Liabilities incurred during such period. "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. "Capitalized Lease Liabilities" means all monetary obligations of the Borrower or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and, with respect to any such leasing or similar -9- 18 arrangement, the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a premium or a penalty. "Cash Equivalent Investment" means, at any time, High Quality Investments maturing not more than 270 days after such time. "Casualty Event" means the damage, destruction or condemnation, as the case may be, of property of the Borrower, the Parent or any of their respective Subsidiaries. "Casualty Proceeds" means, with respect to any Casualty Event, the amount of any insurance proceeds or condemnation awards received by or on behalf of the Borrower, the Parent or any of their respective Subsidiaries in connection with such Casualty Event, but excluding any proceeds or awards required to be paid to a creditor (other than the Lenders) which holds a first- priority Lien permitted by Section 8.2.3 on the property which is the subject of such Casualty Event (including Vehicles securing Vehicle Debt). "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "Change in Control" means (a) any Person other than the Parent shall own any Capital Stock of the Borrower or otherwise have the ability to elect any members of the board of directors of the Borrower; (b) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), excluding Sanford Miller, John D. Kennedy, Jeffrey D. Congdon or any Wholly Owned Subsidiary or Related Person of any one or more of them or Ford Motor Company or any Wholly Owned Subsidiary of Ford Motor Company, (i) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 30% of the total then outstanding voting power of the Voting Stock of the Parent or (ii) has the right or the ability by voting right, contract or otherwise to elect or designate for election a majority of the board of directors of the Parent; (c) during any period of twenty-four months, individuals who at the beginning of such period constituted the board of directors of the Parent (together with any new directors whose election by such board of directors, or whose nomination for election by the shareholders of the Parent, as the case may be, was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute 50% or more of the board of directors then in office; -10- 19 (d) any Person or two or more Persons acting in concert (in any such case, excluding Sanford Miller, John D. Kennedy, Jeffrey D. Congdon or any Wholly Owned Subsidiary of any one or more of them) shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to direct or control, directly or indirectly, the management or policies of the Borrower or the Parent; or (e) a "Change of Control" under the Senior Notes, the Series A Notes or the Series B Notes shall have occurred. "Closing Date" means the date on which Credit Extensions are first made hereunder. "Code" means the Internal Revenue Code of 1986, and the regulations thereunder, in each case as amended, reformed or otherwise modified from time to time. "Commitment" means, as the context may require, a Lender's Loan Commitment and/or Letter of Credit Commitment. "Commitment Amount" means, on any date, $300,000,000, as such amount may be reduced from time to time pursuant to Section 2.2. "Commitment Termination Event" means (a) the occurrence of any Default described in clauses (a) through (d) of Section 9.1.9; or (b) the occurrence and continuance of any other Event of Default and either (i) the declaration of all or any portion of the Loans to be due and payable pursuant to Section 9.3, or (ii) the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated. "Compliance Certificate" means, as the context may require, a certificate duly completed and executed by an Authorized Officer of the Parent or the Borrower, as the case may be, substantially in the form of Exhibit D hereto, together with such changes thereto as the Administrative Agent may from time to time reasonably request for the purpose of monitoring the Borrower's compliance with the financial covenants contained herein. "Contingent Liability" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments -11- 20 in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the debt, obligation or other liability guaranteed thereby. "Continuation/Conversion Notice" means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit C hereto. "Controlled Group" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Parent, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "Convertible Subordinated Debt Offering" is defined in the third recital. "Corporate Restructuring" is defined in the third recital. "Co-Syndication Agent" and "Co-Syndication Agents" are defined in the preamble and includes each other Person as shall have subsequently been appointed as a successor Co- Syndication Agent pursuant to Section 11.4. "CP Enhancement Letter of Credit" means the Letter of Credit, dated as of the date hereof, of Credit Suisse First Boston, issued pursuant to the terms hereof and of the CP Enhancement Letter of Credit Application and Agreement. "CP Enhancement Letter of Credit Application and Agreement" means the Letter of Credit Reimbursement Agreement, dated as of the date hereof, among the Borrower, Budget Funding Corporation, the Issuer and the Lessees from time to time designated thereunder. "CP Program" is defined in the third recital. "Credit Extension" means and includes (a) the advancing of any Loans by the Lenders in connection with a Borrowing, and (b) any issuance or extension by the Issuer of a Letter of Credit. "Credit Extension Request" means, as the context may require, any Borrowing Request or Issuance Request. "Credit Suisse First Boston" is defined in the preamble. -12- 21 "Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "Demand Capitalization Note" means the promissory note dated as of the date hereof, issued by the Borrower to TFFC. "Disbursement Date" is defined in Section 4.5. "Disclosure Schedule" means the Disclosure Schedule attached hereto as Schedule I, as it may be amended, supplemented or otherwise modified from time to time by the Borrower with the written consent of the Administrative Agent and the Required Lenders. "Distribution" means, with respect to any Person, any dividend or distribution (in cash, property or obligations) on any shares of any class of Capital Stock (now or hereafter outstanding) of such Person or on any warrants, options or other rights with respect to any shares of any class of Capital Stock (now or hereafter outstanding) of such Person, other than dividends or distributions payable in the common stock (other than Redeemable Capital Stock) of such Person or warrants or options to purchase such common stock or split-ups or reclassifications of its Capital Stock into additional or other shares of such common stock. "Dollar" and the symbol "$" mean the lawful currency of the United States. "Domestic Office" means, relative to any Lender, the office of such Lender designated as such opposite its name in Schedule II hereto or designated in the Lender Assignment Agreement or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. A Lender may have separate Domestic Offices for purposes of making, maintaining or continuing ABR Loans. "EBITDA" means, for any applicable period, the sum for such period of (a) Net Income (excluding therefrom (i) the effect of any non-cash gains (or non-cash losses), (ii) any write-up in the value of any asset, (iii) the income (or losses) of any Person (other than the Borrower or any other Subsidiary of the Borrower) in which the Borrower, the Parent or any of their respective Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid in cash to (or the amount of contributions to capital actually made in cash by) the Borrower, the Parent or any of their respective Subsidiaries by (or in) such Person during such period, (iv) except where the provisions hereof expressly require a pro forma determination, the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Parent or is merged into or consolidated with the Parent or any of its Subsidiaries or the date that such other Person's assets are acquired by the Parent or any of its Subsidiaries and (v) the income of any Subsidiary of the Parent to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, -13- 22 judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary) plus (b) to the extent deducted in arriving at such Net Income, the sum, without duplication, of (i) Aggregate Interest Expense, plus (ii) taxes computed on the basis of income plus (iii) the aggregate amount of depreciation and amortization of tangible and intangible assets; provided, however, that in the event any such period would include a Pre-Acquisition Period, EBITDA for such Pre-Acquisition Period would equal the sum of (i) in the event such Pre-Acquisition Period would include the Fiscal Quarter ending December 31, 1996, $120,617,000 plus (ii) EBITDA for the remainder of such Pre-Acquisition Period (or, if the preceding clause (i) is not applicable, for the entirety of such Pre-Acquisition Period) determined on a pro forma basis after giving effect to consummation of the Transaction in a manner consistent with the pro forma financial statements set forth in the Registration Statement. "Effective Date" means the date this Agreement becomes effective pursuant to Section 12.8. "Eligible Assignee" means a lending institution at the time of any proposed assignment having total assets in excess of $1,000,000,000 which is organized under the laws of the United States, or any state thereof or any other country which is a member of the OECD, or a political subdivision of any such country (provided that such bank is acting through a branch or agency located in the country in which it is organized, another country which is also a member of the OECD or in the Cayman Islands) and long-term unsecured debt ratings of BBB- (or better) from S&P and Baa3 (or better) from Moody's; provided, however, that neither the Borrower, the Parent nor any of their respective Affiliates shall qualify as an Eligible Assignee. "Eligible Cash and Cash Equivalent Investments" means, at any time of determination thereof, cash or Cash Equivalent Investments of the Borrower or any Subsidiary of the Borrower that is a Subsidiary Guarantor as to which each of the following requirements has been fulfilled to the reasonable satisfaction of the Administrative Agent (which requirements shall be deemed to have been fulfilled to the reasonable satisfaction of the Administrative Agent unless the Administrative Agent shall have otherwise notified the Borrower in writing): (a) such cash or Cash Equivalent Investments are held free and clear of all Liens, other than the Liens in favor of the Administrative Agent for the benefit of the Lenders, by the Administrative Agent or a third party acting solely as agent for the Administrative Agent pursuant to a written agreement (provided that such third party is (i) a Federal Reserve bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $250,000,000 or (iii) a bank approved in writing for such purposes by the Required Lenders); -14- 23 (b) the Administrative Agent has a security interest in such cash or Cash Equivalent Investments, which security interest is, under applicable law, (i) legal, valid and binding and (ii) perfected and first priority (or, if such applicable law would not characterize security interests in any deposit account in which the holder of such security interest has rights senior to any other Person that obtains a judicial lien on, or execution against, such deposit account or obtains a lien thereon granted by the holder of such deposit account as "perfected" or "first priority", the Administrative Agent has rights with respect to such cash or Cash Equivalent Investments that is senior to any such Person); (c) the Borrower or such Subsidiary has the full and unqualified right to assign and grant a Lien in such cash or Cash Equivalent Investments to the Administrative Agent; (d) such cash or Cash Equivalent Investment is in Dollars (or in Canadian Dollars, to the extent such cash or Cash Equivalent Investments in Canadian Dollars does not exceed Cdn $3,000,000); (e) such cash or Cash Equivalent Investments is held in an account subject to a Deposit Account Agreement (as defined in the Borrower Security Agreement); and (f) if such cash or Cash Equivalent Investment is subject to any dispute, setoff, counterclaim or other claim or defense on the part of the obligor thereunder or the party holding such asset, the portion of such cash or Cash Equivalent Investment so subject shall be excluded from Eligible Cash and Cash Equivalent Investments; provided, however, that cash or Cash Equivalent Investments that would otherwise be Eligible Cash and Cash Equivalent Investments but for the requirement in clause (b)(ii) above or the requirement in clause (e) above shall be deemed to be Eligible Cash and Cash Equivalent Investments to the extent such cash or Cash Equivalent Investments does not exceed in the aggregate $10,000,000; provided further, however, an additional $3,000,000 of such cash or Cash Equivalent Investments shall be deemed to be Eligible Cash and Cash Equivalent Investments until May 30, 1997, to the extent such cash or Cash Equivalent Investments are held in a bank listed in Schedule III hereto and such bank and the Borrower (or the applicable Subsidiary) are exercising their best efforts to provide the Administrative Agent with such perfected and first priority security interest. "Eligible Non-Repurchase Vehicles" means the aggregate Non-Repurchase Vehicle Value (as defined in the Base Indenture) of Non-Repurchase Vehicles (as defined in the Base Indenture) that are financed pursuant to the Base Indenture Supplement. "Eligible Receivable" means, at any time of determination thereof, any Receivable of the Borrower or any Subsidiary of the Borrower that is a Subsidiary Guarantor (other than an Excluded Receivable) as to which each of the following requirements has been fulfilled to the reasonable satisfaction of the Administrative Agent (which requirements shall be deemed to have been fulfilled to the reasonable satisfaction of the Administrative Agent unless the Administrative Agent shall have otherwise notified the Borrower in writing): -15- 24 (a) the Borrower or such Subsidiary has lawful and absolute title to such Receivable, free and clear of all Liens other than the Liens in favor of the Administrative Agent for the benefit of the Lenders; (b) the Administrative Agent has a security interest in such Receivable, which security interest is legal, valid, binding, perfected and first priority under the U.C.C. or under the analogous secured transactions law of any Canadian province; provided, however, that (i) the aggregate amount of such Receivables as to which the Administrative Agent has a security interest under Canadian law may not exceed 3% of the total amount of all Eligible Receivables at the time of such determination (such Receivables that do not exceed such 3% threshold being herein referred to as "Canadian Eligible Receivables"); (ii) no Receivable as to which any United States federal or state governmental agency or instrumentality is the Account Debtor may be an Eligible Receivable, except (A) to the extent the Borrower or such Subsidiary has complied with the Assignment of Claims Act of 1940, as amended (31 U.S.C. ss. 3727; 41 U.S.C. ss. 15), by delivering to the Administrative Agent a notice of assignment in favor of the Administrative Agent under such Act and in compliance with applicable provisions of 31 C.F.R. ss. 7-103.8 and 41 C.F.R. ss. 1-30.7, or with similar state law (collectively, for purposes of this definition, the "Registration Requirements") or (B) unless the Administrative Agent requests the Borrower or such Subsidiary to comply with the Registration Requirements with respect to the Receivables described in this subclause (B) and the Borrower or such Subsidiary does not exercise their best efforts to so comply, to the extent the aggregate amount of such Receivables would not exceed 3% of the total amount of all Eligible Receivables at the time of such determination; and (iii) no Receivable as to which any other government or agency of such government (including any foreign governmental authority or agency) is the Account Debtor may be an Eligible Receivable; (c) the Borrower or such Subsidiary has the full and unqualified right to assign and grant a Lien in such Receivable to the Administrative Agent for the benefit of the Lenders; (d) such Receivable is payable in Dollars (or, in the case of Canadian Eligible Receivables, Dollars or Canadian Dollars) and is a legal, valid, binding and enforceable obligation of the Person who is obligated under such Receivable (the "Account Debtor"); (e) without limiting the effect of the preceding clause (d), such Receivable complies with all requirements of applicable law, including the Federal Consumer Credit Protection Act, the Federal Truth in Lending Act and Regulation Z of the F.R.S. Board; -16- 25 (f) if such Account is subject to any dispute, setoff, counterclaim or other claim or defense on the part of the Account Debtor denying liability under such Receivable, the portion of such Account so subject shall be excluded from Eligible Receivables; (g) such Receivable (i) evidences monetary obligations and (ii) is evidenced by (A) an invoice or statement rendered to the Account Debtor or (B) an obligation of the Account Debtor to make royalty payments to the Borrower or such Subsidiary pursuant to a franchise agreement that is in full force and effect; (h) such Receivable is a bona fide Receivable which arose in the ordinary course of business, and with respect to which, (i) in the case of a Receivable arising from the sale of goods, such goods have been shipped or delivered to and not rejected by the Account Debtor, such Receivable was created as a result of a sale on an absolute basis and not on a consignment, approval or sale-and-return basis and all other actions necessary to create a binding obligation on the part of the Account Debtor for such Receivable have been taken, and (ii) in the case of a Receivable relating to the rental of a Vehicle or the sale of services, such rental or services have been completed or performed and not rejected by the Account Debtor and all other actions necessary to create a binding obligation on the part of the Account Debtor have been taken; (i) with respect to such Receivable, the Account Debtor is not (i) an Affiliate of the Borrower, the Parent or any of their respective Subsidiaries, (ii) organized or located in a jurisdiction other than the United States (except to the extent an Account Debtor with respect to a Canadian Eligible Receivable is located in Canada), or (iii) the subject of any reorganization, bankruptcy, receivership, custodianship or insolvency or any other condition of the type described in clauses (b) through (d) of Section 9.1.9; (j) such Receivable is not outstanding more than 90 days past the due date with respect thereto; (k) no payment with respect to such Receivable made by check has been returned for insufficient funds; (l) such Receivable has not been placed with a lawyer or other agent for collection; -17- 26 (m) if the Borrower, the Parent or any of their respective Subsidiaries is indebted to such Account Debtor and such Account Debtor has a contractual right of setoff with respect to such indebtedness, unless the Borrower, the Parent or the relevant Subsidiary (as the case may be), on the one hand, and such Account Debtor, on the other hand, have entered into an agreement whereby the Account Debtor is prohibited from exercising any right of setoff with respect to the Receivables of the Borrower and its Subsidiaries, Eligible Receivables shall exclude an amount equal to the amount of such indebtedness; and (n) such Receivable has such other characteristics or criteria as the Administrative Agent, in its reasonable discretion, may specify in writing to the Borrower from time to time. Notwithstanding the foregoing, (i) all Receivables of any single Account Debtor (unless otherwise agreed to by the Required Lenders) and its Affiliates which, in the aggregate, exceed 5% of the total amount of all Eligible Receivables at the time of such determination, shall be deemed not to be Eligible Receivables to the extent of such excess, (ii) the total amount of Eligible Receivables shall be reduced by an amount equal to the excess, if any, of (x) the aggregate amount payable by the Borrower, the Parent and their respective Subsidiaries to Account Debtors that are franchisees of the Borrower, the Parent or any of their respective Subsidiaries at the time of such determination over (y) 5% of such total amount of Eligible Receivables, and (iii) in determining the amount of Receivables to be included as Eligible Receivables, the face amount of Receivables shall be reduced by (A) the amount of all accrued and actual returns, discounts, claims, credits or credits pending, charges, price adjustments, commissions or other amounts due to any Person engaged by the Borrower or the applicable Subsidiary of the Borrower in the rental or sale of Vehicles, freight or finance charges or other allowances (including any amount that the Borrower or such Subsidiary, as applicable, may be obligated to rebate to a customer pursuant to the terms of any agreement or understanding (written or oral) or that the Borrower or such Subsidiary, as applicable, established as a reserve therefor (and the Borrower agrees that any such reserve will in no event be less than the reserve that would be so established consistent with past practice or in accordance with GAAP)) and (B) the aggregate amount of all cash received in respect of Receivables but not yet applied by the Borrower or such Subsidiary to reduce the amount of the Receivables. "Eligible Repurchase Vehicles" means the Net Book Value (as defined in the Base Indenture) of Repurchase Vehicles (as defined in the Base Indenture) that are financed pursuant to the Base Indenture Supplement. "Enhancement Letter of Credit Application and Agreement" means, with respect to each Enhancement Letter of Credit, the application and agreement therefor completed by the account party or parties in respect of such Enhancement Letter of Credit and accepted by the Issuer. "Enhancement Letters of Credit" is defined in clause (b)(i) of the sixth recital. "Enhancement Letters of Credit Commitment Amount" means, on any date, $225,000,000, as such amount may be reduced from time to time pursuant to Section 2.2. -18- 27 "Environmental Laws" means all applicable federal, 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. "Equity Offering" is defined in the third recital. "Equivalent" means, on any date of determination, (a) in Dollars of any currency, the equivalent in Dollars of such currency determined by using the quoted spot rate at which Credit Suisse First Boston's principal office in New York City, New York, offers to exchange Dollars for such currency in New York City, New York, at the open of business on such date and (b) in any currency of Dollars, the equivalent in such currency of Dollars determined by using the quoted spot rate at which Credit Suisse First Boston's principal office in New York City, New York, offers to exchange such currency for Dollars in New York City, New York, at the open of business on such date. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections thereto. "Eurocurrency Loan" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the Eurocurrency Rate (Reserve Adjusted). "Eurocurrency Office" means, relative to any Lender, the office of such Lender designated as such opposite its name in Schedule II hereto or designated in the Lender Assignment Agreement or such other office of a Lender (or any successor or assign of such Lender) as designated from time to time by notice from such Lender to the Borrower and the Administrative Agent, whether or not outside the United States, which shall be making or maintaining Eurocurrency Loans of such Lender hereunder. "Eurocurrency Rate" means, relative to any Interest Period, with respect to Eurocurrency Loans denominated in any Available Currency, an interest rate per annum equal to: (a) the rate determined by the Administrative Agent at approximately 11:00 a.m. (London, England time) two Business Days prior to the beginning 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 such Available Currency (as set forth by any service selected by the Administrative Agent 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 Administrative Agent 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 such Available Currency are offered by the Eurocurrency Office of -19- 28 each of the Reference Lenders 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 such Reference Lender's Eurocurrency Loan comprising part of such Borrowing to be outstanding during such Interest Period and for a period equal to such Interest Period; provided that any determination of the Eurocurrency Rate for any Interest Period pursuant to this clause (b) shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Lenders two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 3.2.4. "Eurocurrency Rate (Reserve Adjusted)" means, relative to any Loan to be made, continued or maintained as, or converted into, a Eurocurrency Loan for any Interest Period, arate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant to the following formula:
Eurocurrency Rate = Eurocurrency Rate (Reserve Adjusted) 1.00 - Eurocurrency Reserve Percentage
The Eurocurrency Rate (Reserve Adjusted) for any Interest Period for Eurocurrency Loans will be determined by the Administrative Agent on the basis of the Eurocurrency Reserve Percentage in effect two Business Days before the first day of such Interest Period. "Eurocurrency Reserve Percentage" means, relative to any Interest Period for Eurocurrency Loans, 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 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" is defined in Section 9.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Receivable" means any Receivable of the Borrower or any Subsidiary of the Borrower that is (a) subject to a Lien which is not a Lien in favor of the Administrative Agent for the benefit of the Lenders and (b) (i) an obligation payable to TFFC in respect of Vehicles leased or financed pursuant to a Lease (as defined in the Base Indenture), (ii) an obligation of a manufacturer of a Vehicle securing Vehicle Debt pursuant to a Repurchase Program (as defined in the Base Indenture), (iii) an obligation of an insurer or governmental entity with respect to a Casualty Event in respect of a Vehicle securing Vehicle Debt or (iv) an obligation of a Person in respect of the purchase price of a Vehicle securing Vehicle Debt. -20- 29 "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Credit Suisse First Boston from three federal funds brokers of recognized standing selected by it. "Fee Letter" is defined in Section 3.3.2. "Fiscal Quarter" means any quarter of a Fiscal Year. "Fiscal Year" means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "1997 Fiscal Year") refer to the Fiscal Year ending on the December 31 occurring during such calendar year. "Foreign Currency" means, collectively, French Francs, Sterling, Swiss Francs and each Alternate Currency. "Foreign Currency Loan" means any Loan made in a Foreign Currency. "Foreign Currency Loan Commitment Amount" means, on any date, $40,000,000, as such amount may be reduced from time to time pursuant to Section 2.2. "Foreign Pledge Agreement" means any supplemental pledge agreement governed by the laws of a jurisdiction other than the United States or a state thereof executed and delivered by the Borrower or any of its Subsidiaries pursuant to the terms of this Agreement, in form and substance satisfactory to the Administrative Agent, as may be necessary or desirable under the laws of organization or incorporation of a Subsidiary to further protect or perfect the Lien on and security interest in any Pledged Shares and/or Pledged Notes (as such terms are defined in the Pledge Agreements). "Foreign Subsidiary" means any Subsidiary of the Borrower (a) which is organized under the laws of any jurisdiction outside of the United States of America, (b) which conducts the major portion of its business outside of the United States of America and (c) all or substantially all of the property and assets of which are located outside of the United States of America. "Franchisee Acquisition" means any Business Acquisition in respect of a Person that was a franchisee of the Borrower, the Parent or any of their respective Subsidiaries on the Effective Date, so long as the consideration paid in connection with such Business Acquisition consisted -21- 30 solely of Capital Stock of the Parent issued in connection therewith and the assumption of Vehicle Debt (if any). "French Franc" and the symbol "Fr" means the lawful currency of the Republic of France. "F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "GAAP" is defined in Section 1.4. "General Letters of Credit" is defined in clause (b)(ii) of the sixth recital. "Guarantor" means, collectively, the Parent and each Subsidiary Guarantor. "Guaranty" means, as the context may require, the Parent Guaranty or the Subsidiary Guaranty. "Guaranteed Obligations" is defined in Section 4.10.1. "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, 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 Agreements" means, collectively, currency exchange agreements, interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and all other agreements or arrangements designed to protect a Person against fluctuations in interest rates or currency exchange rates. "Hedging Obligations" means, with respect to any Person, all liabilities of such Person under Hedging Agreements. "herein", "hereof", "hereto", "hereunder" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. -22- 31 "High Quality Investments" means (a) U.S. Government Obligations; (b) participation certificates (excluding strip mortgage securities that are purchased at prices exceeding their principal amounts) and senior debt obligations of the Federal Home Loan Mortgage Corporation, consolidated system wide bonds and notes of the Farm Credit System, senior debt obligations and mortgage-backed securities (excluding stripped mortgage securities which are purchased at prices exceeding their principal amounts) of the Federal Mortgage Association which, in the case of mortgage-backed securities, are rated at least AA by S&P and Aa by Moody's, senior debt obligations (excluding securities that have no fixed value and/or whose terms do not promise a fixed dollar amount at maturity or call date) of the Student Loan Marketing Association and debt obligations of the Resolution Funding Corp. (collectively, "Agency Obligations"); (c) direct obligations of any state of the United States or any subdivision or agency thereof whose short-term unsecured general obligation debt has ratings from S&P of at least A-1 and Moody's of at least P-1 or any obligation that has ratings from S&P and Moody's at least equivalent to A-1 and P-1, respectively, and which is fully and unconditionally guaranteed by any state, subdivision or agency whose short term, unsecured general obligation debt has ratings from S&P and Moody's at least equivalent to A-1 and P-1, respectively; (d) commercial paper maturing in not more than 270 days which is issued by a corporation (other than an Affiliate of any Obligor) and having ratings from S&P and Moody's at least equivalent to A-1 and P-1, respectively; (e) deposits, federal funds or bankers acceptances (maturing in not more than 365 days) of any domestic bank (including a branch office of a foreign bank which branch office is located in the United States, provided that the Administrative Agent shall have received a legal opinion or opinions to the effect that full and timely payment of such deposit or similar obligation is enforceable against the principal office or any branch of such bank), which: (i) has an unsecured, uninsured and unguaranteed obligation which has ratings from S&P and Moody's at least equivalent to A-1 and P-1, respectively, or (ii) is the lead bank of a parent bank holding company with an uninsured, unsecured and unguaranteed obligation meeting the rating requirements in the preceding clause (i); (f) deposits of any bank or savings and loan association which has combined capital, surplus and undivided profits of not less than $100 million, provided such deposits are fully insured by the Federal Deposit Insurance Corporation, the Banking Insurance Fund or the Savings Association Insurance Fund; -23- 32 (g) investments in a money-market fund which may be a 12b-1 fund as registered under the Investment Company Act of 1940 and is rated at least the equivalent of AAm or AAm-G by S&P and P-1 by Moody's; (h) repurchase agreements with a term of six months or less with any institution having short-term, unsecured debt rated at least the equivalent of A-1 by S&P and P-1 by Moody's; (i) repurchase agreements collateralized by U.S. Government Obligations or Agency Obligations (the "Collateral Securities") with any registered broker-dealer which is under the jurisdiction of the Securities Investors Protection Corp. or any commercial bank, if such broker-dealer or bank has uninsured, unsecured and unguaranteed debt rated at least the equivalent of A-1 by S&P and P-1 by Moody's, provided that: (A) a master repurchase agreement or other specific written repurchase agreement governs the transaction; (B) the Collateral Securities are held free and clear of any other Lien by the Administrative Agent or an independent third party acting solely as agent for the Administrative Agent, provided that any such third party (1) is (x) a Federal Reserve bank, (y) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less that $250 million, or (z) a bank approved in writing for such purpose by the Required Lenders, and (2) certifies in writing to the Administrative Agent (or delivers to the Administrative Agent a written opinion of counsel to such third party) that such third party holds the Collateral Securities free and clear of any Lien, as agent for the Administrative Agent; (C) a perfected first security interest under the Uniform Commercial Code is created in, or book entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq. are followed with respect to, the Collateral Securities for the benefit of the Administrative Agent; (D) such repurchase agreement has a term of 30 days or less; (E) such repurchase agreement matures (or permits the Administrative Agent to withdraw all or any portion of the invested funds) at least ten (10) days (or other appropriate liquidation period) prior to each Quarterly Payment Date; (F) the fair market value of the Collateral Securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least one hundred and three percent (103%) (as determined by the Borrower and certified by the chief financial or accounting Authorized Officer of the Borrower to the Administrative Agent in a certificate in form and substance satisfactory to the Administrative Agent); and -24- 33 (G) the Administrative Agent obtains an opinion of counsel to such broker-dealer or bank to the effect that such repurchase agreement is a legal, valid, binding and enforceable agreement of such broker-dealer or bank (and, in the case of a bank which is a branch of a foreign bank, of such foreign bank) in accordance with its terms; and (j) any other similar investments that are requested by the Borrower to be classified as "High Quality Investments" and consented to by the Administrative Agent in its sole and absolute discretion. "Impermissible Qualification" means, relative to the opinion or certification of any independent public accountant as to any financial statement of the Borrower, the Parent or any other Obligor, any qualification or exception to such opinion or certification (a) which is of a "going concern" or similar nature; (b) which relates to the limited scope of examination of matters relevant to such financial statement; or (c) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause the Borrower, the Parent or such other Obligor to be in default of any of its obligations under Section 8.2.4. "including" and "include" means including without limiting the generality of any description preceding such term, and, for purposes of this Agreement and each other Loan Document, 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. "Indebtedness" of any Person means, without duplication: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities; (d) all other items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined; -25- 34 (e) net liabilities of such Person under all Hedging Obligations; (f) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; (g) Redeemable Capital Stock; and (h) all Contingent Liabilities of such Person in respect of any of the foregoing. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer to the extent there is recourse to such Person with respect to such Indebtedness. "Indemnified Liabilities" is defined in Section 12.4. "Indemnified Parties" is defined in Section 12.4. "Interest Coverage Ratio" means, at the end of any Fiscal Quarter, the ratio of (a) Adjusted EBITDA for the four consecutive Fiscal Quarters ending on the last day of such Fiscal Quarter to (b) Non-Vehicle Interest Expense for the four consecutive Fiscal Quarters ending on the last day of such Fiscal Quarter. "Interest Period" means, relative to any Eurocurrency Loan, the period beginning on (and including) the date on which such Eurocurrency Loan is made or continued as, or converted into, a Eurocurrency Loan pursuant to Section 2.3 or 2.4 and ending on (but excluding) the day which numerically corresponds to such date one, two, three or six months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month) as the Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4; provided, however, that (a) the Borrower shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than seven different dates; (b) Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration; (c) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless, if such -26- 35 Interest Period applies to Eurocurrency Loans, such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); and (d) no Interest Period may end later than the Stated Maturity Date. "Investment" means, relative to any Person, (a) any loan or advance made by such Person to any other Person (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business); (b) any Contingent Liability of such Person; and (c) any ownership or similar interest held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property. "Issuance Request" means a request and certificate duly executed by the chief executive, accounting or financial Authorized Officer of the Borrower, in substantially the form of Exhibit B-2 attached hereto (with such changes thereto as may be agreed upon from time to time by the Administrative Agent and the Borrower). "Issuer" means Credit Suisse First Boston or any of its affiliates, and/or any other Lender having short-term credit ratings of A-1 (or better) from S&P and P-1 from Moody's which has agreed to issue one or more Letters of Credit at the request of the Administrative Agent (which shall, at the Borrower's request, notify the Borrower from time to time of the identity of such other Lender). "Lender Assignment Agreement" means a Lender Assignment Agreement substantially in the form of Exhibit J hereto. "Lenders" is defined in the preamble and, in addition, shall include any commercial bank or other financial institution that becomes a Lender pursuant to Section 12.11.1. "Letter of Credit" means, collectively, Enhancement Letters of Credit and General Letters of Credit, which letters of credit, in each case, shall be irrevocable standby letters of credit in such form as may be requested by the Borrower and approved by the Issuer. "Letter of Credit Commitment" means, relative to any Lender, such Lender's obligation to issue (in the case of the Issuer) or participate in (in the case of all Lenders) Letters of Credit pursuant to Section 2.1.2. -27- 36 "Letter of Credit Commitment Termination Date" means the earliest of (a) May 30, 1997 (if the initial Credit Extension has not occurred on or prior to such date); (b) the first Business Day prior to the Stated Maturity Date; (c) the date on which the Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and (d) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clause (c) or (d) above, the Letter of Credit Commitments shall terminate automatically and without any further action. "Letter of Credit Outstandings" means, at any time, an amount equal to the sum of (a) the aggregate Stated Amount at such time of all Letters of Credit then outstanding and undrawn (as such aggregate Stated Amount shall be adjusted, from time to time, as a result of drawings, the issuance of Letters of Credit, or otherwise); plus (b) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations. "Leverage Ratio" means, at the end of any Fiscal Quarter, the ratio of (a) Adjusted Debt as at the last day of such Fiscal Quarter to (b) Adjusted EBITDA for the four consecutive Fiscal Quarters ending on the last day of such Fiscal Quarter. "Lien" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property, or other priority or preferential arrangement of any kind or nature whatsoever, to secure payment of a debt or performance of an obligation. "Liquidity Facility" means the Liquidity Agreement, dated as of the date hereof, among Budget Funding Corporation, the lenders party thereto and Credit Suisse First Boston, as the Liquidity Agent for such lenders, as the same may be amended, supplemented, amended and restated, replaced or otherwise modified from time to time in accordance with the terms hereof. "Liquidity Obligation" is defined in Section 4.5. -28- 37 "Loan" is defined in Section 2.1.1. "Loan Commitment" means, relative to any Lender, such Lender's obligation to make Loans pursuant to Section 2.1.1. "Loan Commitment Amount" means, on any date, $100,000,000, as such amount may be reduced from time to time pursuant to Section 2.2. "Loan Commitment Termination Date" means the earliest of (a) May 30, 1997 (if the initial Credit Extension has not occurred on or prior to such date); (b) the Stated Maturity Date; (c) the date on which the Loan Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and (d) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clause (c) or (d) above, the Loan Commitments shall terminate automatically and without any further action. "Loan Document" means this Agreement, the Notes, the Pledge Agreements, the Security Agreements, the Subsidiary Guaranty, the Letters of Credit, the Enhancement Letter of Credit Application and Agreements, the Foreign Pledge Agreements, Deposit Account Agreements (as defined in the Security Agreements) and each other agreement, certificate, document or instrument delivered in connection with this Agreement and such other agreements, whether or not specifically mentioned herein or therein. "LOC Liquidity Disbursement" means, with respect to any Enhancement Letter of Credit, any drawing thereunder to the extent such drawing is for the purpose of providing liquidity support to Budget Funding Corporation or another SPC which has issued highly-rated commercial paper in connection with the financing of Vehicles, including any LOC Liquidity Disbursement (as defined in the CP Enhancement Letter of Credit Application and Agreement) under the CP Enhancement Letter of Credit and the portion of any LOC Termination Disbursement (as defined in the CP Enhancement Letter of Credit Application and Agreement) allocable to Budget Funding Corporation. "local time" means (a) relative to matters in respect of Foreign Currency Loans denominated in Australian Dollars, Sydney, Australia time; (b) relative to matters in respect of Foreign Currency Loans denominated in New Zealand Dollars, Wellington, New Zealand time; -29- 38 (c) relative to matters in respect of Foreign Currency Loans denominated in French Francs, Paris, France time; (d) relative to matters in respect of Foreign Currency Loans denominated in Swiss Francs, Zurich, Switzerland time; (e) relative to matters in respect of Foreign Currency Loans denominated in Sterling, London, England time; and (f) relative to any matter not set forth in clauses (a) through (e) above, New York City, New York time. "Moody's" means Moody's Investors Service, Inc. "NationsBanc" is defined in the preamble. "Net Adjusted Debt" means, at any time, the excess of (a) Adjusted Debt at such time over (b) the amount obtained by taking the average of unrestricted cash of the Borrower at such time (including the aggregate amount of Eligible Cash and Cash Equivalents of the Borrower that is included in the Borrowing Base Amount at such time) and the amount of such unrestricted cash as of the last Business Day of each of the preceding two calendar months. "Net Disposition Proceeds" means the excess of (a) the gross cash proceeds received by the Borrower, the Parent or any of their respective Subsidiaries from any sale, transfer or conveyance of assets permitted pursuant to clause (c) of Section 8.2.10 excluding any such sale, transfer or conveyance permitted pursuant to clause (a) of Section 8.2.10 (collectively referred to herein for purposes of this definition as a "permitted disposition") and any cash payments received in respect of promissory notes or other non-cash consideration delivered to the Borrower, the Parent or such Subsidiary in respect of any permitted disposition. over (b) the sum of (i) all reasonable and customary fees and expenses with respect to legal, investment banking, brokerage and accounting and other professional fees, sales commissions and disbursements actually incurred in connection with such -30- 39 permitted disposition which have not been paid (other than in the case of reasonable out-of-pocket expenses) to Affiliates of the Borrower or the Parent; plus (ii) all taxes and other governmental costs and expenses actually paid or estimated by the Borrower, the Parent or such Subsidiary (in good faith) to be payable in cash in connection with such permitted disposition; plus (iii) payments made by the Borrower, the Parent or such Subsidiary to retire Indebtedness (other than the Loans) of the Borrower, the Parent or such Subsidiary where payment of such Indebtedness is required in connection with such permitted disposition; provided, however, that if, after the payment of all taxes with respect to such permitted disposition, the amount of estimated taxes, if any, pursuant to clause (b)(ii) above exceeded the tax amount actually paid in respect of such permitted disposition, the Commitment Amount shall be immediately and automatically reduced by an amount equal to the aggregate amount of such excess. "Net Equity Proceeds" means, with respect to the sale or issuance by the Borrower, the Parent or any of their respective Subsidiaries to any Person (other than the Parent, the Borrower or any of their respective Subsidiaries) of any Capital Stock, other than pursuant to the Equity Offering, or any warrants or options with respect to such Capital Stock or the exercise of any such warrants or options, the excess of: (a) the gross cash proceeds received by the Borrower, the Parent or such Subsidiary from such sale, exercise or issuance (other than proceeds received with respect to employee incentive stock options or deferred stock purchase plans), over (b) all reasonable and customary fees and expenses with respect to underwriting commissions and legal, investment banking, brokerage and accounting and other professional fees, sales commissions and disbursements actually incurred in connection with such sale or issuance or exercise which have not (other than in the case of reasonable out-of-pocket expenses) been paid to Affiliates of the Borrower or the Parent in connection therewith. "Net Income" means, for any applicable period, the aggregate of all amounts which, in accordance with GAAP, would be included as net income (or net loss) on a consolidated statement of income of the Parent and its Subsidiaries for such period; provided, however, that, in the event any such period would include a Pre-Acquisition Period, Net Income for such Pre-Acquisition Period -31- 40 would equal the sum of (i) in the event such Pre-Acquisition Period would include the Fiscal Quarter ending December 31, 1996, ($1,682,000) plus (ii) Net Income for the remainder of such Pre-Acquisition Period (or, if the preceding clause (i) is not applicable, for the entirety of such Pre-Acquisition Period) determined on a pro forma basis after giving effect to consummation of the Transaction in a manner consistent with the pro forma financial statements set forth in the Registration Statement. "Net Issuance Proceeds" means, as to any issuance of indebtedness for borrowed money by the Borrower, the Parent or any of their respective Subsidiaries, the excess of: (a) the gross cash proceeds received by the Borrower, the Parent or such Subsidiary from such issuance, over (b) all reasonable and customary fees and expenses with respect to underwriting commissions and legal, investment banking, brokerage and accounting and other professional fees, sales commissions and disbursements actually incurred in connection with such issuance which have not (other than in the case of reasonable out-of-pocket expenses) been paid to Affiliates of the Borrower or the Parent in connection therewith. "Net Worth" means, with respect to any Person at any date, on a consolidated basis for such Person and its Subsidiaries, the excess of: (a) the sum of capital stock taken at par value, capital surplus and retained earnings (or accumulated deficit) of such Person at such date; over (b) treasury stock of such Person and, to the extent included in the preceding clause (a), minority interests in Subsidiaries of such Person at such date. "New Zealand Dollars" and the symbol "NZ$" mean the lawful currency of New Zealand. "Non-Material Subsidiary" means any Subsidiary of the Borrower that (a) accounted for no more than 1/2 of 1% of consolidated revenues of the Parent and its Subsidiaries or 1/2 of 1% of consolidated earnings of the Parent and its Subsidiaries before interest and taxes, in each case for the four consecutive Fiscal Quarters of the Parent ending on the last day of the most recently completed Fiscal Quarter with respect to which, pursuant to Section 8.1.1, financial statements have been, or are required to have been, delivered by the Borrower or the Parent to the Administrative Agent, and (b) has assets which represent no more than 1/2 of 1% of the consolidated assets of the Parent and its Subsidiaries as of the last day of the last Fiscal Quarter of the most recently completed Fiscal Quarter with respect to which, pursuant to Section 8.1.1, -32- 41 financial statements have been, or are required to have been, delivered by the Borrower or the Parent to the Administrative Agent, to the extent that Non-Material Subsidiaries do not (i) account in the aggregate for more than 2 1/2% of consolidated revenues of the Parent and its Subsidiaries or 2 1/2% of consolidated earnings of the Parent and its Subsidiaries before interest and taxes, in each case for the four consecutive Fiscal Quarters of the Parent ending on the last day of the most recently completed Fiscal Quarter with respect to which, pursuant to Section 8.1.1, financial statements have been, or are required to have been, delivered by the Borrower or the Parent to the Administrative Agent, or (ii) have assets which represent more than 2 1/2% of the consolidated assets of the Parent and its Subsidiaries as of the last day of the last Fiscal Quarter of the most recently completed Fiscal Quarter with respect to which, pursuant to Section 8.1.1, financial statements have been, or are required to have been, delivered by the Borrower or the Parent to the Administrative Agent. "Non-Vehicle Debt" means (a) Total Debt minus (b) to the extent included in such Total Debt, Vehicle Debt plus (c) to the extent included in such Vehicle Debt, the sum of (i) with respect to Vehicles owned by TFFC or any other SPC and leased to the Borrower or any Subsidiary of the Borrower, any obligation of the Borrower or such Subsidiary with respect to such Vehicles which, when added to all rental payments previously made by the Borrower or such Subsidiary and the next regularly scheduled rental payment to be made by the Borrower or such Subsidiary with respect to such Vehicles, exceeds the sum of the aggregate Depreciation Charges (as defined in the Base Indenture) with respect to such Vehicles plus any fair market value adjustment with respect to such Vehicles provided for in the documents relating to the lease applicable to such Vehicles plus (ii) with respect to Vehicles owned by the Borrower or any Subsidiary of the Borrower (other than TFFC or another SPC), any obligation of the Borrower or such Subsidiary with respect to such Vehicles which exceeds the excess of (x) the aggregate Capitalized Cost (as defined in the Base Indenture) of such Vehicles over (y) the sum of the aggregate Depreciation Charges (as defined in the Base Indenture) accrued with respect to such Vehicles plus any fair market value adjustment with respect to such Vehicles provided for in the documents relating to the financing arrangements applicable to such Vehicles. -33- 42 "Non-Vehicle Interest Expense" means, for any applicable period, the excess of (a) the aggregate consolidated gross interest expense of the Parent and its Subsidiaries for such period, as determined in accordance with GAAP ("Aggregate Interest Expense"), including (i) commitment fees paid or owed with respect to the then unutilized portion of the Loan Commitment Amount, (ii) all other fees paid or owed with respect to the issuance or maintenance of Contingent Liabilities (including letters of credit), which, in accordance with GAAP, would be included as interest expense, (iii) net costs or benefits under Hedging Arrangements and (iv) the portion of any payments made in respect of Capitalized Lease Liabilities of the Parent and its Subsidiaries allocable to interest expense, but excluding the amortization of debt issuance costs and other financing expenses incurred in connection with the Transaction (provided that, in the event any such period would include a Pre-Acquisition Period, such gross interest expense for such Pre-Acquisition Period would equal the sum of (A) in the event such Pre-Acquisition Period would include the Fiscal Quarter ending December 31, 1996, $31,053,000 (of which $24,753,000 is on account of Vehicle Debt) plus (B) gross interest expense for the remainder of such Pre-Acquisition Period (or, if the preceding clause (A) is not applicable, for the entirety of such Pre-Acquisition Period) determined on a pro forma basis after giving effect to consummation of the Transaction in a manner consistent with the pro forma financial statements set forth in the Registration Statement) over (b) to the extent included in the preceding clause (a), gross interest expense in respect of Vehicle Debt. "Note" means a promissory note of the Borrower payable to the order of any Lender, in the form of Exhibit A hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Obligations" means all obligations (monetary or otherwise, whether absolute or contingent, matured or unmatured, direct or indirect, choate or inchoate, 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 Notes, the Letters of Credit and each other Loan Document. "Obligor" means, as the context may require, the Borrower, the Parent and any other Person (other than any Agent, the Issuer or any Lender) to the extent such Person is obligated under, or otherwise a party to, this Agreement or any other Loan Document. "OECD" means the Organization for Economic Cooperation and Development. "Organic Document" means, relative to any Obligor, as applicable, its certificate of incorporation, by-laws, certificate of partnership, partnership agreement, certificate of formation, -34- 43 limited liability agreement and all shareholder agreements, voting trusts and similar arrangements applicable to any of such Obligor's partnership interests, limited liability company interests or authorized shares of capital stock. "Parent" is defined in the preamble. "Parent Closing Date Certificate" means the closing date certificate executed and delivered by the Parent pursuant to Section 6.1.11, substantially in the form of Exhibit I-2 hereto. "Parent Guaranty" means the Obligations of the Parent undertaken pursuant to Article X. "Parent Pledge Agreement" means the Pledge Agreement executed and delivered by the Parent pursuant to Section 6.1.13, substantially in the form of Exhibit F-1 hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Parent Security Agreement" means the Security Agreement executed and delivered by the Parent pursuant to Section 6.1.14, substantially in the form of Exhibit G-3 hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Participant" is defined in Section 12.11.2. