<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 6, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
PRIME SERVICE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7353 76-0452435
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) No.)
</TABLE>
16225 PARK TEN PLACE, SUITE 200
HOUSTON, TEXAS 77084
(713) 578-5600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
BRIAN FONTANA
CHIEF FINANCIAL OFFICER
PRIME SERVICE, INC.
16225 PARK TEN PLACE, SUITE 200
HOUSTON, TEXAS 77084
(713) 578-5600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
WITH COPIES TO:
CHARLES K. MARQUIS, ESQ. D. COLLIER KIRKHAM, ESQ.
STEVEN R. FINLEY, ESQ. CRAVATH, SWAINE & MOORE
GIBSON, DUNN & CRUTCHER LLP 825 EIGHTH AVENUE
200 PARK AVENUE NEW YORK, NEW YORK 10019
NEW YORK, NEW YORK 10166 (212) 474-1000
(212) 351-4000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE COMMON STOCK: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PROPOSED MAXIMUM AGGREGATE OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common Stock, par value $.01 per share.................. $195,000,000 $67,242
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A)
<TABLE>
<CAPTION>
ITEM IN FORM S-1 CAPTION IN PROSPECTUS
------------------------------------------------------ ------------------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus.............................. Facing Page; Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................ Prospectus Summary; Inside Front and Outside Back
Cover Pages of Prospectus; Table of Contents;
Available Information
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges............................. Prospectus Summary; Risk Factors; Selected
Consolidated Historical, Pro Forma Financial and Other
Data
4. Use of Proceeds....................................... Prospectus Summary; Use of Proceeds; Description of
Certain Indebtedness
5. Determination of Offering Price....................... Outside Front Cover Page; Underwriting
6. Dilution.............................................. Dilution; Risk Factors
7. Selling Security Holders.............................. Principal and Selling Stockholders
8. Plan of Distribution.................................. Underwriting
9. Description of Securities to Be Registered............ Prospectus Summary; Description of Common Stock
10. Interests of Named Experts and Counsel................ Not applicable
11. Information with Respect to the Registrant............ Prospectus Summary; Risk Factors; Selected
Consolidated Historical, Pro Forma Financial and Other
Data; Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business; Management; Principal and Selling
Stockholders; Description of Certain Indebtedness;
Certain Transactions
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities........................ Not applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 6, 1996
Shares
Prime Service, Inc.
Common Stock
($0.01 PAR VALUE)
--------------
ALL OF THE SHARES OF COMMON STOCK, $0.01 PAR VALUE (THE "COMMON STOCK"), OF
PRIME SERVICE, INC. (THE "COMPANY" OR "PRIME") OFFERED HEREBY ARE BEING SOLD BY
THE COMPANY (THE "OFFERING"), EXCEPT THAT THE SELLING STOCKHOLDERS NAMED
HEREIN UNDER PRINCIPAL AND SELLING STOCKHOLDERS (THE "SELLING
STOCKHOLDERS") HAVE GRANTED THE UNDERWRITERS THE OPTION TO PURCHASE UP
TO SHARES OF THE COMMON STOCK SOLELY TO COVER OVER-ALLOTMENTS. SEE
"PRINCIPAL AND SELLING STOCKHOLDERS" AND "UNDERWRITING." PRIOR TO
THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON
STOCK. IT IS ANTICIPATED THAT THE INITIAL PUBLIC OFFERING PRICE
WILL BE BETWEEN $ AND $ PER SHARE. FOR
INFORMATION RELATING TO THE FACTORS CONSIDERED IN
DETERMINING THE INITIAL OFFERING PRICE TO THE PUBLIC, SEE
"UNDERWRITING."
APPLICATION WILL BE MADE TO LIST THE COMMON STOCK ON THE NEW YORK STOCK
EXCHANGE.
--------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE 9
HEREIN.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS TO
TO PUBLIC COMMISSIONS COMPANY(1)
------------------ ------------------ ------------------
<S> <C> <C> <C>
PER SHARE.......................................... $ $ $
TOTAL(2)........................................... $ $ $
</TABLE>
- ------------------------
(1) BEFORE DEDUCTION OF EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $ .
(2) THE SELLING STOCKHOLDERS HAVE GRANTED THE UNDERWRITERS AN OPTION,
EXERCISABLE FOR 30 DAYS FROM THE DATE OF THIS PROSPECTUS, TO PURCHASE A
MAXIMUM OF ADDITIONAL SHARES OF COMMON STOCK TO COVER OVER-ALLOTMENTS
OF SHARES. IF THE OPTION IS EXERCISED IN FULL, THE TOTAL PRICE TO PUBLIC
WILL BE $ , UNDERWRITING DISCOUNTS AND COMMISSIONS WILL BE
$ , PROCEEDS TO COMPANY WILL REMAIN THE SAME, AND PROCEEDS TO
SELLING STOCKHOLDERS WILL BE $ .
--------------
THE SHARES ARE OFFERED BY THE SEVERAL UNDERWRITERS WHEN, AS AND IF DELIVERED
TO AND ACCEPTED BY THE UNDERWRITERS AND SUBJECT TO THEIR RIGHT TO REJECT ORDERS
IN WHOLE OR IN PART. IT IS EXPECTED THAT THE COMMON STOCK WILL BE READY FOR
DELIVERY ON OR ABOUT , 1996, AGAINST PAYMENT IN IMMEDIATELY AVAILABLE
FUNDS.
CS First Boston
Merrill Lynch & Co.
Salomon Brothers Inc
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
[INSERT MAP]
PRIME INTENDS TO FURNISH ITS STOCKHOLDERS ANNUAL REPORTS CONTAINING AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AND QUARTERLY REPORTS CONTAINING UNAUDITED
INTERIM INFORMATION FOR THE FIRST THREE QUARTERS OF EACH FISCAL YEAR OF PRIME.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH WOULD OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DURING THE OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES 10B-6,
10B-7, AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND
NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT
OTHERWISE REQUIRES, REFERENCES TO THE "COMPANY" OR "PRIME" INCLUDE PRIMECO INC.,
A TEXAS CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF THE COMPANY ("PRIMECO").
UNLESS THE CONTEXT OTHERWISE REQUIRES, THE INFORMATION CONTAINED HEREIN (I)
GIVES EFFECT TO A FOR ONE SPLIT OF THE COMMON STOCK EFFECTIVE PRIOR TO
COMPLETION OF THE OFFERING, AND THE CONVERSION OF ALL OUTSTANDING CLASS A COMMON
STOCK, CLASS C COMMON STOCK AND CLASS D COMMON STOCK OF THE COMPANY INTO AN
EQUIVALENT NUMBER OF SHARES OF COMMON STOCK EFFECTIVE AS OF THE CLOSING OF THE
OFFERING, AND (II) ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT
EXERCISED. SEE "UNDERWRITING."
THE COMPANY
GENERAL
Prime is the second largest rental equipment company in the United States,
based upon 1995 rental equipment revenues, and currently operates 101 rental
equipment yards in 13 states. The Company rents over 100 different types of
equipment, such as aerial manlifts, portable air compressors, forklifts and
light earth moving equipment and small equipment such as lawnmowers, plumbing
equipment and hand tools, to commercial construction, industrial and residential
users. The Company also sells complementary parts and merchandise and used
equipment, and acts as a distributor of new equipment on behalf of nationally
known equipment manufacturers. At July 31, 1996, the Company had an equipment
rental fleet with a book value of $245.7 million ($347.5 million at original
cost) comprised of over 40,000 pieces of equipment. Over the period from 1991 to
1995, Prime's total revenues increased from $146.2 million to $242.8 million, a
compound annual growth rate of 13.5%. Total 1995 revenues on a pro forma basis
for two acquisitions completed in 1996 would have been $307.2 million, an
increase of 45% over the 1994 historical result.
Prime seeks to be the market leader in the regions it services while
maximizing its profitability and cash flow. The Company attributes its success
to its operating strategy which includes, among other things, a focus on
customer service, a modern and diverse rental fleet, and a proprietary
point-of-sale ("POS") system. Management believes that the consistent delivery
of high quality service, including 24 hour on-call maintenance, repair and
support services, differentiates Prime from its competitors. Prime believes it
also offers one of the most comprehensive and well maintained fleets of
equipment in the rental equipment industry. The Company employs an extensive
preventive maintenance program for its rental fleet, increasing the
dependability, useful life and resale value of the equipment. In addition, the
Company's proprietary POS system enables each rental equipment yard manager on a
real-time basis to search the Company's entire rental fleet for needed
equipment, determine its location and arrange for delivery to customers using
the Company's radio-dispatched fleet of trucks and trailers and independent
carriers. The Company believes that its extensive, well maintained rental fleet,
coupled with its ability to redeploy equipment rapidly and efficiently among its
yards, allows it to optimize fleet utilization and return on fleet investment.
Prime has a diverse base of over 40,000 active customers, ranging from
"Fortune 500" companies to small contractors and homeowners. Commercial
construction and industrial customers accounted for approximately 50% and 40%,
respectively, of the Company's total revenues in 1995, with subcontractors,
homeowners and other customers generating the remaining 10%.
Primeco was purchased from W.R. Grace & Co. in 1989 by Compagnie Francaise
de l'Afrigue Occidentale, a French company which, in turn, was acquired by an
affiliate of Artemis S.A. ("Artemis") in 1993. In December 1994, affiliates of
Investcorp S.A. ("Investcorp") and a group of international investors formed
Prime Service, Inc. to acquire Primeco from Artemis (the "1994 Acquisition").
3
<PAGE>
INDUSTRY
According to a survey conducted for the Associated Equipment Distributors,
an industry trade association ("AED"), the equipment rental industry grew from
approximately $600 million in 1982 to approximately $13 billion in 1993, the
last period for which such data is available. This increase represents a
compound annual growth rate of 32%. In addition, according to the Rental
Equipment Register, an industry trade publication ("RER"), rental revenues for
the top 100 equipment rental companies increased approximately 25% to $2.5
billion in 1995 from approximately $2.0 billion in 1994. Management believes
that this growth reflects, in part, increased outsourcing trends by industrial
corporations related to an increased emphasis on minimizing capital invested to
purchase low usage equipment as well as reducing the labor costs associated with
maintaining and servicing such equipment. While equipment users traditionally
have rented equipment for specific purposes, such as supplementing capacity
during peak periods in connection with special projects, the convenience and
cost-saving factors of utilizing rental equipment have encouraged customers to
look to suppliers such as the Company as ongoing comprehensive sources of
equipment. Management believes that demand for rental equipment by the
industrial segment will continue to increase as these industrial companies
continue to outsource many non-core operations. According to recent surveys
conducted by the CIT Group, commercial construction contractors intend to
increase the percentage of equipment they rent without a purchase option to an
estimated 8% of their total equipment requirements in 1996 from less than 5% in
1994.
The rental equipment industry is highly fragmented and primarily consists of
a large number of relatively small, independent businesses serving discrete
local markets and a small number of multi-yard regional and multi-regional
operators. Management believes that the rental equipment industry offers
substantial consolidation opportunities for large, well-capitalized rental
businesses such as the Company. Relative to smaller competitors, multi-regional
operators such as the Company benefit from several competitive advantages,
including purchasing power, the ability to service national accounts, the
ability to transfer equipment among rental equipment yards in response to
changing patterns of customer demand and sophisticated management information
systems. In addition, multi-regional operators such as the Company are less
sensitive to localized cyclical downturns.
STRATEGY
Prime's strategy is to become the largest and most profitable rental
equipment company in the United States. Since the 1994 Acquisition, the Company
has pursued an aggressive growth strategy primarily by: (i) increasing the
rental fleet at its existing rental equipment yards to satisfy current and
anticipated demands, (ii) expanding its rental equipment yard network both in
existing and new geographic markets by either acquiring existing yards or, to a
lesser extent, opening new yards, (iii) increasing revenues from industrial
customers and (iv) maximizing the utilization and profitability of its rental
fleet. The Company plans to continue implementing these strategies, with
increased emphasis on expanding its rental equipment yard network and increasing
its revenues from industrial customers.
INCREASE RENTAL FLEET AT EXISTING RENTAL EQUIPMENT YARDS. From 1991 to
1995, Prime experienced a significant increase in the demand for its rental
equipment, as evidenced by a decline in Prime's percentage of equipment not
rented within the last 90 days (non-rental rate) from an average monthly rate of
7.0% in 1991 to an average monthly rate of 3.4% in 1994, 3.6% in 1995 and 3.5%
for the first six months of 1996, despite increasing the rental fleet (based on
average original cost) from $172.9 million in 1991 to $325.5 million for the six
month period ended June 30, 1996. The Company targets a non-rental rate of 5%,
which it believes minimizes lost revenue opportunities resulting from having
insufficient equipment to meet demand, while maximizing the Company's return on
equity. Prior to the 1994 Acquisition, the Company's capital expenditure program
was limited by the Company's prior owners. From 1991 to 1994, the Company did
not make any material acquisitions and purchased an aggregate of $33.7 million
of equipment (exclusive of amounts required to replace used equipment sold in
the ordinary course of business and inclusive of rental equipment purchases for
new yards). Despite revenues increasing during this period
4
<PAGE>
from $146.3 million in 1991 to $211.9 million in 1994, management believes that
its capital expenditures program and resulting rental equipment fleet were not
adequate to meet the market demand. Since the 1994 Acquisition, the Company has
significantly increased its rental fleet by purchasing approximately $56.3
million of equipment through December 31, 1995, and $24.7 million during the six
months ended June 30, 1996 (in each case exclusive of amounts required to
replace used equipment sold in the ordinary course of business and recent
acquisitions, but inclusive of rental equipment purchases for new yards).
Management expects its total 1996 rental equipment purchases to be $42.9 million
(exclusive of amounts required to replace used equipment sold in the ordinary
course of business and recent acquisitions, but inclusive of rental equipment
purchases for new yards).
EXPAND RENTAL EQUIPMENT YARD NETWORK. Prime intends to selectively expand
its network of rental equipment yards through a combination of acquisitions of
suitable existing rental equipment yards and to a lesser extent by opening new
rental equipment yards. Management believes that its management information
systems, size and operating expertise provide a competitive advantage in making
acquisitions as these strengths allow Prime to (i) integrate targets quickly
into its information and operating structure, (ii) realize significant synergies
in the form of reduced overhead and lower cost of goods through greater
purchasing power, (iii) enhance revenue by supplying acquired yards with
additional equipment to optimize the rental fleet mix and add new business lines
at those yards and (iv) enhance revenue by expanding coverage of national
accounts. The Company primarily targets acquisitions of stable equipment
businesses in new or existing markets where an existing owner has limited
resources to expand the rental equipment fleet. Pursuant to this strategy, in
February 1996 Prime acquired Vibroplant U.S., Inc. (operating as American
Hi-Lift Corporation, "American Hi-Lift"), adding a net of 12 yards in seven
states, and in July 1996 Prime acquired the assets of Alpine Equipment Rentals &
Supply Company, Inc. ("Alpine"), adding a net six yards in the state of
Washington and expanding Prime's presence in the Northwest (collectively, the
"1996 Acquisitions"). In the case of the 1996 Acquisitions, Prime completed the
integration of the acquired equipment yards and the acquired fleet into the
Company's management information systems on the closing date of each
acquisition. In connection with the integration of the business of American
Hi-Lift, Prime's management reduced, on an annualized basis, the selling,
general, administrative and other expenses associated with American Hi-Lift by
approximately $5 million, from $15.2 million incurred by American Hi-Lift for
the year ended March 31, 1995.
INCREASE REVENUES FROM INDUSTRIAL CUSTOMERS. Prime believes that it is one
of the largest suppliers of rental equipment to industrial companies in the
southern United States, based upon revenues from equipment rentals to such
customers. The demand for rental equipment from Prime's industrial customers
generally has been less sensitive to economic cycles than that of its commercial
and residential customers and is, therefore, more stable. Management attributes
this to the fact that a major part of rental equipment use by industrial
customers is related to ongoing and periodic maintenance work on existing
facilities. Since many of the facilities operate 24 hours a day, such
maintenance is essential to industrial customers in order to avoid costly
shutdowns that result from equipment failures. Prime has taken a number of steps
to increase revenues from industrial customers, including focusing its national
marketing program on the industrial market segment and offering services that
meet the specific needs of industrial customers such as its Integrated Rental
Management-TM- program. Under its Integrated Rental Management-TM- program,
Prime typically enters into exclusive contracts with large industrial customers,
generally "Fortune 500" companies, to supply rental equipment, to provide 24
hours a day maintenance and repair services, and to provide sophisticated
equipment management services required for a particular facility or facilities.
Prime believes that it is well-positioned to take advantage of the trend of
companies outsourcing their rental equipment needs due to its formalized
Integrated Rental Management-TM- program, customized POS system and strong
national account relationships.
MAXIMIZE UTILIZATION AND PROFITABILITY OF RENTAL FLEET. Prime believes that
it maintains customer loyalty by maintaining a diverse modern fleet. As of June
30, 1996, the average age of Prime's rental fleet was 37 months. Prime's
proprietary POS system allows it to monitor the demand for and actual usage of
its
5
<PAGE>
equipment on a real-time basis. The Company can, taking advantage of the POS
system and its presence in numerous markets, allocate new equipment and transfer
current equipment to yards with high rental activity. In addition, if
utilization of equipment declines, management is able to quickly react by
decreasing purchases of new equipment or replacement of used rental equipment
sold. The Company believes its comprehensive preventative maintenance program
allows it to increase the useful life of its equipment and obtain premium values
when it is sold.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company..........
Common Stock outstanding immediately after (1)
the Offering...............................
Use of proceeds to the Company............... The net proceeds to the Company from the
Offering will be used to reduce outstanding
indebtedness of the Company. Prime will not
receive any proceeds from the sale by the
Selling Stockholders.
Dividend policy.............................. The Company does not anticipate paying any
dividends.
Proposed NYSE Symbol......................... " "
</TABLE>
- ------------------------
(1) Excludes (i) shares subject to options outstanding on the date
hereof and (ii) shares reserved for issuance pursuant to options
available for grant under the Company's Management Stock Incentive Plan (the
"Stock Plan"). See "Management--Management Stock Incentive Plan."
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should consider
carefully the information set forth under "Risk Factors," in addition to the
other information set forth in this Prospectus, before purchasing any of the
shares of Common Stock.
6
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA
The following table sets forth summary financial and other data of the
Company as of and for the five years ended December 31, 1995 and as of and for
the six months ended June 30, 1996 and 1995. The adjusted pro forma statement of
operations data assume that the 1996 Acquisitions and the Offering occurred at
January 1, 1995. The adjusted pro forma balance sheet data reflect the June 30,
1996 balance sheet data as adjusted for the Alpine acquisition and the Offering
as if they occurred on that date. The pro forma financial data does not purport
to represent what the Company's financial position or results of operations
would actually have been had the 1996 Acquisitions and the Offering in fact
occurred on such dates or to project the Company's financial position or results
of operations for any future date or period. For additional information, see the
Consolidated Financial Statements and Pro Forma Consolidated Financial
Statements included elsewhere in this Prospectus. The following table should
also be read in conjunction with "Selected Consolidated Historical, Pro Forma
Financial and Other Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
SUCCESSOR YEAR ENDED SUCCESSOR SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
PREDECESSOR YEAR ENDED ----------------------------------- ---------------------------------
DECEMBER 31, ADJUSTED ADJUSTED
------------------------------- COMBINED PRO FORMA PRO FORMA
1991 1992 1993 1994 (1) 1995 1995 1995 1996 1996
--------- --------- --------- ----------- --------- ----------- --------- --------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues........... $ 146,231 $ 156,724 $ 174,249 $ 211,924 $ 242,787 $ 307,192 $ 115,360 $ 153,456 $ 167,229
Gross profit (2)......... 40,649 49,631 62,393 75,790 68,837 95,435 32,405 50,932 56,969
Operating income......... 3,755 10,337 21,651 34,459 20,789 32,332 11,758 24,586 26,762
Interest expense, net.... 16,826 14,299 12,753 13,852 30,546 20,363 14,812 18,239 11,771
Net (loss) income before
extraordinary item..... (9,774) (3,797) 4,548 12,084 (7,389) 6,060(3) (2,560) 3,142 8,570(3)
Net (loss) income........ (9,774) (3,797) 4,548 12,084 (8,657) (3,828) 3,142
Net income per share
before extraordinary
item...................
BALANCE SHEET DATA (END OF PERIOD):
Net book value of rental
equipment.............. $ 90,594 $ 87,358 $ 99,093 $ 153,818 $ 181,798 $ 173,392 $ 246,412 $ 254,163
Total assets............. 288,331 278,314 280,072 369,403 391,979 386,989 493,979 498,380(4)
Total debt............... 163,000 146,000 133,000 235,000 265,000 255,500 344,000 201,550
Stockholders' equity..... 99,524 105,727 110,275 69,633 60,976 73,461 73,513 224,466(4)
OTHER DATA:
Gross equipment capital
expenditures........... $ 21,557 $ 31,061 $ 38,088 $ 52,814 $ 89,372 $ 47,978 $ 50,513
Net equipment capital
expenditures (5)....... 11,142 18,943 30,089 39,871 66,520 35,759 37,298
Gross rental revenue
(6).................... 86,405 93,516 102,802 120,388 141,138 65,371 88,390
Average original cost of
rental equipment (7)... 172,940 169,954 174,210 191,241 228,406 215,972 325,490
Gross rental
revenue/average
original cost of rental
equipment ("ROI")...... 50.0% 55.0% 59.0% 63.0% 61.8% 60.5%(8) 54.3%(8)
Non-rental rate.......... 7.0% 5.9% 4.1% 3.4% 3.6% 3.6% 3.5%
Number of rental
equipment yards (end of
period)................ 64 64 70 74 81 78 96
</TABLE>
7
<PAGE>
NOTES TO SUMMARY FINANCIAL AND OTHER DATA
(1) As a result of the 1994 Acquisition, the Company's assets and liabilities
were adjusted to their estimated fair values as of December 2, 1994. In
addition, the Company entered into new financing arrangements and had a
change in its capital structure. Rental equipment acquired subsequent to
January 1, 1995 is being depreciated over a longer useful life. See Note 2
to the Consolidated Financial Statements. Accordingly, the combined results
of the 1994 period and subsequent periods are not comparable to prior
periods. The period from December 2, 1994 to December 31, 1994 reflects:
increased cost of sales due to higher depreciation expense for rental
equipment and cost of rental equipment sales; increased interest expense;
and lower other depreciation and amortization. The combined period for 1994
represents the mathematical addition of the historical amounts for the
Predecessor period (January 1, 1994 to December 1, 1994) and the Successor
period (December 2, 1994 to December 31, 1994) and are not indicative of
results that would have been obtained had the 1994 Acquisition occurred on
January 1, 1994. For information regarding the periods separately, see the
Consolidated Financial Statements included elsewhere in this Prospectus.
(2) Reflects costs of $22.6 million, $9.4 million and $6.2 million for the year
ended December 31, 1995 and the six month periods ended June 30, 1995 and
1996, respectively, related to the step-up in carrying value of the rental
fleet that existed at the date of the 1994 Acquisition.
(3) Excludes the write-off of the historical unamortized prepaid management fee
paid to Investcorp International, Inc., the write-off of the historical
unamortized deferred financing costs directly related to the debt retired
with the proceeds from the Offering and the early redemption penalties
resulting from the retirement of approximately $33.3 million of the Senior
Notes and the $10 million Subordinated Notes.
(4) Reflects the write-off of the historical unamortized prepaid management fee
paid to Investcorp International, Inc. ($1,296, net of related income tax
benefit of $829), the write-off of the historical unamortized deferred
financing costs directly related to the debt retired with the proceeds from
the Offering ($2,976, net of related income tax benefit of $1,864) and the
early redemption penalties resulting from the retirement of approximately
$33.3 million of the Senior Notes and the $10 million Subordinated Notes
($2,775, net of related income tax benefit of $1,175).
(5) Net equipment capital expenditures represent gross rental equipment capital
expenditures reduced by the net book value of rental equipment sold.
(6) Gross rental revenue equals rental revenue less income from equipment that
the Company rents from third parties and subsequently re-rents to its
customers plus reclassified rental income due to sales of used rental
equipment through rent-to-own and rental purchase option programs.
(7) Average original cost of rental equipment represents the average of the
monthly original cost of rental equipment. Original cost represents the
original price paid by the Company or its acquirees, as the case may be, for
the equipment, excluding effects of purchase accounting adjustments.
(8) ROI for interim periods is calculated on an annualized basis. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
8
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF SHARES OF COMMON STOCK SHOULD CONSIDER CAREFULLY
THE FOLLOWING RISK FACTORS RELATING TO THE OFFERING AND THE BUSINESS OF THE
COMPANY, TOGETHER WITH INFORMATION AND FINANCIAL DATA SET FORTH ELSEWHERE IN
THIS PROSPECTUS, PRIOR TO MAKING AN INVESTMENT DECISION.
GENERAL ECONOMIC CONDITIONS
The rental equipment industry is affected by changes in economic conditions,
including national, regional and local slowdowns in construction and industrial
activity. In addition, most of Prime's revenues are derived from customers who
are in industries and businesses that are cyclical in nature and subject to
changes in general economic conditions. Prime's operating results may also be
adversely affected by events or conditions in a particular region, such as
regional economic slowdowns, adverse weather and other factors. Prime's
operating results may be adversely affected by increases in interest rates that
may lead to a decline in economic activity, while simultaneously resulting in
higher interest payments by Prime under its credit facility. There can be no
assurance that economic slowdowns or adverse economic conditions will not have a
material adverse effect on the Company's operating results and financial
condition.
ABILITY TO IMPLEMENT AND MANAGE GROWTH STRATEGY
A principal component of the Company's strategy is to continue to expand
through additional acquisitions and start-up locations that complement the
Company's business in new or existing markets. The results achieved to date by
the Company in its expansion efforts are not necessarily indicative of its
prospects or ability to penetrate new markets, many of which will have different
competitive conditions and demographic characteristics than the Company's
current markets. Implementation of the Company's growth strategy may impose
significant strain on the Company's management, operating systems and financial
resources. Failure by the Company to manage its growth, or unexpected
difficulties encountered during expansion, could have a material adverse impact
on the Company's results of operations or financial condition.
The Company's ability to acquire or open and operate profitably new rental
equipment yards depends upon a number of factors, including (i) identifying
businesses or assets that meet the Company's investment criteria or identifying
and obtaining attractive sites for new yards, (ii) generating sufficient funds
from existing operations or obtaining third-party financing to acquire or open
and develop new yards, (iii) the Company's executive management team and its
financial and accounting controls and (iv) staffing, training and retaining
skilled on-site management personnel. Certain of these factors are beyond the
Company's control and may be affected by the economy or actions taken by
competing companies. The inability of the Company to successfully integrate
acquired businesses into its operations could have an adverse effect on the
Company's results of operations.
The primary source of capital to fund the Company's growth will be debt
financing, principally amounts borrowed under the Company's credit facility,
which will become effective contemporaneously with the consummation of this
Offering. As of June 30, 1996, after giving pro forma effect to the sale of the
Common Stock hereby and the application of the proceeds therefrom, the Company
would have had $[ ] million of indebtedness outstanding and would have had
$[ ] million of availability under the credit facility. To the extent the
Company succeeds in acquiring new businesses or opening start-up locations, the
amount of the Company's outstanding indebtedness can be expected to increase. As
such indebtedness increases, the level of indebtedness of the Company could have
important consequences to the holders of the Common Stock, including (i) an
increasing portion of the Company's cash flow from operations will be dedicated
to the payment of principal and interest on its indebtedness and will not be
available for other purposes; (ii) the ability of the Company to obtain
financing thereafter for working capital needs and general corporate purposes
may be impaired; and (iii) the Company's level of indebtedness may reduce its
flexibility to respond to changing business and economic conditions.
9
<PAGE>
DEPENDENCE ON KEY PERSONNEL
Certain of the executive officers of the Company, particularly Thomas E.
Bennett, the President and Chief Executive Officer, are of significant
importance to the direction and management of the Company. The loss of the
services of such persons could have a material adverse effect on the Company's
business and future operations, and there can be no assurance that the Company
would be able to find replacements for such persons with comparable business
experience.
IMPACT OF SIGNIFICANT COMPETITION
The equipment rental industry is highly fragmented and competitive. The
Company's competitors include: large national companies; regional competitors
which operate in one or two states; small, independent businesses with one or
two rental locations; and equipment vendors and dealers who both sell and rent
equipment to customers. Some of the Company's competitors have greater financial
resources, are more geographically diverse and have greater name recognition
than the Company. There can be no assurance that the Company will not encounter
increased competition from existing competitors or new market entrants that may
be significantly larger and have greater financial and marketing resources. In
addition, to the extent existing or future competitors seek to gain or retain
market share by reducing prices, the Company may be required to lower its
prices, thereby adversely affecting operating results. Existing or future
competitors also may seek to compete with the Company for acquisitions, which
could have the effect of increasing the price for acquisitions or reducing the
number of suitable acquisitions. In addition, such competitors also may compete
with the Company for start-up locations, thereby limiting the number of
attractive locations for expansion. See "Business--Competition."
ENVIRONMENTAL LIABILITIES
The Company is subject to various evolving Federal, state and local
environmental laws and regulations governing, among other things, emissions to
air, discharge to waters and the generation, handling, storage, transportation,
treatment and disposal of hazardous substances and wastes. These laws and
regulations provide for substantial penalties for violations, and, in many
cases, could require the Company to remediate a site to meet applicable legal
requirements. Certain limited environmental investigations of the Company's
properties have revealed releases or possible releases of hazardous materials
that may require remediation. These include discharges of petroleum-based
materials from underground storage tanks, disposals of solvents, and groundwater
contamination at certain of the Company's sites. If the extent of environmental
conditions requiring remediation, or the cost of remediation, exceeds the
Company's current estimates and the Company is unable to obtain indemnification
from various sellers of such sites or is unsuccessful in collecting recoveries
from state trust funds, such additional costs could adversely affect the
Company's financial condition, results of operations and cash flows. See
"Business--Environmental Regulation."
CONTROL BY PRINCIPAL STOCKHOLDERS
Upon consummation of the Offering, certain existing stockholders who are
affiliates of Investcorp and others of whom frequently co-invest with
Investcorp, may be deemed to be the beneficial owners of approximately % of
the outstanding shares of Common Stock. Until such time, if ever, that there is
a significant decrease in the percentage of outstanding shares held by such
stockholders, these stockholders will be able to control the Company through
their ability to determine the outcome of votes of stockholders regarding, among
other things, election of directors and approval of significant transactions. In
particular, Investcorp, as the beneficial owner of % of the Common Stock
after the Offering and with representatives on the board of directors of the
Company, may be able to exert influence over the operations of the Company and
Primeco. In addition, executive officers, directors and senior management of the
Company and Primeco will own an aggregate of approximately shares, or
%, of the
10
<PAGE>
Common Stock after the Offering on a fully diluted basis, after giving effect to
the exercise of all outstanding options held by such officers, directors and
management. See "Principal Stockholders."
LIABILITY AND INSURANCE
The Company's business exposes it to possible claims for personal injury or
death resulting from the use of equipment rented or sold by the Company and from
injuries caused in motor vehicle accidents in which Company delivery and service
personnel are involved. The Company carries comprehensive insurance subject to a
large deductible per claim, with no aggregate deductible limit. In addition, the
Company maintains a policy to insure against catastrophic losses. There can be
no assurance that existing or future claims will not exceed the level of the
Company's insurance, or that such insurance will continue to be available on
economically reasonable terms, if at all.
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock in the Offering will experience immediate and
substantial dilution in the net tangible book value of their Common Stock. As of
June 30, 1996, the net tangible book value per share was $ . As of such
date, current stockholders would experience an increase in net tangible book
value per share of $ and purchasers of shares in the Offering would
experience dilution in net tangible book value of $ per share (based on
an assumed initial public offering price of $ per share). See
"Dilution."
NO DIVIDENDS
The Company currently does not intend to pay any cash dividends on the
Common Stock. The Company is a holding company with no business operations of
its own. The Company therefore is dependent upon payments, dividends and
distributions from Primeco for funds to pay its expenses and to pay future cash
dividends or distributions, if any, to holders of the Common Stock. Primeco
currently intends to retain any earnings for support of its working capital,
repayment of indebtedness, capital expenditures and general corporate purposes.
Primeco has no current intention of paying dividends or making other
distributions to the Company in excess of amounts necessary to pay the Company's
operating expenses and taxes. Primeco's credit facility and subordinated debt
contain restrictions on Primeco's ability to pay dividends or make other
distributions to the Company. See "Dividend Policy" and "Description of Certain
Indebtedness."
EFFECT OF CERTAIN CHARTER, CHANGE OF CONTROL AND STATUTORY PROVISIONS
The Company's Board of Directors is authorized, subject to certain
limitations prescribed by law, to issue up to million shares of preferred
stock in one or more classes or series and to fix the designations, powers,
preferences, rights, qualifications, limitations or restrictions, including
voting rights, of those shares without any further vote or action by
stockholders. The rights of the holders of 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 issuance of preferred stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no current plans to issue shares of preferred stock.
See "Description of Capital Stock--Preferred Stock."
Primeco's credit facility and subordinated indebtedness contain provisions
that, under certain circumstances, will cause such indebtedness to become due
upon the occurrence of a change of control of Primeco or the Company. See
"Description of Certain Indebtedness." These provisions could have the effect of
making it more difficult for a third party to acquire control of the Company.
The Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law. In general, the statute prohibits a publicly
held Delaware corporation from engaging in a
11
<PAGE>
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
See "Description of Capital Stock--Certain Provisions of Delaware Law."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY IN PRICE OF COMMON STOCK
Prior to the Offering, there has been no public market for the Common Stock.
There can be no assurance that an active public market for the Common Stock will
develop or be sustained after the Offering. The initial public offering price
was determined by negotiations between the Company and the representatives of
the Underwriters, and may bear no relationship to the market price of the Common
Stock after the Offering. See "Underwriting." Subsequent to the Offering, prices
for the Common Stock will be determined by the market and may be influenced by a
number of factors, including the depth and liquidity of the market for the
Common Stock, investor perceptions of the Company and other equipment rental
companies and general economic and other conditions. In addition, the stock
market may experience volatility that affects the market prices of companies in
ways unrelated to the operating performance of such companies, and such
volatility could adversely affect the market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, shares of Common Stock will be
outstanding. The shares sold in the Offering will be freely transferable
without restriction under the Securities Act of 1933, as amended (the
"Securities Act"), except for shares acquired by "affiliates" of the Company as
that term is defined under the Securities Act. Of the remaining
outstanding shares of Common Stock, were sold in offshore distributions
under Regulation S within the past year, were sold in offshore
distributions under Regulation S more than one year ago and are deemed to
be restricted securities. Pursuant to Rule 701 under the Securities Act,
of the restricted securities will be available for resale in the public market
without restriction commencing 90 days after the date of this Prospectus. All of
the remaining restricted securities are eligible for sale in the public market
in compliance with Rule 144 under the Securities Act. Subject to certain
exceptions, the Company and certain stockholders of the Company (who in the
aggregate hold shares of Common Stock) have agreed with the
representatives of the Underwriters that they will not offer, issue, pledge,
sell, transfer or otherwise dispose of any shares of Common Stock or securities
convertible into or exercisable or exchangeable for shares of Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of the representatives of the Underwriters. See "Principal Stockholders"
and "Underwriting."
At the expiration of the 180-day period described above, or earlier with the
written consent of CS First Boston Corporation, the holders of shares of
Common Stock will have the right to sell shares of Common Stock without regard
to the volume or the other limitations of Rule 144 under the Securities Act.
The Company intends to file a registration statement on Form S-8 under the
Securities Act to register the sale of the shares of Common Stock reserved
for issuance under its Stock Plan. As a result, any shares issued upon exercise
of stock options granted under such plan will be available, subject to special
rules for affiliates, for resale in the public market after the effective date
of such registration statement, subject to applicable lock-up arrangements. See
"Management--Management Stock Incentive Plan."
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock or the availability of shares of Common Stock for future
sale would have on the market price of the Common Stock prevailing from time to
time. Sales of substantial amounts of Common Stock in the public market
following the Offering, or the perception that such sales could occur, could
have an adverse effect on prevailing market prices for the Common Stock. See
"Shares Eligible for Future Sale" and "Underwriting."
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering are expected to be
$ (assuming an initial public offering price of $ per share, after
deducting estimated offering expenses and underwriting discounts and
commissions). The Company intends to use the net proceeds to (i) pay $
million to reduce outstanding borrowings under Primeco's credit facility, (ii)
redeem approximately $33.3 million in principal amount of Primeco's 12.75%
Senior Subordinated Notes Due 2005 (the "Senior Notes") for $37.5 million (which
includes the premium on such principal as provided in the indenture in respect
of the Senior Notes), and (iii) repay $10 million of subordinated notes held by
an affiliate of Investcorp and other international investors (the "Subordinated
Notes") at a redemption price of $10.35 million. See "Certain Transactions."
Although the application of the net proceeds will result in a reduction of the
principal amount outstanding under Primeco's credit facility, it will not reduce
the maximum amount that Primeco can borrow under its credit facility. The
revolving credit facility permits Primeco to borrow funds for working capital
and capital expenditure purposes, including acquisitions. Prime currently is
considering several potential acquisitions, although Prime does not currently
have any understandings or agreements with respect to potential acquisitions.
For further information on the interest rates, maturity and other terms of the
credit facility, the Senior Notes and the Subordinated Notes, see "Description
of Certain Indebtedness" and Note 8 to the Consolidated Financial Statements.
DIVIDEND POLICY
The Company currently does not intend to pay any cash dividends on the
Common Stock.
The Company is a holding company with no business operations of its own. The
Company therefore is dependent upon payments, dividends and distributions from
Primeco for funds to pay dividends to stockholders of the Company. Primeco
currently intends to retain any earnings for support of its working capital,
repayment of indebtedness, capital expenditures and other general corporate
purposes. Primeco has no current intention of paying dividends or making other
distributions to the Company in excess of amounts necessary to pay the Company's
operating expenses and taxes. Primeco's credit facility and its indenture in
respect of the Senior Notes contain restrictions on Primeco's ability to pay
dividends or make payments or other distributions to the Company. See "Risk
Factors--No Dividends," and "Description of Certain Indebtedness."
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996 (i) on a historical basis, (ii) on a pro forma basis to reflect the
Alpine acquisition, and (iii) on an adjusted pro forma basis to reflect the
Alpine acquisition and the Offering. This table should be read in conjunction
with the "Use of Proceeds," "Selected Consolidated Historical and Pro Forma
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the Consolidated Financial Statements included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------------------
<S> <C> <C> <C>
ADJUSTED
HISTORICAL PRO FORMA PRO FORMA
---------- ----------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Senior credit facility(1).................................................. $ 234,000 $ 245,000 $134,850
12.75% Senior Subordinated Notes due 2005.................................. 100,000 100,000 66,700
Subordinated Notes......................................................... 10,000 10,000 --
---------- ----------- -----------
Total debt............................................................. 344,000 355,000 201,550
---------- ----------- -----------
Stockholders' equity:
Preferred stock, par value $.01 per share; million shares authorized,
no shares issued and outstanding......................................... -- --
Common Stock, par value $.01 per share; million shares authorized,
issued and shares outstanding ( shares outstanding as
adjusted)(2)............................................................. 11 11 11
Additional paid-in capital................................................. 79,389 79,389 237,389
Accumulated deficit........................................................ (5,882) (5,882 ) (12,929 )(3)
Treasury Stock............................................................. (5) (5 ) (5 )
---------- ----------- -----------
Total stockholders' equity............................................... 73,513 73,513 224,466
---------- ----------- -----------
Total capitalization..................................................... $ 417,513 $ 428,513 $426,016
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
- ------------------------
(1) As of August 31, 1996 the amount outstanding under the senior credit
facility was $240.0 million. The credit facility is collateralized by
substantially all of the assets of the Company. See Footnote 8 to the
Consolidated Financial Statements.
(2) Excludes (i) shares subject to options outstanding on the date hereof
under the Stock Plan and (ii) shares reserved for issuance pursuant to
options available for grant under the Company's Stock Plan. See
"Management--Management Stock Incentive Plan."
(3) Includes the write-off of the historical prepaid management fee paid to
Investcorp International, Inc. ($1,296, net of related tax benefit of $829),
the write-off of the historical unamortized deferred financing costs
directly related to the debt retired with the proceeds from the Offering
($2,976, net of related income tax benefit of $1,864) and the early
redemption penalties resulting from the retirement of approximately $33.3
million of the Senior Notes and the $10 million Subordinated Notes ($2,775,
net of related income tax benefit of $1,775).
14
<PAGE>
DILUTION
The net tangible book value of the Company at June 30, 1996 (adjusted for
the Alpine acquisition), was $ million, or $ per share of Common
Stock. Net tangible book value per share represents the amount of tangible
assets of the Company, less total liabilities, divided by the number of
outstanding shares of Common Stock. Without taking into account any other
changes in net tangible book value after June 30, 1996, other than to give
effect to the sale by the Company of shares of Common Stock offered hereby
(based on an assumed initial public offering price of $ per share and
after deducting estimated offering expenses and underwriting discounts and
commissions), and the application of the estimated net proceeds therefrom, the
pro forma net tangible book value of the Company at June 30, 1996, would have
been $ million, or $ per share. This represents an immediate
increase in net tangible book value of $ per share of Common Stock to
existing stockholders and an immediate dilution of approximately $ per
share to new investors purchasing shares in the Offering. The following table
illustrates the per share book value dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......... $
Net tangible book value per share before the
Offering............................................ $
Increase per share attributable to the Offering.......
---------
Pro forma net tangible book value per share after the
Offering..............................................
---------
Net tangible book value dilution per share to new
investors............................................. $
---------
---------
</TABLE>
The following table summarizes, as of June 30, 1996, the differences between
existing stockholders and new investors with respect to the number of shares of
Common Stock purchased from the Company, the total consideration paid and the
average price paid per share (based on an assumed initial public offering price
of per share and before deducting estimated offering expenses and
underwriting discount and commissions):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..............
New investors......................
----- ----- ----- -----
Total........................
</TABLE>
As of June 30, 1996 there were options outstanding to purchase a total of
shares of Common Stock at a weighted average exercise price of $
per share. To the extent that any of these options are exercised, there will be
further dilution to new investors. See "Capitalization" and "Management--
Management Stock Incentive Plan."
