Exhibit 99.1
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE ("Agreement") is entered
into by and among AutoNation, Inc., a Delaware corporation ("AutoNation"), ANC
Rental Corporation, together with its subsidiaries and affiliates (collectively,
"ANC"), including but not limited to the debtors and debtors-in-possession
(collectively, the "Debtors"), in those certain jointly administered Chapter 11
Bankruptcy cases presently pending in the United States Bankruptcy Court for the
District of Delaware (the "Court") as Case No. 01-11200 (MFW) (the "Case"), and
the Official Committee of Unsecured Creditors in the Case (the "Committee," and
with AutoNation and ANC, the "Parties") pursuant to XX.XX. 1102 and 1103 of the
Bankruptcy Code, 11 U.S.C. ss. 101 et seq. (the "Code").
WHEREAS, certain of the Debtors were formerly wholly-owned direct and
indirect subsidiaries of AutoNation; and
WHEREAS, on June 30, 2000, AutoNation distributed to its shareholders
all of the outstanding stock of ANC in a tax-free spin-off (the "Spin-off"); and
WHEREAS, certain of the Debtors and AutoNation entered into certain
agreements in connection with the Spin-off; and
WHEREAS, the Debtors filed the instant Case on November 13, 2001 (the
"Petition Date"); and
WHEREAS, the Committee has been duly appointed in the Case; and
WHEREAS, the Debtors and the Committee have asserted that certain
claims, including claims for fraudulent conveyance and breach of fiduciary duty,
may exist against AutoNation and its officers and directors with respect to
actions taken prior to the Spin-off, in connection with the Spin-off or
otherwise, and AutoNation has asserted certain claims as a creditor in the Case;
and
WHEREAS, the Parties have agreed to resolve their differences, in the
manner set forth herein, with respect to all matters which were or could have
been raised in the context of the Spinoff or the Case and/or otherwise with
respect to the matters at issue;
AND NOW, therefore, the Parties hereby stipulate and agree as follows:
1. AUTONATION CREDIT SUPPORT.
A. AIG RETRO BOND. AutoNation agrees that it shall remain the
guarantor (the "Guaranty") under that certain AIG Retro Bond issued November 9,
2001 by Liberty Bond Services, an unincorporated division of Liberty Mutual
Insurance Company, in the total principal amount of $29,500,000, including any
replacement as contemplated below (the "AIG Retro Bond") until the earlier of:
(a) December 31, 2006 or (b) cancellation of such bond (the "Guaranty
Termination Date"), provided, however, that in the event that the underlying AIG
obligation currently supported by the AIG Retro Bond becomes collateralized by a
new bond or other instrument under the same terms and conditions or terms and
conditions that are at least as favorable to AutoNation as the current AIG Retro
Bond, and without expanding or changing such underlying AIG obligation or
AutoNation's indemnification obligations under the Guaranty, AutoNation's
Guaranty shall continue in full force and effect with respect to such new bond
or instrument until the Guaranty Termination Date. In the event that the AIG
Retro Bond is not cancelled prior to the Guaranty Termination Date, ANC hereby
agrees to take such actions as are necessary to cancel and/or replace the AIG
Retro Bond or the Guaranty supporting such Bond on the Guaranty Termination
Date, which may include providing substitute credit support for the AIG Retro
Bond effective as of the Guaranty Termination Date. ANC also agrees to use its
reasonable best efforts to obtain a full release of AutoNation's obligations
under the AIG Retro Bond as of the Guaranty Termination Date, without payment
by, or other obligation of, AutoNation.
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B. ADDITIONAL CREDIT SUPPORT. AutoNation further agrees that,
solely upon a final order in the Case approving confirmation of a plan of
reorganization under Section 1129 of the Bankruptcy Code (a "Plan") or a sale of
all or substantially all of Debtors assets (as a going concern) under Section
363 of the Bankruptcy Code (a "Sale"), AutoNation shall agree to guaranty up to
$10,500,000 of (i) domestic airport concession surety bonds selected by ANC from
the list of airport locations listed on Exhibit A, or (ii) other bonds as
requested by Debtors and approved by AutoNation in its reasonable discretion
(the "Additional Credit Support", and together with the Guaranty, the "Credit
Support"), until the earlier of the December 31, 2006 or the earlier
cancellation of such Additional Credit Support (together with the Guaranty
Termination Date, a "Termination Date"). To the extent that an underlying bond
obligation for which AutoNation provides Additional Credit Support is cancelled
or terminated for any reason prior to the Termination Date, AutoNation shall
continue to provide Additional Credit Support on another bond, as requested by
Debtor and approved by AutoNation in its reasonable discretion, up to an
aggregate amount not to exceed $10,500,000. Any obligation to provide Additional
Credit Support shall terminate upon the dismissal or conversion of the Case. The
Additional Credit Support shall only support surety bonds that, by their terms,
terminate on or before December 31, 2006. If for any reason the Additional
Credit Support is not cancelled prior to the Termination Date, ANC hereby agrees
to take such actions as are necessary to cancel and/or replace the Additional
Credit Support on the Termination Date, which may include providing substitute
credit support for the Additional Credit Support effective as of the Termination
Date. ANC also agrees to use its reasonable best efforts to obtain a full and
unconditional release of AutoNation's obligations under the Additional Credit
Support as of the Termination Date, without payment by, or other obligation of,
AutoNation.