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Pension Plan" means a "pension plan", as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "Percentage" means, relative to any Lender, the percentage set forth opposite its name in Schedule II hereto or set forth in the Lender Assignment Agreement, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to Section 12.11.1. "Permitted Business Acquisition" means any Business Acquisition, so long as (a) (i) such Business Acquisition is a Franchisee Acquisition; or (ii) in the case of a Business Acquisition other than a Franchisee Acquisition, the aggregate amount of expenditures of the Borrower and its Subsidiaries (excluding Vehicle Debt but including the aggregate amount of any and all other Indebtedness assumed in connection therewith and including the fair market value of any shares of Capital Stock of the Parent issued in connection therewith) in respect of such Business Acquisition (such amount, the "Subject Amount"), when added to the aggregate amount of all such expenditures of the Borrower and its Subsidiaries in respect of Business -35- 44 Acquisitions (other than Franchisee Acquisitions) during the Fiscal Year in which such Subject Amount would be expended, does not exceed $150,000,000 (provided that the portion thereof payable in cash does not exceed $50,000,000), and (b) in the event the Subject Amount (which amount shall include, in the event such Business Acquisition is to be consummated in a series of related transactions, the aggregate amount of all such expenditures of the Borrower and its Subsidiaries in respect of such related transactions) would exceed $10,000,000 or in the event any portion of the consideration in respect of such Business Acquisition is in Capital Stock of the Parent, the Administrative Agent shall have received a Compliance Certificate executed by the chief financial or accounting Authorized Officer of the Parent certifying and, if reasonably requested by the Administrative Agent, showing (in reasonable detail and with appropriate calculations and computations in all respects reasonably satisfactory to the Administrative Agent) that on a historical pro forma basis (after giving effect to such Business Acquisition and all transactions related thereto (including all Indebtedness that would be assumed or incurred as a result of such acquisition) and all Business Acquisitions consummated prior thereto during the applicable periods thereunder) as of the last day of the most recently completed Fiscal Quarter with respect to which, pursuant to Section 8.1.1, financial statements have been, or are required to have been, delivered by the Borrower or the Parent and the Borrower would be in compliance with Section 8.2.4 as of the last day of such Fiscal Quarter and would not suffer an increase in the Leverage Ratio as of such date. "Person" means any natural person, corporation, limited liability company, partnership, joint venture, joint stock company, firm, association, trust or unincorporated organization, government, governmental agency, court or any other legal entity, whether acting in an individual, fiduciary or other capacity. "Plan" means any Pension Plan or Welfare Plan. "Pledge Agreement" means, as the context may require, the Parent Pledge Agreement, the Borrower Pledge Agreement or the Subsidiary Pledge Agreement. "Pre-Acquisition Period" means the period prior to the Acquisition Date. "Quarterly Payment Date" means the last Business Day of each March, June, September, and December. "Rating Agencies" means S&P and Moody's. "Receivable" means any right to payment for goods sold or leased or for services rendered, whether or not earned by performance, including any right to payment under any franchise agreement. -36- 45 "Redeemable Capital Stock" means Capital Stock of the Borrower, the Parent or any of their respective Subsidiaries that, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, (i) is or upon the happening of an event or passage of time would be required to be redeemed (for consideration other than shares of common stock of the Parent) on or prior to April 30, 2003, (ii) is redeemable at the option of the holder thereof (for consideration other than shares of common stock of the Parent) at any time prior to such date or (iii) is convertible into or exchangeable for debt securities of the Parent, the Borrower or any of their respective Subsidiaries at any time prior to such anniversary. "Reference Lenders" means Credit Suisse First Boston, NationsBanc and Caisse Nationale de Credit Agricole or, in the event that any one of such banks ceases to be a Lender hereunder at any time, any other commercial bank designated by the Borrower and approved by the Administrative Agent as constituting a "Reference Lender" hereunder. "Registration Statement" means the Registration Statement of the Parent on Form S-1, filed with the SEC under the Securities Act on February 12, 1997 (File No. 333-21691), as last amended on April 18, 1997. "Reimbursement Obligation" is defined in Section 4.6. "Related Person" means, with respect to any natural person, (a) any lineal descendant or antecedent, father, mother, spouse, brother, sister or executor of such person or (b) a partnership, corporation, limited liability company, trust or other entity formed solely for the benefit of any of the foregoing. "Release" means a "release", as such term is defined in CERCLA. "Required Lenders" means, at any time, Lenders holding at least 51% of the sum of the aggregate principal amount of the Loans then outstanding plus the Letter of Credit Outstandings, or if no Loans and Letters of Credit are then outstanding, Lenders having at least 51% of the Commitment Amount; provided, however, that, in the event that at any such time the Co- Syndication Agents (and their Affiliates) hold at least 40% of the sum of the aggregate principal amount of the Loans then outstanding plus the Letter of Credit Outstandings, or if no Loans and Letters of Credit are then outstanding, have at least 40% of the Commitment Amount, then "Required Lenders" shall mean (other than for purposes of determining the Lenders necessary to declare all or any portion of the Loans to be due and payable, to terminate any Commitment or to demand compliance with Section 4.7) Lenders holding at least 662/3% of the sum of the aggregate principal amount of the Loans then outstanding plus the Letter of Credit Outstandings, or if no Loans and Letters of Credit are then outstanding, Lenders having at least 662/3% of the Commitment Amount. "Resource Conservation and Recovery Act" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended. "S&P" means Standard & Poor's Rating Services. -37- 46 "SEC" means the Securities and Exchange Commission. "Secured Parties" means the Lenders, the Issuer, the Agents and each of their respective successors, transferees and assigns. "Securities Act" means the Securities Act of 1933, as amended. "Security Agreement" means, as the context may require, the Borrower Security Agreement, the Subsidiary Security Agreement or the Parent Security Agreement. "Senior Debt Offering" is defined in the third recital. "Senior Note Purchase Agreements" means the several Note Purchase Agreements, dated as of April 25, 1997, in each case between the Borrower and the purchaser named therein, as the same may be amended, supplemented, amended and restated or otherwise modified from time to time in accordance with the terms hereof. "Senior Notes" means the 9.57% Guaranteed Senior Notes due 2007 of the Borrower, issued pursuant to the Senior Note Purchase Agreements, as the same may be amended, supplemented, amended and restated or otherwise modified from time to time in accordance with the terms hereof. "Series A Note Purchase Agreements" means the several Note Purchase Agreements, dated as of December 1, 1996, in each case between the Parent and the purchaser named therein, as supplemented and amended by the Series B Note Purchase Agreements and as the same may be amended, supplemented, amended and restated or otherwise modified from time to time in accordance with the terms hereof. "Series B Note Purchase Agreements" means the several Note Purchase Agreements, dated as of April 25, 1997, in each case between the Parent and the purchaser named therein, as the same may be amended, supplemented, amended and restated or otherwise modified from time to time in accordance with the terms hereof. "Series A Notes" means the 7.0% Convertible Subordinated Notes, Series A, due 2007 of the Parent, issued pursuant to the Series A Note Purchase Agreements, as the same may be amended, supplemented, amended and restated or otherwise modified from time to time in accordance with the terms hereof. "Series B Notes" means the 6.85% Convertible Subordinated Notes, Series B, due 2007 of the Parent, issued pursuant to the Series B Note Purchase Agreements, as the same may be amended, supplemented, amended and restated or otherwise modified from time to time in accordance with the terms hereof. "SPC" means Budget Funding Corporation, TFFC and any other bankruptcy-remote Subsidiary of the Borrower formed for the specific purpose of issuing highly-rated commercial paper, medium-term notes or other securities in connection with the financing of Vehicles or for -38- 47 the specific purpose of owning such Vehicles and leasing such Vehicles to the Borrower and its other Subsidiaries, in each case pursuant to a structured financing or securitization program. "Stated Amount" of each Letter of Credit means the maximum amount available for drawing thereunder (whether or not any conditions to drawing can then be met). "Stated Expiry Date" is defined in Section 4.1. "Stated Maturity Date" means April 29, 2002. "Sterling" and the symbol "(pound)" mean the lawful currency of the United Kingdom of Great Britain and Northern Ireland. "Stock Purchase Agreements" is defined in the second recital. "Subordinated Debt" means all unsecured Indebtedness of the Parent, the Borrower or any Subsidiary Guarantor for money borrowed which is subordinated, upon terms satisfactory to the Administrative Agent, in right of payment to the payment in full in cash of all Obligations of the Parent, the Borrower or such Subsidiary Guarantor, as the case may be, including the Series A Notes and the Series B Notes. "Subordinated Intercompany Debt" means unsecured Indebtedness (a) subordinated to the Obligations by provisions substantially in the form set forth in Schedule IV hereto and (b) the terms of which (including interest rate) are not more burdensome to the obligor or obligors thereunder than those terms generally available from independent third parties to obligors similarly situated as such obligor or obligors. "Subsidiary" means, with respect to any Person, any corporation, partnership or other business entity of which more than 50% of the outstanding capital stock (or other ownership interest) having ordinary voting power to elect a majority of the board of directors, managers or other voting members of the governing body of such entity (irrespective of whether at the time capital stock (or other ownership interest) of any other class or classes of such entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. "Subsidiary Guarantor" means any Subsidiary of the Borrower that is a party to the Subsidiary Guaranty. "Subsidiary Guaranty" means the Guaranty executed and delivered by each Subsidiary that is a party thereto pursuant to Section 6.1.12, substantially in the form of Exhibit H hereto, as amended, supplemented, restated or otherwise modified from time to time. "Subsidiary Pledge Agreement" means, collectively, the Pledge Agreement executed and delivered by each Subsidiary party thereto pursuant to Section 6.1.13, substantially in the form -39- 48 of Exhibit F-3 hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Subsidiary Security Agreement" means, collectively, the Security Agreement executed and delivered by each Subsidiary pursuant to Section 6.1.14, substantially in the form of Exhibit G-2 hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Supermajority Lenders" means, at any time, Lenders holding at least 66 2/3% of the sum of the aggregate principal amount of the Loans then outstanding plus the Letter of Credit Outstandings, or if no Loans and Letters of Credit are then outstanding, Lenders having at least 66 2/3% of the Commitment Amount; provided, however, that, in the event that at any such time the Co-Syndication Agents (and their Affiliates) hold at least 40% of the sum of the aggregate principal amount of the Loans then outstanding plus the Letter of Credit Outstandings, or if no Loans and Letters of Credit are then outstanding, have at least 40% of the Commitment Amount, then "Supermajority Lenders" shall mean Lenders holding at least 75% of the sum of the aggregate principal amount of the Loans then outstanding plus the Letter of Credit Outstandings, or if no Loans and Letters of Credit are then outstanding, Lenders having at least 75% of the Commitment Amount. "Swiss Francs" and the symbol "SFr" mean the lawful currency of The Swiss Confederation. "Taxes" is defined in Section 5.6. "TFFC" means Team Fleet Financing Corporation, a Delaware corporation and Wholly Owned Subsidiary of the Borrower. "Total Debt" means, without duplication, the aggregate amount of all Indebtedness of the Parent and its Subsidiaries, other than Indebtedness of the type described in clause (b) (except to the extent such Indebtedness consists of unreimbursed drawings under letters of credit), (d) or (e) of the definition of "Indebtedness" or, to the extent in respect of such Indebtedness, clause (h) of the definition of "Indebtedness". "Transaction" is defined in the third recital. "type" means, relative to any Loan, the portion thereof, if any, being maintained as an ABR Loan or a Eurocurrency Loan. "U.C.C." means the Uniform Commercial Code as from time to time in effect in the State of New York. "United States" or "U.S." means the United States of America, its fifty states and the District of Columbia. -40- 49 "U.S. Government Obligations" means direct obligations of, or obligations the timely payment of principal of and interest on which is fully and unconditionally guaranteed by, the United States. "Vehicle Debt" means Indebtedness relating solely to the financing of any Vehicle and secured thereby (and by related collateral), other than any such Vehicle financed hereunder pursuant to the Base Indenture Supplement; provided that any obligation included as Non-Vehicle Debt pursuant to clause (iii) of the definition thereof shall not be deemed to be Vehicle Debt. "Vehicle Interest Expense" is defined in clause (b) of the definition of "Non-Vehicle Interest Expense". "Vehicles" means all existing and hereafter acquired motor vehicle inventory of the Borrower and the Borrower's Subsidiaries, consisting of passenger automobiles, light trucks and vans, whether held for sale, lease or rental purposes. "Voting Stock" means, with respect to any Person, Capital Stock in respect of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers, trustees or other similar governing body of such Person (irrespective of whether or not at the time the Capital Stock of any other class or classes shall have or might have voting power by reason of the occurrence of any contingency). "Welfare Plan" means a "welfare plan", as such term is defined in Section 3(1) of ERISA. "Wholly Owned Subsidiary" means, with respect to any Person, a Subsidiary all the Capital Stock (other than directors' qualifying shares that are required under applicable law) of which is owned by such Person or another Wholly Owned Subsidiary of such Person. SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in the Disclosure Schedule and in each Note, Borrowing Request, Continuation/Conversion Notice, Issuance Request, Loan Document, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document. SECTION 1.3. Cross-References. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. -41- 50 SECTION 1.4. Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 8.2.4) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, those generally accepted accounting principles ("GAAP") applied in the preparation of the financial statements referred to in Section 7.5. Unless otherwise expressly provided, all financial covenants and defined financial terms shall be computed on a consolidated basis for the Parent and its Subsidiaries, in each case without duplication. ARTICLE II COMMITMENTS, BORROWING PROCEDURES AND NOTES SECTION 2.1. Commitments. On the terms and subject to the conditions of this Agreement (including Article VI), each Lender severally agrees as follows: SECTION 2.1.1. Loan Commitment. From time to time on any Business Day occurring prior to the Loan Commitment Termination Date, each Lender will make Loans (relative to such Lender, its "Loans") denominated in any Available Currency to the Borrower equal to such Lender's Percentage of the aggregate amount of the Borrowing of Loans requested by the Borrower to be made on such day. On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow Loans. SECTION 2.1.2. Commitment to Issue Letters of Credit. From time to time on any Business Day, the Issuer will issue, and each Lender will participate in, the Letters of Credit, in accordance with Article IV. SECTION 2.1.3. Lenders Not Permitted or Required To Make Loans or Issue Letters of Credit Under Certain Circumstances. No Lender shall be permitted or required to (a) make any Loan if, after giving effect thereto, the aggregate outstanding principal amount of all Loans (after converting all Foreign Currency Loans to the Equivalent thereof in Dollars) (i) denominated in Foreign Currencies of all Lenders would exceed the Foreign Currency Loan Commitment Amount, (ii) of all Lenders would exceed the Loan Commitment Amount, (iii) of all Lenders, together with all Letter of Credit Outstandings, would exceed the lesser of the Commitment Amount and the then existing Borrowing Base Amount, -42- 51 (iv) denominated in Foreign Currencies of such Lender would exceed such Lender's Percentage of the Foreign Currency Loan Commitment Amount, (v) of such Lender would exceed such Lender's Percentage of the Loan Commitment Amount, or (vi) of such Lender, together with its Percentage of all Letter of Credit Outstandings, would exceed such Lender's Percentage of the lesser of the Commitment Amount and the then existing Borrowing Base Amount; or (b) issue (in the case of the Issuer) any Letter of Credit if, after giving effect thereto (i) all Letter of Credit Outstandings in respect of Enhancement Letters of Credit would exceed the Enhancement Letters of Credit Commitment Amount, (ii) all Letter of Credit Outstandings, together with the aggregate outstanding principal amount of all Loans (after converting all Foreign Currency Loans to the Equivalent thereof in Dollars) of all Lenders would exceed the lesser of the Commitment Amount and the then existing Borrowing Base Amount, (iii) such Lender's Percentage of all Letter of Credit Outstandings in respect of Enhancement Letters of Credit would exceed such Lender's Percentage of the Enhancement Letters of Credit Commitment Amount, or (iv) such Lender's Percentage of all Letter of Credit Outstandings, together with the aggregate outstanding principal amount of all Loans (after converting all Foreign Currency Loans to the Equivalent thereof in Dollars) of such Lender would exceed such Lender's Percentage of the lesser of the Commitment Amount and the then existing Borrowing Base Amount. SECTION 2.2. Reduction of Commitment Amounts. The Commitment Amount, the Enhancement Letters of Credit Commitment Amount, the Loan Commitment Amount and the Foreign Currency Loan Commitment Amount are subject to reduction from time to time pursuant to this Section 2.2. SECTION 2.2.1. Optional. The Borrower may, from time to time on any Business Day occurring after the Closing Date, voluntarily reduce the unused amount of the Commitment Amount; provided, however, that all such reductions shall require at least three Business Days' prior notice to the Administrative Agent and be permanent, and any partial reduction of the Commitment Amount shall be in a minimum amount of $5,000,000 and in an integral multiple of $1,000,000. -43- 52 SECTION 2.2.2. Mandatory. The Commitment Amount shall, (a) on the first Business Day prior to the Stated Maturity Date, be reduced to the then existing Loan Commitment Amount; and (b) to the extent not applied to the permanent repayment of other Indebtedness that is not Subordinated Debt or Subordinated Intercompany Debt, concurrently with the receipt by the Borrower, the Parent or any of their respective Subsidiaries of any Net Disposition Proceeds, Net Equity Proceeds, Net Issuance Proceeds or Casualty Proceeds, as the case may be, be reduced by an aggregate amount equal to 100% of such Net Disposition Proceeds, 50% of such Net Equity Proceeds, 100% of such Net Issuance Proceeds or 100% of such Casualty Proceeds, as the case may be; provided, however, that the Commitment Amount shall not be reduced by the amount of any Casualty Proceeds received by the Borrower, the Parent or such Subsidiary under this clause (b) so long as (i) (A) the Borrower informs the Administrative Agent no later than 30 days following the occurrence of the Casualty Event resulting in such Casualty Proceeds of its, the Parent's or such Subsidiary's good faith intention to apply such Casualty Proceeds to the rebuilding or replacement of the property which was the subject of such Casualty Event, and (B) such Casualty Proceeds are in fact applied to rebuild or replace such damaged, destroyed or condemned property within 180 days following the receipt of such Casualty Proceeds, and (ii) no Default shall have occurred and be continuing. Each such reduction in the Commitment Amount shall be permanent and automatic. SECTION 2.2.3. Corresponding Reductions. Any reduction of the Commitment Amount which reduces the Commitment Amount below the then current amount of the Enhancement Letters of Credit Commitment Amount, the Loan Commitment Amount or the Foreign Currency Loan Commitment Amount, as the case may be, shall result in an automatic and corresponding reduction of the Enhancement Letters of Credit Commitment Amount, the Loan Commitment Amount or the Foreign Currency Commitment Amount, as the case may be, to the amount of the Commitment Amount, as so reduced, without any further action on the part of the Administrative Agent, the Lenders or otherwise. SECTION 2.3. Borrowing Procedure. By delivering a Borrowing Request to the Administrative Agent on or before 11:00 a.m. (New York City, New York time) on a Business Day, the Borrower may from time to time irrevocably request, (a) on such Business Day (but in any event not more than five Business Days' notice) in the case of ABR Loans denominated in Dollars, (b) on not less than three (but in any event not more than five) Business Days' notice in the case of Eurocurrency Loans denominated in Dollars, or (c) on not less than four (but in any event not more than six) Business Days' notice in the case of Eurocurrency Loans denominated in any Foreign Currency, -44- 53 that a Borrowing be made, in the case of ABR Loans, in a minimum amount of $3,000,000 and an integral multiple of $100,000, in the case of Eurocurrency Loans, in a minimum amount of $5,000,000 (or the Equivalent thereof in any Foreign Currency) and an integral multiple of $100,000 (or the Equivalent thereof in such Foreign Currency) or, in either case, in the unused amount of the Commitment (subject to the Foreign Currency Loan Commitment Amount if such Loan is a Eurocurrency Loan denominated in a Foreign Currency) and rounded to the nearest one hundred thousand units of such Foreign Currency in the case of Eurocurrency Loans denominated in a Foreign Currency. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the type of Loans, and shall be made on the Business Day, in the Available Currency specified in such Borrowing Request. On or before 1:00 p.m. (local time) on such Business Day, each Lender shall deposit with the Administrative Agent same day funds in the applicable Available Currency an amount equal to such Lender's Percentage of the requested Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Administrative Agent shall make such funds available to the Borrower by wire transfer to the accounts the Borrower shall have specified in its Borrowing Request. No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. SECTION 2.4. Continuation and Conversion Elections. By delivering a Continuation/Conversion Notice to the Administrative Agent on or before 11:00 a.m. (New York City, New York time) on a Business Day, the Borrower may from time to time irrevocably elect, (a) on such Business Day in the case of ABR Loans, (b) on not less than three (but in any event not more than five) Business Days' notice in the case of Eurocurrency Loans denominated in Dollars, or (c) on not less than four (but in any event not more than six) Business Days' notice in the case of Eurocurrency Loans denominated in any Foreign Currency, that all, or any portion in an aggregate minimum amount of $3,000,000 (or the Equivalent thereof in any Foreign Currency) and an integral multiple of $100,000 (or the Equivalent thereof in such Foreign Currency), in the case of any Eurocurrency Loan, be converted into an ABR Loan denominated in Dollars, or an aggregate minimum amount of $5,000,000 (or the Equivalent thereof in any Foreign Currency) and an integral multiple of $100,000 (or the Equivalent thereof in such Foreign Currency), in the case of any ABR Loan or Eurocurrency Loan, as the case may be, be converted into or continued as, as the case may be, a Eurocurrency Loan (in the absence of delivery of a Continuation/ Conversion Notice with respect to any Eurocurrency Loan at least three Business Days (but not more than five Business Days) before the last day of the then current Interest Period with respect thereto, such Eurocurrency Loan shall, on such last day, automatically convert to an ABR Loan); provided, however, that (i) each such conversion or continuation shall be pro rated among the applicable outstanding Loans of all Lenders, (ii) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, Eurocurrency Loans when any Default has occurred and is continuing and -45- 54 (iii) no Loan or portion of the outstanding principal amount of any Loan may be continued as or converted into a Loan denominated in an Available Currency other than the one in which it was originally issued, except that Eurocurrency Loans denominated in a Foreign Currency that are to be converted into ABR Loans shall only be converted into ABR Loans denominated in Dollars. SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its obligation to make, continue or convert Eurocurrency Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such Eurocurrency Loan; provided, however, that such Eurocurrency Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such Eurocurrency Loan shall nevertheless be to such 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 5.1, 5.2, 5.3 or 5.4, it shall be conclusively assumed that each Lender elected to fund all Eurocurrency Loans in an Available Currency by purchasing deposits in such Available Currency in its Eurocurrency Office's interbank eurodollar market. SECTION 2.6. Loan Accounts. (a) The Loans and participations in the Letter of Credit Outstandings made by each Lender and the Letters of Credit issued by the Issuer shall be evidenced by one or more loan accounts or records maintained by such Lender or the Issuer, as the case may be, in the ordinary course of business. The loan accounts or records maintained by the Administrative Agent, the Issuer and each Lender shall be conclusive absent manifest error of the amount of the Loans, the participations in Letter of Credit Outstandings and the Letters of Credit made by the Lenders and the Issuer, as the case may be, and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Loans and Letters of Credit, as the case may be, or of the Lenders with respect to participations in Letter of Credit Outstandings. (b) If requested by any Lender, such Lender's Loans under the Loan Commitment shall be evidenced by a Note payable to the order of such Lender in a maximum principal amount equal to such Lender's Percentage of the sum of (a) the difference of the original Loan Commitment Amount minus the original Foreign Currency Loan Commitment Amount plus (b) 103% of the original Foreign Currency Loan Commitment Amount. The Borrower hereby irrevocably authorizes each Lender having a Note to make (or cause to be made) appropriate notations on the grid attached to such Lender's 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 and Interest Period applicable to the Loans evidenced thereby, and whether such Loans are denominated in Dollars or a Foreign Currency. Such notations shall be conclusive and binding on the Borrower absent manifest error; provided, however, that the failure of any Lender having a Note to make any such notations shall not limit or otherwise affect any Obligations of the Borrower or any other Obligor. -46- 55 SECTION 2.7. Special Provisions for Loans Denominated in Foreign Currencies. SECTION 2.7.1. Notification of Request. If any Borrowing Request requests a Borrowing in a Foreign Currency, or if pursuant to any Continuation/Conversion Notice the Borrower elects to continue any Eurocurrency Loan denominated in a Foreign Currency, the Administrative Agent shall in the notice given to the Lenders pursuant to Section 2.3 or Section 2.4, as the case may be, give details of such request or election including, as the case may be, the aggregate principal amount of the Borrowing in such Foreign Currency to be made by each Lender pursuant to the terms of this Agreement or the aggregate principal amount of such Eurocurrency Loans to be continued by each Lender pursuant to the terms of this Agreement. SECTION 2.7.2. Availability. Each Lender shall be treated as having confirmed that the Foreign Currency requested, or elected by the Borrower to be continued, is Available to it unless no later than 10:00 a.m. (New York City, New York time) two Business Days prior to the day of the requested Borrowing, or the proposed continuation, it shall have notified the Administrative Agent that such Foreign Currency is not Available. SECTION 2.7.3. Notification of Availability. In the event the Administrative Agent has received notification from any of the Lenders that the Foreign Currency requested or elected by the Borrower to be continued is not available, then the Administrative Agent shall notify the Borrower and the Lenders no later than 12:00 noon (New York City, New York time) two Business Days prior to the day of the proposed Borrowing or proposed continuation. SECTION 2.7.4. Consequences of Non-Availability. If the Administrative Agent notifies the Borrower pursuant to Section 2.7.3 that any of the Lenders has notified the Administrative Agent that the Foreign Currency requested or elected by the Borrower to be continued is not Available, such notification shall (a) in the case of any Borrowing Request, revoke such Borrowing Request and (b) in the case of any Continuation/Conversion Notice, result in the Eurocurrency Loans denominated in such Foreign Currency being automatically converted into Eurocurrency Loans denominated in Dollars for a one month Interest Period on the last day of the then current Interest Period with respect to such Eurocurrency Loans denominated in such Foreign Currency. ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. Repayments and Prepayments. The Borrower shall repay in full the unpaid principal amount of each Loan upon the Stated Maturity Date. Prior thereto, the Borrower -47- 56 (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 Loans; provided, however, that (i) any such prepayment shall be made pro rata among Loans of the same type and denominated in the same Available Currency, and, if applicable, having the same Interest Period of all Lenders; (ii) all such voluntary prepayments shall require prior irrevocable written notice to the Administrative Agent received by the Administrative Agent no later than 11:00 a.m. (New York City, New York) (A) on such Business Day in the case of ABR Loans, (B) on not less than three (but in any event not more than five) Business Days' notice in the case of Eurocurrency Loans denominated in Dollars, or (C) on not less than four (but in any event not more than six) Business Days' notice in the case of Eurocurrency Loans denominated in any Foreign Currency; and (iii) all such voluntary partial prepayments shall be, in the case of ABR Loans, in an aggregate minimum amount of $3,000,000 and an integral multiple of $100,000 and, in the case of Eurocurrency Loans, in an aggregate minimum amount of $5,000,000 (or the Equivalent thereof in any Foreign Currency) and an integral multiple of $100,000 (or the Equivalent thereof in such Foreign Currency), in the case of Eurocurrency Loans denominated in a Foreign Currency, rounded to the nearest one hundred thousand unit of such Foreign Currency; (b) shall, on each date when (i) any reduction in the Commitment Amount shall become effective (including pursuant to Section 2.2), make a mandatory prepayment equal to the excess, if any, of the aggregate, outstanding principal amount of all Loans (after converting all Foreign Currency Loans to the Equivalent thereof in Dollars) and Letter of Credit Outstandings over the Commitment Amount in effect on such date (following such reduction); (ii) the aggregate unpaid principal amount of all Foreign Currency Loans (after converting all such Foreign Currency Loans to the Equivalent thereof in Dollars and multiplying such resulting amount by 97.08737864%) then outstanding exceeds the Foreign Currency Loan Commitment Amount in effect on such date, make a mandatory prepayment equal to the excess, if any, of the aggregate, outstanding principal amount of all Foreign Currency Loans (after -48- 57 converting all such Foreign Currency Loans to the Equivalent thereof in Dollars) over the Foreign Loan Commitment Amount in effect on such date; or (iii) the aggregate unpaid principal amount of all Loans (after converting all Foreign Currency Loans to the Equivalent thereof in Dollars and multiplying such resulting amount by 97.08737864%) and Letter of Credit Outstandings exceeds the lesser of the Commitment Amount in effect on such date and the Borrowing Base Amount in effect on such date, make a mandatory prepayment equal to the excess, if any, of the aggregate, outstanding principal amount of all Loans (after converting all Foreign Currency Loans to the Equivalent thereof in Dollars) and Letter of Credit Outstandings over the lesser of the Commitment Amount in effect on such date and the Borrowing Base Amount in effect on such date, which mandatory prepayment shall be applied (or held for application, as the case may be) by the Lenders (A) first, to the payment of the aggregate unpaid principal amount of those Foreign Currency Loans then outstanding equal to the excess, if any, of the aggregate, outstanding principal amount of all Foreign Currency Loans (after converting all such Foreign Currency Loans to the Equivalent thereof in Dollars) over the Foreign Currency Loan Commitment Amount in effect on such date (following such reduction, if applicable); (B) second, to the payment of the aggregate unpaid principal amount of those Loans then outstanding equal to the excess, if any, of the aggregate, outstanding principal amount of all Loans (after converting all Foreign Currency Loans to the Equivalent thereof in Dollars) over the Loan Commitment Amount in effect on such date (following such reduction, if applicable); (C) third, to the payment and/or cash collateralization of the then outstanding Letter of Credit Outstandings in respect of Enhancement Letters of Credit equal to the excess, if any, of the Letter of Credit Outstandings in respect of the Enhancement Letters of Credit over the Enhancement Letters of Credit Commitment Amount in effect on such date (following such reduction, if applicable); (D) fourth, to the payment and/or cash collateralization of the then outstanding Letter of Credit Outstandings equal to the excess, if any, of the Letter of Credit Outstandings over the lesser of the Commitment Amount in effect on such date (following such reduction, if applicable) and the Borrowing Base Amount in effect on such date; and (E) fifth, to the payment of the aggregate unpaid principal amount of the Loans denominated in Dollars then outstanding, then to the payment of the -50- 58 aggregate unpaid principal amount of all Foreign Currency Loans then outstanding, and then to the payment and/or cash collateralization of the then outstanding Letter of Credit Outstandings equal to the excess, if any, of the aggregate, outstanding principal amount of all Loans (after converting all Foreign Currency Loans to the Equivalent thereof in Dollars) and Letter of Credit Outstandings over the lesser of the Commitment Amount in effect on such date (following such reduction, if applicable) and the Borrowing Base Amount in effect on such date; and (c) shall, immediately upon any acceleration of the Stated Maturity Date of any Loans pursuant to Section 9.2 or Section 9.3, repay all Loans, unless, pursuant to Section 9.3, only a portion of all Loans is so accelerated. Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty (except as may be required by Section 5.4). SECTION 3.2. Interest Provisions. Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.2. SECTION 3.2.1. Rates. Pursuant to an appropriately delivered Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that Loans comprising a Borrowing accrue interest at a rate per annum: (a) on that portion maintained from time to time as an ABR Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin for such Loan; and (b) on that portion maintained as a Eurocurrency Loan, during each Interest Period applicable thereto, equal to the sum of the Eurocurrency Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin for such Loan. All Eurocurrency Loans 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 Eurocurrency Loan. SECTION 3.2.2. Post-Maturity Rates. After the date any principal amount of any Loan is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise), or after any other monetary Obligation of the Borrower or any other Obligor, as the case may be, shall have become due and payable, the Borrower or such other Obligor, as the case may be, shall pay, but only to the extent permitted by law and not otherwise provided for in any Enhancement Letter of Credit in respect of a Liquidity Obligation, interest (after as well as before judgment) on such amounts at a rate per annum equal (a) in the case of such amounts that are comprised of the principal amount of any Loan, to 2.0% above the rate otherwise applicable thereto; and -50- 59 (b) in the case of such amounts that are comprised of any monetary obligation of the Borrower or such other Obligor (other than such obligations comprised of the principal amount of any Loan), to the Alternate Base Rate from time to time in effect plus a margin of 2.0%. SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be payable, without duplication: (a) on the Stated Maturity Date therefor; (b) on the date of any optional or required payment or prepayment, in whole or in part, of principal outstanding on such Loan; (c) with respect to ABR Loans, on each Quarterly Payment Date occurring after the Closing Date; (d) with respect to Eurocurrency Loans, on the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, on the same calendar day of every third month of such Interest Period as the day on which such Interest Period commenced); (e) with respect to any ABR Loans converted into Eurocurrency Loans on a day when interest would not otherwise have been payable pursuant to clause (c), on the date of such conversion; and (f) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to Section 9.2 or Section 9.3, immediately upon such acceleration. Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.2.4. Interest Rate Determination. Each Reference Lender agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurocurrency Rate. If any one or more of the Reference Lenders shall fail timely to furnish such information to the Administrative Agent for any such interest rate, the Administrative Agent shall determine such interest rate on the basis of the information furnished by the remaining Reference Lenders. SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in this Section 3.3. All such fees shall be non-refundable. SECTION 3.3.1. Commitment Fees. The Borrower agrees to pay to the Administrative Agent for the account of each Lender, for the period (including any portion thereof when any of its Commitment is suspended by reason of the Borrower's inability to satisfy any condition of -51- 60 Article VI) commencing on the Effective Date and continuing through the Loan Commitment Termination Date, a commitment fee equal to the Applicable Commitment Fee on such Lender's Percentage of the sum of the average daily unused portion of the Commitment Amount. Such commitment fee shall be payable by the Borrower in arrears on each Quarterly Payment Date, commencing with the first such day following the Effective Date, and on the Loan Commitment Termination Date. SECTION 3.3.2. Arrangement Fees. In accordance with the letter agreement (the "Fee Letter") among the Borrower and Credit Suisse First Boston dated March 24, 1997, the Borrower shall pay on the Closing Date an arrangement fee to the Arranger for the account of the Lenders in such proportion as the Arranger shall determine in its sole discretion. SECTION 3.3.3. Administrative Agent's Fee. The Borrower agrees to pay to the Administrative Agent for its own account, a non-refundable initial fee in the amount set forth in the Fee Letter, payable on the Closing Date and, thereafter, a non-refundable annual fee in the amount set forth in the Fee Letter, payable in advance on each anniversary of the Closing Date. SECTION 3.3.4. Letter of Credit Face Amount Fee. The Borrower agrees to pay to the Administrative Agent, for the account of the Lenders, a fee for each Letter of Credit for the period from and including the date of the issuance of such Letter of Credit to (but not including) the date upon which such Letter of Credit expires, calculated at a per annum rate equal to the Applicable Margin with respect to Eurocurrency Loans on the Stated Amount of such Letter of Credit. Such fee shall be payable by the Borrower in arrears each Quarterly Payment Date, and on the Letter of Credit Commitment Termination Date for any period then ending for which such fee shall not theretofore have been paid, commencing on the first such date after the issuance of such Letter of Credit. SECTION 3.3.5. Letter of Credit Issuing Fee. The Borrower agrees to pay to the Administrative Agent, for the account of the Issuer, an issuing fee for each Letter of Credit for the period from and including the date of issuance of such Letter of Credit to (but not including) the date upon which such Letter of Credit expires, of 1/8% per annum on the Stated Amount of such Letter of Credit. Such fee shall be payable by the Borrower in arrears on each Quarterly Payment Date and on the Letter of Credit Commitment Termination Date for any period then ending for which such fee shall not theretofore have been paid, commencing on the first such date after the issuance of such Letter of Credit. SECTION 3.3.6. Letter of Credit Administrative Fee. The Borrower agrees to pay to the Administrative Agent, for the account of the Issuer, the amounts set forth in Section 4.3. -52- 61 ARTICLE IV LETTERS OF CREDIT SECTION 4.1. Issuance Requests. By delivering to the Administrative Agent and the Issuer an Issuance Request, together with an Enhancement Letter of Credit Application and Agreement if such Issuance Request is in respect of an Enhancement Letter of Credit on or before 1:00 p.m. (New York City, New York time), the Borrower may request, from time to time prior to the Loan Commitment Termination Date and, except in the case of the Letters of Credit which are described in the Issuance Request and applicable Enhancement Letter of Credit Application and Agreement(s) delivered by the Borrower to the Administrative Agent pursuant to Section 6.1.16, on not less than two nor more than ten Business Days' notice, in the case of General Letters of Credit, and on not less than 15 nor more than 21 Business Days' notice, in the case of Enhancement Letters of Credit, that the Issuer issue Letters of Credit in support of financial obligations of the Borrower or any other Account Party incurred in the ordinary course of business of the Borrower or such Account Party, as the case may be, and which are described in such Issuance Request; provided that, in the case of an Issuance Request that requests an increase in the Stated Amount of an Enhancement Letter of Credit then outstanding, such Issuance Request shall be so delivered on not less than five nor more than ten Business Days notice. Upon receipt of an Issuance Request and, if applicable, an Enhancement Letter of Credit Application and Agreement, the Administrative Agent shall promptly notify the Lenders thereof. Each Letter of Credit shall by its terms: (a) be issued in a Stated Amount denominated in Dollars which (i) is at least $100,000; (ii) does not exceed (or would not exceed) (A) in the case of General Letters of Credit, an amount equal to the excess, if any, of the lesser of the Commitment Amount and the then existing Borrowing Base Amount over all Letter of Credit Outstandings, together with the aggregate outstanding principal amount of all Loans (after converting all Foreign Currency Loans to the Equivalent thereof in Dollars), and (B) in the case of the Enhancement Letters of Credit, an amount equal to the lesser of (1) the excess, if any, of the lesser of the Enhancement Letters of Credit Commitment Amount over all Letter of Credit Outstandings in respect of Enhancement Letters of Credit and (2) the excess, if any, of the lesser of the Commitment Amount and the then existing Borrowing Base Amount over all -53- 62 Letter of Credit Outstandings, together with the aggregate outstanding principal amount of all Loans (after converting all Foreign Currency Loans to the Equivalent thereof in Dollars); and (b) except in the case of the Letters of Credit set forth on Schedule V hereto, be stated to expire on a date (its "Stated Expiry Date") no later than the earlier of (i) (A) one year from its date of issuance, in the case of a General Letter of Credit, and (B) three years from its date of issuance, in the case of an Enhancement Letter of Credit, and (ii) the Letter of Credit Commitment Termination Date in effect at the time of such issuance. So long as no Default has occurred and is continuing, by delivery to the Issuer and the Administrative Agent of an Issuance Request, at least two but not more than ten Business Days prior to the Stated Expiry Date of any issued General Letter of Credit or prior to the date any issued General Letter of Credit containing an "evergreen" or similar automatic extension feature is scheduled to automatically be extended unless the beneficiary thereof shall have received notice to the contrary from the Issuer, the Borrower may request the Issuer to extend the Stated Expiry Date of such issued General Letter of Credit for an additional period not to exceed the earlier of (A) one year from its date of extension and (B) the Letter of Credit Commitment Termination Date in effect at the time of such extension. So long as no Default has occurred and is continuing, the Borrower (or the applicable Account Party) may request the Issuer to extend the Stated Expiry Date of any issued Enhancement Letter of Credit for an additional period not to exceed the earlier of (A) one year from its date of extension and (B) the Letter of Credit Commitment Termination Date in effect at the time of such extension; provided such request is made in accordance with the terms of the Enhancement Letter of Credit Application and Agreement relating thereto and is accompanied by delivery to the Issuer and the Administrative Agent of an Issuance Request. Notwithstanding any provision to the contrary, the Issuer may not issue any Enhancement Letter of Credit or enter into any Enhancement Letter of Credit Application and Agreement that provides for LOC Liquidity Disbursements (other than the CP Enhancement Letter of Credit or the CP Enhancement Letter of Credit Application and Agreement), unless each Lender has consented to the terms thereof. SECTION 4.2. Issuances and Extensions. On the terms and subject to the conditions of this Agreement (including Article VI), the Issuer shall issue Letters of Credit, and extend the Stated Expiry Dates of outstanding Letters of Credit, in accordance with the Issuance Requests made therefor and, if applicable, the Enhancement Letter of Credit Application and Agreement relating thereto. The Issuer shall promptly confirm any such issuance or extension (including the date of such issuance or extension), as the case may be, to the Administrative Agent. The Issuer will make available the original of each Letter of Credit which it issues in accordance with the Issuance Request and the Enhancement Letter of Credit Application and Agreement, if applicable, therefor to the beneficiary thereof (and will promptly provide each of the Lenders with a copy of such Letter of Credit) and will notify the beneficiary under any Letter of Credit of any extension of the Stated Expiry Date thereof. -54- 63 SECTION 4.3. Expenses. The Borrower agrees to pay to the Administrative Agent for the account of the Issuer all administrative expenses of the Issuer in connection with the issuance, maintenance, modification (if any) and administration of each Letter of Credit issued by the Issuer upon demand from time to time. SECTION 4.4. Other Lenders' Participation. Each Letter of Credit issued pursuant to Section 4.2 shall, effective upon its issuance and without further action, be issued on behalf of all Lenders (including the Issuer thereof) pro rata according to their respective Percentages. Each Lender shall, to the extent of its Percentage, be deemed irrevocably to have participated in the issuance of such Letter of Credit and (x) shall be responsible to reimburse promptly the Issuer thereof for Reimbursement Obligations which have not been reimbursed by the Borrower in accordance with Section 4.5, or which have been reimbursed by the Borrower but must be returned, restored or disgorged by the Issuer for any reason, or (y) in the case of an LOC Liquidity Disbursement, shall participate in such LOC Liquidity Disbursement in accordance with the terms of the Enhancement Letter of Credit Application and Agreement relating thereto. Each Lender shall, to the extent of its Percentage, be entitled to receive from the Administrative Agent a ratable portion of the letter of credit fees received by the Administrative Agent pursuant to Section 3.3.4 with respect to each Letter of Credit. In the event that (a) the Borrower shall fail to reimburse the Issuer, or if for any reason Loans shall not be made to fund any Reimbursement Obligation, all as provided in Section 4.5 and in an amount equal to the amount of any drawing honored by the Issuer under a Letter of Credit issued by it, (b) the Issuer must for any reason return or disgorge such reimbursement or (c) an LOC Liquidity Disbursement has occurred, the Issuer shall promptly notify the Administrative Agent of the unreimbursed amount of such drawing and of such Lender's respective participation therein. Each Lender shall make available to the Administrative Agent for the account of the Issuer, whether or not any Default shall have occurred and be continuing, an amount equal to its respective participation in same day or immediately available funds at the office of the Issuer specified in such notice not later than 11:00 a.m. (New York City, New York time) on the Business Day (under the laws of the jurisdiction of the Issuer) after the date notified by the Issuer. In the event that any Lender fails to make available to the Administrative Agent for the account of the Issuer the amount of such Lender's participation in such Letter of Credit as provided herein, the Issuer shall be entitled to recover such amount on demand from such Lender together with interest at the daily average Federal Funds Rate for three Business Days (together with such other compensatory amounts as may be required to be paid by such Lender to the Administrative Agent and/or the Issuer, as the case may be, pursuant to the Rules for Interbank Compensation of the council on International Banking or the Clearinghouse Compensation Committee, as the case may be, as in effect from time to time) and thereafter at the Alternate Base Rate plus 2.0%. Nothing in this Section shall be deemed to prejudice the right of any Lender to recover from the Issuer any amounts made available by such Lender to the Issuer pursuant to this Section in the event that it is determined by a court of competent jurisdiction that the payment with respect to a Letter of Credit by the Issuer in respect of which payment was made by such Lender constituted gross negligence or wilful misconduct on the part of the Issuer. The Issuer shall distribute to the Administrative Agent for the account of each other Lender which has paid all amounts payable by it under this Section with respect to any Letter of Credit issued by the Issuer such other Lender's Percentage -55- 64 of all payments received by the Issuer from the Borrower in reimbursement of drawings honored by the Issuer under such Letter of Credit when such payments are received. SECTION 4.5. Disbursements. The Issuer will notify the Borrower and the Administrative Agent promptly of the presentment for payment of any Letter of Credit, together with notice of the date (a "Disbursement Date") such payment shall be made. Subject to the terms and provisions of such Letter of Credit, the Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit. Prior to 11:00 a.m. (New York City, New York time) on the Disbursement Date, the Borrower will reimburse the Issuer for all amounts which it has disbursed under such Letter of Credit, except to the extent such amounts are in respect of an LOC Liquidity Disbursement (in which case such amounts shall be reimbursed to the Issuer or the Lenders by the applicable SPC in accordance with the provisions of the Enhancement Letter of Credit Application and Agreement relating thereto (the obligation of such SPC to reimburse the Issuer or the Lenders for such amounts in accordance with such terms being herein referred to as a "Liquidity Obligation")). To the extent the Issuer is not reimbursed in full in respect of any Reimbursement Obligation payable by the Borrower in accordance with the immediately preceding sentence, such Reimbursement Obligation shall accrue interest at a fluctuating rate determined by reference to the Alternate Base Rate, plus a margin of 2.0% per annum, payable on demand. In the event the Issuer is not reimbursed by the Borrower on the Disbursement Date for any Reimbursement Obligation in respect of any General Letter of Credit due and owing on such Disbursement Date, or if the Issuer must for any reason return or disgorge such reimbursement, the Lenders (including the Issuer) shall, on the terms and subject to the conditions of this Agreement (including the conditions set forth in Article VI), fund such Reimbursement Obligation by making, on the next Business Day, Loans which are ABR Loans as provided in Section 2.3 (the Borrower being deemed to have given a timely Borrowing Request therefor for such amount); provided, however, for the purpose of determining the availability of the Commitments to make Loans immediately prior to giving effect to the application of the proceeds of such Loans, such Reimbursement Obligation shall be deemed not to be outstanding at such time. SECTION 4.6. Reimbursement. The obligation (a "Reimbursement Obligation") of an Obligor under Section 4.5 or under the applicable Enhancement Letter of Credit Application and Agreement to reimburse the Issuer with respect to each disbursement (including interest thereon), and each Lender's obligation to make participation payments in each drawing which has not been reimbursed by the Borrower or the applicable Account Party, shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim, or defense to payment which the Borrower may have or have had against any Lender or any beneficiary of a Letter of Credit, including any defense based upon the occurrence of any Default, any draft, demand or certificate or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient, the failure of any disbursement to conform to the terms of the applicable Letter of Credit (if, in the Issuer's good faith opinion, such disbursement is determined to be appropriate) or any non-application or misapplication by the beneficiary of the proceeds of such disbursement, or the legality, validity, form, regularity, or