15
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma consolidated balance sheet as of June 30, 1996
presents the financial position of the Company as if the following transactions
had occurred on June 30, 1996: (i) the consummation of the acquisition of Alpine
on July 29, 1996 and (ii) the consummation of the Offering. The pro forma
consolidated balance sheet as of June 30, 1996 combines, with appropriate
adjustments, the Company's unaudited consolidated balance sheet as of June 30,
1996 and the unaudited balance sheet of Alpine as of June 30, 1996. Certain
reclassifications were made to conform Alpine's historical financial statements
with the Company's historical financial statements.
The pro forma consolidated statements of income for the six months ended
June 30, 1996 and the fiscal year ended December 31, 1995 set forth below
present the results of operations of the Company for such period and such year
as if the following transactions had occurred on January 1, 1995: (i) the
acquisition of American Hi-Lift on February 26, 1996; (ii) the acquisition of
Alpine on July 29, 1996; and (iii) the consummation of the Offering and
application of the estimated net proceeds therefrom. The pro forma consolidated
statement of operations for the six months ended June 30, 1996 combines, with
appropriate adjustments, the Company's unaudited consolidated results of
operations for its six months ended June 30, 1996, the unaudited results of
operations of Alpine for the same six month period and the unaudited results of
operations of American Hi-Lift for the period from January 1, 1996 through
February 25, 1996. The pro forma consolidated statement of operations for the
fiscal year ended December 31, 1995, combines, with appropriate adjustments, the
Company's audited consolidated results of operations for its fiscal year ended
December 31, 1995, the audited results of operations of Alpine for its fiscal
year ended December 31, 1995 and the audited results of operations of American
Hi-Lift for the period from April 1, 1995 through February 25, 1996 combined
with the unaudited one month period ended April 30, 1995 (the one month period
ended April 30, 1995 is included twice because the Company believes it is
representative of normal operations, while the one month period ended March 31,
1995 includes adjustments relating to prior months). Certain reclassifications
were made to conform American Hi-Lift's historical financial statements with the
Company's historical financial statements.
The pro forma consolidated financial information for Alpine has been
prepared on the basis of preliminary assumptions and estimates. The pro forma
consolidated financial statements may not be indicative of the results of
operations that would have been achieved if the acquisition of Alpine and
American Hi-Lift and the application of the net proceeds from the Offering had
been effected on the dates indicated or which may be achieved in the future. The
pro forma consolidated financial statements and notes thereto should be read in
conjunction with "Selected Consolidated Historical, Pro Forma Financial and
Other Data," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and the Consolidated Financial Statements of the
Company, Alpine and American Hi-Lift appearing elsewhere herein.
16
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
(in thousands)
<TABLE>
<CAPTION>
ACQUISITION OFFERING ADJUSTED
PRIME ALPINE ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
---------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................ $ 120 $ 360 $ (360)(1) $ 120 $ $ 120
Accounts receivables, net................ 46,305 1,516 47,821 47,821
Inventories.............................. 23,376 22 23,398 23,398
Rental equipment, net.................... 246,412 7,576 175(2) 254,163 254,163
Property, plant and equipment, net....... 28,929 1,434 (196)(2) 30,167 30,167
Cost in excess of fair value of net
assets acquired, net................... 130,301 489(3) 130,790 130,790
Other assets............................. 18,536 72 278(4) 18,886 (6,965)(9) 11,921
---------- --------- ----------- ----------- ----------- -----------
Total assets......................... $ 493,979 $ 10,980 $ 386 $ 505,345 $ (6,965) $ 498,380
---------- --------- ----------- ----------- ----------- -----------
---------- --------- ----------- ----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable......................... $ 8,330 $ 170 $ (170)(5) $ 8,330 $ $ 8,330
Accrued expenses......................... 28,680 356 (356)(5) 28,680 28,680
Debt..................................... 344,000 2,958 8,042(6) 355,000 (153,450) 10) 201,550
Deferred income taxes.................... 30,415 30,415 (4,468)(9) 25,947
Other liabilities........................ 9,041 90 276(7) 9,407 9,407
Stockholders' equity..................... 73,513 7,406 (7,406)(8) 73,513 150,953 224,466
---------- --------- ----------- ----------- ----------- -----------
Total liabilities and stockholder's
equity............................. $ 493,979 $ 10,980 $ 386 $ 505,345 $ (6,965) $ 498,380
---------- --------- ----------- ----------- ----------- -----------
---------- --------- ----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to Pro Forma Consolidated Balance Sheet.
17
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
Pro forma adjustments related to the Alpine acquisition and the Offering
include the following:
<TABLE>
<C> <S> <C>
(1) Elimination of cash not purchased.
(2) Adjusts acquired assets to estimated fair market value.
(3) Excess of the aggregate purchase price over the estimated fair value of the
tangible assets acquired.
(4) Cash payment for noncompete agreements, $ 350
less other assets not purchased. (72)
---------
$ 278
---------
---------
(5) Elimination of liabilities not assumed.
(6) Debt issued to finance the acquisition, $ 11,000
less Alpine debt not assumed. (2,958)
---------
$ 8,042
---------
---------
(7) Liabilities related to the acquisition costs, $ 366
less liabilities not assumed. (90)
---------
$ 276
---------
---------
(8) Elimination of Alpine's stockholders equity.
</TABLE>
<TABLE>
<CAPTION>
BOOK VALUE DEFERRED
AT JUNE 30, INCOME TAX
1996 BENEFIT
--------------- -----------
<C> <S> <C> <C>
(9) Write-off of deferred financing costs related to debt extinguished
with Offering proceeds (see "Use of Proceeds")................................ $(4,840) $(1,864 )
Write-off of historical unamortized prepaid management fee paid to (2,125 ) (829 )
Investcorp International Inc. (see "Certain Transactions")....................
Early redemption penalties of $4.6 million (see "Use of Proceeds")............ -- (1,775 )
------- -----------
($6,965) $ (4,468 )
-------
------- -----------
-----------
(10) Gross proceeds from the Offering, $ 170,000
less estimated Offering costs (see "Use of Proceeds"), (12,000 )
less early redemption penalties (see "Use of Proceeds") (4,550 )
-----------
$ 153,450
-----------
-----------
</TABLE>
18
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRIME AMERICAN ALPINE
FOR THE HI-LIFT FOR FOR THE
SIX MONTHS THE PERIOD SIX MONTHS
ENDED FROM JAN. 1, 1996 ENDED ACQUISITION OFFERING ADJUSTED
JUNE 30, 1996 TO FEB. 25, 1996 JUNE 30, 1996 ADJUSTMENTS PRO FORMA ADJUSTMENT PRO FORMA
------------- ----------------- ------------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental revenue......... $ 87,678 $6,239 $4,553 $ $ 98,470 $ $ 98,470
New equipment sales.... 21,303 630 21,933 21,933
Rental equipment
sales................ 17,148 980 185 18,313 18,313
Parts and merchandise
sales................ 18,730 433 19,163 19,163
Service revenue and
other income......... 8,597 661 92 9,350 9,350
------------- ------ ------ ----------- --------- ---------- ---------
153,456 8,943 4,830 167,229 167,229
Cost of sales:
Depreciation--rental
equipment............ 18,097 1,175 299 (222)(1) 19,349 19,349
Cost of new equipment
sales................ 17,867 516 18,383 18,383
Cost of rental
equipment sales, net
of accumulated
depreciation......... 14,215 524 174 467(2) 15,380 15,380
Cost of parts and
merchandise sales.... 13,622 250 13,872 13,872
Direct operating
expenses............. 38,723 2,763 968 822(3) 43,276 43,276
------------- ------ ------ ----------- --------- ---------- ---------
102,524 5,228 1,441 1,067 110,260 110,260
------------- ------ ------ ----------- --------- ---------- ---------
Gross profit....... 50,932 3,715 3,389 (1,067) 56,969 56,969
------------- ------ ------ ----------- --------- ---------- ---------
Selling, general,
administrative and
other.................. 23,171 2,457 2,779 (1,804)(4) 26,603 26,603
Depreciation and
amortization:
Noncompete agreements.. 59(5) 59 59
Cost in excess of fair
value of assets
acquired............. 1,618 76(6) 1,694 1,694
Property, plant and
equipment............ 1,557 158 136 1,851 1,851
Interest expense, net.... 18,239 280 153 764(7) 19,436 (7,665)(9) 11,771
------------- ------ ------ ----------- --------- ---------- ---------
44,585 2,895 3,068 (905) 49,643 (7,665) 41,978
------------- ------ ------ ----------- --------- ---------- ---------
Income before
income taxes..... 6,347 820 321 (162) 7,326 7,665 14,991
Income tax expense..... 3,205 374 2 (110)(8) 3,471 2,950(8) 6,421
------------- ------ ------ ----------- --------- ---------- ---------
Net income......... $ 3,142 $ 446 $ 319 $ (52) $ 3,855 $ 4,715 $ 8,570(10)
------------- ------ ------ ----------- --------- ---------- ---------
------------- ------ ------ ----------- --------- ---------- ---------
Net income per
share............ $
---------
---------
Shares
outstanding......
---------
---------
</TABLE>
See accompanying notes to Pro Forma Statement of Operations.
19
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
The pro forma adjustments include the following:
<TABLE>
<C> <S> <C>
(1) Adjust depreciation expense for adjusted carrying values of assets acquired
from American Hi-Lift and the Company's depreciation method. $ (311)
Adjust depreciation expense for adjusted carrying values of assets acquired
from Alpine. 89
---------
$ (222)
---------
---------
(2) Adjust cost of sales for American Hi-Lift rental equipment sold to reflect new
carrying values and depreciation method. $ 456
Adjust cost of sales for Alpine rental equipment sold to reflect new carrying
values. 11
---------
$ 467
---------
---------
(3) Reclassify certain Alpine selling, general, administrative and other expenses
("SG&A") to direct operating expenses to conform with the Company's
presentation.
(4) Adjust American Hi-Lift SG&A expenses due to personnel and overhead
reductions. $ (834)
Adjust Alpine SG&A expenses due to personnel and overhead reductions. (148)
Reclassify certain Alpine SG&A expenses to direct operating expenses to
conform with the Company's presentation. (822)
---------
$ (1,804)
---------
---------
(5) Amortization on Alpine covenants not to compete (3 years).
(6) Additional two-months of amortization of American Hi-Lift goodwill (40 year
life). $ 70
Amortization of Alpine goodwill (40 year life). 6
---------
$ 76
---------
---------
(7) Adjust interest expense for debt incurred to finance the acquisitions at the
Company's current rate of 8%.
American Hi-Lift $ 479
Alpine 285
---------
$ 764
---------
---------
(8) Adjust income tax expense to the Company's effective blended rate.
(9) Eliminate interest expense incurred on debt that will be retired with the
proceeds from the Offering (see "Use of Proceeds") (credit facility at 8.0%,
Senior Notes at 12.75%, and Subordinated Notes at 14%).
(10) Excludes the write-off of the historical unamortized deferred financing costs
directly related to the debt retired with the proceeds from the Offering (see
"Use of Proceeds"), the early redemption penalties resulting from the
retirement of approximately $33.3 million of the Senior Notes and the $10
million Subordinated Notes (see "Use of Proceeds") and the write-off of the
unamortized historical prepaid management fee paid to Investcorp International
Inc. (see "Certain Transactions").
</TABLE>
20
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AMERICAN ACQUISITION OFFERING ADJUSTED
PRIME HI-LIFT ALPINE ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
------------- ----------- ------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental revenue............. $ 138,983 $ 37,439 $ 10,127 $ $ 186,549 $ $ 186,549
New equipment sales........ 34,601 3,778 38,379 38,379
Rental equipment sales..... 23,144 5,882 412 29,438 29,438
Parts and merchandise
sales.................... 32,223 2,599 34,822 34,822
Service revenue and other
income................... 13,836 3,966 202 18,004 18,004
------------- ----------- ------------- ------------- ----------- ----------- -----------
242,787 53,664 10,741 307,192 307,192
Cost of sales:
Depreciation--rental
equipment................ 37,427 7,048 615 (1,703)(1) 43,387 43,387
Cost of new equipment
sales.................... 28,960 3,097 32,057 32,057
Cost of rental equipment
sales, net of accumulated
depreciation............. 22,853 3,141 372 2,781(2) 29,147 29,147
Cost of parts and
merchandise sales........ 24,157 1,497 25,654 25,654
Direct operating
expenses................. 60,553 16,577 2,520 1,862(3) 81,512 81,512
------------- ----------- ------------- ------------- ----------- ----------- -----------
173,950 31,360 3,507 2,940 211,757 211,757
------------- ----------- ------------- ------------- ----------- ----------- -----------
Gross profit........... 68,837 22,304 7,234 (2,940) 95,435 95,435
------------- ----------- ------------- ------------- ----------- ----------- -----------
Selling, general,
administrative and other... 36,821 14,742 5,680 (7,161)(4) 50,082 50,082
Depreciation and
amortization:
Noncompete agreements...... 5,877 117(5) 5,994 5,994
Cost in excess of fair
value of assets
acquired................. 2,955 429(6) 3,384 3,384
Property, plant and
equipment................ 2,395 950 298 3,643 3,643
Interest expense, net........ 30,546 1,680 270 3,838(7) 36,334 (15,971)(9) 20,363
------------- ----------- ------------- ------------- ----------- ----------- -----------
78,594 17,372 6,248 (2,777) 99,437 (15,971) 83,466
------------- ----------- ------------- ------------- ----------- ----------- -----------
(Loss) income before
income taxes......... (9,757) 4,932 986 (163) (4,002) 15,971 11,969
Income tax (benefit)
expense.................... (2,368) 2,241 37 (152)(8) (242) 6,151(8) 5,909
------------- ----------- ------------- ------------- ----------- ----------- -----------
Net (loss) income before
extraordinary item......... $ (7,389) $ 2,691 $ 949 $ (11) $ (3,760) $ 9,820 $ 6,060(10)
------------- ----------- ------------- ------------- ----------- ----------- -----------
------------- ----------- ------------- ------------- ----------- ----------- -----------
Net income per share
before
extraordinary
item...............
-----------
-----------
Shares outstanding...
-----------
-----------
</TABLE>
See accompanying notes to Pro Forma Consolidated Statement of Operations.
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
The pro forma adjustments include the following (in thousands):
<TABLE>
<C> <S> <C>
(1) Adjust depreciation expense for adjusted carrying values of assets acquired
from American Hi-Lift and the Company's depreciation method. $ (1,863)
Adjust depreciation expense for adjusted carrying values of assets acquired
from Alpine. 160
---------
$ (1,703)
---------
---------
(2) Adjust cost of sales for American Hi-Lift rental equipment sold to reflect new
carrying values and depreciation method. $ 2,741
Adjust cost of sales for Alpine rental equipment sold to reflect new carrying
values. 40
---------
$ 2,781
---------
---------
(3) Reclassify certain Alpine SG&A expenses to direct operating expenses to
conform with the Company's presentation.
(4) Adjust American Hi-Lift SG&A expenses due to personnel and overhead reductions
and the elimination of American Hi-Lift's management fee. $ (5,004)
Adjust Alpine SG&A expenses due to personnel and overhead reductions. (295)
Reclassify certain Alpine SG&A expenses to direct operating expenses to
conform with the Company's presentation. (1,862)
---------
$ (7,161)
---------
---------
(5) Amortization of Alpine covenants not to compete (3 years)
(6) Amortization of American Hi-Lift goodwill (40 year life). $ 417
Amortization of Alpine goodwill (40 year life). 12
---------
$ 429
---------
---------
(7) Adjust interest expense for debt incurred to finance the acquisitions at the
Company's then current rate of 8.5%.
American Hi-Lift $ 3,172
Alpine 666
---------
$ 3,838
---------
---------
(8) Adjust income tax expense to the Company's effective blended rate.
(9) Eliminate interest expense incurred on debt that will be retired with the
proceeds from the Offering. (see "Use of Proceeds") (credit facility at 8.5%,
Senior Notes at 12.75% and Subordinated Notes at 14%).
(10) Excludes the write-off of the historical unamortized deferred financing costs
directly related to the debt retired with the proceeds from the Offering, (see
"Use of Proceeds") the early redemption penalties resulting from the
retirement of approximately $33.3 million of the Senior Notes and the $10
million Subordinated Notes (see "Use of Proceeds") and the write-off of the
historical unamortized prepaid management fee paid to
Investcorp-International, Inc. (see "Certain Transactions").
</TABLE>
22
<PAGE>
SELECTED CONSOLIDATED HISTORICAL, PRO FORMA FINANCIAL AND OTHER DATA
The following table sets forth selected financial and other data of the
Company as of and for the five years ended December 31, 1995 and as of and for
the six months ended June 30, 1996 and 1995. As a result of certain adjustments
made in connection with the 1994 Acquisition, the results of operations for the
periods subsequent to such acquisition are not comparable to prior periods. The
adjusted pro forma statement of operations data assume that the 1996
Acquisitions and the Offering occurred at January 1, 1995. The pro forma balance
sheet data reflects the historical June 30, 1996 balance sheet data as adjusted
for the acquisition of Alpine and the Offering.
The selected historical financial data for the six months ended June 30,
1996 and 1995 and the five years ended December 31, 1995 were derived from the
Company's Consolidated Financial Statements. The adjusted pro forma financial
data were derived from the Pro Forma Consolidated Financial Statements included
elsewhere in this Prospectus that give effect to the 1996 Acquisitions and the
Offering. The pro forma adjustments are based upon available information and
certain assumptions that management believes are reasonable. The adjusted pro
forma financial information does not purport to represent what the Company's
financial position or results of operations actually would have been had the
1996 Acquisitions and the Offering in fact occurred on such date or to project
the Company's financial position or results of operations for any future date or
period. The pro forma adjustments are based on the purchase method of accounting
and a preliminary allocation of the purchase cost incurred in connection with
the Alpine acquisition.
For additional information, see the Pro Forma Consolidated Financial
Statements included elsewhere in this Prospectus. The following table should
also be read in conjunction with "Capitalization" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations." For reports by
the independent accountants with respect to historical financial information,
see "Index to Financial Statements."
<TABLE>
<CAPTION>
SUCCESSOR YEAR ENDED SUCCESSOR SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
PREDECESSOR YEAR ENDED ----------------------------------- --------------------------
DECEMBER 31, ADJUSTED
------------------------------- COMBINED PRO FORMA
1991 1992 1993 1994 (1) 1995 1995 1995 1996
--------- --------- --------- ----------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Revenues:
Rental revenue......... $ 83,645 $ 90,698 $ 100,829 $ 118,593 $ 138,983 $ 186,549 $ 64,198 $ 87,678
New equipment sales.... 20,336 18,878 26,162 32,396 34,601 38,379 16,316 21,303
Rental equipment
sales................ 14,726 17,303 13,498 20,359 23,144 29,438 12,303 17,148
Parts and merchandise
sales................ 20,349 21,317 23,874 28,787 32,223 34,822 15,957 18,730
Service and other
income............... 7,175 8,528 9,886 11,789 13,836 18,004 6,586 8,597
--------- --------- --------- ----------- --------- ----------- ------------ ------------
Total revenue........ 146,231 156,724 174,249 211,924 242,787 307,192 115,360 153,456
Cost of sales (2), (3)... 105,582 107,093 111,856 136,134 173,950 211,757 82,955 102,524
--------- --------- --------- ----------- --------- ----------- ------------ ------------
Gross profit......... 40,649 49,631 62,393 75,790 68,837 95,435 32,405 50,932
Selling, general and
administrative
expenses............... 24,696 26,856 28,248 30,901(4) 36,821(4) 50,082(4) 17,267(4) 23,171(4)
Depreciation and
amortization (5)....... 12,198 12,438 12,494 10,430 11,227 13,021 3,380 3,175
--------- --------- --------- ----------- --------- ----------- ------------ ------------
Operating income......... 3,755 10,337 21,651 34,459 20,789 32,332 11,758 24,586
Interest expense, net.... 16,826 14,299 12,753 13,852 30,546 20,363 14,812 18,239
--------- --------- --------- ----------- --------- ----------- ------------ ------------
(Loss) income before
income taxes........... (13,071) (3,962) 8,898 20,607 (9,757) 11,969 (3,054) 6,347
Income tax (benefit)
expense................ (3,297) (165) 4,350 8,523 (2,368) 5,909 (494) 3,205
--------- --------- --------- ----------- --------- ----------- ------------ ------------
Net (loss) income before
extraordinary item..... (9,774) (3,797) 4,548 12,084 (7,389) $ 6,060(6) (2,560) 3,142
----------- ------------
-----------
Extraordinary (loss) net
of tax benefit......... -- (1,268) (1,268)
--------- --------- --------- ----------- --------- ------------ ------------
--------- --------- --------- ----------- --------- ------------ ------------
Net (loss) income........ $ (9,774) $ (3,797) $ 4,548 $ 12,084 $ (8,657) $ (3,828) $ 3,142
--------- --------- --------- ----------- --------- ------------ ------------
--------- --------- --------- ----------- --------- ------------ ------------
Net income per share
before extraordinary
item................... $
-----------
-----------
Shares outstanding.......
-----------
-----------
<CAPTION>
ADJUSTED
PRO FORMA
1996
-----------
<S> <C>
OPERATING DATA:
Revenues:
Rental revenue......... $ 98,470
New equipment sales.... 21,933
Rental equipment
sales................ 18,313
Parts and merchandise
sales................ 19,163
Service and other
income............... 9,350
-----------
Total revenue........ 167,229
Cost of sales (2), (3)... 110,260
-----------
Gross profit......... 56,969
Selling, general and
administrative
expenses............... 26,603(4)
Depreciation and
amortization (5)....... 3,604
-----------
Operating income......... 26,762
Interest expense, net.... 11,771
-----------
(Loss) income before
income taxes........... 14,991
Income tax (benefit)
expense................ 6,421
-----------
Net (loss) income before
extraordinary item..... $ 8,570(6)
-----------
-----------
Extraordinary (loss) net
of tax benefit.........
Net (loss) income........
Net income per share
before extraordinary
item................... $
-----------
-----------
Shares outstanding.......
-----------
-----------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
SUCCESSOR YEAR ENDED SUCCESSOR SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
PREDECESSOR YEAR ENDED ----------------------------------- --------------------------
DECEMBER 31, ADJUSTED
------------------------------- COMBINED PRO FORMA
1991 1992 1993 1994 (1) 1995 1995 1995 1996
--------- --------- --------- ----------- --------- ----------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF PERIOD):
Net book value of rental
equipment.............. $ 90,594 $ 87,358 $ 99,093 $ 153,818 $ 181,798 $ 173,392 $ 246,412
Total assets............. 288,331 278,314 280,072 369,403 391,979 386,989 493,979
Total debt............... 163,000 146,000 133,000 235,000 265,000 255,500 344,000
Stockholders' equity..... 99,524 105,727 110,275 69,633 60,976 73,461 73,513
OTHER DATA:
Gross equipment capital
expenditure............ $ 21,557 $ 31,061 $ 38,088 $ 52,814 $ 89,372 $ 47,978 $ 50,513
Net equipment capital
expenditures (8)....... 11,142 18,943 30,089 39,871 66,520 35,759 37,298
Gross rental revenue
(9).................... 86,405 93,516 102,802 120,388 141,138 65,371 88,390
Average original cost of
rental equipment
(10)................... 172,940 169,954 174,210 191,241 228,406 215,972 325,490
Gross rental revenue/
average original cost
of rental equipment
("ROI") (10)........... 50.0% 55.0% 59.0% 63.0% 61.8% 60.5%(11) 54.3%(11)
Non-rental rate.......... 7.0% 5.9% 4.1% 3.4% 3.6% 3.6% 3.5%
Number of rental
equipment yards (end of
period)................ 64 64 70 74 81 78 96
<CAPTION>
ADJUSTED
PRO FORMA
1996
-----------
<S> <C>
BALANCE SHEET DATA (END O
Net book value of rental
equipment.............. $ 254,163
Total assets............. 498,380(7)
Total debt............... 201,550
Stockholders' equity..... 224,466(7)
OTHER DATA:
Gross equipment capital
expenditure............
Net equipment capital
expenditures (8).......
Gross rental revenue
(9)....................
Average original cost of
rental equipment
(10)...................
Gross rental revenue/
average original cost
of rental equipment
("ROI") (10)...........
Non-rental rate..........
Number of rental
equipment yards (end of
period)................
</TABLE>
- ------------------------------
(1) As a result of the 1994 Acquisition the Company's assets and liabilities
were adjusted to their estimated fair values as of December 2, 1994. In
addition, the Company entered into new financing arrangements and had a
change in its capital structure. Rental equipment acquired subsequent to
January 1, 1995 is being depreciated over a longer useful life. See Note 2
to the Consolidated Financial Statements. Accordingly, the combined results
of the 1994 period are not comparable to prior periods. The period from
December 2, 1994 to December 31, 1994 reflects: increased cost of sales due
to higher depreciation expense for rental equipment and cost of rental
equipment sales; increased interest expense; and lower other depreciation
and amortization. Accordingly, the combined period for 1994 represents the
mathematical addition of the historical amounts for the Predecessor period
(January 1, 1994 to December 1, 1994) and the Successor period (December 2,
1994 to December 31, 1994) and are not indicative of results that would have
been obtained had the 1994 Acquisition occurred on January 1, 1994. As use
herein, "Predecessor" refers to Primeco prior to the 1994 Acquisition, and
"Successor" refers to the Company after the acquisition.
(2) Reflects rental equipment depreciation.
(3) Reflects costs of $22.6 million, $9.4 million, and $6.2 million for the year
ended December 31, 1995 and the six month periods ended June 30, 1995 and
1996, respectively, related to the increase in carrying value of the rental
fleet that existed at the date of the 1994 Acquisition.
(4) Includes $125, $1,500, $750, and $750 in 1994, 1995, the six months ended
June 30, 1995 and the six months ended June 30, 1996, respectively,
consisting of amortization of pre-paid management fees to Investcorp
International Inc.
(5) Excludes rental equipment depreciation.
(6) Excludes the write-off of the historical unamortized prepaid management fee
paid to Investcorp International, Inc., the write-off of the historical
unamortized deferred financing costs directly related to the debt retired
with the proceeds of the Offering and the early redemption penalties
resulting from the retirement of approximately $33.3 milllion of the 12.75%
Senior Notes and the $10 million Subordinated Notes.
(7) Reflects the write-off of the historical unamortized prepaid management fee
paid to Investcorp International, Inc. ($1,296 net of related income tax
benefit of $829), the write-off of the historical unamortized deferred
financing costs related to the debt retired with the proceeds from the
Offering ($2,976 net of related income tax benefit of $1,864) and the early
redemption penalties resulting from the retirement of approximately $33.3
million of the Senior Notes and the $10 million Subordinated Notes. ($2,775
net of related income tax benefit of $1,775).
(8) Net equipment capital expenditures represent gross rental equipment capital
expenditures reduced by the net book value of rental equipment sold.
(9) Gross rental revenue equals rental revenue less income from equipment that
the Company rents from third parties and subsequently re-rents to its
customers plus reclassified rental income due to sales of used rental
equipment through rent-to-own and rental purchase option programs.
(10) Average original cost of rental equipment represents the average of the
monthly original cost of rental equipment. Original cost represents the
original price paid by the Company, its predecessor and its acquirees for
the equipment, excluding effects of purchase accounting adjustments.
(11) ROI for interim periods is calculated on an annualized basis. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Consolidated Historical, Pro Forma Financial and Other Data" and the
Consolidated Financial Statements of the Company and the notes thereto included
elsewhere in this Prospectus.
GENERAL
Prime Service, Inc. is a holding company with no business operations of its
own. The Company's only material asset is the outstanding capital stock of
Primeco. Primeco derives revenue from four sources: (i) rental of equipment,
(ii) sales of new equipment and used rental equipment, (iii) sales of parts and
merchandise and (iv) service and other income. Financial information presented
herein for periods after December 1, 1994 is consolidated financial information
of the Company, and for periods prior to December 2, 1994 is financial
information of Primeco.
The Company's primary source of revenue is the rental of equipment to
commercial construction, industrial and residential users. Growth in rental
revenue is dependent on several factors, including the demand for rental
equipment, the amount of equipment available for rent, rental rates and general
economic conditions. The level of new and used equipment sales is primarily a
function of the supply of and demand for such equipment, price and general
economic conditions. The Company's revenues derived from the sale of used
equipment are also affected by its need to maintain the appropriate age, quality
and mix of its rental equipment. Prime sells parts and merchandise which
generally complement the equipment rented and sold at its rental equipment
yards. Revenues from the sale of parts and merchandise are usually correlated
with rental revenue and the sale of new and used equipment. Service and other
income consists primarily of damage waiver and delivery charges and is
correlated with the level of rental revenue.
A measure used by the Company to determine the appropriate mix and to manage
the utilization of its rental equipment is ROI. ROI is defined as gross rental
revenue as a percentage of average monthly original cost of rental equipment.
Prime's ROI improved from 50.0% in 1990 to 61.8% in 1995. During the first six
months of 1996, Prime's ROI declined to 54.3% from 60.5% during the same period
of 1995. The decline is primarily attributable to the integration of American
Hi-Lift's rental fleet, which involved taking substantial amounts of American
Hi-Lift's rental fleet temporarily out of service to be refurbished and upgraded
to Prime's quality standards. Prime's ROI for the first six months of 1996,
calculated excluding gross rental revenue and original equipment cost
attributable to former American Hi-Lift equipment, would have been 58.8%. The
Company expects ROI for the remainder of 1996 to improve from that of the first
six months as such rental equipment comes back into service.
Prior to the 1994 Acquisition, the Company's capital expenditure program was
limited by the Company's prior owners. From 1991 to 1994, the Company did not
make any material acquisitions and purchased an aggregate of $33.7 million of
equipment (exclusive of amounts required to replace used equipment sold in the
ordinary course of business and inclusive of rental equipment purchases for new
yards). Despite revenues increasing during this period from $146.3 million in
1991 to $211.9 million in 1994, management believes that its capital
expenditures program and resulting rental equipment fleet were not adequate to
meet the market demand. Since the 1994 Acquisition, the Company has
significantly increased its rental fleet by purchasing approximately $56.3
million of equipment through December 31, 1995, and $24.7 million during the six
months ended June 30, 1996 (in each case exclusive of amounts required to
replace used equipment sold in the ordinary course of business and recent
acquisitions, but inclusive of rental equipment purchases for new yards).
Management expects its total 1996 rental equipment purchases to be $42.9 million
(exclusive of amounts required to replace used equipment sold in the ordinary
course of business and recent acquisitions, but inclusive of rental equipment
purchases for new yards).
25
<PAGE>
As a result of the 1994 Acquisition, Prime's assets and liabilities were
adjusted to their estimated fair values as of December 2, 1994. The step-up in
the carrying value of the rental fleet to estimated fair value increased
depreciation expense and the cost of rental used equipment sold in 1994, 1995
and 1996. The effects of the step-up on each period are discussed below. In
addition, in order to better reflect the useful life of the rental equipment and
its estimated salvage value upon disposal, the Company changed its depreciation
method for rental equipment acquired after January 1, 1995. See Note 2 to the
Consolidated Financial Statements.
The 1994 amounts discussed below represent the mathematical addition of the
historical amounts for the Predecessor period (January 1, 1994 to December 1,
1994) and the Successor period (December 2, 1994 to December 31, 1994) for
purposes of the discussion below only and are not indicative of results that
would actually have been obtained if the 1994 Acquisition occurred on January 1,
1994.
RECENT DEVELOPMENTS
AMERICAN HI-LIFT ACQUISITION. On February 26, 1996, Prime completed the
purchase of all of the outstanding stock of American Hi-Lift from Vibroplant plc
and Vibroplant Investments. Prime paid a purchase price of $66.5 million for the
shares of American Hi-Lift, which included repayment of the outstanding bank
debt of American Hi-Lift. American Hi-Lift merged into Primeco after the
closing.
American Hi-Lift operated 17 rental locations in California, Texas, Florida,
Louisiana, Ohio, Alabama, South Carolina and Georgia, and the acquisition
resulted in a net increase to the Company of 12 rental yards. American Hi-Lift,
which specialized in renting and selling aerial lift equipment to industrial and
commercial customers, had gross revenues of $50.4 million for the year ended
March 31, 1995. In conjunction with this transaction, certain existing
stockholders of the Company invested in additional common equity of the Company.
In connection with the American Hi-Lift acquisition, certain stockholders of the
Company made a capital infusion of $9.4 million into the Company. Prime used
these funds, as well as borrowings under its credit facility, to fund the
transaction.
ALPINE ACQUISITION. On July 29, 1996, Primeco purchased substantially all
of Alpine's assets. Prime paid approximately $11 million for Alpine's assets,
which included repayment of the outstanding debt of Alpine.
Alpine operated 6 rental yards oriented toward industrial equipment in the
state of Washington, resulting in a net increase of 6 yards and expanding
Prime's presence in the northwest market. This increased presence will allow the
Company to capitalize on opportunities to service the construction and
industrial markets by expanding the rental fleet mix at these yards, by
expanding coverage of national accounts in the region and by introducing
equipment sales at these yards.
26
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the major components of the Company's
statement of operations expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994(4) 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
Statement of Operations:
Total revenues........................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales (1)..................... 72.2 68.3 64.2 64.2 71.6 71.9 66.8
Gross profit (2)...................... 27.8 31.7 35.8 35.8 28.4 28.1 33.2
Selling, general, administrative and
other expenses...................... 16.9 17.1 16.2 14.6 15.2 15.0 15.1
Depreciation and amortization (3)..... 8.3 7.9 7.2 4.9 4.6 2.9 2.1
Operating income...................... 2.6 6.6 12.4 16.3 8.6 10.2 16.0
</TABLE>
- ------------------------
(1) Includes rental equipment depreciation.
(2) See the "Gross Profit" discussions below for a discussion of the effect of
the step-up to fair value on gross profit.
(3) Excludes rental equipment depreciation.
(4) Combines the Predecessor period ended December 1, 1994, and the Successor
period ended December 31, 1994.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
On February 26, 1996, Prime acquired American Hi-Lift, a company
specializing in renting and selling aerial lift equipment. The purchase price of
American Hi-Lift was $66.5 million. The American Hi-Lift acquisition was
accounted for under the purchase method of accounting; therefore, the results of
operations of the Company include American Hi-Lift beginning February 26, 1996.
American Hi-Lift had gross revenues of $50.4 million for the year ended March
31, 1995.
TOTAL REVENUES. Total revenues for the six months ended June 30, 1996,
increased 33.0% to $153.5 million, when compared to total revenues of $115.4
million for the same period in the prior year. The increase was primarily the
result of the acquisition of American Hi-Lift, which resulted in increased
rental revenues, and also reflects increases in all of the Company's revenue
components.
RENTAL REVENUES. Rental revenues for the six months ended June 30,
1996, increased 36.6% to $87.7 million, when compared with the corresponding
prior period rental revenues of $64.2 million. This increase was primarily a
result of the American Hi-Lift acquisition.
NEW EQUIPMENT SALES. New equipment sales for the six months ended June
30, 1996, increased 30.6% to $21.3 million, when compared with the
corresponding prior period sales of $16.3 million. The increase is due to
strong general economic conditions, increased demand for equipment as well
as sales associated with the yards purchased in the American Hi-Lift
acquisition.
USED EQUIPMENT SALES. Rental equipment sales for the six months ended
June 30, 1996, increased 39.4% to $17.1 million, when compared with the
corresponding prior period sales of $12.3 million, resulting, primarily,
from continued strong demand for used rental equipment and Prime's efforts
to dispose of older equipment purchased with the American Hi-Lift
acquisition.
27
<PAGE>
PARTS AND MERCHANDISE SALES. Parts and merchandise sales for the six
months ended June 30, 1996, increased 17.4% to $18.7 million, when compared
with the corresponding prior period sales of $16.0 million. This increase
correlates to higher rental revenue and sales of equipment since parts and
merchandise generally complement the equipment the Company rents and sells.
SERVICE AND OTHER INCOME. Service and other income for the six months
ended June 30, 1996, increased 30.3% to $8.6 million, when compared with the
corresponding prior period service and other income of $6.6 million. This
increase related to the increase in rental revenue.
GROSS PROFIT. Gross profit for the six months ended June 30, 1996,
increased 57.2% to $50.9 million, when compared with the corresponding prior
period gross profit of $32.4 million. Gross profit as a percentage of total
revenues was 33.2% for the six months ended June 30, 1996 and 28.1% for the six
months ended 1995. The increase is the result of increased revenues as
previously discussed with the most significant component being the $23.5 million
increase in rental revenue. The effect of the increase to fair value of the
rental equipment as a result of the 1994 Acquisition decreased gross profit for
the first six months of 1996 by $6.2 million, as compared to gross profits of
$9.4 million in the first six months of 1995. Gross profit was also impacted by
direct operating expenses, which increased by 33.2% to $38.7 million, when
compared to the prior period expense level of $29.1 million. This increase
primarily reflects increased expenses associated with the repair and maintenance
costs associated with refurbishing and upgrading the former American Hi-Lift
equipment to Prime's standards.
SELLING, GENERAL, ADMINISTRATIVE AND OTHER EXPENSES. Selling, general,
administrative and other expenses for the six months ended June 30, 1996,
increased 34.2% to $23.2 million, when compared to the prior expenses of $17.3
million. The increase reflects higher sales commissions due to increased rental
and sales revenue and continuing expenses associated with the inclusion of the
American Hi-Lift acquisition into the Company's operations. As a percentage of
total revenues, selling, general, adminstrative and other expenses for the first
six months of 1996 was 15.1%, as compared to 15.0% during the same period in
1995.
INTEREST EXPENSE. Interest expense net of interest income for the six
months ended June 30, 1996 increased 23.1% to $18.2 million, when compared with
the corresponding prior period interest expense of $14.8 million. The increase
reflects higher borrowings outstanding. The Company's average outstanding
indebtedness for the six months ended June 30, 1996, totaled $317.8 million,
compared to $237.8 million for the six months ended June 30, 1995. This increase
is due primarily to the American Hi-Lift acquisition on February 26, 1996, and
borrowings to fund capital expenditures.
INCOME TAX EXPENSE (BENEFIT). Income tax expense for the first six months
ended June 30, 1996 increased to $3.2 million from an income tax benefit of $0.5
million for the corresponding prior period in 1995. This increase is due
primarily to the increase in pre-tax income.
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM. Net income for the six months
ended June 30, 1996 increased to $3.1 million, from a net loss of $2.6 million
for the corresponding prior period in 1995. This increase reflects the factors
discussed above.
1995 COMPARED TO 1994
TOTAL REVENUES. Total revenues for the Company in 1995 increased 14.6% to
$242.8 million from $211.9 million. This increase reflects an increase in all of
Primeco's revenue components with rental revenues producing the largest dollar
increase.
RENTAL REVENUES. Rental revenues in 1995 increased 17.2% to $139.0
million from $118.6 million in 1994. This increase was a result of an
overall improvement in economic conditions, an increase in the average
amount of equipment available for rental and an increase in rental rates in
May 1995. The average amount of equipment available for rental in 1995
increased as evidenced by an increase in the
28
<PAGE>
monthly average original cost of rental equipment of 19.4% to $228.4 million
from $191.2 million in 1994. Prime's utilization of rental equipment
decreased slightly in 1995 with an ROI of 61.8% versus 63.0% in 1994,
primarily due to substantial additions to the rental fleet and a different
mix of rental equipment. Although slightly less than 1994, 1995's ROI
remained at a historical high level. In May 1995, the Company raised the
listed rental rates by a weighted average of 5%; the increases vary,
depending on the equipment type and duration of rental. Although Prime
attempts to achieve rental rates that are as close to list price as
possible, actual rental rates realized are generally lower than listed
rental rates owing to competitive conditions in various markets.
NEW EQUIPMENT SALES. Sales of new equipment in 1995 increased 6.8% to
$34.6 million from $32.4 million in 1994 primarily due to improved general
economic conditions and higher selling prices.
USED RENTAL EQUIPMENT SALES. Sales of used rental equipment in 1995
increased 13.7% to $23.1 million from $20.4 million in 1994 due to high
demand for used rental equipment and the Company's normal fleet upgrading.
PARTS AND MERCHANDISE SALES. Sales of parts and merchandise in 1995
increased 11.9% to $32.2 million from $28.8 million in 1994. This increase
correlates to the higher rental revenue and sales of equipment since parts
and merchandise generally complement the equipment the Company rents and
sells.
SERVICE AND OTHER INCOME. Service and other income in 1995 increased
17.4% to $13.8 million from $11.8 million in 1994. This increase reflects
the increased rental revenue.
GROSS PROFIT. Gross profit in 1995 decreased 9.2% to $68.8 million from
$75.8 million in 1994. Gross profit as a percentage of total revenues was 28.4%
in 1995 and 35.8% in 1994. This decrease primarily reflects higher depreciation
expense and cost of sales of rental equipment sold (non-cash items) due to the
increase in fair value of rental equipment as a result of the 1994 Acquisition.
The result of the increase to fair value was to decrease 1995 gross profits by
$22.6 million as compared to a $1.1 million decrease in 1994. Direct operating
expenses increased primarily due to higher compensation costs (reflecting an
increased number of employees) and increased maintenance costs necessary to
support the increased size of the rental fleet and to staff new rental equipment
yards. The increase in direct operating expenses also reflects start-up costs of
opening eight new rental equipment yards in 1995.
Depreciation for rental equipment acquired subsequent to January 1, 1995 was
changed as described in Note 2 to the Consolidated Financial Statements located
elsewhere in this Prospectus.
SELLING, GENERAL, ADMINISTRATIVE AND OTHER EXPENSES. Selling, general,
administrative and other expenses in 1995 increased 19.1% to $36.8 million from
$30.9 million in 1994. This increase primarily reflects higher sales commissions
due to increased rental and sales revenue in 1995 and unusually low expenses in
1994 due to a one-time insurance settlement with a prior owner which generated
approximately a $2.1 million gain and a franchise tax refund of approximately
$500,000. As a percentage of total revenues, selling, general, administrative
and other expenses in 1995 was 15.2% versus 14.6% in 1994.
INTEREST EXPENSE. Interest expense net of interest income increased 120.5%
to $30.5 million in 1995 from $13.9 million in 1994. This increase reflects
higher interest expense relating to higher levels of indebtedness incurred in
connection with the 1994 Acquisition. Immediately prior to the 1994 Acquisition,
the Company had outstanding debt of $133.0 million, and immediately after the
1994 Acquisition, the Company had outstanding debt of $235.0 million. At
December 31, 1995, outstanding debt aggregated $265.0 million, of which $155.0
million was at variable rates, $100.0 million was at a fixed rate of 12.75%, and
$10.0 million was at a fixed rate of 14%. At that date, after giving effect to
the interest rate swap described in Note 8 to the Consolidated Financial
Statements located elsewhere in this Prospectus, approximately $75.0 million of
indebtedness bore interest at variable rates.