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C. NO FURTHER OBLIGATIONS. Except to the extent provided
herein, AutoNation shall be under no further obligation to provide any further
guaranties or credit support in favor of the Debtors (other than that which
exists as of the date hereof). Nothing contained in this Agreement shall be
deemed to impose any obligation upon AutoNation to increase, reinstate,
replenish, renew or replace its Credit Support in the event that claims are made
with respect to or upon the Credit Support or the Credit Support is otherwise
reduced, released, or cancelled (except as otherwise expressly provided herein).
2. PAYMENTS TO UNSECURED TRUST. Without limiting any other provision of
this Agreement, in resolution of fraudulent conveyance claims asserted by the
Committee, AutoNation agrees, upon confirmation of any Plan of Reorganization,
to thereafter make payments to the ANC Unsecured Creditors' Liquidating LLC or
other similar entity established upon the effective date of a Plan (the
"Trust"), as follows: within thirty (30) days after the Termination Date of any
Credit Support (the "Released Support") with respect to such Released Support (a
"Payment Date"), and provided that the Released Support has been fully and
unconditionally released by the beneficiaries of such Credit Support or the
bonds have expired or have been cancelled, thereby eliminating any further
obligation of AutoNation under the Released Support, AutoNation shall pay to the
"Trust" an amount equal to fifty percent (50%) of the following amount: the
Released Support, less any payments made or losses incurred by or claimed
against AutoNation (and not reimbursed to AutoNation by ANC as of the Payment
Date) with respect to any Credit Support, including in connection with the
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release thereof ("Credit Support Claim Amounts"). By way of example, if the
total amount of the Released Support is $10 million and there are $2 million in
Credit Support Claim Amounts, the calculation shall be as follows: .5 x ($10
million - $2 million) = $4 million. In the event any Credit Support Claim
Amounts are recovered by AutoNation after the Payment Date from the Debtors,
AutoNation and the Debtor shall provide the Committee with prompt notice of such
recovery, and AutoNation shall also pay the Trust, within thirty (30) days of
such recovery, fifty percent (50%) of such recovered amounts. In no event shall
AutoNation's aggregate payments to the Trust exceed $20,000,000. The payments to
the Trust shall be deemed to be distributions to unsecured creditors pursuant to
a plan of reorganization so long as the Trust is responsible solely for making
payments on account of general unsecured creditors' claims and the Trust is not
responsible for making payments on account of secured claims, administrative
claims, unsecured priority claims or any claims other than general unsecured
creditors' claims.