enforceability of such Letter of Credit; provided, however, that nothing herein shall adversely affect the right of the Borrower to commence any proceeding against the Issuer for any wrongful -56- 65 disbursement made by the Issuer under a Letter of Credit as a result of acts or omissions constituting gross negligence or wilful misconduct on the part of the Issuer. SECTION 4.7. Deemed Disbursements. Upon the occurrence and during the continuation of any Event of Default or the occurrence of the Letter of Credit Commitment Termination Date, an amount equal to that portion of Letter of Credit Outstandings attributable to outstanding and undrawn Letters of Credit shall, at the election of the Issuer acting on instructions from the Required Lenders, and without demand upon or notice to the Borrower, be deemed to have been paid or disbursed by the Issuer under such Letters of Credit (notwithstanding that such amount may not in fact have been so paid or disbursed), and, upon notification by the Issuer to the Administrative Agent and the Borrower of its obligations under this Section, the Borrower shall be immediately obligated to reimburse the Issuer the amount deemed to have been so paid or disbursed by the Issuer. Any amounts so received by the Issuer from the Borrower pursuant to this Section shall be held as collateral security for the repayment of the Borrower's obligations in connection with the Letters of Credit issued by the Issuer. At any time when such Letters of Credit shall terminate and all Obligations of the Issuer are either terminated or paid or reimbursed to the Issuer in full, the Obligations of the Borrower under this Section shall be reduced accordingly (subject, however, to reinstatement in the event any payment in respect of such Letters of Credit is recovered in any manner from the Issuer), and the Issuer will return to the Borrower the excess, if any, of (a) the aggregate amount deposited by the Borrower with the Issuer and not theretofore applied by the Issuer to any Reimbursement Obligation over (b) the aggregate amount of all Reimbursement Obligations to the Issuer pursuant to this Section, as so adjusted. At such time when all Events of Default shall have been cured or waived, the Issuer shall return to the Borrower all amounts then on deposit with the Issuer pursuant to this Section. All amounts on deposit pursuant to this Section shall, until their application to any Reimbursement Obligation or their return to the Borrower, as the case may be, bear interest at the daily average Federal Funds Rate from time to time in effect (net of the costs of any reserve requirements, in respect of amounts on deposit pursuant to this Section, pursuant to F.R.S. Board Regulation D), which interest shall be held by the Issuer as additional collateral security for the repayment of the Borrower's Obligations in connection with the Letters of Credit issued by the Issuer. SECTION 4.8. Nature of Reimbursement Obligations. The Borrower shall assume all risks of the acts, omissions, or misuse of any Letter of Credit by the beneficiary thereof. Neither the Issuer nor any Lender (except to the extent of its own gross negligence or wilful misconduct) shall be responsible for: (a) the form, validity, sufficiency, accuracy, genuineness, or legal effect of any Letter of Credit or any document submitted by any party in connection with the -57- 66 application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent, or forged; (b) the form, validity, sufficiency, accuracy, genuineness, or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (c) failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit; (d) errors, omissions, interruptions, or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, or otherwise; or (e) any loss or delay in the transmission or otherwise of any document or draft required in order to make a disbursement under a Letter of Credit or of the proceeds thereof. None of the foregoing shall affect, impair, or prevent the vesting of any of the rights or powers granted the Issuer or any Lender hereunder. In furtherance and extension, and not in limitation or derogation, of any of the foregoing, any action taken or omitted to be taken by the Issuer in good faith shall be binding upon the Borrower and shall not put the Issuer under any resulting liability to the Borrower. SECTION 4.9. Indemnity. In addition to amounts payable as elsewhere provided herein, the Borrower hereby agrees to protect, indemnify, pay and save the Issuer harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees and allocated costs of internal counsel) which the Issuer may incur or be subject to as a consequence, direct or indirect, of (a) the issuance of the Letters of Credit, other than as a result of the gross negligence or wilful misconduct of the Issuer as determined by a court of competent jurisdiction, or (b) the failure of the Issuer to honor a drawing under any Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority. SECTION 4.10. Borrower's Guaranty of Reimbursement Obligations of its Subsidiaries. The Borrower agrees as follows in respect of the Reimbursement Obligations of its Subsidiaries (other than SPCs): SECTION 4.10.1. Guaranty. The Borrower hereby absolutely, unconditionally and irrevocably -58- 67 (a) guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all Reimbursement Obligations (other than Liquidity Obligations) now or hereafter existing, of each of its Subsidiaries that is an Account Party which arise out of, or are incurred in connection with, such Letters of Credit, whether for principal, interest, fees, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)), and (b) indemnifies and holds harmless each Secured Party and each holder of a Note for any and all costs and expenses (including reasonable attorney's fees and expenses) incurred by such Secured Party or such holder, as the case may be, in enforcing any rights under the guaranty contained in this Section 4.10. The guaranty contained in this Section 4.10 constitutes a guaranty of payment when due and not of collection, and the Borrower specifically agrees that it shall not be necessary or required that any Secured Party or any holder of any Note exercise any right, assert any claim or demand or enforce any remedy whatsoever against any Account Party or any other Obligor (or any other Person) before or as a condition to the obligations of the Borrower under the guaranty contained in this Section 4.10 (such obligations hereinafter referred to as the "Guaranteed Obligations"). SECTION 4.10.2. Acceleration of Guaranty. The Borrower agrees that, in the event of the dissolution or insolvency of any Account Party, any other Obligor or the Borrower, or the inability or failure of any Account Party, any other Obligor or the Borrower to pay debts as they become due, or an assignment by any Account Party, any other Obligor or the Borrower for the benefit of creditors, or the commencement of any case or proceeding in respect of any Account Party, any other Obligor or the Borrower under any bankruptcy, insolvency or similar laws, and if such event shall occur at a time when any of the Guaranteed Obligations of any Account Party may not then be due and payable, the Borrower agrees that it will pay to the Administrative Agent for the account of the Secured Parties forthwith the full amount which would be payable under the guaranty contained in this Section 4.10 by the Borrower if all such Guaranteed Obligations were then due and payable. SECTION 4.10.3. Guaranty Absolute, etc. The guaranty contained in this Section 4.10 shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Guaranteed Obligations of the Account Parties have been paid in full in cash, all Obligations of the Borrower and each other Obligor hereunder have been paid in full in cash, all Letters of Credit have been terminated or expired and all Commitments shall have terminated. The Borrower guarantees that the Guaranteed Obligations of the Account Parties will be paid strictly in accordance with the terms of this Agreement and each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Secured Party or any holder of any Note with respect thereto. The liability of -59- 68 the Borrower under the guaranty contained in this Section 4.10 shall be absolute, unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of this Agreement, any Note or any other Loan Document; (b) the failure of any Secured Party or any holder of any Note (i) to assert any claim or demand or to enforce any right or remedy against any Account Party, any other Obligor or any other Person (including any other guarantor (including the Borrower)) under the provisions of this Agreement, any Note, any other Loan Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor (including the Borrower) of, or collateral securing, any Guaranteed Obligations of any Account Party; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations of any Account Party, or any other extension, compromise or renewal of any Guaranteed Obligation of any Account Party; (d) any reduction, limitation, impairment or termination of any Guaranteed Obligations of any Account Party for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Borrower hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Guaranteed Obligations of any Account Party or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of this Agreement, any Note or any other Loan Document; (f) any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to departure from, any other guaranty, held by any Secured Party or any holder of any Note securing any of the Guaranteed Obligations of any Account Party; or (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any Account Party any surety or any guarantor. SECTION 4.10.4. Reinstatement, etc. The Borrower agrees that the guaranty contained in this Section 4.10 shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Guaranteed Obligations is rescinded or must otherwise be restored by any Secured Party or any holder of any Note, upon the insolvency, -60- 69 bankruptcy or reorganization of any Account Party or otherwise, all as though such payment had not been made. SECTION 4.10.5. Waiver, etc. The Borrower hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations of any Account Party or any other Obligor and the guaranty contained in this Section 4.10 and any requirement that the Administrative Agent, any other Secured Party or any holder of any Note protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against any Account Party, any other Obligor or any other Person (including any other guarantor) or entity or any collateral securing the Guaranteed Obligations of any Account Party. SECTION 4.10.6. Postponement of Subrogation, etc. The Borrower agrees that it will not exercise any rights which it may acquire by way of rights of subrogation under the guaranty contained in this Section 4.10, by any payment made under the guaranty contained in this Section 4.10 or otherwise, until the prior payment in full in cash of all Guaranteed Obligations of each Account Party, the prior payment in full in cash of all Obligations of the Borrower, the termination or expiration of all Letters of Credit and the termination of all Commitments. Any amount paid to the Borrower on account of any such subrogation rights prior to the payment in full in cash of all Guaranteed Obligations of each Account Party shall be held in trust for the benefit of the Secured Parties and each holder of a Note and shall immediately be paid to the Administrative Agent for the benefit of the Secured Parties and each holder of a Note and credited and applied against the Guaranteed Obligations of each Account Party, whether matured or unmatured, in accordance with the terms of this Agreement; provided, however, that if (a) the Borrower has made payment to the Secured Parties and each holder of a Note of all or any part of the Guaranteed Obligations of any Account Party, and (b) all Guaranteed Obligations of each Account Party have been paid in full in cash, all Obligations of the Borrower have been paid in full in cash, all Letters of Credit have been terminated or expired and all Commitments have been permanently terminated, each Secured Party and each holder of a Note agrees that, at the Borrower's request, the Administrative Agent, on behalf of the Secured Parties and the holders of the Notes, will execute and deliver to the Borrower appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to the Borrower of an interest in the Guaranteed Obligations of each Account Party resulting from such payment by the Borrower. In furtherance of the foregoing, for so long as any Obligations (including Guaranteed Obligations) or Commitments remain outstanding, the Borrower shall refrain from taking any action or commencing any proceeding against any Account Party(or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in the respect of payments made under the guaranty contained in this Section 4.10 to any Secured Party or any holder of a Note. -61- 70 SECTION 4.10.7. Successors, Transferees and Assigns; Transfers of Notes, etc. The guaranty contained in this Section 4.10 shall: (a) be binding upon the Borrower, and its successors, transferees and assigns; and (b) inure to the benefit of and be enforceable by the Administrative Agent and each other Secured Party. Without limiting the generality of the foregoing clause (b), any Lender may assign or otherwise transfer (in whole or in part) any Note or Credit Extension held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all rights and benefits in respect thereof granted to such Lender under any Loan Document (including the guaranty contained in this Section 4.10) or otherwise, subject, however, to any contrary provisions in such assignment or transfer, and to the provisions of Section 12.11 and Article XI. SECTION 4.11. No Bankruptcy Petition Against TFFC and Budget Funding Corporation. With respect to each Enhancement Letter of Credit issued hereunder relating to TFFC or Budget Funding Corporation, each of the Lenders hereby covenants and agrees that, (a) prior to the date which is one year and one day after the payment in full of the latest maturing note issued under the Base Indenture, it will not institute against, or join with any other Person in instituting against, TFFC, and (b) prior to the date which is one year and one day after the payment in full of the latest maturing commercial paper note issued by Budget Funding Corporation, it will not institute against, or join with any other Person in instituting against, Budget Funding Corporation, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any federal or state bankruptcy or similar law; provided, however, that nothing in this Section 4.11 shall constitute a waiver of any right to indemnification, reimbursement or other payment from any Obligor pursuant to this Agreement or any other Loan Document. In the event that any Lender takes action in violation of this Section 4.11, the Borrower agrees, for the benefit of the holders of the notes issued under the Base Indenture and the commercial paper notes issued by Budget Funding Corporation, that it shall cause TFFC or Budget Funding Corporation, as the case may be, to file an answer with the bankruptcy court or otherwise properly contest the filing of such a petition by such Lender against TFFC or Budget Funding Corporation, as the case may be, or the commencement of such action and raise the defense that such Lender 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; and such Lender shall be liable for and pay any costs and expenses incurred by TFFC or Budget Funding Corporation, as the case may be, in connection therewith. The provisions of this Section 4.11 shall survive the termination of the Agreement. -62- 71 ARTICLE V CERTAIN EUROCURRENCY RATE AND OTHER PROVISIONS SECTION 5.1. Eurocurrency Rate Lending Unlawful. If any Lender shall determine (which determination shall, upon notice thereof to the Borrower, the Administrative Agent and the Lenders, 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 such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a Eurocurrency Loan of a certain type, the obligations of such Lender to make, continue, maintain or convert into any such Loans shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and all outstanding Eurocurrency Loans of such type of such Lender shall automatically convert into ABR Loans denominated in Dollars at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion, and all Loans of such Lender that would otherwise have been made or continued as, or converted into, Eurocurrency Loans shall instead be made as or converted into, or continued as, ABR Loans denominated in Dollars upon which interest shall be payable at the same time as the related Eurocurrency Loans. SECTION 5.2. Deposits Unavailable. If the Administrative Agent shall have determined that by reason of circumstances affecting the Reference Lenders' relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to Eurocurrency Loans of such type, then, upon notice from the Administrative Agent to the Borrower and the Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to make or continue any Loans as, or to convert any Loans into, Eurocurrency Loans of such type shall forthwith be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 5.3. Increased Eurocurrency Loan Costs, etc. The Borrower agrees to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, Eurocurrency Loans 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 5.5 and 5.6, respectively; provided, however, that the Borrower shall have no obligation to pay any such additional amount under this Section 5.3 with respect to any day or days unless such Lender shall have notified the Borrower of its demand therefor within 45 days of the date upon which such Lender has obtained audited information with respect to the fiscal year of such lender in which such day or days occurred. Each such demand shall be provided to the Administrative Agent and the Borrower in writing and shall state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender on an after- -63- 72 tax basis for such increased cost or reduced amount. Such additional amounts shall be payable by the Borrower directly to such Lender within five Business Days of its receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on the Borrower. SECTION 5.4. Funding Losses. In the event any Lender 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 such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a Eurocurrency Loan) as a result of (a) any conversion or repayment or prepayment of the principal amount of any Eurocurrency Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise; (b) any Loans not being made as Eurocurrency Loans in accordance with the Borrowing Request therefor, whether pursuant to Section 2.7.4 or otherwise; or (c) any Loans not being continued as, or converted into, Eurocurrency Loans in accordance with the Continuation/ Conversion Notice therefor, then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within five Business Days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender 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. SECTION 5.5. 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 affects or would affect the amount of capital required or expected to be maintained by any Lender or any Person controlling such Lender, and such 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 its Commitments, issuance of or participation in Letters of Credit or the Loans made by such Lender is reduced to a level below that which such 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 such Lender to the Borrower, the Borrower shall pay directly to such Lender within five Business Days additional amounts sufficient to compensate such Lender or such controlling Person on an after-tax basis for such reduction in rate of return; provided, however, that the Borrower shall have no obligation to pay any such additional amount under this Section 5.5 with respect to any day or days unless such Lender shall have notified the Borrower of its demand therefor within 45 days of the date upon which such Lender has obtained audited information with respect to the fiscal year of such lender in which such day or days occurred. A statement of such Lender as to any -64- 73 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, such Lender may use any method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable. SECTION 5.6. Taxes. All payments by the Borrower of principal of, and interest on, the Credit Extensions 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 in the case of each Lender and the Administrative Agent, taxes imposed on or measured by its overall net income, overall receipts or overall assets and franchise taxes imposed on it by the jurisdiction under the laws of which such Lender or the Administrative Agent, as the case may be, is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on or measured by its overall net income, overall receipts and overall assets and franchise taxes imposed on it by the jurisdiction of such Lender's Domestic Office or Eurocurrency 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 (a) pay directly to the relevant authority the full amount required to be so withheld or deducted; (b) promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority; and (c) pay to the Administrative Agent for the account of the Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction been required. Moreover, if any Taxes are directly asserted against the Administrative Agent or any Lender with respect to any payment received by the Administrative Agent or such Lender hereunder, the Administrative Agent or such 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 Administrative Agent, for the account of the respective Lenders, the required receipts or other required documentary evidence, the Borrower shall indemnify the Lenders for any incremental Taxes, interest or penalties that may become payable by any Lender as a result -65- 74 of any such failure. For purposes of this Section 5.6, a distribution hereunder by the Administrative Agent or any Lender to or for the account of any Lender shall be deemed a payment by the Borrower. Upon the request of the Borrower or the Administrative Agent, each Lender that is organized under the laws of a jurisdiction other than the United States shall, prior to the due date of any payments under the Notes, execute and deliver to the Borrower and the Administrative Agent, on or about the first scheduled payment date in each Fiscal Year, one or more (as the Borrower or the Administrative Agent may reasonably request) United States Internal Revenue Service Forms 4224 or Forms 1001 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 such Lender is exempt from withholding or deduction of Taxes. SECTION 5.7. Payments, Computations, etc. Unless otherwise expressly provided, all payments by the Borrower pursuant to this Agreement, the Notes, each Letter of Credit or any other Loan Document shall be made by the Borrower to the Administrative Agent for the pro rata account of the Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 12:00 noon (local time) on the date due, in same day or immediately available funds, to such account as the Administrative Agent shall specify from time to time by notice to the Borrower. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All interest (including interest on Eurocurrency Loans) and fees shall be computed 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 Loan (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 (c) of the definition of the term "Interest Period" with respect to Eurocurrency Loans) 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 5.8. Sharing of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan (other than pursuant to the terms of Sections 5.3, 5.4, 5.5 and 5.6) or Letter of Credit in excess of its pro rata share of payments then or therewith obtained by all Lenders, such Lender shall purchase from the other Lenders such participations in Loans made by them and/or Letters of Credit as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such -66- 75 recovery together with an amount equal to such selling Lender's ratable share (according to the proportion of (a) the amount of such selling Lender's required repayment to the purchasing Lender to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 5.9) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim. SECTION 5.9. Setoff. Each Lender shall, upon the occurrence of any Default described in clauses (a) through (d) of Section 9.1.9 or, with the consent of the Required Lenders, upon the occurrence of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations (other than Liquidity Obligations) owing to it (whether or not then due), and (as security for such Obligations) the Borrower hereby grants to each Lender a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with or otherwise held by such Lender; provided, however, that any such appropriation and application shall be subject to the provisions of Section 5.8. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have. SECTION 5.10. Substitution of Lender. If any Lender has demanded to be paid additional amounts pursuant to Section 5.3, 5.5 or 5.6 and the payment of such additional amounts are, and are likely to continue to be, more onerous in the reasonable judgment of the Borrower than with respect to the other Lenders, the Borrower shall have the right to seek one or more Eligible Assignees (each, a "Substitute Lender") to purchase the outstanding Loans of such Lender (the "Affected Lender"), and if the Borrower locates a Substitute Lender, the Affected Lender shall, upon (a) prior written notice to the Administrative Agent, -67- 76 (b) payment to the Affected Lender of the purchase price agreed between it and the Substitute Lender (or, failing such agreement, a purchase price in the amount of the outstanding principal amount of the Affected Lender's Loans and accrued interest thereon to the date of payment) plus any amount (other than principal and interest) then due to it or accrued for its account hereunder or under any other Loan Document, (c) satisfaction of the provisions set forth in Section 12.11.1, and (d) payment by the Borrower to the Affected Lender and the Administrative Agent of all reasonable out-of-pocket expenses in connection with such assignment and assumption (including the processing fees described in Section 12.11.1), assign and delegate all its rights and obligations under this Agreement and any other Loan Document to which it is a party (including its outstanding Loans and participations in Letter of Credit Outstandings) to the Substitute Lender, and the Substitute Lender shall assume such rights and obligations, whereupon the Substitute Lender shall in accordance with Section 12.11.1 become a party to each Loan Document to which the Affected Lender is a party and shall have the rights and obligations of a Lender thereunder and the Affected Lender shall be released from its obligations hereunder and each other Loan Document to the extent of such assignment and delegation. ARTICLE VI CONDITIONS PRECEDENT SECTION 6.1. Initial Credit Extension. The obligations of the Lenders and the Issuer to make the initial Credit Extension shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 6.1. SECTION 6.1.1. Resolutions, etc. The Administrative Agent shall have received from each of the Borrower, the Parent and each other Obligor a certificate, dated the Closing Date, of the Secretary or Assistant Secretary of such Person as to (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement, the Notes and each other Loan Document to be executed by it; (b) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement, the Notes and each other Loan Document executed by it; and (c) the full force and validity of each Organic Document of such Person and true and complete copies thereof, -68- 77 upon which certificate each Lender, the Issuer and each Agent may conclusively rely until it shall have received a further certificate of the Secretary of the Borrower, the Parent or such other Obligor canceling or amending such prior certificate. SECTION 6.1.2. Delivery of Notes. The Administrative Agent shall have received, for the account of each Lender that requests that its Loans be evidenced by a Note, its Note duly executed and delivered by the Borrower. SECTION 6.1.3. Acquisition and Transaction Consummated. (a) The conditions set forth in each of the Stock Purchase Agreements to the obligations of the Parent to consummate the Acquisition shall have been satisfied in full (without amendment or waiver of, or other forbearance to exercise any rights with respect to, any of the terms or provisions thereof by the Parent), and the Acquisition shall have been consummated in accordance with the terms thereof. (b) The Parent shall have received gross cash proceeds of at least $150,000,000 pursuant to the Equity Offering and such proceeds shall have been used to fund, in part, the Acquisition. (c) The Parent shall have received gross cash proceeds of not greater than $50,000,000 pursuant to the Convertible Subordinated Debt Offering and such proceeds shall have been used to fund, in part, the Acquisition, and the Borrower shall have received gross cash proceeds of not greater than $170,000,000 pursuant to the Senior Debt Offering. The terms of the Series B Notes and the Senior Notes shall be satisfactory in all respects to the Administrative Agent. (d) The CP Program shall have been established, and the Liquidity Facility shall have become effective. (e) The Administrative Agent shall have received satisfactory evidence that the Corporate Restructuring shall have occurred on terms and conditions satisfactory in all respects to the Administrative Agent. SECTION 6.1.4. Payment of Outstanding Indebtedness, etc. All Indebtedness identified in Item 8.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule, together with all interest, all prepayment premiums and other amounts due and payable with respect thereto, shall have been paid in full (including, to the extent necessary, from proceeds of the initial Credit Extensions); and all Liens securing payment of any such Indebtedness have been released and the Administrative Agent shall have received all Uniform Commercial Code Form UCC-3 termination statements or other instruments as may be suitable or appropriate in connection therewith. SECTION 6.1.5. Delivery of Financial Statements. The Administrative Agent shall have received -69- 78 (a) audited consolidated financial statements for the 1995 Fiscal Year and the 1996 Fiscal Year of the Borrower and its Subsidiaries and Parent and its Subsidiaries; and (b) unaudited pro forma consolidated balance sheet of the Parent as at the date of the most recent consolidated balance sheet delivered pursuant to clause (a) above after giving effect to the Transaction (including the initial Credit Extension), in each case satisfactory to the Administrative Agent and the Lenders. SECTION 6.1.6. Consents, etc. The Administrative Agent shall have received true and correct copies of all governmental and third party approvals and consents necessary or advisable in connection with the Transaction (including the execution and delivery of this Agreement and each other Loan Document by each Obligor or party hereto and thereto and their performance of their respective Obligations hereunder and thereunder) and continuing operations of the Parent and its Subsidiaries (after giving effect to the consummation of the Transaction) shall have been obtained and be in full force and effect 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 the Acquisition or the financing thereof. SECTION 6.1.7. No Material Adverse Change. There shall not have occurred a material adverse change in the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Parent and its Subsidiaries, taken as a whole, or the Borrower and its Subsidiaries, taken as a whole, since December 31, 1996. SECTION 6.1.8. Availability Under the Borrowing Base. The Administrative Agent shall have received, with counterparts for each Lender, a certificate of the chief financial or accounting Authorized Officer of the Borrower or the Parent, in form and substance satisfactory to the Administrative Agent, certifying that as of the Closing Date, after giving effect to the Transaction, the sum of (a) the excess of (i) the Borrowing Base Amount over (ii) the sum of (A) all Letter of Credit Outstandings plus (B) the aggregate principal amount of all outstanding Loans (if any) plus (b) unrestricted cash and Cash Equivalent Investment of the Borrower and its Subsidiaries (exclusive of any Eligible Cash and Cash Equivalents included in the Borrowing Base Amount) is not less than $35,000,000. SECTION 6.1.9. Fees and Expenses of the Transaction. The Administrative Agent shall have received evidence satisfactory to it that the fees and expenses to be incurred in connection with the Transaction and the financing thereof will not exceed $25,000,000 in the aggregate. SECTION 6.1.10. Business Plan. The Administrative Agent and the Lenders shall have received a business plan for the 1997 Fiscal Year satisfactory to the Administrative Agent and the Lenders, financial projections for the period from the Effective Date to the Stated Maturity Date satisfactory to the Administrative Agent and the Lenders and a written analysis of the business and prospects of the Parent and its Subsidiaries (including the Borrower and its Subsidiaries) for the period from the Effective Date to the Stated Maturity Date satisfactory to the Administrative Agent and the Lenders. -70- 79 SECTION 6.1.11. Closing Date Certificates. The Administrative Agent shall have received, with counterparts for each Lender, the Borrower Closing Date Certificate and the Parent Closing Date Certificate, in each case dated the date of the Closing Date and duly executed and delivered by an Authorized Officer of the Borrower and Parent, as the case may be, in which certificates the Borrower and Parent, as the case may be, shall agree and acknowledge that the statements made therein shall be deemed to be true and correct representations and warranties of the Borrower and Parent, as the case may be, made as of such date, and, at the time each such certificate is delivered, such statements shall in fact be true and correct. All documents and agreements required to be appended to the Borrower Closing Date Certificate and Parent Closing Date Certificate, in each case shall be in form and substance satisfactory to the Administrative Agent. SECTION 6.1.12. Guaranty. The Administrative Agent shall have received the Subsidiary Guaranty, dated the Closing Date, duly executed by each Subsidiary of the Borrower that is a party thereto. SECTION 6.1.13. Pledge Agreements. The Administrative Agent shall have received executed counterparts of the Borrower Pledge Agreement, the Parent Pledge Agreement and the Subsidiary Pledge Agreement, in each case dated as of the Closing Date and duly executed and delivered by the Borrower, the Parent and each Subsidiary that is a party to the Subsidiary Pledge Agreement, as the case may be, together with the certificates, evidencing all of the issued and outstanding shares of Capital Stock pledged pursuant to each Pledge Agreement, which certificates shall in each case be accompanied by undated stock powers duly executed in blank, or, if any securities pledged pursuant to any Pledge Agreement are uncertificated securities, confirmation and evidence satisfactory to the Administrative Agent that the security interest in such uncertificated securities has been transferred to and perfected by the Administrative Agent for the benefit of the Lenders in accordance with Section 8-313 and Section 8-321 of the U.C.C. or any similar or local law which may be applicable. SECTION 6.1.14. Security Agreements. The Administrative Agent shall have received executed counterparts of the Borrower Security Agreement, the Subsidiary Security Agreement and the Parent Security Agreement, in each case dated as of the Closing Date and duly executed and delivered by the Borrower, each Subsidiary of the Borrower that is a party to the Subsidiary Security Agreement and the Parent, as the case may be, together with (a) acknowledgment copies of properly filed Uniform Commercial Code financing statements (Form UCC-1) or such other evidence of filing as may be acceptable to the Administrative Agent, or in the discretion of the Administrative Agent copies suitable for filing, naming in each case the Borrower, such Subsidiary or the Parent, as the case may be, as the debtor and the Administrative Agent as the secured party, or other similar instruments or documents, filed or suitable for filing under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the security interest of the Administrative Agent pursuant to each Security Agreement; -71- 80 (b) executed copies of proper Uniform Commercial Code Form UCC-3 termination statements, if any, necessary to release all Liens and other rights of any Person (other than Liens permitted under Section 8.2.3) (i) in any collateral described in each Security Agreement previously granted by any Person, and (ii) securing any of the Indebtedness identified in Item 8.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule, together with such other Uniform Commercial Code Form UCC-3 termination statements as the Administrative Agent may reasonably request from such Obligors; and (c) certified copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Administrative Agent, dated a date reasonably near to the Closing Date, listing all effective financing statements, tax liens and judgment liens which name the Borrower, such Subsidiaries and the Parent (under their respective present names and any previous names thereof) as the debtor and which are filed in the jurisdictions in which filings were made pursuant to clause (a) above, together with copies of such financing statements (none of which (other than those described in clause (a), if such Form UCC-11 or search report, as the case may be, is current enough to list such financing statements described in clause (a)) shall cover any collateral described in each Security Agreement). SECTION 6.1.15. Borrowing Base Certificate. The Administrative Agent shall have received an initial Borrowing Base Certificate, executed and delivered by an Authorized Officer of the Borrower, setting forth, as of the Closing Date, computations of the Borrowing Base Amount in respect of Eligible Cash and Eligible Cash Equivalents on such date, and, as of March 31, 1997, computations of the Borrowing Base Amount in respect of Eligible Receivables on such date. SECTION 6.1.16. Issuance Request. The Administrative Agent and the Issuer shall have received an Issuance Request for each Letter of Credit to be issued on the Closing Date and an Enhancement Letter of Credit Application and Agreement for each Enhancement Letter of Credit to be issued on the Closing Date. SECTION 6.1.17. Opinions of Counsel. The Administrative Agent shall have received (a) opinions, dated the Closing Date and addressed to the Administrative Agent and the Lenders, from King & Spalding, counsel to the Obligors, Robert L. Aprati, General Counsel of the Borrower, and Kenneth M. Lipowitz, counsel to the Parent, substantially in the form of Exhibits K-1, K-2 and K-3 hereto, respectively, and (b) such reliance letters as it may reasonably request with respect to opinions delivered in connection with the Transaction dated the Closing Date and addressed to the Agents, the Issuer and all of the Lenders. -72- 81 SECTION 6.1.18. Closing Fees, Expenses, etc. The Administrative Agent shall have received for its own account or for the account of each Lender, as the case may be, all fees, costs and expenses due and payable pursuant to Sections 3.3 and 12.3, if then invoiced. SECTION 6.2. All Credit Extensions. The obligation of each Lender and the Issuer to make any Credit Extension (including the initial Credit Extension) shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 6.2. SECTION 6.2.1. Compliance with Warranties, No Default, etc. Both before and after giving effect to any Credit Extension (but, if any Default of the nature referred to in Section 9.1.5 shall have occurred with respect to any other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds of any Credit Extension) the following statements shall be true and correct (a) the representations and warranties set forth in Article VII (excluding, however, those contained in Section 7.7) and in each other Loan Document shall, in each case, be true and correct with the same effect as if then made (unless stated to relate solely to an early date, in which case such representations and warranties shall be true and correct as of such earlier date); (b) except as disclosed by the Borrower or the Parent to the Agents, the Issuer and the Lenders pursuant to Section 7.7 (i) no labor controversy, litigation, arbitration or governmental investigation or proceeding shall be pending or, to the best knowledge of the Borrower, threatened against the Borrower, the Parent or any of their respective Subsidiaries which might materially adversely affect the Parent'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 shall have occurred in any labor controversy, litigation, arbitration or governmental investigation or proceeding disclosed pursuant to Section 7.7 which might materially adversely affect the consolidated businesses, operations, assets, revenues, properties or prospects of the Borrower, the Parent and their respective Subsidiaries; and (c) no Default shall have then occurred and be continuing, and neither the Borrower, the Parent nor any of their respective Subsidiaries nor any other Obligor is in material violation of any law or governmental regulation or court order or decree. SECTION 6.2.2. Credit Request. The Administrative Agent shall have received a Borrowing Request or Issuance Request, as the case may be, for such Credit Extension. Each of the delivery of a Borrowing Request or an Issuance Request and the acceptance by the Borrower of the proceeds of the Borrowing or the issuance of the Letter of Credit, as applicable, shall -73- 82 constitute a representation and warranty by the Borrower that on the date of such Borrowing (both immediately before and after giving effect to such Borrowing and the application of the proceeds thereof) or the issuance of the Letter of Credit, as applicable, the statements made in Section 6.2.1 are true and correct. SECTION 6.2.3. Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of the Borrower, the Parent or any of their respective Subsidiaries or any other Obligor shall be satisfactory in form and substance to the Administrative Agent and its counsel; the Administrative Agent and its counsel shall have received all information, approvals, opinions, documents or instruments as the Administrative Agent or its counsel may reasonably request. ARTICLE VII REPRESENTATIONS AND WARRANTIES In order to induce the Lenders, the Issuer and the Agents to enter into this Agreement and to make Loans and issue Letters of Credit hereunder, each of the Borrower and the Parent represents and warrants unto each Agent, the Issuer and each Lender as set forth in this Article VII. SECTION 7.1. Organization, etc. Each of the Borrower, the Parent and each of their respective Subsidiaries (a) is a corporation validly organized and existing and in good standing under the laws of the jurisdiction of its incorporation, (b) is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, except to the extent that the failure to so qualify has not had, and could not reasonably be expected to have, a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole, (c) has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under this Agreement, the Notes and each other Loan Document to which it is a party and to own and hold under lease its property and to conduct its business substantially as currently conducted by it, and (d) subject to Section 7.12, has complied in all material respects with all laws, rules, regulations and orders applicable to it. -74- 83 SECTION 7.2. Due Authorization, Non-Contravention, etc. The execution, delivery and performance by the Borrower of this Agreement, the Notes and each other Loan Document executed or to be executed by it, and the execution, delivery and performance by each of the Parent and each other Obligor of each Loan Document executed or to be executed by it and the Borrower's, the Parent's and each such other Obligor's participation in the consummation of the Transaction are within the Borrower's, the Parent's and each such Obligor's corporate powers, have been duly authorized by all necessary corporate action, and do not (a) contravene the Borrower's, the Parent's or such other Obligor's Organic Documents; (b) contravene any contractual restriction, law or governmental regulation or court decree or order binding on or affecting the Borrower, the Parent or such other Obligor; or (c) result in, or require the creation or imposition of, any Lien (other than the Liens created under the Loan Documents in favor of the Administrative Agent for the benefit of the Secured Parties) on any of the Borrower's, the Parent's or such other Obligor's properties. SECTION 7.3. Government Approval, Regulation, etc. Other than those authorizations, approvals or other actions by, and notices to or filings with, any governmental authority or regulatory body, if any, which have been duly obtained or made and are in full force and effect, no additional authorization or approval or other action by, and no additional notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the Borrower, the Parent or any other Obligor of this Agreement, the Notes or any other Loan Document to which it is a party, or for the Borrower's, the Parent's and each such other Obligor's participation in the consummation of the Transaction. Neither the Borrower, the Parent nor any of their respective Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 7.4. Validity, etc. This Agreement constitutes, and the Notes and each other Loan Document executed by the Borrower will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except to the extent the enforceability thereof 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; and each Loan Document executed pursuant hereto by the Parent and each other Obligor will, on the due execution and delivery thereof by the Parent or such Obligor, as the case may be, be the legal, valid and binding obligation of the Parent or such Obligor, as the case may be, enforceable in accordance with its terms, except to -75- 84 the extent the enforceability thereof 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. Each of the Loan Documents which purports to create a security interest creates a valid first priority security interest in the Collateral (as defined in such Loan Document) subject thereto, subject only to Liens permitted by Section 8.2.3, securing the payment of the Obligations described therein. SECTION 7.5. Financial Information; Absence of Undisclosed Liabilities. The financial statements of the Borrower and its Subsidiaries and the Parent and its Subsidiaries furnished to each Agent and each Lender pursuant to clause (a) of Section 6.1.5 have been prepared in accordance with GAAP consistently applied, and present fairly the consolidated financial condition of the corporations covered thereby as at the dates thereof and the results of their operations for the periods then ended. To the best knowledge of the Parent and the Borrower, neither the Parent and its Subsidiaries nor the Borrower and its Subsidiaries had any material liabilities (matured or unmatured, fixed or contingent) that were not fully reflected or provided for on the financial statements delivered pursuant to clause (a) of Section 6.1.5, whether or not required by GAAP to be shown on such financial statements. The pro forma balance sheet delivered pursuant to clause (b) of Section 6.1.5 have been prepared in accordance with the requirements of GAAP for the preparation of pro forma financial statements. All balance sheets, all statements of operations, shareholders' equity and cash flow and all other financial information of each of the Borrower and its Subsidiaries and the Parent and its Subsidiaries furnished pursuant to Section 8.1.1 have been and will for periods following the Effective Date be prepared in accordance with GAAP consistently applied, and do or will present fairly the consolidated financial condition of the corporations covered thereby as at the dates thereof and the results of their operations for the periods then ended. SECTION 7.6. No Material Adverse Change; Absence of Undisclosed Liabilities. There has been no material adverse change in the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Parent and its Subsidiaries, taken as a whole, or the Borrower and its Subsidiaries, taken as a whole, since December 31, 1996. SECTION 7.7. Litigation, Labor Controversies, etc. There is no pending or, to the best knowledge of the Borrower or the Parent, threatened litigation, action, proceeding, or labor controversy affecting the Borrower, the Parent or any of their respective Subsidiaries, or any of their respective properties, businesses, assets or revenues, which may materially adversely affect the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole, or which purports to affect the legality, validity or enforceability of this Agreement, the Notes or any other Loan Document, except as disclosed in Item 7.7 ("Litigation") of the Disclosure Schedule. -76- 85 SECTION 7.8. Subsidiaries. (a) The Parent has no direct Subsidiaries, except for the Borrower. (b) The Borrower has no Subsidiaries, except those Subsidiaries (i) which are identified in Item 7.8(b) ("Existing Subsidiaries of the Borrower") of the Disclosure Schedule by their correct legal name, their jurisdiction of organization and the holders (and their respective percentage ownership of) the Capital Stock thereof or (ii) which are permitted to have been acquired in accordance with Section 8.2.5 or 8.2.10. SECTION 7.9. Ownership of Properties. Except as permitted pursuant to Section 7.13 or Section 8.2.3, the Borrower, the Parent and each of their respective Subsidiaries owns (i) in the case of owned real property, good and marketable fee title to, and (ii) in the case of owned personal property, good and valid title to, or, in the case of leased real or personal property, valid and enforceable leasehold interests (as the case may be) in, all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever, free and clear in each case of all Liens or claims, except for Liens permitted pursuant to Section 8.2.3. SECTION 7.10. Taxes. The Borrower, the Parent and each of their respective Subsidiaries has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be due and owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 7.11. Pension and Welfare Plans. During the twelve-consecutive-month period prior to the date of the execution and delivery of this Agreement and prior to the date of any Credit Extension hereunder, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which might result in the incurrence by the Borrower, the Parent or any member of the Controlled Group of any material liability, fine or penalty. Except as disclosed in Item 7.11 ("Employee Benefit Plans") of the Disclosure Schedule, neither the Borrower, the Parent nor any member of the Controlled Group has any contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title I of ERISA. SECTION 7.12. Environmental Warranties. Except as set forth in Item 7.12 ("Environmental Matters") of the Disclosure Schedule (none of which items disclosed therein, singly or in the aggregate, have, or may reasonably be expected to have, a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole) and to the best knowledge of the Borrower, the Parent and their respective Subsidiaries, -77- 86 (a) all facilities and property (including underlying groundwater) owned or leased by the Borrower, the Parent or any of their respective Subsidiaries have been, and continue to be, owned or leased and operated by the Borrower, the Parent and such Subsidiary, as the case may be, in compliance with all Environmental Laws and in accordance with industry practices, except to the extent any such failure to comply would, singly or in the aggregate, have, or may reasonably be expected to have, a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole; (b) there are no pending or threatened (i) claims, complaints, notices or requests for information received by the Borrower, the Parent or any of their respective Subsidiaries with respect to any alleged violation of any Environmental Law, which, if true, would, singly or in the aggregate, have, or would reasonably be expected to have, a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole, or (ii) complaints, notices or inquiries to the Borrower, the Parent or any of their respective Subsidiaries regarding potential liability under any Environmental Law, which, if true, would, singly or in the aggregate, have, or would reasonably be expected to have, a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole; (c) there have been no Releases of Hazardous Materials at, on or under any property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries that, singly or in the aggregate, have, or may reasonably be expected to have, a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole; (d) the Borrower, the Parent and each of their respective Subsidiaries have been issued and are in material compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desirable for their businesses; (e) no property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries is listed or proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up; -78- 87 (f) there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries that, singly or in the aggregate, have, or may reasonably be expected to have, a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole; (g) neither the Borrower, the Parent nor any of their respective Subsidiaries has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which may lead to material claims against the Borrower, the Parent or such Subsidiary thereof for any remedial work, damage to natural resources or personal injury, including claims under CERCLA; (h) neither the Borrower, the Parent nor any of their respective Subsidiaries has entered into any agreements or engaged in any activities that, singly or in the aggregate, would give rise to liability under any Environmental Law with regard to acts, omissions or conditions of property of any third party, including any franchisee of the Borrower, the Parent or any of their respective Subsidiaries, which liability, singly or in the aggregate, has, or may reasonably be expected to have, a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole; (i) there are no polychlorinated biphenyls or friable asbestos present at any property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries that, singly or in the aggregate, have, or may reasonably be expected to have, a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole; and (j) no conditions exist at, on or under any property now or previously owned or leased by the Borrower and its Subsidiaries, which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law that, singly or in the aggregate, has, or may reasonably be expected to have, a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole. SECTION 7.13. Intellectual Property. Each of the Borrower, the Parent and their respective Subsidiaries owns and possesses or licenses (as the case may be) all such patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, -79- 88 service mark rights and copyrights as the Borrower and the Parent considers necessary for the conduct of the businesses of the Borrower, the Parent and their respective Subsidiaries as now conducted without, individually or in the aggregate, any infringement upon rights of other Persons, in each case except as could not reasonably be expected to result in a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole, and there is no individual patent, patent right, trademark, trademark right, trade name, trade name right, service mark, service mark right or copyright the loss of which would result in a material adverse change in the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole, except as may be disclosed in Item 7.13 ("Intellectual Property") of the Disclosure Schedule. SECTION 7.14. Regulations G, U and X. Neither the Borrower, the Parent nor any of their respective Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Credit Extensions will be used to purchase or carry margin stock or otherwise for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation G, U or X. Terms for which meanings are provided in F.R.S. Board Regulation G, U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. SECTION 7.15. Accuracy of Information. All factual information heretofore or contemporaneously furnished by the Borrower or the Parent in writing to any Agent, the Issuer or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby (including the Transaction, true and