29
<PAGE>
INCOME TAX EXPENSE (BENEFIT). Income tax expense in 1995 was a benefit of
$3.2 million (including a $0.8 million tax benefit on the extraordinary loss),
compared to an expense of $8.5 million in 1994. The effective income tax rate
for both periods differs from the federal statutory rate of 35% primarily as the
result of the non tax-deductible amortization of goodwill. At December 31, 1995,
the Company has an alternative minimum tax credit carry forward of approximately
$3.1 million and a corresponding valuation allowance. The allowance was
established since at that time it was not likely that the benefit of the credits
would be realized due to the high level of interest expense resulting from the
financing of the 1994 Acquisition.
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM. Net income decreased from
income of $12.1 million in 1994 to a loss of $7.4 million in 1995. This loss
includes the write off of the covenant not to compete with the former owner of
Primeco. Pinault S.A., the parent of Artemis, has exited the rental industry as
a result of the divestiture of Pinault Equipment. See Note 5 to the Consolidated
Financial Statements located elsewhere in this Prospectus. The amount written
off in 1995 was $3.6 million ($5.9 million pretax). Net income was also impacted
by the factors discussed above.
1994 COMPARED TO 1993
TOTAL REVENUES. Total revenues in 1994 increased 21.6% to $211.9 million
from $174.2 million in 1993. This increase was primarily a result of higher
rental revenue and an increase in the sale of new and used equipment.
RENTAL REVENUE. Rental revenue in 1994 increased 17.6% to $118.6
million from $100.8 million in 1993. This increase was a result of an
overall improvement in economic conditions, an increase in the average
amount of equipment available for rental, higher utilization of rental
equipment and an increase in rental rates in March 1994. The average amount
of equipment available for rental in 1994 increased as evidenced by an
increase in the monthly average original cost of rental equipment of 9.8% to
$191.2 million from $174.2 million in 1993. The Company's higher utilization
of rental equipment is reflected by an increase in ROI to 63.0% in 1994 from
59.0% in 1993. In March 1994, the Company raised average listed rental rates
by varying amounts depending on equipment type and duration of rental, with
a weighted average increase of approximately 5%, which was the first such
increase since 1991. Although the Company attempts to achieve rental rates
that are as close to list price as possible, actual rental rates realized
are generally lower than listed rental rates owing to competitive conditions
in various markets.
NEW EQUIPMENT SALES. Sales of new equipment in 1994 increased 23.8% to
$32.4 million from $26.2 million in 1993 primarily due to improved general
economic conditions.
USED RENTAL EQUIPMENT SALES. Sales of used rental equipment in 1994
increased 50.8% to $20.4 million from $13.5 million in 1993 due to high
demand for rental equipment in 1994 and a $2.3 million used equipment
auction in 1994 (there was no such auction in 1993).
PARTS AND MERCHANDISE SALES. Sales of parts and merchandise in 1994
increased 20.6% to $28.8 million from $23.9 million in 1993. This increase
correlates to the higher rental revenue and sales of equipment since parts
and merchandise generally complement the equipment Primeco rents and sells.
SERVICE AND OTHER INCOME. Service and other income in 1994 increased
19.2% to $11.8 million from $9.9 million in 1993. This increase reflects the
increased rental revenue.
GROSS PROFIT. Gross profit in 1994 increased 21.5% to $75.8 million from
$62.4 million in 1993. This increase primarily reflects the increase in total
revenues. This increase was partly offset by a 15.7% increase in direct
operating expenses in 1994 to $53.6 million from $46.3 million in 1993. The
increase was also partly offset by higher depreciation expense and cost of sales
of rental equipment due to the increase in carrying value of rental equipment as
a result of the 1994 Acquisition. Direct operating expenses increased primarily
due to higher compensation costs (reflecting an increased number of employees)
and
30
<PAGE>
increased maintenance costs necessary to support the increased size of the
rental fleet and to staff new rental equipment yards. The increase in direct
operating expenses also reflects start-up costs of opening five new rental
equipment yards in 1994. Gross profit as a percentage of total revenues was
35.8% in both 1994 and 1993.
SELLING, GENERAL, ADMINISTRATIVE AND OTHER EXPENSES. Selling, general,
administrative and other expenses in 1994 increased 9.4% to $30.9 million from
$28.2 million in 1993. This increase primarily reflects higher sales commissions
due to increased rental and sales revenue in 1994, offset by a one-time benefit
from a settlement of approximately $2.1 million with a prior owner of the
Company and a franchise tax refund of approximately $500,000. As a percentage of
total revenues, selling, general, administrative and other expenses in 1994
declined to 14.6% from 16.2% in 1993.
INTEREST EXPENSE. Interest expense net of interest income increased 8.6% to
$13.9 million in 1994 from $12.8 million in 1993. This increase reflects higher
interest expense following the 1994 Acquisition. Prior to the 1994 Acquisition,
reduced outstanding debts were offset by higher interest rates during that
period as compared to 1993. At December 31, 1994, outstanding debt aggregated
$235.0 million, of which $225.0 million was at variable rates and $10.0 million
was at a fixed rate of 14% per annum. At that date, after giving effect to the
interest rate swaps described in Note 8 to the Consolidated Financial
Statements, approximately $145.0 million of indebtedness bore interest at
variable rates.
INCOME TAX EXPENSE (BENEFIT). Income tax expense was $8.5 million in 1994
compared to an expense of $4.4 million in 1993. The effective income tax rate
for both periods differ from the federal statutory rate of 34.0% due to high
levels of non tax-deductible amortization of goodwill. The Company had net
operating loss carry forwards for federal and state income tax purposes of
approximately $9.3 million. At December 31, 1994, the Company had a valuation
allowance established which eliminates the deferred tax asset associated with
the net operating losses. The allowance was established since it is not more
likely than not that the benefit of these losses will be realized due to the
high level of interest expense resulting from the financing of the 1994
Acquisition and the limitations placed on the utilization of the net operating
losses as a result of the 1994 Acquisition.
NET INCOME (LOSS). Net income in 1994 increased to $12.1 million from $4.5
million in 1993. This increase reflects the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1996, and the years ended December 31,
1993, 1994 and 1995, the Company's principal sources of funds consisted of the
net cash provided by operating activities, the proceeds from the sale of used
rental equipment and in 1995, the proceeds from its credit facility, the
proceeds from the issuance of $100 million in Senior Notes and a $10 million
capital infusion from the Company's stockholders. See "Description of Certain
Indebtedness." The components of net cash provided by operating activities are
detailed on the Statements of Cash Flows in the Consolidated Financial
Statements and include net income or loss adjusted for (i) depreciation and
amortization, (ii) the gains (or losses) on the sales of used rental equipment
and (iii) the effect of changes in certain operating assets and liabilities. Net
cash provided by operating activities excludes proceeds from the sale of rental
equipment. Net cash provided by operating activities for the six months ended
June 30, 1996, increased 38.6% to $14.0 million from $10.1 million for the
corresponding period in 1995. This increase was primarily caused by the
acquisition of American Hi-Lift. Net cash provided by operating activities in
1995 decreased 14.4% to $32.2 million from $37.6 million in 1994. This decrease
resulted primarily from increased interest expense and increased working capital
investment. Net cash provided by operating activities in 1994 decreased 4.8% to
$37.6 million from $39.5 million in 1993. This decrease resulted primarily from
a decrease in certain operating liabilities and the absence of the decrease in
inventory levels experienced in 1993, and was partly offset by increased rental
revenue and deferred income taxes.
For the six months ended June 30, 1996, the Company's principal uses of
funds were for the acquisition of American Hi-Lift and the purchase of equipment
for the Company's rental fleet. The gross
31
<PAGE>
rental equipment capital expenditures for the six months ended June 30, 1996,
increased 5.3% to $50.5 million from $48.0 million for the corresponding period
in 1995. Of those amounts, $25.8 million and $18.3 million was spent in the six
months ended June 30, 1996 and 1995, respectively, to replace used rental
equipment sold with the remaining amount being a net increase in investment in
the rental fleet. Proceeds from the sale of rental equipment for the six months
ended June 30, 1996, increased 39.6% to $17.0 million from $12.2 million for the
corresponding period in 1995.
During the years ended December 31, 1993, 1994 and 1995, the Company's
principal uses of funds were for the purchase of equipment for its rental fleet
and the payment of principal on its outstanding indebtedness. The gross rental
equipment capital expenditures were $38.1 million, $52.8 million and $89.4
million in 1993, 1994 and 1995, respectively. Of those amounts, $20.4 million,
$33.0 million and $34.6 million were spent to replace used rental equipment sold
in 1993, 1994 and 1995 respectively, with the remaining amounts being a net
increase in investment in the rental fleet. Proceeds from the sale of used
rental equipment were $13.5 million, $20.5 million and $23.1 million in 1993,
1994 and 1995, respectively.
The Company has no long-term minimum purchase commitments for rental
equipment. Management has budgeted $98 million of gross fleet capital
expenditures exclusive of acquisitions in 1996, of which approximately $54
million will be used to replace used rental equipment sold, with the remaining
amounts being a net increase in investment in rental fleet. These expenditures
will be offset by expected proceeds from the sale of used equipment of
approximately $31 million. Prime will utilize these capital expenditures to
expand the fleet at existing rental equipment yards, to satisfy the equipment
needs of current and new Integrated Rental Management-TM- customers, to provide
for the equipment needs of new rental equipment yards, and to maintain and grow
the fleet at the rental yards recently acquired in connection with the
Subsequent Acquisitions. The Company also expects to spend approximately $6
million in 1996 on non-equipment related capital expenditures consisting of
buildings, land, furniture and fixtures and environmental capital expenditures.
In addition to the budgeted capital expenditures, the Company is currently
considering several potential acquisitions, although the Company does not
currently have any understandings or agreements with respect to potential
acquisitions. In 1996, Primeco purchased all of the outstanding stock of
American Hi-Lift for approximately $66.5 million, and all of the assets of
Alpine for approximately $11 million. The purchases were funded by a $9.4
million capital contribution from certain stockholders of the Company and the
balance through borrowings from Prime's credit facility.
The Company's operations are subject to various environmental laws and
regulations. In order to comply with these requirements, the Company is engaged
in ongoing remediation, capital improvement and periodic compliance activities.
In connection with the 1994 Acquisition, an environmental consultant conducted
certain investigations of the Company's properties and compliance with
applicable environmental laws. In 1995, Prime spent approximately $1.3 million
on environmental matters, including costs related to remediation, compliance and
capital requirements, and has budgeted approximately $4.4 million in 1996 for
such matters. As of June 30, 1996, the Company had a reserve for environmental
remediation of $7.0 million and related receivables from state trust fund
programs and a seller of equipment yards of $2.0 million.
Prime incurred substantial indebtedness in connection with the 1994
Acquisition and the 1996 Acquisitions. At June 30, 1996, Prime had indebtedness
outstanding of $344.0 million, consisting of $224.0 million under the credit
facility, $100 million under the Senior Notes and $10 million under the
Subordinated Notes. Prime also incurred additional indebtedness of $11 million
under its credit facility in connection with its purchase of Alpine's assets.
Prime received net proceeds of approximately $96.0 million from the Senior
Notes, which were issued on March 6, 1995. Such proceeds were used to repay
$75.0 million of indebtedness under a subordinated loan facility plus accrued
interest and $20.0 million of indebtedness under the revolving credit portion of
the credit facility (without reducing the commitment under the credit facility).
Prime believes that cash provided by operations, proceeds from the sale of
used equipment in the ordinary course of business and funds available under the
credit facility will be sufficient to permit Prime to
32
<PAGE>
meet its payment obligations under the credit facility and the Senior Notes and
to meet its anticipated capital expenditures as described above.
The credit facility requires Prime to maintain interest rate protection,
which it has done through rate swap agreements covering a portion of its
outstanding and available credit facility including the portion related to
letters of credit. Accordingly, at December 31, 1995, Primeco had outstanding
interest rate swap agreements (total notional amount of $80.0 million) placed
with financial institutions, one of which is an affiliate of Salomon Brothers
Inc, that effectively converted a portion of its floating-rate debt to
fixed-rate debt. At December 31, 1995, the market value of the swaps represented
a loss of approximately $2.6 million. See Note 8 in the Consolidated Financial
Statements.
QUARTERLY RESULTS
The following table sets forth certain unaudited consolidated statement of
operations data for the years ended December 31, 1994 and 1995, and the six
months ended June 30, 1996. The unaudited quarterly information has been
prepared on the same basis as the annual financial information and, in
management's opinion, includes all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the information for the
quarters presented. As a result of the 1994 Acquisition, the results subsequent
to that date are not comparable to prior periods.
<TABLE>
<CAPTION>
1996
QUARTERS
1994 QUARTERS ENDED 1995 QUARTERS ENDED ENDED
------------------------------------------------ ------------------------------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31
----------- ----------- ----------- --------- --------- --------- --------- --------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues.......... $ 47,197 $ 54,299 $ 54,383 $ 56,045 $ 55,889 $ 59,471 $ 62,876 $ 64,551 $ 70,930
Gross profit............ 16,534 20,046 20,035 19,175 14,844 17,561 18,276 18,156 23,360
Operating income........ 6,122 9,747 9,724 8,866 4,552 7,206 7,689 1,342(1) 11,078
Interest expense
(net)................. 3,096 3,169 3,247 4,340 7,086 7,726 7,713 8,021 8,471
Extraordinary (loss) net
of tax benefit........ -- -- -- -- (1,268) -- -- -- --
Net income (loss)....... 1,640 3,944 3,886 2,614 (3,205) (623) (372) (4,457) 1,236
<CAPTION>
<S> <C>
JUNE 30
-----------
<S> <C>
Total revenues.......... $ 82,526
Gross profit............ 27,572
Operating income........ 13,508
Interest expense
(net)................. 9,768
Extraordinary (loss) net
of tax benefit........ --
Net income (loss)....... 1,906
</TABLE>
- ------------------------------
(1) Reflects the write-off of noncompete recorded at 1994 Acquisition. See Note
5 to the Consolidated Financial statements.
OTHER MATTERS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
SFAS 121, which is effective for fiscal years beginning after December 15, 1995,
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Prime adopted SFAS 121 at the beginning of 1996, without a material
effect on the financial statements.
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 123, entitled "ACCOUNTING FOR STOCK-BASED
COMPENSATION" ("SFAS No. 123"), in October 1995. Prime will adopt the new
disclosure rules of SFAS No. 123 in Fiscal Year 1997.
33
<PAGE>
BUSINESS
GENERAL
Prime is the second largest rental equipment company in the United States,
based upon 1995 rental equipment revenues, and currently operates 101 rental
equipment yards in 13 states. The Company rents over 100 different types of
equipment, such as aerial manlifts, portable air compressors, forklifts and
light earth moving equipment and small equipment such as lawnmowers, plumbing
equipment and hand tools, to commercial construction, industrial and residential
users. The Company also sells complementary parts and merchandise and used
equipment, and acts as a distributor of new equipment on behalf of nationally
known equipment manufacturers. At July 31, 1996, the Company had an equipment
rental fleet with a book value of $245.7 million ($347.5 million at original
cost) comprised of over 40,000 pieces of equipment. Over the period from 1991 to
1995, Prime's total revenues increased from $146.2 million to $242.8 million, a
compound annual growth rate of 13.5%. Total 1995 revenues on a pro forma basis
for two acquisitions completed in 1996 would have been $307.2 million, an
increase of 45% over the 1994 historical result.
Prime seeks to be the market leader in the regions it services while
maximizing its profitability and cash flow. The Company attributes its success
to its operating strategy which includes, among other things, a focus on
customer service, a modern and diverse rental fleet, and a proprietary POS
system. Management believes that the consistent delivery of high quality
service, including 24 hour on-call maintenance, repair and support services
differentiates Prime from its competitors. Prime believes it also offers one of
the most comprehensive and well maintained fleets of equipment in the rental
equipment industry. The Company employs an extensive preventive maintenance
program for its rental fleet, increasing the dependability, useful life and
resale value of the equipment. In addition, the Company's proprietary POS system
enables each rental equipment yard manager on a real-time basis to search the
Company's entire rental fleet for needed equipment, determine its location and
arrange for delivery to customers using the Company's radio-dispatched fleet of
trucks and trailers and independent carriers. The Company believes that its
extensive, well maintained rental fleet, coupled with its ability to redeploy
equipment rapidly and efficiently among its yards, allows it to optimize fleet
utilization and return on fleet investment.
Prime has a diverse base of over 40,000 active customers, ranging from
"Fortune 500" companies to small contractors and homeowners. Commercial
construction and industrial customers accounted for approximately 50% and 40%,
respectively, of the Company's total revenues in 1995, with subcontractors,
homeowners and other customers generating the remaining 10%.
Primeco was purchased from W.R. Grace & Co. in 1989 by Compagnie Francaise
de l'Afrigue Occidentale, a French company which, in turn, was acquired by an
affiliate of Artemis in 1993. In December 1994, affiliates of Investcorp and a
group of international investors formed Prime Service, Inc. to acquire Primeco
from Artemis.
INDUSTRY
According to a survey conducted for the AED, the equipment rental industry
has grown from approximately $600 million in 1982 to approximately $13 billion
in 1993, the last period for which such data is available. This increase
represents a compound annual growth rate of 32%. In addition, according to the
RER, rental revenues for the top 100 equipment rental companies increased
approximately 25% to $2.5 billion in 1995 from approximately $2.0 billion in
1994. Management believes that this growth reflects, in part, increased
outsourcing trends by industrial corporations related to an increased emphasis
on minimizing capital invested to purchase low usage equipment as well as
reducing the labor costs associated with maintaining and servicing such
equipment. While equipment users traditionally have rented equipment for
specific purposes, such as supplementing capacity during peak periods in
connection with special projects, the convenience and cost-saving factors of
utilizing rental equipment have encouraged customers to look to suppliers such
as the Company as ongoing comprehensive sources of equipment. Management
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believes that demand for rental equipment by the industrial segment will
continue to increase as these industrial companies continue to outsource many
non-core operations. According to recent surveys conducted by the CIT Group,
commercial construction contractors intend to increase the percentage of
equipment they rent without a purchase option to an estimated 8% of their total
equipment requirements in 1996 from less than 5% in 1994.
The rental equipment industry is highly fragmented and primarily consists of
a large number of relatively small, independent businesses serving discrete
local markets and a small number of multi-yard regional and multi- regional
operators. Management believes that the rental equipment industry offers
substantial consolidation opportunities for large, well-capitalized rental
businesses such as the Company. Relative to smaller competitors, multi-regional
operators such as the Company benefit from several competitive advantages,
including purchasing power, the ability to service national accounts, the
ability to transfer equipment among rental equipment yards in response to
changing patterns of customer demand and sophisticated management information
systems. In addition, multi-regional operators such as the Company are less
sensitive to localized cyclical downturns.
STRATEGY
Prime's strategy is to become the largest and most profitable rental
equipment company in the United States. Since the 1994 Acquisition, the Company
has pursued an aggressive growth strategy primarily by: (i) increasing the
rental fleet at its existing rental equipment yards to satisfy current and
anticipated demands, (ii) expanding its rental equipment yard network both in
existing and new geographic markets by either acquiring existing yards or, to a
lesser extent, opening new yards, (iii) increasing revenues from industrial
customers and (iv) maximizing the utilization and profitability of its rental
fleet. The Company plans to continue implementing these strategies, with
increased emphasis on expanding its rental equipment yard network and increasing
its revenues from industrial customers.
INCREASE RENTAL FLEET AT EXISTING RENTAL EQUIPMENT YARDS. From 1991 to
1995, Prime experienced a significant increase in the demand for its rental
equipment, as evidenced by a decline in Prime's percentage of equipment not
rented within the last 90 days (non-rental rate) from an average monthly rate of
7.0% in 1991 to an average monthly rate of 3.4% in 1994, 3.6% in 1995 and 3.5%
for the first six months of 1996, despite increasing the rental fleet (based on
average original cost) from $172.9 million in 1991 to $325.5 million for the six
month period ended June 30, 1996. The Company targets a non-rental rate of 5%,
which it believes minimizes lost revenue opportunities resulting from having
insufficient equipment to meet demand, while maximizing the Company's return on
equity. Prior to the 1994 Acquisition, the Company's capital expenditure program
was limited by the Company's prior owners. From 1991 to 1994, the Company did
not make any material acquisitions and purchased an aggregate of $33.7 million
of equipment (exclusive of amounts required to replace used equipment sold in
the ordinary course of business and inclusive of rental equipment purchases for
new yards). Despite revenues increasing during this period from $146.3 million
in 1991 to $211.9 million in 1994, management believes that its capital
expenditures program and resulting rental equipment fleet were not adequate to
meet the market demand. Since the 1994 Acquisition, the Company has
significantly increased its rental fleet by purchasing approximately $56.3
million of equipment through December 31, 1995, and $24.7 million during the six
month ended June 30, 1996 (exclusive of amounts required to replace used
equipment sold in the ordinary course of business and recent acquisitions, but
inclusive of rental equipment purchases for new yards). Management expects its
total 1996 rental equipment purchases to be $42.9 million (in each case
exclusive of amounts required to replace used equipment sold in the ordinary
course of business and recent acquisitions, but inclusive of rental equipment
purchases for new yards).
EXPAND RENTAL EQUIPMENT YARD NETWORK. Prime intends to selectively expand
its network of rental equipment yards through a combination of acquisitions of
suitable existing rental equipment yards and to a lesser extent by opening new
rental equipment yards. Management believes that its management information
systems, size and operating expertise provide a competitive advantage in making
acquisitions as these
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strengths allow Prime to (i) integrate targets quickly into its information and
operating structure, (ii) realize significant synergies in the form of reduced
overhead and lower cost of goods through greater purchasing power, and (iii)
enhance revenue by supplying acquired yards with additional equipment to
optimize the rental fleet mix and add new business lines at those yards and (iv)
enhance revenue by expanding coverage of national accounts. The Company
primarily targets acquisitions of stable equipment businesses in new or existing
markets where an existing owner has limited resources to expand the rental
equipment fleet. Pursuant to this strategy, in February 1996 Prime acquired
Vibroplant U.S., Inc. (operating as American Hi-Lift Corporation, "American
Hi-Lift"), adding a net of 12 yards in seven states, and in July 1996 Prime
acquired the assets of Alpine, adding a net six yards in the state of Washington
and expanding Prime's presence in the Northwest (collectively, the "1996
Acquisitions"). In the case of the 1996 Acquisitions, Prime completed the
integration of the acquired equipment yards and the acquired fleet into the
Company's management information systems on the closing date of each
acquisition. In connection with the integration of the business of American
Hi-Lift, Prime's management reduced on an annualized basis the selling, general,
administrative and other expenses associated with American Hi-Lift by
approximately $5 millon, as compared to $15.2 million incurred by American
Hi-Lift for the year ended March 31, 1995.
INCREASE REVENUES FROM INDUSTRIAL CUSTOMERS. Prime believes that it is one
of the largest suppliers of rental equipment to industrial companies in the
southern United States, based upon revenues from equipment rentals to such
customers. The demand for rental equipment from Prime's industrial customers
generally has been less sensitive to economic cycles than that of its commercial
and residential customers and is, therefore, more stable. Management attributes
this to the fact that a major part of rental equipment use by industrial
customers is related to ongoing and periodic maintenance work on existing
facilities. Since many of the facilities operate 24 hours a day, such
maintenance is essential to industrial customers in order to avoid costly
shutdowns that result from equipment failures. Prime has taken a number of steps
to increase revenues from industrial customers, including focusing its national
marketing program on the industrial market segment and offering services that
meet the specific needs of industrial customers such as its Integrated Rental
Management-TM- program. Under its Integrated Rental Management-TM- program,
Prime typically enters into exclusive contracts with large industrial customers,
generally "Fortune 500" companies, to supply rental equipment, to provide 24
hours a day maintenance and repair services, and to provide sophisticated
equipment management services required for a particular facility or facilities.
Prime believes that it is well-positioned to take advantage of the trend of
companies outsourcing their rental equipment needs due to its formalized
Integrated Rental Management-TM- program, customized POS system and strong
national account relationships.
MAXIMIZE UTILIZATION AND PROFITABILITY OF RENTAL FLEET. Prime believes that
it maintains customer loyalty by maintaining a diverse modern fleet. During the
first six months of 1996, the average age of Prime's rental fleet was 37 months.
Prime's proprietary POS system allows it to monitor the demand for and actual
usage of its equipment on a real-time basis. The Company can, taking advantage
of its presence in numerous markets, allocate new equipment and transfer current
equipment to yards with high rental activity. In addition, if utilization of
equipment declines, management is able to quickly react by decreasing purchases
of new equipment or replacement of used rental equipment sold. The Company
believes its comprehensive preventative maintenance program allows it to
increase the useful life of its equipment and obtain premium values when it is
sold.
The Company is a Delaware corporation. Its principal executive officers are
located at 16225 Park Ten Place, Suite 200, Houston, Texas 77084. Its telephone
number is (713) 578-5600.
OPERATIONS
Typically, Prime's rental equipment yards occupy approximately 2.2 acres and
include (i) a service center, (ii) a customer showroom displaying selected
rental equipment, new equipment offered for sale and related merchandise, (iii)
an equipment service area and (iv) storage facilities for equipment requiring
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protection from inclement weather. Each rental equipment yard is staffed by, on
average, approximately 15 full-time employees and one part-time employee,
including a manager, assistant manager, sales assistants, truck drivers,
mechanics and other personnel. Currently, the Company's yard managers have been
with the Company for an average of seven years. Most of the rental equipment
yards offer a full range of equipment for rental and sale, with the actual mix
designed to meet the anticipated needs of the customers in each location. Prime
continues to expand its network of rental equipment yards selectively through a
combination of acquisitions of suitable existing rental equipment yards in new
and existing geographic areas and, to a lesser extent, openings of new rental
equipment yards in its existing markets. Prime increased its yard count from 74
in 1994 to 101 as of August 31, 1996, for a net increase of 27 rental
facilities. The Company operates all of its yards, including acquired yards,
under the name PRIME EQUIPMENT-Registered Trademark-.
CUSTOMERS
Prime has developed a diverse base of over 40,000 customers who have done
business with Prime in the last twelve months, ranging from "Fortune 500"
companies operating nationwide to subcontractors and homeowners. During 1995, no
single customer accounted for more than 3.0% of total revenues, and the 10
largest customers accounted for less than 9.5% of total revenues. Generally,
Prime's customer base includes three broad categories: (i) commercial
construction companies, (ii) industrial companies and (iii) subcontractors,
homeowners and others. Commercial construction and industrial customers
accounted for approximately 50% and 40%, respectively, of Prime's total revenues
in 1995, with subcontractors, homeowners and other customers generating the
remaining 10%.
COMMERCIAL CONSTRUCTION. Prime's commercial construction customers include
national and regional contractors and subcontractors involved in commercial
construction projects, such as office and apartment buildings, roads, bridges
and highways, and plants and other manufacturing facilities. Prime's equipment
is used in each phase of a commercial construction project, and includes
backhoes used for digging, compaction equipment used for compacting earth,
trowels used for laying concrete, and welding machines, booms and lifts used in
the construction of buildings. Although the commercial construction market is
cyclical on a regional basis, Prime's geographic diversity makes it less
sensitive to downturns in any one region.
INDUSTRIAL. Management believes Prime is one of the largest suppliers of
rental equipment to industrial companies in the southern United States, based
upon equipment rental revenues. Prime's industrial customers, many of which
operate 24 hours per day and seven days per week, use equipment rented from
Prime to perform work required to construct, maintain and repair major
industrial and manufacturing facilities. Prime's industrial customers represent
a broad range of industries including pulp and paper, chemical, petrochemical,
steel, aluminum and textiles. In addition, Prime serves several public
utilities. Aerial equipment such as boom lifts and platforms is used by
industrial customers to conduct safety inspections and routine maintenance,
while equipment such as air tools and air compressors is used in combustible
environments where the risk of explosion prevents the use of electrical tools
and equipment. Prime has benefited from the growing trend of large industrial
corporations towards outsourcing many non-core components of their businesses
and heightened safety and environmental standards that require compliance and
ongoing maintenance by industrial customers.
SUBCONTRACTORS, HOMEOWNERS AND OTHERS. Primarily through 11 yards in Texas,
Prime rents landscaping, plumbing, remodeling and home improvement tools to
subcontractors, homeowners and other customers. Equipment rentals to
subcontractors and homeowners generally are for shorter periods (often one to
two days) and provide higher gross margins relative to other market segments,
but require greater maintenance and management time than commercial and
industrial rentals. Revenues from subcontractors, homeowners and others
accounted for approximately 10% of Prime's total revenues in 1995, and
Management does not anticipate any material expansion in this business segment.
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PRODUCTS AND SERVICES
Equipment rental, including the Integrated Rental Management-TM- program and
shutdown and turnaround services, represents Prime's principal line of business.
In 1995, rental equipment together with rental-related revenue (such as damage
waiver income, delivery charges, labor charges and warranty income), accounted
for 62.9% of Prime's total revenues. Prime also acts as a distributor of new
equipment on behalf of nationally known equipment manufacturers. Revenues from
the sale of new equipment accounted for approximately 14.3% of Prime's total
revenues in 1995. The balance of Prime's 1995 revenues were derived from the
sale of parts and related merchandise such as diamond saw blades, coolers,
gloves and safety equipment (13.3%) and the sale of used rental equipment
(9.5%).
RENTAL EQUIPMENT. Prime believes it offers one of the most comprehensive
and well-maintained fleet of equipment in the rental equipment industry. Prime
believes that its new-equipment distribution relationships, together with the
volume of its equipment purchases, help it to achieve favorable pricing and
terms on its rental fleet equipment purchases. Prime's rental fleet consists of
approximately 40,000 pieces of equipment. Five categories of equipment
represented approximately 75.7% (based on original cost) of Prime's total rental
equipment fleet as of December 31, 1995: (i) platforms and booms (28.7%), (ii)
forklifts (14.4%), (iii) air compressors and dryers (13.4%), (iv) loaders and
backhoes (11.8%) and (v) scissors and vertical platforms (7.4%). The mix of
equipment at each of Prime's rental equipment yards is tailored to meet the
demands of the local customer base.
Prime seeks to maintain a modern efficient rental fleet through regular
sales of used rental equipment and ongoing capital investment in new rental
equipment. In addition, Prime believes it has one of the most advanced
preventive maintenance programs in the rental equipment industry. This program
extends the useful life of Prime's rental equipment and produces higher resale
prices. Management attempts to balance the objective of obtaining acceptable
prices from equipment sales against the revenues obtainable from used equipment
rentals. As of June 30, 1996, the weighted average age of the various categories
of Prime's rental equipment was 37 months. Over the last five years, Prime
received an average of 58% of the original cost of equipment upon resale,
largely due to the ongoing preventative maintenance of the equipment and its
significant remaining useful life at the time of resale. The weighted average
age of equipment sold was 66 months for 1995, and 69 months for the first six
months of 1996.
Prime believes that many customers choose to rent equipment rather than to
purchase or lease it in order to minimize capital requirements and maintenance
costs and to maximize the flexibility of equipment utilization and availability.
Accordingly, Prime offers flexible rental terms and conditions to its customers.
Customers may rent equipment by the day, week or month, with the daily rental
rate declining as the duration of the rental term increases. During 1995 and the
first six months of 1996, the average rental was for a period of 13 days.
Generally, Prime's industrial customers tend to rent for longer periods of time
than commercial construction customers, subcontractors or homeowners. Prime
provides 24 hour maintenance, repair and support services to customers,
including service at the customer's job site.
INTEGRATED RENTAL MANAGEMENT-TM- PROGRAM. Prime believes that the
Integrated Rental Management-TM- program offers an attractive opportunity for
growth by capitalizing on Prime's customized POS system and strong national
account relationships. Prime has entered into agreements with certain "Fortune
500" industrial companies to act as the exclusive supplier and manager of
industrial rental equipment used by each such customer, its contractors and
subcontractors in connection with repair, maintenance and construction at
certain of such customers' plants. Prime believes that customers benefit from
this arrangement in a number of ways, including cost savings, reduced capital
investment in equipment and related maintenance costs, and increased ability to
focus on their core operations through outsourcing equipment needs. Prime
benefits through increased revenues, as well as the reduction of operating
costs, and improved fleet utilization rates as a result of the sole-source
arrangement with the customer. The existing Integrated Rental Management-TM-
contracts generally require several months notice for termination. There can be
no assurance that Prime will be able to maintain its existing Integrated Rental
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Management-TM- contracts or obtain additional Integrated Rental Management-TM-
contracts in the future. If Prime's existing Integrated Rental Management-TM-
contracts were to be terminated by the customers, Prime would redeploy the
rental equipment dedicated to servicing those contracts among its existing
rental equipment yards and, if necessary, proportionately reduce its purchases
of new rental equipment. Management believes that the Integrated Rental
Management-TM- program affords significant growth opportunities due to the trend
by industrial companies toward outsourcing non-core components of their
businesses.
SHUTDOWN AND TURNAROUND SERVICES. Prime's "Turnaround Central" operation,
located in Houston, Texas, is dedicated to providing industrial customers with
the equipment, tools and supplies needed to perform scheduled periodic
maintenance and repairs ("turnarounds") as well as required repairs resulting
from accidents or emergencies that curtail operations ("shutdowns"). In
addition, Prime assists the customer in managing and monitoring the location and
utilization of the equipment and tools by utilizing a bar-code scanning system
that enables Prime's personnel to track the equipment and identify the employees
of the customer using such equipment. The lost production experienced as a
consequence of turnarounds and shutdowns make these procedures costly to
manufacturers who therefore place a premium on efficiency and speed in
accomplishing the required maintenance or repairs. Turnaround Central is
generally able to deliver its comprehensive package to a customer anywhere in
the United States in less than 24 hours. Management believes that few of Prime's
competitors offer specialized services tailored to meet the demands of
turnarounds and shutdowns. The Turnaround Central operation helps to promote
Prime's relationships with its industrial customers by efficiently providing
them with a critical, value-added service.
SALES OF NEW EQUIPMENT. Prime is a distributor for over 30 major equipment
manufacturers, including JLG Industries, Inc., Simon Aerials, Inc.,
Snorkel-Economy and Genie Industries (booms and high-reach equipment), Lull
Industries, Inc. and Gehl Construction (rough terrain forklifts and skid-steer
loaders), Sullair Corporation (air compressors), Chicago Pneumatic Tool Company
(air tools), Target Products, Inc. (concrete saws) and Wacker Corporation (earth
compaction equipment). Prime is the leading distributor of various lines of
equipment for several of these manufacturers. During 1995, five categories of
equipment, consisting of air compressors and dryers, platform booms, saws,
compaction equipment and forklifts, accounted for approximately 55.9% of Prime's
sales of new equipment. Prime believes that its distribution relationships,
together with the volume of its purchases, help it to achieve favorable prices
and terms on equipment purchased for its rental fleet. Sales of new equipment
offer flexibility to the customer and also provide Prime with improved
relationships and visibility with its customers.
SALES OF USED EQUIPMENT. Prime maintains a regular program of selling used
equipment in order to adjust the size and composition of its rental fleet to
changing market conditions and to maintain the quality of its available rental
fleet. Prime is generally able to achieve favorable sales prices for its used
equipment due to its strong preventive maintenance program and its practice of
selling used equipment before it becomes obsolete or irreparable. Management is
also able to adjust and balance the rate of used equipment sales and new
equipment purchases to deal with changing economic conditions and thereby
minimize the short-term adverse effects of declines in economic activity. In
general, Prime seeks to sell approximately 12-15% of its used equipment rental
fleet each year based on original cost. The weighted average age of equipment
sold in 1995 was 66 months. Sales of used equipment are accomplished by Prime in
several ways, including: (i) directly from rental equipment yards; (ii) from
Prime's two dedicated used equipment yards (one in Texas and one in Florida);
(iii) through advertising; and (iv) through auctions.
RELATED PARTS AND MERCHANDISE SALES. Prime also sells parts, supplies and
merchandise, including diamond and regular saw blades, drill bits, shovels,
goggles, hard hats and other safety gear and coolers, as a complement to its
equipment rental and sale business.
OTHER SERVICES. Prime also offers maintenance service to its customers that
own equipment and generates revenues from damage waiver charges, delivery
charges (particularly for larger pieces of
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equipment) and warranty income. Although these services comprised only 6% of
Prime's total revenues for 1995, they provide relatively high margins and
contribute to Prime's profitability.
PURCHASING AND SUPPLIERS
Prime's size, purchasing volume and new equipment distribution relationships
enable it to purchase equipment directly from manufacturers at prices and on
terms that Prime believes to be more favorable than are available to its smaller
competitors. All of Prime's purchasing is coordinated through its central
purchasing department. All suppliers of Prime must meet specified standards of
quality and experience. Prime participates in dealer quality councils and
training programs with certain of its suppliers. The favorable pricing, service,
training and information that Prime receives from its suppliers represent a
competitive advantage that Prime believes is significant. Prime's Product
Evaluation Committee meets quarterly to analyze the effectiveness, quality and
profitability of Prime's equipment and to address equipment procurement issues.
The Product Evaluation Committee is composed of corporate management and yard
employees whose experience with specific equipment brands and models,
supplemented by performance data captured by Prime's POS system, provides the
basis for equipment procurement decisions. Prime believes that it could readily
replace any of its existing suppliers if it were to lose its ability to purchase
equipment from such suppliers.
MAINTENANCE PROGRAM
Prime's preventive maintenance program establishes a schedule of preventive
maintenance customized to each category of equipment. To administer this
program, Prime employs a full-time staff of 468 trained mechanics, who perform
equipment maintenance at Prime's yards and at customers' job sites. In contrast,
Prime believes that many of its competitors do not practice preventive
maintenance to the same extent as Prime and tend to focus a greater portion of
their maintenance efforts on repairing damaged or inoperable equipment. As a
result of this program, Prime believes that it is able to obtain more dependable
performance from its fleet, extend the useful life of its rental equipment fleet
and obtain more favorable prices when used rental equipment is sold.
POS SYSTEM
Prime's advanced proprietary POS system, which has been in place in all of
Prime's rental equipment yards since October 1992, is used by Prime for the
day-to-day management of approximately 40,000 pieces of rental equipment. This
computer system links all of Prime's rental equipment yards, headquarters and
other facilities, permitting universal access to real-time data concerning the
location, rental status and maintenance history of each piece of equipment in
the rental fleet. In addition, the POS system provides information concerning
customer sales and credit histories, generates rental contracts and processes
more than 65,000 invoices per month. The POS system is linked to Prime's
management information system, which provides management with access to
up-to-date financial information concerning Prime's performance. Prime's systems
professionals also developed the customized, proprietary software used in
Prime's Integrated Rental Management-TM- program, as well as software programs
for specific customer needs. Prime's data center, located at its headquarters in
Houston, Texas, employs an IBM mainframe computer system for its flexibility and
capacity to accommodate Prime's systems needs for the near future. In the event
Prime's POS system becomes disabled, Prime has retained disaster recovery
back-up services which will provide computer systems at several off-site
locations. The Company believes that its current information systems, along with
its internal development staff and outside consultants, will provide the
necessary flexibility to accommodate changing customer needs and future growth
of the Company.
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SALES, MARKETING AND ADVERTISING
Prime markets its services in four principal ways, the most important of
which is marketing through its sales force. Prime also has developed a national
accounts program, a telemarketing program and certain promotional activities to
supplement and support the efforts of Prime's sales force.
SALES FORCE. Prime markets its products and value-added services primarily
through its approximately 181 member sales force, consisting of the Vice
President of Sales and Marketing, two Directors of Sales, and ten sales managers
who oversee 168 sales representatives. Prime's sales force is knowledgeable
about all of Prime's services and products, including the rental of equipment,
sales of new and used equipment, sales of parts and merchandise, and Prime's
value-added rental services, including Integrated Rental Management-TM- and
Turnaround Central. Operating directly from the local rental equipment yards,
sales managers and representatives call regularly on contractors' job sites and
industrial facilities in their sales territories, often assisting customers in
planning for their equipment requirements. Prime also provides its sales force
with extensive training, including frequent in-house training by supplier
representatives regarding the operating features and maintenance requirements of
new equipment. Members of Prime's sales force earn commissions on all equipment
rentals and sales that they generate.
NATIONAL ACCOUNTS. Prime's national accounts department is dedicated
exclusively to marketing to large customers with a nationwide presence in order
to develop regional or multi-regional relationships. The national accounts
department supplements the efforts of the sales force whose members deal
directly with management of the local production facilities of national firms.
National account marketers call on the corporate headquarters of Prime's main
industrial and commercial construction customers in order to expand existing
business relationships to include additional production facilities or
construction sites. Multi-facility arrangements are covered by "blanket"
contracts with the national accounts department. The terms of these blanket
contracts designate Prime as the preferred supplier of rental equipment at
designated customer facilities. Since the national accounts program was
initiated in 1991, the number of national account customers has increased from
42 to 86 (representing approximately 350 operating facilities to which Prime
rents and sells equipment under blanket contracts). In 1995, national account
customers represented approximately 13.4% of Prime's total revenues, and Prime's
top 10 national accounts represented over 7.6% of Prime's total revenues.
TELEMARKETING. Management believes that Prime's telemarketing program is
one of the most advanced programs currently in use in the rental equipment
industry. Prime's telemarketing department, which was established in 1991,
employs four full-time telemarketers who are based at Prime's headquarters in
Houston and make approximately 2,200 targeted telephone calls per month, or 100
telephone calls per day per telemarketer. The telemarketers are aided by
in-house, custom-designed software, which contains an extensive database
providing access to over 250,000 active or potential customers. This database
enables the telemarketers to understand each prospect's activities and their
potential equipment needs before placing a call. The primary objectives of the
telemarketers are: (i) to generate leads and open new accounts for sales
personnel in the field by calling on companies in a targeted geographical area,
(ii) to call on inactive accounts to review whether they have current or
near-term equipment needs and (iii) to perform market research.
PROMOTIONAL ACTIVITIES. Prime actively promotes its services by direct mail
and advertising in the yellow pages of telephone directories in the markets it
serves. Prime also hosts open houses, customer appreciation events and other
special promotional events. Prime provides a toll-free telephone number
that automatically connects the caller to Prime's rental equipment yard closest
to that caller. Furthermore, Prime also prints its marketing materials in
Spanish to address the Hispanic customer base in many of its markets in the
southwestern United States.