3. TAX INDEMNITY. Notwithstanding any provision to the contrary
contained in that certain tax sharing agreement, entered into between ANC and
AutoNation, dated June 30, 2000 (the "Tax Sharing Agreement"), AutoNation agrees
to indemnify ANC for any and all (i) federal income taxes (including penalties
and interest) asserted by the IRS against any ANC entity with respect to any
period during which such ANC entity was a member of the AutoNation consolidated
group for such tax purposes, and (ii) state and local income taxes (including
penalties and interest) asserted by any state or local taxing authority against
any ANC entity with respect to any period during which such ANC entity was a
member of a consolidated or combined group with AutoNation for such tax
purposes, but only to the extent that such amounts arise as a result of
correlative adjustments to a state or local income tax return in connection with
any adjustments asserted by the IRS to any federal income tax return with
respect to which AutoNation provides an indemnity pursuant to clause (i) of this
sentence. ANC shall have no payment or other indemnification obligation to
AutoNation for any such taxes. ANC, or any successor, shall provide AutoNation
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with prompt access to all records, personnel and information reasonably
requested by AutoNation in connection with the foregoing tax matters. ANC shall
provide such cooperation as is reasonably requested by AutoNation in connection
with preparing any such tax returns or contesting any audit or other proceeding
with respect to periods ending on or before or including the date of Spin-off,
and shall retain all tax records relating to such periods until 90 days after
the expiration of all applicable statutes of limitation (including any
applicable extension thereof). AutoNation shall be relieved of its
indemnification obligations under this paragraph to the extent that AutoNation
is materially prejudiced by any failure of ANC, or any successors, to comply
with its obligations under the preceding two sentences. ANC further acknowledges
that AutoNation shall have the sole right to prepare and file any tax return and
to respond to, control, settle and resolve any contests with applicable taxing
authorities in connection with the tax matters described in this paragraph. With
respect to any AutoNation federal income tax period ending on or before or
including the date of the Spin-off, if, as a result of AutoNation (a) filing (or
causing to be filed) any amended income tax return with respect to any such tax
period, or (b) agreeing to or having imposed on it any resolution of an issue
raised in any tax audit or other proceeding with respect to any such tax period,
the tax position of ANC in income tax periods following the Spin-off is
adversely affected (an "AutoNation Adverse Tax Position"), then AutoNation shall
indemnify ANC for any federal, state or local income taxes actually paid by ANC
resulting from AutoNation's Adverse Tax Position. For purposes of the preceding
sentence, if the resolution of the AutoNation Adverse Tax Position results in a
decrease in any ANC tax attribute (e.g., a net operating loss carryforward),
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then AutoNation shall indemnify ANC for taxes paid by ANC which ANC would not
otherwise actually have had to pay if an AutoNation Adverse Tax Position had not
occurred; provided, however, a decrease in any ANC tax attribute as a result of
ANC's actions required in the first sentence of Section 4 below shall be
excluded. With respect to any AutoNation federal income tax period ending on or
before or including the date of the Spin-off, if, as a result of AutoNation (a)
filing (or causing to be filed) any amended income tax return with respect to
any such tax period, or (b) agreeing to or having imposed on it any resolution
of an issue raised in any tax audit or other proceeding with respect to any such
tax period, the tax position of ANC in income tax periods following the Spin-off
is benefited (an "AutoNation Beneficial Tax Position"), then ANC shall indemnify
AutoNation for any actual reduction in ANC's federal, state or local income
taxes resulting from AutoNation's Beneficial Tax Position. For purposes of the
preceding sentence, if the resolution of the AutoNation Beneficial Tax Position
results in an increase in any ANC tax attribute (e.g., a net operating loss
carryforward), then ANC shall indemnify AutoNation for any actual reduction in
ANC's taxes which ANC would otherwise actually have had to pay if an AutoNation
Beneficial Tax Position had not occurred; provided, however, a decrease in any
ANC tax attribute as a result of ANC's actions required in the first sentence of
Section 4 below shall be excluded.
4. TAX RETURNS. Within 30 days of the Approval Date (as defined below)
of this Agreement for federal income tax returns and within 60 days of the
Approval Date for state income tax returns, ANC will amend all previously filed
income tax returns to the extent necessary to provide that AutoNation's recorded
basis of the assets owned by ANC at the time of the Spinoff was carried over by
ANC and depreciation methods used with respect to such assets were consistent.
All such filings, and, with respect to the carry over basis and depreciation
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methods, any future income tax filings, shall be in a manner consistent with the
basis and methods used by AutoNation on its tax returns. AutoNation will pay up
to $200,000 of the out-of-pocket third-party professional fees incurred by ANC
in connection with the preparation of such amended tax returns by ANC, based
upon submission of invoices to AutoNation. AutoNation shall be granted a
reasonable opportunity to review such returns prior to their filing, and ANC
shall make any changes reasonably requested by AutoNation to ensure compliance
with this paragraph. In connection with any inquiry by any taxing authority, ANC
further agrees that (i) it shall provide these amended returns to such taxing
authority and (ii) prior to submission by ANC of any tax returns or other
materials to any taxing authority, it shall provide a copy of any such returns
or other materials to AutoNation for its review. ANC will be provided with
sufficient information from AutoNation's December 31, 2000 federal, state and
local income tax returns to allow ANC to comply with its obligations under this
paragraph.