complete copies of which were furnished to the each Agent, the Issuer and each Lender in connection with its execution and delivery hereof) was true and accurate in every material respect on the date as of which such information was dated or certified and was not incomplete by omitting to state any material fact necessary to make such information not misleading. All other such factual information hereafter furnished by or on behalf of the Borrower or the Parent to any Agent, the Issuer or any Lender will be true and accurate in every material respect on the date as of which it is dated or certified and such information will not be incomplete by omitting to state any material fact necessary to make such information not misleading. SECTION 7.16. Stock Purchase Agreements and Senior Note Purchase Agreements. Each of the representations and warranties made in each of the Stock Purchase Agreements and the Senior Note Purchase Agreements is true and correct in all material respects. Each of the Stock Purchase Agreements and the Senior Note Purchase Agreements constitutes the legal, valid and binding obligations of each of the parties thereto enforceable in accordance with its terms. SECTION 7.17. Senior Indebtedness, etc. The subordination provisions applicable to the Series A Notes and the Series B Notes will be enforceable against the holders of the Series A Notes and Series B Notes by the holder of any Senior Indebtedness (as defined in the Series A Note Purchase Agreements and the Series B Note Purchase Agreements) which has not -80- 89 effectively waived the benefits thereof. All Obligations, including those to pay principal of and interest (including post-petition interest) on the Loans and Reimbursement Obligations, and fees and expenses in connection therewith, constitute Senior Indebtedness (as defined in the Series A Note Purchase Agreements and the Series B Note Purchase Agreements) and all such Obligations are entitled to the benefits of the subordination created by the Series A Notes and Series B Notes. SECTION 7.18. No Burdensome Restrictions. Except as disclosed in the prospectus filed pursuant to Rule 424(b) under the Securities Act in connection with the Registration Statement, neither the Borrower or the Parent, nor any of their respective Subsidiaries, is subject to any law, rule, regulation, order or agreement which could reasonably be expected to have a material adverse effect on the currently existing business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole. ARTICLE VIII COVENANTS SECTION 8.1. Affirmative Covenants. The Borrower and the Parent agree with each Agent, the Issuer and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower and the Parent will perform the obligations set forth in this Section 8.1. SECTION 8.1.1. Financial Information, Reports, Notices, etc. The Borrower and the Parent will furnish, or will cause to be furnished, to each Lender, the Issuer and each Agent copies of the following financial statements, reports, notices and information: (a) as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Parent, consolidated and consolidating balance sheets of the Parent and its Subsidiaries as of the end of such Fiscal Quarter and consolidated and consolidating statements of earnings and consolidated statements of cash flow of the Parent and its Subsidiaries, in each case other than the consolidated statements of cash flow, for such Fiscal Quarter and, in each case (including the consolidated statements of cash flow), for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, certified by the chief financial or accounting Authorized Officer of the Parent; (b) as soon as available and in any event within 90 days after the end of each Fiscal Year of the Parent, a copy of the annual audited report for such Fiscal Year for the Parent and its Subsidiaries, including therein consolidated balance sheets of the Parent and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of the Parent and its Subsidiaries for such Fiscal Year, in each case certified (without any Impermissible Qualification) in a manner acceptable to the Administrative Agent and the Required Lenders by independent public accountants acceptable to the -81- 90 Administrative Agent and the Required Lenders, together with a report from such accountants containing a computation of, and showing compliance with, each of the financial ratios and restrictions contained in Section 8.2.4 and to the effect that, in making the examination necessary for the signing of such annual report by such accountants, they have not become aware of any Default that has occurred and is continuing, or, if they have become aware of such Default, describing such Default and the steps, if any, being taken to cure it; (c) concurrently with the delivery of the financial statements referred to in clauses (a) and (b) above, a Compliance Certificate, executed by the chief financial or accounting Authorized Officer of the Parent, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Administrative Agent) compliance with the financial covenants set forth in Section 8.2.4; (d) as soon as possible and in any event within three days after the occurrence of each Default, a statement of the chief financial or accounting Authorized Officer of the Parent or the Borrower setting forth details of such Default and the action which the Parent or the Borrower has taken and proposes to take with respect thereto; (e) as soon as possible and in any event within five days after (x) the occurrence of any adverse development with respect to any litigation, action, proceeding or labor controversy described in Section 7.7 or (y) the commencement of any labor controversy, litigation, action or proceeding of the type described in Section 7.7, notice thereof and copies of all documentation relating thereto; (f) (i) within 12 Business Days following the last day of each calendar month, a Borrowing Base Certificate for the preceding calendar month that is calculated as of the last day of such preceding calendar month, certified by the chief financial or accounting Authorized Officer of the Borrower or the Parent and (ii) as soon as possible following the presentment for payment under any Enhancement Letter of Credit, a Borrowing Base Certificate for the date of such presentment that is calculated as of the last day of the calendar month immediately preceding the month in which such presentment is made, in the case of the calculation of clauses (a), (c) and (d) of the definition of "Borrowing Base Amount", and as of the date of such presentment (after giving effect to any reimbursement made in connection therewith), in the case of the calculation of clause (b) of the definition of "Borrowing Base Amount", certified by the chief financial or accounting Authorized Officer of the Borrower or the Parent; (g) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to any of its securityholders, and all reports and registration statements which the Borrower, the Parent or any of their respective Subsidiaries files with the Securities and Exchange Commission or any national securities exchange; -82- 91 (h) immediately upon becoming aware of the institution of any steps by the Borrower or any other Person to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Borrower, the Parent or any of their respective Subsidiaries furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the incurrence by the Borrower or the Parent of any material liability, fine or penalty, or any material increase in the contingent liability of the Borrower with respect to any post-retirement Welfare Plan benefit, notice thereof and copies of all documentation relating thereto; (i) as soon as available and in any event no later than 31 days after the first day of each Fiscal Year of the Parent, an annual budget, prepared on a monthly basis for such Fiscal Year of the Parent containing consolidated and consolidating projected statements of earnings and cash flow of the Parent and its Subsidiaries and the Borrower and its Subsidiaries; (j) concurrently with the delivery of the financial statements described in clause (b) of this Section 8.1.1, a narrative explanation, in the form customarily provided to the Board of Directors of the Parent, of any material variance from the budget of the Parent for such Fiscal Year that is reflected in such financial statements; provided, however, if the foregoing is not provided to the Board of Directors of the Parent the same shall, at the request of the Administrative Agent, be delivered to the Administrative Agent; (k) as soon as possible and in any event within three days after the delivery thereof, copies of all notices, agreements or documents delivered pursuant to the Senior Note Purchase Agreements and each other agreement for borrowed money to which the Parent or any Subsidiary of the Parent (other than Vehicle Debt) is a party and with a commitment or outstandings exceeding $10,000,000, except for such notices, agreements or documents (i) delivered pursuant to the terms hereof or (ii) which are delivered in the ordinary course of each such agreement (such as borrowing requests, letter of credit requests and the like); and (l) such other information respecting the condition or operations, financial or otherwise, of the Borrower, the Parent or any of their respective Subsidiaries as any Lender through the Administrative Agent may from time to time reasonably request. SECTION 8.1.2. Compliance with Laws, Material Agreements, etc. The Borrower and the Parent will, and will cause each of their respective Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations, orders and material agreements, such compliance to include: (a) the maintenance and preservation of its corporate existence and qualification as a foreign corporation; -83- 92 (b) the maintenance and preservation of all governmental licenses, permits and other approvals necessary for it to perform its obligations under this Agreement, the Notes and each other Loan Document to which it is a party and to own and hold under lease its property and to conduct its business substantially as currently conducted by it; (c) the maintenance, preservation and renewal of all material agreements necessary to conduct its business substantially as currently conducted by it (or the substitution for any such material agreement with a similar agreement), including the Supply Agreement dated as of the date hereof, between Ford Motor Company and the Borrower, and the Advertising Agreement dated as of the date hereof, between Ford Motor Company and the Borrower; and (d) the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 8.1.3. Maintenance of Properties. The Borrower and the Parent will, and will cause each of their respective Subsidiaries to, maintain, preserve, protect and keep its properties in good repair, working order and condition, and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times unless the Borrower determines in good faith that the continued maintenance of any of its properties is no longer economically desirable. SECTION 8.1.4. Insurance. The Borrower and the Parent will, and will cause each of their respective Subsidiaries to, maintain or cause to be maintained with responsible insurance companies insurance with respect to its properties and business (including business interruption insurance) against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses of established reputation and will, upon request of the Administrative Agent, furnish to each Lender at reasonable intervals a certificate of an Authorized Officer of the Borrower or the Parent setting forth the nature and extent of all insurance maintained by the Borrower, the Parent and their respective Subsidiaries in accordance with this Section. SECTION 8.1.5. Books and Records. The Borrower and the Parent will, and will cause each of their respective Subsidiaries to, keep books and records which accurately reflect all of their respective business affairs and transactions and permit each Agent and each Lender or any of their respective representatives, at reasonable times and intervals, to visit all of their respective offices, to discuss their respective financial matters with their respective officers and independent public accountant (and the Borrower and the Parent each hereby authorizes such independent public accountants to discuss such financial matters with each Lender or its representatives whether or not any representative of the Borrower, the Parent or such Subsidiary is present) and to examine (and, at the expense of the Borrower, photocopy extracts from) any of their respective books or other corporate records. The Borrower shall pay any fees of such -84- 93 independent public accountant incurred in connection with the either Agent's or any Lender's exercise of its rights pursuant to this Section. SECTION 8.1.6. Environmental Covenant. The Borrower and the Parent will, and will cause each of their respective Subsidiaries to, (a) use and operate all of their respective facilities and properties in material compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws; (b) follow practices that are at least as effective as industry practices to minimize and respond to spills and overfills of petroleum products; (c) respond to past and ongoing releases of petroleum-containing materials in a manner that, as prudent, minimizes potential liability to third parties for off-site contamination from facilities owned or leased or otherwise operated by the Borrower, the Parent or any of their respective Subsidiaries; (d) respond to past and ongoing releases of petroleum-containing materials in a manner that, as prudent, minimizes any likelihood that the Borrower, the Parent or any of their respective Subsidiaries would incur costs or damages that, singly or in the aggregate, have, or may reasonably be expected to have, a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole or the Parent and its Subsidiaries, taken as a whole; (e) manage the disposition of residuals such as spent petroleum-containing material in a manner that, as prudent, minimizes any likelihood that the Borrower, the Parent or any of their respective Subsidiaries would incur costs or damages that, singly or in the aggregate, have, or may reasonably be expected to have, a material adverse effect on the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole or the Parent and its Subsidiaries, taken as a whole; (f) immediately notify the Administrative Agent and provide copies upon receipt of all written claims, complaints, notices or inquiries relating to the condition of their facilities and properties or compliance with Environmental Laws; and (g) provide such information and certifications which the Administrative Agent may reasonably request from time to time to evidence compliance with this Section 8.1.6. SECTION 8.1.7. Use of Proceeds. The Borrower shall apply the proceeds of each Credit Extension in accordance with the sixth recital; without limiting the foregoing, no proceeds of any -85- 94 Loan will be used to acquire any equity security of a class which is registered pursuant to Section 12 of the Exchange Act or any "margin stock", as defined in F.R.S. Board Regulation U. SECTION 8.1.8. Foreign Subsidiaries as of the Closing Date. Unless otherwise agreed to by the Required Lenders, the Borrower or its applicable Subsidiary (which Subsidiary, if not theretofore a party to the Subsidiary Pledge Agreement, shall execute and deliver to the Administrative Agent a supplement to the Subsidiary Pledge Agreement for the purpose of becoming a pledgor thereunder, which supplement shall be in form and substance reasonably satisfactory to the Administrative Agent) shall no later than 180 days following the Closing Date, pursuant to a Pledge Agreement (as further supplemented, if necessary, by a Foreign Pledge Agreement) to which the Borrower or such pledgor Subsidiary is a party, (a) pledge to the Administrative Agent all of the outstanding shares of the Capital Stock of each Foreign Subsidiary owned by the Borrower or such pledgor Subsidiary on the Closing Date, together with undated stock powers or equivalent instruments of transfer satisfactory to the Administrative Agent for such certificates or such other evidence of beneficial ownership, executed in blank or otherwise, so as to perfect the security interest of the Administrative Agent therein in accordance with applicable law (or, if any such shares of Capital Stock are uncertificated, confirmation and evidence satisfactory to the Administrative Agent that the security interest in such uncertificated securities has been perfected by the Administrative Agent in accordance with applicable law); provided, however, that the Borrower or such Subsidiary shall not be required to pledge the shares of Capital Stock of a Foreign Subsidiary required to be pledged hereunder to the extent such pledge would (x) constitute an investment in earnings in United States property under Section 956 (or any successor provision thereto) of the Code that would increase the amount of income of the applicable pledgor that would otherwise be subject to United States income tax and (y) subject the Borrower, the Parent or the Person the Capital Stock of which is being pledged to a significant adverse tax consequence, as determined by the Parent and evidenced by a certificate of the chief financial or accounting Authorized Officer of the Parent that is accepted in writing by the Administrative Agent (such acceptance not to be unreasonably withheld); and (b) the Borrower or such pledgor Subsidiary shall take all such actions and execute any such documents, certificates or instruments as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to perfect the first priority security interest of the Administrative Agent in the interests of the Borrower or such Subsidiary in such Foreign Subsidiary pledged pursuant to such Pledge Agreement (and such Foreign Pledge Agreement, if applicable); together with such opinions of legal counsel as the Administrative Agent may reasonably request, which legal opinions shall be in form and substance reasonably satisfactory to the Administrative Agent. -86- 95 SECTION 8.1.9. Future Subsidiaries. Without limiting the effect of any provision contained herein (including Section 8.2.5), upon any Person becoming either a direct or indirect Subsidiary of the Borrower (other than an SPC or a Non-Material Subsidiary), (a) in the event such Person is a Subsidiary which is not a Foreign Subsidiary, such Person (i) if not theretofore a party to the Subsidiary Guaranty, shall execute and deliver to the Administrative Agent a supplement to the Subsidiary Guaranty for the purpose of becoming a guarantor thereunder, which supplement shall be substantially in the form attached to the Subsidiary Guaranty, and (ii) if not theretofore a party to the Subsidiary Security Agreement, shall execute and deliver to the Administrative Agent a supplement to the Subsidiary Security Agreement for the purpose of becoming a grantor thereunder, which supplement shall be substantially in the form attached to the Subsidiary Security Agreement; (b) the Borrower or such Subsidiary (which Subsidiary, if not theretofore a party to the Subsidiary Pledge Agreement, shall execute and deliver to the Administrative Agent a supplement to the Subsidiary Pledge Agreement for the purpose of becoming a pledgor thereunder, which supplement shall be substantially in the form attached to the Subsidiary Pledge Agreement) shall, pursuant to the Pledge Agreement (as further supplemented, if necessary, by a Foreign Pledge Agreement) to which the Borrower or such Subsidiary is a party, pledge to the Administrative Agent all of the outstanding shares of the Capital Stock of such Person owned by the Borrower or such Subsidiary, together with (A) undated stock powers or equivalent instruments of transfer satisfactory to the Administrative Agent for such certificates or such other evidence of beneficial ownership, executed in blank (or, if any such shares of Capital Stock are uncertificated, confirmation and evidence satisfactory to the Administrative Agent that the security interest in such uncertificated securities has been perfected by the Administrative Agent in accordance with Section 8-313 and Section 8-321 of the U.C.C. or any similar or local law which may be applicable) and (B) executed copies of Uniform Commercial Code financing statements naming the Borrower or such Subsidiary as the debtor and the Administrative Agent as the secured party, suitable for filing under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to perfect the first priority security interest of the Administrative Agent in the interests of the Borrower or such Subsidiary in such Person pledged pursuant to such Pledge Agreement (and such Foreign Pledge Agreement, if applicable); provided, however, that the Borrower or such Subsidiary shall not be required to pledge the shares of Capital Stock of a Foreign Subsidiary required to be pledged hereunder (1) if the Required Lenders have otherwise agreed or (2) to the extent such pledge would (x) constitute an investment in earnings in United States property under Section 956 (or any successor provision thereto) of the Code that would increase the amount of income of the applicable pledgor that would otherwise be subject to United States income tax and (y) subject the Borrower, the Parent or the Person the Capital Stock of which is being pledged to a significant adverse tax consequence, as determined by the Parent and evidenced by a certificate of the chief financial or accounting -87- 96 Authorized Officer of the Parent that is accepted in writing by the Administrative Agent (such acceptance not to be unreasonably withheld); (c) the Administrative Agent shall have received from each such Subsidiary certified copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Administrative Agent, dated a date reasonably near (but prior to) the date of any such Person becoming a direct or indirect Subsidiary of the Borrower, listing all effective financing statements, tax liens and judgment liens which name such Person as the debtor and which are filed in the jurisdictions in which filings are to be made pursuant to this Agreement and the other Loan Documents, and in such other jurisdictions as the Administrative Agent may reasonably request, together with copies of such financing statements (none of which (other than financing statements (i) filed pursuant to the terms hereof in favor of the Administrative Agent, if such Form UCC-11 or search report, as the case may be, is current enough to list such financing statements, (ii) being terminated pursuant to termination statements that are to be delivered on or prior to the date such Person becomes such Subsidiary or (iii) in respect of Liens permitted under Section 8.2.3) shall cover any of the collateral described in the Subsidiary Security Agreement); and (d) the Administrative Agent shall have received from each such Subsidiary executed copies of U.C.C. financing statements naming each such Subsidiary as the debtor and the Administrative Agent as the secured party, suitable for filing under the U.C.C. of all jurisdictions as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to perfect the first priority security interest of the Administrative Agent pursuant to the Subsidiary Security Agreement entered into by such Subsidiary, together, in each case, with such opinions of legal counsel as the Administrative Agent may reasonably request, which legal opinions shall be in form and substance reasonably satisfactory to the Administrative Agent. SECTION 8.2. Negative Covenants. The Borrower and the Parent agree with each Agent, the Issuer and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will perform the obligations set forth in this Section 8.2. SECTION 8.2.1. Business Activities. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, engage in any business activity, except those described in the first recital and such activities as may be incidental or related thereto, including, the ownership and operation of parking lots, the ownership and rental of recreation vehicles and the ownership and operation of limousine services, taxi fleets or car dealerships. SECTION 8.2.2. Indebtedness. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, create, incur, assume or suffer to exist or otherwise -88- 97 become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness in respect of the Loans and other Obligations; (b) until the Closing Date, Indebtedness and identified in Item 8.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule; (c) Indebtedness existing as of a date not more than 30 days prior to the Effective Date which is identified in Item 8.2.2(c) ("Ongoing Indebtedness") of the Disclosure Schedule (provided that any item of Indebtedness existing as of the Effective Date having a principal amount not exceeding $500,000 that is not identified in such Item 8.2.2(c) shall be permitted hereunder to the extent the aggregate principal amount of all such Indebtedness does not exceed $2,500,000); (d) Indebtedness of the Borrower in respect of the Senior Notes in an aggregate principal amount not to exceed $170,000,000 less the portion thereof repaid or prepaid, and guaranties thereof of the Subsidiary Guarantors; (e) Indebtedness of the Parent in respect of the Series A Notes in an aggregate principal amount not to exceed $80,000,000 less the portion thereof represented by Series A Notes which have been exchanged for common stock of the Parent; (f) Indebtedness of the Parent in respect of the Series B Notes in an aggregate principal amount not to exceed $50,000,000 less the portion thereof represented by Series B Notes which have been exchanged for common stock of the Parent; (g) Vehicle Debt; (h) Indebtedness in respect of the Demand Capitalization Note to the extent the obligations of the Borrower thereunder (whether contingent or otherwise) do not exceed at any time $31,500,000; (i) Indebtedness of Foreign Subsidiaries incurred for working capital purposes to the extent the aggregate principal amount thereof does not exceed at any time outstanding $30,000,000; (j) Indebtedness in an aggregate principal amount not to exceed $40,000,000 at any time outstanding which is incurred by the Borrower or any of its Subsidiaries to a vendor of any assets permitted to be acquired pursuant to Section 8.2.7 to finance its acquisition of such assets; (k) unsecured Indebtedness incurred in the ordinary course of business (including open accounts extended by suppliers on normal trade terms in connection with purchases -89- 98 of goods and services, but excluding Indebtedness incurred through the borrowing of money or Contingent Liabilities); (l) Indebtedness in respect of Capitalized Lease Liabilities to the extent permitted by Section 8.2.7; (m) Hedging Obligations of the Parent or any of its Subsidiaries pursuant to agreements designed to protect the Parent or any of its Subsidiaries against fluctuations in interest rates in respect of Indebtedness of the Parent or such Subsidiary and not entered into for purposes of speculation; (n) Hedging Obligations of the Parent or any of its Subsidiaries pursuant to agreements designed to protect the Parent or any of its Subsidiaries against fluctuations in currency values and entered into in the ordinary course of business and not for purposes of speculation; (o) Indebtedness of the Parent owing to the Borrower pursuant to an Investment of the Borrower permitted pursuant to clause (e) of Section 8.2.5; (p) Indebtedness of the Borrower or any Subsidiary Guarantor owing to the Parent; (q) Indebtedness of the Borrower or any Subsidiary of the Borrower owing to a Subsidiary of the Borrower (other than a Subsidiary Guarantor); provided that any such Indebtedness of the Borrower (other than Indebtedness of the Borrower owing to TFFC in respect of amounts advanced by TFFC to the Borrower based upon TFFC's Profits (as defined in the Base Indenture or any supplement thereto)) constitutes Subordinated Intercompany Debt; (r) Indebtedness of Subsidiary Guarantors that are Wholly Owned Subsidiaries of the Borrower owing to the Borrower or a Subsidiary Guarantor; (s) Indebtedness of Subsidiaries of the Borrower owing to the Borrower or a Subsidiary Guarantor to the extent permitted by clause (g) of Section 8.2.5; (t) Contingent Liabilities of the Parent in respect of guarantees of the Parent in respect of Indebtedness of a Foreign Subsidiary of the type permitted and described in clause (g) or (i) above; (u) Indebtedness which refinances Indebtedness permitted by clauses (d), (e) and (f) above; provided, however, that after giving effect to such refinancing, (i) the principal amount of outstanding Indebtedness is not increased, (ii) neither the tenor nor the average life thereof is reduced, (iii) the respective obligor or obligors shall be the same on the refinancing Indebtedness as on the Indebtedness being refinanced, (iv) the security, if any, for the refinancing Indebtedness shall be the same as that for the Indebtedness being -90- 99 refinanced (except to the extent that less security is granted to holders of refinancing Indebtedness), (v) the holders of refinancing Indebtedness are not afforded covenants, defaults, rights or remedies more burdensome to the obligor or obligors than those contained in the Indebtedness being refinanced and (vi) the refinancing Indebtedness is subordinated to the same degree, if any, as the Indebtedness being refinanced; and (v) other Indebtedness of the Borrower and its Subsidiaries in an aggregate amount not to exceed (i) during the 1997 Fiscal Year or the 1998 Fiscal Year, $25,000,000 and (ii) during the 1999 Fiscal Year or any Fiscal Year thereafter, $35,000,000; provided, however, that no Indebtedness otherwise permitted by clauses (i), (j), (l), (m), (n), (s) or (v) shall be permitted if, after giving effect to the incurrence thereof, any Default shall have occurred and be continuing. SECTION 8.2.3. Liens. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (a) Liens securing payment of the Obligations, granted pursuant to any Loan Document; (b) Liens securing payment of Indebtedness of the type permitted and described in clause (b) of Section 8.2.2; (c) Liens granted prior to the Effective Date to secure payment of Indebtedness of the type permitted and described in clause (c) of Section 8.2.2; (d) Liens granted to secure payment of Vehicle Debt and covering only Vehicles financed by such Vehicle Debt, Excluded Receivables relating to such Vehicles, rights under the Demand Capitalization Note, cash (and investments thereof in High Quality Investments) of an SPC arising from the operations of such SPC and all proceeds of the foregoing; (e) Liens granted to secure payment of Indebtedness of the type permitted and described in clause (i) of Section 8.2.2 and covering only assets of the Foreign Subsidiary obligated under such Indebtedness; (f) Liens granted to secure payment of Indebtedness of the type permitted and described in clause (j) of Section 8.2.2 and covering only those assets acquired with the proceeds of such Indebtedness; (g) Liens granted to secure payment of Indebtedness (other than Subordinated Intercompany Debt) of the type permitted and described in clause (q), (r) or (s) of Section 8.2.2; -91- 100 (h) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (i) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (j) Liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (k) judgment Liens in existence less than 30 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies; and (l) other Liens securing Indebtedness in an aggregate amount not to exceed $25,000,000 at any time outstanding (it being acknowledged that any such Liens shall not cover any property, revenues or assets constituting Collateral (as such term is defined in any Loan Document)). Notwithstanding the foregoing clauses (b) through (l), the Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any trademarks, software systems, reservations systems or other intellectual property (or rights in respect of any thereof), whether now owned or hereafter acquired. SECTION 8.2.4. Financial Condition. The Borrower and the Parent will not permit: (a) the Net Worth of the Parent to be at any time less than the sum, at such time, of (i) $294,500,000, plus (ii) 50% of the Net Income of the Parent for each Fiscal Year, commencing with the 1997 Fiscal Year, as shall have been completed on or prior to such time (in each case with no reduction for net losses) plus 50% of Net Equity Proceeds; (b) the Leverage Ratio, as of the last day of each Fiscal Quarter, commencing with the third Fiscal Quarter of the 1997 Fiscal Year, to be greater than the ratio set forth opposite such Fiscal Quarter below: -92- 101
FISCAL QUARTER RATIO -------------- ----- The third Fiscal Quarter of the 1997 Fiscal Year 5.60:1.00 The fourth Fiscal Quarter of the 1997 Fiscal Year 5.60:1.00 The first Fiscal Quarter of the 1998 Fiscal Year 5.25:1.00 The second Fiscal Quarter of the 1998 Fiscal Year 5.00:1.00 The third Fiscal Quarter of the 1998 Fiscal Year 4.75:1.00 The fourth Fiscal Quarter of the 1998 Fiscal Year 4.25:1.00 The first Fiscal Quarter of the 1999 Fiscal Year 4.00:1.00 The second Fiscal Quarter of the 1999 Fiscal Year 3.75:1.00 The third Fiscal Quarter of the 1999 Fiscal Year 3.50:1.00 The fourth Fiscal Quarter of 3.25:1.00 the 1999 Fiscal Year and each Fiscal Quarter thereafter
(c) the Interest Coverage Ratio, as of the last day of each Fiscal Quarter, commencing with the third Fiscal Quarter of the 1997 Fiscal Year, to be less than the ratio set forth opposite such Fiscal Quarter below:
FISCAL QUARTER RATIO -------------- ----- The third Fiscal Quarter of the 1997 Fiscal Year 2.50:1.00
-93- 102 The fourth Fiscal Quarter of the 1997 Fiscal Year 2.50:1.00 The first Fiscal Quarter of the 1998 Fiscal Year 2.50:1.00 The second Fiscal Quarter of the 1998 Fiscal Year 2.75:1.00 The third Fiscal Quarter of the 1998 Fiscal Year 2.75:1.00 The fourth Fiscal Quarter of the 1998 Fiscal Year 3.00:1.00 The first Fiscal Quarter of the 1999 Fiscal Year 3.00:1.00 The second Fiscal Quarter of the 1999 Fiscal Year 3.00:1.00 The third Fiscal Quarter of the 1999 Fiscal Year and each Fiscal Quarter thereafter 3.25:1.00
SECTION 8.2.5. Investments. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except: (a) Investments existing on the Effective Date and identified in Item 8.2.5(a) ("Ongoing Investments") of the Disclosure Schedule; (b) Cash Equivalent Investments and High Quality Investments; (c) Investments which are Permitted Business Acquisitions; (d) without duplication, Investments permitted as Capital Expenditures pursuant to Section 8.2.7; (e) Investments by the Borrower in the Parent, by way of contributions to capital or the making of loans or advances, to the extent the amount of such Investment would be permitted as a dividend pursuant to clause (a) of Section 8.2.6 at the time of such Investment; -94- 103 (f) Investments by the Borrower and Subsidiary Guarantors in Subsidiary Guarantors that are Wholly Owned Subsidiaries of the Borrower; (g) Investments by the Borrower and Subsidiary Guarantors in Subsidiaries of the Borrower that are not permitted by the preceding clause (f), by way of contributions to capital, the making of loans or advances or the incurrence of Contingent Liabilities, to the extent the aggregate amount of such Investments in any Fiscal Year does not exceed $15,000,000 and the aggregate amount of such Investments at any time outstanding does not exceed $50,000,000; (h) Investments by the Parent in the Borrower or any Subsidiary Guarantor; (i) Investments by a Subsidiary of the Borrower (other than a Subsidiary Guarantor) in the Borrower or a Subsidiary of the Borrower; (j) without duplication, Investments permitted as Contingent Liabilities pursuant to Section 8.2.2; and (k) other Investments in an aggregate amount at any one time not to exceed $25,000,000; provided, however, that (i) any Investment which when made complies with the requirements of the definition of the term "Cash Equivalent Investment" or "High Quality Investment" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; and (ii) no Investment otherwise permitted by clause (c), (e), (g) or (k) shall be permitted to be made if, immediately before or after giving effect thereto, any Default shall have occurred and be continuing. SECTION 8.2.6. Restricted Payments, etc. On and at all times after the Effective Date: (a) the Borrower will not declare, pay or make any Distribution with respect to any shares of its Capital Stock (now or hereafter outstanding) or on any warrants, options or other rights with respect to any such shares of Capital Stock (now or hereafter outstanding) or apply, or permit any of its Subsidiaries to apply, any of its funds, property or assets to the purchase, redemption, sinking fund or other retirement of, or agree or permit any of its Subsidiaries to purchase or redeem, any shares of any class of Capital Stock (now or hereafter outstanding) of the Borrower, or warrants, options or other rights with respect to any such shares of Capital Stock (now or hereafter outstanding) of the Borrower; provided, however, that the Borrower may -95- 104 (i) make Distributions to the Parent to the extent that it is necessary to permit the Parent to pay taxes based on income and franchise taxes and other similar licensure expenses and other actual and reasonable general administrative costs and expenses attributable to the operations of the Parent; (ii) make Distributions to the Parent to the extent it is necessary to make payments of interest on the Series A Notes and Series B Notes on the regular scheduled dates therefor, so long as, immediately before and after giving effect thereto, no Default shall have occurred and be continuing; and (iii) make a Distribution to the Parent to the extent necessary to make a Distribution declared by the Parent (but in no event exceeding the amount of such Distribution permitted to be made by the Parent pursuant to the succeeding clause (b)) , so long as, immediately before and after giving effect thereto, no Default shall have occurred and be continuing and the Distribution by the Parent is so made at such time; (b) the Parent will not declare, pay or make any Distribution with respect to any shares of its Capital Stock (now or hereafter outstanding) or on any warrants, options or other rights with respect to any such shares of Capital Stock (now or hereafter outstanding) or apply, or permit any of its Subsidiaries to apply, any of its funds, property or assets to the purchase, redemption, sinking fund or other retirement of, or agree or permit any of its Subsidiaries to purchase or redeem, any shares of any class of Capital Stock (now or hereafter outstanding) of the Parent, or warrants, options or other rights with respect to any such shares of Capital Stock (now or hereafter outstanding) of the Parent; provided, however, that the Parent may declare, pay and make cash Distributions to its stockholders in any Fiscal Year, so long as (i) both before and after giving effect to any such payment, no Default shall have occurred and be continuing, (ii) the Parent shall have delivered to the Administrative Agent (A) 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 Sections 8.1.1 and (B) a certificate of the Parent executed by its chief financial or accounting Authorized Officer 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, and (iii) the aggregate amount of such Distribution to be made by the Parent pursuant to this clause (b), when added to the aggregate amount of all such Distributions during the Fiscal Year in which such Distribution would be made, does not exceed the amount set forth below opposite such Fiscal Year -96- 105
FISCAL YEAR AMOUNT ----------- ------ 1997 Fiscal Year $3,000,000 1998 Fiscal Year The lesser of (i) 15% of Net Income of the Parent for the 1997 Fiscal Year and (ii) $6,000,000 1999 Fiscal Year 15% of Net Income of the Parent for the 1998 Fiscal Year 2000 Fiscal Year and each 20% of Net Income of the Fiscal Year thereafter Parent for the immediately prior Fiscal Year
(c) the Borrower will not permit any of its Subsidiaries to declare, pay or make any Distribution with respect to any shares of Capital Stock (now or hereafter outstanding) of any such Subsidiary (other than (x) with respect to any such shares held by the Borrower or any of its Wholly Owned Subsidiaries and (y) with respect to such shares which are shares of common stock, so long as such Distribution is made on a pro rata basis, consistent with the ownership interests in such shares of common stock, to the owners of such shares of common stock) or apply any of its funds, property or assets to the purchase, redemption, sinking fund or other retirement of, or agree to purchase or redeem, any shares of any class of Capital Stock (now or hereafter outstanding) of any such Subsidiary, or warrants, options or other rights with respect to any such shares of Capital Stock (now or hereafter outstanding) of any such Subsidiary (other than any such shares, warrants, options or other rights held by the Borrower or any of its Wholly Owned Subsidiaries); (d) the Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to (i) make any payment or prepayment of principal of, or make any payment of interest on, any Subordinated Debt on any day other than the stated, scheduled date for such payment or prepayment set forth in the documents and instruments memorializing such Subordinated Debt, or which would violate the subordination provisions of such Subordinated Debt; or (ii) redeem, purchase or defease, any Subordinated Debt; and -97- 106 (e) the Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, make any deposit for any of the foregoing purposes. SECTION 8.2.7. Capital Expenditures, etc. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, make or commit to make Capital Expenditures in any Fiscal Year, except (a) Capital Expenditures for the acquisition of Vehicles and (b) other Capital Expenditures which do not aggregate in excess of the amount set forth below opposite such Fiscal Year:
1997 $35,000,000 1998 $37,000,000 1999 $40,000,000 2000 $42,000,000 2001 $43,000,000 2002 $44,000,000
SECTION 8.2.8. Take or Pay Contracts. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, enter into or be a party to any arrangement for the purchase of materials, supplies, other property or services if such arrangement by its express terms requires that payment be made by the Borrower, the Parent or such Subsidiary regardless of whether such materials, supplies, other property or services are delivered or furnished to it (it being understood and agreed that motor vehicle supply agreements containing customary and reasonable provisions that provide price and other incentives to purchase motor vehicles from the manufacturer thereunder shall not violate this Section 8.2.8). SECTION 8.2.9. Consolidation, Merger, etc. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other Person, or otherwise enter into or consummate any Business Acquisition not constituting an Investment, except (a) any Subsidiary of the Borrower may liquidate or dissolve voluntarily into, and may merge with and into, the Borrower or any Wholly Owned Subsidiary of the Borrower, and the assets or stock of any Subsidiary of the Borrower may be purchased or otherwise acquired by the Borrower or any Wholly Owned Subsidiary of the Borrower; and (b) so long as no Default has occurred and is continuing or would occur after giving effect thereto, the Borrower or any of its Subsidiaries may enter into or consummate any Permitted Business Acquisition. SECTION 8.2.10. Asset Dispositions, etc. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, sell, issue, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to, any property, business or assets of the Parent, the Borrower or any of their respective Subsidiaries (including accounts receivable and Capital Stock) to any Person, unless -98- 107 (a) any such sale, transfer, lease, contribution or conveyance is in the ordinary course of its business or is permitted by Section 8.2.9; (b) any such issuance is an issuance of Capital Stock of the Parent; (c) (i) any such sale, transfer or conveyance is for not less than the fair market value of the assets so sold, transferred or conveyed (as determined in good faith by the Board of Directors of the Parent or a committee thereof, whose determination shall be evidenced by a certified written resolution of such Board or committee) and the consideration received by the Borrower or the relevant Subsidiary of the Borrower in respect thereof consists of at least 80% cash or Cash Equivalent Investments and (ii) the fair market value of such assets, together with the aggregate fair market value of all other assets sold, transferred or conveyed pursuant to this clause (c) in the Fiscal Year such assets are sold, transferred or conveyed, does not exceed $35,000,000; provided, however, that no such sale, transfer or conveyance shall be permitted to be made if immediately before or after giving effect thereto, any Default shall have occurred and be continuing; or (d) without limiting the effect in any manner of the provisions of Article IX, any such sale, transfer or conveyance of Vehicles is in connection with a Liquidation Event of Default (as defined in the Liquidity Facility) or similar event of default with respect to Budget Funding Corporation, TFFC or any other SPC under any other agreement relating to Vehicle Debt. SECTION 8.2.11. Modification of Certain Agreements. The Borrower will not consent to any amendment, supplement or other modification of (a) any of the terms or provisions contained in, or applicable to, a Stock Purchase Agreement, other than any amendment, supplement or other modification which would not have an adverse effect on the Lenders or (b) the Liquidity Facility, the Senior Note Purchase Agreements, the Senior Notes, the Series A Note Purchase Agreements, the Series A Notes, the Series B Note Purchase Agreements, the Series B Notes or any document or instrument evidencing or applicable to any Subordinated Debt, other than any amendment, supplement or other modification which satisfies each of the requirements set forth in the proviso to clause (u) of Section 8.2.2 or which would not have an adverse effect on the Lenders. SECTION 8.2.12. Transactions with Affiliates. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its other Affiliates unless such arrangement or contract is fair and equitable to the Borrower, the Parent or such Subsidiary and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrower, the Parent or such Subsidiary with a Person which is not one of its Affiliates; provided, however, that the foregoing restriction shall not apply to (a) any agreement or arrangement between or among the Borrower and any Subsidiary Guarantor that is a Wholly Owned Subsidiary of the Borrower that is not otherwise prohibited hereunder, (b) any agreement or arrangement that provides for the sale of Vehicles from TFFC to the Borrower or any other -99- 108 Subsidiary of the Borrower at the higher of the fair market value thereof and the book value thereof, to the extent such agreement or arrangement is entered into in connection with a structured financing or securitization program and (c) the rate of interest on any Indebtedness permitted pursuant to clause (s) of Section 8.2.2. SECTION 8.2.13. Negative Pledges, Restrictive Agreements, etc. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, enter into any agreement (excluding this Agreement and any other Loan Document) prohibiting (a) the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired; or (b) the ability of any Subsidiary of the Borrower to make any payments, directly or indirectly, to the Borrower by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to the Borrower; except (i) any indenture or agreement governing Indebtedness permitted by clause (d) of Section 8.2.2 as in effect on the Closing Date and any refinancings thereof permitted by clause (u) of Section 8.2.2; (ii) any agreement governing any Indebtedness permitted by clause (g), (j) or (l) of Section 8.2.2 as to the assets financed with the proceeds of such Indebtedness; (iii) as to any SPC, usual and customary restrictions pursuant to the Organic Documents of such SPC; or (iv) usual and customary restrictions pursuant to any agreement relating to any Indebtedness of any Foreign Subsidiary permitted pursuant to clause (i) of Section 8.2.2, such as maintenance of net worth or other balance sheet conditions, provided that such restrictions are agreed to in good faith and, where applicable, based upon reasonable assumptions. SECTION 8.2.14. Ability to Amend; Restrictive Agreements. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, enter into, or accept obligations under, any agreement (a) prohibiting (including subjecting to any condition) the ability of the Borrower, the Parent or any of their respective Subsidiaries to amend, supplement or otherwise modify this Agreement or any other Loan Document or (b) containing any provision that would contravene any provision of this Agreement or any other Loan Document. -100- 109 SECTION 8.2.15. Accounting Changes. The Parent will not, and will not permit any of its Subsidiaries to, change its Fiscal Year from twelve consecutive calendar months ending on December 31. SECTION 8.2.16. Tax Sharing Arrangements. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, enter into or permit to exist any tax sharing agreement or similar arrangement unless the same shall have been reviewed by, and consented to, by the Administrative Agent. SECTION 8.2.17. Activities of the Parent. Without limiting the effect of any provision contained in this Article VIII, the Parent will not engage in any business activity other than its continuing ownership of all the shares of Capital Stock of the Borrower and its compliance with the obligations applicable to it under the Loan Documents and the Base Indenture. Without limiting the generality of the immediately preceding sentence, the Parent will not (a) create, incur, assume or suffer to exist any Indebtedness (other than (i) Indebtedness in respect of the guaranty contained in Article X, (ii) Indebtedness evidenced by the Series A Notes or the Series B Notes and (iii) Indebtedness of the Parent consisting of the Contingent Liabilities described in clause (t) of Section 8.2.2), (b) create, assume, or suffer to exist any Lien upon, or grant any options or other rights with respect to, any of its revenues, property or other assets, whether now owned or hereafter acquired (other than pursuant to the Loan Documents), (c) wind-up, liquidate or dissolve itself (or suffer to exist any of the foregoing), consolidate or amalgamate with or merge into or with any other Person, or convey, sell, transfer, lease or otherwise dispose of all or any part of its assets, in one transaction or a series of transactions, to any Person or Persons, (d) create, incur, assume or suffer to exist any Investment in any Person other than (i) as provided in clause (a) of Section 8.2.5 and (ii) in respect of any additional equity Investments in the Borrower or any Subsidiary Guarantor or (e) permit to be taken any action that would result in a Change in Control. The Parent agrees not to commence or cause the commencement of any of the actions described in clause (b), (c) or (d) of Section 9.1.9 of this Agreement with respect to any of its Subsidiaries. ARTICLE IX EVENTS OF DEFAULT SECTION 9.1. Listing of Events of Default. Each of the following events or occurrences described in this Section 9.1 shall constitute an "Event of Default". SECTION 9.1.1. Non-Payment of Obligations. The Borrower or any other Obligor shall (a) default in the payment or prepayment when due of any principal of any Loan, (b) default in the payment when due of any Reimbursement Obligation, or (c) default (and such default shall continue unremedied for a period of three Business Days) in the payment when due of any interest on any Loan, any fee or of any other Obligation. -101- 110 SECTION 9.1.2. Breach of Warranty. Any representation or warranty of the Borrower or any other Obligor made or deemed to be made hereunder or in any other Loan Document executed by it or any other writing or certificate furnished by or on behalf of the Borrower or any other Obligor to either Agent or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document (including any certificates delivered pursuant to Article VI) is or shall be incorrect when made in any material respect. SECTION 9.1.3. Non-Performance of Certain Covenants and Obligations. The Borrower or the Parent shall default in the due performance and observance of any of its obligations under Section 8.2 or Section 8.1.1, 8.1.2 (except to the extent such Section relates to a Non-Material Subsidiary), 8.1.8, or 8.1.9. SECTION 9.1.4. Non-Performance of Other Covenants and Obligations. Any Obligor shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document executed by it, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender. SECTION 9.1.5. Default on Other Indebtedness. (a) A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness (other than Indebtedness described in Section 9.1.1) of the Borrower, the Parent or any of their respective Subsidiaries or any other Obligor having a principal amount, individually or in the aggregate, in excess of $10,000,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity. (b) A Liquidity Agreement Amortization Event (as defined in the Liquidity Facility) shall have occurred or TFFC is unable to finance the purchase of Vehicles pursuant to the CP Program or any similar event shall have occurred with respect to TFFC or any other SPC. SECTION 9.1.6. Judgments. Any judgment or order for the payment of money in excess of $10,000,000 shall be rendered against the Borrower, the Parent or any of their respective Subsidiaries or any other Obligor and either (a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or (b) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. -102- 111 SECTION 9.1.7. Pension Plans. Any of the following events shall occur with respect to any Pension Plan (a) the institution of any steps by the Borrower, the Parent, any member of its Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, the Borrower, the Parent or any such member could be required to make a contribution to such Pension Plan, or could reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $1,000,000 (provided, however, that the Borrower may terminate its domestic defined benefit pension plan which it suspended effective December 31, 1991, so long as such termination does not result in the Borrower, the Parent or any member of its Controlled Group incurring a liability in respect of such Pension Plan in excess of $10,000,000); or (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA. SECTION 9.1.8. Change in Control. Any Change in Control shall occur. SECTION 9.1.9. Bankruptcy, Insolvency, etc. The Borrower, the Parent or any of their respective Subsidiaries (other than a Non-Material Subsidiary) or any other Obligor shall (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Borrower, the Parent or any of their respective Subsidiaries or any other Obligor or any property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for the Borrower, the Parent or any of their respective Subsidiaries or any other Obligor or for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days, provided that the Borrower, the Parent, each of their respective Subsidiaries and each other Obligor hereby expressly authorizes the Administrative Agent and each Lender to appear in any court conducting any relevant proceeding during such 60- day period to preserve, protect and defend their rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Borrower, the Parent or any of their respective Subsidiaries or any other Obligor, and, if any such case or proceeding is not commenced by the Borrower, the Parent or such Subsidiary or such other Obligor, such case or proceeding shall be consented to or -103- 112 acquiesced in by the Borrower, the Parent or such Subsidiary or such other Obligor or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that the Borrower, the Parent, such Subsidiary and each other Obligor hereby expressly authorizes each Agent and each Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or (e) take any action authorizing, or in furtherance of, any of the foregoing. SECTION 9.1.10. Impairment of Security, etc. (a) Any Loan Document, or any Lien granted thereunder, shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of any Obligor party thereto; the Borrower, the Parent, any other Obligor or any other party shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability; or any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien, subject only to those exceptions expressly permitted by such Loan Document. (b) The subordination provisions contained in the Series A Note Purchase Agreements and the Series B Note Purchase Agreements shall, in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of any holder of Series A Notes or Series B Notes or of any party to the Series A Note Purchase Agreements or the Series B Note Purchase Agreements. SECTION 9.2. Action if Bankruptcy. If any Event of Default described in clauses (a) through (d) of Section 9.1.9 shall occur, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable and the Borrower shall immediately comply with its obligations under Section 4.7, in each case, without notice or demand. SECTION 9.3. Action if Other Event of Default. If any Event of Default (other than any Event of Default described in clauses (a) through (d) of Section 9.1.9) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated and/or demand immediate compliance of the Borrower with its obligations under Section 4.7, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, the Commitments shall terminate and/or, as the case may be, the Borrower shall be obligated to comply immediately with its obligations under Section 4.7. -104- 113 ARTICLE X PARENT GUARANTY SECTION 10.1. Guaranty. The Parent hereby absolutely, unconditionally and irrevocably (a) guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all Obligations of the Borrower now or hereafter existing, whether for principal, interest, fees, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)), and (b) indemnifies and holds harmless each Secured Party and each holder of a Note for any and all costs and expenses (including reasonable attorney's fees and expenses) incurred by such Secured Party or such holder, as the case may be, in enforcing any rights under the guaranty set forth in this Article X. The guaranty set forth in this Article X constitutes a guaranty of payment when due and not of collection, and the Parent specifically agrees that it shall not be necessary or required that any Secured Party or any holder of any Note exercise any right, assert any claim or demand or enforce any remedy whatsoever against the Borrower or any other Obligor (or any other Person) before or as a condition to the obligations of the Parent under the guaranty set forth in this Article X. SECTION 10.2. Acceleration of Parent Guaranty. The Parent agrees that, in the event of the dissolution or insolvency of the Borrower, any other Obligor or the Parent, or the inability or failure of the Borrower, any other Obligor or the Parent to pay debts as they become due, or an assignment by the Borrower, any other Obligor or the Parent for the benefit of creditors, or the commencement of any case or proceeding in respect of the Borrower, any other Obligor or the Parent under any bankruptcy, insolvency or similar laws, and if such event shall occur at a time when any of the Obligations of the Borrower and each other Obligor may not then be due and payable, the Parent agrees that it will pay to the Administrative Agent for the account of the Secured Parties forthwith the full amount which would be payable under the guaranty set forth in this Article X by the Parent if all such Obligations were then due and payable. SECTION 10.3. Guaranty Absolute, etc. The guaranty set forth in this Article X shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Obligations of the Borrower and each other Obligor have been paid in full in cash, all obligations of the Parent under the guaranty set forth in this Article X shall have been paid in full in cash, all Letters of Credit have been terminated or expired and all Commitments shall have terminated. The Parent guarantees that the Obligations of the Borrower will be paid strictly in accordance with the terms of this Agreement and each -105- 114 other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Secured Party or any holder of any Note with respect thereto. The liability of the Parent under the guaranty set forth in this Article X shall be absolute, unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of this Agreement, any Note or any other Loan Document; (b) the failure of any Secured Party or any holder of any Note (i) to assert any claim or demand or to enforce any right or remedy against the Borrower, any other Obligor or any other Person (including any other guarantor (including the Parent)) under the provisions of this Agreement, any Note, any other Loan Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor (including the Parent) of, or collateral securing, any Obligations of the Borrower; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower, or any other extension, compromise or renewal of any Obligation of the Borrower; (d) any reduction, limitation, impairment or termination of any Obligations of the Borrower for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Parent hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Obligations of the Borrower or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of this Agreement, any Note or any other Loan Document; (f) any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to departure from, any other guaranty, held by any Secured Party or any holder of any Note securing any of the Obligations of the Borrower; or (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrower, any surety or any guarantor. -106- 115 SECTION 10.4. Reinstatement, etc. The Parent agrees that the guaranty set forth in this Article X shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Obligations is rescinded or must otherwise be restored by any Secured Party or any holder of any Note, upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made. SECTION 10.5. Waiver, etc. The Parent hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations of the Borrower and the guaranty set forth in this Article X and any requirement that the Administrative Agent, any other Secured Party or any holder of any Note protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against the Borrower, any other Obligor or any other Person (including any other guarantor) or entity or any collateral securing the Obligations of the Borrower. SECTION 10.6. Postponement of Subrogation, etc. The Parent agrees that it will not exercise any rights which it may acquire by way of rights of subrogation under the guaranty set forth in this Article X, by any payment made under the guaranty set forth in this Article X or otherwise, until the prior payment in full in cash of all Obligations of the Borrower and each other Obligor, the termination or expiration of all Letters of Credit and the termination of all Commitments. Any amount paid to the Parent on account of any such subrogation rights prior to the payment in full in cash of all Obligations of the Borrower and each other Obligor shall be held in trust for the benefit of the Secured Parties and each holder of a Note and shall immediately be paid to the Administrative Agent for the benefit of the Secured Parties and each holder of a Note and credited and applied against the Obligations of the Borrower and each other Obligor, whether matured or unmatured, in accordance with the terms of this Agreement; provided, however, that if (a) the Parent has made payment to the Secured Parties and each holder of a Note of all or any part of the Obligations of the Borrower, and (b) all Obligations of the Borrower and each other Obligor have been paid in full in cash, all Letters of Credit have been terminated or expired and all Commitments have been permanently terminated, each Secured Party and each holder of a Note agrees that, at the Parent's request, the Administrative Agent, on behalf of the Secured Parties and the holders of the Notes, will execute and deliver to the Parent appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to the Parent of an interest in the Obligations of the Borrower resulting from such payment by the Parent. In furtherance of the foregoing, for so long as any Obligations or Commitments remain outstanding, the Parent shall refrain from taking any action or commencing any proceeding against the Borrower (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in the respect of payments made under the guaranty set forth in this Article X to any Secured Party or any holder of a Note. -107- 116 SECTION 10.7. Successors, Transferees and Assigns; Transfers of Notes, etc. The guaranty set forth in this Article X shall: (a) be binding upon the Parent, and its successors, transferees and assigns; and (b) inure to the benefit of and be enforceable by the Administrative Agent and each other Secured Party. Without limiting the generality of the foregoing clause (b), any Lender may assign or otherwise transfer (in whole or in part) any Note or Credit Extension held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all rights and benefits in respect thereof granted to such Lender under any Loan Document (including the guaranty set forth in this Article X) or otherwise, subject, however, to any contrary provisions in such assignment or transfer, and to the provisions of Section 12.11 and Article XI. ARTICLE XI THE AGENTS SECTION 11.1. Actions. Each Lender hereby appoints Credit Suisse First Boston as its Administrative Agent and NationsBanc as its Documentation Agent under and for purposes of this Agreement, the Notes and each other Loan Document. Each Lender authorizes the Administrative Agent to act on behalf of such Lender under this Agreement, the Notes and each other Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel in order to avoid contravention of applicable law), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) each Agent pro rata according to such Lender's Percentage, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, such Agent in any way relating to or arising out of this Agreement, the Notes and any other Loan Document, including reasonable attorneys' fees, and as to which such Agent is not reimbursed by the Borrower; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from such Agent's gross negligence or wilful misconduct. No Agent shall be required to take any action hereunder, under the Notes or under any other Loan Document, or to prosecute or defend any suit in respect of this Agreement, the Notes or any other Loan Document, unless such Agent is indemnified hereunder to its satisfaction. If any indemnity in favor of either Agent shall be or become, in such Agent's determination, inadequate, such Agent may call for -108- 117 additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. SECTION 11.2. Funding Reliance, etc. Unless the Administrative Agent shall have been notified by telephone, confirmed in writing, by any Lender by 12:00 noon (New York City, New York time) on the Business Day of a Borrowing, with respect to ABR Loans, and by 5:00 p.m. (local time) on the Business Day prior to a Borrowing, with respect to Eurocurrency Loans, that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender and the Borrower severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing (in the case of the Borrower) and (in the case of the Lender), at the Federal Funds Rate for the first two Business Days after which such amount has not been repaid, and thereafter at the interest rate applicable to Loans comprising such Borrowing. SECTION 11.3. Exculpation. Neither Agent nor any of their respective directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own wilful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document, nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Borrower of its obligations hereunder or under any other Loan Document. Any such inquiry which may be made by either Agent shall not obligate it to make any further inquiry or to take any action. Each Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which such Agent believes to be genuine and to have been presented by a proper Person. SECTION 11.4. Successor. Each Agent may resign as such at any time upon at least 30 days' prior notice to the Borrower and all Lenders. If either Agent at any time shall resign, the Required Lenders may appoint another Lender as a successor Agent which shall thereupon become an Agent hereunder in such capacity as held by the resigning Agent. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and, in the case where the successor Agent is to be the Administrative Agent, having a combined capital and -109- 118 surplus of at least $500,000,000. Upon the acceptance of any appointment as an Agent hereunder by a successor Agent, such successor Agent shall be entitled to receive from the retiring Agent such documents of transfer and assignment as such successor Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as an Agent, the provisions of (a) this Article XI shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement; and (b) Section 11.3 and Section 11.4 shall continue to inure to its benefit. SECTION 11.5. Credit Extensions by Agents. Each Agent shall have the same rights and powers with respect to (x) the Loans made by it in its capacity as a Lender or any of its Affiliates, (y) the Notes held by it or any of its Affiliates, and (z) its participating interests in the Letters of Credit as any other Lender and may exercise the same as if it were not an Agent. Each Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if Credit Suisse First Boston and NationsBanc were not Agents hereunder. SECTION 11.6. Credit Decisions. Each Lender acknowledges that it has, independently of each Agent and each other Lender, and based on such Lender's review of the financial information of the Borrower, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of each Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document. SECTION 11.7. Copies, etc. The Administrative Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by the Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by the Borrower). The Administrative Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Administrative Agent from the Borrower for distribution to the Lenders by the Administrative Agent in accordance with the terms of this Agreement or any other Loan Document. -110- 119 ARTICLE XII MISCELLANEOUS PROVISIONS SECTION 12.1. Waivers, Amendments, etc. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; provided, however, that no such amendment, modification or waiver which would: (a) modify any requirement hereunder that any particular action be taken by all the Lenders, by the Required Lenders or by the Supermajority Lenders shall be effective unless consented to by each Lender; (b) modify this Section 12.1, change the definition of "Required Lenders" or "Supermajority Lenders", increase the Commitment Amount, the Enhancement Letters of Credit Commitment Amount, the Foreign Loan Commitment Amount, the Loan Commitment Amount or the Percentage of any Lender, reduce any fees described in Article III, release all or substantially all collateral security which is a component in the Borrowing Base Amount, except as otherwise specifically provided in any Loan Document, release any Guarantor from its obligations under its Guaranty, or extend the Loan Commitment Termination Date or the Letter of Credit Commitment Termination Date shall be made without the consent of each Lender; (c) release all or substantially all collateral security which is not a component in the Borrowing Base Amount, except as otherwise specifically provided in any Loan Document shall be made without the consent of the Supermajority Lenders; (d) extend the due date for, or reduce the amount of, (i) any scheduled repayment or prepayment of principal of or interest on any Loan (or reduce the principal amount of or rate of interest on any Loan) or (ii) any repayment of a Reimbursement Obligation (or reduce the amount of or rate of interest on any Reimbursement Obligation) shall be made without the consent of each Lender; (e) modify the definition of Borrowing Base Amount or any definition related thereto shall be made without the consent of the Supermajority Lenders; (f) affect adversely the interests, rights or obligations of the Issuer qua the Issuer shall be made without the consent of the Issuer; or (g) affect adversely the interests, rights or obligations of the Administrative Agent qua the Administrative Agent shall be made without consent of the Administrative Agent. -111- 120 No failure or delay on the part of either Agent, the Issuer, any Lender or the holder of any Note in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by either Agent, the Issuer, any Lender or the holder of any Note under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION 12.2. Notices. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth in the case of the Borrower, the Parent or any Agent, below its signature hereto or in the case of any Lender, in Schedule II hereto or in a Lender Assignment Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when the confirmation thereof is received by the transmitter. SECTION 12.3. Payment of Costs and Expenses. The Borrower agrees to pay on demand all expenses of each Agent (including the fees and out-of-pocket expenses of counsel to the Agents and of local counsel, if any, who may be retained by counsel to the Agents) in connection with (a) the negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated (other than the fees and expenses of the Agents in the event that the transactions contemplated hereby are not consummated and such non-consummation results from the failure of the Agents to negotiate and deal with the Borrower in good faith); (b) the filing, recording, refiling or rerecording of any Loan 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 Loan Document; and (c) the preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document. -112- 121 The Borrower further agrees to pay, and to save the Agents, the Issuer and the Lenders harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Agreement, the Credit Extensions hereunder, the issuance of the Notes, Letters of Credit or any other Loan Documents. The Borrower also agrees to reimburse each Agent, the Issuer and each Lender upon demand for all reasonable out-of-pocket expenses (including attorneys' fees and legal expenses) incurred by such Agent or such 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 12.4. Indemnification. In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments, the Borrower hereby indemnifies, exonerates and holds each Agent, the Issuer and each Lender and each of their respective officers, directors, employees and agents (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, (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Credit Extension, including all Indemnified Liabilities arising in connection with the Transaction or the use of any Letter of Credit; (b) the entering into and performance of this Agreement and any other Loan 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 Required Lenders pursuant to Article VI not to fund any Credit Extension) provided that any such action is resolved in favor of such Indemnified Party; (c) any investigation, litigation or proceeding related to any acquisition or proposed acquisition by the Borrower or any of its Subsidiaries of all or any portion of the stock or assets of any Person, whether or not such Agent, the Issuer or such Lender is party thereto; (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 the Borrower 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 the Borrower or any Subsidiary thereof of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under -113- 122 any Environmental Law), regardless of whether caused by, or within the control of, the Borrower 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 wilful misconduct. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 12.5. Survival. The obligations of the Borrower under Sections 4.9, 5.3, 5.4, 5.5, 5.6, 12.3 and 12.4, and the obligations of the Lenders under Section 11.1, shall in each case survive any assignment from one Lender to another (in the case of Sections 11.3 and 11.4) and any termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments. The representations and warranties made by each Obligor in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document. SECTION 12.6. Severability. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 12.7. Headings. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof. SECTION 12.8. Execution in Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrower, each Lender and the Adminsitrative Agent (or notice thereof satisfactory to the Administrative Agent) shall have been received by the Administrative Agent. SECTION 12.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. This Agreement, the Fee Letter, the Notes and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 12.10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that: -114- 123 (a) each of the Borrower and the Parent may not assign or transfer either of their respective rights or obligations hereunder without the prior written consent of the Administrative Agent and all of the Lenders; and (b) the rights of sale, assignment and transfer of the Lenders are subject to Section 12.11. SECTION 12.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes. Each Lender may assign, or sell participations in, its Loans, Letters of Credit and Commitments to one or more other Persons in accordance with this Section 12.11. SECTION 12.11.1. Assignments. Any Lender, (a) with the written consents of the Borrower, the Issuer and the Administrative Agent (which consents shall not be unreasonably delayed or withheld and which consent, in the case of the Borrower, shall be deemed to have been given in the absence of a written notice delivered by the Borrower to the Administrative Agent, on or before the fifth Business Day after receipt by the Borrower of such Lender's request for consent, stating, in reasonable detail, the reasons why the Borrower proposes to withhold such consent) may at any time assign and delegate to one or more Eligible Assignees, and (b) with notice to the Borrower, the Issuer and the Administrative Agent, but without the consent of the Borrower, the Issuer or the Administrative Agent, may assign and delegate to any of its Affiliates which is an Eligible Assignee or to any other Lender (each Eligible Assignee to whom such assignment and delegation is to be made, being hereinafter referred to as an "Assignee Lender"), all or any fraction of such Lender's total Loans and Commitments (which assignment and delegation shall be of a constant, and not a varying, percentage of all the assigning Lender's Loans and Commitments) in a minimum aggregate amount of $5,000,000; provided, however, that the assigning Lender shall have Commitments, participations in Letter of Credit Outstandings and Loans aggregating at least $5,000,000; provided further, however, that any such Assignee Lender will comply, if applicable, with the provisions contained in the last sentence of Section 5.6; provided further, however, that, the Borrower, the Issuer and the Administrative Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until (i) written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the Borrower, the Issuer and the Administrative Agent by such assigning Lender and such Assignee Lender, -115- 124 (ii) such Assignee Lender shall have executed and delivered to the Borrower, the Issuer and the Administrative Agent a Lender Assignment Agreement, accepted by the Administrative Agent, and (iii) the processing fees described below shall have been paid. From and after the date that the Administrative Agent accepts such Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the assigning Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Loan Documents. Within five Business Days after its receipt of notice that the Administrative Agent has received an executed Lender Assignment Agreement, the Borrower shall, to the extent requested, execute and deliver to the Administrative Agent (for delivery to the relevant Assignee Lender) new Notes evidencing such Assignee Lender's assigned Loans and Commitments and, if the assigning Lender has retained Loans and Commitments hereunder which are evidenced by any Notes, replacement Notes in the principal amount of the Loans and Commitments retained by the assignor Lender hereunder (such Notes to be in exchange for, but not in payment of, those Notes then held by such assignor Lender). Each such Note shall be dated the date of the predecessor Notes. The assignor Lender shall mark the predecessor Notes "exchanged" and deliver them to the Borrower. Accrued interest on that part of the principal comprising any assigned Loans, and accrued fees, shall be paid as provided in the Lender Assignment Agreement. Accrued interest on that part of the principal of any Loans not assigned shall be paid to the assignor Lender. Accrued interest and accrued fees shall be paid at the same time or times provided in this Agreement. Such assigning Lender must also pay a processing fee to the Administrative Agent upon delivery of any Lender Assignment Agreement in the amount of $3,500. Any attempted assignment and delegation not made in accordance with this Section 12.11.1 shall be null and void. Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including the Loans owing to it and the Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the F.R.S. Board. SECTION 12.11.2. Participations. Upon prior written notice to the Borrower and the Administrative Agent, any Lender may at any time sell to one or more commercial banks or other financial institutions (each of such commercial banks and other financial institutions being herein called a "Participant") participating interests (or a sub-participating interest, in the case of a Lender's participating interest in a Letter of Credit) in any of the Loans, Commitments, or other interests of such Lender hereunder; provided, however, that -116- 125 (a) no participation or sub-participation contemplated in this Section 12.11 shall relieve such Lender from its Commitments or its other obligations hereunder or under any other Loan Document, (b) such Lender shall remain solely responsible for the performance of its Commitments and such other obligations, (c) the Borrower and each other Obligor and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents, (d) no Participant, unless such Participant is an Affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant's consent, take any actions of the type described in clause (b), (c) or (d) of Section 12.1, and (e) the Borrower shall not be required to pay any amount under Section 5.6 that is greater than the amount which it would have been required to pay had no participating interest been sold. The Borrower acknowledges and agrees that each Participant, for purposes of Sections 5.3, 5.4, 5.5, 5.6, 5.8, 5.9, 12.3 and 12.4, shall be considered a Lender. SECTION 12.12. Other Transactions. Nothing contained herein shall preclude either Agent or any other Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 12.13. Independence of Covenants. All covenants contained in this Agreement and each other Loan 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 Default or an Event of Default if such action is taken or such condition exists. SECTION 12.14. Judgment Currency. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum due hereunder (including under Section 10.1), under any Note or under any other Loan Document in another currency into Dollars or into a Foreign Currency, as the case may be, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the applicable Secured Party could purchase such other currency with Dollars or with such Foreign Currency, as the case may be, in New York City, New York at the close of business on the Business Day immediately preceding the day on which final -117- 126 judgment is given, together with any premiums and costs of exchange payable in connection with such purchase. (b) The obligation of each of the Borrower and the Parent in respect of any sum due from it to either Agent, any Lender or any other Secured Party hereunder, under any Note or under any other Loan Document shall, notwithstanding any judgment in a currency other than Dollars or a Foreign Currency, as the case may be, be discharged only to the extent that on the Business Day next succeeding receipt by such Agent, such Lender or such other Secured Party of any sum adjudged to be so due in such other currency, such Agent, such Lender or such other Secured Party may, in accordance with normal banking procedures, purchase Dollars or such Foreign Currency, as the case may be, with such other currency. If the Dollars or such Foreign Currency so purchased are less than the sum originally due to such Agent, such Lender or such other Secured Party in Dollars or in such Foreign Currency, each of the Borrower and the Parent agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Agent, such Lender or such other Secured Party against such loss. SECTION 12.15. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS, THE BORROWER OR THE PARENT 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 ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE BORROWER AND THE PARENT 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 PARENT 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 PARENT HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION 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 PARENT, AS THE CASE MAY BE, HAS OR HEREAFTER MAY ACQUIRE ANY -118- 127 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, EACH OF THE BORROWER AND THE PARENT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF THE OBLIGATIONS OF SUCH PERSON UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. SECTION 12.16. Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, THE LENDERS, THE BORROWER AND THE PARENT 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 LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS, THE BORROWER OR THE PARENT. EACH OF THE BORROWER AND THE PARENT ACKNOWLEDGES AND AGREES THAT EACH SUCH PERSON HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH SUCH PERSON IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. [REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK] -119- 128 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. BUDGET RENT A CAR CORPORATION By: /s/ Stephen G. Worthley ---------------------------------- Name: Stephen G. Worthley Title: Vice President/Treasurer Address: 4225 Naperville Road Lisle, IL 60532 Facsimile No.: (630) 955-7810 Attention: Robert L. Aprati Senior Vice President and General Counsel BUDGET GROUP INC. (formerly known as Team Rental Group, Inc.), as a Guarantor By: /s/ Sanford Miller ----------------------------------- Name: Sanford Miller Title: Chief Executive Officer Address: 4225 Naperville Road Lisle, IL 60532 Facsimile No.: (630) 955-7810 - - Attention: Scott R. White Executive Vice President -120- 129 CREDIT SUISSE FIRST BOSTON, as a Co- Syndication Agent and the Administrative Agent By: /s/ Roger W. Saylor ----------------------------------- Name: Roger W. Saylor Title: Associate By: /s/ Edward E. Barr ----------------------------------- Name: Edward E. Barr Title: Associate Address: Eleven Madison Avenue 21st Floor New York, NY 10010-3629 Facsimile No.: (212) 325-8304 Attention: Diane Albanese CREDIT SUISSE FIRST BOSTON, as Issuer By: /s/ Roger W. Saylor ----------------------------------- Name: Roger W. Saylor Title: Associate By: /s/ Edward E. Barr ----------------------------------- Name: Edward E. Barr Title: Associate -121- 130 NATIONSBANC CAPITAL MARKETS, INC., as a Co-Syndication Agent and the Documentation Agent By: /s/ Arrington H. Mixon ----------------------------------- Name: Arrington H. Mixon Title: M.D. Address: 100 North Tryon Street 7th Floor Charlotte, NC 28255 Facsimile No.: (704) 388-0209 Attention: Arrington H. Mixon -122- 131 LENDERS: CREDIT SUISSE FIRST BOSTON By: /s/ Edward E. Barr ----------------------------------- Name: Edward E. Barr Title: Associate By: /s/ Roger W. Saylor ----------------------------------- Name: Roger W. Saylor Title: Associate NATIONSBANK, N.A. (SOUTH) By: /s/ Andrew M. Airheart ----------------------------------- Name: Andrew M. Airheart Title: Senior Vice President CAISSE NATIONALE DE CREDIT AGRICOLE By: /s/ Dean Balice ----------------------------------- Name: Dean Balice Title: Senior Vice President Branch Manager BHF BANK AKTIENGESELLSCHAFT By: /s/ Paul Travers ----------------------------------- Name: Paul Travers Title: Vice President By: /s/ Linda Pace ----------------------------------- Name: Linda Pace Title: Vice President -123- 132 CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ Stephanie E. Johnson ----------------------------------- Name: Stephanie E. Johnson Title: Authorized Signatory CREDIT LYONNAIS CHICAGO BRANCH By: /s/ Michel Buysschaert ----------------------------------- Name: Michel Buysschaert Title: Vice President PNC BANK, KENTUCKY, INC. By: /s/ James D. Neil ----------------------------------- Name: James D. Neil Title: Vice President ROYAL BANK OF CANADA By: /s/ Patrick K. Shields ----------------------------------- Name: Patrick K. Shields Title: Manager THE TORONTO-DOMINION BANK By: /s/ Jorge A. Garcia ----------------------------------- Name: Jorge A. Garcia Title: Mgr. Cr. Admin. -124- 133 BANK OF HAWAII By: /s/ Donna R. Parker ----------------------------------- Name: Donna R. Parker Title: Vice President -125- 134 SCHEDULE I to Credit Agreement $300,000,000 Credit Agreement DISCLOSURE SCHEDULES ITEM 7.7. Litigation. None. 135 $300,000,000 Credit Agreement DISCLOSURE SCHEDULES ITEM 7.8.(b) Existing Subsidiaries. See list beginning next page. 136 Existing Subsidiaries of the. Borrower
Name Jurisdiction of Incorporation ---- ----------------------------- Budget Car Sales, Inc. (formerly "Team Car Sales") Indiana Team Car Sales of Charlotte, Inc. Delaware Team Car Sales of Dayton, Inc. Delaware Team Car Sales of Philadelphia, Inc. Delaware Team Car Sales of Richmond, Inc. Delaware Team Car Sales of San Diego, Inc. Delaware Team Car Sales of Southern California, Inc. Delaware ValCar Rental Car Sales, Inc. Indiana IN Motors VI, LLC (1) Indiana TCS Properties, LLC Indiana Budget Rent a Car Systems, Inc. Delaware Budget Funding Corporation Delaware Budget Fleet Finance Corporation Delaware BRAC of New York, Inc. Delaware Long Island Car & Truck Rental, Inc. (2) Delaware NYRAC, Inc. New York Rebound Services, Inc. Delaware Diversified Services, Inc. Delaware Automated Transportation, Inc. California Expert Leasing, Inc. Florida Rapid Rentals, Inc. District of Columbia Moisant Car Sales, Inc. Louisiana Budget Rent a Car of New Orleans, Inc. Louisiana Westeam Enterprises, Inc. California
137 Existing Subsidiaries of the. Borrower
Name Jurisdiction of Incorporation ---- ----------------------------- MacKay Car & Truck Rentals, Inc. North Carolina Metro West, Inc. Delaware Lee-Al, Inc. California Dayton Auto Lease Company, Inc. Ohio Don Kremer, Inc. Ohio Arizona Rent a Car Systems, Inc, Delaware Capital City Leasing, Inc. Florida Team Rental of Connecticut, Inc. Delaware Team Rental of Cincinnati, Inc. Delaware Team Rental of Ft. Wayne, Inc. Delaware Fort Wayne Rental Group, Inc. Delaware Team Rental of Philadelphia, Inc. Delaware Team Rental of Pittsburgh, Inc, Delaware Team Rental of Rochester, Inc. Delaware Team Rental of Southern California, Inc. Delaware BRAC SOCAL Funding Corporation Delaware Tranex Rentals of New York, Inc. New York VPSI, Inc. Delaware Team Claims Services, Inc. Florida Budget Rent a Car International, Inc. Delaware Budget Rent a Car Espana, S.A. Spain Budget Rent a Car Ltd., Ireland London, England BRACRENT, S.A. Spain
138 Existing Subsidiaries of the Borrower
Name Jurisdiction of Incorporation ---- ----------------------------- Societe Financiere et de Participation Tours, France Budget France, S.A. Tours, France BTI (U.K.) pie London, England BTI (Gatwick) Limited London, England BTI (Stansted) Limited London, England BTI (London) Limited London, England BTI (Marble Arch) Limited London, England BTI (Slough) Limited London, England BTI (Heathrow) Limited London, England Budget Rent a Car Australia Pty. Ltd. Victoria, Australia Budget Rent a Car Pty. Limited Victoria, Australia Budget Rent a Car Limited Auckland, New Zealand Budget Rent a Car Operations Pty. Ltd. Victoria, Australia Target Rent a Car Limited Wellington New Zealand Budget Lease Mgmt (Car Sales) Limited Auckland, New Zealand Budget Locacao de Veiculos Ltda. Sao Paulo, Brazil Budget Rent a Car Asia-Pacific, Inc. Delaware Budget Rent a Car of Japan, Inc. Delaware Budget Rent a Car of Canada Limited Ottawa, Ontario Control Risk Corporation Illinois Philip Jacobs Insurance Agency, Inc. California Reservation Services, Inc. Texas 200-214 N. Michigan Avenue, Inc. Illinois BRAC Reinsurance Company, Ltd. Bermuda
139 Existing Subsidiaries of the Borrower (Cont'd)
Name Jurisdiction of Incorporation - ---- ----------------------------- BRAC Credit Corporation Delaware Compass Computer Services, Inc. (3) Delaware Budget Sales Corporation Delaware Team Fleet Financing Corporation Delaware Team Realty Services, Inc. Delaware Team Fleet Services Corporation Delaware
- -------------------------- (1) 1% owned by Budget Car Sales, Inc.; 1% owned by the Borrower, and 98% owned by ValCar Rental Car Sales, Inc. (2) A 72% owned subsidiary of BRAC of New York, Inc. (3) A 50% owned subsidiary of the Borrower. 140 $300,000,000 Credit Agreement Disclosure Schedules ITEM 7.11. Emplovee Benefit Plans None. 141 $300,000,000 Credit Agreement Disclosure Schedules ITEM 7.12. Environmental Matters None. 142 $300,000,000 Credit Agreement Disclosure Schedules ITEM 7.13. Intellectual Property Each service mark/trade name including the name "Budget" in the following countries: Argentina Australia Austria Belgium Brazil Canada Chile China Colombia Denmark Finland France Germany Italy Israel Japan Luxembourg Mexico Netherlands New Zealand Norway Russia South Africa Spain Sweden Switzerland United Kingdom United States Venezuela 143 $300,000,000 Credit Agreement Disclosure Schedules ITEM 8.2.2(b) Indebtedness to be Paid See attachment. 144 $300,000,000 Credit Agreement Budget Group, Inc. Indebtedness to be Paid [as of 4/28/97]
Payee BUDGET Payee TEAM - -------------------------- --------------- ----------- ----------- Budget Funding Corporation 260,190,000 NationsBank $37,948,000 Ford - Ford Vehicles 220,806,617 Ford - Non-Ford Vehicles 390,469,902 Ford - Working Capital 443,517,915 -------------- ----------- TOTAL BUDGET 1,314,984,434 TOTAL TEAM $37,948,000 ============== =========== TOTAL TEAM & BUDGET $1,352,932,434 ==============
145 $300,000,000 Credit Agreement Disclosure Schedules ITEM 8.2.2(c) Ongoing Indebtedness See attachment. 146 S300,000,000 Credit Agreement Budget Group, Inc. Existing Debt [as of 4/19/97]
Payee BUDGET Maturity Payee TEAM Maturity ----- ---------- -------- -------------------------------------- ------------ -------- EAST REGION: (B) (1)Truckers Bank 456,303 1997 (1)TFFC Class A (B) $100,000,000 1999 (9)LT Note Payable - Secured 613,407 2002 (1)TFFC Class B (B) 5,682,000 2000 (1)So. Cal. Class A (B) 38,500,000 1998 FLORIDA:(B) (1)So. Cal. Class B(B) 1,500,000 1998 (4)Stephen Mogg 400,042 1998 (1)TFFC Series 1996-1 Class A (B) 166,000,000 2002 (1)TFFC Series 1996-1 Class B (B) 10,000,000 2002 RESERVATIONS:(B) (2)Convertible Subordinated (C) 80,000,000 2007 (3)Wizcom Note 29,874,995 1998 (10)Bank One (B) 8,054,000 1998** (1) Truckers Bank (B) 3,355,000 Demand Note CORPORATE: (A) (10) World Omni (B) 17,079,000 Demand Note (1)Budget Fleet Finance (B) 500,000,000 1999 (1) National City Bank of Dayton (B) 3,618,000 1997 (6)Nashville Franchise Note 42,476 1997 (4) Core States - Meridian Bank (B) 1,892,000 1997 (6)Rodenburg - Charleston A 176,161 1999 (8) Other Dcbt - Secured & Unsecured (B) 1,891,000 (6)Rodcnburg - Charleston B 483,976 1998 ------------ (6)Rodenburg - Charleston C 334,615 1999 $437,571,000 (5)IRBS - Orlando 550,000 1998 ============ (5)IRBS - Fort Lauderdale 389,772 1998 (4)Sea First Mortgage 400,000 1998 (7)AFCO Primary 279,445 1997 (7)AFCO Property 2,387,863 1997 (7)AFCO Umbrella 914,098 1997 (7)AFCO Exec 189,154 1997 FRANCE: (B) (1)Credit Ford 3,398,000 1997 (1)Foum Imobilization 2,470,000 1997 (1)Disc 1,227,000 1997 (2)Credit Lyonnais 1,520,000 2001 (2)Credit Lyonnais 618,000 2000 (2)Societe Generale 266,000 1999 (2)UFB 1,000 1997 (2)Overdrafts 3,536,000 BTI: (B) (1)Forward Trust 25,114,000 1997 (1)UDT 17,521,000 1997 (4)Notingham 104,000 2002 (2)Overdrafts 17,294,538 AUSTRALIA: (B) (1)Societe Generale 14,329,491 1997 (2)Westpac - Commercial Bills 393,000 1997 (1)Westpac - Fleet 5,179,037 1997 -------------- TOTAL BUDGET $ 630,463,373* ============== TOTAL TEAM & BUDGET $1,068,034,373 ==============
* Not including other items of indebtedness having an unpaid principal amount not exceeding $1,000,000 **Debt carried for 90 days and is not subject to refinance provision (1)Fleet Debt - secured by vehicles (2)Working Capital Debt - unsecured (3)Reservation - Wizcom Debt - unsecured (4)Mortgages with Liens on Property - secured by property (5)Industrial Revenue Bonds - unsecured (6)Franchise Acquisition Notes @ unsecured (7)Insurance Notes - unsecured (8)Other Debt (9)Note payable to Corporate secured by franchise (10)Fleet Debt - secured by vehicles and related receivables (A)Obligor is BRACC (B)Obligor is a Subsidiary (C)Obligor is Team 147 $300,000,000 Credit Agreement Disclosure Schedules ITEM 8.2.5(a) Ongoing Investments See attachment. 148 Budget Rent a Car Corporation Investment Accounts As of 4/28/97
Description Account 1997 Balance - ------------------------------------- ------- ------------- Invest-Systems 25100 * 786,040.17 Invest-Budget Leasing 25130 * 10,000.00 Invest-BRAC Reinsurance 25140 * 1,613,938.00 Invest-Control Risk Group 25170 * 940,061.00 Invest-BRAC International 25180 * 35,634,479.43 Invest-BRAC International - Australia 25180 * 3,375,203.00 Invest-Budget Funding Corp 25220 * 25,000.00 Invest-JV Long Island 25230 * 225,000.00 Invest-Budget Fleet Financing 25240 * 25,000.00 Invest-Thailand 25999 801,055.85 Invest-Oth 25999 580,739.35 Balance per General Ledger 44,016,516.60 * Investment Account Eliminated 634,721.60 Balance Per Consideration 1,381,795.00
149 SCHEDULE II to Credit Agreement LENDER INFORMATION
LENDER PERCENTAGE DOMESTIC OFFICE EUROCURRENCY OFFICE - ------ ---------- --------------- ------------------- CREDIT SUISSE FIRST BOSTON 33.3333333333% Credit Suisse First Boston Credit Suisse First Boston Eleven Madison Avenue Eleven Madison Avenue New York, NY 10010-3629 New York, NY 10010-3629 Attn: Roger Saylor Attn: Roger Saylor Fax: (212) 325-6677 Fax: (212) 325-6677 NATIONSBANK, N.A. (SOUTH) 25.0000000000% NationsBank, N.A. (South) NationsBank, N.A. (South) 101 North Tryon Street 101 North Tryon Street N01-001-15-06 N01-001-15-06 Charlotte, NC 28255 Charlotte, NC 28255 Attn: Barbara Pollack Attn: Barbara Pollack Fax: (704) 386-8694 Fax: (704) 386-8694 CAISSE NATIONALE DE CREDIT 8.3333333333% Caisse Nationale de Credit Caisse Nationale de Credit Agricole Agricole 55 East Monroe Street 55 East Monroe Street Chicago, IL 60603 Chicago, IL 60603 Attn: Laurence Grant Attn: Laurence Grant Fax: (312) 372-3455 Fax: (312) 372-3455 BHF BANK 5.0000000000% BHF Bank Aktiengesellschaft BHF Bank Aktiengesellschaft AKTIENGESELLSCHAFT New York Branch New York Branch 590 Madison Avenue 590 Madison Avenue New York, NY 10022 New York, NY 10022 Attn: Sharon Fong Attn: Sharon Fong Fax: (212) 756-5536 Fax: (212) 756-5536
150
LENDER PERCENTAGE DOMESTIC OFFICE EUROCURRENCY OFFICE - ------ ---------- --------------- ------------------- CANADIAN IMPERIAL BANK OF 5.0000000000% Canadian Imperial Bank of Canadian Imperial Bank of COMMERCE Commerce Commerce 2 Paces Ferry Road 2 Paces Ferry Road Suite 1200 Suite 1200 Atlanta, GA 30339 Atlanta, GA 30339 Attn: Clare Coyne/Kelli Jones Attn: Clare Coyne/Kelli Jones Fax: (770) 319-4950 Fax: (770) 319-4950 CREDIT LYONNAIS CHICAGO 5.0000000000% Credit Lyonnais Chicago Branch Credit Lyonnais Chicago Branch BRANCH 227 West Monroe Street 227 West Monroe Street Suite 3300 Suite 3300 Chicago, IL 60606 Chicago, IL 60606 Attn: Joce Cote Attn: Joce Cote Fax: (502) 581-2302 Fax: (502) 581-2302 PNC BANK, KENTUCKY, INC. 5.0000000000% PNC Bank, Kentucky, Inc. PNC Bank, Kentucky, Inc. 500 W. Jefferson Street 500 W. Jefferson Street Louisville, KY 40202 Louisville, KY 40202 Attn: Jamie Argenbright Attn: Jamie Argenbright Fax: (502) 581-2302 Fax: (502) 581-2302 ROYAL BANK OF CANADA 5.0000000000% Royal Bank of Canada Royal Bank of Canada Grand Cayman Branch Grand Cayman Branch 32 Old Slip, One Financial Square 32 Old Slip, One Financial Square 23rd Floor 23rd Floor New York, NY 10005-3531 New York, NY 10005-3531 Attn: Linda Smith Attn: Linda Smith Fax: (212) 428-2372 Fax: (212) 428-2372
-2- 151
LENDER PERCENTAGE DOMESTIC OFFICE EUROCURRENCY OFFICE - ------ ---------- --------------- ------------------- THE TORONTO- DOMINION BANK 5.0000000000% The Toronto-Dominion Bank The Toronto-Dominion Bank 909 Fannin, Suite 1700 909 Fannin, Suite 1700 Houston, TX 77010 Houston, TX 77010 Attn: Jorge A. Garcia Attn: Jorge A. Garcia Fax: (713) 951-9921 Fax: (713) 951-9921 BANK OF HAWAII 3.3333333333% Bank of Hawaii Bank of Hawaii 130 Merchant Street 130 Merchant Street 20th Floor 20th Floor Honolulu, Hawaii 96813 Honolulu, Hawaii 96813 Attn: Iwalani Sabarre-Kapika Attn: Iwalani Sabarre-Kapika Fax: (808) 484-3584 Fax: (808) 484-3584
-3- 152 SCHEDULE III to Credit Agreement DEPOSIT BANKS NBD Bank, N.A. Indianapolis, Indiana Norwest Bank Colorado, N.A. Denver, Colorado Texas Commerce Bank Arlington, Texas 153 SCHEDULE IV to the Credit Agreement SUBORDINATION PROVISIONS TO BE CONTAINED IN SUBORDINATED INTERCOMPANY DEBT The following provisions and conditions shall be made a part of each instrument evidencing or pursuant to which Subordinated Intercompany Debt may be incurred by any Person (a "Debtor") to another Person (a "Subordinated Creditor") in accordance with the Credit Agreement referred to below. SECTION 1. Definitions. Terms used but not defined herein have the meanings given to them in the Credit Agreement. As used in these provisions, the following terms shall have the meanings specified below: "Administrative Agent" means Credit Suisse First Boston, in its capacity as Administrative Agent under the Credit Agreement. "Credit Agreement" means the Credit Agreement, dated as of April 29, 1997, among Budget Rent a Car Corporation, Budget Group, Inc. (formerly known as Team Rental Group, Inc.), the various financial institutions as are, or may from time to time become, parties thereto (each individually a "Lender" and collectively the "Lenders") and the Administrative Agent, including all amendments, renewals, extensions, restructurings, supplements or modifications thereto and all refundings, refinancings and replacements thereof (and of any such refunding, refinancing or replacement), including any agreement (i) extending or shortening the maturity of any indebtedness incurred thereunder or contemplated thereby, (ii) adding or deleting borrowers or guarantors thereunder or (iii) increasing the amount of indebtedness incurred thereunder or available to be borrowed thereunder. "Hedging Arrangements" means any and all interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and currency exchange agreements, and all other agreements or arrangements designed to protect against fluctuations in interest rates or currency values, entered into by the Debtor with any Secured Party (or any Affiliate of a Secured Party). "Intercompany Subordinated Debt" means all indebtedness and other obligations of the Debtor from time to time owing to the Subordinated Creditor in respect of indebtedness related to or resulting from intercompany loans, advances or other indebtedness from a Subordinated Creditor (whether created directly or acquired by assignment or otherwise), and interest, premiums and fees, if any, thereon and other amounts payable in respect thereof and all rights and remedies of the Subordinated Creditor with respect thereto. "Secured Parties" is defined in the Credit Agreement. 154 "Senior Indebtedness" is defined in clause (a) of Section 2. SECTION 2. Agreement to Subordinate. (a) The Debtor and the Subordinated Creditor agree that the Intercompany Subordinated Debt is and shall be subject, subordinate and rendered junior, to the extent and in the manner hereinafter set forth, in right of payment, to the prior payment in cash in full of all obligations of the Debtor now existing or hereafter arising in connection with the Credit Agreement or any Hedging Arrangement, whether for (i) principal, (ii) reimbursement obligations in respect of letters of credit, (iii) interest (including, without limitation, interest accruing after the filing of a petition initiating any proceeding referred to in clause (a) of Section 3, whether or not allowed as a claim in such proceeding), (iv) costs, fees (including, without limitation, attorneys' fees and disbursements) and reasonable expenses or (v) otherwise (the obligations specified in clauses(a)(i) through (a)(v) above are referred to collectively as the "Senior Indebtedness"). For purposes of these provisions, the Senior Indebtedness shall not be deemed to have been paid in cash in full until the Secured Parties shall have received full payment of the Senior Indebtedness in cash and all letters of credit issued under the Credit Agreement have expired or been terminated or have been cash collateralized in full, which payment and/or cash collateralization shall have been retained by the Secured Parties for a period of time in excess of all applicable preference or other similar periods under applicable bankruptcy, insolvency or creditors' rights laws. Each of the Debtor and the Subordinated Creditor waives notice of acceptance of these provisions by the Secured Parties, and the Subordinated Creditor waives notice of and consent to the making, amount and terms of the Senior Indebtedness which may exist or be created from time to time and any renewal, extension, amendment or modification thereof, and any other lawful action which any Secured Party in its and their sole and absolute discretion may take or omit to take with respect thereto. The provisions of this Section shall constitute a continuing offer made for the benefit of and to all Secured Parties and each Secured Party is hereby irrevocably authorized to enforce such provisions. (b) In the event that the Debtor shall make, and/or any Subordinated Creditor shall receive, any payment on Intercompany Subordinated Debt in contravention of these provisions or the terms of the Credit Agreement, then and in any such event such payment shall be deemed to be the property of, segregated, received and held in trust for the benefit of, and shall be promptly paid over and delivered to, the Administrative Agent for the pro rata benefit of the Secured Parties. (c) The Debtor shall not make, and the Subordinated Creditor shall receive or accept, any payment in respect of any Intercompany Subordinated Debt if a Default of the nature set forth in Section 9.1.9 of the Credit Agreement or any Event of Default has occurred and is continuing or would result therefrom, unless and until (i) the Senior Indebtedness has been paid in cash in full, (ii) in the case of an Event of -2- 155 Default referred to above other than a Default of the nature set forth in Section 8.1.9 of the Credit Agreement, such Event of Default has been cured or waived or (iii) the Administrative Agent has otherwise consented in writing. For purposes of these provisions, "payment" in respect of any Intercompany Subordinated Debt shall include any direct or indirect payment or distribution from any source, whether in cash, property or securities, by set-off or otherwise, in respect of principal, premium, interest or otherwise, including in connection with any redemption or purchase of such Intercompany Debt or any recovery on any claim for rescission or damages. SECTION 3. In Furtherance of Subordination. (a) Upon any distribution of all or any of the assets of the Debtor or the Subordinated Creditor in the event of (i) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Debtor or the Subordinated Creditor, or to its creditors, as such, or to its assets, (ii) any liquidation, dissolution or other winding up of the Debtor or the Subordinated Creditor, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (iii) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Debtor or the Subordinated Creditor, then, and in any such event, unless the Administrative Agent shall otherwise agree in writing, the Secured Parties shall receive payment in cash in full of all amounts due or to become due (whether or not the Senior Indebtedness has been declared due and payable prior to the date on which the Senior Indebtedness would otherwise have become due and payable) on or in respect of all Senior Indebtedness (including postpetition interest) before the Subordinated Creditor or anyone claiming through or on its behalf (including any receiver, trustee, or otherwise) is entitled to receive any payment on account of principal of (or premium, if any) or interest on or other amounts payable in respect of the Intercompany Subordinated Debt, and to that end, any payment or distribution which may be payable or deliverable in respect of the Intercompany Subordinated Debt in any such case, proceeding, dissolution, liquidation or other winding up or event, shall be paid or delivered directly to the Administrative Agent for the application (in the case of cash) to, or as collateral (in the case of noncash property or securities) for, the payment or prepayment of the Senior Indebtedness until the Senior Indebtedness shall have been paid in cash in full. (b) If any proceedings, liquidation, dissolution or winding up referred to in clause (a) above is commenced by or against the Debtor or the Subordinated Creditor, -3- 156 (i) the Administrative Agent is hereby irrevocably authorized and empowered (in its own name or in the name of the Debtor, the Subordinated Creditor or otherwise), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution in respect of the Intercompany Subordinated Debt above and give acquittance therefor and to file claims and proofs of claim and take such other action (including, without limitation, voting the Intercompany Subordinated Debt or enforcing any security interest or other lien securing payment of the Intercompany Subordinated Debt) as the Administrative Agent may reasonably deem necessary or advisable for the exercise or enforcement of any of the rights or interests of the Secured Parties or the Administrative Agent hereunder; provided that in the event the Administrative Agent takes such action, the Administrative Agent shall apply all proceeds first, to the payment of the costs of enforcement of these provisions, and second, to the pro rata payment of the Senior Indebtedness; and (ii) the Subordinated Creditor shall duly and promptly take such action as the Administrative Agent may request (A) to collect the Intercompany Subordinated Debt for the account of the Secured Parties and the Administrative Agent and to file appropriate claims or proofs of claim in respect of the Intercompany Subordinated Debt, (B) to execute and deliver to the Administrative Agent such powers of attorney, assignments, or other instruments as the Administrative Agent may reasonably request in order to enable it to enforce any and all claims with respect to, and any security interests and other liens securing payment of, the Intercompany Subordinated Debt and (C) to collect and receive any and all payments or distributions which may be payable or deliverable upon or with respect to the Intercompany Subordinated Debt. (c) All payments or distributions of assets of the Debtor, whether in cash, property or securities upon or with respect to the Intercompany Subordinated Debt which are received by the Subordinated Creditor contrary to these provisions shall be received in trust for the pro rata benefit of the Secured Parties, shall be segregated from other funds and property held by the Subordinated Creditor and shall be forthwith paid over to the Administrative Agent in the same form as so received (with any necessary indorsement) to be applied, pro rata (in the case of cash) to, or held as collateral (in the case of noncash property or securities) for, the payment or prepayment of the Senior Indebtedness, whether matured or unmatured, in accordance with the terms of these provisions. (d) The Secured Parties and the Administrative Agent are hereby authorized to demand specific performance of these provisions, whether or not the Debtor or the Subordinated Creditor shall have complied with any of the provisions hereof applicable to it, at any time when the Subordinated Creditor shall have failed -4- 157 to comply with any of these provisions applicable to it. The Subordinated Creditor hereby irrevocably waives any defense (other than the defense of payment in full of the Senior Indebtedness) based on the adequacy of a remedy at law which might be asserted as a bar to such remedy of specific performance. SECTION 4. No Enforcement or Commencement of Any Proceedings. The Subordinated Creditor agrees that, so long as any Senior Indebtedness shall remain unpaid (including any Letter of Credit remaining outstanding), or any Commitment shall be in effect, it will not accelerate the maturity of the Intercompany Subordinated Debt or commence, or join with any creditor other than the Secured Parties in commencing any proceeding referred to in clause (a) of Section 3. SECTION 5. Rights of