INTERNET WEB PAGE. In addition to its principal marketing methods, the
Company is currently in the process of creating an internet web page that is
anticipated to be used as a marketing tool to describe the
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Company's locations, product lines, and used rental equipment available for
sale, which it expects to have on-line in early fall of 1996.
PROPERTIES
Prime owns 47 of its rental locations and leases 47 rental locations as well
as its approximately 23,000 square foot headquarters space in Houston, Texas,
with the majority of its leases having multiple five or ten-year renewal
options. These figures do not include the Integrated Rental Management-TM-
service centers that are located on-site at customer-owned locations. As part of
its 101 yards, Prime also operates a used rental equipment yard in each of Texas
and Florida, equipment service centers at various sites, a national warranty
center, and the Turnaround Central facility. Prime has granted mortgages on 40
of its owned real property sites to the lenders under its credit facility to
secure Prime's obligations thereunder. The total investment in owned facilities
is approximately $25.5 million at June 30, 1996, while the average base rent on
leased facilities is approximately $66,000 annually. Management believes that
none of Prime's leased facilities, individually, is material to the operations
of Prime. In addition, Prime maintains a fleet of 714 trucks and 161 trailers,
of which 82 trucks and 101 trailers are owned by Prime as of June 30, 1996.
COMPETITION
The rental equipment industry is fragmented and highly competitive. Each
market in which Prime operates is served by numerous competitors, ranging from
large multi-regional or regional companies, such as Hertz Equipment Rental
(currently the largest rental equipment company), to small, independent
businesses with a limited number of locations. Prime believes that participants
in the rental equipment market compete on the basis of service, breadth of
product line, quality and price. In general, Prime believes that regional and
multi-regional operators, especially larger operators such as Prime, enjoy
substantial competitive advantages over small, independent rental businesses who
cannot afford to maintain the broad and extensive rental equipment fleet and
high level of maintenance and service that Prime offers. In its markets, Prime
believes that its POS system, its commitment to customer service and fleet
maintenance and its centralized management systems enable it to compete
successfully with other large regional and multi-regional operators.
EMPLOYEES
At June 30, 1996, Prime had a total of 1,726 employees, of which 699 were
salaried and 1,027 were non-salaried personnel. Of these, 131 were involved in
administration, 189 in sales and marketing, and 1,406 in operations and rental
equipment yard management. Prime is committed to, and has realized significant
benefits from, its formal employee training programs including the Quality
Improvement Program and management and salesforce training programs. Prime
believes that this investment in its employees, in conjunction with services
such as safety awareness programs for both customers and employees and drug- and
alcohol-free workplace policies, is a competitive advantage that positions Prime
to be responsive to customer needs. None of Prime's work force is unionized and
management believes that its relationship with employees is satisfactory.
TRADE NAMES
Primeco is the owner of the trademark PRIME EQUIPMENT-Registered Trademark-
registered with the U.S. Patent and Trademark Office for use in connection with
the rental of light to medium construction equipment. Prime has also filed with
the U.S. Patent and Trademark Office a declaration of intent to use the
trademark Integrated Rental Management-TM-. Although management believes that
the PRIME EQUIPMENT-Registered Trademark- name is recognized among customers in
the industry, it does not believe that Prime's operations are dependent to any
significant extent on any single trade name. Primeco has granted its lenders
under its credit facility a lien on its intellectual property, including the
PRIME EQUIPMENT-Registered Trademark- trademark.
42
<PAGE>
ENVIRONMENTAL REGULATION
Prime is subject to various evolving federal, state and local environmental
laws and regulations governing, among other things, emissions to air, discharge
to waters and the generation, handling, storage, transportation, treatment and
disposal of hazardous substances and wastes. These laws and regulations provide
for substantial fees and sanctions for violations, and, in many cases, could
require Prime to remediate a site to meet applicable legal requirements.
In 1995, Prime spent approximately $1.3 million on environmental matters,
including costs related to remediation, compliance, and capital requirements,
and has budgeted expenditures of approximately $4.4 million in 1996 for such
matters. At June 30, 1996, Prime had a reserve for environmental remediation of
$7.0 million and a related receivable from state trust fund programs and a
seller of certain yards of $2.0 million. The actual cost of remediating
environmental conditions may be different than that accrued by Prime due to the
difficulty in estimating such costs and due to potential changes in the status
of legislation and state reimbursement programs.
Management believes that the amounts required to correct any identified
environmental condition and to maintain compliance with applicable environmental
regulations will not have a material adverse effect on the financial condition
or results of operations of Prime.
LEGAL PROCEEDINGS
From time to time, the Company has been and is involved in various legal
proceedings, all of which management believes are routine in nature and
incidental to the conduct of its business. The ultimate legal and financial
liability of the Company with respect to such proceedings cannot be estimated
with certainty, but the Company believes, based on its examination of such
matters, that none of such proceedings, if determined adversely to the Company,
would have a material adverse effect on the financial condition or results of
operations of the Company.
43
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of the
directors and executive officers of the Company and Primeco. Each director of
the Company will hold office until the next annual meeting of shareholders of
the Company or until his successor has been elected and qualified. Officers of
the Company are elected by the Board of Directors of the Company and serve at
the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- -------------------------------------------------- --- --------------------------------------------------------
<S> <C> <C>
Thomas E. Bennett................................. 51 President, Chief Executive Officer, Director
Brian Fontana..................................... 38 Executive Vice President, Chief Financial Officer
Kevin L. Loughlin................................. 46 Director of Finance, Treasurer, Secretary
John D. Latimer................................... 50 Controller, Assistant Treasurer, Assistant Secretary
Peter A. Post..................................... 52 Vice President Operations
James O. York..................................... 53 Vice President of Sales and Marketing
Gerald E. Lane.................................... 55 Director of Central Division
Michael Gordon.................................... 44 Director of Eastern Region
Rick L. McCurry................................... 49 Director of Western Division
Christopher J. O'Brien............................ 38 Director
Charles J. Philippin.............................. 45 Director
Jon P. Hedley..................................... 35 Director
Christopher J. Stadler............................ 32 Director
</TABLE>
Thomas E. Bennett joined the Company in 1975 as Equipment Manager. He became
a Rental Equipment Yard Manager in 1978 of the Company's largest distribution
location, and was named Regional Manager in 1979. In 1987, Mr. Bennett was
promoted to Vice President of the Southwest Division. In 1988, he was selected
as the Vice President of Operations and of the Company and was named President,
Chief Executive Officer and a director in 1990. Prior to joining the Company,
Mr. Bennett worked for the Tool Crib, Inc. for eleven years.
Brian Fontana joined Primeco on April 1, 1996 as Executive Vice President
and Chief Financial Officer. Mr. Fontana was employed previously with National
Convenience Stores, Incorporated (NCS), a company traded on the New York Stock
Exchange until it was acquired by Diamond Shamrock in 1995. Mr. Fontana joined
NCS in 1990 as Assistant Treasurer and was appointed to Treasurer in February
1992. In August 1993, he was promoted to Vice President and Treasurer, a
position he held until December 1993, when Mr. Fontana was named Vice President
and Chief Financial Officer.
Kevin L. Loughlin joined the Company in 1980 as Controller and Vice
President of Finance and held this position until 1990, when he was named
Executive Vice President, Chief Financial Officer, Secretary and Treasurer. He
was elected a director of the Company in January 1995. From 1973 to 1979, Mr.
Loughlin was employed by W.R. Grace where he served in various accounting and
financial capacities. Prior to joining W.R. Grace, Mr. Loughlin was an
accounting supervisor for Dun & Bradstreet from 1971 to 1973.
John D. Latimer served as Assistant Controller of the Company from 1979 to
1989. In 1982, he was elected to the office of Assistant Secretary of the
Company. In December 1989, he was named Controller and Assistant Treasurer of
the Company.
Peter A. Post joined the Company in 1979 as a Rental Equipment Yard Manager.
In December 1979, Mr. Post was promoted to Regional Manager for East Texas,
Louisiana and Alabama, where he served until 1988 when he was named Vice
President of Operations for the Southwest Division. In January 1990, Mr. Post
became Vice President, Southwest Division.
44
<PAGE>
James O. York joined the Company in April, 1996 as the Vice President of
Sales and Marketing. Prior to joining Primeco, Mr. York held similar positions
during the past 17 years with Tate, Inc. and Trak International, both of which
are manufacturers of construction and industrial equipment.
Gerald E. Lane joined the Company in 1981 as a Rental Equipment Yard
Manager. In 1983, he was promoted to Regional Manager and in October 1992, was
named Vice President, Southeast Division. Prior to joining the Company, Mr. Lane
worked for Hertz Equipment Rental Company for 18 years.
Michael Gordon joined the Company in 1981 as an inside salesman. In 1982, he
was promoted to Rental Equipment Yard Manager. In 1988, Mr. Gordon was promoted
to Regional Manager for the Houston area. In 1993 he became Regional Manager for
the Company's California Region. Mr. Gordon was promoted to Director of the
Eastern Division in September 1995. Prior to joining the Company, Mr. Gordon was
employed by JLG Industries for 3 years.
Rick L. McCurry joined the Company in 1989 as Regional Manager for North
Texas and Oklahoma. He remained in this position until September 1995 when he
was named Director of Operations Western Division. Prior to joining the Company,
Mr. McCurry served as General Manager at Zuni Rental in Albuquerque, New Mexico
for 6 years.
Christopher J. O'Brien became director of Prime in December 1994. He has
been an executive of Investcorp, its predecessor or one or more of its
wholly-owned subsidiaries since November 1993. Mr. O'Brien is a director of
Simmons Holdings, Inc. and Star Markets Holdings, Inc.
Charles J. Philippin became a director of Prime in December 1994. He has
been an executive of Investcorp, its predecessor or one or more of its
wholly-owned subsidiaries since October 1994. Prior to joining Investcorp, Mr.
Philippin was a partner with Coopers & Lybrand L.L.P. Mr. Philippin is a
director of Saks Holdings, Inc.
Jon P. Hedley became a director of Prime in September 1996. He has been an
executive of Investcorp, its predecessor or one of more of its wholly-owned
subsidiaries since April 1990. Mr. Hedley is a director of Saks Holdings, Inc.
Christopher J. Stadler became a director of Prime in September 1996. He has
been an executive of Investcorp, its predecessor or one or more of its
wholly-owned subsidiaries since April 1, 1996. Prior to joining Investcorp, Mr.
Stadler was a Director with CS First Boston Corporation.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE. Promptly following the consummation of the Offering, the
Board of Directors of the Company will establish an audit committee (the "Audit
Committee"). The Audit Committee will make recommendations concerning the
engagement of independent public accountants, review with the independent public
accountants the scope and results of the audit engagement, approve professional
services provided by the independent public accountants, review the independence
of the independent public accountants, consider the range of audit and non-audit
fees and review the adequacy of the Company's internal accounting controls. The
Audit Committee will initially consist of directors, a majority of which
shall be independent directors.
COMPENSATION COMMITTEE. Promptly following the consummation of the
Offering, the Board of Directors of the Company will establish a compensation
committee (the "Compensation Committee") to establish remuneration levels for
executive officers of the Company and oversee implementation of the Company's
stock option plans and any other incentive programs.
45
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1995, the Company had no compensation committee or other committee of the
Board of Directors performing similar functions. Decisions concerning
compensation of executive officers were made by the Company's Board of
Directors.
DIRECTOR COMPENSATION
The Company pays no additional remuneration to its employees or to
executives of Investcorp for serving as directors. Other directors receive an
annual retainer of $25,000, $1,500 for each regular or special meeting and
reimbursement of out-of-pocket expenses incurred in attending meetings of the
Board of Directors and any committees of the Board on which they serve.
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation earned in the previous
three years by the Company's Chief Executive Officer and each of the other four
most highly compensated executive officers whose remuneration exceeded $100,000
(collectively, the "Named Executive Officers"). The current compensation
arrangements for each of these officers are described in "--Employment
Arrangements" below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
PRIME
LTIP (OPTIONS) ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) PAYOUTS(2) (#)(3) COMPENSATION(4)
- ---------------------------------------------------- --------- ---------- ---------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Bennett................................... 1995 $ 225,000 $ 330,000 -- -- $ 4,620
Chief Executive Officer 1994 172,500 95,757 $74,000 -- 4,620
1993 161,000 93,980 -- 4,497
Kevin L. Loughlin................................... 1995 140,000 160,000 -- -- 4,620
Director of Finance, 1994 135,600 63,544 47,017 -- 4,620
Treasurer and Secretary 1993 130,000 61,750 -- 4,497
Peter A. Post....................................... 1995 130,625 140,000 -- -- 4,620
Vice President of Operations 1994 110,500 41,387 38,040 -- 4,620
1993 105,000 30,975 -- 4,122
Gerald E. Lane...................................... 1995 110,000 110,000 -- -- 4,620
Director of Central Division 1994 96,700 56,441 14,080 -- 4,620
1993 86,000 51,887 -- 2,944
John D. Latimer..................................... 1995 97,983 29,792 -- -- 3,863
Controller 1994 94,650 30,288 490 -- 3,673
1993 91,000 27,300 -- 3,218
</TABLE>
- ------------------------
(1) Earned in year shown but paid in subsequent year.
(2) Amounts paid upon termination of the Seller's phantom stock plan pursuant to
the 1994 Acquisition.
(3) Following the closing of the 1994 Acquisition, certain members of management
were offered the opportunity to purchase shares of Common Stock from the
original investors at a price of $ per share (the price per share paid by
the original investors). The number of shares purchased by the Named
Executive Officers were as follows: Thomas E. Bennett ( ); Kevin L.
Loughlin ( ); Peter A. Post ( ); Gerald E. Lane ( ); and John D.
Latimer ( ).
46
<PAGE>
(4) Amounts paid pursuant to the Company's defined contribution 401(k) plan
matching program.
The following table provides information with respect to stock options
granted during the fiscal year ended December 31, 1995 to the Named Executive
Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (D)
----------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS EXERCISE OF
UNDERLYING GRANTED TO BASE PRICE
OPTIONS GRANTED EMPLOYEES IN PER EXPIRATION
NAME (A) FISCAL YEAR SHARE DATE 5% (B) 10% (C)
- ------------------------------ --------------- ----------------- ------------- -------------- ---------- ----------
Thomas E. Bennett............. 26.3% $ Dec. 2, 2004 $ 141,524 $ 358,665
Kevin L. Loughlin............. 8.7 Dec. 2, 2004 $ 47,145 $ 119,481
Peter A. Post................. 7.6 Dec. 2, 2004 $ 40,895 $ 103,639
Gerald E. Lane................ 6.5 Dec. 2, 2004 $ 35,216 $ 89,248
John D. Latimer............... 4.7 Dec. 2, 2004 $ 25,135 $ 63,701
</TABLE>
- ------------------------
(a) The options are for shares of Common Stock and were granted on December 2,
1994, and vest at 20% per year over 5 years upon achievement of certain
objectives. Prime achieved its 1995 objective and 20% of the options for
each named executive officer vested on March 30, 1996. To the extent not
earlier vested or terminated, all options will vest on the tenth anniversary
of the date of grant and will expire 30 days thereafter if not exercised.
All options will also vest upon certain changes in control.
(b) Represents an assumed market price per share of $ .
(c) Represents an assumed market price per share of $ .
(d) The dollar amounts under columns headed 5% and 10% represent the
hypothetical gain or "option spread" that would exist for the options based
on assumed 5% and 10% annual compounded rates of share price appreciation
over the full option term. These assumed rates for a 5% hypothetical gain
would result in a price per Share on December 2, 2004 of $114.02 and for a
10% hypothetical gain would result in a price per Share on December 2, 2004
of $181.56.
The following table contains certain information regarding options to
purchase shares of Common Stock held as of December 31, 1995 be each of the
Named Executive Officers. None of such Named Executive Officers exercised any
options during fiscal 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED HOLDINGS OPTIONS AT
FY-END
------------------------------------
<S> <C> <C>
NAME EXERCISABLE UNEXERCISABLE (A)
- --------------------------------------------------------------- ----------------- -----------------
Thomas E. Bennett.............................................. 0
Kevin L. Loughlin.............................................. 0
Peter A. Post.................................................. 0
Gerald E. Lane................................................. 0
John D. Latimer................................................ 0
</TABLE>
- ------------------------
(a) Options are for shares of Common Stock and vest 20% per year over 5 years
upon achievement of certain objectives. Prime achieved its 1995 objective
and 20% of the options for each named executive officer vested on March 30,
1996.
47
<PAGE>
EMPLOYEE BENEFIT PLANS
The Company has a noncontributory defined benefit pension plan (the "Plan")
covering substantially all of its employees. The following table sets forth the
estimated annual benefits payable upon retirement under the Plan based on
retirement at age 65 and 1995 covered compensation of $25,920:
<TABLE>
<CAPTION>
YEARS OF SERVICE
REMUNERATION -----------------------------------------------------
(I.E. FINAL EARNINGS) 15 20 25 30 35
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$125,000................................................... $ 24,971 $ 33,055 $ 41,319 $ 49,583 $ 57,846
$150,000 and above......................................... 30,041 40,055 50,069 60,083 70,096
</TABLE>
For each of the individuals listed above, the Plan covers total compensation
as listed in the Summary Compensation Table, but limited to $150,000 as required
by the Retirement Protection Act. Each of the five officers listed in the
Summary Compensation Table has credited service as of December 31, 1995 of 6.3
years. Benefits under the Plan are based on (i) final earnings (the highest five
consecutive years' earnings out of the last ten years before retirement date or
average earnings received in the last five full years before early retirement or
termination of employment), (ii) covered compensation (the average of the Social
Security Taxable Wage Bases for the 35-year period ending at Social Security
Retirement Age) and (iii) years of credited service. Benefits under the Plan are
determined by a formula which multiplies (x) the sum of 1% of final earnings up
to covered compensation and 1.4% of final earnings in excess of covered
compensation by (y) the years of credited service up to 35 years. There is no
reduction for early retirement at age 62. The Company's policy is to fund all
current and prior service costs. Plan assets are invested in various segregated
accounts with an insurance company. Benefits under the Plan are not subject to
any offset.
The Company also sponsors a defined contribution 401(k) plan that covers
substantially all employees. The Company matches 50 percent of employee
contributions limited to a maximum equal to three percent of eligible employee
compensation. Company contributions to the plan were approximately $633,000,
$588,000 and $471,000 in 1995, 1994 and 1993, respectively.
EMPLOYMENT ARRANGEMENTS
Primeco has entered into employment agreements with Thomas E. Bennett, Brian
Fontana, Kevin L. Loughlin, Peter A. Post and Gerald E. Lane. Mr. Bennett's
agreement, effective as of December 2, 1994, provides that he shall serve as
President and Chief Executive Officer. Upon the expiration of the initial five
(5) year term, the agreement shall automatically be extended for an additional
term of one year, unless either party has notified the other party of its
election to terminate the agreement, not later than 90 days prior to the
scheduled expiration date. During the term of employment, the agreement provides
for an annual base salary of $225,000 subject to annual review by the Board
provided that the level of base salary shall not be subject to reduction. Mr.
Bennett's current annual base salary is $240,000. Mr. Bennett is entitled to
participate in the management cash incentive bonus program, and in all fringe
benefit programs maintained by Primeco. Mr. Bennett's employment agreement also
provides that in the event that Primeco terminates his employment or elects to
not renew the agreement other than for cause, Mr. Bennett will receive monthly
one-twelfth (1/12) of his annual base salary at the time of such termination for
the period ending on the earlier of the expiration date of the employment
agreement or the first anniversary of the date of termination. If Mr. Bennett's
employment is terminated by death, Primeco shall pay to Mr. Bennett's estate or
legal representative a lump sum payment equal to 25% of Mr. Bennett's annual
base salary in effect at such time. If Mr. Bennett's employment is terminated
based upon a permanent disability, Primeco shall pay to Mr. Bennett a lump sum
of 50% of Mr. Bennett's annual base salary in effect at such time.
Mr. Fontana, Mr. Loughlin, Mr. Post and Mr. Lane's employment agreements are
substantially identical to Mr. Bennett's except that the annual base salaries
differ and the initial terms are for three
48
<PAGE>
(3) years. The initial annual base salaries for Messrs. Fontana, Loughlin, Post
and Lane are $160,000, $140,000, $125,000 and $110,000, respectively. The
current annual base salaries for Messrs. Fontana, Loughlin, Post and Lane are
$160,000, $150,000, $150,000 and $115,000, respectively.
Upon his employment, Mr. Fontana also purchased shares of Common Stock
and was awarded options for shares of Common Stock. Mr. Fontana will also
participate in Prime's bonus plan. Bonuses awarded under the plan for 1996 would
be paid in 1997.
Upon his employment, Mr. York purchased shares of Common ']Stock and was
awarded options for shares of Common Stock.
MANAGEMENT STOCK INCENTIVE PLAN
Prime has adopted the Stock Plan in order to provide incentives to employees
and directors of Prime and Primeco by granting them awards tied to the Common
Stock. The Stock Plan is administered by the Compensation Committee, which has
broad authority in administering and interpreting the Stock Plan. Awards to
employees are not restricted to any specified form or structure and may include,
without limitation, sales or bonuses of stock, restricted stock, stock options
or stock appreciation rights (collectively, "Awards"). Options granted under the
Stock Plan may be options intended to qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended, or options not
intended to so qualify. An award granted under the Stock Plan to an employee may
include a provision terminating the award upon termination of employment under
certain circumstances or accelerating the receipt of benefits upon the
occurrence of specified events, including, at the discretion of the Compensation
Committee, any change of control of Prime.
49
<PAGE>
CERTAIN TRANSACTIONS
The Company was capitalized with $70.0 million of equity contributed by
Investcorp, its affiliates and other international and domestic investors and
$10.0 million aggregate principal amount of Subordinated Notes acquired for $9
million by Invifin S.A., an affiliate of Investcorp, and other international
investors. The Company capitalized Primeco with $79.0 million in exchange for
100% of the outstanding common and preferred stock of Primeco in connection with
the consummation of the 1994 Acquisition. This capital contribution to Primeco,
in addition to borrowings under the credit facility and the subordinated loan
facility, provided the sources of the consideration for the 1994 Acquisition and
related costs and fees. The Company paid $150,000 in fees to Invifin in
connection with the Subordinated Notes. The Company intends to repay the
Subordinated Notes with the proceeds from the Offering. Following repayment of
the Subordinated Notes, the Company intends to contribute to Primeco the
outstanding preferred stock of Primeco.
In connection with the 1994 Acquisition, Primeco paid Investcorp
International, Inc. ("III") fees of $2.7 million for arranging Primeco's credit
facility. Primeco also entered into an agreement for management advisory,
strategic planning and consulting services (the "Management Agreement") with III
pursuant to which Primeco agreed to pay III $1.5 million per year for a five
year term. Primeco prepaid III $4.5 million for the first three years of the
term and agreed to make quarterly payments during the fourth and fifth years. In
connection with the 1994 Acquisition, Primeco also entered into an agreement
with Investcorp Bank E.C. ("EC") for a term of five years pursuant to which
Primeco paid EC approximately $7.6 million in exchange for EC's assistance in
arranging financing for the 1994 Acquisition and for EC's covenant not to
arrange or facilitate the acquisition of a competitor of Primeco without
Primeco's consent. These two agreements will be terminated in connection with
the Offering.
In connection with the purchase of American Hi-Lift, certain stockholders of
the Company made a capital infusion of $9.4 million into the Company which, in
turn, paid $1.0 million to III on February 26, 1996 for financial advisory
services related to the purchase of American Hi-Lift. This capital contribution,
plus borrowing from Prime's credit facility, provided funds for the completion
of the American Hi-Lift purchase.
50
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following tables set forth certain information regarding beneficial
ownership of the Common Stock immediately prior to and immediately following
completion of the Offering, by (i) each person who is known by the Company to
own beneficially more than 5% of the outstanding shares of the Common Stock,
(ii) each director and executive officer named in the Summary Compensation
Table, (iii) all executive officers and directors as a group, and (iv) each
Selling Stockholder. Unless otherwise indicated, each person has sole voting
power and investment power with respect to the shares attributed to them.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS
--------------------------------------------------
<S> <C> <C> <C> <C>
PRIOR TO THE OFFERING AFTER THE OFFERING
------------------------ ------------------------
<CAPTION>
NUMBER OF NUMBER OF
NAME OF BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT
- --------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investcorp (1)....................................................... 36.6%
SIPCO Limited (2).................................................... 36.6%
Equipment Holdings Limited (3)....................................... 5.8%
Equipment Investment Limited (3)..................................... 8.6%
Equipment Rental Limited (3)......................................... 5.6%
Equity PEC Limited (3)............................................... 6.0%
Fleet Equity Limited (3)............................................. 5.8%
PE Holdings Limited (3).............................................. 5.8%
PE Investments Limited (3)........................................... 5.8%
Prime Equity Limited (3)............................................. 5.8%
Prime Holdings Limited (3)........................................... 5.8%
Rental Equity Limited (3)............................................ 5.8%
Rental Holdings Limited (3).......................................... 5.8%
Thomas E. Bennett.................................................... *
Brian Fontana........................................................ *
Kevin L. Loughlin.................................................... *
Peter A. Post........................................................ *
Gerald E. Lane....................................................... *
John D. Latimer...................................................... *
Jon P. Hedley........................................................ *
Christopher J. O'Brien............................................... *
Charles J. Philippin................................................. *
Christopher J. Stadler............................................... *
All directors and executive officers
as a group (13 people)............................................. *
</TABLE>
- ------------------------
* Less than 1%.
(1) Investcorp does not own any shares of the Common Stock. The number of shares
shown as owned by Investcorp includes all of the shares owned by Arlington
Limited, Ballet Limited, Chemical Nominees (Guernsey) Limited, Denary
Limited, Equipment Rental Limited, Equity PEA Limited, Equity PEB Limited,
Equity PEC Limited, Equity PED Limited, Freeport Limited, Gleam Limited,
Highlands Limited, Investcorp Investment Equity Limited, LaPorte Limited,
Noble Limited, Outrigger Limited, Plano Limited, Quill Limited, Radial
Limited, Shoreline Limited and Zinnia Limited. Other than Equipment Rental
Limited and Investcorp Investment Equity Limited, which are indirect wholly
owned subsidiaries of Investcorp, Investcorp owns no stock in such entities.
Investcorp may be deemed to share beneficial ownership of the shares of
Common Stock held by such entities because such entities or their
shareholders or principals have entered into revocable management agreements
with a wholly owned subsidiary of Investcorp pursuant to which each such
entity has granted such subsidiary the authority to direct the voting and
disposition of the stock owned by such entity for so long as such agreement
is in effect. Investcorp is a Luxembourg corporation, with its registered
address at 37 rue Notre-Dame, Luxembourg.
(2) SIPCO Limited ("SIPCO") does not directly own any Common Stock. The number
of shares shown as owned by SIPCO consists of the shares Investcorp is
deemed to beneficially own. SIPCO may be deemed to control Investcorp
through its ownership of a majority of the stock of a company which
indirectly owns a majority of Investcorp's outstanding stock. SIPCO is a
Cayman Islands corporation with its address at P.O. Box 1111, West Wind
Building, George Town, Grand Cayman, British West Indies.
(3) PO Box 1111, West Wind Building, Harbour Drive, George Town, Grand Cayman,
British West Indies.
<TABLE>
<CAPTION>
SELLING STOCKHOLDERS
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OWNERSHIP SHARES OWNERSHIP AFTER
PRIOR TO THE OFFERING OFFERED THE OFFERING
------------------------ ----------- ------------------------
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
NAME SHARES PERCENT SHARES SHARES PERCENT
- ---------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total.....................................................
</TABLE>
51
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon completion of the Offering, the Company's authorized capital stock will
consist of million shares of preferred stock, of which no shares will be
issued and outstanding, and million shares of Common Stock, $.01 par value
per share, of which shares will be issued and outstanding. The material
terms of the Company's Certificate of Incorporation and Bylaws are discussed
below.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in the election
of directors and on all other matters on which stockholders are entitled or
permitted to vote. Holders of Common Stock are not entitled to vote cumulatively
for the election of directors. Holders of Common Stock have no redemption,
conversion, preemptive or other subscription rights. There are no sinking fund
provisions relating to the Common Stock. In the event of the liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share ratably in all of the assets of the Company, if any, remaining after
satisfaction of the debts and liabilities of the Company. The outstanding shares
of Common Stock are, and the shares of Common Stock offered hereby will be, upon
payment therefor as contemplated herein, validly issued, fully paid and
nonassessable.
Holders of Common Stock are entitled to receive dividends when and as
declared by the Board of Directors of the Company out of funds legally available
therefor. The Company does not anticipate paying cash dividends on the Common
Stock in the foreseeable future. See "Dividend Policy."
PREFERRED STOCK
The Board of Directors is authorized, subject to certain limitations
prescribed by law, to issue the preferred stock in one or more classes or series
and to fix the designations, powers, preferences, rights, qualifications,
limitations or restrictions of any such class or series. The rights of the
holders of 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 issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. The Company has no
current plans to issue shares of preferred stock.
CERTAIN PROVISIONS OF DELAWARE LAW
The Company is incorporated under the Delaware General Corporation law (the
"DGCL"). The Company is subject to Section 203 of the DGCL, which restricts
certain transactions and "business combination" between a Delaware corporation
and an "interested stockholder" (in general, a stockholder owning 15% or more of
the corporation's outstanding voting stock) or an affiliate or associate of an
interested stockholder, for a period of three years from the date the
stockholder becomes an interested stockholder. A "business combination" includes
mergers, asset sales and other transactions resulting in a financial benefit to
the interested stockholder. Subject to certain exceptions, unless the
transaction is approved by the Board of Directors and the holders of at least
66 2/3% of the outstanding voting stock of the corporation (excluding shares
held by the interested stockholder), Section 203 prohibits significant business
transactions such as a merger with, disposition of assets to or receipt of
disproportionate financial benefits by the interested stockholder, or any other
transaction that would increase the interested stockholder's proportionate
ownership of any class or series of the corporation's stock. The statutory ban
does not apply if, upon consummation of the transaction in which any person
becomes an interested stockholder, the interested stockholder owns at least 85%
of the outstanding voting stock of the corporation (excluding shares held by
persons who are both directors and officers or by certain employee stock plans).
52
<PAGE>
The Company's Certificate of Incorporation contains certain provisions
permitted under the DGCL relating to the liability of directors. The Certificate
of Incorporation provides that, to the fullest extent permitted by the DGCL, no
director of the Company will be liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director. The Certificate of
Incorporation and Bylaws of the Company also contain provisions indemnifying the
directors and officers of the Company to the fullest extent permitted by the
DGCL.
Section 203 and the provisions of the Company's Certificate of Incorporation
and Bylaws described above may make it more difficult for a third party to
acquire, or discourage acquisition bids for, the Company. Section 203 and these
provisions could have the effect of inhibiting attempts to change the membership
of the Board of Directors of the Company. In addition, the limited liability
provisions in the Certificate of Incorporation and the indemnification
provisions in the Certificate of Incorporation and Bylaws may discourage
stockholders from bringing a lawsuit against directors for breach of their
fiduciary duty (including breaches resulting from grossly negligent conduct) and
may have the effect of reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if successful, might
otherwise have benefited the Company and its stockholders. Furthermore, a
stockholder's investment in the Company may be adversely affected to the extent
the Company pays the costs of settlement and damage awards against directors and
officers of the Company pursuant to the indemnification provisions in the
Company's Bylaws. The limited liability provisions in the Certificate of
Incorporation will not limit the liability of directors under federal securities
laws.
SHARES RESERVED FOR ISSUANCE
The Company has shares of Common Stock reserved for issuance upon the
exercise of options granted or to be granted under the Stock Plan. As of ,
1996, options for the purchase of shares have been granted. Upon the
closing of the Offering, options for the purchase of shares of Common
Stock will be fully vested.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is
.
LISTING
Application will be made to list the Common Stock on the New York Stock
Exchange under the proposed symbol " ."
53
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
CREDIT AGREEMENT
GENERAL. The credit agreement (the "Credit Facility") among Primeco, the
several lenders from time to time parties thereto (collectively, the "Lenders"),
The Chase Manhattan Bank, formerly Chemical Bank, as administrative agent (the
"Administrative Agent"), and The CIT Group/Business Credit, Inc., as collateral
agent (the "Collateral Agent") provides for a $125.0 million term loan facility
maturing on December 31, 2000 (the "Term Loan Facility"), and a $175.0 million
revolving credit facility maturing on December 31, 1999 (the "Revolving Loan
Facility"), of which $10 million is available in the form of standby or trade
letters of credit.
Primeco utilized all of the proceeds of the Term Loan Facility, and $25.0
million of the $175.0 million Revolving Loan Facility, in connection with the
1994 Acquisition. The remaining availability under the Revolving Loan Facility
may be utilized to meet Primeco's current working capital requirements,
including the issuance of standby and trade letters of credit. Primeco can also
utilize the remaining availability to fund capital expenditures, subject to
borrowing base limitations and certain limits on annual capital expenditure
limits. As of July 31, 1996, $234.0 million in principal amount is outstanding
under the Credit Facility. Primeco from time to time has amended covenants
contained in the Credit Facility to accommodate acquisitions and increases in
capital expenditure levels.
The Loans under the Credit Facility are secured by a first priority security
interest in substantially all of the assets of Primeco. In addition, the Loans
are guaranteed by the Company. The Company's guarantee is secured by a pledge of
all of the issued and outstanding capital stock of Primeco. Primeco is also
required to grant mortgages in after acquired real property acquired for
consideration in excess of $1 million.
The Credit Facility contains certain covenants and restrictions that, among
other things, restrict: (i) consolidations, mergers and sales of assets of
Primeco and its subsidiaries; (ii) the incurrence of liens or other
encumbrances; (iii) the incurrence of contingent obligations; (iv) the payment
of dividends; (v) prepayments and amendments of subordinated debt instruments
and equity; (vi) investments, loans and advances; (vii) certain transactions
with affiliates; (viii) capital expenditures and (ix) incurrence of
indebtedness. The Credit Facility also contains covenants requiring Primeco to
maintain specified levels of consolidated EBITDA, debt to EBITDA coverage
ratios, and interest coverage ratios, each of which must be determined
quarterly.
Upon the occurrence of certain Events of Default (as defined), all amounts
owing under the Credit Facility may become immediately due and payable. Events
of Default under the Credit Facility include, among other things: (1) failure to
pay principal when due or interest within five days after due; (2) any material
inacurracy in any representation or warranty; (3) certain cross-defaults under
other indebtedness, in each case provided that the aggregate other indebtedness
is at least $5.0 million; (4) certain insolvency events; (5) certain prohibited
ERISA events; (6) judgments aggregating $5.0 million or more (excluding amounts
covered by insurance), not stayed, discharged, vacated or bonded within the
applicable time for such action; or (7) a change of control, which is deemed to
occur if any person (other than Investcorp, any of its affiliates or
subsidiaries, senior management of the Company or Primeco, any entity that is
majority-owned by such senior management of the Company or Primeco, or any
person acting in the capacity of an underwriter) directly or indirectly acquires
25% or more, on a fully diluted basis, of the outstanding voting power of the
common stock of the Company or Primeco.
SUBORDINATED DEBT
On March 6, 1995, $100.0 million aggregate principal amount of 12.75% Senior
Subordinated Notes due March 1, 2005 (the "Senior Notes") were issued by Primeco
pursuant to an Indenture, dated as of March 6, 1995 (the "Indenture"), between
Primeco and Texas Commerce Bank National Association, as Trustee (the
"Trustee"). The Senior Notes are unsecured senior subordinated obligations of
Primeco.
54
<PAGE>
Upon 30 days' prior notice by Primeco, the Senior Notes will be redeemable
in whole or in part, on or after March 1, 2000, and prior to maturity, at the
following redemption prices (expressed in percentages of principal amount), plus
accrued interest to the redemption date.
If redeemed during the 12-month period commencing on or after March 1 of the
years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2000........................................................................ 106.375%
2001........................................................................ 104.250%
2002........................................................................ 102.125%
2003 and thereafter......................................................... 100.000%
</TABLE>
The Company intends to contribute approximately $37.5 million of the net
proceeds from the Offering to Primeco to enable Primeco, in accordance with the
terms of the Indenture, to redeem approximately $33.3 million aggregate
principle amount of Senior Notes, together with the accrued but unpaid interest
and premium thereon, at a redemption price of $37.5 million.
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder will have the right to require Primeco to repurchase all
or any part of such holder's Senior Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase:
(i) any person (as defined), other than one or more Permitted Holders,
is or becomes the beneficial owner (as defined), directly or indirectly, of
more than 35% of the total voting power of the voting stock of Primeco or
the Company, as the case may be; PROVIDED that the Permitted Holders
beneficially own, directly or indirectly, in the aggregate a lesser
percentage of the total voting power of Primeco or the Company, as the case
may be, than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of Primeco or the Company, as the case
may be (for purposes of this clause (i), such other person shall be deemed
to beneficially own any voting stock of a specified corporation held by a
parent corporation, if such other person "beneficially owns" (as defined),
directly or indirectly, more than 35% of the voting power of the voting
stock of such parent corporation and the Permitted Holders "beneficially
own", directly or indirectly, in the aggregate a lesser percentage of the
voting power of the voting stock of such parent corporation and do not have
the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such parent
corporation); or
(ii) any person (other than Investcorp, its affiliates and members of
the senior management of the Company or Primeco) (a) nominates one or more
individuals for election to the board of directors of Primeco or the
Company, as the case may be, (b) solicits proxies, authorizations or
consents in connection therewith and (c) such number of nominees elected to
serve on the board of directors represents a majority of the board of
directors of the Company or Primeco, as the case may be, following such
election.
The Indenture contains various restrictive covenants that, among other
things, limit: (i) the incurrence of certain additional indebtedness by Primeco;
(ii) the creation of senior indebtedness of Primeco which is, by its terms,
subordinated in right of payment to other indebtedness of Primeco; and (iii) the
payment of dividends on capital stock of Primeco. See "Risk Factors--No
Dividends".
An Event of Default is defined in the Indenture as, among other things, (i)
a default in any payment of interest when due, continued for 30 days, (ii) a
default in the payment of principal when due, (iii) the failure to comply with
certain covenants, (iv) a cross-default of other indebtedness in excess of $10.0
million, (v) bankruptcy, insolvency or reorganization of Primeco or a
singnificant subsidiary, (vi) a judgment in excess of $10.0 million or (vii) the
failure of any Senior Note guarantee to be in full force and effect.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, assuming no exercise of the Underwriters'
over-allotment option, shares of Common Stock will be outstanding (
shares if the Underwriters' over-allotment
55
<PAGE>
option is exercised in full). Of these shares, the shares of Common Stock
sold in the Offering ( shares if the Underwriters' over-allotment option is
exercised in full) will be available for resale in the public market without
restriction or further registration under the Securities Act, except that shares
purchased by an "affiliate" of the Company (in general, any person who has a
control relationship to Primeco) may be resold only if registered under the
Securities Act or if transferred pursuant to an exemption from registration,
including resales pursuant to Rule 144 promulgated under the Securities Act
("Rule 144") and Regulation S promulgated under the Securities Act ("Regulation
S"). Of the remaining outstanding shares of Common Stock, were sold in
offshore distributions under Regulation S within the past year, were sold
in offshore distributions under Regulation S more than one year ago and are
deemed to be "restricted securities" as that term is defined in Rule 144.
Pursuant to Rule 701 under the Securities Act, of the restricted securities
will be available for resale in the public market without restriction commencing
90 days after the date of this Prospectus. All of the remaining restricted
securities are eligible for sale in the public market in compliance with Rule
144. Certain existing stockholders of the Company (who in the aggregate hold
shares of Common Stock) have agreed, subject to certain exceptions, that
they will not offer, sell or otherwise dispose of any of the shares of Common
Stock owned by them for a period of days after the date of this Prospectus
without the prior written consent of the representatives of the Underwriters.
Additionally, the Company and certain stockholders have agreed that, during the
period of 180 days from the date of this Prospectus, subject to certain
exceptions, they will not issue, sell, offer or agree to sell, grant any options
for the sale of (other than employee stock options) or otherwise dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable for Common Stock, other than pursuant to the Offering.
In addition, up to shares of Common Stock may be issued upon exercise
of certain employee stock options that Prime has granted, of which options to
purchase shares of Common Stock will be exercisable upon the closing of
the Offering. Also, the Company will grant, conditioned upon the closing of the
Offering, options for the purchase of shares of Common Stock, one-third of
which, or shares, will be exercisable upon the closing of the Offering.
The Company intends to file a registration statement on Form S-8 under the
Securities Act to register the shares of Common Stock reserved for
issuance under the Management Stock Incentive Plan. As a result, any shares
issued upon exercise of stock options granted under such plans will be
available, subject to special rules for affiliates, for resale in the public
market after the effective date of such registration statement, subject to
applicable lock-up arrangements. See "Underwriting" and "Management--Stock
Incentive Plan."
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned shares for at least two
years is entitled to sell, within any three-month period, a number of restricted
securities which does not exceed the greater of 1% of the then-outstanding
shares of the Company's Common Stock ( shares immediately after the
Offering) or the average weekly trading volume of the Common Stock during the
four calendar weeks preceding the date on which notice of the sale is filed with
the Commission. Sales under Rule 144 also may be subject to certain manner of
sale provisions, notice requirements and the availability of current public
information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the three months preceding a sale, and who has beneficially owned
shares within the definition of "restricted securities" under Rule 144 for at
least three years, is entitled to sell such shares under Rule 144(k) without
regard to the volume limitation, manner of sale provisions, public information
requirements or notice requirements. Regulation S permits the sale by issuers,
affiliates and others of shares in an "offshore transaction" (as defined in
Regulation S), subject to certain other conditions including the requirement
that the purchaser not resell the shares to a U.S. person during a one year
restricted period (or a 40-day restricted period if the shares are distributed
in reliance on Regulation S after the Company's securities are registered under
the Exchange Act).
Prior to the Offering, there has been no public market for the Common Stock.
No prediction can be made as to the effect, if any, that market sales of shares
of Common Stock that are restricted securities or the availability of such
shares will have on the market price of the Common Stock prevailing from time to
time. Nevertheless, sales of substantial amounts of Common Stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices for the Common Stock and could impair the Company's future ability to
raise capital through an offering of equity securities.
56
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1996 (the "Underwriting Agreement"), the
Underwriters named below (the "Underwriters"), for whom CS First Boston
Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon
Brothers Inc, are acting as representatives (the "Representatives"), have
severally but not jointly agreed to purchase from the Company and the Selling
Stockholders the following respective numbers of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
CS First Boston Corporation......................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................................................