5. DATA CENTER LEASE. The Parties hereby agree that that certain Data
Center Lease dated May 31, 2000 (and commencing January 1, 2000) by and between
Corporate Properties Holding, Inc. (which AutoNation shall cause to amend) and
ANC Rental Corporation for a portion of the premises located at 0000 X.X. 00xx
Xxx., Xx. Xxxxxxxxxx, Xxxxxxx 00000, shall be amended as follows: (i) the
current terms and conditions shall be extended to expire on December 31, 2005
(the "Extended Term"), and (ii) ANC Rental Corporation shall have the option to
extend the Extended Term for an additional three-year period on the same terms
and conditions as the current Data Center Lease except that the Base Rent shall
be increased by five percent (5%) (the "Extension Option") by providing written
notice to Corporate Properties Holding, Inc. stating its exercise of the
Extension Option no later than six months prior to the expiration date of the
Extended Term. AutoNation agrees to continue the same level of facility upkeep
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and maintenance that AutoNation performed over the prior three years. ANC agrees
to assume the lease upon confirmation of a Plan or Sale, and AutoNation waives
any right to object to an assignment of the lease in connection with a Sale,
other than on the basis of inadequate assurance of future performance.
6. ASSUMPTION/REJECTION OF CERTAIN AGREEMENTS. Upon the execution of
this Agreement, the Debtors shall file a motion seeking authorization to: (i)
assume the obligations under that certain Lease dated July 8, 1997 by and
between Value Rent-A-Car, Inc., as tenant, and Mitsubishi Motor Sales of
America, Inc., as landlord, for the premises located at 00000 Xxxxxxx Xxx.,
Xxxxx Xxxxx, Xxxxxxx (the "Property Lease"); (ii) reject the Tax Sharing
Agreement; (iii) reject that certain Reimbursement Agreement dated June 30, 2000
by and between AutoNation and ANC, as amended (the "Reimbursement Agreement");
(iv) reject the Separation and Distribution Agreement between ANC and
AutoNation; (v) reject the Auto Parts Contract between AutoNation and ANC dated
June 30, 2000, (vi) reject the AutoNation/ CarTemps Agreement between AutoNation
and ANC dated June 30, 2000 and (vii) reject the Benefits Agreement between
AutoNation and ANC dated June 30, 2000. The Debtors further acknowledge that in
the event of a Sale pursuant to which the Property Lease is assigned, they shall
use reasonable best efforts to obtain a reimbursement agreement in favor of
AutoNation from the purchaser in such Sale with respect to the Property Lease.
AutoNation and ANC each acknowledge that the other has fully performed its
obligations under the Transitional Services Agreement and Rental Fleet Purchase
Contract, each dated as of June 30, 2000.
7. RELEASE BY AUTONATION. Each of AutoNation and its subsidiaries,
successors and assigns ("AutoNation Releasors"), does hereby unconditionally and
irrevocably release and forever discharge ANC and the Committee and any of its
or their predecessors, successors and assigns, individually or collectively
("ANC Releasees"), of and from any and all claims, charges, complaints, actions,
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causes of action, defenses, demands, suits, dues, bond, sums of monies,
covenants, guarantees, agreements, representations, obligations, damages, costs,
liabilities, expenses, losses and debts of any nature whatsoever (collectively,
"Losses") and howsoever arising, both at law and in equity, relating to any
matter, claim or right, whether presently known or unknown, past or present,
asserted or unasserted, contingent or liquidated, which any such person now has,
ever had or may have against any ANC Releasees arising from or relating to any
facts or events occurring in whole or in part at or prior to the date hereof,
including rejection damages resulting from the Debtors' rejection of any
agreement with AutoNation, other than Losses (i) arising under this Agreement,
(ii) arising from claims for parts provided and services performed by
AutoNation's dealers to ANC prior to the Petition Date in an amount not to
exceed $1,500,000, (iii) arising in the ordinary course of business between ANC
and AutoNation or any of its subsidiaries after the Petition Date, or (iv)
arising under any other agreement between the Parties that is assumed by the
Debtors in the Case or entered into after the Petition Date.
8. RELEASE BY ANC AND COMMITTEE. Each of ANC, its shareholders,
creditors, trustees and subsequently appointed trustees, successors and assigns
and the Committee and its successors and assigns (the "ANC Releasors"), does
hereby unconditionally and irrevocably release and forever discharge AutoNation
and its past or present, direct or indirect, subsidiaries and any of its or
their respective past and present shareholders, directors, officers, employees,
agents, legal representatives, predecessors, successors and assigns,
individually or collectively (the "AutoNation Releasees"), of and from any and
all Losses however arising, both at law or in equity, relating to any matter,
claim or right, whether presently known or unknown, past or present, asserted or
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unasserted, contingent or liquidated which any such person has, ever had or may
have against any AutoNation Releasees arising from or relating to any facts or
events occurring in whole or in part at or prior to the date hereof, including
without limitation any action or inaction in connection with the Spin-off or
AutoNation's ownership of ANC prior to the Spin-off, other than Losses (i)
arising under this Agreement, (ii) arising in the ordinary course of business
between ANC and AutoNation after the Petition Date, (iii) arising under any
other agreement between the Parties that is assumed by the Debtors in the Case
or entered into after the Petition Date or (iv) arising from claims against ANC,
or its directors or officers (in such capacities), for any event, action or
inaction occurring after the Spin-off. For the avoidance of doubt, the releases
granted herein shall extend to any ANC officer or director or any proposed ANC
director (at or preceding the time of the Spin-off) with respect to (but limited
to) any claims or causes of action arising out of the Spin-Off or otherwise on
or prior to June 30, 2000. Nothing contained in this Agreement shall be
construed to release AutoNation or ANC from their obligations under the Tax
Indemnification Agreement entered into between ANC and AutoNation as of October
2, 2002 or any agreements related thereto.