Subordination. The Subordinated Creditor agrees that no payment or distribution to the Secured Parties or the Administrative Agent pursuant to these provisions shall entitle the Subordinated Creditor to exercise any rights of subrogation in respect thereof until all Senior Indebtedness has been paid in cash in full and the Commitments have been terminated. The Subordinated Creditor agrees that these provisions shall not be affected by any action, or failure to act, by the Administrative Agent or the Secured Parties which results, or may result, in affecting, impairing or extinguishing any right of reimbursement or subrogation or other right or remedy of the Subordinated Creditor against the Debtor. SECTION 6. Subordination Legend: Further Assurances. The Subordinated Creditor and the Debtor will cause each note and instrument (if any) evidencing the Intercompany Subordinated Debt to be endorsed with the following legend: "The indebtedness evidenced by this instrument is subordinated to the prior payment in cash in full of the Senior Indebtedness (as defined in the Intercompany Subordination Agreement, dated as of__ ,__) pursuant to, and to the extent provided in, the Intercompany Subordination Agreement by the maker hereof and payee named herein in favor of the Secured Parties referred to therein and any person now or hereafter designated as their agent." Each of the Subordinated Creditor and the Debtor hereby agrees to mark its books of account in such a manner as shall be effective to give proper notice of the effect of these provisions and will, in the case of any Intercompany Subordinated Debt which is not evidenced by any note or instrument, following the occurrence and subject to the continuation of an Event of Default, upon the Administrative Agent's request, cause such Intercompany Subordinated Debt to be evidenced by an appropriate note or instrument or instruments endorsed with the above legend. Each of the Subordinated Creditor and the Debtor will at its expense and at any time and from time to time promptly execute and deliver all further instruments and documents and take all further action that may be necessary or that the Secured Parties or the Administrative Agent may reasonably request in order to protect any right or interest granted -5- 158 or purported to be granted hereunder or to enable the Secured Parties or the Administrative Agent to exercise and enforce their rights and remedies hereunder. SECTION 7. No Disposition of Intercompany Subordinated Debt. The Subordinated Creditor will not, without the prior written consent of the Administrative Agent, upon the occurrence and during the continuation of any Default of the nature set forth in Section 9.1.9 of the Credit Agreement or an Event of Default, take, or permit to be taken, any action to assert, collect or enforce the Intercompany Subordinated Debt or any part thereof. SECTION 8. Agreement by the Debtor. The Debtor agrees that it will not make any payment on any of the Intercompany Subordinated Debt, or take any other action, in contravention of these provisions. SECTION 9. Obligations Hereunder Not Affected. All rights and interest of the Secured Parties and the Administrative Agent hereunder, and all agreements and obligations of the Subordinated Creditor and the Debtor hereunder, shall remain in full force and effect irrespective of: (a) any lack of validity or enforceability of any document evidencing Senior Indebtedness; (b) any change in the time, manner or place of payment of, or any other term of, all or any of the Senior Indebtedness, or any other amendment or waiver of or any consent to departure from any of the documents evidencing or relating to the Senior Indebtedness; (c) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guaranty or Loan Document, for all or any of the Senior Indebtedness; (d) any failure of any Secured Party or the Administrative Agent to assert any claim or to enforce any right or remedy against any other party hereto under these provisions, the Credit Agreement or any other Loan Document; (e) any reduction, limitation, impairment or termination of the Senior Indebtedness for any reason (other than the defense of payment in full of the Senior Indebtedness), including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Debtor and the Subordinated Creditor hereby waive any right to or claim of) any defense (other than the defense of payment in full of the Senior Indebtedness) or setoff, counterclaim, recoupment or termination whatsoever by reason of invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Senior Indebtedness; and -6- 159 (f) any other circumstance which might otherwise constitute a defense (other than the defense of payment in full of the Senior Indebtedness) available to, or a discharge of, the Debtor in respect of the Senior Indebtedness or the Subordinated Creditor in respect of these provisions. These provisions shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Senior Indebtedness is rescinded or must otherwise be returned by any Secured Party or the Administrative Agent upon the insolvency, bankruptcy or reorganization of the Debtor or otherwise, all as though such payment had not been made. The Subordinated Creditor acknowledges and agrees that the Secured Parties and the Administrative Agent may in accordance with the terms of the Credit Agreement, without notice or demand and without affecting or impairing the Subordinated Creditor's obligations hereunder, from time to time (i) renew, compromise, extend, increase, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Senior Indebtedness or any part thereof, including, without limitation, to increase or decrease the rate of interest thereon or the principal amount thereof; (ii) take or hold security for the payment of the Senior Indebtedness and exchange, enforce, foreclose upon, waive and release any such security; (iii) apply such security and direct the order or manner of sale thereof as the Administrative Agent and the Secured Parties, in their sole discretion, may determine; (iv) release and substitute one or more endorsers, warrantors, borrowers or other obligers; and (v) exercise or refrain from exercising any rights against the Debtor or any other Person. SECTION 10. Representations and Warranties. The Subordinated Creditor, in respect of itself and the Intercompany Subordinated Debt owing to it, as the Debtor, as the case may be, hereby represents and warrants as follows: (a) the Subordinated Creditor owns the Intercompany Subordinated Debt now outstanding free and clear of any Lien; (b) these provisions constitute a legal, valid and binding obligation of the Subordinated Creditor and the Debtor, enforceable in accordance with its terms. SECTION 11. Amendments. Waivers. No amendment or waiver of these provisions nor consent or any departure by the Subordinated Creditor or the Debtor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent, and then such waiver, amendment or consent shall be effective only in the specific instance and for the specific purpose for which given. Any waiver, forbearance, failure or delay by the Administrative Agent or the Secured Parties in exercising, or the exercise or beginning of exercise by the Administrative Agent or the Secured Parties of, any right, power or remedy, simultaneous or later shall not preclude the further, simultaneous or later exercise thereof, and every right, power or remedy of the Administrative Agent and the Secured Parties shall continue in full force and effect until such right, power or remedy is specifically waived in a writing executed or authorized by such Secured Parties. -7- 160 SECTION 12. Expenses. The Subordinated Creditor and the Debtor jointly and severally agree to pay, upon demand, to the Administrative Agent or the Secured Parties, as applicable, any and all reasonable costs and expenses, including, without limitation, reasonable attorneys' fees and disbursements which the Secured Parties or the Administrative Agent may incur in connection with the exercise or enforcement of any of the rights or interest of the Secured Parties or the Administrative Agent hereunder. SECTION 13. Severability. If any of these provisions shall be held invalid or unenforceable, these provisions shall be construed as if not containing those provisions, and the rights and obligations of the parties hereto shall be construed and enforced accordingly. SECTION 14. Cumulative Rights. The rights, powers and remedies of the Secured Parties and the Administrative Agent under these provisions shall be in addition to all rights, powers and remedies given to the Secured Parties and the Administrative Agent by virtue of any contract, statute or rule of law, all of which rights, powers and remedies shall be cumulative and may be exercised successively or concurrently. The parties hereto expressly acknowledge and agree that the Secured Parties and the Administrative Agent are intended, and by this reference expressly made, third party beneficiaries of these provisions. SECTION 15. Governing Law. THESE PROVISIONS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 18. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THESE PROVISIONS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY OF THE SECURED PARTIES OR THE SUBORDINATED CREDITOR OR THE DEBTOR 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. THE DEBTOR AND THE SUBORDINATED CREDITOR EACH 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 FINAL, NON-APPEALABLE JUDGEMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION OR BY A FINAL, NON-APPEALABLE JUDGMENT OF ANY APPLICABLE APPELLATE COURT. THE DEBTOR AND THE SUBORDINATED CREDITOR 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. THE DEBTOR AND THE SUBORDINATED CREDITOR EACH HEREBY EXPRESSLY AND IRREVOCABLY -8- 161 WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT 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 DEBTOR OR THE SUBORDINATED CREDITOR 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 ITSELF OR ITS PROPERTY, EACH OF THE DEBTOR AND THE SUBORDINATED CREDITOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THESE PROVISIONS. SECTION 19. Waiver of Jury Trial. THE DEBTOR AND THE SUBORDINATED CREDITOR AND, BY ACCEPTING THESE PROVISIONS AND THE BENEFITS THEREOF, THE ADMINISTRATIVE AGENT, ANY ISSUER AND ANY LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THESE PROVISIONS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE DEBTOR OR THE SUBORDINATED CREDITOR AND EACH SUCH PERSON ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE SECURED PARTIES CONTINUING TO MAKE CREDIT EXTENSIONS UNDER THE CREDIT AGREEMENT. -9- 162 SCHEDULE V to Credit Agreement SCHEDULED LETTERS OF CREDIT 1. Applicant: Budget Rent A Car Corporation Beneficiary: Ford Motor Credit Company Amount: $24,750,000.00 L/C No.: TS-06000863 Issuance Date: April 29, 1997 Stated Expiry Date: August 2, 1998 2. Applicant: Budget Rent A Car Corporation Beneficiary: Ford Motor Credit Company Amount: $7,400,000.00 L/C No.: TS-06000865 Issuance Date: April 29, 1997 Stated Expiry Date: October 16, 1999 3 Applicant: Budget Rent A Car Corporation Beneficiary: Ford Motor Credit Company Amount: $25,000,000.00 L/C No.: TS-06000866 Issuance Date: April 29, 1997 Stated Expiry Date: August 24, 2000 163 FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of October 24, 1997 (this "Amendment"), is made by and among BUDGET RENT A CAR CORPORATION, a Delaware corporation (the "Borrower"), BUDGET GROUP, INC. (formerly known as Team Rental Group, Inc.), a Delaware corporation (the "Parent"), the various financial institutions parties hereto (collectively, the "Lenders"), NATIONSBANC CAPITAL MARKETS, INC., as a Co-Syndication Agent and as the Documentation Agent, and CREDIT SUISSE FIRST BOSTON, as a Co-Syndication Agent, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders and as the arranger. W I T N E S S E T H: WHEREAS, the Borrower, the Parent, the Lenders and the Agents have heretofore entered into that certain Credit Agreement, dated as of April 29, 1997 (the "Credit Agreement"); WHEREAS, the Credit Agreement provides for the pledge to the Administrative Agent of all (subject to certain limitations) of the outstanding shares of the Capital Stock of each existing Foreign Subsidiary of the Borrower within 180 days of the Closing Date, together with undated stock powers or equivalent instruments of transfer satisfactory to the Administrative Agent for such certificates or such other evidence of beneficial ownership, executed in blank or otherwise, so as to perfect the security interest of the Administrative Agent therein in accordance with applicable law; WHEREAS, the Borrower desires to limit such pledge to all (subject to certain limitations) of the outstanding shares of the Capital Stock of each Foreign Subsidiary that is not a Non-Material Subsidiary of the Borrower; and WHEREAS, the Lenders and the Agents 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, the Parent, the Lenders and the Agents hereby agree as follows: 164 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 fourth recital. "Amendment" is defined in the preamble. "Borrower" is defined in the preamble. "Credit Agreement" is defined in the first recital. "First Amendment to Borrower Pledge Agreement" means the First Amendment to Borrower Pledge Agreement, substantially in the form of Annex I hereto, to be entered into by and between the Borrower and the Administrative Agent. "First Amendment to Subsidiary Pledge Agreement" means the First Amendment to Subsidiary Pledge Agreement, substantially in the form of Annex II hereto, to be entered into by and among the Subsidiaries of the Borrower parties thereto and the Administrative Agent. "Lenders" is defined in the preamble. "Parent" is defined in the preamble. 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. 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. -2- 165 SECTION 2.1. Amendment to Section 1.1 of the Credit Agreement. Section 1.1 of the Credit Agreement ("Defined Terms") is hereby amended by inserting in such Section the following definition in the appropriate alphabetical order: "First Amendment" means the First Amendment to Credit Agreement, dated as of October 24, 1997, among the Borrower, the Parent, the Lenders parties thereto and the Agents. SECTION 2.2. Amendment to Section 8.1.8 of the Credit Agreement. Section 8.1.8 of the Credit Agreement ("Foreign Subsidiaries as of the Closing Date") is hereby amended by (a) deleting the number "180" from the sixth line of such Section and inserting the number "210" in lieu thereof and (b) inserting in the second line of clause (a) of such Section, the words "(other than a Non-Material Subsidiary)" immediately following the words "Stock of each Foreign Subsidiary" and immediately preceding the words "owned by the Borrower" in such line. ARTICLE III CONDITIONS TO EFFECTIVENESS This Amendment, and the amendments and modifications contained herein, shall be and 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. 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, the Parent and each of the Required Lenders. SECTION 3.2. Execution of Amendments to Pledge Agreements. The Administrative Agent shall have received counterparts of each of the First Amendment to Borrower Pledge Agreement, duly executed and delivered on behalf of the Borrower, and the First Amendment to Subsidiary Pledge Agreement, duly executed and delivered on behalf of each Subsidiary of the Borrower that is a party thereto. SECTION 3.3. Fees and Expenses. The Administrative Agent shall have received all fees and expenses due and payable pursuant to Section 5.4 (to the extent then invoiced) and pursuant to the Credit Agreement (including all previously invoiced fees and expenses). -3- 166 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.1. Representations and Warranties. In order to induce the Lenders and the Agents to enter into this Amendment, each of the Borrower and the Parent hereby represents and warrants to each Agent 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 early date, in which case such representations and warranties are true and correct as of such earlier date); (b) except as disclosed by the Borrower or the Parent 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, the Parent or any of their respective Subsidiaries which might materially adversely affect the Parent'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, the Parent and their respective Subsidiaries; (c) all of the Foreign Subsidiaries (other than those that are Non-Material Subsidiaries) of the Borrower are set forth on Schedule I hereto; (d) no Default has occurred and is continuing, and neither the Borrower, the Parent nor any of their respective Subsidiaries nor any other Obligor is in material violation of any law or governmental regulation or court order or decree; and (e) this Amendment has been duly authorized, executed and delivered by each of the Borrower and the Parent and constitutes a legal, valid and binding obligation of each such Person, 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 -4- 167 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 or the Parent 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 any Borrower have been prepared in good faith by the Borrowers and represent the best estimates of the Borrowers, 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 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, the Parent or any other Obligor which would require the consent 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. -5- 168 SECTION 5.3. Further Assurances. Each of the Borrower and the Parent 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. 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 5.5. 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. SECTION 5.6. Execution of Amendments to Pledge Agreements. By their signatures below, the Required Lenders acknowledge that the Administrative Agent will be executing each of the First Amendment to Borrower Pledge Agreement and the First Amendment to Subsidiary Pledge Agreement. SECTION 5.7. Execution in Counterparts. This Amendment may be executed by the parties hereto in several 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. -6- 169 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 RENT A CAR CORPORATION By: /s/ Robert L. Aprati ------------------------------------------ Name: Robert L. Aprati Title: Executive Vice President BUDGET GROUP INC. (formerly known as Team Rental Group, Inc.), as a Guarantor By: /s/ Robert L. Aprati ------------------------------------------ Name: Robert L. Aprati Title: Executive Vice President -7- 170 CREDIT SUISSE FIRST BOSTON, as a Lender, a Co-Syndication Agent and the Administrative Agent By: -------------------------------------------- Name: Title: By: -------------------------------------------- Name: Title: NATIONSBANC CAPITAL MARKETS, INC., as a Co-Syndication Agent and the Documentation Agent By: /s/ Richard M. Starke -------------------------------------------- Name: Richard M. Starke Title: V.P. CREDIT SUISSE FIRST BOSTON, as the Issuer By: -------------------------------------------- Name: Title: BANK OF HAWAII, as a Lender By: /s/ Donna R. Parker -------------------------------------------- Name: Donna R. Parker Title: Vice President -8- 171 THE BANK OF NEW YORK, as a Lender By: /s/ John R. Ciulla ------------------------------------------ Name: John R. Ciulla Title: Assistant Vice President BANK POLSKA KASA OPIEKI, as a Lender By: /s/ Harvey Winter ------------------------------------------ Name: Harvey Winter Title: Vice President BANK UNITED, as a Lender By /s/ Mario Chiodetti ------------------------------------------ Name: Mario Chiodetti Title: Director BHF BANK AKTIENGESELLSCHAFT, as a Lender By: /s/ Linda Pace ------------------------------------------ Name: Linda Pace Title: V.P. By: /s/ Heidimarie Skor ------------------------------------------ Name: Heidimarie Skor Title: Vice President -9- 172 CAISSE NATIONALE DE CREDIT AGRICOLE, as a Lender By: /s/ Katherine L. Abbott ------------------------------------------- Name: Katherine L. Abbott Title: First Vice President CANADIAN IMPERIAL BANK OF COMMERCE, as a Lender By: /s/ Stephanie E. Johnson ------------------------------------------- Name: Stephanie E. Johnson Title: Director, CIB Wood Gundy Securities Corp., as Agent CREDIT LYONNAIS CHICAGO BRANCH, as a Lender By: /s/ Kent J. Davis ------------------------------------------- Name: Kent J. Davis Title: Vice President IMPERIAL BANK, as a Lender By: /s/ Ray Vadalma ------------------------------------------- Name: Ray Vadalma Title: Senior Vice President -10- 173 LONG TERM CREDIT BANK OF JAPAN, as a Lender By: ------------------------------------------- Name: Title: NATIONSBANK, N.A. (SOUTH), as a Lender By: /s/ Richard M. Starke ------------------------------------------- Name: Richard M. Starke Title: Vice President PNC BANK, KENTUCKY, INC., as a Lender By: /s/ Ralph M. Bowman ------------------------------------------- Name: Ralph M. Bowman Title: Vice President ROYAL BANK OF CANADA, as a Lender By: ------------------------------------------- Name: Title: THE TORONTO-DOMINION BANK, as a Lender By: /s/ Jorge A. Garcia ------------------------------------------- Name: Jorge A. Garcia Title: Mgr. Cr. Admin. -11- 174 SCHEDULE I LIST OF FOREIGN SUBSIDIARIES OF THE BORROWER THAT ARE NOT NON-MATERIAL SUBSIDIARIES
Name Jurisdiction of Incorporation - ---- ----------------------------- Budget Rent a Car Canada Limited Ottawa, Ontario Budget Rent a Car Limited Auckland, New Zealand Budget Rent a Car Operations Pty. Ltd. Victoria, Australia Budget Rent a Car Australia Pty. Ltd. Victoria, Australia BTI (U.K.) plc London, England Societe Financiere et de Participation Tours, France Budget France, S.A. Tours, France
175 ANNEX I to First Amendment to Credit Agreement FIRST AMENDMENT TO BORROWER PLEDGE AGREEMENT THIS FIRST AMENDMENT TO BORROWER PLEDGE AGREEMENT, dated as of October 24, 1997 (this "Amendment"), is made by and between BUDGET RENT A CAR CORPORATION, a Delaware corporation (the "Borrower"), and CREDIT SUISSE FIRST BOSTON, as administrative agent (in such capacity, the "Administrative Agent") for the Secured Parties. W I T N E S S E T H: WHEREAS, the Borrower, Budget Group, Inc. (formerly known as Team Rental Group, Inc.), a Delaware corporation (the "Parent"), various financial institutions (collectively, the "Lenders"), Nationsbanc Capital Markets, Inc., as a Co-Syndication Agent and as the Documentation Agent, and the Administrative Agent have heretofore entered into that certain First Amendment to Credit Agreement, dated as of the date hereof (the "First Amendment to Credit Agreement"), which amends that certain Credit Agreement, dated as of April 29, 1997 (the "Credit Agreement"), among the Borrower, the Parent, the Lenders parties thereto, Nationsbanc Capital Markets, Inc., as a Co-Syndication Agent and as the Documentation Agent, and the Administrative Agent; WHEREAS, the Borrower and the Administrative Agent have heretofore entered into that certain Borrower Pledge Agreement, dated as of April 29, 1997 (the "Borrower Pledge Agreement"); WHEREAS, the Credit Agreement provides for the pledge to the Administrative Agent of, among other things, all (subject to certain limitations) of the outstanding shares of the Capital Stock of each Foreign Subsidiary owned, directly or indirectly, by the Borrower on, and subsequent to, the Closing Date, together with undated stock powers or equivalent instruments of transfer satisfactory to the Administrative Agent for such certificates or such other evidence of beneficial ownership, executed in blank or otherwise, so as to perfect the security interest of the Administrative Agent therein in accordance with applicable law; WHEREAS, the Borrower desires to limit such pledge to all (subject to certain limitations) of the outstanding shares of the Capital Stock of each Foreign Subsidiary that is not a Non-Material Subsidiary of the Borrower on, and subsequent to, the Closing Date and to amend the Borrower Pledge Agreement as set forth below; and 176 WHEREAS, the Administrative Agent is willing, on and subject to the terms and conditions set forth below, to amend the Borrower Pledge Agreement, in each case as provided below (the Borrower Pledge Agreement, as amended pursuant to the terms of this Amendment, being referred to as the "Amended Borrower Pledge Agreement"); NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the Borrower and the Administrative Agent 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): "Amended Borrower Pledge Agreement" is defined in the fifth recital. "Amendment" is defined in the preamble. "Borrower" is defined in the preamble. "Borrower Pledge Agreement" is defined in the second recital. "Credit Agreement" is defined in the first recital. "First Amendment to Credit Agreement" is defined in the first recital. "Lenders" is defined in the first recital. "Parent" is defined in the first recital. SECTION 1.2. Other Definitions. Terms for which meanings are provided for, or incorporated by reference, in the First Amendment to Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendment with such meanings. ARTICLE II AMENDMENTS TO BORROWER PLEDGE AGREEMENT Subject to the satisfaction of the conditions set forth in Article III of the First Amendment to Credit Agreement, effective as of the date hereof, the Borrower Pledge -2- 177 Agreement is hereby amended in accordance with this Article II; except expressly as so amended by this Amendment, the Borrower Pledge Agreement shall continue in full force and effect in accordance with its terms. SECTION 2.1. Amendment to Section 2.1 of the Borrower Pledge Agreement. Clause (a) of Section 2.1 of the Borrower Pledge Agreement ("Grant of Security Interest") is hereby amended by inserting the words "provided, that, in the case of each Pledged Share Issuer that is a Foreign Subsidiary of the Borrower, the pledge of the shares of Capital Stock of such Pledged Share Issuer shall be limited to the extent such pledge would not (x) constitute an investment in earnings in United States property under Section 956 (or any successor provision thereto) of the Code that would increase the amount of income of the applicable pledgor that would otherwise be subject to United States income tax and (y) subject the Borrower, the Parent or such Pledged Share Issuer to a significant adverse tax consequence;" after the semicolon (";") at the end thereof. SECTION 2.2. Amendments to Article III of the Borrower Pledge Agreement. Article III of the Borrower Pledge Agreement ("Representations and Warranties") is hereby amended in accordance with Sections 2.2.1 and 2.2.2 below. SECTION 2.2.1. Amendment to Section 3.1 of the Borrower Pledge Agreement. Section 3.1 of the Borrower Pledge Agreement ("Representations and Warranties, etc.") is hereby amended by inserting the words ", and except as set forth or may be otherwise provided in the applicable Foreign Pledge Agreement with respect to a Pledged Share Issuer that is a Foreign Subsidiary of the Borrower" immediately prior to the period (".") at the end thereof. SECTION 2.2.2. Amendment to Section 3.4 of the Borrower Pledge Agreement. Section 3.4 of the Borrower Pledge Agreement ("As to Pledged Shares") is hereby amended in its entirety to read as follows: SECTION 3.4. As to Pledged Shares. In the case of any Pledged Shares constituting such Collateral, all of such Pledged Shares are duly authorized and validly issued, fully paid, and non-assessable, and constitute all of the issued and outstanding shares of Capital Stock of each Pledged Share Issuer (except in the case of each Pledged Share Issuer that is a Foreign Subsidiary of the Borrower, in which case, such Pledged Shares constitute all of the shares of Capital Stock of such Pledged Share Issuer that may be pledged such that after giving effect to such pledge, such pledge would not (a) constitute an investment in earnings in United States property under Section 956 (or any successor provision thereto) of the Code that would increase the amount of income of the applicable pledgor that would otherwise be subject to United States income tax and (b) subject the Borrower, the Parent or such Pledged Share Issuer to a significant adverse tax consequence). The Pledgor has no direct Subsidiaries other than (i) the Pledged Share Issuers and (ii) Subsidiaries of the Borrower that are Non-Material Subsidiaries or SPCs, except as set forth in Item C of Attachment 1 hereto. -3- 178 SECTION 2.3. Amendment to Section 4.1 of the Borrower Pledge Agreement. Section 4.1 of the Borrower Pledge Agreement ("Protect Collateral; Further Assurances, etc.") is hereby amended by inserting the parenthetical "(including in the event that the Pledged Share Issuer is a Foreign Subsidiary of the Borrower, by entering into a Foreign Pledge Agreement)" between the words "all further instruments" on the seventh line thereof and the comma (",") following such words. SECTION 2.4. Amendment to Article VII of the Borrower Pledge Agreement. Article VII of the Borrower Pledge Agreement ("Miscellaneous Provisions") is hereby amended by inserting a new Section 7.9 at the end thereof to read in its entirety as follows: SECTION 7.9 Foreign Pledge Agreements. Without limiting any of the rights, remedies, privileges or benefits provided hereunder to the Administrative Agent for its benefit and the ratable benefit of the other Secured Parties, the Pledgor and the Administrative Agent hereby agree that the terms and provisions of this Pledge Agreement in respect of any Collateral subject to the pledge or other lien of a Foreign Pledge Agreement are, and shall be deemed to be, supplemental and in addition to the rights, remedies, privileges and benefits provided to the Administrative Agent and the other Secured Parties under such Foreign Pledge Agreement and under applicable law to the extent consistent with applicable law; provided, that, in the event that the terms of this Pledge Agreement conflict or are inconsistent with the applicable Foreign Pledge Agreement or applicable law governing such Foreign Pledge Agreement, the terms of such Foreign Pledge Agreement or such applicable law shall be controlling. SECTION 2.5. Amendment to Attachment 1 to the Borrower Pledge Agreement. Attachment 1 to the Borrower Pledge Agreement is hereby amended to read in its entirety as Attachment 1 hereto. ARTICLE III MISCELLANEOUS SECTION 3.1. Full Force and Effect; Limited Amendment. Except as expressly amended hereby, all of the representations, warranties, terms, covenants, conditions and other provisions of the Borrower Pledge Agreement 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 any Borrower, the Parent or any other Obligor which would require the consent of the Lenders under the Credit Agreement or any of the other Loan Documents. -4- 179 SECTION 3.2. 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 3.3. Further Assurances. The Borrower agrees that it will take any action that from time to time may be reasonably necessary to effectuate the amendments contemplated herein. SECTION 3.4. 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. SECTION 3.5. Execution in Counterparts. This Amendment may be executed by the parties hereto in several 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 3.6. 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 3.7. 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 3.8. 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] -5- 180 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 RENT A CAR CORPORATION By: ----------------------------------- Name: Title: CREDIT SUISSE FIRST BOSTON, as the Administrative Agent By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: -6- 181 ANNEX II to First Amendment to Credit Agreement FIRST AMENDMENT TO SUBSIDIARY PLEDGE AGREEMENT THIS FIRST AMENDMENT TO SUBSIDIARY PLEDGE AGREEMENT, dated as of October 24, 1997 (this "Amendment"), is made by and among each Subsidiary of Budget Rent A Car Corporation, a Delaware corporation (the "Borrower") a signatory hereto (each a "Pledgor") and CREDIT SUISSE FIRST BOSTON, as administrative agent (in such capacity, the "Administrative Agent") for the Secured Parties. W I T N E S S E T H: WHEREAS, the Borrower, Budget Group, Inc. (formerly known as Team Rental Group, Inc.), a Delaware corporation (the "Parent"), various financial institutions (collectively, the "Lenders"), Nationsbanc Capital Markets, Inc., as a Co-Syndication Agent and as the Documentation Agent, and the Administrative Agent have heretofore entered into that certain First Amendment to Credit Agreement, dated as of the date hereof (the "First Amendment to Credit Agreement"), which amends that certain Credit Agreement, dated as of April 29, 1997 (the "Credit Agreement"), among the Borrower, the Parent, the Lenders parties thereto, Nationsbanc Capital Markets, Inc., as a Co-Syndication Agent and as the Documentation Agent, and the Administrative Agent; WHEREAS, the Pledgors and the Administrative Agent have heretofore entered into that certain Subsidiary Pledge Agreement, dated as of April 29, 1997 (the "Subsidiary Pledge Agreement"); WHEREAS, the Pledgors desire to amend the Subsidiary Pledge Agreement as set forth below; and WHEREAS, the Administrative Agent is willing, on and subject to the terms and conditions set forth below, to amend the Subsidiary Pledge Agreement, in each case as provided below (the Subsidiary Pledge Agreement, as amended pursuant to the terms of this Amendment, being referred to as the "Amended Subsidiary Pledge Agreement"); NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, each Pledgor and the Administrative Agent hereby agree as follows: 182 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. "Amendment" is defined in the preamble. "Amended Subsidiary Pledge Agreement" is defined in the fourth recital. "Borrower" is defined in the preamble. "Credit Agreement" is defined in the first recital. "First Amendment to Credit Agreement" is defined in the first recital. "Lenders" is defined in the first recital. "Parent" is defined in the first recital. "Pledgor" is defined in the preamble. "Subsidiary Pledge Agreement" is defined in the second recital. SECTION 1.2. Other Definitions. Terms for which meanings are provided for, or incorporated by reference, in the First Amendment to Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendment with such meanings. ARTICLE II AMENDMENTS TO SUBSIDIARY PLEDGE AGREEMENT Subject to the satisfaction of the conditions set forth in Article III of the First Amendment to Credit Agreement, effective as of the date hereof, the Subsidiary Pledge Agreement is hereby amended in accordance with this Article II; except expressly as so amended by this Amendment, the Subsidiary Pledge Agreement shall continue in full force and effect in accordance with its terms. -2- 183 SECTION 2.1. Amendment to Section 2.1 of the Subsidiary Pledge Agreement. Clause (a) of Section 2.1 of the Subsidiary Pledge Agreement ("Grant of Security Interest") is hereby amended by inserting the words "provided, that, in the case of each Pledged Share Issuer that is a Foreign Subsidiary of such Pledgor, the pledge of the shares of Capital Stock of such Pledged Share Issuer shall be limited to the extent such pledge would not (x) constitute an investment in earnings in United States property under Section 956 (or any successor provision thereto) of the Code that would increase the amount of income of the applicable pledgor that would otherwise be subject to United States income tax and (y) subject the Borrower, the Parent or such Pledged Share Issuer to a significant adverse tax consequence;" after the semicolon (";") at the end thereof. SECTION 2.2. Amendments to Article III of the Subsidiary Pledge Agreement. Article III of the Subsidiary Pledge Agreement ("Representations and Warranties") is hereby amended in accordance with Sections 2.2.1 and 2.2.2 below. SECTION 2.2.1. Amendment to Section 3.1 of the Subsidiary Pledge Agreement. Section 3.1 of the Subsidiary Pledge Agreement ("Representations and Warranties, etc.") is hereby amended by inserting the words ", and except as set forth or may be otherwise provided in the applicable Foreign Pledge Agreement with respect to a Pledged Share Issuer that is a Foreign Subsidiary of such Pledgor" immediately prior to the period (".") at the end thereof. SECTION 2.2.2. Amendment to Section 3.4 of the Subsidiary Pledge Agreement. Section 3.4 of the Subsidiary Pledge Agreement ("As to Pledged Shares") is hereby amended in its entirety to read as follows: SECTION 3.4. As to Pledged Shares. In the case of any Pledged Shares constituting such Collateral, all of such Pledged Shares are duly authorized and validly issued, fully paid, and non-assessable, and constitute all of the issued and outstanding shares of Capital Stock of each Pledged Share Issuer (except in the case of each Pledged Share Issuer that is a Foreign Subsidiary of such Pledgor, in which case, such Pledged Shares constitute all of the shares of Capital Stock of such Pledged Share Issuer that may be pledged such that after giving effect to such pledge, such pledge would not (a) constitute an investment in earnings in United States property under Section 956 (or any successor provision thereto) of the Code that would increase the amount of income of the applicable pledgor that would otherwise be subject to United States income tax and (b) subject the Borrower, the Parent or such Pledged Share Issuer to a significant adverse tax consequence). Such Pledgor has no direct Subsidiaries other than (i) the Pledged Share Issuers and (ii) Subsidiaries of such Pledgor that are Non-Material Subsidiaries or SPCs, except as set forth in Item C of Attachment 1 hereto. SECTION 2.3. Amendment to Section 4.1 of the Subsidiary Pledge Agreement. Section 4.1 of the Subsidiary Pledge Agreement ("Protect Collateral; Further Assurances, etc.") is hereby amended by inserting the parenthetical "(including in the event that the Pledged Share Issuer is a Foreign Subsidiary of the Borrower, by entering into a Foreign Pledge Agreement)" -3- 184 between the words "all further instruments" on the seventh line thereof and the comma (",") following such words. SECTION 2.4. Amendment to Article VII of the Subsidiary Pledge Agreement. Article VII of the Subsidiary Pledge Agreement ("Miscellaneous Provisions") is hereby amended by inserting a new Section 7.9 at the end thereof to read in its entirety as follows: SECTION 7.9 Foreign Pledge Agreements. Without limiting any of the rights, remedies, privileges or benefits provided hereunder to the Administrative Agent for its benefit and the ratable benefit of the other Secured Parties, each Pledgor and the Administrative Agent hereby agree that the terms and provisions of this Pledge Agreement in respect of any Collateral subject to the pledge or other lien of a Foreign Pledge Agreement are, and shall be deemed to be, supplemental and in addition to the rights, remedies, privileges and benefits provided to the Administrative Agent and the other Secured Parties under such Foreign Pledge Agreement and under applicable law to the extent consistent with applicable law; provided, that, in the event that the terms of this Pledge Agreement conflict or are inconsistent with the applicable Foreign Pledge Agreement or applicable law governing such Foreign Pledge Agreement, the terms of such Foreign Pledge Agreement or such applicable law shall be controlling. SECTION 2.5. Amendment to Attachment 1 to the Subsidiary Pledge Agreement. Attachment 1 to the Subsidiary Pledge Agreement relating to each Pledgor for whom a corresponding Attachment 1 is attached hereto shall be amended in its entirety to read as set forth in such corresponding Attachment 1 hereto. ARTICLE III MISCELLANEOUS SECTION 3.1. Full Force and Effect; Limited Amendment. Except as expressly amended hereby, all of the representations, warranties, terms, covenants, conditions and other provisions of the Subsidiary Pledge Agreement 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 any Pledgor, the Borrower, the Parent or any other Obligor which would require the consent of the Lenders under the Credit Agreement or any of the other Loan Documents. SECTION 3.2. 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, -4- 185 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 3.3. Further Assurances. Each Pledgor agrees that it will take any action that from time to time may be reasonably necessary to effectuate the amendments contemplated herein. SECTION 3.4. 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. SECTION 3.5. Execution in Counterparts. This Amendment may be executed by the parties hereto in several 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 3.6. 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 3.7. 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 3.8. 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] -5- 186 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 RENT-A-CAR SYSTEMS, INC. NYRAC, INC. DIVERSIFIED SERVICES, INC. RAPID RENTALS, INC. BUDGET RENT-A-CAR OF NEW ORLEANS, INC. BUDGET RENT-A-CAR INTERNATIONAL, INC. CONTROL RISK CORPORATION PHILIP JACOBS INSURANCE AGENCY, INC. RESERVATION SERVICES, INC. BRAC CREDIT CORPORATION BRAC OF NEW YORK, INC. AUTOMATED TRANSPORTATION, INC. MOISANT CAR SALES, INC. BUDGET SALES CORPORATION BUDGET RENT-A-CAR OF CANADA LIMITED By ------------------------------- Name: Title: FT. WAYNE RENTAL GROUP, INC. LEE-AL, INC. METRO WEST, INC. WESTEAM ENTERPRISES, INC. TEAM CAR SALES OF SAN DIEGO, INC. VAN POOL SERVICES, INC. By ------------------------------- Name: Title: -6- 187 CAPITAL CITY LEASING, INC. DON KREMER, INC. MACKAY CAR & TRUCK RENTALS, INC. TEAM REALTY SERVICES, INC. TEAM RENTAL OF CINCINNATI, INC. TEAM RENTAL OF CONNECTICUT, INC. TEAM RENTAL OF PHILADELPHIA, INC. TEAM RENTAL OF PITTSBURGH, INC. TEAM RENTAL OF SOUTHERN CALIFORNIA, INC. TRANEX RENTALS OF NEW YORK, INC. TEAM RENTAL OF FT. WAYNE, INC. TEAM RENTAL OF ROCHESTER, INC. By --------------------------------- Name: Title: DAYTON AUTO LEASE COMPANY, INC. By --------------------------------- Name: Title: TEAM FLEET SERVICES CORPORATION By --------------------------------- Name: Title: -7- 188 TEAM CAR SALES OF CHARLOTTE, INC. TEAM CAR SALES OF DAYTON, INC. TEAM CAR SALES OF RICHMOND, INC. BUDGET CAR SALES, INC. (formerly known as Team Car Sales, Inc.) VALCAR RENTAL CAR SALES, INC. TEAM CAR SALES OF PHILADELPHIA, INC. ARIZONA RENT-A-CAR SYSTEMS, INC. By ------------------------------------ Name: Title: TEAM CAR SALES OF SOUTHERN CALIFORNIA, INC. By ------------------------------------ Name: Title: IN MOTORS VI, LLC By ValCar Rental Car Sales, Inc., as a Member By ------------------------------------ Name: Title: -8- 189 TCS PROPERTIES, LLC By Budget Car Sales, Inc. (formerly known as Team Car Sales, Inc.), as a Member By --------------------------------------- Name: Title: CREDIT SUISSE FIRST BOSTON, as Administrative Agent By ------------------------------------------ Name: Title: By ------------------------------------------ Name: Title: -9- 190 AMENDMENT AND WAIVER NO. 2 TO CREDIT AGREEMENT THIS AMENDMENT AND WAIVER NO. 2 TO CREDIT AGREEMENT, dated as of January 28, 1998 (this "Amendment"), is made by and among BUDGET RENT A CAR CORPORATION, a Delaware corporation (the "Borrower"), BUDGET GROUP, INC., a Delaware corporation (the "Parent"), the Lenders (as defined below) parties hereto and the Administrative Agent (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, the Parent, the various financial institutions parties thereto (collectively, the "Lenders"), Nationsbanc Capital Markets, Inc., ("NationsBanc"), as a co-syndication agent (in such capacity, a "Co-Syndication Agent") for the Lenders and as the documentation agent (in such capacity, the "Documentation Agent") for the Lenders, and Credit Suisse First Boston, as a co-syndication agent (in such capacity, a "Co-Syndication Agent" and, together with NationsBanc, collectively, the "Co-Syndication Agents") for the Lenders, as administrative agent (in such capacity, the "Administrative Agent", and together with, the Co-Syndication Agents and the Documentation Agent, the "Agents") for the Lenders and as the arranger have heretofore entered into that certain Credit Agreement, dated as of April 29, 1997 (as amended by the First Amendment to Credit Agreement, dated as of October 24, 1997, the "Credit Agreement"); WHEREAS, the Parent desires to acquire all of the Capital Stock of Cruise America, Inc., a Florida corporation ("Cruise America"), by merging CA Acquisition Corporation, a Florida corporation and a Wholly Owned Subsidiary of the Parent ("Acquisition Corp."), with and into Cruise America (the "Merger"), as a result of which Cruise America will become a Wholly Owned Subsidiary of the Parent, as more fully described in the Proxy Statement/Prospectus of Cruise America and the Parent, dated December 29, 1997 (the "Proxy Statement"); WHEREAS, the Parent has requested that the Lenders and the Administrative Agent (a) grant a limited waiver and consent with respect to Sections 8.2.1, 8.2.9 and 8.2.17 of the Credit Agreement in order to permit, on the terms and subject to the conditions hereof, the Merger and (b) in connection with the Merger, amend the definitions of "Non-Vehicle Debt" and "Vehicles"; and WHEREAS, the Lenders and the Administrative Agent are willing, on and subject to the terms and conditions set forth below, to grant such limited waiver and consent to permit the Merger and amend the Credit Agreement as provided below (the Credit Agreement, as amended 191 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, the Parent, the Lenders and the Administrative Agent 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): "Acquisition Corp." is defined in the second recital. "Administrative Agent" is defined in the first recital. "Agents" is defined in the first recital. "Amended Credit Agreement" is defined in the fourth recital. "Amendment" is defined in the preamble. "Borrower" is defined in the preamble. "Amendment Effective Date Certificate" means the amendment effective date certificate executed and delivered by the Borrower and the Parent pursuant to Section 3.7, substantially in the form of Annex I hereto. "Credit Agreement" is defined in the first recital. "Cruise America" is defined in the second recital. "First Amendment to Subsidiary Security Agreement" means the First Amendment to Subsidiary Security Agreement, substantially in the form of Annex II hereto, to be entered into by the Subsidiaries of the Borrower parties thereto and the Administrative Agent. "Lenders" is defined in the first recital. "Merger" is defined in the second recital. -2- 192 "Merger Agreement" is defined in Section 3.4. "Parent" is defined in the preamble. "Proxy Statement" is defined in the second recital. "Second Amendment Effective Date" is defined in Section 3.1. "Supplement to Parent Pledge Agreement" means Supplement No. 1 to Parent Pledge Agreement, substantially in the form of Annex III hereto, to be made by the Parent and consented to by the Administrative Agent. "Third Amendment to Subsidiary Pledge Agreement" means the Third Amendment to Subsidiary Pledge Agreement, substantially in the form of Annex IV hereto, to be entered into by the Subsidiaries of the Borrower parties thereto and the Administrative Agent. 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. ARTICLE II AMENDMENTS AND LIMITED WAIVER Effective on (and subject to the occurrence of) the Second Amendment Effective Date, certain provisions of the Credit Agreement are hereby amended or waived in accordance with this Article II; except expressly as so amended or waived by this Amendment, the Credit Agreement shall continue in full force and effect in accordance with its terms. SECTION 2.1. Amendments to Credit Agreement. Section 1.1 of the Credit Agreement ("Defined Terms") is amended in accordance with Sections 2.1.1 and 2.1.2. SECTION 2.1.1. Section 1.1 of the Credit Agreement is amended by inserting in such Section the following definition in the appropriate alphabetical order: "Second Amendment" means the Amendment and Waiver No. 2 to Credit Agreement, dated as of January __, 1998, among the Borrower, the Parent, the Lenders parties thereto and the Administrative Agent. SECTION 2.1.2. The following definitions in Section 1.1 of the Credit Agreement are amended as follows: -3- 193 (a) "Non-Vehicle Debt" is amended by inserting immediately prior to the period (".") at the end thereof the following: "plus (iii) with respect to any Vehicle not financed pursuant to the Series 1994-1 Supplement to the Base Indenture, the Series 1996-1 Supplement to the Base Indenture, the Series 1997-1 Supplement to the Base Indenture, the Series 1997-2 Supplement to the Base Indenture or the Series 1994-A Supplement to the Base Indenture dated as of June 1, 1994, among Budget Fleet Finance Corporation, the Borrower and The Bank of New York (as Trustee), any obligation of the Borrower, the Parent or any of their respective Subsidiaries (other than TFFC or another SPC) payable to the source of such financing to the extent such obligation exceeds the fair market value of such Vehicle"; and (b) "Vehicles" is amended in its entirety to read as follows: "'Vehicles' means all existing and hereafter acquired motor vehicle inventory of the Borrower and the Borrower's Subsidiaries, consisting of (i) passenger automobiles, light-duty and medium-duty trucks and vans and (ii) motorcycles, sport utility vehicles, buses, truck campers and motor homes, in each case, whether held for sale, lease or rental purposes.". SECTION 2.2. Limited Waiver. On the terms and subject to the conditions set forth herein and in reliance on the representations and warranties of each of the Borrower and the Parent herein contained, the Required Lenders (a) waive the restrictions set forth in Sections 8.2.9 and 8.2.17 of the Credit Agreement to the extent necessary to permit the Merger and (b) waive the restrictions set forth in Section 8.2.1 of the Credit Agreement to the extent necessary to permit Cruise America to engage in the businesses conducted by it on the date hereof and described in the Proxy Statement and such activities as may be incidental or related thereto. The foregoing waiver shall be limited precisely as written and in no event shall be deemed to constitute a waiver of compliance by the Parent or the Borrower with respect to any other term, provision or condition of the Credit Agreement or any other Loan Document or prejudice any right or remedy that any Agent or any Lender may now have or may have in the future under or in connection with the Credit Agreement, any other Loan Document or any other instrument or agreement referred to therein. ARTICLE III CONDITIONS TO EFFECTIVENESS SECTION 3.1. Second Amendment Effective Date. This Amendment, and the amendments and modifications and limited waiver contained herein, shall be and become effective on the date (the "Second Amendment Effective Date") when each of the conditions set forth in this Article III shall have been fulfilled to the satisfaction of the Administrative Agent. -4- 194 SECTION 3.2. Execution of Counterparts. The Administrative Agent shall have received counterparts of this Amendment, duly executed and delivered on behalf of the Borrower, the Parent and each of the Required Lenders. SECTION 3.3. Resolutions, etc. The Administrative Agent shall have received from Cruise America and each of its Subsidiaries (other than a Foreign Subsidiary, an SPC or a Non-Material Subsidiary) a certificate, dated the Second Amendment Effective Date, of the Secretary or Assistant Secretary of such Person as to (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of Supplement No. 1 to Subsidiary Guaranty, Supplement No. 1 to Subsidiary Security Agreement and each other Loan Document to be executed by it; (b) the incumbency and signatures of those of its officers authorized to act with respect to Supplement No. 1 to Subsidiary Guaranty, Supplement No. 1 to Subsidiary Security Agreement and each other Loan Document to be executed by it; and (c) the full force and validity of each Organic Document of such Person and true and complete copies thereof, upon which certificate each Lender, the Issuer and each Agent may conclusively rely until it shall have received a further certificate of the Secretary of such Person canceling or amending such prior certificate. SECTION 3.4. Merger Consummated. The conditions to the obligations of the Parent and Acquisition Corp. to consummate the Merger set forth in the Plan and Agreement of Merger, dated as of November 25, 1997 (the "Merger Agreement"), among Cruise America, the Parent and Acquisition Corp. shall have been satisfied in all material respects (without amendment or waiver of, or other forbearance to exercise any rights with respect to, any of the material terms or provisions thereof by the Parent or Acquisition Corp.), and the Merger shall have been consummated in accordance with the terms thereof. SECTION 3.5. Consents, etc. The Administrative Agent shall have received true and correct copies of all governmental and third party approvals and consents necessary or advisable in connection with the Merger (including this Amendment and each other amendment/waiver relating to any material agreement for borrowed money to which the Parent or any Subsidiary of the Parent is a party) and continuing operations of the Parent and its Subsidiaries (after giving effect to the consummation of the Merger) shall have been obtained and be in full force and effect 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 the Merger or the financing thereof. -5- 195 SECTION 3.6. No Material Adverse Change. There shall not have occurred a material adverse change in the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Parent and its Subsidiaries, taken as a whole, or the Borrower and its Subsidiaries, taken as a whole, since December 31, 1996. SECTION 3.7. Amendment Effective Date Certificate. The Administrative Agent shall have received, with counterparts for each Lender, the Amendment Effective Date Certificate, dated the Second Amendment Effective Date and duly executed and delivered by an Authorized Officer of each of the Borrower and Parent, in which certificate each of the Borrower and Parent shall agree and acknowledge that the statements made therein shall be deemed to be true and correct representations and warranties of each of the Borrower and Parent made as of such date, and, at the time each such certificate is delivered, such statements shall in fact be true and correct. SECTION 3.8. Supplement to Parent Pledge Agreement. The Administrative Agent shall have received a Supplement to Parent Pledge Agreement, dated the Second Amendment Effective Date, duly executed and delivered by the Parent, together with the certificate(s), evidencing all of the issued and outstanding shares of Capital Stock of Cruise America pledged pursuant to the Parent Pledge Agreement, which certificate(s) shall be accompanied by undated stock powers duly executed in blank. SECTION 3.9. Supplement to Subsidiary Guaranty. The Administrative Agent shall have received a Supplement to Subsidiary Guaranty, substantially in the form of Annex I to the Subsidiary Guaranty and dated the Second Amendment Effective Date, duly executed and delivered by each of Cruise America and each of its Subsidiaries (other than a Foreign Subsidiary, an SPC or a Non-Material Subsidiary). SECTION 3.10. Amendment to Subsidiary Pledge Agreement. The Administrative Agent shall have received counterparts of the Third Amendment to Subsidiary Pledge Agreement, dated as of the Second Amendment Effective Date and duly executed and delivered on behalf of each Subsidiary of the Borrower that is a party thereto. SECTION 3.11. Supplement to Subsidiary Pledge Agreement. The Administrative Agent shall have received a Supplement to Subsidiary Pledge Agreement, substantially in the form of Annex I to the Subsidiary Pledge Agreement (after giving effect to the amendments set forth in the Third Amendment to Subsidiary Pledge Agreement), dated as of the Second Amendment Effective Date and duly executed and delivered by Cruise America, together with the certificate(s), evidencing all of the issued and outstanding shares of Capital Stock of each Subsidiary of Cruise America (other than an SPC or a Non-Material Subsidiary) pledged pursuant to the Subsidiary Pledge Agreement, which certificate(s) shall be accompanied by undated stock powers duly executed in blank. SECTION 3.12. Amendment to Subsidiary Security Agreement. The Administrative Agent shall have received a counterpart of the First Amendment to Subsidiary Security -6- 196 Agreement, dated as of the Second Amendment Effective Date and duly executed and delivered on behalf of each Subsidiary of the Borrower that is a party thereto. SECTION 3.13. Supplement to Subsidiary Security Agreement. The Administrative Agent shall have received a Supplement to Subsidiary Security Agreement, substantially in the form of Annex I to the Subsidiary Security Agreement (after giving effect to the amendments set forth in the First Amendment to Subsidiary Security Agreement), dated as of the Second Amendment Effective Date and duly executed and delivered by each of Cruise America and each of its Subsidiaries (other than a Foreign Subsidiary, an SPC or a Non-Material Subsidiary), together with (a) acknowledgment copies of properly filed Uniform Commercial Code financing statements (Form UCC-1) or such other evidence of filing as may be acceptable to the Administrative Agent, or in the discretion of the Administrative Agent copies suitable for filing, naming such Obligor, as the debtor and the Administrative Agent as the secured party, or other similar instruments or documents, filed or suitable for filing under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the security interest of the Administrative Agent pursuant to the Subsidiary Security Agreement; (b) executed copies of proper Uniform Commercial Code Form UCC-3 termination statements, if any, necessary to release all Liens and other rights of any Person (other than Liens permitted under Section 8.2.3 of the Credit Agreement) in any collateral described in the Subsidiary Security Agreement previously granted by such Obligor, together with such other Uniform Commercial Code Form UCC-3 termination statements as the Administrative Agent may reasonably request from such Obligor; and (c) certified copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Administrative Agent, dated a date reasonably near to the Second Amendment Effective Date, listing all effective financing statements, tax liens and judgment liens which name such Obligor (under its present names and any previous names thereof) as the debtor and which are filed in the jurisdictions in which filings were made pursuant to clause (a) above, together with copies of such financing statements (none of which (other than those described in clause (a), if such Form UCC-11 or search report, as the case may be, is current enough to list such financing statements described in clause (a)) shall cover any collateral described in the Subsidiary Security Agreement). SECTION 3.14. Pro Forma Compliance Certificate. The Administrative Agent shall have received, with counterparts for each Lender, a Compliance Certificate executed by the chief financial or accounting Authorized Officer of the Parent certifying and showing (in reasonable detail and with appropriate calculations and computations in all respects reasonably satisfactory to the Administrative Agent) that on a historical pro forma basis (after giving effect to the Merger and all transactions related thereto (including all Indebtedness that would be assumed or -7- 197 incurred as a result of such acquisition) and all Business Acquisitions consummated prior thereto during the applicable periods thereunder) as of the last day of the most recently completed Fiscal Quarter with respect to which, pursuant to Section 8.1.1 of the Credit Agreement, financial statements have been, or are required to have been, delivered by the Borrower or the Parent and the Borrower would be in compliance with Section 8.2.4 of the Credit Agreement as of the last day of such Fiscal Quarter and would not suffer an increase in the Leverage Ratio as of such date. SECTION 3.15. Opinions of Counsel. The Administrative Agent shall have received (a) opinions, dated the Second Amendment Effective Date and addressed to the Administrative Agent and the Lenders, from counsel to the Obligors, in form and substance satisfactory to the Administrative Agent, and (b) such reliance letters as it may reasonably request with respect to opinions delivered in connection with the Merger dated the Second Amendment Effective Date and addressed to the Agents and all of the Lenders. SECTION 3.16. Fees and Expenses. The Administrative Agent shall have received all fees and expenses due and payable pursuant to Section 5.4 (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 Lenders and the Administrative Agent to enter into this Amendment, each of the Borrower and the Parent hereby represents and warrants to each Agent 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 (i) Section 7.7 of the Credit Agreement and (ii) Section 7.8 of the Credit Agreement as such Section relates to the ownership by the Parent of Acquisition Corp. prior to the Merger and Cruise America immediately following the Merger) 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 or the Parent 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, the Parent or any of their respective Subsidiaries which might materially adversely affect the Parent's consolidated business, operations, assets, revenues, properties or prospects or which purports to affect -8- 198 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, the Parent and their respective Subsidiaries; (c) no Default has occurred and is continuing, and neither the Borrower, the Parent nor any of their respective 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 each of the Borrower and the Parent and constitutes a legal, valid and binding obligation of each such Person, 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 or the Parent 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 any Borrower have been prepared in good faith by the Borrowers and represent the best estimates of the Borrowers, 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. -9- 199 ARTICLE V MISCELLANEOUS 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, the Parent or any other Obligor which would require the consent 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. Each of the Borrower and the Parent 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. 