Salomon Brothers Inc.............................................................
----------
Total.......................................................................
----------
----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the shares of Common Stock offered hereby (other
than those shares covered by the over-allotment option described below) if any
are purchased. The Underwriting Agreement provides that, in the event of a
default by an Underwriter, in certain circumstances the purchase commitments of
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.
The Selling Stockholders have granted to the Underwriters an option,
expiring at the close of business on the 30th day after the date of this
Prospectus, to purchase up to additional outstanding shares from the
Selling Stockholders at the initial public offering price less the underwriting
discounts and commissions, all as set forth on the cover page of this
Prospectus. Such option may be exercised only to cover over-allotments in the
sale of the shares of Common Stock. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Common Stock as
it was obligated to purchase pursuant to the Underwriting Agreement.
The Company has been advised by the Representatives that the Underwriters
propose to offer the Shares to the public initially at the public offering price
set forth on the cover page of this Prospectus and, through the Representatives,
to certain dealers at such price less a concession of $ per share, and
the Underwriters and such dealers may allow a discount of $ per share on
sales to certain other dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
Representatives.
The Representatives have informed the Company that they do not expect
discretionary sales by the Underwriters to exceed 5% of the shares of Common
Stock being offered hereby.
Each of the Company, the Selling Stockholders and certain other stockholders
has agreed that it will not offer, sell, contract to sell, announce its
intention to sell, pledge or otherwise dispose of, directly or indirectly, or
file with the Securities and Exchange Commission a registration statement under
the Securities Act relating to, any additional shares of the Company's Common
Stock or securities convertible into or exchangeable or exercisable for any
shares of the Company's Common Stock without the prior written consent of CS
First Boston Corporation for a period of 180 days after the date of this
Prospectus, except in the case of the Company, issuances pursuant to the
exercise of employee stock options granted under the Company's existing
incentive plans or pursuant to the Company's dividend reinvestment plan.
At the request of Prime, the Underwriters have reserved up to shares
of Common Stock for sale, at the initial public offering price less the
underwriting discount, to directors, officers and employees of Prime and its
affiliates. The number of shares available for sale to the general public will
be reduced to
57
<PAGE>
the extent such persons purchase such reserved shares. Any reserved shares not
so purchased will be offered by the Underwriters to the general public on the
same terms as the other shares offered hereby.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or contribute to payments which the Underwriters may be required
to make in respect thereof.
Application will be made to list the shares of Common Stock on the New York
Stock Exchange, under the proposed symbol " ." In connection with the
listing of the Common Stock on the New York Stock Exchange, the Underwriters
will undertake to sell round lots of 100 shares or more to a minimum of 2,000
beneficial owners.
Prior to the Offering, there has been no established trading market for the
Common Stock. The initial price to the public for the Common Stock offered
hereby has been determined by negotiation among the Company, the Selling
Stockholders and the Representatives. The factors considered in determining the
initial price to the public include the history of and the prospects for the
industry in which the Company competes, the ability of the Company's management,
the past and present operations of the Company, the historical results of
operations of the Company, the prospects for future earnings of the Company, the
general condition of the securities markets at the time of the Offering and the
recent market prices of securities of generally comparable companies. There can
be no assurance, however, that the prices at which the Common Stock will sell in
the public market after this Offering will not be lower than the price at which
they are sold by the Underwriters.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the shares of Common Stock in Canada is being made only
on a private placement basis exempt from the requirement that the Company
prepare and file a prospectus with the securities regulatory authorities in each
province where trades of the Common Stock are effected. Accordingly, any resale
of the Common Stock in Canada must be made in accordance with applicable
securities laws which will vary depending on the relevant jurisdiction, and
which may require resales to be made in accordance with available statutory
exemptions or pursuant to a discretionary exemption granted by the applicable
Canadaian securities regulatory authority. Purchasers are advised to seek legal
advice prior to any resale of the Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of the Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company, the Selling
Stockholders and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities laws
to purchase such Common Stock without the benefit of a prospectus qualified
under such securities laws, (ii) where required by law, that such purchaser is
purchasing as principal and not as agent and (iii) such purchaser has reviewed
the text above under "Resale Restrictions."
RIGHTS OF ACTION AND ENFORCEMENT
The Common Stock being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the SECURITIES ACT (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
All of the Company's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Ontario purchasers to effect service of process within Canada upon the
Company or such persons. All or a substantial portion of the assets of the
Company and such persons may be located outside of Canada and, as a result, it
may not be possible to
58
<PAGE>
satisfy a judgment against the Company or such persons in Canada or to enforce a
judgment obtained in Canadian courts against such Company or persons outside of
Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of the Common Stock to whom the SECURITIES ACT (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Common Stock acquired by such purchaser pursuant to this Offering. Such
report must be in the form attached to British Columbia Securities Commission
Blanket Order BOR #95/17, a copy of which may be obtained from the Company. Only
one such report must be filed in respect of the Common Stock acquired on the
same date and under the same prospectus exemption.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Gibson, Dunn & Crutcher LLP, New York, New York, and for
the Underwriters by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The (i) consolidated financial statements of the Company as of December 31,
1994 and 1995, for the year ended December 31, 1995 for the period January 1,
1994, to December 1, 1994, and for the period December 2, 1994, to December 31,
1994, and (ii) financial statements of Alpine Equipment Rentals and Supply
Company as of December 31, 1994 and 1995, and for the years then ended, have
been included herein in reliance on the reports of Coopers & Lybrand L.L.P.,
independent certified public accountants, given on the authority of that firm as
experts in accounting and auditing.
The (i) financial statements of the Company for the year ended December 31,
1993, and (ii) financial statements of Vibroplant U.S., Inc., as of March 31,
1995 and February 25, 1996, and for each of the years in the two-year period
ended March 31, 1995, and the period from April 1, 1995, through February 25,
1996, have been included herein and in the registration statement in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP covering
the Vibroplant U.S., Inc. financial statements contains an explanatory paragraph
that states that Vibroplant U.S., Inc. changed its method of computing
depreciation in 1995 and its method of accounting for income taxes in 1994.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement relating to the shares of Common Stock
offered hereby on Form S-1 (herein, together with all amendments and exhibits,
referred to as the "Registration Statement") under the Securities Act of 1933,
as amended (the "Securities Act"). This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract,
agreement, indenture or other document referred to are not necessarily complete.
With respect to each such contract, agreement, indenture or other document filed
as an Exhibit to the Registration Statement, reference is made to such exhibit
for a more complete description thereof, and each such statement shall be deemed
qualified in its entirety by such reference. The Registration Statement and the
exhibits and schedules thereto may be inspected and copied (at prescribed rates)
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
Commission's regional offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, New
York, New York 10048.
59
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PRIME SERVICE, INC.
Reports of Independent Accountants................................................. F-2
Consolidated Balance Sheet......................................................... F-4
Consolidated Statement of Operations............................................... F-5
Consolidated Statement of Stockholder's Equity..................................... F-6
Consolidated Statement of Cash Flows............................................... F-7
Notes to Consolidated Financial Statements......................................... F-8
VIBROPLANT U.S., INC.
Independent Auditors' Report....................................................... F-23
Balance Sheets..................................................................... F-24
Statements of Operations........................................................... F-25
Statements of Stockholder's Equity................................................. F-26
Statements of Cash Flows........................................................... F-27
Notes to Financial Statements...................................................... F-28
ALPINE EQUIPMENT RENTALS AND SUPPLY COMPANY
Report of Independent Accountants.................................................. F-36
Balance Sheet...................................................................... F-37
Statement of Operations............................................................ F-38
Statement of Stockholders' Equity.................................................. F-39
Statement of Cash Flows............................................................ F-40
Notes to Financial Statements...................................................... F-41
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Prime Service, Inc.:
We have audited the accompanying consolidated balance sheet of Prime
Service, Inc. and Subsidiary (the "Company") as of December 31, 1995 and 1994
and the related consolidated statements of operations, stockholders' equity and
cash flows of the Company for the year ended December 31, 1995 and for the
period from December 2, 1994 through December 31, 1994, and of the Predecessor
(as defined in Note 1) for the period from January 1, 1994 through December 1,
1994. 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 financial statements of the Predecessor for
the year ended December 31, 1993 were audited by other auditors whose report
dated January 28, 1994 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.
As explained in Note 1 to the financial statements, controlling ownership of
the Predecessor was acquired by the Company in a purchase transaction as of
December 2, 1994. The acquisition was accounted for as a purchase and,
accordingly, the purchase price was allocated to the assets and liabilities of
the Predecessor based upon their estimated fair value at December 2, 1994.
Accordingly, the financial statements of the Company are not comparable to those
of the Predecessor.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of December 31, 1995 and 1994, and the consolidated results of the Company's
operations and its cash flows for the year ended December 31, 1995 and for the
period from December 2, 1994 through December 31, 1994, and the results of the
Predecessor's operations and its cash flows for the period from January 1, 1994
through December 1, 1994, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Houston, Texas
August 30, 1996
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Primeco Inc.:
We have audited the accompanying statements of operations, common
stockholder's equity and cash flows of Primeco Inc. (the Predecessor) for the
year ended December 31, 1993. These financial statements are the responsibility
of Primeco's management. Our responsibility is to express an opinion on these
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, the financial statements referred to above present fairly,
in all material respects, the results of the operations and the cash flows of
Primeco Inc. for the year ended December 31, 1993, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Houston, Texas
January 28, 1994
F-3
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------ JUNE 30,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................................... $ 12,090 $ 178 $ 120
Accounts receivable, net................................................ 30,175 36,467 46,305
Inventories............................................................. 12,689 17,399 23,376
Rental equipment, net................................................... 153,818 181,798 246,412
Property, plant and equipment, net...................................... 20,768 22,334 28,929
Cost in excess of fair value of net assets acquired, net................ 117,713 115,084 130,301
Other assets............................................................ 22,150 18,719 18,536
------------ ------------ -----------
Total assets........................................................ $ 369,403 $ 391,979 $ 493,979
------------ ------------ -----------
------------ ------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable........................................................ $ 12,122 $ 14,968 $ 8,330
Accrued expenses........................................................ 23,578 27,607 28,680
Debt.................................................................... 235,000 265,000 344,000
Deferred income taxes................................................... 27,594 21,876 30,415
Other liabilities....................................................... 1,476 1,552 9,041
Commitments and contingencies (Notes 8 and 9)
STOCKHOLDERS' EQUITY
Common stock (Note 11).................................................. 10 10 11
Paid-in capital......................................................... 69,990 69,990 79,389
Accumulated deficit..................................................... (367) (9,024) (5,882)
Less Treasury Stock at cost............................................. -- -- (5)
------------ ------------ -----------
Stockholders' equity................................................ 69,633 60,976 73,513
------------ ------------ -----------
Total liabilities and stockholders' equity.......................... $ 369,403 $ 391,979 $ 493,979
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD FROM PERIOD FROM
FOR THE YEAR JANUARY 1, DECEMBER 2, FOR THE YEAR FOR THE SIX
ENDED 1994 THROUGH 1994 THROUGH ENDED MONTHS
DECEMBER 31, DECEMBER 1, DECEMBER 31, DECEMBER 31, ENDED JUNE
1993 1994 1994 1995 30, 1995
------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
PREDECESSOR PREDECESSOR SUCCESSOR SUCCESSOR SUCCESSOR
------------ ------------ ------------- ------------ -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Rental revenue.................................... $ 100,829 $ 108,272 $ 10,321 $ 138,983 $ 64,198
New equipment sales............................... 26,162 29,728 2,668 34,601 16,316
Rental equipment sales............................ 13,498 18,718 1,641 23,144 12,303
Parts and merchandise sales....................... 23,874 26,551 2,236 32,223 15,957
Service revenue and other income.................. 9,886 10,806 983 13,836 6,586
------------ ------------ ------------- ------------ -----------
174,249 194,075 17,849 242,787 115,360
------------ ------------ ------------- ------------ -----------
Cost of sales:
Depreciation--rental equipment.................... 17,456 17,365 2,822 37,427 15,808
Cost of new equipment sales....................... 22,211 25,269 2,251 28,960 13,684
Cost of rental equipment sales, net of accumulated
depreciation.................................... 7,999 11,809 1,134 22,853 12,219
Cost of parts and merchandise sales............... 17,902 20,175 1,736 24,157 12,176
Direct operating expenses......................... 46,288 48,981 4,592 60,553 29,068
------------ ------------ ------------- ------------ -----------
111,856 123,599 12,535 173,950 82,955
------------ ------------ ------------- ------------ -----------
62,393 70,476 5,314 68,837 32,405
------------ ------------ ------------- ------------ -----------
Selling, general, administrative and other.......... 28,248 28,030 2,871 36,821 17,267
Depreciation and amortization:
Noncompete agreements............................. 7,260 5,008 123 5,877 750
Cost in excess of fair value of assets required... 3,254 2,983 232 2,955 1,476
Property, plant and equipment..................... 1,980 1,893 191 2,395 1,154
Interest expense, net............................... 12,753 11,605 2,247 30,546 14,812
------------ ------------ ------------- ------------ -----------
53,495 49,519 5,664 78,594 35,459
------------ ------------ ------------- ------------ -----------
Income (loss) before income taxes............... 8,898 20,957 (350) (9,757) (3,054)
Income tax expense (benefit)........................ 4,350 8,506 17 (2,368) (494)
------------ ------------ ------------- ------------ -----------
Net income (loss) before extraordinary item..... 4,548 12,451 (367) (7,389) (2,560)
------------ ------------ ------------- ------------ -----------
Extraordinary item--loss on early extinguishment of
debt, net of tax benefit of $794.................. -- -- -- (1,268) (1,268)
------------ ------------ ------------- ------------ -----------
------------ ------------ ------------- ------------ -----------
Net income (loss)................................... $ 4,548 $ 12,451 $ (367) $ (8,657) $ (3,828)
------------ ------------ ------------- ------------ -----------
------------ ------------ ------------- ------------ -----------
Income (loss) per common share:
Net income (loss) before extraordinary item..... $ (.37) $ (7.39) $ (2.56)
Extraordinary item.............................. -- (1.27) (1.27)
------------- ------------ -----------
Net income (loss)............................... $ (.37) $ (8.66) $ (3.83)
------------- ------------ -----------
------------- ------------ -----------
Weighted average common shares outstanding.......... 1,000 1,000 1,000
------------- ------------ -----------
------------- ------------ -----------
<CAPTION>
FOR THE SIX
MONTHS
ENDED JUNE
30, 1996
-----------
<S> <C>
SUCCESSOR
-----------
(UNAUDITED)
<S> <C>
Revenue:
Rental revenue.................................... $ 87,678
New equipment sales............................... 21,303
Rental equipment sales............................ 17,148
Parts and merchandise sales....................... 18,730
Service revenue and other income.................. 8,597
-----------
153,456
-----------
Cost of sales:
Depreciation--rental equipment.................... 18,097
Cost of new equipment sales....................... 17,867
Cost of rental equipment sales, net of accumulated
depreciation.................................... 14,215
Cost of parts and merchandise sales............... 13,622
Direct operating expenses......................... 38,723
-----------
102,524
-----------
50,932
-----------
Selling, general, administrative and other.......... 23,171
Depreciation and amortization:
Noncompete agreements............................. --
Cost in excess of fair value of assets required... 1,618
Property, plant and equipment..................... 1,557
Interest expense, net............................... 18,239
-----------
44,585
-----------
Income (loss) before income taxes............... 6,347
Income tax expense (benefit)........................ 3,205
-----------
Net income (loss) before extraordinary item..... 3,142
-----------
Extraordinary item--loss on early extinguishment of
debt, net of tax benefit of $794.................. --
-----------
-----------
Net income (loss)................................... $ 3,142
-----------
-----------
Income (loss) per common share:
Net income (loss) before extraordinary item..... $ 2.89
Extraordinary item.............................. --
-----------
Net income (loss)............................... $ 2.89
-----------
-----------
Weighted average common shares outstanding.......... 1,089
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITAL STOCK TOTAL
------------------------ PAID-IN ACCUMULATED TREASURY STOCKHOLDERS'
SHARES PAR VALUE CAPITAL DEFICIT STOCK EQUITY
----------- ----------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Predecessor:
Balance at January 1, 1993....................... 1,000 $ 1 $ 128,736 $ (23,010) $ -- $ 105,727
Net income....................................... -- -- -- 4,548 -- 4,548
----- ----- ---------- ------------ ----- ------------
Predecessor:
Balance at December 31, 1993..................... 1,000 $ 1 128,736 (18,462) -- 110,275
Net income....................................... -- -- -- 12,451 -- 12,451
----- ----- ---------- ------------ ----- ------------
Predecessor:
Balance at December 1, 1994...................... 1,000 $ 1 $ 128,736 $ (6,011) $ -- $ 122,726
----- ----- ---------- ------------ ----- ------------
----- ----- ---------- ------------ ----- ------------
Successor:
Balance at December 2, 1994...................... $ -- $ -- $ -- $ -- $ -- $ --
Sale of common stock on December 2, 1994......... 1,000 10 69,990 -- -- 70,000
Net loss......................................... -- -- -- (367) -- (367)
----- ----- ---------- ------------ ----- ------------
Successor:
Balance at December 31, 1994..................... 1,000 10 69,990 (367) -- 69,633
Net loss......................................... -- -- -- (8,657) -- (8,657)
----- ----- ---------- ------------ ----- ------------
Successor:
Balance at December 31, 1995..................... 1,000 10 69,990 (9,024) -- 60,976
----- ----- ---------- ------------ ----- ------------
Sale of common stock (unaudited)................. 134 1 9,399 -- -- 9,400
Purchase of Treasury Stock (unaudited)........... -- -- -- -- (5) (5)
Net income (unaudited)........................... -- -- -- 3,142 -- 3,142
----- ----- ---------- ------------ ----- ------------
Successor:
Balance at June 30, 1996 (unaudited)............. 1,134 11 79,389 $ (5,882) $ (5) $ 73,513
----- ----- ---------- ------------ ----- ------------
----- ----- ---------- ------------ ----- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD FROM PERIOD FROM
FOR THE JANUARY 1, DECEMBER 2, FOR THE FOR THE
YEAR ENDED 1994 THROUGH 1994 THROUGH YEAR ENDED SIX MONTHS
DECEMBER 31, DECEMBER 1, DECEMBER 31, DECEMBER 31, ENDED JUNE
1993 1994 1994 1995 30, 1995
------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
PREDECESSOR PREDECESSOR SUCCESSOR SUCCESSOR SUCCESSOR
------------ ------------ ------------- ------------ -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss).................................... $ 4,548 $ 12,451 $ (367) $ (8,657) $ (3,828)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization...................... 29,949 27,249 3,368 48,656 19,242
Deferred income tax provision (benefit)............ 4,351 4,465 9 (4,924) (321)
Net (gain) loss on disposal of rental equipment,
and property, plant and equipment................ (4,817) (6,701) (363) 508 212
Provision for doubtful accounts.................... 928
Extraordinary loss on extinguishment of debt....... 1,268 1,268
Effect of changes in operating assets and
liabilities:
Decrease (increase) in accounts receivable....... (3,656) (6,611) 730 (6,291) (1,737)
Decrease (increase) in inventories............... 3,084 (182) 22 (4,710) (4,969)
Decrease (increase) in prepaid expenses and
other.......................................... 225 597 (232) (572) (2,378)
Increase (decrease) in accounts payable, accrued
expenses and other liabilities................. 5,859 2,668 (385) 6,945 2,617
------------ ------------ ------------- ------------ -----------
Net cash provided by operating activities............ 39,543 34,864 2,782 32,223 10,106
------------ ------------ ------------- ------------ -----------
Investing activities:
Additions to rental equipment........................ (38,088) (48,830) (3,984) (89,372) (47,978)
Additions to property, plant and equipment........... (1,980) (2,627) (223) (3,736) (1,230)
Payment to seller for the 1994 Acquisition........... (138,000)
Payments for acquisition costs....................... (13,667) (328) (325)
Purchase of AHL, net of cash acquired
Proceeds from sales of rental equipment.............. 13,497 18,862 1,680 23,079 12,210
Proceeds from disposals of property, plant and
equipment.......................................... 240 1,075 4 154 63
Payments for noncompete agreement related to
acquisition........................................ (200)
------------ ------------ ------------- ------------ -----------
Net cash used in investing activities................ (26,531) (31,520) (154,190) (70,203) (37,260)
------------ ------------ ------------- ------------ -----------
Financing activities:
Proceeds from Predecessor revolving line of credit... 2,000 10,000
Payments of Predecessor revolving line of credit..... (10,000)
Proceeds from revolving line of credit............... 26,000 (4,000)
Payments of revolving line of credit................. (20,000)
Payments of Predecessor debt......................... (15,000) (133,000)
Proceeds from Successor debt......................... 225,000 100,000 100,000
Payments of Successor debt........................... (76,000) (75,500)
Payments of financing costs.......................... (13,974) (3,932) (3,906)
Proceeds from issuance of common stock............... 70,000
Proceeds from issuance of Subordinated Notes......... 10,000
Purchase of Treasury Stock...........................
------------ ------------ ------------- ------------ -----------
Net cash provided (used) by financing activities..... (13,000) 158,026 26,068 16,594
------------ ------------ ------------- ------------ -----------
Net (decrease) increase in cash and cash equivalents... 12 3,344 6,618 (11,912) (10,560)
Cash and cash equivalents at beginning of period....... 2,116 2,128 5,472 12,090 12,090
------------ ------------ ------------- ------------ -----------
Cash and cash equivalents at end of period............. $ 2,128 $ 5,472 $ 12,090 $ 178 $ 1,530
------------ ------------ ------------- ------------ -----------
------------ ------------ ------------- ------------ -----------
<CAPTION>
FOR THE
SIX MONTHS
ENDED JUNE
30, 1996
-----------
<S> <C>
SUCCESSOR
-----------
(UNAUDITED)
<S> <C>
Operating activities:
Net income (loss).................................... $ 3,142
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization...................... 21,272
Deferred income tax provision (benefit)............ 1,245
Net (gain) loss on disposal of rental equipment,
and property, plant and equipment................ (2,568)
Provision for doubtful accounts....................
Extraordinary loss on extinguishment of debt.......
Effect of changes in operating assets and
liabilities:
Decrease (increase) in accounts receivable....... (3,962)
Decrease (increase) in inventories............... (2,628)
Decrease (increase) in prepaid expenses and
other.......................................... 538
Increase (decrease) in accounts payable, accrued
expenses and other liabilities................. (3,030)
-----------
Net cash provided by operating activities............ 14,009
-----------
Investing activities:
Additions to rental equipment........................ (50,513)
Additions to property, plant and equipment........... (2,449)
Payment to seller for the 1994 Acquisition...........
Payments for acquisition costs....................... (105)
Purchase of AHL, net of cash acquired (66,503)
Proceeds from sales of rental equipment.............. 17,045
Proceeds from disposals of property, plant and
equipment.......................................... 63
Payments for noncompete agreement related to
acquisition........................................
-----------
Net cash used in investing activities................ (102,462)
-----------
Financing activities:
Proceeds from Predecessor revolving line of credit...
Payments of Predecessor revolving line of credit.....
Proceeds from revolving line of credit............... 79,500
Payments of revolving line of credit.................
Payments of Predecessor debt.........................
Proceeds from Successor debt.........................
Payments of Successor debt........................... (500)
Payments of financing costs..........................
Proceeds from issuance of common stock............... 9,400
Proceeds from issuance of Subordinated Notes.........
Purchase of Treasury Stock........................... (5)
-----------
Net cash provided (used) by financing activities..... 88,395
-----------
Net (decrease) increase in cash and cash equivalents... (58)
Cash and cash equivalents at beginning of period....... 178
-----------
Cash and cash equivalents at end of period............. $ 120
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY
The consolidated financial statements of Prime Service, Inc. ("Prime"),
formerly Prime Holding, Inc., include the accounts of Prime and its subsidiary.
Intercompany accounts and transactions are eliminated in consolidation. On
December 2, 1994, Prime acquired Primeco Inc. (the "1994 Acquisition") from a
subsidiary of Artemis S.A. (the "Seller") through Prime's subsidiary Prime
Acquisition Corp. ("PAC"). Immediately following the completion of the
Acquisition, PAC merged into Primeco Inc. ("Primeco"), as a result of which
Primeco became a wholly-owned subsidiary of Prime. Prime has substantially no
assets or investments other than the shares of stock of Primeco. Prime was
initially capitalized with $70.0 million of equity contributed by Investcorp
S.A. ("Investcorp"), its affiliates and other international investors and $10.0
million in principal amount of subordinated indebtedness (the "Subordinated
Notes") provided by Invifin S.A. ("Invifin"), an affiliate of Investcorp. For
purposes of identification and description, Prime is referred to as the
"Predecessor" for the period prior to the 1994 Acquisition, the "Successor" for
the period subsequent to the Acquisition and the "Company" for both periods.
The Company's operations primarily consist of renting equipment and, to a
lesser extent, selling complementary parts, merchandise and used equipment to
commercial construction, industrial and residential users. The Company also acts
as a distributor of new equipment on behalf of major equipment manufacturers.
The total purchase price for the 1994 Acquisition, including fees and
expenses relating to its financing, and the covenant-not-to-compete payment, was
approximately $305.0 million (repayment of $133.0 million of the Predecessor's
debt, cash payment of $138.0 million to the Seller and $34.0 million of
transaction and financing fees) and was accounted for by the purchase method.
Accordingly, the assets and liabilities of the Predecessor were adjusted to
reflect the allocation of the purchase price based on estimated fair values.
The following selected pro forma financial information presents the year
ended December 31, 1994, as though the controlling ownership of the Predecessor
had been acquired on January 1, 1994, and assumes that there were no other
changes in the operations of the Predecessor. The pro forma results are not
necessarily indicative of the financial results that might have occurred had the
1994 Acquisition actually taken place on January 1, 1994, or of future results
of operations (in thousands).
<TABLE>
<CAPTION>
PRO FORMA
FOR THE YEAR
ENDED
DECEMBER 31, 1994
-----------------
<S> <C>
(UNAUDITED)
Revenues................................................................... $ 211,924
Net loss................................................................... (546)
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RENTAL AGREEMENTS
The Company rents equipment primarily to the construction, industrial and
homeowner markets. Rental agreements are structured as operating leases, and
rental revenue is recognized in the period in which it is earned.
F-8
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
New equipment held for sale is valued at the lower of cost or market, with
cost being determined on the specific identification method. Parts and
merchandise are valued at lower of cost or market, with cost determined by the
retail method.
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired prior to January 1, 1995 is computed using the straight-line method
over the estimated four-year useful life of the assets, after giving effect to
an estimated salvage value of 33 1/3%. Rental equipment acquired subsequent to
January 1, 1995 is depreciated over the estimated five year useful life of the
assets, after giving effect to an estimated salvage value of 50%. Accumulated
depreciation was $2.8 million, $38.9 million and $55.5 million at December 31,
1994, 1995, and June 30, 1996, respectively.
Expenditures for additions or improvements which extend asset lives are
capitalized in the period incurred. Normal repairs and maintenance costs are
expensed as incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any gains
or losses are included in results of operations.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets,
giving effect to an estimated salvage value.
The estimated useful lives for buildings and improvements range from 15 to
30 years and the estimated useful lives for equipment and furniture and fixtures
range from 5 to 10 years.
Expenditures for additions or improvements which extend asset lives are
capitalized in the period incurred. Normal repairs and maintenance costs are
expensed as incurred. When property, plant and equipment are disposed of, the
related cost and accumulated depreciation are removed from the respective
accounts, and any gains or losses are included in results of operations.
COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED
Goodwill represents the excess of the cost over the fair value of net assets
acquired. At each balance sheet date, management assesses whether there has been
a permanent impairment in the value of goodwill by comparing anticipated
undiscounted future cash flows from operating activities with the carrying value
of the goodwill. The amount of any resulting impairment is calculated by
discounting the same undiscounted cash flows from operating activities. The
factors considered by management in this assessment include operating results,
trends and prospects as well as the effects of obsolescence, demand, competition
and other economic factors.
Goodwill is amortized on a straight-line basis over the estimated life of 40
years. Accumulated amortization was $232,000, $3.1 million and $4.8 million at
December 31, 1994 and 1995, and June 30, 1996, respectively.
F-9
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Predecessor filed a consolidated income tax return with the Seller for
the period ended December 2, 1994. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to the differences
between the financial statement carrying value of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured by using enacted tax rates that are applicable to the future years
in which deferred tax assets or liabilities are expected to be realized or
settled. The effect of a change in tax rates on deferred tax assets and
liabilities is recognized in net earnings in the period in which the tax rate
change was enacted. The Company establishes a valuation allowance when it is
more likely than not that a deferred tax asset will not be recovered.
CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand and all highly liquid investment instruments purchased with original
maturities of three months or less.
INTEREST RATE SWAP AGREEMENTS
The existing interest swaps effectively convert a portion of the Company's
variable-rate debt to a fixed rate. The income earned or expense incurred as a
result of the interest paid exceeding interest received (or vice versa) under
terms of interest rate swap agreements is accrued in the period incurred or
earned, as the notional amounts of the swap agreements were designated to
specific debt (Note 8). Therefore, the related income and expense is accounted
for as an adjustment to the interest expense related to that debt.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist primarily of cash, accounts receivable and
interest rate swaps. As of December 31, 1994 and 1995, and June 30, 1996, the
Company had no significant concentrations of credit risk except for the interest
rate swaps discussed in Note 8.
The Company maintains cash and cash equivalents with various financial
institutions located throughout the country in order to limit exposure. The
Company's periodic evaluations of the relative credit standing of these
financial institutions are considered in the Company's investment strategy.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's customer
base and their geographic dispersion. The Company generally does not require
collateral on accounts receivable. At December 31, 1994 and 1995, and June 30,
1996, the Company had an allowance for doubtful accounts of approximately
$925,000, $925,000 and $1,472,000, respectively.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from estimates. Significant
estimates used by the Company relate to estimated salvage values and remediation
of environmental matters.
F-10
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain amounts previously reported in the financial statements have been
reclassified to conform with the presentation used for the year ended December
31, 1995 with no impact on stockholder's equity or operations.
UNAUDITED INTERIM FINANCIAL INFORMATION
In the opinion of management, the accompanying unaudited interim
consolidated financial statements contain all adjustments (consisting only of
normal recurring items) necessary to present fairly the consolidated financial
position of the Company as of June 30, 1996 and the consolidated results of its
operations and cash flows for the six months ended June 30, 1995 and 1996.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission's rules and regulations. The results of operations for all
interim periods presented are not necessarily indicative of the results to be
expected for the full year.
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
New equipment held for sale................................ $ 4,662 $ 6,882 $ 9,821
Merchandise................................................ 4,571 6,328 6,397
Parts...................................................... 3,121 4,008 6,810
Other...................................................... 335 181 348
--------- --------- -----------
$ 12,689 $ 17,399 $ 23,376
--------- --------- -----------
--------- --------- -----------
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
Property, plant and equipment at cost:
Land..................................................... $ 5,932 $ 6,068 $ 7,707
Buildings and improvements............................... 9,737 11,160 14,446
Transportation equipment................................. 1,238 1,817 2,798
Furniture and fixtures................................... 2,759 3,594 4,768
Shop and other equipment................................. 1,293 1,954 3,029
--------- --------- -----------
20,959 24,593 32,748
Accumulated depreciation................................... (191) (2,259) (3,819)
--------- --------- -----------
Net property, plant and equipment.................... $ 20,768 $ 22,334 $ 28,929
--------- --------- -----------
--------- --------- -----------
</TABLE>
F-11
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. OTHER ASSETS
Other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
Deferred financing costs, less accumulated amortization of $158, $2,764 and
$6,005, respectively......................................................... $ 13,825 $ 13,804 $ 12,563
Noncompete agreement, less accumulated amortization of $123.................... 5,877 -- --
Prepaid expenses and other..................................................... 1,248 840 1,793
Estimated reimbursements related to environmental remediation obligations (see
Note 9)...................................................................... 1,200 1,200 2,055
Prepaid management fee (see Note 6)............................................ -- 2,875 2,125
--------- --------- -----------
$ 22,150 $ 18,719 $ 18,536
--------- --------- -----------
--------- --------- -----------
</TABLE>
In connection with the 1994 Acquisition, the Company paid the Seller $6.0
million for a noncompete agreement. During 1995 and in January 1996, the Seller
divested itself of all its rental equipment operations which significantly
reduced the Seller's ability to compete against the Company. Consequently, the
Company determined that the noncompete agreement provided no future benefit to
the Company, and accordingly, the unamortized balance of approximately $4.5
million was written off and is included in depreciation and amortization expense
in the December 31, 1995 consolidated statement of operations.
The costs incurred in obtaining long-term financing are amortized over the
terms of the agreement using the effective interest method. Amortization of
deferred financing costs included in interest expense for the year ended
December 31, 1993, the period from January 1 to December 1, 1994, the period
from December 2, 1994 to December 31, 1994, and for the year ended December 31,
1995, approximated $399,000, $319,000, $158,000 and $2.8 million, respectively.
Amortization of deferred financing costs included in interest expense for the
six-month periods ended June 30, 1995 and 1996 approximated $1,270,000 and
$1,241,000, respectively.
6. RELATED PARTY TRANSACTIONS
Under the terms of a management agreement, the Company will pay an annual
management fee to Investcorp of $1.5 million. During 1995, the Company prepaid
the management fee for the next three years.
In connection with the Acquisition, the Successor paid Investcorp and its
affiliates approximately $11.5 million in exchange for Investcorp's assistance
in arranging the Acquisition, the bank financing, and issuing the Subordinated
Notes.
The Predecessor paid the Seller an annual management fee of $500,000. The
Predecessor also paid legal fees of approximately $82,000 to a law firm with
which one of the directors of the Predecessor was affiliated.
7. EMPLOYEE BENEFIT PLANS
The Company has a noncontributory defined benefit pension plan covering
substantially all of its employees. Benefits are based on years of service and
the employees' highest average earnings received in
F-12
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. EMPLOYEE BENEFIT PLANS (CONTINUED)
any five consecutive years during the last ten years before retirement. The
Company funds the plan in accordance with the Employee Retirement Income
Security Act of 1974 and the Internal Revenue Code. Plan assets are invested in
various segregated accounts with an insurance company, the underlying
investments of which are cash equivalents, marketable equity securities,
government securities and other corporate securities.
The assumptions used in accounting for the defined benefit plan for the
Successor and Predecessor periods are as follows: weighted-average discount rate
is 6.75% for 1993, 8% for 1994 and 7% for 1995; rates of increase in
compensation levels is 5.5% for all periods; and the expected long-term rate of
return on plan assets is 9.5% for all periods.
Net periodic pension cost consisted of the following components (in
thousands):
<TABLE>
<CAPTION>
FOR THE
PERIOD FOR THE PERIOD
FROM FROM
FOR THE YEAR JANUARY 1, DECEMBER 2, FOR THE YEAR
ENDED 1994 THROUGH 1994 THROUGH ENDED
DECEMBER 31, DECEMBER 1, DECEMBER 31, DECEMBER 31,
1993 1994 1994 1995
------------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
PREDECESSOR PREDECESSOR SUCCESSOR SUCCESSOR
------------- ------------- --------------- ------------
Service cost........................................ $ 1,180 $ 1,235 $ 113 $ 1,524
Interest cost....................................... 304 379 34 549
Actual return on plan assets........................ (377) (173) (3) (1,111)
Net total of other components....................... 225 (98) (21) 749
------ ------ ----- ------------
Net periodic pension cost........................... $ 1,332 $ 1,343 $ 123 $ 1,711
------ ------ ----- ------------
------ ------ ----- ------------
</TABLE>
The actuarial present value of the accumulated benefit of the plan is as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
<S> <C> <C>
1994 1995
--------- ---------
Vested..................................................................... $ 2,557 $ 3,808
Nonvested.................................................................. 382 1,152
--------- ---------
Total...................................................................... $ 2,939 $ 4,960
--------- ---------
--------- ---------
</TABLE>
The reconciliation of the funded status of the plan is as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1994 1995
--------- ---------
Projected benefit obligation.............................................. $ 5,784 $ 9,880
Plan assets at fair value................................................. 4,287 6,740
--------- ---------
Projected benefit obligation in excess of plan assets..................... 1,497 3,140
Unrecognized net loss..................................................... -- (1,142)
--------- ---------
Net pension liability..................................................... $ 1,497 $ 1,998
--------- ---------
--------- ---------
</TABLE>
F-13
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. EMPLOYEE BENEFIT PLANS (CONTINUED)
The Company sponsors a defined contribution 401(k) plan that covers
substantially all employees. The Company matches 50 percent of employee
contributions limited to a maximum equal to 3 percent of eligible employee
compensation. Company contributions to the plan in the Predecessor and Successor
periods ending December 31, 1993, December 1, 1994, December 31, 1994 and
December 31, 1995 approximated $471,000, $540,000, $48,000, and $633,000,
respectively.
8. DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- ---------
(UNAUDITED)
-----------
<S> <C> <C> <C>
Senior term loan............................. $ 125,000 $ 124,000 $ 123,500
Senior revolving credit loan................. 25,000 31,000 110,500
Subordinated loan facility................... 75,000 -- --
Senior subordinated notes.................... -- 100,000 100,000
Subordinated Notes to related party.......... 10,000 10,000 10,000
--------- --------- -----------
$ 235,000 $ 265,000 $ 344,000
--------- --------- -----------
--------- --------- -----------
</TABLE>
The Successor's bank credit agreement provides for a $300 million senior
credit facility including a $125 million term loan and a $175 million revolving
credit facility. The term loan requires semiannual payments which began June 30,
1995, and extend through December 31, 2000. The outstanding balance under the
revolving credit facility and any amounts owed as a result of letters of credit
being funded (see Note 9) become due December 31, 1999. The senior term loan and
the senior revolving credit loan are collateralized by substantially all the
assets of the Company.
On March 6, 1995 the Company issued $100 million of 12.75% senior
subordinated notes due March 1, 2005. The Company received net proceeds of
approximately $96 million, which were used to repay $75 million of indebtedness
under the subordinated loan facility plus accrued interest and $20 million of
indebtedness under the revolving credit portion of the senior credit facility.
The loss incurred on the early extinguishment of the subordinated loan facility,
resulting from the write off of deferred financing costs, has been reflected as
an extraordinary loss on the consolidated statement of operations.
The interest rate under the senior bank credit agreement is based, at the
Company's option, on the lead lending bank's alternate base rate or the bank's
Eurodollar deposit rate, plus margins as follows:
<TABLE>
<CAPTION>
REVOLVING
TERM LOAN CREDIT LOAN
----------- -----------
<S> <C> <C>
Alternate base rate margin.......................................... 1.75% 1.25%
Eurodollar deposit rate margin...................................... 3.00% 2.50%
</TABLE>
The interest rates in effect at December 31, 1995 for the term loan and the
revolving credit loan were 8.8% and 8.4%, respectively. The interest rates in
effect at December 31, 1994 for the term loan, revolving credit loan and
subordinated loan facility were 9.2%, 9.3%, and 12.5%, respectively.
F-14
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. DEBT (CONTINUED)
A commitment fee of 1/2 of 1% per annum is charged on the unused portion of
the revolving credit facility.
With respect to Eurodollar deposit (LIBOR-based) rate loans, the Company can
elect interest rate periods ending one, two, three or six months from the
expiration of the preceding period.
The bank credit agreement requires the maintenance of certain financial
ratios and places restrictions on capital expenditures, leases, additional
borrowings, mergers and acquisitions, and payments of dividends. Certain of
these loan requirements change during the term of the agreement and some become
more restrictive.
The Predecessor bank credit agreement required the Company to maintain
interest rate swap agreements covering a portion of its outstanding and
available credit facility including that portion related to letters of credit.
At December 1, 1994, the Predecessor had outstanding interest rate swap
agreements with two financial institutions which effectively converted floating
rate debt to fixed rate debt. The Successor's bank credit agreement also has
requirements for interest rate swaps. Accordingly, the interest rate swaps that
were in effect at Acquisition were continued by the Successor. A fee of $250,000
was paid in connection with this arrangement. The terms of the interest rate
swaps and the unrealized losses at December 31, 1994 and 1995 are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
1994 1995
NOTIONAL PAY UNREALIZED UNREALIZED
AMOUNT MATURITY DATE RATE RECEIPT RATE LOSSES LOSSES
- ------------- -------------------- --------- ------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 40,000,000 February 27, 1997 9.13% 6 month LIBOR $ (2,200) $ (1,405)
40,000,000 March 21, 1997 8.99% 6 month LIBOR (1,900) (1,317)
</TABLE>
The Company is exposed to credit losses for amounts receivable from
counterparties for interest to the extent variable interest rates exceed fixed
interest rates per the swap agreements (an average of 9.06%) each quarter in the
event of nonperformance by the counterparties to the agreements. In addition,
cancellation of the agreements due to nonperformance by the counterparties would
also cause an increase in interest expense in future periods to the extent that
the fixed interest rates per the swap agreements were less than variable
interest rates during such periods. However, the Company does not anticipate
nonperformance by the counterparties. A 1% increase in interest rates on $80.0
million would increase interest expense by $800,000 per annum. The Company is
subject to market loss in the event of falling interest rates on both swaps.
Unrealized losses are the net amounts of money that would be paid for equal and
offsetting interest rate swaps.
As part of the Company's initial capitalization, the Company issued $10.0
million in subordinated notes to Invifin, an affiliate of Investcorp. The notes
are due on March 31, 2006 and bear interest at 14%. Holdings incurred a fee of
$1.2 million in connection with the issuance of these notes. This fee has been
capitalized as a deferred financing cost and is being amortized over the term of
the note using the effective interest method.
F-15
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. DEBT (CONTINUED)
Maturities of debt are as follows at June 30, 1996 (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
- ---------------------------------------------------------------------------------
<S> <C>
(UNAUDITED)
1996............................................................................. $ 500
1997............................................................................. 1,000
1998............................................................................. 12,000
1999............................................................................. 145,500
2000 and thereafter.............................................................. 185,000
-----------
$ 344,000
-----------
-----------
</TABLE>
Outstanding debt of the Predecessor included a term loan of $71.0 million, a
revolving credit facility of up to $80.0 million and a $6.0 million commitment
for the issuance of letters of credit. As part of the 1994 Acquisition, the
Company replaced this debt with the securities detailed above.