9. ANC'S REIMBURSEMENT OBLIGATION. In the event that AutoNation shall
be required to pay on any of its Credit Support obligations to third parties as
set forth herein, ANC shall reimburse AutoNation in an amount equal to any such
payments made by AutoNation.
10. Section 105 Relief. This Agreement shall be conditioned upon, which
condition may be waived at the option of AutoNation, entry of a final and
nonappealable order in the Bankruptcy Case pursuant to Section 105 of the Code
permanently enjoining the prosecution by any person or entity against AutoNation
Releasees (collectively the "Released Parties"), for any and all Losses however
arising, both at law or in equity, relating to any matter, claim or right,
whether presently known or unknown, past or present, asserted or unasserted,
contingent or liquidated which any such person has, ever had or may have,
arising from any action or inaction of the AutoNation Releasees in connection
with the Spin-off or AutoNation's ownership of ANC prior to the Spin-off.
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11. ENTIRE AGREEMENT; RECITALS. This Agreement constitutes the entire
agreement between the Parties. This Agreement supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether written or oral, of the parties hereto, relating to the subject matter
hereof. The recitals set forth herein are hereby incorporated into this
Agreement by reference hereto.
12. BINDING EFFECT; MODIFICATIONS; ETC. This Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors and
assigns, including, without limitation, any purchaser of all or substantially
all of the Debtors' assets. Any person or entity released under any provision of
this Agreement shall have the right to independently seek the enforcement of
such provision. Each Party represents and warrants that neither it nor any of
its affiliates has assigned or transferred any claims being released hereunder.
No modification of this Agreement shall be effective unless it is in writing and
signed by the party or parties sought to be bound by the modification.
13. NOTICES. All notices, requests and communications required or
permitted hereunder shall be in writing and shall be sufficiently given and
deemed to have been received upon personal delivery or, if sent by overnight
delivery for next business day delivery, upon the first to occur of actual
receipt or the first business day after being so sent, addressed to the above
parties as set forth on the signature page below. Notice of a change of address
of one of the parties or their agent for purposes of service of notice shall be
given in writing to the other parties as provided above but shall be effective
only upon actual receipt.
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14. EFFECTIVENESS. Upon execution of the Agreement, the Parties shall
promptly take all actions as necessary to obtain from the Court in this Case
approval of this Agreement, including the relief requested in Sections 6 and 10.
Except as contemplated in the prior sentence, the terms and conditions of this
Agreement are subject to the Court in the Case entering an order approving this
Agreement which Order has become final and non appealable, and if appealed, as
to which no stay has been entered (the "Approval Date"). To the extent that such
Court approval is not obtained, this Agreement shall be null and void. This
Agreement is binding on a future trustee or examiner should one be appointed in
this chapter 11 Case or upon conversion to a chapter 7. The Parties have entered
into this Agreement in good faith and AutoNation is entitled to the benefit of
Sections 363(m) and 364(e) of the Code.
15. COUNTERPARTS; FACSIMILE. This Agreement may be executed in
counterparts. Such counterpart documents, when taken together, will constitute
one and the same instrument. A signature sent by facsimile with confirming
identification thereon, by counsel, on any counterpart will be deemed an
original for all purposes.
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AUTONATION, INC.
000 XX 0xx Xxxxxx, 00xx Xxxxx
Xx. Xxxxxxxxxx, XX 00000
By: Xxxxxxxx X. Xxxxxxxx /s/
ANC RENTAL CORPORATION, on behalf of itself and its
subsidiaries
000 X. Xxxxxxx Xxx., 00xx Xxxxx
Xx. Xxxxxxxxxx, XX 00000
By: Xxxxxx X. Xxxxxxxx /s/
XXXXXX, XXXXXX & XXXXXXXXX
Counsel for the Committee
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxx, Esq.
By: Xxxxxx Xxxxxxx /s/
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