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 5.5. 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. SECTION 5.6. Execution of Amendment to Subsidiary Security Agreement and Amendment to Subsidiary Pledge Agreement. By their signatures below, the Required Lenders acknowledge that the Administrative Agent will be executing each of the First Amendment to Subsidiary Security Agreement and the Third Amendment to the Subsidiary Pledge Agreement. -10- 200 SECTION 5.7. Execution in Counterparts. This Amendment may be executed by the parties hereto in several 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 THIS PAGE LEFT INTENTIONALLY BLANK.] -11- 201 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written. BUDGET RENT A CAR CORPORATION By: /s/ Robert L. Carpenter ------------------------------- Name: Title: BUDGET GROUP INC., as a Guarantor By: /s/ Robert L. Carpenter ------------------------------- Name: Title: -12- 202 CREDIT SUISSE FIRST BOSTON, as a Lender, and the Administrative Agent By: /s/ Joel Glodowski ---------------------------------------- Name: Joel Glodowski Title: Managing Director By: /s/ Daniel R. Wenger ---------------------------------------- Name: Daniel R. Wemger Title: Associate CREDIT SUISSE FIRST BOSTON, as the Issuer By: /s/ Joel Glodowski ---------------------------------------- Name: Joel Glodowski Title: Managing Director By: /s/ Daniel R. Wenger ---------------------------------------- Name: Daniel R. Wemger Title: Associate BANK OF HAWAII, as a Lender By: ---------------------------------------- Name: Title: -13- 203 THE BANK OF NEW YORK, as a Lender By: /s/ John R. Ciulla ------------------------------------- Name: John R. Ciulla Title: Assistant Vice President BANK POLSKA KASA OPIEKI, as a Lender By: /s/ Harvey Winter ------------------------------------- Name: Harvey Winter Title: Vice President BANK UNITED, as a Lender By: /s/ Mario Chiodetti ------------------------------------- Name: Mario Chiodetti Title: Director BHF BANK AKTIENGESELLSCHAFT, as a Lender By: /s/ Paul Travers ------------------------------------- Name: Paul Travers Title: V.P. By: /s/ Linda Pace ------------------------------------- Name: Linda Pace Title: Vice President -14- 204 CREDIT AGRICOLE INDOSUEZ, as a Lender By: /s/ Katherine L. Abbott ---------------------------------------- Name: Katherine L. Abbott Title: First Vice President By: /s/ David Bouhl ---------------------------------------- Name: David Bouhl, F.V.P. Title: Head of Corporate Banking Chicago CANADIAN IMPERIAL BANK OF COMMERCE, as a Lender By: /s/ Stephanie Johnson-DeVane ---------------------------------------- Name: Stephanie Johnson-DeVane Title: Executive Director CIBC Oppenheimer Corp., As Agent CREDIT LYONNAIS CHICAGO BRANCH, as a Lender By: ---------------------------------------- Name: Title: IMPERIAL BANK, as a Lender By: /s/ Ray Vadalma ---------------------------------------- Name: Ray Vadalma Title: Senior Vice President -15- 205 LONG TERM CREDIT BANK OF JAPAN, as a Lender By: ---------------------------------------- Name: Title: NATIONSBANK, N.A. (SOUTH), as a Lender By: /s/ Richard M. Starke ---------------------------------------- Name: Richard M. Starke Title: Vice President PNC BANK, KENTUCKY, INC., as a Lender By: /s/ James D. Neil ---------------------------------------- Name: James D. Neil Title: Vice President ROYAL BANK OF CANADA, as a Lender By: /s/ Monica Stettler ---------------------------------------- Name: Monica Stettler Title: Manager - Automotive Group THE TORONTO-DOMINION BANK, as a Lender By: /s/ Jorge A. Garcia ---------------------------------------- Name: Jorge A. Garcia Title: Mgr. Cr. Admin. -16- 206 ANNEX I to Second Amendment to Credit Agreement AMENDMENT EFFECTIVE DATE CERTIFICATE BUDGET GROUP, INC. BUDGET RENT A CAR CORPORATION This Amendment Effective Date Certificate (this "Certificate") is delivered pursuant to Section 3.8 of the Amendment and Waiver No. 2 to Credit Agreement, dated as of January 28, 1998 (the "Second Amendment"), among Budget Rent a Car Corporation, a Delaware corporation (the "Borrower"), Budget Group, Inc. (formerly known as Team Rental Group, Inc.), a Delaware corporation (the "Parent"), the various financial institutions as are, or may from time to time become, parties thereto (each, individually, a "Lender", and collectively, the "Lenders"), and Credit Suisse First Boston, as the administrative agent (in such capacity, the "Administrative Agent"). Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided for, or incorporated by reference, in the Credit Agreement. Each of the undersigned hereby certifies, represents and warrants, for and on behalf of the Parent and the Borrower, as the case may be, as of the Second Amendment Effective Date, as follows: 1. Merger Consummated. The conditions to the obligations of the Parent and CA Acquisition Corporation, a Florida corporation and a Wholly Owned Subsidiary of the Parent ("Acquisition Corp."), to consummate the Merger set forth in the Plan and Agreement of Merger, dated as of November 25, 1997 (the "Merger Agreement", a true and complete copy of which, together with all agreements delivered in connection therewith, is attached hereto as Annex I), among Cruise America, the Parent and Acquisition Corp. have been satisfied in all material respects (without amendment or waiver of, or other forbearance to exercise any rights with respect to, any of the material terms or provisions thereof by the Parent or Acquisition Corp.), and the Merger has been consummated in accordance with the terms thereof. 2. Consents, etc. All governmental and third party approvals and consents necessary or advisable in connection with the Merger (including this Amendment and each other amendment/waiver relating to any material agreement for borrowed money to which the Parent or any Subsidiary of the Parent is a party) and continuing operations of the Parent and its Subsidiaries (after giving effect to the consummation of the Merger) have been obtained and are in full force and effect and all applicable waiting periods have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the Merger or the financing thereof. True and complete copies of all such governmental and third party approvals and consents are attached hereto as Annex II. 207 3. No Material Adverse Change. There has not occurred a material adverse change in the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Parent and its Subsidiaries, taken as a whole, or the Borrower and its Subsidiaries, taken as a whole, since December 31, 1996. 4. Warranties, No Default, etc. Both before and after giving effect to the Second Amendment Effective Date, the following statements are true and correct (a) the representations and warranties set forth in Article VII of the Credit Agreement (excluding, however, those contained in (i) Section 7.7 thereof and (ii) Section 7.8 thereof as such Section relates to the ownership by the Parent of Acquisition Corp. prior to the Merger and Cruise America immediately following the Merger) and in each other Loan Document are, in each case, true and correct with the same effect as if then made (unless stated to relate solely to an early 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, the Parent or any of their respective Subsidiaries which might materially adversely affect the Parent'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, the Parent and their respective Subsidiaries; and (c) no Default has occurred and be continuing, and neither the Borrower, the Parent nor any of their respective Subsidiaries nor any other Obligor is in material violation of any law or governmental regulation or court order or degree. 5. Material Subsidiaries. As of the Second Amendment Effective Date, all of the Subsidiaries of the Borrower which are not Non-material Subsidiaries or SPCs are, collectively, parties to the First Amendment to Subsidiary Security Agreement and the Third Amendment to Subsidiary Pledge Agreement and attached hereto as Annex III is a summary of such mergers. -2- 208 IN WITNESS WHEREOF, the undersigned has caused this Certificate to be executed and delivered, and the certification, representations and warranties contained herein to be duly made, by an Authorized Officer this ____ day of _________, 1998. BUDGET GROUP, INC. By ---------------------------------------- Title: BUDGET RENT A CAR CORPORATION By ---------------------------------------- Title: -3- 209 ANNEX I [MERGER AGREEMENT] 210 ANNEX II [APPROVALS AND CONSENTS] 211 ANNEX III SUBSIDIARY MERGERS 212 ANNEX II to Second Amendment to Credit Agreement FIRST AMENDMENT TO SUBSIDIARY SECURITY AGREEMENT THIS FIRST AMENDMENT TO SUBSIDIARY SECURITY AGREEMENT, dated as of January 28, 1998 (this "Amendment"), is made by and among each Subsidiary (as defined in the Credit Agreement referred to below) of Budget Rent A Car Corporation, a Delaware corporation (the "Borrower"), a signatory hereto (each a "Grantor" and collectively, the "Grantors") and the Administrative Agent (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, Budget Group, Inc. (formerly known as Team Rental Group, Inc.), a Delaware corporation (the "Parent"), the various financial institutions parties thereto (collectively, the "Lenders"), Nationsbanc Capital Markets, Inc., ("NationsBanc"), as a co-syndication agent (in such capacity, a "Co-Syndication Agent") for the Lenders and as the documentation agent (in such capacity, the "Documentation Agent") for the Lenders, and Credit Suisse First Boston, as a co-syndication agent (in such capacity, a "Co-Syndication Agent" and, together with NationsBanc, collectively, the "Co-Syndication Agents") for the Lenders, as administrative agent (in such capacity, the "Administrative Agent", and together with, the Co-Syndication Agents and the Documentation Agent, the "Agents") for the Lenders and as the arranger have heretofore entered into that certain Second Amendment to Credit Agreement, dated as of the date hereof (the "Second Amendment to Credit Agreement"), which amends that certain Credit Agreement, dated as of April 29, 1997 (as amended by the First Amendment to Credit Agreement, dated as of October 24, 1997, the "Credit Agreement") among such parties; WHEREAS, the Grantors and the Administrative Agent have heretofore entered into that certain Subsidiary Security Agreement, dated as of April 29, 1997 (the "Subsidiary Security Agreement"); WHEREAS, the Grantors desire to amend the Subsidiary Security Agreement as set forth below; and WHEREAS, the Administrative Agent is willing, on and subject to the terms and conditions set forth below, to amend the Subsidiary Security Agreement, in each case as provided below (the Subsidiary Security Agreement, as amended pursuant to the terms of this Amendment, being referred to as the "Amended Subsidiary Security Agreement"); 213 NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, each Grantor and the Administrative Agent 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 first recital. "Amendment" is defined in the preamble. "Amended Subsidiary Security Agreement" is defined in the fourth recital. "Borrower" is defined in the preamble. "Credit Agreement" is defined in the first recital. "Grantor" and "Grantors" are defined in the preamble. "Lenders" is defined in the first recital. "Parent" is defined in the first recital. "Second Amendment to Credit Agreement" is defined in the first recital. "Subsidiary Security Agreement" is defined in the second recital. SECTION 1.2. Other Definitions. Terms for which meanings are provided for, or incorporated by reference, in the Second Amendment to Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendment with such meanings. ARTICLE II AMENDMENTS TO SUBSIDIARY SECURITY AGREEMENT SECTION 2.1. Amendment to Article I of the Subsidiary Security Agreement. Section 1.1 of the Subsidiary Security Agreement ("Defined Terms") is hereby amended by inserting in such Section the following definition in the appropriate alphabetical order: -2- 214 "Grantor" and "Grantors" are defined in the preamble and shall include each other Person which may from time to time hereafter become a party hereto pursuant to Section 7.8. SECTION 2.2. Amendment to Article VII of the Subsidiary Security Agreement. Article VII of the Subsidiary Security Agreement ("Miscellaneous Provisions") is hereby amended by inserting a new Section 7.8 at the end thereof to read in its entirety as follows: SECTION 7.8 Additional Grantors. Upon the execution and delivery by any other Person of an instrument in the form of Annex I hereto, such Person shall become a "Grantor" hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of any such instrument shall not require the consent of any other Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Security Agreement. SECTION 2.3. Amendment to Schedules to the Subsidiary Security Agreement. The Schedules to the Subsidiary Security Agreement relating to each Grantor for whom corresponding Schedules are attached hereto shall be amended in their entirety to read as set forth in such corresponding Schedules hereto. SECTION 2.4. Addition of Annex I. The Subsidiary Security Agreement is hereby amended by inserting a new Annex I at the end thereof in the form of Annex I hereto. ARTICLE III MISCELLANEOUS SECTION 3.1. Full Force and Effect; Limited Amendment. Except as expressly amended hereby, all of the representations, warranties, terms, covenants, conditions and other provisions of the Subsidiary Security Agreement 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 any Grantor, the Borrower, the Parent or any other Obligor which would require the consent of the Lenders under the Credit Agreement or any of the other Loan Documents. SECTION 3.2. 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. Any breach of any representation or warranty or covenant or agreement contained in this Amendment -3- 215 shall be deemed to be an Event of Default for all purposes of the Credit Agreement and the other Loan Documents. SECTION 3.3. Further Assurances. Each Grantor agrees that it will take any action that from time to time may be reasonably necessary to effectuate the amendments contemplated herein. SECTION 3.4. 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. SECTION 3.5. Execution in Counterparts. This Amendment may be executed by the parties hereto in several 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 3.6. 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 3.7. 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] -4- 216 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 RENT-A-CAR SYSTEMS, INC. NYRAC, INC. BUDGET RENT-A-CAR INTERNATIONAL, INC. CONTROL RISK CORPORATION PHILIP JACOBS INSURANCE AGENCY, INC. RESERVATION SERVICES, INC. BRAC CREDIT CORPORATION AUTOMATED TRANSPORTATION, INC. MOISANT CAR SALES, INC. BUDGET SALES CORPORATION By --------------------------------------- Name: Title: TEAM CAR SALES OF SAN DIEGO, INC. VAN POOL SERVICES, INC. By --------------------------------------- Name: Title: TEAM REALTY SERVICES, INC. By --------------------------------------- Name: Title: -5- 217 DAYTON AUTO LEASE COMPANY, INC. By --------------------------------------- Name: Title: TEAM FLEET SERVICES CORPORATION By --------------------------------------- Name: Title: TEAM CAR SALES OF CHARLOTTE, INC. TEAM CAR SALES OF DAYTON, INC. TEAM CAR SALES OF RICHMOND, INC. BUDGET CAR SALES, INC. (formerly known as Team Car Sales, Inc.) VALCAR RENTAL CAR SALES, INC. TEAM CAR SALES OF PHILADELPHIA, INC. By --------------------------------------- Name: Title: -6- 218 TEAM CAR SALES OF SOUTHERN CALIFORNIA, INC. By --------------------------------------- Name: Title: IN MOTORS VI, LLC By ValCar Rental Car Sales, Inc., as a Member By --------------------------------------- Name: Title: TCS PROPERTIES, LLC By Budget Car Sales, Inc. (formerly known as Team Car Sales, Inc.), as a Member By --------------------------------------- Name: Title: CREDIT SUISSE FIRST BOSTON, as Administrative Agent By --------------------------------------- Name: Title: By --------------------------------------- Name: Title: -7- 219 ANNEX I to First Amendment to Subsidiary Security Agreement SUPPLEMENT TO SUBSIDIARY SECURITY AGREEMENT This SUPPLEMENT NO. ___, dated as of ___________ __, ____ (this "Supplement"), to the Subsidiary Security Agreement, dated as of April 29, 1997 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Security Agreement"), among the initial signatories thereto and each other Person which from time to time thereafter became a party thereto pursuant to Section 7.8 thereof (each, individually, a "Grantor", and, collectively, the "Grantors"), in favor of the Administrative Agent (as defined below) for the benefit of the Secured Parties (such and other capitalized terms being used herein with the meanings provided, or incorporated by reference, in the Security Agreement), is made by the undersigned. W I T N E S S E T H: WHEREAS, pursuant to that certain Credit Agreement, dated as of April 29, 1997 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement") among Budget Rent A Car Corporation, a Delaware corporation (the "Borrower"), Budget Group, Inc. (formerly known as Team Rental Group, Inc.), a Delaware corporation (the "Parent"), the various financial institutions parties thereto (collectively, the "Lenders"), Nationsbanc Capital Markets, Inc., ("NationsBanc"), as a co-syndication agent (in such capacity, a "Co-Syndication Agent") for the Lenders and as the documentation agent (in such capacity, the "Documentation Agent") for the Lenders, and Credit Suisse First Boston, as a co-syndication agent (in such capacity, a "Co-Syndication Agent" and, together with NationsBanc, collectively, the "Co-Syndication Agents") for the Lenders, as administrative agent (in such capacity, the "Administrative Agent", and together with, the Co-Syndication Agents and the Documentation Agent, the "Agents") for the Lenders and as the arranger, the Lenders and the Issuer have extended Commitments to make, and have made, Credit Extensions to the Borrower; WHEREAS, as a condition precedent to the continued making and maintenance of the Credit Extensions under the Credit Agreement, the undersigned is required to execute and deliver this Supplement; WHEREAS, the undersigned has duly authorized the execution, delivery and performance of this Supplement and the Security Agreement; 220 WHEREAS, the Security Agreement provides that additional parties may become Grantors under the Security Agreement by execution and delivery of an instrument in the form of this Supplement; WHEREAS, pursuant to the provisions of Section 7.8 of the Security Agreement, the undersigned is becoming a Grantor under the Security Agreement; and WHEREAS, the undersigned desires to become a Grantor under the Security Agreement in order to induce the Secured Parties to continue to make and maintain Credit Extensions under the Credit Agreement as consideration therefor; NOW, THEREFORE, the undersigned agrees, for the benefit of each Secured Party, as follows: SECTION 1. In accordance with the Security Agreement, the undersigned by its signature below becomes a Grantor under the Security Agreement with the same force and effect as if it were an original signatory thereto as a Grantor and the undersigned hereby: (a) agrees to all the terms and provisions of the Security Agreement applicable to it as a Grantor thereunder; (b) assigns and pledges to the Administrative Agent for its benefit and the ratable benefit of each of the Secured Parties, and hereby grants to the Administrative Agent for its benefit and the ratable benefit of each of the Secured Parties, a security interest in all of the following, whether now or hereafter existing or acquired by the undersigned (the "Collateral"): (i) all Subject Assets and Related Contracts of the undersigned; (ii) all Deposit Accounts of such Grantor and all cash, checks, drafts, notes, bills of exchange, money orders, and other like instruments, if any, now owned or hereafter acquired, held therein (or in sub-accounts thereof) and all certificates and instruments, if any, from time to time representing or evidencing such investments, and all interest, earnings and proceeds in respect thereof; (iii) all certificates of deposit, securities, and other investments, if any, now owned or hereafter acquired, of the Grantor and all certificates and instruments, if any; (iv) all books, records, writings, data bases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this clause (b); and -2- 221 (v) all products, offspring, rents, issues, profits, returns, income and proceeds of and from any and all of the foregoing Collateral (including proceeds which constitute property of the types described in subclauses (i) through (iv), proceeds deposited from time to time in any Deposit Account of such Grantor, and to the extent not otherwise included, all payments under insurance (whether or not the Administrative Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral); (c) agrees that the Schedule attached hereto shall be deemed to be a Schedule thereto; and (d) represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, each reference to a "Grantor" in the Security Agreement shall be deemed to include the undersigned. SECTION 2. The undersigned hereby represents and warrants that this Supplement has been duly authorized, executed and delivered by the undersigned and constitutes a legal, valid and binding obligation of the undersigned, enforceable against it in accordance with its terms. SECTION 3. Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect in accordance with its terms. SECTION 4. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Security Agreement shall not in any way be affected or impaired. SECTION 5. Without limiting the provisions of the Credit Agreement (or any other Loan Document, including the Security Agreement), the undersigned agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including reasonable attorneys' fees and expenses of the Administrative Agent. SECTION 6. THIS SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THIS SUPPLEMENT, THE SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO. -3- 222 SECTION 7. This Supplement hereby incorporates by reference the provisions of the Security Agreement, which provisions are deemed to be a part hereof, and this Supplement shall be deemed to be a part of the Security Agreement. SECTION 8. This Supplement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. [REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK] -4- 223 IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. [NAME OF ADDITIONAL GRANTOR] By --------------------------------------- Name: Title: ACKNOWLEDGED AND ACCEPTED BY: CREDIT SUISSE FIRST BOSTON, as Administrative Agent By ------------------------------- Name: Title: By ------------------------------- Name: Title: -5- 224 SCHEDULE I to Supplement No. __ Subsidiary Security Agreement ([NAME OF ADDITIONAL GRANTOR]) Item A. Location of Deposit Accounts
Contact Bank Name and Address Account Number Person --------------------- -------------- ------ 1. 2. 3.
Item B. Place(s) of Business and Chief Executive Office Item C. Trade Names Item D. Merger or Other Corporate Reorganization Item E. Government Contracts 225 ANNEX III to Second Amendment to Credit Agreement SUPPLEMENT TO PARENT PLEDGE AGREEMENT This SUPPLEMENT NO. 1, dated as of January 28, 1998 (this "Supplement"), to the Parent Pledge Agreement, dated as of April 29, 1997 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Pledge Agreement"), made by Budget Group, Inc. (formerly known as Team Rental Group, Inc.), a Delaware corporation (the "Parent"), in favor of the Administrative Agent (as defined below) for the benefit of the Secured Parties (such and other capitalized terms being used herein with the meanings provided, or incorporated by reference, in the Pledge Agreement), is made by the Parent. W I T N E S S E T H: WHEREAS, Budget Rent A Car Corporation, a Delaware corporation (the "Borrower"),Budget Group, Inc. (formerly known as Team Rental Group, Inc.), a Delaware corporation (the "Parent"), the various financial institutions parties thereto (collectively, the "Lenders"), Nationsbanc Capital Markets, Inc., ("NationsBanc"), as a co-syndication agent (in such capacity, a "Co-Syndication Agent") for the Lenders and as the documentation agent (in such capacity, the "Documentation Agent") for the Lenders, and Credit Suisse First Boston, as a co-syndication agent (in such capacity, a "Co-Syndication Agent" and, together with NationsBanc, collectively, the "Co-Syndication Agents") for the Lenders, as administrative agent (in such capacity, the "Administrative Agent", and together with, the Co-Syndication Agents and the Documentation Agent, the "Agents") for the Lenders and as the arranger have heretofore entered into that certain Second Amendment to Credit Agreement, dated as of the date hereof (the "Second Amendment to Credit Agreement"), which amends that certain Credit Agreement, dated as of April 29, 1997 (as amended by the First Amendment to Credit Agreement, dated as of October 24, 1997, the "Credit Agreement") among such parties; and WHEREAS, in connection with the Second Amendment, the Parent desires to Supplement the Attachment to the Pledge Agreement; NOW, THEREFORE, the Parent agrees, for the benefit of each Secured Party, as follows: SECTION 1. In accordance with the Pledge Agreement, the Parent by its signature desires to assign and pledge its shares of Cruise America, Inc., a Florida corporation to the Administrative Agent for the benefit of the Secured Parties and the Pledgor hereby: 226 (a) acknowledes and reaffirms all of the terms and provisions of the Pledge Agreement applicable to it as a Pledgor thereunder (including as such terms and provisions relate to its pledge and assignment of its shares of the Borrower); (b) not in limitation of clause (a) but in furtherance thereof, pledges, hypothecates, assigns, charges, mortgages, delivers, and transfers to the Administrative Agent, for its benefit and the ratable benefit of each of the Secured Parties, and hereby grants to the Administrative Agent, for its benefit and the ratable benefit of the Secured Parties, a continuing security interest in, all of the following property of the Pledgor (the "Collateral"): (i) all issued and outstanding shares of Capital Stock of each Pledged Share Issuer identified in Item A of Attachment 1 hereto (as such Attachment may be further supplemented by the Pledgor and accepted by the Administrative Agent); (ii) all other Pledged Shares issued from time to time; (iii) all promissory notes of each Pledged Note Issuer identified in Item B of Attachment 1 hereto (as such Attachment may be further supplemented by the Pledgor and accepted by the Administrative Agent); (iv) all other Pledged Notes issued from time to time; (v) all other Pledged Property, whether now or hereafter delivered to the Administrative Agent in connection with this Pledge Agreement; (vi) all Dividends, Distributions, interest, and other payments and rights with respect to any Pledged Property; and (vii) all proceeds of any of the foregoing; (c) agrees that the Attachment attached hereto shall be deemed to be an Attachment thereto; and (d) represents and warrants that the representations and warranties made by it as a Pledgor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, each reference to a "Pledgor" in the Pledge Agreement shall be deemed to include the Pledgor. SECTION 2. The Pledgor hereby represents and warrants that this Supplement has been duly authorized, executed and delivered by the Pledgor and constitutes a legal, valid and binding obligation of the Pledgor, enforceable against it in accordance with its terms. -2- 227 SECTION 3. Except as expressly supplemented hereby, the Pledge Agreement shall remain in full force and effect in accordance with its terms. SECTION 4. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Pledge Agreement shall not in any way be affected or impaired. SECTION 5. Without limiting the provisions of the Credit Agreement (or any other Loan Document, including the Pledge Agreement), the Pledgor agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including reasonable attorneys' fees and expenses of the Administrative Agent. SECTION 6. THIS SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THIS SUPPLEMENT, THE PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO. SECTION 7. This Supplement hereby incorporates by reference the provisions of the Pledge Agreement, which provisions are deemed to be a part hereof, and this Supplement shall be deemed to be a part of the Pledge Agreement. SECTION 8. This Supplement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. [REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK] -3- 228 IN WITNESS WHEREOF, the Pledgor has caused this Supplement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. BUDGET GROUP INC. By: -------------------------------------- Name: Title: ACKNOWLEDGED AND ACCEPTED BY: CREDIT SUISSE FIRST BOSTON, as Administrative Agent By: ----------------------------- Name: Title: By: ----------------------------- Name: Title: -4- 229 SCHEDULE I to Supplement No. __ Parent Pledge Agreement (Budget Group, Inc.) Item A. Pledged Shares
Capital Stock ------------- Authorized Outstanding % of Shares Pledged Share Issuer Shares Shares Pledged - -------------------- ---------- ----------- ----------- Budget Rent A Car Corporation 4,250,000 2,740,000 100% Cruise America, Inc.
Item B. Pledged Notes
Pledged Note Issuer Description - ------------------- ----------- None.
Item C. Additional Subsidiaries None. 230 ANNEX IV to Second Amendment to Credit Agreement THIRD AMENDMENT TO SUBSIDIARY PLEDGE AGREEMENT THIS THIRD AMENDMENT TO SUBSIDIARY PLEDGE AGREEMENT, dated as of January 28, 1998 (this "Amendment"), is made by and among each Subsidiary (as defined in the Credit Agreement referred to below) of Budget Rent A Car Corporation, a Delaware corporation (the "Borrower"), a signatory hereto (each a "Pledgor" and collectively, the "Pledgors") and the Administrative Agent (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, Budget Group, Inc. (formerly known as Team Rental Group, Inc.), a Delaware corporation (the "Parent"), the various financial institutions parties thereto (collectively, the "Lenders"), Nationsbanc Capital Markets, Inc., ("NationsBanc"), as a co-syndication agent (in such capacity, a "Co-Syndication Agent") for the Lenders and as the documentation agent (in such capacity, the "Documentation Agent") for the Lenders, and Credit Suisse First Boston, as a co-syndication agent (in such capacity, a "Co-Syndication Agent" and, together with NationsBanc, collectively, the "Co-Syndication Agents") for the Lenders, as administrative agent (in such capacity, the "Administrative Agent", and together with, the Co-Syndication Agents and the Documentation Agent, the "Agents") for the Lenders and as the arranger have heretofore entered into that certain Second Amendment to Credit Agreement, dated as of the date hereof (the "Second Amendment to Credit Agreement"), which amends that certain Credit Agreement, dated as of April 29, 1997 (as amended by the First Amendment to Credit Agreement, dated as of October 24, 1997, the "Credit Agreement") among such parties; WHEREAS, the Pledgors and the Administrative Agent have heretofore entered into that certain Subsidiary Pledge Agreement, dated as of April 29, 1997 (as amended by the First Amendment to Subsidiary Pledge Agreement, dated as of October 24, 1997 and the Second Amendment to Subsidiary Pledge Agreement, dated as of November 26, 1997, the "Subsidiary Pledge Agreement"); WHEREAS, the Pledgors desire to amend the Subsidiary Pledge Agreement as set forth below; and WHEREAS, the Administrative Agent is willing, on and subject to the terms and conditions set forth below, to amend the Subsidiary Pledge Agreement, in each case as provided below (the Subsidiary Pledge Agreement, as amended pursuant to the terms of this Amendment, being referred to as the "Amended Subsidiary Pledge Agreement"); 231 NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, each Pledgor and the Administrative Agent 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 first recital. "Amendment" is defined in the preamble. "Amended Subsidiary Pledge Agreement" is defined in the fourth recital. "Borrower" is defined in the preamble. "Credit Agreement" is defined in the first recital. "Lenders" is defined in the first recital. "Parent" is defined in the first recital. "Pledgor" and "Pledgors" are defined in the preamble. "Second Amendment to Credit Agreement" is defined in the first recital. "Subsidiary Pledge Agreement" is defined in the second recital. SECTION 1.2. Other Definitions. Terms for which meanings are provided for, or incorporated by reference, in the Second Amendment to Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendment with such meanings. ARTICLE II AMENDMENTS TO SUBSIDIARY PLEDGE AGREEMENT SECTION 2.1. Amendment to Article I of the Subsidiary Pledge Agreement. Section 1.1 of the Subsidiary Pledge Agreement ("Defined Terms") is hereby amended by inserting in such Section the following definition in the appropriate alphabetical order: -2- 232 "Pledgor" and "Pledgors" are defined in the preamble and shall include each other Person which may from time to time hereafter become a party hereto pursuant to Section 7.9. SECTION 2.2. Amendment to Article VII of the Subsidiary Pledge Agreement. Article VII of the Subsidiary Pledge Agreement ("Miscellaneous Provisions") is hereby amended by inserting a new Section 7.9 at the end thereof to read in its entirety as follows: SECTION 7.9 Additional Pledgors. Upon the execution and delivery by any other Person of an instrument in the form of Annex I hereto, such Person shall become a "Pledgor" hereunder with the same force and effect as if originally named as a Pledgor herein. The execution and delivery of any such instrument shall not require the consent of any other Pledgor hereunder. The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Pledgor as a party to this Pledge Agreement. SECTION 2.3. Amendment to Attachment 1 to the Subsidiary Pledge Agreement. Attachment 1 to the Subsidiary Pledge Agreement relating to each Pledgor for whom a corresponding Attachment 1 is attached hereto shall be amended in its entirety to read as set forth in such corresponding Attachment 1 hereto. SECTION 2.4. Addition of Annex I. The Subsidiary Pledge Agreement is hereby amended by inserting a new Annex I at the end thereof in the form of Annex I hereto. ARTICLE III MISCELLANEOUS SECTION 3.1. Full Force and Effect; Limited Amendment. Except as expressly amended hereby, all of the representations, warranties, terms, covenants, conditions and other provisions of the Subsidiary Pledge Agreement 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 any Pledgor, the Borrower, the Parent or any other Obligor which would require the consent of the Lenders under the Credit Agreement or any of the other Loan Documents. SECTION 3.2. 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. Any breach of any representation or warranty or covenant or agreement contained in this Amendment -3- 233 shall be deemed to be an Event of Default for all purposes of the Credit Agreement and the other Loan Documents. SECTION 3.3. Further Assurances. Each Pledgor agrees that it will take any action that from time to time may be reasonably necessary to effectuate the amendments contemplated herein. SECTION 3.4. 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. SECTION 3.5. Execution in Counterparts. This Amendment may be executed by the parties hereto in several 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 3.6. 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 3.7. 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] -4- 234 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 RENT-A-CAR SYSTEMS, INC. NYRAC, INC. BUDGET RENT-A-CAR INTERNATIONAL, INC. CONTROL RISK CORPORATION PHILIP JACOBS INSURANCE AGENCY, INC. RESERVATION SERVICES, INC. BRAC CREDIT CORPORATION AUTOMATED TRANSPORTATION, INC. MOISANT CAR SALES, INC. BUDGET SALES CORPORATION By ---------------------------------------- Name: Title: LEE-AL, INC. WESTEAM ENTERPRISES, INC. TEAM CAR SALES OF SAN DIEGO, INC. VAN POOL SERVICES, INC. By ---------------------------------------- Name: Title: TEAM REALTY SERVICES, INC. By ---------------------------------------- Name: Title: -5- 235 DAYTON AUTO LEASE COMPANY, INC. By ---------------------------------------- Name: Title: TEAM FLEET SERVICES CORPORATION By ---------------------------------------- Name: Title: TEAM CAR SALES OF CHARLOTTE, INC. TEAM CAR SALES OF DAYTON, INC. TEAM CAR SALES OF RICHMOND, INC. BUDGET CAR SALES, INC. (formerly known as Team Car Sales, Inc.) VALCAR RENTAL CAR SALES, INC. TEAM CAR SALES OF PHILADELPHIA, INC. By ---------------------------------------- Name: Title: -6- 236 TEAM CAR SALES OF SOUTHERN CALIFORNIA, INC. By ---------------------------------------- Name: Title: IN MOTORS VI, LLC By ValCar Rental Car Sales, Inc., as a Member By ---------------------------------------- Name: Title: TCS PROPERTIES, LLC By Budget Car Sales, Inc. (formerly known as Team Car Sales, Inc.), as a Member By ---------------------------------------- Name: Title: CREDIT SUISSE FIRST BOSTON, as Administrative Agent By ---------------------------------------- Name: Title: By ---------------------------------------- Name: Title: -7- 237 ANNEX I to Third Amendment to Subsidiary Pledge Agreement SUPPLEMENT TO SUBSIDIARY PLEDGE AGREEMENT This SUPPLEMENT NO. ___, dated as of ___________ __, ____ (this "Supplement"), to the Subsidiary Pledge Agreement, dated as of April 29, 1997 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Pledge Agreement"), among the initial signatories thereto and each other Person which from time to time thereafter became a party thereto pursuant to Section 7.9 thereof (each, individually, a "Pledgor", and, collectively, the "Pledgors"), in favor of the Administrative Agent (as defined below) for the benefit of the Secured Parties (such and other capitalized terms being used herein with the meanings provided, or incorporated by reference, in the Pledge Agreement), is made by the undersigned. W I T N E S S E T H: WHEREAS, pursuant to that certain Credit Agreement, dated as of April 29, 1997 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement") among Budget Rent A Car Corporation, a Delaware corporation (the "Borrower"), Budget Group, Inc. (formerly known as Team Rental Group, Inc.), a Delaware corporation (the "Parent"), the various financial institutions parties thereto (collectively, the "Lenders"), Nationsbanc Capital Markets, Inc., ("NationsBanc"), as a co-syndication agent (in such capacity, a "Co-Syndication Agent") for the Lenders and as the documentation agent (in such capacity, the "Documentation Agent") for the Lenders, and Credit Suisse First Boston, as a co-syndication agent (in such capacity, a "Co-Syndication Agent" and, together with NationsBanc, collectively, the "Co-Syndication Agents") for the Lenders, as administrative agent (in such capacity, the "Administrative Agent", and together with, the Co-Syndication Agents and the Documentation Agent, the "Agents") for the Lenders and as the arranger, the Lenders and the Issuer have extended Commitments to make, and have made, Credit Extensions to the Borrower; WHEREAS, as a condition precedent to the continued making and maintenance of the Credit Extensions under the Credit Agreement, the undersigned is required to execute and deliver this Supplement; WHEREAS, the undersigned has duly authorized the execution, delivery and performance of this Supplement and the Pledge Agreement; WHEREAS, the Pledge Agreement provides that additional parties may become Pledgors under the Pledge Agreement by execution and delivery of an instrument in the form of this Supplement; 238 WHEREAS, pursuant to the provisions of Section 7.9 of the Pledge Agreement, the undersigned is becoming a Pledgor under the Pledge Agreement; and WHEREAS, the undersigned desires to become a Pledgor under the Pledge Agreement in order to induce the Secured Parties to continue to make and maintain Credit Extensions under the Credit Agreement as consideration therefor; NOW, THEREFORE, the undersigned agrees, for the benefit of each Secured Party, as follows: SECTION 1. In accordance with the Pledge Agreement, the undersigned by its signature below becomes a Pledgor under the Pledge Agreement with the same force and effect as if it were an original signatory thereto as a Pledgor and the undersigned hereby: (a) agrees to all the terms and provisions of the Pledge Agreement applicable to it as a Pledgor thereunder; (b) pledges, hypothecates, assigns, charges, mortgages, delivers, and transfers to the Administrative Agent, for its benefit and the ratable benefit of each of the Secured Parties, and hereby grants to the Administrative Agent, for its benefit and the ratable benefit of the Secured Parties, a continuing security interest in, all of the following property of the undersigned (the "Collateral"): (i) all issued and outstanding shares of Capital Stock of each Pledged Share Issuer identified in Item A of Attachment 1 hereto (as such Attachment may be further supplemented by the undersigned and accepted by the Administrative Agent); (ii) all other Pledged Shares issued from time to time; (iii) all promissory notes of each Pledged Note Issuer identified in Item B of Attachment 1 hereto (as such Attachment may be further supplemented by the undersigned and accepted by the Administrative Agent); (iv) all other Pledged Notes issued from time to time; (v) all other Pledged Property, whether now or hereafter delivered to the Administrative Agent in connection with this Pledge Agreement; (vi) all Dividends, Distributions, interest, and other payments and rights with respect to any Pledged Property; and (vii) all proceeds of any of the foregoing; -2- 239 (c) agrees that the Attachment attached hereto shall be deemed to be an Attachment thereto; and (d) represents and warrants that the representations and warranties made by it as a Pledgor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, each reference to a "Pledgor" in the Pledge Agreement shall be deemed to include the undersigned. SECTION 2. The undersigned hereby represents and warrants that this Supplement has been duly authorized, executed and delivered by the undersigned and constitutes a legal, valid and binding obligation of the undersigned, enforceable against it in accordance with its terms. SECTION 3. Except as expressly supplemented hereby, the Pledge Agreement shall remain in full force and effect in accordance with its terms. SECTION 4. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Pledge Agreement shall not in any way be affected or impaired. SECTION 5. Without limiting the provisions of the Credit Agreement (or any other Loan Document, including the Pledge Agreement), the undersigned agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including reasonable attorneys' fees and expenses of the Administrative Agent. SECTION 6. THIS SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THIS SUPPLEMENT, THE PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO. SECTION 7. This Supplement hereby incorporates by reference the provisions of the Pledge Agreement, which provisions are deemed to be a part hereof, and this Supplement shall be deemed to be a part of the Pledge Agreement. SECTION 8. This Supplement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. [REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK] -3- 240 IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. [NAME OF ADDITIONAL PLEDGOR] By: ---------------------------------------- Name: Title: ACKNOWLEDGED AND ACCEPTED BY: CREDIT SUISSE FIRST BOSTON, as Administrative Agent By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: -4- 241 SCHEDULE I to Supplement No. __ Subsidiary Pledge Agreement ([NAME OF ADDITIONAL PLEDGOR]) Item A. Pledged Shares
Capital Stock ------------- Authorized Outstanding % of Shares Pledged Share Issuer Shares Shares Pledged - -------------------- ---------- ----------- -----------
Item B. Pledged Notes
Pledged Note Issuer Description - ------------------- -----------