Cash paid for interest, including cash paid under interest rate swaps,
totaled $25.3 million for the year ended December 31, 1995. Cash paid for
interest in 1994 was $1.3 million in the Successor period, and approximately
$12.3 million in the Predecessor period. Cash paid for interest in 1993
approximated $11.4 million.
9. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases facilities, computer equipment, rental equipment, autos
and trucks under operating leases. Minimum future obligations for operating
leases in effect at December 31, 1995 are (in thousands):
<TABLE>
<S> <C>
DECEMBER 31,
- -------------------------------------------------------------------
1996............................................................... $ 5,979
1997............................................................... 5,031
1998............................................................... 3,829
1999............................................................... 2,116
2000............................................................... 1,205
Thereafter......................................................... 1,608
---------
Total minimum obligations.......................................... $ 19,768
---------
---------
</TABLE>
Lease expense charged to operations in the accompanying statements of
operations was approximately $7.2 million for the year ended December 31, 1995.
Lease expense charged to operations for 1994 was $537,000 in the Successor
period, and $5.1 million in the Predecessor period. Lease expense charged to
operations for 1993 was approximately $4.2 million.
LEGAL MATTERS
The Company is party to legal proceedings and potential claims arising in
the ordinary course of its business. In the opinion of management based on
discussions with legal counsel, the Company has
F-16
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
adequate legal defense and/or insurance coverage with respect to these matters,
and management does not believe that the ultimate resolution of these matters
will materially affect the Company's operations, financial position or cash
flows for any period.
ENVIRONMENTAL MATTERS
The Company is subject to various evolving federal, state and local
environmental laws and regulations governing, among other things, emissions to
air, discharge to waters and the generation, handling, storage, transportation,
treatment and disposal of hazardous substances and wastes. These laws and
regulations provide for substantial fees and sanctions for violations, and, in
many cases, could require Prime to remediate a site to meet applicable legal
requirements.
In 1995, the Company spent approximately $1.3 million on environmental
matters, including remediation and compliance costs, and has budgeted
expenditures of approximately $4.4 million in 1996 for such matters. At June 30,
1996, the Company had a reserve for environmental remediation of $7.0 million
and a related receivable from state trust fund programs and a seller of certain
yards of $2.0 million. The actual cost of remediating environmental conditions
may be different than that accrued by the Company due to the difficulty in
estimating such costs and due to potential changes in the status of legislation
and state reimbursement programs.
Management believes that the amounts required to correct any identified
environmental condition and to maintain compliance with applicable environmental
regulations will not have a material adverse effect on the financial condition
or results of operations of the Company.
RISK MANAGEMENT
The Company is self-insured for physical damage or loss to its rental
equipment. Presently, the Company has an insurance deductible of $250,000 per
occurrence for claims related to workers' compensation, vehicle liability, and
general liability. The annual deductible related to employee health benefit
claims is $100,000 per employee.
In February 1994, the Company settled a dispute with W.R. Grace & Co., a
former owner, regarding general liability and workers' compensation insurance.
Accordingly, a liability of $2.0 million, originally recorded in 1990, was
reversed and recorded as a reduction of selling, general and administrative
expenses in the statements of operations in the Predecessor period.
LETTERS OF CREDIT
As of December 31, 1994 and 1995, and June 30, 1996, the Company had letters
of credit outstanding totaling $5.1 million, $8.7 million and $7.7 million,
respectively. These letters of credit guarantee the funding of environmental
remediation and the Company's share of insured claims. None of the Company's
assets are pledged as collateral for these letters of credit.
F-17
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES
The components of the provision (benefit) for income taxes consist of the
following (in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE PERIOD PERIOD FOR THE
YEAR FROM FROM YEAR
ENDED JANUARY 1, DECEMBER 2, ENDED
DECEMBER 1994 THROUGH 1994 THROUGH DECEMBER
31, DECEMBER 1, DECEMBER 31, 31,
1993 1994 1994 1995
----------- ------------- ------------- -----------
PREDECESSOR PREDECESSOR SUCCESSOR SUCCESSOR
----------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Tax provision/(benefit) at statutory rate
(35%)................................... $ 3,025 $ 7,335 $ (123) $ (3,415)
Amortization of cost in excess of fair
value net assets acquired............... 1,106 1,044 96 1,138
Utilization of net operating loss
carryforwards........................... -- -- -- (668)
Change in estimate of prior year net
operating loss and alternative minimum
tax credit carryforward................. -- -- -- (509)
Change in valuation allowance............. -- -- -- 478
Increase in alternative minimum tax credit
carryforward............................ -- -- -- 600
Other..................................... 219 127 44 8
----------- ------ ------ -----------
4,350 8,506 17 (2,368)
Tax benefit from extraordinary item--loss
on extinguishment of debt............... -- -- -- (794)
----------- ------ ------ -----------
$ 4,350 $ 8,506 $ 17 $ (3,162)
----------- ------ ------ -----------
----------- ------ ------ -----------
</TABLE>
The classification of the provision (benefit) for income taxes consists of
the following (in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE PERIOD PERIOD FOR THE
YEAR FROM FROM YEAR
ENDED JANUARY 1, DECEMBER 2, ENDED
DECEMBER 1994 THROUGH 1994 THROUGH DECEMBER
31, DECEMBER 1, DECEMBER 31, 31,
1993 1994 1994 1995
----------- ------------- ------------- -----------
PREDECESSOR PREDECESSOR SUCCESSOR SUCCESSOR
----------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Current:
Federal................................. $ -- $ 3,787 $ -- $ 2,194
State................................... -- 254 8 362
Deferred.................................. 4,350 4,465 9 (5,718)
----------- ------ ------ -----------
Total................................. $ 4,350 $ 8,506 $ 17 $ (3,162)
----------- ------ ------ -----------
----------- ------ ------ -----------
</TABLE>
Income taxes payable as of December 31, 1994 and 1995 were $2.0 million and
$1.1 million, respectively.
F-18
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED)
The components of deferred tax liability are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation in excess of book...................... $ 31,782 $ 28,897
Other................................................... 820
--------- ---------
32,602 28,897
Deferred tax assets:
Accrued casualty losses................................. 1,342 1,708
Allowance for doubtful accounts......................... -- 356
Accrued interest........................................ -- 334
Accrued pension costs................................... 1,158 785
Accrued medical expenses................................ 280 539
Accrued environmental costs............................. 860 1,116
Accrued bonus........................................... 1,284 --
Non-compete agreements.................................. -- 2,143
Net operating losses.................................... 3,679 33
Investment tax credits.................................. 47 --
Alternative minimum tax credit carryforwards............ -- 3,100
Other................................................... -- 40
--------- ---------
8,650 10,154
Less: valuation allowance................................. (3,642) (3,133)
--------- ---------
Net deferred tax liability........................ $ 27,594 $ 21,876
--------- ---------
--------- ---------
</TABLE>
As of December 31, 1995, the Company has state income tax net operating loss
carryforwards of approximately $962,000. Substantially all of the Company's net
operating loss carryforwards expire in the year 2004. Additionally, the Company
has federal alternative minimum tax credit carryforwards of approximately $3.1
million. Cash paid for income taxes during the year ended December 31, 1995
amounted to approximately $3.5 million. The Company paid no cash for income
taxes during 1994 in the Successor period and approximately $2.9 million in the
Predecessor period. Cash paid for income taxes approximated $156,000 during
1993. At December 31, 1995 and 1994 the Company had a valuation allowance
established which eliminates the deferred tax asset associated with the net
operating losses and alternative minimum tax credit carryforwards. The allowance
was established since it is not likely that the benefit of these assets will be
realized due to the Company's high level of interest expense.
F-19
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. STOCKHOLDER'S EQUITY (IN THOUSANDS, EXCEPT FOR PER-SHARE AMOUNTS)
CAPITALIZATION:
The following is a summary of the capitalization of the Company:
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D COMMON TOTAL
SHARES SHARES SHARES SHARES SHARES
----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994
Authorized........................................... 1,025 580 10 1,615 3,230
Issued............................................... 889 101 10 -- 1,000
Outstanding.......................................... 889 101 10 -- 1,000
Balance at December 31, 1995
Authorized........................................... 1,025 580 10 1,615 3,230
Issued............................................... 889 106 5 -- 1,000
Outstanding.......................................... 889 106 5 -- 1,000
Balance at June 30, 1996
Authorized (unaudited)............................... 1,025 580 10 1,615 3,230
Issued (unaudited)................................... 1,023 106 5 -- 1,134
Outstanding (unaudited).............................. 1,023 105 5 -- 1,133
</TABLE>
All of the stock has a $.01 par value per share. The transfer of any shares
of stock is restricted as specified in the Company's Certificate of Designation
(the "Certificate").
CONVERSION OF STOCK:
In the event of an initial public offering or sale of the Company, as
defined in the Certificate, all issued and outstanding shares of Class A, Class
C and Class D Stock not otherwise redeemed by the Company shall automatically
convert into shares of Common Stock on a one-for-one basis.
VOTING RIGHTS:
Holders of shares of Class D Stock and Common Stock are entitled to one vote
for each share of such stock held. Until a change of control of the Company, as
defined in the Certificate, holders of Class A and Class C Stock have no voting
rights, except that the holders of these shares shall have the right to one vote
for each share held as to the approval of any change to the Certificate of
Incorporation that would increase or decrease the par value of such stock, or
change the powers, preferences or special rights of such stock so as to have a
material adverse effect on such holders.
Effective upon a change of control, holders of shares of Class A and Class C
Stock shall be entitled to one vote for each share of stock held.
Currently, affiliates of Investcorp S.A. ("Investcorp") own all of the
outstanding voting stock of the Company. Investcorp owns no voting stock and
less than 10% of the Company's total outstanding stock.
LIQUIDATION RIGHTS:
In the event of liquidation of the Company, each holder of Class A and Class
C Stock shall be entitled to receive $.001 per share before any payment or
distribution shall be made or set aside for payment on the Class D Stock or
Common Stock. Any remaining assets or proceeds therefrom are to be distributed
to all stockholders on a pro rata basis.
F-20
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. STOCKHOLDER'S EQUITY (IN THOUSANDS, EXCEPT FOR PER-SHARE
AMOUNTS) (CONTINUED)
DIVIDEND RIGHTS:
Dividends are payable to all stockholders on a pro rata basis upon
declaration of such dividends by the Board of Directors.
12. MANAGEMENT STOCK INCENTIVE PLAN (IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
At the 1994 Acquisition, Prime adopted a Management Stock Incentive Plan
(the "Plan"), in order to provide incentives to employees and directors of Prime
and Primeco by granting them option awards of Class C Stock of Prime. The Plan
is administered by a committee of the Board of Directors of Prime (the
"Compensation Committee"), which has broad authority in administering and
interpreting the Plan and in determining the type of awards granted under the
Plan.
Prime granted options to purchase 12 shares of its Class C Stock to certain
senior members of Primeco's management and to other officers and employees of
Primeco. The exercise price of each option is $70.00 per share, which is the
same price per share paid by existing holders of Class C Stock to acquire Class
C Stock. Each option is subject to certain vesting provisions. To the extent not
earlier vested or terminated, all options will vest on the tenth anniversary of
the date of grant and will expire 30 days thereafter if not exercised.
13. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has the following types of financial instruments:
- Cash and cash equivalents
- Accounts receivable
- Accounts payable
- Interest rate swaps
- Debt
Due to the short maturity of these instruments, their carrying values
approximate their fair values, except for debt and interest rate swaps.
Management believes that the carrying value of debt approximates its fair value
as of December 31, 1995 and 1994. The fair value of the interest rate swaps is
disclosed in Note 8.
14. ACQUISITION OF AMERICAN HI-LIFT:
On February 26, 1996, Prime completed the purchase of all of the outstanding
stock of Vibroplant U.S., Inc. Prime paid a purchase price of $66.5 million for
the shares of Vibroplant U.S., which included repayment of the outstanding bank
debt of Vibroplant U.S. Vibroplant U.S. merged into Primeco after the closing.
In conjunction with the Vibroplant U.S. acquisition, deferred tax liabilities of
$7.3 million were recorded. The financial statements of Vibroplant U.S. are
included elsewhere in this prospectus.
Vibroplant U.S. (which operates as American Hi-Lift) operates 17 rental
locations in California, Texas, Florida, Louisiana, Ohio, Alabama, South
Carolina and Georgia. American Hi-Lift specializes in renting and selling aerial
lift equipment to industrial and commercial customers.
In conjunction with this transaction, certain existing stockholders
purchased approximately 134,000 shares of Class A, for net proceeds of $9.4
million ($.6 million was paid to Investcorp). Prime then used these funds, as
well as borrowings under its Senior Credit Facility, to fund the transaction.
F-21
<PAGE>
PRIME SERVICE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
14. ACQUISITION OF AMERICAN HI-LIFT: (CONTINUED)
The following pro forma statement of operations presents the results of
operations for the year ended December 31, 1995 and for the six month periods
ended June 30, 1996 and 1995 as though the controlling ownership of American
Hi-Lift had been acquired on January 1, 1995, and assumes that there were no
other changes in the operations of Prime. The pro forma results are not
necessarily indicative of the financial results that might have occurred had the
transaction included in the pro forma statements actually taken place on January
1, 1995, or of future results of operations (in thousands).
<TABLE>
<CAPTION>
PRO FORMA FOR
PRO FORMA FOR SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ----------------------
1995 1996 1995
-------------- ---------- ----------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Revenues........................................... $ 296,451 $ 162,399 $ 141,511
Net (loss) income.................................. (3,936) 3,843 (2,674)
</TABLE>
15. RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
SFAS 121, which is effective for fiscal years beginning after December 15, 1995,
requires that long-lived assets and certain identifiable intangibles be held and
used by an entity to be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company adopted SFAS 121 at the beginning of 1996. The impact
of adopting this statement did not have a material effect on the financial
statements.
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 123, entitled "ACCOUNTING FOR STOCK-BASED
COMPENSATION" ("SFAS No. 123"), in October 1995. The Company will adopt the new
disclosure rules of SFAS No. 123 in fiscal year 1997.
16. ACQUISITION OF ALPINE
On July 29, 1996, Primeco completed the purchase of substantially all of the
assets of Alpine Equipment Rentals & Supply Company, Inc. ("Alpine"). Primeco
paid a purchase price of $11,015,000 for such assets, and also paid $350,000 in
respect of covenants not to compete for two senior executives of Alpine. The
financial statements of Alpine are included elsewhere in this prospectus.
17. INITIAL PUBLIC OFFERING
The Company is in the process of filing an initial public offering for the
issuance of shares of Common Stock. This offering is expected to be completed
during the fourth quarter of 1996. In connection with the Common Stock offering,
Prime plans to effect a stock split in the form of a stock dividend. All share
and per share information for the Successor included within the audited
financial statements and related footnotes reflect historical amounts and have
not been restated to reflect the stock split. Upon completion of the initial
public offering, the Company will (i) terminate its management agreement with
Investcorp, and (ii) use a portion of the net proceeds to retire a portion of
its current debt. As a result of the above, the Company will write-off the
unamortized prepaid management fee ($2.1 million at June 30, 1996) and a portion
of the deferred financing costs ($4.8 million at June 30, 1996), and incur
redemption penalty expense of $4.6 million (not accrued at June 30, 1996).
F-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Vibroplant U.S., Inc.:
We have audited the accompanying balance sheets of Vibroplant U.S., Inc. as
of February 25, 1996 and March 31, 1995, and the related statements of
operations, stockholder's equity and cash flows for the period from April 1,
1995 through February 25, 1996, and for each of the years in the two-year period
ended March 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with 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 Vibroplant U.S., Inc. as of
February 25, 1996 and March 31, 1995, and the results of its operations and its
cash flows for the period from April 1, 1995 through February 25, 1996, and for
each of the years in the two-year period ended March 31, 1995, in conformity
with generally accepted accounting principles.
As discussed in note 3 to the financial statements, the Company changed its
method of computing depreciation in 1995. As discussed in note 2(e) to the
financial statements, the Company changed its method of accounting for income
taxes in 1994 to adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes."
KPMG PEAT MARWICK LLP
Fort Worth, Texas
April 8, 1996
F-23
<PAGE>
VIBROPLANT U.S., INC.
BALANCE SHEETS
MARCH 31, 1995 AND FEBRUARY 25, 1996
<TABLE>
<CAPTION>
MARCH 31, FEBRUARY 25,
1995 1996
------------- -------------
<S> <C> <C>
ASSETS (NOTE 7)
Current assets:
Cash and cash equivalents........................................................ $ 3,003,586 $ 3,693,078
Trade accounts receivable, less allowance for doubtful accounts of approximately
$610,000 in 1995 and $601,000 in 1996 (note 2 (f))............................. 9,114,993 7,186,288
Income taxes receivable (note 8)................................................. 436,899 424,622
Inventories (notes 4 and 12)..................................................... 3,146,086 3,717,727
Prepaid expenses................................................................. 492,778 321,929
Deferred income taxes (note 8)................................................... 891,634 723,696
------------- -------------
Total current assets......................................................... 17,085,976 16,067,340
Property and equipment, net (notes 5 and 12)....................................... 53,803,575 57,484,172
Other assets, net.................................................................. -- 163,155
------------- -------------
Total assets................................................................. $ 70,889,551 $ 73,714,667
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current installments of long-term debt (note 7).................................. $ 7,500,000 $ 7,500,000
Current installments of obligations under capital leases (note 6)................ 145,086 226,000
Accounts payable................................................................. 1,060,433 697,971
Accrued expenses................................................................. 2,899,085 2,910,724
Accrued dividends (note 1)....................................................... -- 15,000,000
------------- -------------
Total current liabilities.................................................... 11,604,604 26,334,695
Long-term debt, excluding current installments (note 7)............................ 17,000,000 13,250,000
Obligations under capital leases, excluding current installments (note 6).......... 163,543 325,069
Accrued environmental costs (note 11).............................................. -- 3,000,000
Deferred income taxes (note 8)..................................................... 8,994,367 10,181,154
------------- -------------
Total liabilities............................................................ 37,762,514 53,090,918
------------- -------------
Stockholder's equity (note 1):
Common stock, $.01 par value, 700,000 shares authorized, 489,691 shares issued
and outstanding................................................................ 4,897 4,897
Additional paid-in capital....................................................... 21,881,396 21,881,396
Retained earnings................................................................ 12,897,384 394,096
Less treasury stock, 14,691 shares, at cost (note 9)............................. (1,656,640) (1,656,640)
------------- -------------
Total stockholder's equity................................................... 33,127,037 20,623,749
Commitments and contingencies (notes 6 and 11)
------------- -------------
$ 70,889,551 $ 73,714,667
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE>
VIBROPLANT U.S., INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND
THE PERIOD FROM APRIL 1, 1995 THROUGH FEBRUARY 25, 1996
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, FEBRUARY 25,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Rental revenue (note 2 (f))......................................... $ 40,442,447 $ 38,584,141 $ 37,203,561
Equipment sales..................................................... 9,332,918 8,116,332 8,848,837
Less cost of sales (note 3)......................................... (6,646,228) (6,971,298) (6,083,250)
------------- ------------- -------------
2,686,690 1,145,034 2,765,587
------------- ------------- -------------
Parts and labor sales............................................... 3,017,420 3,592,854 3,559,906
Less cost of sales.................................................. (1,786,999) (2,085,990) (1,901,780)
------------- ------------- -------------
1,230,421 1,506,864 1,658,126
------------- ------------- -------------
Operating profits............................................. 44,359,558 41,236,039 41,627,274
------------- ------------- -------------
Selling, general and administrative expenses
(notes 6, 9 and 10)............................................... 15,703,727 15,207,889 12,760,387
Depreciation and amortization (note 3).............................. 12,595,813 7,716,029 7,372,818
Operating salaries, wages and benefits.............................. 5,783,733 5,798,864 5,709,057
Other operating expenses (notes 5 and 6)............................ 7,456,803 7,927,021 9,876,408
------------- ------------- -------------
Total operating expenses...................................... 41,540,076 36,649,803 35,718,670
------------- ------------- -------------
Operating income.............................................. 2,819,482 4,586,236 5,908,604
------------- ------------- -------------
Other expenses (income);
Interest expense (note 7)......................................... 2,212,715 1,828,363 1,517,196
Other, net........................................................ 419,029 (166,059) (224,381)
------------- ------------- -------------
Total other expenses.......................................... 2,631,744 1,662,304 1,292,815
------------- ------------- -------------
Income before income taxes and cumulative effect of changes in
accounting methods.......................................... 187,738 2,923,932 4,615,789
Income taxes (note 8)............................................... 133,200 1,578,469 2,119,077
------------- ------------- -------------
Income before cumulative effect of changes in accounting
methods..................................................... 54,538 1,345,463 2,496,712
Cumulative effect at April 1, 1994 of change in accounting for
depreciation (note 3)............................................. -- 4,782,132 --
Cumulative effect at April 1, 1993 of change in accounting for
income taxes (note 2 (e))......................................... (139,218) -- --
------------- ------------- -------------
Net income (loss)............................................. $ (84,680) $ 6,127,595 $ 2,496,712
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE>
VIBROPLANT U.S., INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND
THE PERIOD FROM APRIL 1, 1995 THROUGH FEBRUARY 25, 1996
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ADDITIONAL
NUMBER OF PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
----------- --------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1993............... 489,691 $ 4,897 $ 21,881,396 $ 6,854,469 $ -- $ 28,740,762
Net loss.............................. -- -- -- (84,680) -- (84,680)
Acquisition of 14,691 shares of common
stock (note 9)...................... -- -- -- -- (1,656,640) (1,656,640)
----------- --------- ------------- -------------- ------------- --------------
Balance, March 31, 1994............... 489,691 4,897 21,881,396 6,769,789 (1,656,640) 26,999,442
Net income............................ -- -- -- 6,127,595 -- 6,127,595
----------- --------- ------------- -------------- ------------- --------------
Balance, March 31, 1995............... 489,691 4,897 21,881,396 12,897,384 (1,656,640) 33,127,037
Net income............................ -- -- -- 2,496,712 -- 2,496,712
Dividend.............................. -- -- -- (15,000,000) -- (15,000,000)
----------- --------- ------------- -------------- ------------- --------------
Balance, February 25, 1996............ 489,691 $ 4,897 $ 21,881,396 $ 394,096 $ (1,656,640) $ 20,623,749
----------- --------- ------------- -------------- ------------- --------------
----------- --------- ------------- -------------- ------------- --------------
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE>
VIBROPLANT U.S., INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND
FOR THE PERIOD FROM APRIL 1, 1995 THROUGH FEBRUARY 25, 1996
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, FEBRUARY 25,
1994 1995 1996
------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................... $ (84,680) $ 6,127,595 $ 2,496,712
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Cumulative effect of change in accounting for depreciation.... -- (4,782,132) --
Depreciation and amortization................................. 12,683,697 7,716,029 7,372,818
Provision for bad debts....................................... 300,934 1,055,639 462,715
Provision for loss on real property........................... -- 340,000 --
Deferred income taxes, including $139,218 cumulative effect of
change in accounting for income taxes in 1994............... 11,856 1,630,216 1,354,725
Changes in operating assets and liabilities:
Trade accounts receivable..................................... (573,708) 32,422 1,465,990
Income taxes receivable....................................... 192,763 (307,375) 12,277
Inventories................................................... 4,310,272 3,658,797 3,176,459
Prepaid expenses.............................................. (105,787) 107,995 170,849
Other assets.................................................. -- -- (163,155)
Accounts payable.............................................. (387,489) 421,454 (362,462)
Accrued environmental costs................................... -- -- 3,000,000
Accrued expenses.............................................. (48,912) (232,904) 11,639
------------- -------------- --------------
Net cash provided by operating activities................... 16,298,946 15,767,736 18,998,567
------------- -------------- --------------
Cash flows used in investing activities:
Purchases of property and equipment............................. (6,877,795) (10,941,427) (14,344,316)
Decrease in other assets........................................ 21,624 434,016 --
------------- -------------- --------------
Net cash used in investing activities....................... (6,856,171) (10,507,411) (14,344,316)
------------- -------------- --------------
Cash flows from financing activities:
Proceeds from long-term debt.................................... 2,500,000 24,750,000 --
Payments on long-term debt...................................... (10,159,576) (22,275,344) (3,750,000)
Payments under capital lease obligations........................ -- -- (214,759)
Payments on advances from Parent................................ -- (5,000,000) --
Decrease in bank overdraft...................................... (454,641) (392,366) --
Purchases of treasury stock..................................... (985,269) (671,371) --
------------- -------------- --------------
Net cash used in financing activities....................... (9,099,486) (3,589,081) (3,964,759)
------------- -------------- --------------
Net increase in cash and cash equivalents......................... 343,289 1,671,244 689,492
Cash and cash equivalents at beginning of period.................. 989,053 1,332,342 3,003,586
------------- -------------- --------------
Cash and cash equivalents at end of period........................ $ 1,332,342 $ 3,003,586 $ 3,693,078
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
See accompanying notes to financial statements.
F-27
<PAGE>
VIBROPLANT U.S., INC.
NOTES TO FINANCIAL STATEMENTS
1. STOCK PURCHASE AGREEMENT
On February 26, 1996, pursuant to a stock purchase agreement dated as of
January 9, 1996, Primeco, Inc. (Prime) purchased all of the outstanding stock of
Vibroplant U.S., Inc. (the Company) from Vibroplant plc (the Parent). Prime also
repaid the Company's outstanding bank debt as of February 26, 1996, which was
approximately $36,700,000.
Prior to the stock purchase agreement the Company declared dividends of
$15,000,000 and paid an intercompany account balance of $1,700,000 (including
additional management fees of $1,500,000 recognized at closing) to the Parent
from the proceeds of additional borrowings from a bank.
In conjunction with the stock purchase agreement, on February 26, 1996, the
Parent paid divestiture bonuses totaling $1,024,500 to former employees of the
Company. Severance payments were made to former employees totaling $791,050.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS
The Company is engaged in the rental, sales and servicing of aerial lift
equipment. The majority of the Company's customers are engaged in the
construction industry and are located throughout the United States. No single
customer accounted for more than five percent of the Company's sales in 1994,
1995 or 1996.
(B) CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
(C) INVENTORIES
Inventories consist of equipment replacement parts and supplies and
equipment held for sale. Inventories are carried at the lower of cost or market
value. Cost is determined using the first-in, first-out (FIFO) method for parts
and supplies. Cost for equipment held for sale is determined using the specific
identification method.
(D) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Property and equipment under
capital leases are stated at the lower of the present value of net minimum lease
payments or fair value at the inception of the lease.
Effective April 1, 1994, the Company retroactively changed to the declining
balance method for depreciating rental equipment (note 3). Remaining assets are
depreciated using the straight-line method over the estimated useful lives of
the assets (generally 5 to 30 years). Property and equipment under capital
leases are amortized on a straight-line basis over the shorter of the lease term
or estimated useful lives of the assets.
Upon sale or retirement, the related cost and accumulated depreciation are
eliminated from the accounts and gains and loses are recognized in income.
Repairs and maintenance which do not extend the lives or improve the respective
assets are charged to expense as incurred.
F-28
<PAGE>
VIBROPLANT U.S., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) INCOME TAXES
Effective April 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (Statement
109), on a prospective basis and has reported the cumulative effect of the
change in the 1994 statement of operations. Under the asset and liability method
of Statement 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
(F) REVENUE RECOGNITION
Rental revenue is recognized on the accrual basis. Included in trade
accounts receivable are unbilled rental revenues of approximately $1,296,000 and
$1,255,000 at March 31, 1995 and February 25, 1996, respectively.
(G) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents approximate fair value
because of the short maturity of such instruments.
The carrying amounts of long-term debt approximate fair value due to the
variable interest rate on such obligation.
(H) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(I) NEW ACCOUNTING STANDARD
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," (Statement 121).
Statement 121 requires that certain long-lived assets and certain intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable. Management cannot
currently estimate whether the adoption of Statement 121 in 1997 will have a
material adverse effect on the Company's financial position or results of
operations.
3. CHANGE IN ACCOUNTING FOR DEPRECIATION
Effective April 1, 1994, the Company changed its method of depreciating
rental equipment from the straight line method to the declining balance method.
The new method of depreciation was adopted to
F-29
<PAGE>
VIBROPLANT U.S., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. CHANGE IN ACCOUNTING FOR DEPRECIATION (CONTINUED)
provide a better matching of revenues and expenses over the lives of the rental
equipment and was applied retroactively to equipment acquisitions of prior
years. The effect of the change in 1995 was to increase the cost of equipment
sold by $1,400,000 and to decrease depreciation by $3,700,000. It was not
practical to determine the effect of this change in 1994. The cumulative
adjustment as of April 1, 1994 to retroactively apply the new method of
$4,782,000, after reduction for income taxes of $2,820,000, is included in 1995
income.
4. INVENTORIES
Inventories consist of the following at March 31, 1995 and February 25,
1996:
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Replacement parts and supplies.................................... $ 2,761,984 $ 2,733,309
Equipment held for sale........................................... 384,102 984,418
------------ ------------
$ 3,146,086 $ 3,717,727
------------ ------------
------------ ------------
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at March 31, 1995 and
February 25, 1996:
<TABLE>
<CAPTION>
COST, NET OF
ACCUMULATED ACCUMULATED
COST DEPRECIATION DEPRECIATION
-------------- ------------- -------------
<S> <C> <C> <C>
1995:
Rental equipment................................................... $ 86,810,271 $ 39,682,393 $ 47,127,878
Transportation equipment........................................... 2,799,966 2,205,431 594,535
Furniture and equipment............................................ 2,814,630 2,002,819 811,811
Land............................................................... 1,893,119 -- 1,893,119
Buildings.......................................................... 4,936,110 1,559,878 3,376,232
-------------- ------------- -------------
$ 99,254,096 $ 45,450,521 $ 53,803,575
-------------- ------------- -------------
-------------- ------------- -------------
1996:
Rental equipment................................................... $ 88,130,589 $ 37,268,732 $ 50,861,857
Transportation equipment........................................... 2,712,800 1,835,984 876,816
Furniture and equipment............................................ 2,769,952 2,184,891 585,061
Land............................................................... 1,795,465 -- 1,795,465
Buildings.......................................................... 5,061,195 1,696,222 3,364,973
-------------- ------------- -------------
$ 100,470,001 $ 42,985,829 $ 57,484,172
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
In 1995 the Company recorded a provision for loss on real property of
$340,000. This provision, which is included in other operating expenses in the
accompanying statements of operations, is the result of a decline in the fair
market value of the property.
F-30
<PAGE>
VIBROPLANT U.S., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. LEASES
The Company is obligated under various capital leases for transportation
equipment that expire at various dates during the next four years. At March 31,
1995 and February 25, 1996, the gross amount of equipment and related
accumulated amortization recorded under capital leases were as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Transportation equipment.............................................. $ 494,000 $ 951,000
Less accumulated amortization......................................... 144,000 299,000
---------- ----------
$ 350,000 $ 652,000
---------- ----------
---------- ----------
</TABLE>
Amortization of assets held under capital leases is included with the
depreciation expense.
The Company also has several noncancelable operating leases, primarily for
rental and transportation equipment and land and buildings, that expire over the
next six years. Rental expense for operating leases during 1994, 1995 and 1996
consisted of the following:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ------------
<S> <C> <C> <C>
Rental equipment........................................................... $ -- $ -- $ 507,000
Transportation equipment................................................... 323,000 384,000 471,000
Land and buildings......................................................... 658,000 605,000 540,000
---------- ---------- ------------
$ 981,000 $ 989,000 $ 1,518,000
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
Rental expense is included in selling, general and administrative expenses
for land and buildings and other operating expenses for rental and
transportation equipment in the accompanying statements of operations.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of February 25, 1996 are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING MARCH 31: LEASES LEASES
- ---------------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
1997.............................................................................. $ 286,000 $ 1,519,000
1998.............................................................................. 165,000 1,216,000
1999.............................................................................. 129,000 1,021,000
2000.............................................................................. 48,000 476,000
2001.............................................................................. -- 166,000
2002.............................................................................. -- 160,000
------------- ---------------
Total minimum lease payments...................................................... 628,000 $ 4,558,000
---------------
---------------
Less amount representing interest (at rates ranging from 8% to 11%)............... (76,931)
-------------
Present value of net minimum capital lease payments............................... 551,069
Less current installments of obligations under capital leases..................... (226,000)
-------------
Obligations under capital leases, excluding current installments.................. $ 325,069
-------------
-------------
</TABLE>
F-31
<PAGE>
VIBROPLANT U.S., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT
Long-term debt consists of the following at March 31, 1995 and February 25,
1996 (note 1):
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Term loan with a bank, due in varying installments through June 1999, with interest
at LIBOR plus 1.125% (6.9% at February 25, 1996) secured by substantially all of
the Company's assets and guaranteed by the Parent................................ $ 24,500,000 $ 20,750,000
Less current installments.......................................................... 7,500,000 7,500,000
------------- -------------
Long-term debt, excluding current installments..................................... $ 17,000,000 $ 13,250,000
------------- -------------
------------- -------------
</TABLE>
The loan agreement provides the Company with term loan of $24,500,000, a
$5,000,000 revolving credit facility and letters of credit totaling $2,220,000.
There were no borrowings outstanding under the revolving credit facility or the
letters of credit at March 31, 1995 or February 25, 1996. In connection with
these loan agreements, the Parent has executed guaranty agreements which also
require the Parent to meet various restrictive and affirmative covenants.
Aggregate maturities of long-term debt at February 25, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31:
- -------------------------------------------------------------------------------
<S> <C>
1997........................................................................... $ 7,500,000
1998........................................................................... 3,750,000
1999........................................................................... 9,500,000
-------------
$ 20,750,000
-------------
-------------
</TABLE>
8. INCOME TAXES
Total income taxes for the years ended March 31, 1994 and 1995 and for the
period from April 1, 1995 through February 25, 1996, were as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ------------ ------------
<S> <C> <C> <C>
Income from operations.................................................... $ 133,200 $ 1,578,469 $ 2,119,077
Cumulative effect of change in accounting for depreciation................ -- 2,820,621 --
---------- ------------ ------------
$ 133,200 $ 4,399,090 $ 2,119,077
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
F-32
<PAGE>
VIBROPLANT U.S., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
Income tax expense (benefit) attributable to income from operations consists
of the following for the years ended March 31, 1994 and 1995 and for the period
from April 1, 1995 through February 25, 1996:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
----------- ------------ ------------
<S> <C> <C> <C>
1994:
Federal.................................................................. $ 252,729 $ (116,720) $ 136,009
State.................................................................... 7,833 (10,642) (2,809)
----------- ------------ ------------
$ 260,562 $ (127,362) $ 133,200
----------- ------------ ------------
----------- ------------ ------------
1995:
Federal.................................................................. $ (152,834) $ 1,458,614 $ 1,305,780
State.................................................................... 101,087 171,602 272,689
----------- ------------ ------------
$ (51,747) $ 1,630,216 $ 1,578,469
----------- ------------ ------------
----------- ------------ ------------
1996:
Federal.................................................................. $ 340,352 $ 1,212,122 $ 1,552,474
State.................................................................... 424,000 142,603 566,603
----------- ------------ ------------
$ 764,352 $ 1,354,725 $ 2,119,077
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
Income tax expense attributable to income from operations for the years
ended March 31, 1994 and 1995 and for the period from April 1, 1995 through
February 25, 1996, differed from the amounts computed by applying the marginal
U.S. Federal income tax rate of 34 percent to pretax income as a result of the
following:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ------------ ------------
<S> <C> <C> <C>
Computed "expected" income tax expense.................................... $ 63,830 $ 994,000 $ 1,569,000
Adjustments to deferred tax assets and liabilities for changes in State
income tax rates........................................................ -- 255,000 --
Recognition of valuation allowance for deferred tax assets................ -- 160,000 --
State income taxes, net of Federal income tax benefit..................... (1,854) 117,000 374,000
Tax effect of amortization of nondeductible goodwill...................... 29,900 -- --
Other..................................................................... 41,324 52,469 176,077
---------- ------------ ------------
$ 133,200 $ 1,578,469 $ 2,119,077
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
F-33
<PAGE>
VIBROPLANT U.S., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March 31,
1995 and February 25, 1996, are presented below:
<TABLE>
<CAPTION>
1995 1996
-------------- --------------
<S> <C> <C>
Deferred tax assets:
Trade accounts receivable, principally due to the allowance
for doubtful accounts..................................... $ 231,000 $ 228,000
Accrued expenses, principally due to insurance and
environmental reserves.................................... 715,000 1,615,000
Net operating loss carryforwards............................ 220,000 160,000
Alternative minimum tax credit carryforwards................ 2,466,000 388,000
Other....................................................... 612 20,783
-------------- --------------
Gross deferred tax assets................................. 3,632,612 2,411,783
Less valuation allowance.................................. (160,000) (160,000)
-------------- --------------
Net deferred tax assets................................... $ 3,472,612 $ 2,251,783
-------------- --------------
-------------- --------------
Deferred tax liabilities:
Property and equipment, principally due to differences in
depreciation.............................................. $ (11,520,000) $ (11,709,241)
Other....................................................... (55,345) --
-------------- --------------
Total deferred tax liabilities............................ $ (11,575,345) $ (11,709,241)
-------------- --------------
-------------- --------------
</TABLE>
The valuation allowance for deferred tax assets was $160,000 as of March 31,
1995 and February 25, 1996, respectively.
At February 25, 1996, the Company had net operating loss carryforwards for
state income tax purposes of approximately $160,000 which may be available to
offset future State taxable income, if any through 2005. In addition, the
Company has minimum tax credit carryforwards of approximately $388,000 which are
available to reduce future Federal regular income taxes, if any, over an
indefinite period.
9. RELATED PARTY TRANSACTIONS
During 1994, 1995 and 1996, management fees of $84,000, $84,000, and
$116,000 were charged to the Company by the Parent, respectively. Such amounts
are included in selling, general and administrative expenses in the accompanying
statements of operations.
In 1994, the Company purchased the outstanding common stock not owned by the
Parent for approximately $1,657,000. The Company paid approximately $985,000 in
1994 and paid the remaining balance of $657,371 in 1995.
10. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution plan covering substantially all
employees. The plan provides that employees can voluntarily contribute form 1%
to 15% of their compensation. The Company's contributions are discretionary and
totaled approximately $97,000, $130,000 and $222,000 in 1994, 1995 and 1996,
respectively.
F-34
<PAGE>
VIBROPLANT U.S., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
The Company has entered into bonus compensation agreements with various
employees. Amounts recognized under these agreements were approximately
$100,000, $130,000 and $250,000 in 1994, 1995 and 1996, respectively, which are
included in selling, general and administrative expenses in the accompanying
statements of operations.
11. COMMITMENTS AND CONTINGENCIES
As a result of environmental assessments performed during 1995, the Company
identified environmental contamination of soil and ground water at certain of
the Company's rental facilities. Utilizing cost projections from a remediation
plan developed by the Company's environmental consultants, the Company developed
an estimate of future costs for the remediation. The total estimated aggregate
costs are expected to be $3,000,000, and are based on technology currently
available to treat the contaminated sites. This amount has been recognized in
other operating expenses in the accompanying 1996 statement of operations as it
represents management's best estimate of the remediation costs.
The estimate of the remediation costs could change as a result of changes to
the remediation plan required by the various governmental environmental
agencies, changes in technology available to treat the sites, or unforeseen
circumstances existing at the site. It is not possible to estimate the amount of
losses, if any, that may exceed the amounts accrued as a result of these
factors.
The Company is involved in litigation arising as a result of its acquisition
of American Hi-Lift Corporation (American) in 1988. On January 28, 1994, a jury
verdict of approximately $429,000 was rendered against American. The Company's
management intends to vigorously appeal this decision. Although the outcome of
this litigation and its ultimate impact on the Company have not been determined,
management has recognized a provision for possible losses as a result of this
contingency. Management believes that such provision is adequate to provide for
its maximum estimated liability resulting from this decision.
The Company is fully insured, subject to varying deductibles, for workers'
compensation claims in substantially all states in which it operates. In the
remaining states, the Company provides for workers' compensation claims through
incurred loss retrospective policies. management believes that the Company has
sufficiently provided for estimated claims, including the effect of any
retroactive premium adjustments, at March 31, 1995 and February 25, 1996.
The Company is involved in various other claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position.
12. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Rental equipment of $4,891,358, $3,245,650, and $3,748,100 was transferred
to inventories in 1994, 1995 and 1996, respectively. Capital lease obligations
of $310,635 and $457,199 were incurred in 1995 and 1996, respectively, when the
Company entered into leases for equipment. Dividends payable to the Parent of
$15,00,000 were declared in 1996. In 1994, a liability of $671,371 was
recognized for purchases of treasury stock.
Cash paid for interest was $2,217,152, $2,034,000, and $1,640,000 in 1994,
1995 an 1996, respectively. Cash paid for income taxes was $67,799, $428,400,
and $752,000 in 1994, 1995 and 1996, respectively.
F-35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders
Alpine Equipment Rentals and Supply Company:
We have audited the balance sheet of the Alpine Equipment Rentals and Supply
Company as of December 31, 1995 and 1994, and the related statements of
operations, 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.
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.
As discussed in Note 7, substantially all of the Company's assets were sold
to Primeco Inc. on July 29, 1996.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Alpine Equipment Rentals and
Supply Company as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Houston, Texas
August 30, 1996
F-36
<PAGE>
ALPINE EQUIPMENT RENTALS AND SUPPLY COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
------------- ------------- JUNE 30,
1996
-------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents........................................... $ 449,066 $ 135,073 $ 360,375
Bank certificate of deposit......................................... 50,000 -- --
Accounts receivable, net............................................ 1,364,801 1,734,652 1,515,773
Inventories......................................................... 21,741 21,741 21,741
Rental equipment, net............................................... 6,709,012 7,865,531 7,575,526
Property, plant and equipment, net.................................. 999,974 1,574,428 1,434,243
Other assets........................................................ -- -- 71,258
------------- ------------- -------------
Total assets.................................................... $ 9,594,594 $ 11,331,425 $ 10,978,916
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.................................................... $ 231,347 $ 197,339 $ 169,866
Accrued expenses.................................................... 312,095 381,763 410,876
Debt................................................................ 2,307,583 3,383,084 2,958,469
Note payable to former stockholder.................................. 154,910 81,645 33,251
Commitments and Contingencies (Note 6)
Common stock, no par value, 10,000 shares authorized and 2,087
shares issued and outstanding..................................... 83,613 83,613 83,613
Paid-in capital..................................................... 66,632 66,632 66,632
Retained earnings................................................... 6,438,414 7,137,349 7,256,209
------------- ------------- -------------
Stockholders' equity............................................ 6,588,659 7,287,594 7,406,454
------------- ------------- -------------
Total liabilities and stockholders' equity...................... $ 9,594,594 $ 11,331,425 $ 10,978,916
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-37
<PAGE>
ALPINE EQUIPMENT RENTALS AND SUPPLY COMPANY
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, SIX MONTHS SIX MONTHS
--------------------------- ENDED ENDED
1994 1995 JUNE 30, 1995 JUNE 30, 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Revenues:
Rental revenue............................................. $ 8,794,296 $ 10,126,532 $ 4,627,707 $ 4,553,074
Rental equipment sales..................................... 432,054 412,341 299,892 185,153
Other income............................................... 157,615 201,718 94,576 91,171
------------ ------------- ------------- -------------
9,383,965 10,740,591 5,022,175 4,829,398
Cost of sales:
Depreciation--rental equipment............................. 587,056 614,716 283,604 298,784
Cost of rental equipment sales, net of accumulated
depreciation............................................. 401,666 372,446 265,583 173,752
Direct operating expenses.................................. 2,173,319 2,519,639 1,095,171 967,552
------------ ------------- ------------- -------------
3,162,041 3,506,801 1,644,358 1,440,088
6,221,924 7,233,790 3,377,817 3,389,310
------------ ------------- ------------- -------------
Selling, general, administrative and other................... 5,047,294 5,679,431 2,608,558 2,779,134
Depreciation--property, plant and equipment.................. 213,033 298,572 137,220 135,722
Interest expense............................................. 174,305 270,019 108,031 153,499
------------ ------------- ------------- -------------
5,434,632 6,248,022 2,853,809 3,068,355
Income before income taxes............................. 787,292 985,768 524,008 320,955
Income tax expense........................................... 29,842 36,838 31,500 2,100
------------ ------------- ------------- -------------
Net income............................................. $ 757,450 $ 948,930 $ 492,508 $ 318,855
------------ ------------- ------------- -------------
------------ ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-38
<PAGE>
ALPINE EQUIPMENT RENTALS AND SUPPLY COMPANY
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON COMMON PAID-IN RETAINED STOCKHOLDERS'
SHARES STOCK CAPITAL EARNINGS EQUITY
----------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994.......................... 2,087 $ 83,613 $ 66,632 $ 5,720,964 $5,871,209
Net Income........................................ 757,450 757,450
Stockholder distributions......................... (40,000) (40,000)
----- --------- --------- ------------ ------------
Balance at December 31, 1994........................ 2,087 83,613 66,632 6,438,414 6,588,659
Net Income........................................ 948,930 948,930
Stockholder distributions......................... (249,995) (249,995)
----- --------- --------- ------------ ------------
Balance at December 31, 1995........................ 2,087 83,613 66,632 7,137,349 7,287,594
Net Income (six months, unaudited)................ 318,855 318,855
Stockholder distributions (unaudited)............. (199,995) (199,995)
----- --------- --------- ------------ ------------
Balance at June 30, 1996 (unaudited)................ 2,087 $ 83,613 $ 66,632 $ 7,256,209 $7,406,454
----- --------- --------- ------------ ------------
----- --------- --------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-39
<PAGE>
ALPINE EQUIPMENT RENTALS AND SUPPLY COMPANY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------- SIX MONTHS ENDED
1994 1995 JUNE 30, 1995
------------ ------------ -----------------
<S> <C> <C> <C>
(UNAUDITED)
Operating activities:
Net income......................................................... $ 757,450 $ 948,930 $ 492,508
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation..................................................... 800,089 913,288 420,824
Net gain on disposal of rental equipment; and property, plant and
equipment...................................................... (31,738) (57,195) (34,309)
Provision for doubtful accounts.................................. 22,697 --
Effect on changes in operating assets and liabilities:
Decrease (increase) in accounts receivable..................... (266,979) (369,851) 29,970
Increase in other assets....................................... -- -- (75,157)
Increase in accounts payable and accrued expenses and other
liabilities.................................................. 160,420 35,660 225,947
------------ ------------ -----------------
Net cash provided by operating activities.................... 1,441,939 1,470,832 1,059,783
Investing activities:
Additions to rental equipment...................................... (264,603) (141,509) (135,401)
Additions to property, plant and equipment......................... (34,047) (778,499) (353,964)
Proceeds from sales of rental equipment............................ 432,054 412,341 299,892
Proceeds from disposals of property, plant and equipment........... 1,350 17,300 3,600
Maturity of bank certificate of deposit............................ -- 50,000 50,000
------------ ------------ -----------------
Net cash (used in) provided by investing activities.......... 134,754 (440,367) (135,873)
Financing activities:
Proceeds from debt................................................. 75,000 567,000
Payments of debt................................................... (1,316,018) (1,661,463) (602,886)
Shareholder distributions.......................................... (40,000) (249,995) (249,995)
------------ ------------ -----------------
Net cash used in financing activities........................ (1,281,018) (1,344,458) (852,881)
Net (decrease) increase in cash and cash equivalents................. 295,675 (313,993) 71,029
Cash and cash equivalents at beginning of period..................... 153,391 449,066 449,066
------------ ------------ -----------------
Cash and cash equivalents at end of period........................... $ 449,066 $ 135,073 $ 520,095
------------ ------------ -----------------
------------ ------------ -----------------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest............................. $ 174,305 $ 270,019
Cash paid during the year for income taxes......................... $ 33,356 $ 33,342
Additions to rental equipment and property, plant and equipment
financed through promissory notes................................ $ 1,626,310 $ 2,096,699
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996
-----------------
<S> <C>
(UNAUDITED)
Operating activities:
Net income......................................................... $ 318,855
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation..................................................... 434,506
Net gain on disposal of rental equipment; and property, plant and
equipment...................................................... (11,401)
Provision for doubtful accounts.................................. --
Effect on changes in operating assets and liabilities:
Decrease (increase) in accounts receivable..................... 218,879
Increase in other assets....................................... (71,258)
Increase in accounts payable and accrued expenses and other
liabilities.................................................. 1,640
-----------------
Net cash provided by operating activities.................... 891,221
Investing activities:
Additions to rental equipment...................................... (175,058)
Additions to property, plant and equipment......................... (3,010)
Proceeds from sales of rental equipment............................ 185,153
Proceeds from disposals of property, plant and equipment........... --
Maturity of bank certificate of deposit............................ --
-----------------
Net cash (used in) provided by investing activities.......... 7,085
Financing activities:
Proceeds from debt................................................. 330,000
Payments of debt................................................... (803,009)
Shareholder distributions.......................................... (199,995)
-----------------
Net cash used in financing activities........................ (673,004)
Net (decrease) increase in cash and cash equivalents................. 225,302
Cash and cash equivalents at beginning of period..................... 135,073
-----------------
Cash and cash equivalents at end of period........................... $ 360,375
-----------------
-----------------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.............................
Cash paid during the year for income taxes.........................
Additions to rental equipment and property, plant and equipment
financed through promissory notes................................
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-40
<PAGE>
ALPINE EQUIPMENT RENTALS AND SUPPLY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY
Alpine Equipment Rental and Supply Company (the "Company") was formed in
1974. The Company's operations primarily consist of renting equipment and, to a
lesser extent, selling used equipment to commercial construction, industrial and
residential users in the Washington State area.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RENTAL AGREEMENTS
The Company rents equipment primarily to the construction, industrial and
homeowner markets. Rental agreements are structured as operating leases, and
rental revenue is recognized in the period in which it is earned.
INVENTORIES
Inventory is valued at the lower of cost or market, with cost being
determined on the specific identification method.
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Depreciation for rental equipment is
computed using the straight-line method over the estimated five-year useful life
of the assets, after giving effect to an estimated salvage value. Accumulated
depreciation was approximately $3,780,000 and $4,072,000 and $4,207,000 at
December 31, 1994 and 1995 and June 30, 1996, respectively.
Expenditures for additions or improvements which extend asset lives are
capitalized in the period incurred. Normal repairs and maintenance costs are
expensed as incurred. When rental equipment is disposed of, the related costs
and accumulated depreciation are removed from the respective accounts, and any
gains or losses are included in results of operations.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation is computed
on the straight-line basis over the estimated useful lives of the assets, giving
effect to an estimated salvage value.
The estimated useful lives for leasehold improvements is 15 years and the
estimated useful lives for vehicles, shop tools, and furniture and fixtures is 5
years.
Expenditures for additions or improvements which extend asset lives are
capitalized in the period incurred. Normal repairs and maintenance costs are
expensed as incurred. When property, plant and equipment are disposed of, the
related cost and accumulated depreciation are removed from the respective
accounts, and any gains or losses are included in results of operations.
INCOME TAXES
As of July 1, 1988, the stockholders elected to report the Company's taxable
income as an "S" Corporation for federal income tax purposes, pursuant to
Section 1374(a) of the Internal Revenue Code. Previously, the Company was
organized as a "C" Corporation. As an "S" Corporation, the income of the Company
is taxable directly to the stockholders. Accordingly, the Company is not subject
to federal income taxes with the exception of federal income taxes on gains
realized from the sale of depreciable personal property owned at June 30, 1988
and sold prior to July 1, 1998. Of the original potential taxable gain of
F-41
<PAGE>
ALPINE EQUIPMENT RENTALS AND SUPPLY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
$1,059,000, the Company has recognized approximately $777,000 through December
31, 1995. The remaining gain of approximately $282,000 will be recognized in
1996 following the sale of these assets (see Note 7).
CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and all highly liquid
investment instruments purchased with original maturities of three months or
less.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash and cash equivalents and accounts
receivable. The Company maintains cash deposits with one bank, which from
time-to-time, may exceed federally insured limits. Management periodically
assesses the financial condition of the institution and believes that any
possible credit risk is minimal.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's customer
base. However, the majority of the Company's customers operate in the state of
Washington and therefore the Company is vulnerable to the general economic
conditions of that state. The Company generally does not require collateral on
accounts receivable. At December 31, 1994 and 1995 and June 30, 1996 the Company
had an allowance for doubtful accounts of $22,697.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
In the opinion of management, the accompanying unaudited interim condensed
financial statements contain all adjustments (consisting only of normal
recurring items) necessary to present fairly the financial position of the
Company as of June 30, 1996 and the results of its operations and cash flows for
the six months ended June 30, 1995 and 1996. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the Securities and Exchange Commission's rules and regulations. The
results of operations for all interim periods presented are not necessarily
indicative of the results to be expected for the full year.
F-42
<PAGE>
ALPINE EQUIPMENT RENTALS AND SUPPLY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following as of December 31,
1994 and 1995 and June 30, 1996 (in thousands):
<TABLE>
<CAPTION>
1994 1995
------------- ------------- 1996
-------------
(UNAUDITED)
<S> <C> <C> <C>
Property, plant and equipment at cost:
Vehicles....................................... $ 1,614,046 $ 2,068,177 $ 2,068,177
Shop tools..................................... 188,937 214,266 215,545
Leasehold improvements......................... 295,544 455,186 455,186
Furniture and fixtures......................... 119,363 313,647 315,378
------------- ------------- -------------
2,217,890 3,051,276 3,054,286
Accumulated depreciation......................... (1,217,916) (1,476,848) (1,620,043)
------------- ------------- -------------
Net property, plant and equipment.......... $ 999,974 $ 1,574,428 $ 1,434,243
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
4. RELATED PARTY TRANSACTIONS
The Company leases two of its facilities from partnerships owned by certain
Company shareholders. The leases call for lease payments aggregating $13,903 per
month and both expire in 1996. The rental expense for these leases included in
the statement of operations was approximately $163,000 and $167,000 for the
years ended December 31, 1994 and 1995, respectively.
The Company issued a note payable to a former stockholder for the purchase
of that stockholder's shares of Company stock. See Note 5 for additional
information.
5. DEBT AND NOTE PAYABLE TO FORMER STOCKHOLDER
Debt consists of the following at December 31, 1994 and 1995 and June 30,
1996 (in thousands):
<TABLE>
<CAPTION>
1994 1995
------------ ------------ 1996
------------
(UNAUDITED)
<S> <C> <C> <C>
Revolving credit agreement.......................... $ -- $ 267,000 $ 397,000
Promissory notes issued for the purchase of rental
equipment and property, plant and equipment....... 2,307,583 3,116,084 2,361,469
Note payable to bank................................ -- -- 200,000
------------ ------------ ------------
$ 2,307,583 $ 3,383,084 2,958,469
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
In January 1993, the Company borrowed approximately $200,000 from a bank to
fund distributions to stockholders. This loan accrued interest at 10% and was
repaid in April, 1994.
In March 1993, the Company entered into a one-year revolving credit
agreement with a bank which has been renewed annually. The agreement originally
provided for a $200,000 line of credit which was increased to $400,000 on
December 27, 1995. Interest on the outstanding debt is based on prime plus 1%
(9.5% at December 31, 1994 and 1995) and is collateralized by equipment. The
amount available for additional borrowings under this revolving credit agreement
at December 31, 1995 was approximately $133,000. Borrowings under this revolving
credit agreement are payable on demand.
In connection with the purchase of rental equipment and property, plant and
equipment, the Company has issued promissory notes to several creditors with
varying terms. All notes issued are collateralized by the purchased equipment
and bear interest at various rates ranging from 7.5% to 10.75%
F-43
<PAGE>
ALPINE EQUIPMENT RENTALS AND SUPPLY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. DEBT AND NOTE PAYABLE TO FORMER STOCKHOLDER (CONTINUED)
at December 31, 1995. All notes are payable in monthly installments and mature
on various dates through December 1999.
The note payable to stockholder is a promissory note issued to a former
Company stockholder for the purchase of that stockholder's shares of Company
stock. Monthly installments are due on the note in the amount of $7,500,
including interest at 9%, through December 1, 1996.
Maturities of debt and the note payable are as follows at December 31, 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
- ------------------------------------------------------------------------------------
<S> <C>
1996.............................................................................. $ 1,748,702
1997.............................................................................. 921,022
1998.............................................................................. 564,991
1999.............................................................................. 230,014
------------
$ 3,464,729
------------
------------
</TABLE>
In January 1996, the Company borrowed $200,000 from a bank to fund
distributions of $199,995 to stockholders during that month. This loan bears
interest at 10.25% and is payable on demand.
6. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases facilities under operating leases. Minimum future
obligations for operating leases in effect at December 31, 1995 are:
<TABLE>
<CAPTION>
DECEMBER 31,
- ------------------------------------------------------------------------------------
<S> <C>
1996.............................................................................. $ 419,476
1997.............................................................................. 207,223
1998.............................................................................. 209,430
1999.............................................................................. 193,104
2000.............................................................................. 129,376
------------
Total Minimum Obligations......................................................... $ 1,158,609
------------
------------
</TABLE>
Lease expense charged to operations in the accompanying statement of
operations was approximately $445,000 and $510,000 for the years ended December
31, 1994 and 1995, respectively.
In 1996, two of the Company's operating leases with monthly lease payments
of $8,000 and $7,800, respectively, were extended through July 31, 2002.
7. SUBSEQUENT EVENTS
On July 29, 1996, the Company's shareholders agreed to sell substantially
all of the assets of the Company to Primeco Inc. for approximately $11 million
of cash and a $350,000 payment for a covenant not to compete. This sale required
the Company to recognize its remaining tax liability of approximately $282,000
(as discussed in Note 2) for assets owned prior to July 1, 1988.
F-44
<PAGE>
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 9
Use of Proceeds................................. 13
Dividend Policy................................. 13
Capitalization.................................. 14
Dilution........................................ 15
Pro Forma Consolidated Financial Statements..... 16
Selected Consolidated Historical, Pro Forma
Financial and Other Data...................... 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 25
Business........................................ 34
Management...................................... 44
Certain Transactions............................ 50
Principal and Selling Stockholders.............. 51
Description of Capital Stock.................... 52
Description of Certain Indebtedness............. 54
Shares Eligible for Future Sale................. 55
Underwriting.................................... 57
Notice to Canadian Residents.................... 58
Legal Matters................................... 59
Experts......................................... 59
Additional Information.......................... 59
Index to Financial Statements................... F-1
</TABLE>
--------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
Prime Service, Inc.
Shares
Common Stock
($0.01 PAR VALUE)
PROSPECTUS
CS First Boston
Merrill Lynch & Co.
Salomon Brothers Inc
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Fee............................................................... $
NASD Fee..............................................................
State Blue Sky Qualification..........................................
Listing Fee...........................................................
Trustee's Fees........................................................
Legal Fees............................................................
Printing..............................................................
Accounting Fees.......................................................
Qualified Independent Underwriter Fees and Expenses...................
Miscellaneous.........................................................
-----------
Total............................................................. $
-----------
-----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Corporation Law") gives Delaware corporation broad powers to indemnify
their present and former directors and officers against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with threatened, pending or completed actions,
suits or proceedings to which they are parties or are threatened to be made
parties by reason of being or having been such directors or officers, subject to
specified conditions and exclusions; gives a director or officer who
successfully defends an action the right to be so indemnified; and permits a
corporation to buy directors' and officers' liability insurance. Such
indemnification is not exclusive of any other rights to which those indemnified
by be entitled under any by-law, agreement, vote of stockholders or otherwise.
As permitted by Section 145 of the Delaware Corporation Law, Article VII of
the Bylaws of the Company provides for the indemnification by the Company of its
directors, officers, employees and agents against liabilities and expenses
incurred in connection with actions, suits or proceedings brought against them
by a third party or in the rights of the corporation, by reason of the fact that
they were or are such officers, employees or agents.
Article Eighth of the Company's Amended and Restated Certificate of
Incorporation, which is incorporated by reference in this Registration
Statement, provides that to the fullest extent permitted by the Delaware
Corporation Law as the same exists or may hereafter be amended, a director of
the Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director.
Additionally, Primeco has entered into indemnification agreements with
certain present and former officers and directors of Primeco. These agreements,
among other things, indemnify such officers and directors for certain expenses
and all losses, claims, liabilities, judgments, fines and settlement amounts
incurred by such person arising out of or in connection with such person's
service as a director or officer of Primeco to the fullest extent permitted by
the Texas Business Corporation Act. Primeco also has obtained and maintains
policies of insurance under which its directors and officers will be insured,
within the limits and subject to the limitations of the policies, against
certain expenses in connection with the defense of, and certain liabilities
which might be imposed as a result of, actions, suits or proceedings to which
they are parties by reason of being or having been such officers or directors.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The registrant has not issued or sold securities within the past three years
pursuant to offerings that were not registered under the Securities Act of 1933,
as Amended (the "Securities Act"), except as follows:
<TABLE>
<S> <C>
(a) In December 1994, the Company sold to Arlington Limited 222,322 of its Class A Shares
for an aggregate of $15,562,540, and 2,679 of its Class C Shares for an aggregate of
$187,530.
(b) In December 1994, the Company sold to Freeport Limited 222,322 of its Class A Shares
for an aggregate of $15,562,540, and 2,679 of its Class C Shares for an aggregate of
$187,530.
(c) In December 1994, the Company sold to LaPorte Limited 222,322 of its Class A Shares
for an aggregate of $15,562,540, and 2,679 of its Class C Shares for an aggregate of
$187,530.
(d) In December 1994, the Company sold to Plano Limited 222,322 of its Class A Shares for
an aggregate of $15,562,540, and 2,679 of its Class C Shares for an aggregate of
$187,530.
(e) In December 1994, the Company sold to Equipment Rental Limited 89,996 of its Class C
Shares for an aggregate of $6,299,720.
(f) In December 1994, the Company sold 920 of its Class D Shares, for an aggregate of
$64,400, to each of Ballet Limited, Denary Limited, Gleam Limited, Highlands Limited,
Noble Limited, Outrigger Limited, Quill Limited, Radial Limited, Shoreline Limited and
Zinnia Limited.
(g) In December 1994, the Company sold to Investcorp Investment Equity Limited 800 of its
Class D Shares for an aggregate of $56,000.
(h) In December 1995, the Company sold to Equipment Rental Limited 8,342 shares of its
Class C Shares for an aggregate of $583,940.
(i) In December 1995, Investcorp Investment Equity Limited converted 400 of its Class D
Shares into 400 Class C Shares.
(j) In December 1995, Ballet Limited, Denary Limited, Gleam Limited, Highlands Limited,
Noble Limited, Outrigger Limited, Quill Limited, Radial Limited, Shoreline Limited and
Zinnia Limited each converted 460 Class D Shares into 460 Class C Shares.
(k) In February 1996, the Company sold to Arlington Limited 33,261 of its Class A Shares
for an aggregate of $2,328,270, and 368 of its Class C Shares for an aggregate of
$25,760.
(l) In February 1996, the Company sold to Freeport Limited 33,261 of its Class A Shares
for an aggregate of $2,328,270, and 368 of its Class C Shares for an aggregate of
$25,760.
(m) In February 1996, the Company sold to LaPorte Limited 33,261 of its Class A Shares for
an aggregate of $2,328,270, and 368 of its Class C Shares for an aggregate of $25,760.
(n) In February 1996, the Company sold to Plano Limited 33,261 of its Class A Shares for
an aggregate of $2,328,270, and 368 of its Class C Shares for an aggregate of $25,760.
(o) On various dates from May 30, 1995 through April 30, 1996, pursuant to the Stock Plan,
the Company awarded options to key employees of Primeco, exerciseable in whole or in
part at $70.00 per share, to purchase an aggregate of 17,430 Class C Shares. On the
closing of the Offering, each option will be exerciseable for a number of shares of
Common Stock identical to the number of Class C Shares for which it was exerciseable
prior to the Offering, at the same price per share.
</TABLE>
The transactions set forth above were undertaken in reliance upon the
exemptions from the registration requirements of the Securities Act afforded by
(i) Section 4(2) thereof and/or Regulation D promulgated thereunder, as sales
not involving a public offering, and/or (ii) Rule 701 promulgated thereunder, as
sales by an issuer to employees, directors, officers, consultants or advisors
pursuant to written compensatory benefit plans or written contracts relating to
the compensation of such persons. The purchasers of the securities described
above acquired them for their own account and not with a view to any
distribution thereof to the public. The certificates evidencing the securities
bear legends stating that the shares may not be offered, sold or transferred
other than pursuant to an effective registration statement under the Securities
Act or an exemption from such registration requirements. The Company will place
stop transfer instructions with its transfer agent with respect to the
securities described in paragraphs (a) through (n) above. With respect to the
transactions described in paragraph (o) above, following effectiveness of this
Registration Statement, the Company plans to register on Form S-8 under
II-2
<PAGE>
the Securities Act the shares of Common Stock issuable upon exercise of options
granted under the Stock Plan.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER: DESCRIPTION OF EXHIBITS
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 Amended and Restated Certificate of Designation of the Company
3.3 Amendment to the Amended and Restated Certificate of Incorporation of the Company
3.4 Amended and Restated Bylaws of the Company
4.1 Form of Common Stock Certificate*
4.2 Form of Indenture between Primeco and Texas Commerce Bank National Association, as trustee.
(Incorporated by reference to Exhibit 4 of Primeco's Registration Statement on Form S-1, Registration
Statement No. 33-87404, originally filed with the SEC on December 15, 1994 (the "Primeco Registration
Statement").)
4.3 See Exhibits 3.1 and 3.2 as to rights of holders of the Company's Class A Common Stock, Class C Common
Stock and Class D Common Stock prior to the Offering.
5.1 Opinion of Gibson, Dunn & Crutcher LLP*
10.1 Agreement for Management Advisory, Strategic Planning and Consulting Services, dated as of December 1,
1994, between Investcorp International Inc. and Prime Acquisition Corp. (Incorporated by reference to
Exhibit 10(c) of the Primeco Registration Statement.)
10.2 Agreement for Management Advisory, Strategic Planning and Consulting Services dated as of February 26,
1996 between Investcorp International Inc. and Primeco. (Incorporated by reference to Exhibit 10.2 of
Primeco's Annual Report on Form 10-K for the year ended December 31, 1995.)
10.3 Prime Service, Inc. Management Stock Incentive Plan. (Incorporated by reference to Exhibit 10.3 of
Primeco's Annual Report on Form 10-K for the year ended December 31, 1995 (the "Primeco 10-K").)
10.4 Credit Agreement dated as of December 1, 1994, among Prime Acquisition Corp., the lenders party thereto,
Chemical bank as Administrative Agent, and The CIT Group Business Credit, Inc., as collateral agent.
(Incorporated by reference to Exhibit 10(d) of the Primeco Registration Statement).
10.5 Amendment No. 1 to Credit Agreement, dated as of November 1, 1995, among Primeco, the lenders party
thereto, Chemical Bank as Administrative Agent, and The CIT Group/Business Credit, Inc. as collateral
agent. (Incorporated by reference to Exhibit 10.5 of the Primeco 10-K.)
10.6 Amendment No. 2 to Credit Agreement, dated as of January 10, 1996, among Primeco Inc., the lenders party
thereto, Chemical Bank as Administrative Agent, and The CIT Group/ Business Credit, Inc. as collateral
agent. (Incorporated by reference to Exhibit 10.6 of the Primeco 10-K.)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER: DESCRIPTION OF EXHIBITS
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.7 Security Agreement dated as of December 1, 1994, between Prime Acquisition Corp. and The CIT
Group/Business Credit, Inc. as collateral agent. (Incorporated by reference to Exhibit 10(e) of the
Primeco Registration Statement).
10.8 Interest Rate and Currency Exchange Agreement, dated as of March 7, 1990 between Primeco and Salomon
Brothers Holding Company, Inc., as modified by the Schedule to the Interest Rate and Currency Exchange
Agreement dated as of March 7, 1990, as supplemented by the Letter Agreement dated March 7, 1990
confirming the swap transaction and as amended by the Letter Agreement dated as of December 1, 1994.
(Incorporated by reference to Exhibit 10(g) of the Primeco Registration Statement).
10.9 Letter Agreement dated as of December 1, 1994 between Primeco and Chemical Bank confirming a swap
transaction. (Incorporated by reference to Exhibit 10(h) of the Primeco Registration Statement).
10.10 Employment Agreement, dated December 2, 1994 between Primeco and Thomas E. Bennett (Incorporated by
reference to Exhibit 10.10 of the Primeco 10-K.)
10.11 Employment Agreement, dated April 1, 1996 between Primeco and Brian Fontana (Incorporated by reference
to Exhibit 10.1 of Primeco's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996).
10.12 Employment Agreement, dated December 2, 1994, between Primeco and Kevin L. Loughlin (Incorporated by
reference to Exhibit 10.11 of the Primeco 10-K.)
10.13 Employment Agreement, dated December 2, 1994 between Primeco and Peter A. Post (Incorporated by
reference to Exhibit 10.12 of the Primeco 10-K.)
10.14 Employment Agreement, dated December 2, 1994 between Primeco and Gerald E. Lane (Incorporated by
reference to Exhibit 10.13 of the Primeco 10-K.)
10.15 Indemnity Agreement, dated as of December 2, 1994 between Primeco and Charles J. Phillipin.
(Incorporated by reference to Exhibit 10(k) of the Primeco Registration Statement.)
10.16 Indemnity Agreement, dated as of December 2, 1994 between Primeco and Christopher J. O'Brien.
(Incorporated by reference to Exhibit 10(l) of the Primeco Registration Statement.)
10.17 Indemnity Agreement, dated as of December 2, 1994 between Primeco and Thomas E. Bennett. (Incorporated
by reference to Exhibit 10(m) of the Primeco Registration Statement.)
10.18 Indemnity Agreement, dated as of April 1, 1996, between Primeco and Brian Fontana (Incorporated by
reference to Exhibit 10.2 of Primeco's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996).
10.19 Indemnity Agreement, dated as of December 2, 1994 between Primeco and E. Garrett Bewkes, III.
(Incorporated by reference to Exhibit 10(I) of the Primeco Registration Statement.)
10.20 Indemnity Agreement, dated as of December 2, 1994 between Primeco and Robert V. Glaser. (Incorporated by
reference to Exhibit 10(j) of the Primeco Registration Statement.)
10.21 Indemnity Agreement, dated as of January 30, 1995 between Primeco and Kevin L. Loughlin. (Incorporated
by reference to Exhibit 10(o) of the Primeco Registration Statement.)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER: DESCRIPTION OF EXHIBITS
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.22 Settlement Agreement and Release, dated as of February 26, 1996, by and among Michael Murnin, Randal
Shields, Lloyd Glick, Randolph Goss, Thomas Darnell, Chris Fix, Carlos Goff, Cathy Albritton, Vibroplant
U.S. Inc, and Vibroplant plc. (Incorporated by reference to Exhibit 10.20 of the 1995 10-K).
10.23 Stock Purchase Agreement, dated as of January 9, 1996, and as amended and supplemented by the Closing
Supplement to Stock Purchase Agreement dated as of February 26, 1996, by and among Vibroplant plc,
Vibroplant Investments, Ltd. and Primeco Inc. (Incorporated by reference to Exhibits 2.1 and 2.2 of
Primeco's Current Report on Form 8-K, filed with the SEC on March 12, 1996).
10.24 Form of Mortgage from Primeco Inc. to the CIT Group/Business Credit, Inc. and schedule of substantially
identical mortgages pursuant to Rule 12b-31 of the Exchange Act. (Incorporated by reference to Exhibit
10.23 of the Primeco 10-K.)
10.25 Stock Purchase Agreement, dated October 2, 1994, as amended by Amendment No. 1, dated as of November 28,
1994, between Prime Acquisition Corp. and American Perco, Inc. (Incorporated by reference to Exhibits
10(a) and 10(b) of the Primeco Registration Statement.)
10.26 Asset Purchase and Sale Agreement, dated as of May 13, 1996, as amended as of July 29, 1996, among
Primeco, Alpine Equipment Rentals & Supply Company, Inc., Gary R. Eide, Dale V. Houg, Jerome G.
Schneider and Edward M. Zawislak (incorporated by reference to Exhibits 2.1 and 2.2 of Primeco's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996).
10.27 Holdings Guarantee, dated as of December 1, 1994, made by the Company in favor of the CIT Group/Business
Credit, Inc.
10.28 Holdings Pledge Agreement, dated as of December 1, 1994, made by the Company in favor of the CIT
Group/Business Credit, Inc.
22.1 Subsidiaries of the Company
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
24.1 Power of Attorney (included on signature page of this Registration Statement).
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
(B) FINANCIAL STATEMENTS SCHEDULES:
1. FINANCIAL STATEMENTS INCLUDED: SEE INDEX TO FINANCIAL STATEMENTS INCLUDED
ON PAGE F-1.
[All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are omitted either because
they are not required or because the required information is included in the
financial statements and notes thereto included herein. See "Index to Financial
Statements.']
II-5
<PAGE>
ITEM 17. UNDERTAKINGS.
1. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
2. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on September 6, 1996.
PRIME SERVICE, INC.
By: _______/S/ THOMAS E. BENNETT______
NAME: ________THOMAS E. BENNETT_______
TITLE: __ PRESIDENT, CHIEF EXECUTIVE
OFFICER AND DIRECTOR________
POWER OF ATTORNEY
Each person whose signature appears below, hereby severally and individually
constitute and appoint Brian Fontana and Kevin L. Loughlin, and each of them,
the true and lawful attorneys and agents (with full power of substitution and
resubstitution in each case) of each of us to execute in the name, place and
stead of each of us (individually and in any capacity stated below) any and all
amendments to this Registration Statement on Form S-1 and all instruments
necessary or advisable in connection therewith and to file the same with the
Securities and Exchange Commission, each of said attorneys and agents to have
the power to act with or without the others and to have full power and authority
to do and perform in the name and on behalf of each of the undersigned every act
whatsoever necessary or advisable to be done in the premises as fully and to all
intents and purposes as any of the undersigned might or could do in person, and
we hereby ratify and confirm our signatures as they may be signed by our said
attorneys and agents or each of them to any and all such amendments and
instruments.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
/s/ THOMAS E. BENNETT
- ------------------------------ President, Chief Executive September 6, 1996
Thomas E. Bennett Officer and Director
/s/ BRIAN FONTANA Executive Vice President
- ------------------------------ and Chief Financial September 6, 1996
Brian Fontana Officer
/s/ JOHN D. LATIMER Controller, Assistant
- ------------------------------ Treasurer and Assistant September 6, 1996
John D. Latimer Secretary
/s/ JON P. HEDLEY
- ------------------------------ Director September 6, 1996
Jon P. Hedley
II-7
<PAGE>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
/s/ CHRISTOPHER J. O'BRIEN
- ------------------------------ Director September 6, 1996
Christopher J. O'Brien
/s/ CHARLES J. PHILIPPIN
- ------------------------------ Director September 6, 1996
Charles J. Philippin
/s/ CHRISTOPHER J. STADLER
- ------------------------------ Director September 6, 1996
Christopher J. Stadler
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
SEQUENTIALLY
NUMBER
NUMBERED
PAGE DESCRIPTION OF EXHIBITS
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
2.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 Amended and Restated Certificate of Designation of the Company
3.3 Amendment to the Amended and Restated Certificate of Incorporation of the Company
3.4 Amended and Restated Bylaws of the Company
4.1 Form of Common Stock Certificate*
4.2 Form of Indenture between Primeco and Texas Commerce Bank National Association, as trustee.
(Incorporated by reference to Exhibit 4 of Primeco's Registration Statement on Form S-1, Registration
Statement No. 33-87404, originally filed with the SEC on December 15, 1994 (the "Primeco Registration
Statement").)
4.3 See Exhibits 3.1 and 3.2 as to rights of holders of the Company's Class A Common Stock, Class C
Common Stock and Class D Common Stock prior to the Offering.
5.1 Opinion of Gibson, Dunn & Crutcher LLP*
10.1 Agreement for Management Advisory, Strategic Planning and Consulting Services, dated as of December
1, 1994, between Investcorp International Inc. and Prime Acquisition Corp. (Incorporated by reference
to Exhibit 10(c) of the Primeco Registration Statement.)
10.2 Agreement for Management Advisory, Strategic Planning and Consulting Services dated as of February
26, 1996 between Investcorp International Inc. and Primeco. (Incorporated by reference to Exhibit
10.2 of Primeco's Annual Report on Form 10-K for the year ended December 31, 1995.)
10.3 Prime Service, Inc. Management Stock Incentive Plan. (Incorporated by reference to Exhibit 10.3 of
Primeco's Annual Report on Form 10-K for the year ended December 31, 1995 (the "Primeco 10-K").)
10.4 Credit Agreement dated as of December 1, 1994, among Prime Acquisition Corp., the lenders party
thereto, Chemical bank as Administrative Agent, and The CIT Group Business Credit, Inc., as
collateral agent. (Incorporated by reference to Exhibit 10(d) of the Primeco Registration Statement).
10.5 Amendment No. 1 to Credit Agreement, dated as of November 1, 1995, among Primeco, the lenders party
thereto, Chemical Bank as Administrative Agent, and The CIT Group/ Business Credit, Inc. as
collateral agent. (Incorporated by reference to Exhibit 10.5 of the Primeco 10-K.)
10.6 Amendment No. 2 to Credit Agreement, dated as of January 10, 1996, among Primeco Inc., the lenders
party thereto, Chemical Bank as Administrative Agent, and The CIT Group/Business Credit, Inc. as
collateral agent. (Incorporated by reference to Exhibit 10.6 of the Primeco 10-K.)
10.7 Security Agreement dated as of December 1, 1994, between Prime Acquisition Corp. and The CIT
Group/Business Credit, Inc. as collateral agent. (Incorporated by reference to Exhibit 10(e) of the
Primeco Registration Statement).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
SEQUENTIALLY
NUMBER
NUMBERED
PAGE DESCRIPTION OF EXHIBITS
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.8 Interest Rate and Currency Exchange Agreement, dated as of March 7, 1990 between Primeco and Salomon
Brothers Holding Company, Inc., as modified by the Schedule to the Interest Rate and Currency
Exchange Agreement dated as of March 7, 1990, as supplemented by the Letter Agreement dated March 7,
1990 confirming the swap transaction and as amended by the Letter Agreement dated as of December 1,
1994. (Incorporated by reference to Exhibit 10(g) of the Primeco Registration Statement).
10.9 Letter Agreement dated as of December 1, 1994 between Primeco and Chemical Bank confirming a swap
transaction. (Incorporated by reference to Exhibit 10(h) of the Primeco Registration Statement).
10.10 Employment Agreement, dated December 2, 1994 between Primeco and Thomas E. Bennett (Incorporated by
reference to Exhibit 10.10 of the Primeco 10-K.)
10.11 Employment Agreement, dated April 1, 1996 between Primeco and Brian Fontana (Incorporated by
reference to Exhibit 10.1 of Primeco's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996).
10.12 Employment Agreement, dated December 2, 1994, between Primeco and Kevin L. Loughlin (Incorporated by
reference to Exhibit 10.11 of the Primeco 10-K.)
10.13 Employment Agreement, dated December 2, 1994 between Primeco and Peter A. Post (Incorporated by
reference to Exhibit 10.12 of the Primeco 10-K.)
10.14 Employment Agreement, dated December 2, 1994 between Primeco and Gerald E. Lane (Incorporated by
reference to Exhibit 10.13 of the Primeco 10-K.)
10.15 Indemnity Agreement, dated as of December 2, 1994 between Primeco and Charles J. Phillipin.
(Incorporated by reference to Exhibit 10(k) of the Primeco Registration Statement.)
10.16 Indemnity Agreement, dated as of December 2, 1994 between Primeco and Christopher J. O'Brien.
(Incorporated by reference to Exhibit 10(l) of the Primeco Registration Statement.)
10.17 Indemnity Agreement, dated as of December 2, 1994 between Primeco and Thomas E. Bennett.
(Incorporated by reference to Exhibit 10(m) of the Primeco Registration Statement.)
10.18 Indemnity Agreement, dated as of April 1, 1996, between Primeco and Brian Fontana (Incorporated by
reference to Exhibit 10.2 of Primeco's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996).
10.19 Indemnity Agreement, dated as of December 2, 1994 between Primeco and E. Garrett Bewkes, III.
(Incorporated by reference to Exhibit 10(I) of the Primeco Registration Statement.)
10.20 Indemnity Agreement, dated as of December 2, 1994 between Primeco and Robert V. Glaser. (Incorporated
by reference to Exhibit 10(j) of the Primeco Registration Statement.)
10.21 Indemnity Agreement, dated as of January 30, 1995 between Primeco and Kevin L. Loughlin.
(Incorporated by reference to Exhibit 10(o) of the Primeco Registration Statement.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
SEQUENTIALLY
NUMBER
NUMBERED
PAGE DESCRIPTION OF EXHIBITS
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.22 Settlement Agreement and Release, dated as of February 26, 1996, by and among Michael Murnin, Randal
Shields, Lloyd Glick, Randolph Goss, Thomas Darnell, Chris Fix, Carlos Goff, Cathy Albritton,
Vibroplant U.S. Inc, and Vibroplant plc. (Incorporated by reference to Exhibit 10.20 of the 1995
10-K).
10.23 Stock Purchase Agreement, dated as of January 9, 1996, and as amended and supplemented by the Closing
Supplement to Stock Purchase Agreement dated as of February 26, 1996, by and among Vibroplant plc,
Vibroplant Investments, Ltd. and Primeco Inc. (Incorporated by reference to Exhibits 2.1 and 2.2 of
Primeco's Current Report on Form 8-K, filed with the SEC on March 12, 1996).
10.24 Form of Mortgage from Primeco Inc. to the CIT Group/Business Credit, Inc. and schedule of
substantially identical mortgages pursuant to Rule 12b-31 of the Exchange Act. (Incorporated by
reference to Exhibit 10.23 of the Primeco 10-K.)
10.25 Stock Purchase Agreement, dated October 2, 1994, as amended by Amendment No. 1, dated as of November
28, 1994, between Prime Acquisition Corp. and American Perco, Inc. (Incorporated by reference to
Exhibits 10(a) and 10(b) of the Primeco Registration Statement.)
10.26 Asset Purchase and Sale Agreement, dated as of May 13, 1996, as amended as of July 29, 1996, among
Primeco, Alpine Equipment Rentals & Supply Company, Inc., Gary R. Eide, Dale V. Houg, Jerome G.
Schneider and Edward M. Zawislak (incorporated by reference to Exhibits 2.1 and 2.2 of Primeco's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996).
10.27 Holdings Guarantee, dated as of December 1, 1994, made by the Company in favor of the CIT
Group/Business Credit, Inc.
10.28 Holdings Pledge Agreement, dated as of December 1, 1994, made by the Company in favor of the CIT
Group/Business Credit, Inc.
22.1 Subsidiaries of the Company
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
24.1 Power of Attorney (included on signature page of this Registration Statement).
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"PRIME HOLDING, INC.", FILED IN THIS OFFICE ON THE NINTH DAY OF FEBRUARY, A.D.
1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL]
/s/ Edward J. Freel
---------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2439159 8100 AUTHENTICATION: 7824184
960040045 DATE: 02/12/96
<PAGE>
SECTRETARY OF STATE
DIVISION OF OPERATI0NS
FILED 09:00 AM 02-09-1996
960040045 - 2439159
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PRIME HOLDING, INC.
The undersigned, for the purpose of amending and restating the
certificate of Incorporation of Prime Holding, Inc., a Delaware corporation (the
"Corporation"), does hereby certify that:
(1) The name of the Corporation is Prime Holding, Inc.
(2) The date of filing of its original Certificate of Incorporation
with the Secretary of State of Delaware was November 17, 1994. An Amended
and Restated Certificate of Incorporation was filed by the Corporation on
November 23, 1994. The First Amendment to such Amended and Restated
Certificate of Incorporation was filed on November 30, 1994. A Certificate
of Designation also was filed on November 30, 1994. A second Amendment to
the Amended and Restated Certificate of Incorporation was filed on December
26, 1995.
(3) The Board of Directors of the Corporation deem it advisable and
in the best interests of the Corporation that the entire Amended and Restated
Certificate of Incorporation of the Corporation, as amended, be further amended
and restated in order to provide for the authorization of a greater amount of
capital stock of the Corporation.
(4) This Amended and Restated Certificate of Incorporation was fully
adopted by the Board of Directors as of February 7, 1996 pursuant to Section 242
and Section 141 of the Delaware General Corporation Law.
(5) This Amended and Restated Certificate of Incorporation of Prime
Holding, Inc. has been consented to and authorized by the holders of a majority
of the issued and outstanding stock entitled to vote by written consent given in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
(6) This Amended and Restated Certificate of Incorporation of Prime
Holding, Inc. restates and integrates and further amends the provisions of the
Amended and Restated Certificate of Incorporation of the Corporation, as
amended, pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware. The text of the Amended and Restated Certificate of
Incorporation as heretofore amended or supplemented is hereby restated and
further amended to read in its entirety as follows:
<PAGE>
FIRST: The name of the Corporation (hereinafter called the
"Corporation") is PRIME HOLDING, INC.