Item C. Additional Subsidiaries 242 AMENDMENT NO. 3 TO CREDIT AGREEMENT THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT, dated as of March 13, 1998 (this "Amendment"), is made by and among BUDGET RENT A CAR CORPORATION, a Delaware corporation (the "Borrower"), BUDGET GROUP, INC., a Delaware corporation (the "Parent"), the Lenders (as defined below) parties hereto and the Administrative Agent (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, the Parent, the various financial institutions parties thereto (collectively, the "Lenders"), Credit Suisse First Boston, as a co-syndication agent (in such capacity, a "Co-Syndication Agent") for the Lenders ("CSFB"), as administrative agent (in such capacity, the "Administrative Agent") for the Lenders and as the arranger, and Nationsbanc Capital Markets, Inc., ("NationsBanc"), as a co-syndication agent (in such capacity, a "Co-Syndication Agent" and, together with CSFB, collectively, the "Co-Syndication Agents") for the Lenders and as the documentation agent (in such capacity, the "Documentation Agent", and, together with the Co-Syndication Agents and the Administrative Agent, the "Agents") for the Lenders, have heretofore entered into that certain Credit Agreement, dated as of April 29, 1997 (as amended by the First Amendment to Credit Agreement, dated as of October 24, 1997, and Amendment and Waiver No. 2 to Credit Agreement, dated as of January 28, 1998, the "Credit Agreement"); WHEREAS, the Borrower has requested that the Lenders and the Administrative Agent amend the Credit Agreement, on the terms and subject to the conditions hereof, in order to provide, among other things, the specific provisions pursuant to which the Borrower may pledge Eligible Repurchase Vehicles and Eligible Non-Repurchase Vehicles as collateral under the Credit Agreement; and WHEREAS, the Lenders and the Administrative Agent are willing, on the terms and subject to the 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, the Parent, the Lenders and the Administrative Agent hereby agree as follows: 243 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 first recital. "Agents" is defined in the first recital. "Amended Credit Agreement" is defined in the third recital. "Amendment" is defined in the preamble. "Amendment Effective Date Certificate" means the certificate executed and delivered by the Borrower and the Parent pursuant to Section 3.6, substantially in the form of Annex I hereto. "Borrower" is defined in the preamble. "Consent" means a consent under the Letter of Credit Reimbursement Agreement substantially in the form attached hereto as Exhibit A. "Credit Agreement" is defined in the first recital. "Lenders" is defined in the first recital. "Letter of Credit Reimbursement Agreement" means the Letter of Credit Reimbursement Agreement dated as of April 29, 1997, among Budget Funding Corporation, Budget Systems, certain subsidiaries, affiliates and non-affiliates of Budget Group, Inc., TFFC, the Borrower and Credit Suisse First Boston, as credit enhancer, as heretofore or hereafter amended or otherwise modified in accordance with its terms. "Parent" is defined in the preamble. "Third Amendment Effective Date" is defined in Section 3.1. 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- 244 ARTICLE II AMENDMENTS Effective on (and subject to the occurrence of) the Third Amendment Effective Date, certain provisions of the Credit Agreement are 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. Amendments to Section 1.1 of the Credit Agreement. Section 1.1 of the Credit Agreement ("Defined Terms") is amended in accordance with Sections 2.1.1 and 2.1.2. SECTION 2.1.1. Section 1.1 of the Credit Agreement is amended by inserting in such Section the following definitions in the appropriate alphabetical order: "Amended Borrower Security Agreement" means the Amended and Restated Borrower Security Agreement dated as of March 13, 1998 by the Borrower in favor of the Administrative Agent. "Capitalized Cost" of a Pledged Vehicle means the costs and expenses incurred by the Borrower in connection with the acquisition of such Pledged Vehicle as established by the invoice delivered in connection with such Pledged Vehicle. "Collateral Agency Agreement" means the Collateral Agency Agreement, dated as of March 13, 1998 among the Borrower, as grantor, TFFC, as nominee titleholder, the Collateral Agent, not in its individual capacity but solely as collateral agent for the Administrative Agent, and the Administrative Agent under the Credit Agreement, substantially in the form attached to the Third Amendment as Exhibit B, as heretofore or hereafter amended or otherwise modified in accordance with its terms. "Collateral Agent" means Bankers Trust Company, in its capacity as collateral agent under the Collateral Agency Agreement, and its successors thereunder. "Depreciation Charges" means, (a) with respect to any Pledged Vehicle that is an Eligible Repurchase Vehicle, the scheduled monthly depreciation charge set forth by the Manufacturer in its Repurchase Program for such Pledged Vehicle calculated on a daily basis and (b) with respect to any Pledged Vehicle that is a Non-Repurchase Vehicle, the monthly depreciation charge set forth in the related Depreciation Schedule. If such charge is expressed as a percentage, the Depreciation Charges for such Pledged Vehicle shall be such percentage multiplied by the Capitalized Cost for such Vehicle, calculated on a daily basis. For any Pledged Vehicle not held for a full Related Month in the month of acquisition or disposition, the Depreciation Charges shall be prorated by multiplying the otherwise applicable Depreciation Charges by a fraction, the numerator of which is the number of days from the date depreciation commences (in accordance with the applicable Repurchase Program, if such Pledged Vehicle is an Eligible Repurchase -3- 245 Vehicle) with respect to such Pledged Vehicle to the first day of the next month and the denominator of which is the number of days in such month. For the month in which an Eligible Repurchase Vehicle is turned back to the applicable Manufacturer, the Depreciation Charges shall be prorated by multiplying the otherwise applicable Depreciation Charges by a fraction, the numerator of which is the number of days from the first day of such month to the Turnback Date for such Pledged Vehicle and the denominator of which is the number of days in such month. In the event a Pledged Vehicle is sold to a third party, the Depreciation Charges shall be prorated by multiplying the otherwise applicable Depreciation Charges by a fraction, the numerator of which is the number of days from the first day of such month to the date proceeds were received on the sale of such Pledged Vehicle and the denominator of which is the number of days in such month. "Depreciation Schedule" means, with respect to a Non-Repurchase Vehicle, a schedule of estimated monthly depreciation prepared by the Servicer in accordance with GAAP and revised from time to time in the Servicer's sole discretion. "Determination Date" means the second Business Day prior to each Reference Date. "Eligible Manufacturer" means any of the following: Chrysler Corporation, Ford Motor Company/Jaguar, General Motors Corporation, Mazda Motors of America, Inc., Nissan Motors Corporation in U.S.A., Inc., Toyota Motor Sales, U.S.A., Inc., Volkswagen of America, Honda Motor Company, Hyundai Motor Company Ltd., Subaru of America, SAAB Automobile, Navistar International, and Isuzu Motors Ltd.; provided that no Manufacturer will be deemed an Eligible Manufacturer if a Manufacturer Event of Default has occurred and is continuing with respect to such Manufacturer. "Eligible Repurchase Program" means a repurchase program or guaranteed depreciation program (a) of an Eligible Manufacturer, (b) pursuant to which the repurchase price (or the price guaranteed to be received at auction) is at least equal to the Capitalized Cost of each vehicle, minus all Depreciation Charges accrued with respect to such vehicle prior to the date that the vehicle is submitted for repurchase or auction, minus Excess Mileage Charges, Excess Damage Charges and any other charges specified in such program, (c) that cannot be amended or terminated with respect to any vehicle after the purchase of that vehicle, (d) with respect to which a Manufacturer Event of Default has not occurred which is continuing, (e) the terms of which are otherwise acceptable to the Administrative Agent, and (f) the benefits of which have been collaterally assigned to the Collateral Agent by an agreement acknowledged in writing by the related Manufacturer and TFFC and the Collateral Agent have been provided with an opinion of counsel or, if agreed by the Administrative Agent, a certificate of an officer of the Manufacturer, in form and substance reasonably satisfactory to such parties, that TFFC and the Collateral Agent can enforce the applicable Manufacturer's obligations thereunder. "Excess Damage Charges" means, with respect to any Repurchase Vehicle, the amount charged to the Borrower or the Nominee, or deducted from the Repurchase Price (as defined in the Amended Borrower Security Agreement), by the Manufacturer of such Repurchase Vehicle -4- 246 due to damage over a prescribed limit to the Repurchase Vehicle at the time that the Repurchase Vehicle is turned in to such Manufacturer or its agent for repurchase pursuant to the applicable Repurchase Program. "Excess Mileage Charges" means, with respect to any Repurchase Vehicle, the amount charged to the Grantor or the Nominee, or deducted from the Repurchase Price, by the Manufacturer of such Repurchase Vehicle due to the fact that such Vehicle has mileage over a prescribed limit at the time that such Vehicle is turned in to such Manufacturer or its agent for repurchase pursuant to the applicable Repurchase Program. "Fair Market Value" means with respect to a Pledged Vehicle that is a Non-Repurchase Vehicle on any date of determination, the market value of such Pledged Vehicle as specified in the most recently published NADA Guide for the model class and model year of such Pledged Vehicle based on the average equipment and the average mileage of each Non-Repurchase Vehicle of such model class and model year then currently pledged under the Credit Agreement. If such Non-Repurchase Vehicle is not listed in the most recently published NADA Guide, then the Black Book Official Finance/Lease Guide (the "Lease Guide") shall be used to estimate the wholesale price of the Non-Repurchase Vehicle, based on the Non-Repurchase Vehicle's model class and model year for which the wholesale price of such vehicle is not so published in the NADA Guide; provided, however, that if the Lease Guide is unavailable, the Fair Market Value of such Non-Repurchase Vehicle shall be based on an independent third-party data source approved by the Supermajority Lenders based on the average mileage of each Non-Repurchase Vehicle of such model class and model year then pledged under the Credit Agreement or based upon such other methodology approved by the Supermajority Lenders. "Independent Accountant's Report" means the report of a firm of nationally recognized independent public accountants (who may also render other services to the Servicer) to the effect that they have performed certain agreed upon procedures with respect to (a) the calculation of disposition proceeds obtained from the sale or other disposition of all Non-Repurchase Vehicles (other than casualties) sold or otherwise disposed of during each Related Month in such period and compared such calculations of disposition proceeds with the corresponding amounts set forth in the Monthly Reports prepared by the Borrower and the Servicer, (b) the calculation of the Net Book Value of all Pledged Vehicles and the Non-Repurchase Value of all Non-Repurchase Vehicles for the Related Month and compared such amounts with the corresponding amounts set forth in the Monthly Reports, and that on the basis of such comparison such accountants are of the opinion that such amounts are in agreement, except for such exceptions as they do not believe to be material and such other exceptions as shall be set forth in such report and acceptable to the Administrative Agent. "Manufacturer" means a manufacturer of Pledged Vehicles. "Manufacturer Event of Default" means, with respect to any Manufacturer, (a) the failure of such Manufacturer to pay any amount when due pursuant to the related Repurchase Program with respect to a Pledged Vehicle turned in to such Manufacturer or delivered to an authorized -5- 247 auction site pursuant to the related Repurchase Program; provided, however, that such failure continues for more than sixty (60) days following the Turnback Date such that the aggregate of any such amounts not paid for more than sixty (60) days are in the aggregate in excess of $3,500,000 net of amounts that are the subject of a good faith dispute as evidenced in writing by either the Borrower or the Manufacturer questioning the accuracy of the amounts paid or payable in respect of certain Pledged Vehicles tendered for repurchase, or delivered to an authorized auction site, under a Repurchase Program, (b) the termination of such Manufacturer's Repurchase Program, (c) the occurrence of an event described in any of clauses (a) through (e) of Section 9.1.9 with respect to such Manufacturer, (d) such Manufacturer is no longer an Eligible Manufacturer or (e) the Repurchase Program of a Manufacturer shall no longer be an Eligible Repurchase Program. "Monthly Report" means a report specifying (a) the vehicle identification numbers for all Pledged Vehicles pledged under the Credit Agreement during the Related Month, (b) the Net Book Value of all Eligible Repurchase Vehicles as of the end of the Related Month, (c) the Non-Repurchase Value of all Eligible Non-Repurchase Vehicles as of the end of the Related Month, (d) the vehicle identification numbers for all Eligible Repurchase Vehicles that have been turned back to the Manufacturer for repurchase or auction during the Related Month and the repurchase prices therefor, (e) the vehicle identification numbers and Net Book Value or Non-Repurchase Value, as applicable, of all Pledged Vehicles that became casualties during the Related Month, (f) the aggregate disposition proceeds received in respect of Pledged Vehicles during the Related Month and (g) the aggregate Depreciation Charges with respect to all Pledged Vehicles during the Related Month. "Net Book Value" means, with respect to a Pledged Vehicle, (a) as of any date of determination during the period from the Pledge Date for such Pledged Vehicle to but excluding the Determination Date with respect to the Related Month in which such Pledge Date occurs (such Determination Date, the "Initial Determination Date" for such Pledged Vehicle), the Starting Net Book Value of such Pledged Vehicle, (b) as of the Initial Determination Date for such Pledged Vehicle, (i) the Starting Net Book Value for such Pledged Vehicle minus (ii) the aggregate Depreciation Charges accrued with respect to such Pledged Vehicle through the last day of the Related Month in which the Pledge Date for such Pledged Vehicle occurred, (c) as of any Determination Date after the Initial Determination Date, (i) the Net Book Value of such Pledged Vehicle as calculated on the immediately preceding Determination Date minus (ii) the aggregate Depreciation Charges accrued with respect to such Pledged 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 Pledged Vehicle shall be the Net Book Value calculated for such Pledged Vehicle on the most recent Determination Date. "Nominee Agreement" means a Vehicle Title Nominee Agreement dated as of March 13, 1998 between the Borrower and TFFC or another Affiliate of the Borrower, substantially in the form attached to the Third Amendment as Exhibit C, as any such Vehicle Title Nominee Agreement may heretofore or hereafter be amended or otherwise modified in accordance with its terms. -6- 248 "Non-Repurchase Value" means, with respect to any Pledged Vehicle that is a Non-Repurchase Vehicle, the lesser of (a) the Net Book Value of such Pledged Vehicle and (b) the Fair Market Value of such Pledged Vehicle. "Non-Repurchase Vehicle" means a passenger automobile, van or light duty truck that is not an Eligible Repurchase Vehicle. "Pledge Date" means, with respect to a Pledged Vehicle, the date such Pledged Vehicle is pledged as collateral under the Credit Agreement. "Pledged Vehicle" has the meaning specified in the Amended Borrower Security Agreement. "Reference Date" means the 22nd day of each calendar month or, if such day is not a Business Day, the next succeeding Business Day. "Related Month" means, with respect to any date of determination, the period from and including the 26th day of the calendar month second preceding such date of determination to an including the 25th day of the calendar month immediately preceding such date. "Repurchase Program" means a program pursuant to which a Manufacturer has agreed with the Borrower or the Nominee to repurchase or guarantee the auction sale price of Vehicles manufactured by it or one of its Affiliates. "Servicer" means Budget Group, Inc., a Delaware corporation, or such other party as is appointed as Servicer under the Amended Borrower Security Agreement, and its permitted successors as Servicer thereunder. "Starting Net Book Value" means, with respect to any Pledged Vehicle, an amount equal to the lesser of (a) the Capitalized Cost of such Pledged Vehicle reduced by the aggregate Depreciation Charges accrued with respect to such Pledged Vehicle prior to the Pledge Date for such Pledged Vehicle and (b) the Fair Market Value of such Pledged Vehicle as of the Pledge Date for such Pledged Vehicle. "Third Amendment" means Amendment No. 3 to Credit Agreement, dated as of March 13, 1998, among the Borrower, the Parent, the Lenders parties thereto and the Administrative Agent. "Turnback Date" means, with respect to a Pledged Vehicle that is an Eligible Repurchase Vehicle, the date on which such Pledged Vehicle is accepted for return by a Manufacturer or its agent pursuant to its Repurchase Program and the Depreciation Charges with respect to such Vehicle cease to accrue pursuant to its Repurchase Program. -7- 249 "Vehicle Borrowing Base Amount" means on any date of determination the lesser of (a) $100,000,000 and (b) an amount equal to the sum of (i) 90% of the Net Book Value of all Eligible Repurchase Vehicles on such date and (ii) 85% of the Non-Repurchase Value of all Eligible Non-Repurchase Vehicles on such date. "Vehicle Schedule" has the meaning specified in the Amended Borrower Security Agreement. SECTION 2.1.2. The following definitions in Section 1.1 of the Credit Agreement are amended as follows: (a) "Base Indenture" is amended by deleting the phrase ", subject to such modifications thereto as may be agreed to in the Base Indenture Supplement or by the Required Lenders". (b) "Base Indenture Supplement" is deleted in its entirety. (c) "Borrowing Base Amount" is amended by deleting clauses (c) and (d) of such definition and replacing them with the following: "(c) the Vehicle Borrowing Base Amount at such time." (d) "Eligible Non-Repurchase Vehicle" is amended to read in its entirety as follows: "'Eligible Non-Repurchase Vehicle' means any Non-Repurchase Vehicle (a) that is a Pledged Vehicle, (b) the Manufacturer of which is an Eligible Manufacturer and (b) with respect to which (i) the Collateral Agent is noted as the first priority 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 lien of the Collateral Agent upon such vehicle to be a perfected first priority lien, then in order for a Non-Repurchase Vehicle titled in such state to be an "Eligible Non-Repurchase Vehicle", such action as is required to cause the lien or the Collateral Agent to be a perfected first priority lien shall have been taken by the Borrower." (e) "Eligible Repurchase Vehicle" is amended to read in its entirety as follows: "'Eligible Repurchase Vehicle' means any Pledged Vehicle (a) which is eligible under an Eligible Repurchase Program, and (b) with respect to which (i) the Collateral Agent 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 lien of the Collateral Agent upon such vehicle to be a perfected first priority lien, then in order for a vehicle titled in such state to be an "Eligible -8- 250 Repurchase Vehicle", such action as is required to cause the lien of the Collateral Agent to be a perfected first priority lien shall have been taken by the Borrower." (f) "Enhancement Letters of Credit Commitment Amount" is amended by deleting the amount "$225,000,000" and substituting therefor the amount "$260,000,000". (g) "Permitted Business Acquisition" is amended by adding the following proviso at the end thereof: "provided that the Parent may consummate any such Business Acquisition, so long as (x) the Parent acquires all of the Capital Stock of the Person being acquired, whether directly or pursuant to a merger between such Person and a Wholly Owned Subsidiary of the Parent, (y) the consideration in respect of such Business Acquisition is comprised entirely of Capital Stock of the Parent and (z) concurrently with the consummation of such Business Acquisition, the Capital Stock of such Person (which Person may be the surviving entity of the merger referred to in the preceding clause (x)) is contributed to the Borrower such that such Person becomes a Wholly Owned Subsidiary of the Borrower subject to the terms of the Credit Agreement, including Section 8.1.9". (h) "Vehicle Debt" is amended by deleting the phrase "other than any such Vehicle financed hereunder pursuant to the Base Indenture Supplement;" appearing therein and replacing it with the following: "other than any Pledged Vehicle financed hereunder;". SECTION 2.2. Amendment to Section 8.1.1. Section 8.1.1 of the Credit Agreement ("Financial Information, Reports, Notices, etc.") is amended by: (a) deleting clause (f) thereof in its entirety and replacing it with the following: "(f) (i) within 12 Business Days following the last day of each calendar month, (x) a Borrowing Base Certificate for the preceding calendar month that is calculated as of the last day of such preceding calendar month, certified by the chief financial or accounting Authorized Officer of the Borrower or the Parent and (y) the Monthly Report (with a copy to the Collateral Agent) and (ii) as soon as possible following the presentment for payment under any Enhancement Letter of Credit, a Borrowing Base Certificate for the date of such presentment that is calculated as of the last day of the calendar month immediately preceding the month in which such presentment is made, in the case of the calculation of clauses (a) and (c) of the definition of "Borrowing Base Amount", and as of the date of such presentment (after giving effect to any reimbursement made in connection therewith), in the case of the calculation of clause (b) of the definition of "Borrowing Base Amount", certified by the chief financial or accounting Authorized Officer of the Borrower or the Parent;" (b) deleting the word "and" at the end of clause (k) thereof; -9- 251 (c) redesignating clause (l) thereof as clause (m); and (d) adding the following new clause (l): "(l) on or before the second Determination Date immediately following March 31, June 30, September 30 and December 31 of each year, an Independent Accountant's Report (with a copy to the Collateral Agent); and" SECTION 2.3. Amendment to Section 8.2.9. Section 8.2.9 of the Credit Agreement ("Consolidation, Merger, etc.") is amended by deleting the reference to "Borrower" in clause (b) thereof and substituting therefor a reference to "Parent". SECTION 2.4. Amendment to Section 8.2.17. Section 8.2.17 of the Credit Agreement ("Activities of the Parent") is amended by (a) adding the phrase ", the consummation of Permitted Business Acquisitions" in the first sentence thereof after the word "Borrower" and (b) deleting the word "equity" in clause (d)(ii) of the second sentence thereof. SECTION 2.5. Amendment to Exhibit E to the Credit Agreements. Exhibit E to the Credit Agreement ("Form of Borrowing Base Certificate") shall be deemed to have been amended in a manner consistent with the amendments set forth in this Article II, and, in preparing the Compliance Certificate, the Parent shall make such changes (which shall be subject to the approval of the Administrative Agent) to such Exhibit E as may be necessary to give effect to such amendments. ARTICLE III CONDITIONS TO EFFECTIVENESS SECTION 3.1. Third Amendment Effective Date. This Amendment, and the amendments and modifications contained herein, shall be and become effective on the date (the "Third Amendment Effective Date") when each of the conditions set forth in this Article III shall have been fulfilled to the satisfaction of the Administrative Agent. SECTION 3.2. Execution of Counterparts. The Administrative Agent shall have received counterparts of this Amendment, duly executed and delivered by the Borrower, the Parent, the Servicer and the Supermajority Lenders; provided that the amendment set forth in clause (f) of Section 2.1.2 with respect to the Enhancement Letters of Credit Commitment Amount shall not become effective unless the Administrative Agent shall have received counterparts of this Amendment duly executed and delivered by each of the Lenders. SECTION 3.3. Resolutions, etc. The Administrative Agent shall have received from the Borrower and the Parent a certificate, dated the Third Amendment Effective Date, of the Secretary or Assistant Secretary of such Person as to -10- 252 (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Amendment, the Amended Borrower Security Agreement, the Collateral Agency Agreement and each other Loan Document to be executed by it; (b) the incumbency and signatures of those of its officers authorized to act with respect to this Amendment, the Amended Borrower Security Agreement, the Collateral Agency Agreement and each other Loan Document to be executed by it; and (c) the full force and validity of each Organic Document of such Person and true and complete copies thereof, upon which certificate each Lender, each Issuer and each Agent may conclusively rely until it shall have received a further certificate of the Secretary of such Person canceling or amending such prior certificate. SECTION 3.4. Consents, etc. The Administrative Agent shall have received true and correct copies of all governmental and third party approvals and consents necessary or advisable in connection with this Amendment and each other document to be delivered in connection with this Amendment. SECTION 3.5. No Material Adverse Change. There shall not have occurred a material adverse change in the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Parent and its Subsidiaries, taken as a whole, or the Borrower and its Subsidiaries, taken as a whole, since December 31, 1996. SECTION 3.6. Amendment Effective Date Certificate. The Administrative Agent shall have received, with counterparts for each Lender, the Amendment Effective Date Certificate, dated the Third Amendment Effective Date and duly executed and delivered by an Authorized Officer of each of the Borrower and Parent, in which certificate each of the Borrower and Parent shall agree and acknowledge that the statements made therein shall be deemed to be true and correct representations and warranties of each of the Borrower and Parent made as of such date, and, at the time each such certificate is delivered, such statements shall in fact be true and correct. SECTION 3.7. Financing Statements. The Borrower shall have filed an executed, proper financing statement on Form UCC-1 naming the Borrower as debtor and the Administrative Agent as secured party for filing with the Illinois Secretary of State, or other similar instruments or documents as may be necessary or, in the reasonable opinion of the Administrative Agent or the Collateral Agent, desirable under the UCC of all applicable jurisdictions to perfect the interest of the Collateral Agent in the Collateral (as defined in the Borrower Security Agreement) as agent for the Administrative Agent (on behalf of the Lenders). -11- 253 SECTION 3.8. Other Agreements. The Administrative Agent shall have received executed copies of each of the following documents and all conditions to the effectiveness of each such agreement or document shall have been satisfied in all respects: (i) the Collateral Agency Agreement; (ii) the Amended Borrower Security Agreement; (iii) the Nominee Agreement; (iv) the Consent; and (v) such other documents as the Administrative Agent or the Collateral Agent may reasonably request. SECTION 3.9. No Event of Default. No Event of Default or Default shall have occurred and be continuing on such date or would result from the entry into this Amendment. SECTION 3.10. Opinions of Counsel. The Administrative Agent shall have received opinions, dated the Third Amendment Effective Date and addressed to the Administrative Agent and the Lenders, from counsel to the Obligors, in form and substance satisfactory to the Administrative Agent. SECTION 3.11. Fees and Expenses. The Administrative Agent shall have received all fees and expenses due and payable pursuant to Section 5.4 (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 Lenders and the Administrative Agent to enter into this Amendment, each of the Borrower and the Parent hereby represents and warrants to each Agent and each Lender, as of the date hereof, as follows: (a) the representations and warranties set forth in Article VII 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) no Default has occurred and is continuing, and neither the Borrower, the Parent nor any of their respective Subsidiaries nor any other Obligor is in material violation of any law or governmental regulation or court order or decree; and -12- 254 (c) this Amendment has been duly authorized, executed and delivered by each of the Borrower and the Parent and constitutes a legal, valid and binding obligation of each such Person, 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 or the Parent 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 estimate 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 or Event of Default has occurred and is continuing. ARTICLE V MISCELLANEOUS 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, the Parent or any other Obligor which would require the consent 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 -13- 255 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. Each of the Borrower and the Parent 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. 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 5.5. 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. SECTION 5.6. Execution of Additional Agreements. By their signatures below, the Supermajority Lenders acknowledge that (i) the Administrative Agent will be executing the Amended Borrower Security Agreement and the Collateral Agency Agreement and (ii) the Issuer will be executing the Consent. SECTION 5.7. Execution in Counterparts. This Amendment may be executed by the parties hereto in several 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 THIS PAGE INTENTIONALLY LEFT BLANK.] -14- 256 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written. BUDGET RENT A CAR CORPORATION By: /s/ Stephen G. Worthley -------------------------------------- Name: Stephen G. Worthley Title: Vice President BUDGET GROUP INC., as a Guarantor By: /s/ Stephen G. Worthley -------------------------------------- Name: Stephen G.Worthley Title: Vice President CREDIT SUISSE FIRST BOSTON, as a Lender, and the Administrative Agent By: /s/ Robert Hetu -------------------------------------- Name: Robert Hetu Title: Associate By: /s/ Chris T. Horgan -------------------------------------- Name: Chris T. Horgan Title: Vice President CREDIT SUISSE FIRST BOSTON, as the Issuer By: /s/ Robert Hetu -------------------------------------- Name: Robert Hetu Title: Associate By: /s/ Chris T. Horgan -------------------------------------- Name: Chris T. Horgan Title: Vice President 257 BANK OF HAWAII, as a Lender By: /s/ Joseph T. Donalson -------------------------------------- Name: Joseph T. Donalson Title: Vice President THE BANK OF NEW YORK, as a Lender By: /s/ John R. Ciulla -------------------------------------- Name: John R. Ciulla Title: Assistant Vice President BANK POLSKA KASA OPIEKI, as a Lender By: /s/ Harvey Winter -------------------------------------- Name: Harvey Winter Title: Vice President BANK UNITED, as a Lender By: /s/ Mario Chiodetti -------------------------------------- Name: Mario Chiodetti Title: Director BHF BANK AKTIENGESELLSCHAFT, as a Lender By: /s/ Linda Pace -------------------------------------- Name: Linda Pace Title: Vice President By: /s/ Hans J. Scholz -------------------------------------- Name: Hans J. Scholz Title: Assistant Vice President 258 CREDIT AGRICOLE INDOSUEZ, as a Lender By: /s/ Dean Balice -------------------------------------- Name: Dean Balice Title: Senior Vice President Branch Manager By: /s/ David Bouhl -------------------------------------- Name: David Bouhl F.V.P. Title: Head of Corporate Banking Chicago CANADIAN IMPERIAL BANK OF COMMERCE, as a Lender By: /s/ Stephanie Johnson Devane -------------------------------------- Name: Stephanie Johnson Devane Title: Executive Director CIBC Oppenheimer Corp, As Agent CREDIT LYONNAIS CHICAGO BRANCH, as a Lender By: /s/ Lee E. Greve -------------------------------------- Name: Lee E. Greve Title: First Vice President IMPERIAL BANK, as a Lender By: /s/ Ray Vadalma -------------------------------------- Name: Ray Vadalma Title: Senior Vice President LONG TERM CREDIT BANK OF JAPAN, as a Lender By: /s/ Philip A. Marsden -------------------------------------- Name: Philip A. Marsden Title: Senior Vice President 259 NATIONSBANK, N.A. (SOUTH), as a Lender By: /s/ Richard M. Starke -------------------------------------- Name: Richard M. Starke Title: SVP PNC BANK, KENTUCKY, INC., as a Lender By: /s/ Ralph M. Bowman -------------------------------------- Name: Ralph M. Bowman Title: Vice President ROYAL BANK OF CANADA, as a Lender By: /s/ Monica Stettler -------------------------------------- Name: Monica Stettler Title: Manager - Automotive Group THE TORONTO-DOMINION BANK, as a Lender By: /s/ Jorge A. Garcia -------------------------------------- Name: Jorge A. Garcia Title: Mgr. Cr. Admin. UNION BANK OF CALIFORNIA, N.A., as a Lender By: /s/ Richard P. DeGrey -------------------------------------- Name: Richard P. DeGrey Title: Vice President 260 ANNEX I [Amendment Effective Date Certificate] 261 ANNEX I to Amendment No. 3 to Credit Agreement AMENDMENT EFFECTIVE DATE CERTIFICATE BUDGET GROUP, INC. BUDGET RENT A CAR CORPORATION This Amendment Effective Date Certificate (this "Certificate") is delivered pursuant to Section 3.8 of the Amendment No. 3 to Credit Agreement, dated as of March 13, 1998 (the "Third Amendment"), among Budget Rent a Car Corporation, a Delaware corporation (the "Borrower"), Budget Group, Inc. (formerly known as Team Rental Group, Inc.), a Delaware corporation (the "Parent"), the various financial institutions as are, or may from time to time become, parties thereto (each, individually, a "Lender", and collectively, the "Lenders"), and Credit Suisse First Boston, as the administrative agent (in such capacity, the "Administrative Agent"). Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided for, or incorporated by reference, in the Credit Agreement. Each of the undersigned hereby certifies, represents and warrants, for and on behalf of the Parent and the Borrower, as the case may be, as of the Third Amendment Effective Date, as follows: 1. Consents, etc. All governmental and third party approvals and consents necessary or advisable in connection with the Third Amendment and each other amendment/waiver relating to any material agreement for borrowed money to which the Parent or any Subsidiary of the Parent is a party and continuing operations of the Parent and its Subsidiaries (after giving effect to the consummation of the Third Amendment) have been obtained and are in full force and effect. True and complete copies of all such governmental and third party approvals and consents are attached hereto as Annex I. 2. No Material Adverse Change. There has not occurred a material adverse change in the business, property, operations, assets, liabilities, condition (financial or otherwise) or prospects of the Parent and its Subsidiaries, taken as a whole, or the Borrower and its Subsidiaries, taken as a whole, since December 31, 1996. 3. Warranties, No Default, etc. Both before and after giving effect to the Third Amendment, no Default has occurred which is continuing, and neither the Borrower, the Parent nor any of their respective Subsidiaries nor any other Obligor is in material violation of any law or governmental regulation or court order or decree. 262 IN WITNESS WHEREOF, the undersigned has caused this Certificate to be executed and delivered, and the certification, representations and warranties contained herein to be duly made, by an Authorized Officer as of the 13th day of March, 1998. BUDGET GROUP, INC. By ---------------------------------------- Title: BUDGET RENT A CAR CORPORATION By ---------------------------------------- Title: -2- 263 ANNEX I [APPROVALS AND CONSENTS] -3- 264 EXHIBIT A [Form of Consent] 265 ACKNOWLEDGMENT AND CONSENT UNDER LETTER OF CREDIT REIMBURSEMENT AGREEMENT THIS ACKNOWLEDGMENT AND CONSENT UNDER LETTER OF CREDIT REIMBURSEMENT AGREEMENT (this "Acknowledgment") is dated as of March 13, 1998 among BUDGET RENT A CAR SYSTEMS, INC., a Delaware corporation ("BRACS"), and those direct or indirect Subsidiaries and other Affiliates and certain non-Affiliates of Budget Group, Inc., a Delaware corporation formerly known as Team Rental Group, Inc. ("Budget Group"), identified on the signature pages hereto (BRACS and such additional parties hereto each a "Lessee" and, collectively, the "Lessees"), TEAM FLEET FINANCING CORPORATION, a Delaware corporation ("TFFC"), BUDGET RENT A CAR CORPORATION, a Delaware corporation ("BRACC" or the "Guarantor"),and CREDIT SUISSE FIRST BOSTON, a Swiss banking corporation (the "Credit Enhancer"). W I T N E S S E T H : WHEREAS, the parties hereto have previously entered into that certain Letter of Credit Reimbursement Agreement, dated as of April 29, 1997 (the "Letter of Credit Reimbursement Agreement"); WHEREAS, the parties desire to correct the provisions relating to the Credit Enhancer's waiver of set-off rights set forth in Section 4.17 of the Letter of Credit Reimbursement Agreement; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereby agree as follows: Section 1. Defined Terms. All capitalized terms used herein and not otherwise defined herein shall have the meanings set forth for such terms in the Letter of Credit Reimbursement Agreement, as such agreement may be further amended, supplemented, restated or otherwise modified from time to time. Section 2. Set-off Rights Under the Letter of Credit Reimbursement Agreement. Each Lessee and the Credit Enhancer hereby confirm and agree that, notwithstanding anything to the contrary set forth in Section 4.17 of the Letter of Credit Reimbursement Agreement, it was their mutual intent, and it is their mutual intent, that: 266 (a) the Credit Enhancer may exercise any right that it has or may have to set-off or to exercise any banker's lien or any right of attachment or garnishment with respect to any funds at any time and from time to time on deposit in, or otherwise to the credit of, any account and any claims of a Lessee therein or with respect to any right to payment from such Lessee; and (b) the Credit Enhancer waives and relinquishes any right that it has or may have to set-off or to exercise any banker's lien or any right of attachment or garnishment with respect to any funds at any time and from time to time on deposit in, or otherwise to the credit of, any account and any claims of TFFC therein or with respect to any right to payment from TFFC, it being understood, however, that nothing contained herein shall, or is intended to, derogate from the assignment and security interest granted to the Trustee or to impair any rights of the Credit Enhancer with respect to such assignment and security interest. Section 3. Reference to and Effect on the Related Documents; Ratification. (a) Except as specifically corrected above, the Letter of Credit Reimbursement Agreement is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects. (b) The execution, delivery and effectiveness of this Acknowledgment and Consent shall not operate as a waiver of any right, power or remedy of any party hereto under the Letter of Credit Reimbursement Agreement, nor constitute a waiver of any provision of any of the Related Documents. Section 4. Execution in Counterparts. This Acknowledgment and Consent may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Acknowledgment and Consent by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Acknowledgment and Consent. Section 5. Governing Law. THIS ACKNOWLEDGMENT AND CONSENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. -2- 267 IN WITNESS WHEREOF, the parties hereto have caused this Acknowledgment and Consent to be executed by their respective officers thereunto duly authorized, as of the date first above written. BUDGET RENT A CAR CORPORATION By: ---------------------------------------- Name: Title: CREDIT SUISSE FIRST BOSTON By: ---------------------------------------- Name: Title: By: ---------------------------------------- Name: Title: TEAM FLEET FINANCING CORPORATION By: ---------------------------------------- Name: Title: LESSEES: BUDGET RENT A CAR SYSTEMS, INC. By: ---------------------------------------- Name: Title: 268 TRANEX RENTALS OF NEW YORK, INC. By: ---------------------------------------- Name: Title: CAPITAL CITY LEASING, INC. By: ---------------------------------------- Name: Title: LEE-AL, INC. By: ---------------------------------------- Name: Title: WESTEAM ENTERPRISES, INC. By: ---------------------------------------- Name: Title: TEAM RENTAL OF PHILADELPHIA, INC. By: ---------------------------------------- Name: Title: 269 TEAM RENTAL OF PITTSBURGH, INC. By: ---------------------------------------- Name: Title: TEAM RENTAL OF CINCINNATI, INC. By: ---------------------------------------- Name: Title: MacKAY CAR AND TRUCK RENTALS, INC. By: ---------------------------------------- Name: Title: DON KREMER, INC. By: ---------------------------------------- Name: Title: TEAM RENTAL OF FT. WAYNE, INC. By: ---------------------------------------- Name: Title: 270 TEAM RENTAL OF CONNECTICUT, INC. By: ---------------------------------------- Name: Title: TEAM RENTAL OF SOUTHERN CALIFORNIA, INC. By: ---------------------------------------- Name: Title: ARIZONA RENT-A-CAR SYSTEMS, INC. By: ---------------------------------------- Name: Title: TEAM RENTAL OF ROCHESTER, INC. By: ---------------------------------------- Name: Title: NYRAC, INC. By: ---------------------------------------- Name: Title: 271 AUTOMATED TRANSPORTATION, INC. By: ---------------------------------------- Name: Title: RAPID RENTALS, INC. By: ---------------------------------------- Name: Title: BUDGET RENT-A-CAR OF NEW ORLEANS, INC. By: ---------------------------------------- Name: Title: TEAM RENTAL OF SOUTHERN CALIFORNIA, INC. By: ---------------------------------------- Name: Title: 272 EXHIBIT B [Form of Collateral Agency Agreement] 273 EXHIBIT C [Form of Nominee Agreement] 274 VEHICLE TITLE NOMINEE AGREEMENT THIS VEHICLE TITLE NOMINEE AGREEMENT (this "Nominee Agreement") is made as of March 13, 1998, by and between BUDGET RENT A CAR CORPORATION, a Delaware corporation ("Owner"), and TEAM FLEET FINANCING CORPORATION, a Delaware corporation ("Nominee"). WHEREAS, Owner has acquired, and from time to time in the future will acquire, certain vehicles identified in a schedule to this Nominee Agreement from time to time (such vehicles, the "Vehicles"); WHEREAS, for administrative convenience in the management of the rental fleet financing programs of Owner and its affiliates, the certificates of title for the Vehicles will list Nominee as the titleholder rather than Owner; WHEREAS, notwithstanding that the certificates of title to the Vehicles show Nominee as the titleholder, Owner and Nominee intend that Owner shall be entitled to all incidents, benefits and risks of ownership of the Vehicles and that Nominee shall have no ownership interest in the Vehicles but shall act solely as Owner's nominee owner of the Vehicles pursuant to the terms hereof; and WHEREAS, Nominee and Owner desire to confirm their respective interests in and obligations with respect to the Vehicles and to provide for certain other matters relating to the use and disposition of the Vehicles; NOW THEREFORE, in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Nominee and Owner, intending to be legally bound, hereby agree as follows: 1. Definitions. (a) Capitalized terms used herein and not otherwise defined herein shall have the meanings specified therefor in the Credit Agreement. (b) In addition, the following capitalized terms shall have following meanings when used in this Nominee Agreement: "Administrative Agent" means Credit Suisse First Boston, as syndication and administrative agent under the Credit Agreement. 275 "Collateral Agent" means Bankers Trust Company, as collateral agent under the Collateral Agreement, and any successor Collateral Agent thereunder. "Collateral Agreement" means the Collateral Agency Agreement dated as of March 13, 1998, among the Collateral Agent, Owner and the Administrative Agent (on behalf the Lenders), as heretofore or hereafter amended or otherwise modified in accordance with its terms. "Credit Agreement" means the Revolving Credit Agreement dated as of April 29, 1997 among Owner, as borrower, Budget Group, Inc., as guarantor, the Administrative Agent, as syndication and administrative agent, and the Lenders, as heretofore or hereafter amended or otherwise modified in accordance with its terms. "Lenders" means the institutions parties to the Credit Agreement and identified as such therein. 2. Appointment of Nominee as Nominee Owner; Power of Attorney; Compensation. (a) Owner hereby appoints Nominee as nominee owner of the Vehicles and Nominee hereby agrees to serve as Owner's designated agent in such capacity as described herein. (b) Nominee hereby grants Owner a power of attorney substantially in the form of Exhibit A attached hereto to (i) transfer the title to any Vehicle from the name of Nominee to the name of Owner or the name of a third party, (ii) reflect on the certificate of title of any Vehicle the interest of any lienholder and (iii) execute such other documents and instruments as may be necessary to effect any such transfer or reflect any such interest. (c) In consideration of Nominee's agreement to act as Nominee hereunder, Owner will pay to Nominee an annual fee as agreed by Owner and Nominee 3. Identification of Vehicles. The Vehicles as of the date hereof are identified on the schedule attached hereto as Exhibit B (the "Nominee Vehicle Schedule"). Owner shall at all times maintain a listing (which may be electronic) of the Vehicles, which listing shall be deemed conclusive in identifying the Vehicles. From time to time, upon request by the Collateral Agent, the Administrative Agent or Nominee, Owner shall deliver to the Collateral Agent, the Administrative Agent and Nominee an updated Nominee Vehicle Schedule listing the Vehicles as of the date of delivery of such revised Nominee Vehicle Schedule. 4. Interests in the Vehicles. Notwithstanding the fact that title to the Vehicles will remain in the name of Nominee, Nominee and Owner hereby acknowledge that: -2- 276 (a) except as set forth in subsection (b) below, Owner is entitled to all incidents, benefits and risks of ownership of the Vehicles, including, without limitation, the sole right to operate, rent, sell and otherwise transfer and dispose of the Vehicles; and (b) Nominee has no direct or indirect ownership or other interest in the Vehicles, except such rights and obligations with respect to the Vehicles as are required by Owner's appointment of Nominee as nominee owner of the Vehicles as set forth herein. 5. Transfer of Vehicle Titles. (a) General. Nominee and Owner agree that Owner may (i) change the titleholder's name on the Certificate of title for any Vehicle from the name of Nominee to the name of Owner or a third party or (ii) reflect on the certificate of title of any Vehicle the interest in such Vehicle of any lienholder. Nominee may require Owner to change the titleholder's name on the Certificate of Title for any Vehicle(s) from the name of Nominee to the name of Owner by delivering written notice of such request to Owner. Within 15 business days of receipt of such written notice, Owner agrees to use its reasonable efforts to transfer title to any such Vehicle from the name of Nominee to the name of Owner. (b) Expenses. Owner will be responsible for the payment of any transfer fees, taxes, license fees, registration fees or other similar governmental fees and taxes (including the cost of any recording or registration fees or other similar governmental charges payable with respect to the notation on the certificate of title of the interest of a lienholder) and all costs and expenses in connection with the transfer of title of, or reflection of the interest of any lienholder interest in, any Vehicle (collectively, "Title Fees and Costs"). 6. Indemnification. (a) Owner hereby agrees to indemnify and hold harmless Nominee from and against any damage, loss, liability, expense and tax (including, without limitation, reasonable costs of investigation and attorney's fees and expenses) (collectively, "Losses") (other than any expense incurred by Nominee pursuant to Section 6(b)) arising out of or related to the Vehicles, whether due to Nominee's holding legal title to any Vehicle, Nominee's appointment as nominee owner of the Vehicles or Nominee's performance under this Nominee Agreement, including, without limitation, Losses arising out of or related to (i) Nominee's grant of power of attorney to Owner pursuant to Section 2(b), (ii) Owner's failure to pay all Title Fees and Costs pursuant to Section 5(b), (iii) claims for personal injury or property damage involving any Vehicle, (iv) any personal property taxes payable with respect to the Vehicles. (b) Nominee hereby agrees to indemnify and hold harmless Owner from and against any Losses arising out of or relating to any claim made on a Vehicle or any proceeds thereof by a creditor of or purchaser from Nominee as a result of Nominee's retention of legal title to any Vehicle, Nominee's appointment as nominee owner of the Vehicles or -3- 277 Nominee's performance under this Nominee Agreement, whether direct or indirect, and whether any such Losses are incurred by the Owner, the Collateral Agent or the Master Collateral Agent; provided, however, that such indemnity shall not extend to any Losses arising out of or relating to any claim made on a Vehicle by a purchaser purchasing such Vehicle from or at the direction of Owner, the Collateral Agent or the Master Collateral Agent; provided, further, that such indemnity shall not extend to any Title Fees and Costs incurred. 7. Acknowledgments by Nominee. Nominee hereby acknowledges and consents to the following: (a) pursuant to the Collateral Agreement, Owner will assign, pledge and grant to the Collateral Agent, for the benefit of the Lenders, a first priority, perfected security interest in all of Owner's right, title and interest in and to, among other things, (i) the Vehicles, (ii) any manufacturer repurchase program or guaranteed depreciation program (collectively, "Manufacturer Programs") associated with the Vehicles and (iii) this Nominee Agreement. (b) the Collateral Agent, as assignee of Owner's rights hereunder, shall be entitled to enforce the indemnity set forth in Section 6(b) above against Nominee and Nominee agrees to pay any amounts due with respect to such indemnity directly to the Collateral Agent. 8. Further Assurances. Each of Nominee and Owner will, from time to time, execute and deliver such further instruments and render such further assistance as the other party may reasonably request in order to carry out the transactions contemplated herein; provided, however, that such instruments will be prepared by Owner, and all costs and expenses in connection with such execution and delivery or other assistance will be allocated in accordance with Section 5. 9. Remittance of Proceeds. In the event that Nominee receives any (a) payments in respect of Vehicles representing repurchase prices from vehicle manufacturers or auction dealers under Manufacturer Programs, (b) proceeds from the sale of Vehicles (other than pursuant to a Manufacturer Programs), (c) insurance proceeds in respect of Vehicles, or (d) any other payments or proceeds in respect of Vehicles, in each case, other than any payments received pursuant to Section 6(a), it shall, promptly upon receipt, but in no event later than 2 business days from receipt, deposit such payments or proceeds into the Collateral Account (as defined in the Collateral Agreement). 10. No Third Party Beneficiaries. This Agreement will not confer any rights or remedies upon any Person other than Nominee, Owner, the Collateral Agent and their respective successors and permitted assigns. 11. Entire Agreement. This Agreement and the other agreements specifically referenced herein constitute the entire agreement between Nominee and Owner and supersede any prior -4- 278 understandings, agreements, or representations by or among Nominee and Owner, written or oral, to the extent they related in any way to the subject matter hereof. 12. Succession and Assignment. This Agreement will be binding upon and inure to the benefit of Nominee, Owner and their respective successors and permitted assigns. Except as otherwise provided in Section 7 hereof, neither Nominee nor Owner may assign either this Nominee Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other. 13. Counterparts. This Agreement may be executed in separate counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. 14. Headings. The section headings contained in this Nominee Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Nominee Agreement. 15. Notices. All notices, requests, demands, claims and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder will be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to Nominee: Team Fleet Financing Corporation 5851 Lewis Road Sandston, Virginia 23150 Attention: Donald J. Norwalk Telephone: (804) 222-5310 Telecopier: (804) 222-8998 -5- 279 If to Owner: Budget Rent A Car Corporation 4225 Naperville Road Lisle, Illinois 60532 Attention: Robert L. Aprati Senior V.P. and General Counsel Telephone: (630) 955-7571 Telecopier: (630) 955-7810 Any party hereto may give any notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party hereto may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth. 16. Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK. 17. Amendments and Waivers. No amendment of any provision of this Nominee Agreement will be valid unless the same will be in writing and signed by each of Nominee and Owner. No waiver by either Nominee or Owner of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, will be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. 18. Severability. Any term or provision of this Nominee Agreement that is invalid or unenforceable in any situation in any jurisdiction will not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. -6- 280 19. Construction. (a) General. The language used in this Nominee Agreement will be deemed to be the language chosen by Nominee and Owner to express their mutual intent, and no rule of strict construction will be applied against either Nominee or Owner. (b) Title; Titling. As used in this Nominee Agreement, the term "title" refers to a certificate of title or other similar form of vehicle title and is intended by Nominee and Owner to include the terms "vehicle registration" and "vehicle license plate," unless specified otherwise. Similarly, unless specified otherwise, "titling" will be deemed to include the acts of registering a vehicle, including the registering of the license plates of a vehicle. 20. No Petition. Owner hereby covenants and agrees that, prior to the date which is one year and one day after the payment in full of the latest maturing rental car asset backed note issued by Nominee under the Amended and Restated Base Indenture dated as of December 1, 1996 among Nominee, as issuer, Budget Group, Inc. (formerly known as Team Rental Group, Inc.), as servicer, and Bankers Trust Company, as trustee, it will not institute against, or join with any other party in instituting against, Nominee, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any Federal or state bankruptcy or similar law; provided, however, that nothing in this Section 19 shall constitute a waiver of any right to indemnification, reimbursement or other payment from Nominee pursuant to this Nominee Agreement. In the event that Owner takes action in violation of this Section 19, Nominee agrees that it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such a petition by Owner or the commencement of such action and raise the defense that Owner 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 19 shall survive the termination of this Nominee Agreement, and the resignation or removal of Nominee hereunder. Nothing contained herein shall preclude participation by Owner in assertion or defense of its claims in any such proceeding involving Nominee. * * * * * -7- 281 IN WITNESS WHEREOF, the parties hereto have duly executed this Vehicle Title Nominee Agreement as of the date first above written. BUDGET RENT A CAR CORPORATION By: ---------------------------------- Name: Title: TEAM FLEET FINANCING CORPORATION By: ---------------------------------- Name: Title: 282 EXHIBIT A 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 collateral agent, 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 pursuant to its repurchase program, to a third party through an auction conducted by or through or arranged by the manufacturer pursuant to its guaranteed depreciation program or repurchase program or to any affiliate of Team Fleet Financing Corporation. 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 March, 1998. TEAM FLEET FINANCING CORPORATION By: ---------------------------------- Name: Title: State of ___________________ ) ) County of __________________ ) Subscribed and sworn before me, a notary public, in and for said county and state, this __________ day of March, 1998. ------------------------------------------ Notary Public My Commission Expires:____________________ 283 EXHIBIT B NOMINEE VEHICLE SCHEDULE EX-21.1 6 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1 LIST OF SUBSIDIARIES OF BUDGET GROUP, INC.
SUBSIDIARY JURISDICTION OF INCORPORATION NAME UNDER WHICH IT DOES 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 Rental of Arkansas, Inc........ Delaware Team Holdings Corporation........... Illinois BRAC Reinsurance Company............ 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 Espana, 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 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., formally Budget Leasing Corporation)....... Delaware Budget Rent a Car Australia Pty. Ltd............................... Australia Budget Rent a Car Operations Pty. Limited...................... Australia Societe Financiere et de Participation..................... France Budget France, S.A.................. France Budget Rent a Car of St. Louis, Inc............................... Missouri Peer Group Resources, Inc........... Delaware Premier Car Rental LLC.............. Georgia Budget Rent a Car Company GmbH...... Germany Cruise America, Inc................. Florida
EX-23.1 7 CONSENT OF ARTHUR ANDERSON LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS As independent certified public accountants, we hereby consent to the incorporation by reference of our report included in this Form 10-K into Budget Group, Inc.'s (formerly known as Team Rental Group, Inc.) previously filed Registration Statement File No.'s 333-41093, 333-47079 and 333-04757. March 30, 1998 /s/ Arthur Andersen LLP Orlando, Florida EX-23.2 8 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 333-04757 and 333-47079 of Budget Group, Inc. (formerly known as Team Rental Group, Inc.) on Form S-8 and Registration Statement No. 333-41093 of Budget Group, Inc. on Form S-3 of our report dated April 12, 1996, appearing in the Annual Report on Form 10-K of Budget Group, Inc. for the year ended December 31, 1997. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Indianapolis, Indiana March 30, 1998 EX-27.1 9 FDS - DECEMBER 31, 1997
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EPS HAS BEEN RESTATED FOR SFAS 128. 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 439,738 0 329,356 0 2,045,647 2,814,741 140,165 0 3,574,815 526,816 2,610,009 0 0 258 437,732 3,574,815 1,303,762 1,303,762 205,791 926,685 0 0 107,985 63,301 26,375 36,926 0 0 0 36,926 2.00 1.60 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 10 RESTATED FDS - SEPT. 30, 1997
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EPS HAS BEEN RESTATED FOR SFAS 128. 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 526,663 0 276,030 0 2,024,133 2,826,826 131,340 0 3,481,801 493,568 2,583,585 0 105,750 200 298,698 3,481,801 891,216 891,216 147,376 615,966 0 0 71,966 55,908 23,454 32,454 0 0 0 32,454 2.01 1.49 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 11 RESTATED FDS - JUNE 30, 1997
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EPS HAS BEEN RESTATED FOR SFAS 128. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 335,044 0 233,840 0 2,370,425 2,939,309 135,363 0 3,599,975 467,265 2,756,084 0 105,750 199 270,677 3,599,975 408,769 408,769 86,068 285,441 0 0 31,272 5,988 2,487 3,501 0 0 0 3,501 0.25 0.21 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 12 RESTATED FDS - MARCH 31, 1997
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EPS HAS BEEN RESTATED FOR SFAS 128. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 84,610 0 31,876 0 391,260 507,746 18,624 0 612,521 40,431 477,241 0 0 112 92,737 612,521 102,448 102,448 36,575 57,713 0 0 6,747 1,413 565 848 0 0 0 848 0.08 0.08 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 13 RESTATED FDS - DEC. 31, 1996
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE YEAR PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EPS HAS BEEN RESTATED FOR SFAS 128. 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 116,826 0 31,302 0 335,670 483,798 18,502 0 587,223 37,613 455,609 0 0 112 91,889 587,223 357,370 357,370 113,747 208,356 0 0 27,449 7,818 3,321 4,497 0 0 0 4,497 0.49 0.47 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 14 RESTATED FDS - SEPT. 30, 1996
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EPS HAS BEEN RESTATED FOR SFAS 128. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 24,656 0 38,143 0 349,959 412,758 22,098 0 509,213 39,305 372,300 0 0 112 95,496 509,213 261,020 261,020 77,727 150,035 0 0 20,700 12,558 4,395 8,163 0 0 0 8,163 0.96 0.94 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 15 RESTATED FDS - JUNE 30, 1996
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EPS HAS BEEN RESTATED FOR SFAS 128. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 13,848 0 24,310 0 353,523 391,681 20,217 0 482,791 31,925 402,338 0 0 74 46,454 482,791 159,528 159,528 47,295 94,137 0 0 12,225 5,871 2,348 3,523 0 0 0 3,523 0.48 0.48 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 16 RESTATED FDS - MARCH 31, 1996
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EPS HAS BEEN RESTATED FOR SFAS 128. 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 28,871 0 29,378 0 328,423 386,672 15,438 0 475,227 32,852 396,779 0 0 74 43,522 475,227 65,794 65,794 17,840 40,700 0 0 5,126 2,128 851 1,277 0 0 0 1,277 0.18 0.18 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 17 RESTATED FDS - DEC. 31, 1995
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EPS HAS BEEN RESTATED FOR SFAS 128. 1,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 68,088 0 20,989 0 228,865 317,942 12,503 0 386,323 26,498 318,233 0 0 72 39,520 386,323 149,729 149,729 38,021 97,528 0 0 13,158 1,022 685 337 0 0 0 337 0.05 0.05 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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