SECOND: The address, including street, number, city, and county, of
the registered office of the Corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington 19805, County of New Castle; and the name of the
registered agent of the Corporation in the State of Delaware at such address is
Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 3,230,000. 1,025,000 of said shares shall be
designated as shares of Class A Stock, all of which shall be of the same series
with $.01 par value per share. 580,000 of said shares shall be designed as
Class C Stock all of which shall be of the same series with $.01 par value per
share. 10,000 of said shares shall be designated as Class D Stock all of which
shall be of the same series with $.01 par value per share. 1,615,000 of said
shares shall be designated as Common Stock, all of which shall be of the same
series with $.01 par value per share. The shares of each class of stock of the
Corporation shall be issued as a class, without series. Each such class may
have such voting powers, full or limited, including the right to have more or
less than one vote per share, or no voting powers, and such designations,
preferences, dividend rights and other special rights, qualifications,
limitations and restrictions as shall be stated and expressed in a resolution or
resolutions of the Board of Directors and filed with the Secretary of State of
the State of Delaware in accordance with the Delaware General Corporation Law.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees
in dissolution or of any receiver or receivers appointed for this Corporation
under Section 279 of Title 8 of the Delaware Code, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders
2
<PAGE>
of this Corporation as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three fourths in value
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
SEVENTH: For the management of the business and for the conduct of
the affairs of the Corporation, and in further definition, limitation, and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of Directors.
The number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the Bylaws
of the Corporation. The phrase "Whole Board" and the phrase "total
number of the directors" shall be deemed to have the same meaning, to
wit, the total number of directors which the Corporation would have if
there were no vacancies. No election of directors need be by written
ballot unless required by the Bylaws of the Corporation.
2. After the Bylaws of the Corporation have been adopted,
amended, or repealed as the case may be, in accordance with the
provisions of Section 109 of the Delaware General Corporation Law,
and, after the Corporation has received any payment for any of its
stock, the power to adopt, amend, or repeal the Bylaws of the
Corporation may be exercised by the Board of Directors of the
Corporation.
3. No outstanding share of any class of stock which is
denied voting power under the provisions of the Certificate of
Incorporation or a Certificate of Designation shall entitle the holder
thereof to the right to vote at any meeting of stockholders except as
may be specified in the Certificate of Incorporation or a Certificate
of Designation or as the provisions of paragraph (2) of subsection (b)
of Section 242 of the Delaware General
3
<PAGE>
Corporation law shall otherwise require; provided, that such paragraph of
the Delaware General Corporation Law shall not entitle the holder of a
share of any class of stock to vote on the increase of the number of
authorized shares of such class of stock or the decrease of the number of
authorized but not outstanding shares of such class of stock, if such class
of stock is not a class of stock that has general voting powers including,
without limitation, the power to elect directors.
EIGHTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same may be amended or supplemented, a director of the
corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. If the Delaware
General Corporation Law is amended after the date of the filling of this
Certificate of Incorporation to authorized corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended from time to
time. No repeal or modification of this Article EIGHTH by the stockholders
shall adversely affect any right or protection of a director of the corporation
existing by virtue of this Article EIGHTH at the time of such repeal or
modification.
NINTH: From time to time and subject to the provisions of any
Certificate of Designation filed by the Board any of the provisions of this
Certificate of Incorporation may be amended, altered, or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this Certificate of Incorporation are granted subject to the provisions of this
Article NINTH.
[The remainder of this page has been intentionally left blank]
4
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Amended and
Restated Certificate of Incorporation on behalf of Prime Holding, Inc. and does
verify and affirm, under penalties of perjury, that this Amended and Restated
Certificate of Incorporation is the act and deed of the Corporation and that the
facts stated herein are true as of this 9th day of February, 1996.
PRIME HOLDING, INC.
/s/ Charles J. Philippin
---------------------------------
By: Charles J. Philippin
Its: President
5
<PAGE>
STATE OF DELAWARE
PAGE 1
OFFICE OF THE SECRETARY OF STATE
____________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "PRIME HOLDING, INC.", FILED IN THIS OFFICE ON THE NINTH DATE OF
FEBRUARY, A.D. 1996, AT 9:01 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ EDWARD J. FREEL
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7824203
DATE: 02-12-96
<PAGE>
CERTIFICATE OF DESIGNATION
OF
PRIME HOLDING, INC.
Pursuant to Section 151 of the
General Corporation Law of
the State of Delaware
Prime Holding, Inc., a Delaware corporation (the "Corporation"),
hereby certifies that, pursuant to authority contained in Article FOURTH of its
Amended and Restated Certificate of Incorporation, dated February 9, 1996, and
in accordance with the provisions of Section 151 of the General Corporation Law
of the State of Delaware, the Board of Directors of the Corporation (the
"Board") has determined to file the Certificate of Designation of the
Corporation, and has adopted the following resolution setting forth the
preferences and rights of Class A Stock, Class C Stock, Class D Stock and Common
Stock, respectively:
RESOLVED, that the Board hereby specifies the following preferences,
rights, qualifications and limitations:
1. DEFINITIONS. As used herein the following terms shall have the
following meanings:
"AFFILIATE", with respect to a Class D Stockholder that is not a
natural person, means (i) any Person which, directly or indirectly, is in
control of, is controlled by, or is under common control with, such Class D
Stockholder or (ii) any Person who is a director or officer (a) of such Class D
Stockholder, (b) of any subsidiary of such Class D Stockholder or (c) of any
Person described in clause (i) above. For purposes of this definition,
"control" of a Person shall mean the power, directly or indirectly, (y) to vote
fifty percent (50%) or more of the securities having ordinary voting power for
the election of directors of such Person whether by ownership of securities,
contract, proxy or otherwise, or (z) to direct or cause the direction of the
management and policies of such Person whether by ownership of securities,
contract, proxy or otherwise.
"BOARD" means the Board of Directors of the Corporation.
<PAGE>
"BUSINESS DAY" means any day other than a Saturday, Sunday,
federal holiday or other day on which commercial banks in New York City are
authorized or required to close under the laws of the State of New York.
"CERTIFICATE" means this Certificate of Designation of the
Corporation.
"CERTIFICATE OF INCORPORATION" means the Amended and Restated
Certificate of Incorporation of the Corporation, dated February 9, 1996, as
amended from time to time.
"CHANGE OF CONTROL" means a change of control of the Corporation,
whether such change of control occurs in a single transaction or a series of
transactions; for purposes hereof the phrase "change of control of the
Corporation" means (i) the sale of more than fifty percent (50%) of the
outstanding shares of Class D Stock or Common Stock (other than a sale or
transfer to Permitted Transferees); (ii) a sale of all or substantially all of
the assets of the Corporation; (iii) the issuance by the Corporation subsequent
to December 1, 1994 of additional shares of Class D Stock or Common Stock such
that, after such issuance, such additional shares, in the aggregate, constitute
more than fifty percent (50%) of the issued and outstanding shares of Stock of
the Corporation which entitle the holder to one vote for each share of such
Stock held on all matters as to which Stockholders may be entitled to vote
pursuant to the Delaware General Corporation Law; or (iv) a merger,
consolidation or recapitalization of the Corporation as a result of which the
ownership of the Class D Stock or Common Stock of the Corporation (or the voting
stock of the surviving corporation, if the Corporation is not the survivor) is
changed to the extent of more than fifty percent (50%).
"CLASS A STOCK" has the meaning set forth in Section 2.
"CLASS C STOCK" has the meaning set forth in Section 2.
"CLASS D STOCK" has the meaning set forth in Section 2.
"CLASS A STOCKHOLDER" means a record holder of one or more shares
of Class A Stock.
"CLASS C STOCKHOLDER" means a record holder of one or more shares
of Class C Stock.
2
<PAGE>
"CLASS D STOCKHOLDER" means a record holder of one or more shares
of Class D Stock.
"COMMON STOCK" has the meaning set forth in Section 2.
"COMMON STOCKHOLDER" means a record holder of one or more shares
of Common Stock.
"CONVERSION DATE" has the meaning set forth in Section 6.
"CORPORATION" means Prime Holding, Inc.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"INITIAL PUBLIC OFFERING" means the effectiveness of a
registration statement under the Securities Act covering any of the Stock, and
the completion of a sale of such Stock thereunder, if as a result of such sale
(i) the Corporation becomes a reporting company under Section 12(b) or 12(g) of
the Exchange Act, and (ii) the Stock is traded on the New York Stock Exchange or
the American Stock Exchange, is quoted on the Nasdaq Stock Market or is traded
or quoted on any other national stock exchange or securities system.
"IPO DATE" means the closing date of the Initial Public Offering.
"IPO MAXIMUM AMOUNT" has the meaning set forth in Section 9(c).
"IPO PRO RATA AMOUNT" has the meaning set forth in Section 9(b).
"NON-REDEEMABLE SHARES" means all shares of Class A or Class C
Stock that have been previously sold pursuant to a Tag-Along Transfer other than
pursuant to a Single Transaction Sale.
"NOTICE DATE" has the meaning set forth in Section 4(b).
"OTHER STOCKHOLDERS" has the meaning set forth in Section 4(a).
"PERMITTED TRANSFEREE" with respect to a Transfer by a Class D
Stockholder, means (i) with respect to any Class D Stockholder who is a natural
person, a Transfer to (a) such Stockholder's spouse or issue, or (b) a trust the
3
<PAGE>
beneficiaries of which, and a partnership the limited and general partners of
which, include only the Class D Stockholder, his spouse or issue; and (ii) with
respect to any Class D Stockholder that is not a natural person, a Transfer to
(A) an Affiliate of such Class D Stockholder; or (B) another Class D Stockholder
or its Affiliates, PROVIDED such other Class D Stockholder did not acquire its
shares of Class D Stock pursuant to a Tag-Along Transfer.
"PERSON" means any natural person, partnership, corporation,
trust or incorporated organization or a government or a political subdivision
thereof.
"PROPOSED PURCHASE AMOUNT" has the meaning set forth in Section
4(a).
"PROPOSED TRANSFEREE" has the meaning set forth in Section 4(a).
"PROPOSED TRANSFEROR" has the meaning set forth in Section 4(a).
"REDEMPTION DATE" has the meaning set forth in Section 5(d).
"REGISTRATION ACCEPTANCE NOTICE" has the meaning set forth in
Section 9(c).
"REGISTRATION NOTICE" has the meaning set forth in Section 9(b).
"REGISTRATION NOTICE DATE" has the meaning set forth in Section
9(b).
"SALE OF THE CORPORATION" means the sale of the Corporation
whether such sale occurs pursuant to (i) the sale of one hundred percent (100%)
of the outstanding shares of Stock; (ii) a sale of all or substantially all of
the assets of the Corporation; or (iii) a merger, consolidation or
recapitalization of the Corporation as a result of which the ownership of the
Stock of the Corporation (or the voting stock of the surviving corporation, if
the Corporation is not the survivor) is changed to the extent of one hundred
percent (100%).
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
4
<PAGE>
"SINGLE TRANSACTION SALE" means a Sale of the Corporation in a
single transaction.
"STAGGERED SALE" means a Sale of the Corporation in more than one
transaction, each such transaction also being referred to individually as a
"Staggered Sale."
"STOCK" has the meaning set forth in Section 2.
"STOCKHOLDER" means a record holder of one or more shares of
Class A Stock, Class C Stock, Class D Stock or Common Stock.
"TAG-ALONG ACCEPTANCE DATE" has the meaning set forth in Section
4(c).
"TAG-ALONG NOTICE" has the meaning set forth in Section 4(c).
"TAG-ALONG PRO RATA AMOUNT" has the meaning set forth in Section
4(a).
"TAG-ALONG REDEMPTION PRICE" has the meaning set forth in Section
5(a).
"TAG-ALONG TRANSFER" has the meaning set forth in Section 4(a).
"TRANSFER", with respect to any share of Stock, means the sale,
assignment, pledge, hypothecation, gift or other disposition whatsoever (other
than pursuant to the Initial Public Offering or pursuant to the redemption by
the Corporation or the conversion by the Holder of any such share of Stock, in
either case in accordance with the terms of this Certificate) of such share, or
the encumbrance or granting of any rights or interests whatsoever in or with
respect to such share.
"TRANSFER NOTICE" has the meaning set forth in Section 4(b).
"WARRANT DATE" means, (i) if the Warrant Triggering Event is the
Initial Public Offering, the IPO Date, or (ii) if the Warrant Triggering Event
is a Sale of the Corporation, the closing date of (A) the Single Transaction
Sale, if the Sale of the Corporation is pursuant to a Single Transaction Sale,
or (B) the Staggered Sale that causes a Sale of the Corporation to occur, if the
Sale of the Corporation is pursuant to a series of Staggered Sales.
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<PAGE>
"WARRANT HOLDER(S)" means the Holder(s) of the Warrants.
"WARRANT REDEMPTION PRICE" has the meaning set forth in Section
5(b).
"WARRANT SHARES" means the shares of Common Stock purchasable by
the Warrant Holder(s) pursuant to the exercise of the Warrants.
"WARRANT TRIGGERING EVENT" means (i) an Initial Public Offering
or (ii) a Sale of the Corporation, whether such sale occurs pursuant to a Single
Transaction Sale or a series of Staggered Sales.
"WARRANT" means the Class A Warrant issued by the Corporation
which entitles the Warrant Holder(s), upon the occurrence of a Warrant
Triggering Event, to purchase the number of shares of the Common Stock of the
Corporation specified therein.
2. DESIGNATION AND NUMBER. As set forth in the Certificate of
Incorporation, the first class of stock of the Corporation shall have a par
value of $0.01 per share and shall be designated as "Class A Stock" and the
number of shares constituting such class shall be 1,025,000. The second class
of stock of the Corporation shall have a par value of $0.01 per share and shall
be designated as "Class C Stock" and the number of shares constituting such
class shall be 580,000. The third class of stock of the Corporation shall have
a par value of $0.01 per share and shall be designated as "Class D Stock" and
the number of shares constituting such class shall be 10,000. The fourth class
of stock of the Corporation shall have a par value of $0.01 per share and shall
be designated as "Common Stock" and the number of shares constituting such class
shall be 1,615,000. The Class A Stock, Class C Stock, Class D Stock and Common
Stock are sometimes referred to collectively herein as the "Stock". The
Corporation may, by an amendment to the Certificate of Incorporation duly
adopted, increase or decrease, at any time and from time to time (but not below
the number of shares of Class A Stock, Class C Stock, Class D Stock or Common
Stock then outstanding), the number of authorized shares of Class A Stock,
Class C Stock, Class D Stock or Common Stock, as the case may be. Shares of
Stock redeemed, purchased or otherwise acquired by the Corporation pursuant to
the terms hereof shall be retired and shall revert to authorized but unissued
Class A Stock, Class C Stock, Class D Stock or Common Stock, as the case may be.
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<PAGE>
3. RESTRICTIONS ON TRANSFER.
(a) Except for Transfers to a Permitted Transferee, no Class D
Stockholder shall Transfer any share of the Class D Stock owned by such Class D
Stockholder except in accordance with the terms of this Certificate including,
without limitation, the terms of Section 4 hereof. Any Transfer or attempt to
Transfer any share of Class D Stock in violation of the terms and conditions of
this Certificate shall be null and void and of no force and effect, the
transferee thereof shall not be deemed to be the registered holder thereof nor
entitled to any rights with respect thereto, and the Corporation shall refuse to
Transfer any of such Class D Stock on its books to such alleged transferee.
(b) No Stockholder shall Transfer any shares of Stock (including
Class D Stockholders who wish to Transfer shares of Class D Stock to a Permitted
Transferee) unless such Transfer complies with the conditions specified in this
Section 3(b), which are intended to ensure compliance with the provisions of the
Securities Act. Prior to any Transfer, the holder of the shares of Stock
proposed to be Transferred shall give written notice to the Corporation of such
holder's intention to effect such Transfer. Each such notice shall describe the
manner and circumstances of the proposed Transfer in sufficient detail, and, if
requested by the Corporation, shall be accompanied by either (i) a written
opinion of legal counsel who is reasonably satisfactory to the Corporation,
addressed to the Corporation and reasonably satisfactory in form and substance
to the Corporation's counsel, to the effect that the proposed Transfer may be
effected without registration under the Securities Act and qualification under
applicable state securities laws, or (ii) a "no action" letter from the SEC to
the effect that the Transfer of such securities without registration under the
Securities Act will not result in a recommendation by the staff of the SEC that
action be taken with respect thereof, or a combination of (i) and (ii) above,
whereupon the holder of such shares of Stock shall be entitled to Transfer such
shares in accordance with the terms of this Certificate and the written notice
delivered by the holder to the Corporation. Each certificate evidencing the
shares of Stock Transferred as above provided shall bear the appropriate
restrictive legend set forth in Section 10, PROVIDED THAT, following the Initial
Public Offering, such certificates shall bear the legend set forth in Section 10
or another legend only if, in the opinion of counsel to the Corporation, the
imposition of such legend is required under the Securities Act or other
applicable law. Any purported Transfer in violation of this Section 3(b) shall
be null and void and of no force or effect, and the Corporation shall not record
any such Transfer on its stock transfer books. The restrictions on Transfer
contained in this Section 3(b) shall
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<PAGE>
not apply to Transfers of shares of Stock (i) in the Initial Public Offering; or
(ii) following the Initial Public Offering, PROVIDED THAT such Transfer is made
in compliance with the Securities Act and applicable state securities laws and
in accordance with any restrictions on transfer contained in any restrictive
legend set forth on the certificates representing such shares.
4. TAG-ALONG RIGHTS.
(a) TRANSFER BY CLASS D STOCKHOLDERS. If, other than in connection
with the Initial Public Offering, any Class D Stockholder or Stockholders (for
purposes of this Section 4, singularly or collectively, the "Proposed
Transferor"), at any time or from time to time in one transaction or in a series
of transactions, desires to enter into an agreement (whether oral or written) to
Transfer its shares of Class D Stock or any part thereof to any Person other
than a Permitted Transferee (the "Proposed Transferee"), such proposed Transfer
shall be deemed a "Tag-Along Transfer" and shall only be permitted if, in
connection therewith, each of the Class A and Class C Stockholders
(collectively, the "Other Stockholders") shall have the right, but not the
obligation, to cause the Proposed Transferor to require, as a condition to such
Tag-Along Transfer, that the Proposed Transferee purchase from each such Other
Stockholder up to the number of shares (the "Tag-Along Pro Rata Amount") of
Class A or Class C Stock derived by multiplying the total number of shares of
Class A or Class C Stock, as the case may be, owned by such Other Stockholder by
a fraction, the numerator of which is equal to the number of shares of Class D
Stock that is proposed to be Transferred by the Proposed Transferor to the
Proposed Transferee (the "Proposed Purchase Amount") and the denominator of
which is the total number of shares of Class D Stock (other than shares of
Class D Stock that have previously been Transferred pursuant to a Tag-Along
Transfer) outstanding as of the Notice Date (as defined in Section 4(b)). All
Tag-Along Transfers by Other Stockholders shall be on the same terms and
conditions (with such changes as are necessary to apply such terms and
conditions to a sale by such Other Stockholders) as the proposed Tag-Along
Transfer by the Proposed Transferor, PROVIDED THAT no Other Stockholder may be
required to make any representation or warranty in connection with the Tag-Along
Transfer other than as to its ownership and authority to Transfer the shares of
Stock to be Transferred by it, free and clear of any and all liens and
encumbrances and in compliance with all applicable laws.
(b) TRANSFER NOTICE. The Proposed Transferor participating in a Tag-
Along Transfer shall promptly (and in any event at least thirty (30) Business
Days prior to the closing date thereof) provide the Corporation and the Other
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<PAGE>
Stockholders with written notice (the "Transfer Notice") of the proposed Tag-
Along Transfer containing the following:
(i) the name and address of the Proposed Transferor and the
Proposed Transferee;
(ii) the Proposed Purchase Amount;
(iii) the proposed amount and form of consideration to be paid
for such shares of Class D Stock, the terms and conditions of payment
offered by the Proposed Transferee and the closing date for the proposed
Tag-Along Transfer;
(iv) the aggregate number of shares of Class A or Class C
Stock, as the case may be, held of record as of the date the Transfer
Notice is sent (the "Notice Date") by the Other Stockholder to whom the
notice is sent;
(v) the aggregate number of shares of Class A or Class C
Stock, as the case may be, held of record as of the Notice Date by all
Other Stockholders as a group;
(vi) the Tag-Along Pro Rata Amount; and
(vii) a statement confirming that the Proposed Transferee has
been informed of the tag-along rights provided for in this Certificate.
Upon written request by the Proposed Transferor, the Corporation shall provide
to the Proposed Transferor the information referred to in (iv) and (v) above for
inclusion in the Transfer Notice and such other information as may be required
to enable the Proposed Transferor to comply with the terms of this Section 4(b).
(c) TAG-ALONG NOTICE. Each Other Stockholder desiring to participate
in the proposed Tag-Along Transfer shall provide a written notice (the "Tag-
Along Notice") to the Proposed Transferor on or before the expiration of ten
(10) Business Days after the Notice Date (the "Tag-Along Acceptance Date")
stating the number of shares held by such Other Stockholder (up to its Tag-Along
Pro Rata Amount) to be included in the proposed Tag-Along Transfer on the terms
and conditions specified in the Transfer Notice. The Tag-Along Notice given by
each Other Stockholder shall constitute such Other Stockholder's binding
agreement to include a number of shares equal to its Tag-Along Pro Rata Amount
(or such lesser amount as stated in the Tag-Along Notice) in the Tag-Along
Transfer on the terms and conditions specified in the Transfer
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<PAGE>
Notice and in this Certificate. If the Proposed Transferee does not purchase
all of the shares of Stock of the Proposed Transferor and the Other Stockholders
included in such proposed Tag-Along Transfer, then the proposed Tag-Along
Transfer to such Proposed Transferee shall be prohibited and any attempt to
consummate the proposed Tag-Along Transfer shall be null and void and of no
force and effect.
(d) Each Proposed Transferor and each Other Stockholder whose shares
are sold in a Tag-Along Transfer shall be required to bear its PRO RATA share,
based on the number of shares included in such Tag-Along Transfer, of the
expenses of the transaction including, without limitation, legal, accounting and
investment banking fees and expenses.
(e) The provisions of this Section 4 shall not apply to a subsequent
Transfer of any share of Class D Stock that has previously been the subject of a
completed Tag-Along Transfer which complied with the provisions of this Section
4.
5. REDEMPTION.
(a) The number of shares of Class A or Class C Stock equal to the
difference between (i) the number of shares included in any Tag-Along Transfer
by the Class A or Class C Stockholder pursuant to Section 4 and (ii) the Tag-
Along Pro Rata Amount for each such Class A or Class C shall be redeemed by the
Corporation out of funds legally available therefor PRO RATA from each of the
Class A and Class C Stockholders who elected to include in the Tag-Along
Transfer a number of shares of Stock less than the number of shares that
constitute their Tag-Along Pro Rata Amount or any such Stockholders that did not
elect to participate in a Tag-Along Transfer at a redemption price (the "Tag-
Along Redemption Price") for each share of Class A or Class C Stock so redeemed
equal to the per share price paid for the Class D Stock by the Proposed
Transferee less such Other Stockholder's PRO RATA share, based on the number of
shares of Stock so redeemed from such Other Stockholder, of the expenses of the
Tag-Along Transfer including, without limitation, legal, accounting and
investment banking fees and expenses. The provisions of this Section 5(a) shall
not apply to the Non-Redeemable Shares.
(b) If the Warrant Holder(s) exercise(s) the Class A Warrant, the
Corporation shall redeem from the Class A Stockholders, PRO RATA based on the
number of shares of such Class A Stock then owned by each such Stockholder, out
of funds legally available therefor, a number of shares of Class A Stock equal
to the Warrant Shares at a redemption price (the "Warrant Redemption Price")
equal to the par value of each share of Class A Stock so redeemed. The
provisions of this Section 5(b) shall not apply to the Non-Redeemable
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Shares. If a redemption pursuant to this Section 5(b) occurs as a result of a
Sale of the Corporation, such redemption shall occur, or shall be deemed to
occur, immediately prior to any redemption pursuant to Section 5(a) hereof.
(c) The shares of Class A and Class C Stock redeemed by the
Corporation pursuant to (i) a Section 5(a) mandatory redemption pursuant to a
Tag-Along Transfer that constitutes a Sale of the Corporation or (ii) a Section
5(b) mandatory redemption shall, on the Redemption Date (as defined in Section
5(d)), be retired and upon such retirement shall automatically revert to
authorized but unissued shares of Class A or Class C Stock, as relevant, and the
Corporation shall, on the Redemption Date, but immediately after such
redemption, to the extent required by the Warrant or the documentation pursuant
to which the Sale of the Corporation is effected, issue to (A) the Proposed
Transferee, in the case of a Section 5(a) mandatory redemption pursuant to a
Tag-Along Transfer that constitutes a Sale of the Corporation and/or (B) the
Warrant Holder(s), in the case of a Section 5(b) mandatory redemption, a number
of shares of Common Stock equal to (1) the number of shares of Class A or
Class C Stock so redeemed, in the case of a Section 5(a) mandatory redemption
pursuant to a Tag-Along Transfer that constitutes a Sale of the Corporation
and/or (2) the Warrant Shares, in the case of a Section 5(b) mandatory
redemption. The shares of Class A or Class C Stock redeemed by the Corporation
pursuant to a Section 5(a) mandatory redemption pursuant to a Tag-Along Transfer
that does not constitute a Sale of the Corporation shall, on the Redemption
Date, be retired and upon such retirement shall automatically revert to
authorized but unissued shares of Class A or Class C Stock, as relevant, and the
Corporation shall, on the Redemption Date, but immediately after such
redemption, issue to the Proposed Transferee a number of shares of Class A or
Class C Stock equal to the number of shares of such classes of Stock so
redeemed. Upon any issuance of shares of Class A or Class C Stock equal to the
number of shares of such class of Stock redeemed pursuant to a Section 5(a)
mandatory redemption, the Corporation shall receive from the Proposed Transferee
as the purchase price for such shares an amount equal to the Tag-Along
Redemption Price.
(d) The Corporation shall give to each holder of record of the shares
of Class A or Class C Stock to be redeemed pursuant to the terms of this Section
5 prior written notice of such redemption not less than two Business Days prior
to the date such shares will be redeemed (the "Redemption Date") which (i) in
the case of a redemption pursuant to Section 5(a) shall be the closing date of
the Tag-Along Transfer and (ii) in the case of a redemption pursuant to Section
5(b) shall be the Warrant Date. Each such notice shall state: (A) the
Redemption Date; (B) the total number of
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<PAGE>
shares of the Class A or Class C Stock to be redeemed and, if fewer than all the
shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (C) the Tag-Along Redemption Price or the Warrant
Redemption Price, as relevant; and (D) the fact that the certificates for the
shares subject to redemption are to be surrendered in exchange for payment of
the Tag-Along Redemption Price or Warrant Redemption Price, as relevant, at the
principal office of the Corporation or at such other place as the Corporation
shall designate.
(e) On the Redemption Date, the shares of Class A or Class C Stock
required to be redeemed pursuant to the terms of this Section 5 shall be deemed
to have been so redeemed, notwithstanding that the certificates representing
such Class A or Class C Stock shall not have been surrendered at the principal
office of the Corporation or such other place as the Corporation may have
designated or that notice from the Corporation shall not have been given by the
Corporation or, if given, shall not have been received by any holder of Class A
or Class C Stock whose shares of Stock are to be so redeemed. All certificates
representing the redeemed shares of Class A or Class C Stock, including all
certificates not so delivered by such Class A or Class C Stockholders, shall be,
or shall be deemed to be, canceled by the Corporation as of the Redemption Date
and shall thereafter no longer be of any force or effect.
6. CONVERSION.
If the Initial Public Offering or a Sale of the Corporation (whether
pursuant to a Single Transaction Sale or a series of Staggered Sales) occurs,
each issued and outstanding share of Class A, Class C and Class D Stock not
otherwise redeemed by the Corporation pursuant to the mandatory redemption
provisions of Section 5(a) or 5(b) hereof shall automatically convert into one
share of Common Stock effective on the Redemption Date (or, in the case of an
Initial Public Offering in which no Redemption Date occurs, the IPO Date), but
immediately after the redemptions and issuances described in Section 5 (the
"Conversion Date"). Prior to or on the Conversion Date, each holder of shares of
Class A, Class C or Class D Stock shall surrender such holder's certificates
evidencing such shares at the principal office of the Corporation or at such
other place as the Corporation shall designate to such holder in writing at
least ten (10) Business Days prior to the Conversion Date, and shall, within ten
(10) Business Days after the Conversion Date, be entitled to receive from the
Corporation certificates evidencing the number of shares of Common Stock into
which such shares of Class A, Class C or Class D Stock are converted. On the
Conversion Date, each holder of shares of
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<PAGE>
Class A, Class C or Class D Stock shall be deemed to be a holder of record of
the Common Stock issuable upon such conversion, notwithstanding that the
certificates representing such Class A or Class C Stock shall not have been
surrendered at the principal office of the Corporation or such other place as
the Corporation may have designated, that notice from the Corporation shall not
have been given or, if given, shall not have been received by any holder of
shares of Class A, Class C or Class D Stock, or that certificates evidencing
such shares of Common Stock shall not then be actually delivered to such holder.
All certificates representing the converted shares of Class A, Class C or
Class D Stock, including all certificates not so delivered by such Class A,
Class C or Class D Stockholders, shall be, or shall be deemed to be, canceled by
the Corporation as of the Conversion Date and shall thereafter no longer be of
any force or effect.
7. VOTING RIGHTS.
(a) Holders of shares of Class D Stock and Common Stock shall be
entitled to one vote for each share of such stock held on all matters as to
which stockholders may be entitled to vote pursuant to the Delaware General
Corporation Law.
(b) Prior to a Change of Control, holders of Class A or Class C shall
not have any voting rights, except that the holders of the Class A and Class C
Stock shall have the right to one vote for each share of such stock held as to
(i) the approval of any amendment, or the alteration or repeal, whether by
merger, consolidation or otherwise, of any provision of this Certificate or the
Certificate of Incorporation that would increase or decrease the par value of
the shares of the Class A or Class C Stock, or alter or change the powers,
preferences, or special rights of the shares of the Class A or Class C Stock, so
as to affect such holders adversely, PROVIDED that each such holder of Class A
or Class C Stock shall only have the right to vote on such matters affecting the
Class A or Class C Stock, as relevant; and (ii) any other matters required under
the laws of the State of Delaware; PROVIDED, HOWEVER, that unless otherwise
required by the terms of this Certificate, paragraph (2) of subsection (b) of
Section 242 of the Delaware General Corporation Law shall not entitle the holder
of a share of such Class A or Class C Stock to vote on the increase of the
number of authorized shares of such class of Stock or the decrease of the number
of authorized but not outstanding shares of such class of Stock.
(c) Effective upon a Change of Control, holders of shares of Class A
or Class C Stock shall be entitled to one vote for each share of such stock held
on all matters as to
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<PAGE>
which Stockholders may be entitled to vote pursuant to the Delaware General
Corporation Law.
8. LIQUIDATION RIGHTS.
(a) Upon the liquidation, dissolution or winding up of the affairs of
the Corporation, whether voluntary or involuntary, each holder of Class A or
Class C Stock shall be entitled to receive out of the net assets of the
Corporation or the proceeds thereof available for distribution to Stockholders,
before any payment or distribution shall be made or set aside for payment on the
Class D or Common Stock upon such liquidation, dissolution or winding up, the
amount of $0.001 per share. Such distribution shall be allocated PRO RATA
according to the number of shares of Class A or Class C Stock held by each
Stockholder. Following such distribution, any subsequent payment or
distribution upon such liquidation, dissolution or winding up shall be allocated
PRO RATA based upon the number of shares of Stock held by each Stockholder.
(b) None of the sale, transfer, conveyance or lease of all or
substantially all of the property or business of the Corporation, the merger or
consolidation of the Corporation into or with any other corporation or the
merger or consolidation of any other corporation into or with the Corporation
shall be deemed to be a dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this Section 8.
(c) If the assets of the Corporation or the proceeds thereof
available for distribution to the holders of shares of the Class A or Class C
Stock upon any dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in full all
amounts to which such holders are entitled, no distribution shall be made on any
shares of the Corporation's Class D or Common Stock.
9. REGISTRATION RIGHTS.
(a) INITIAL PUBLIC OFFERING. If, in its sole discretion, the Board
determines that the Initial Public Offering shall include shares of Stock held
by Stockholders, the Corporation shall offer to all Stockholders the opportunity
to include in the registration statement to be filed with the SEC in connection
with the Initial Public Offering a number of shares of Stock determined by
allocating the total number of shares to be sold by the Stockholders in such
Initial Public Offering PRO RATA among all of the Stockholders based on the
respective numbers of shares of Stock owned by such Stockholders at such time.
14
<PAGE>
(b) REGISTRATION NOTICE. The Corporation shall as soon as
practicable (and in no event less than thirty (30) Business Days prior to the
proposed effective date of the registration statement) provide all Stockholders
with written notice (the "Registration Notice") of the proposed Initial Public
Offering containing the following:
(i) the estimated effective date of the registration statement
and the estimated IPO Date;
(ii) the estimated per-share offering price, underwriting
discounts and commissions and net proceeds to the selling Stockholders;
(iii) the aggregate number of shares of Class A, Class C or
Class D Stock, as the case may be, held of record as of the date of the
Registration Notice (the "Registration Notice Date") by the Stockholders; and
(iv) the maximum number of shares (the "IPO Pro Rata Amount")
of Common Stock such Stockholder would be entitled to include in the
registration statement, calculated in accordance with Section 9(a) above, if all
Stockholders were to elect to include their IPO Pro Rata Amount in such
registration statement.
(c) REGISTRATION ACCEPTANCE. Each Stockholder desiring to
participate in the proposed Initial Public Offering shall provide written notice
(the "Registration Acceptance Notice") to the Corporation within fifteen (15)
Business Days of the Registration Notice Date. The Registration Acceptance
Notice shall set forth the maximum number of shares (the "IPO Maximum Amount")
of Common Stock, if any, such Stockholder desires to include in the proposed
Initial Public Offering, which may be a smaller or larger number of shares than
the number of shares that constitute the IPO Pro Rata Amount. The Registration
Acceptance Notice given by any Stockholder shall constitute such Stockholder's
binding agreement to include a number of shares equal to the IPO Maximum Amount
in the Initial Public Offering, PROVIDED THAT the net proceeds per share (after
deduction of underwriting discounts and commissions) to be realized in the
Initial Public Offering are not less than ninety percent (90%) of the amount
thereof estimated pursuant to paragraph (b) (ii) above. If the Registration
Acceptance Notice from any Stockholder is not received by the Corporation within
the fifteen (15) Business Day period specified above, such Stockholder shall be
deemed to have elected not to include any shares of Stock in such Initial Public
Offering. In such case, or if any Stockholder specifies in its Registration
Acceptance Notice that it desires to include in such registration statement a
number of shares of Stock that is less than the IPO Pro Rata
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<PAGE>
Amount, the aggregate number of shares of Stock not so included in such
registration statement shall, if the Board of Directors of the Corporation in
its sole discretion determines that such shares should be included in the
registration statement and circumstances (including, without limitation, the
timing of the effective date of the registration statement) permit the inclusion
of such shares, be allocated among all Stockholders delivering such Registration
Acceptance Notice and desiring to participate in such Initial Public Offering,
with such allocation made PRO RATA based on the number of shares included in the
IPO Maximum Amount specified by each such Stockholder in its Registration
Acceptance Notice.
(d) UNDERWRITTEN OFFERING. In the event that any registration
pursuant to this Section 9 shall be, in whole or in part, an underwritten public
offering (i) the number of shares of Stock to be included in such offering may
be reduced PRO RATA among the Stockholders based upon the number of shares
included in the IPO Maximum Amount specified by each such Stockholder in its
Registration Acceptance Notice if and to the extent that the managing
underwriter shall be of the opinion that such inclusion may adversely affect the
success of such offering and (ii) each Stockholder participating in such Initial
Public Offering shall be required to (A) make customary representations and
warranties and (B) provide customary indemnification in each case in accordance
with the terms of the underwriting agreement.
(e) EXPENSES OF REGISTRATION. Each Stockholder participating in the
Initial Public Offering pursuant to this Section 9 shall bear its PRO RATA share
(based on the ratio that the number of shares of Stock included by such
Stockholder in the Initial Public Offering bears to the total number of shares
of Stock included in such Initial Public Offering) of all underwriting discounts
and commissions. No other registration expenses shall be payable by such
Stockholders.
(f) OTHER REGISTRATION RIGHTS. Notwithstanding the provisions of
this Section 9, the Corporation may by contract with a Stockholder (i) grant
registration rights to such Stockholder that differ in certain respects from
those rights set forth herein or (ii) further restrict the registration rights
with respect to such Stockholder otherwise provided for herein.
10. LEGEND.
(a) All certificates representing shares of Class A and Class C Stock
in the Corporation shall, in addition to
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<PAGE>
other legends that may be required by state or federal securities laws, bear the
following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY BE
REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE."
"THESE SECURITIES ARE SUBJECT TO MANDATORY REDEMPTION BY THE
CORPORATION. THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF
EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS."
(b) All certificates representing shares of Class D Stock in the
Corporation shall, in addition to other legends that may be required by state or
federal securities laws, bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY BE
REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE."
"AS SPECIFIED IN THE CERTIFICATE OF DESIGNATION OF THE
CORPORATION ON FILE WITH THE DELAWARE SECRETARY OF STATE, THE
TRANSFERABILITY OF THESE SECURITIES IS SUBJECT TO RESTRICTION.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER
WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH
CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS."
(c) All certificates representing shares of Common Stock in the
Corporation shall, in addition to other legends that may be required by state or
federal securities laws, bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY BE
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<PAGE>
REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE."
"THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER
WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH
CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS."
PROVIDED THAT, as specified in Section 3(b) hereof, following the Initial Public
Offering, such certificates shall bear such legend or another legend only if, in
the opinion of counsel to the Corporation, the imposition of such legend is
required under the Securities Act or other applicable law.
11. RECORD HOLDERS. The Corporation shall be entitled to recognize
the exclusive right of a person registered in its records as the holder of
shares of Class A, Class C, Class D or Common Stock and such record holders
shall be deemed the holders of such shares for all purposes.
[The remainder of this page has been intentionally left blank]
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IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designation
under seal and on behalf of Prime Holding, Inc. and does verify and affirm,
under penalties of perjury, that this Certificate of Designation is the act and
deed of the Corporation and that the facts stated herein are true as of this 9th
day of February, 1996.
PRIME HOLDING, INC.
/s/ Charles J. Philippin
----------------------------------
By: Charles J. Philippin
Its: President
<PAGE>
STATE OF DELAWARE
PAGE 1
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "PRIME HOLDING, INC.", CHANGING ITS NAME FROM PRIME HOLDING, INC.
TO "PRIME SERVICE, INC.", FILED IN THIS OFFICE ON THE FOURTH DAY OF SEPTEMBER,
A.D. 1996, AT 3 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL]
/s/ Edward J. Freel
---------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2439159 8100 AUTHENTICATION: 8091518
960256622 DATE: 09/04/96
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
PRIME HOLDING, INC.
_____________________
PURSUANT TO SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
______________________
Prime Holding, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby sets forth an
amendment to its Certificate of Incorporation pursuant to Section 242 of the
General Corporation Law of the State of Delaware, hereby certifying as
follows:
FIRST: The name of the Corporation shall be and hereby is "Prime
Service, Inc."
SECOND: This Amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, said corproation has caused this Certificate to
be signed by Christopher J. O'Brien this 1st day of September A.D. 1996.
/s/ Christopher J. O'Brien
---------------------------------
Authorized Officer
Christopher J. O'Brien
<PAGE>
PRIME HOLDING, INC.
(a Delaware Corporation)
BYLAWS
ARTICLE I
Offices
SECTION 1.01 Registered Office. The registered office of Prime
Holding, Inc. (hereinafter called the Corporation) in the State of Delaware
shall be at 1013 Centre Road, City of Wilmington 19805, County of New Castle and
the name of the registered agent in charge thereof shall be The Corporation
Service Company.
SECTION 1.02 Other Offices. The Corporation may also have an office
or offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (hereinafter called the Board) may from time
to time determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 2.01 Annual Meetings. Annual meetings of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 Special Meetings. A special meeting of the stockholders
for the transaction of any proper business may be called at any time by the
Board or by the President.
SECTION 2.03 Place of Meetings. All meetings of the stockholders
shall be held at such places, within or without the State of Delaware, as may
from time to time be designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers of notice thereof.
<PAGE>
SECTION 2.04 Notice of Meetings. Except as otherwise required by
law, notice of each meeting of the stockholders, whether annual or special,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting by delivering a typewritten or printed notice thereof to him personally,
or by depositing such notice in the United States mail or in the care of an
express courier, in a postage prepaid envelope, directed to him at his post
office address or other delivery address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have furnished to the
Secretary his address for such purpose, then at his post office address last
known to the Secretary, or by transmitting a notice thereof to him at such
address by facsimile, telegraph, cable, or wireless. Except as otherwise
expressly required by law, no publication of any notice of a meeting of the
stockholders shall be required. Every notice of a meeting of the stockholders
shall state the place, date and hour of the meeting, and, in the case of a
special meeting, shall also state the purpose or purposes for which the meeting
is called. Notice of any meeting of stockholders shall not be required to be
given to any stockholder who shall have waived such notice and such notice shall
be deemed waived by any stockholder who shall attend such meeting in person or
by proxy, except as a stockholder who shall attend such meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Except as
otherwise expressly required by law, notice of any adjourned meeting of the
stockholders need not be given if the time and place thereof are announced at
the meeting at which the adjournment is taken.
SECTION 2.05 Quorum. Except in the case of any meeting for the
election of directors summarily ordered as provided by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. In the absence of a
quorum at any meeting or any adjournment thereof, a majority in voting interest
of the stockholders present in person or by proxy and entitled to vote thereat
or, in the absence therefrom of all the stockholders, any officer entitled to
preside at, or to act as secretary of, such meeting may adjourn such meeting
from time to time. At any such adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted at the meeting
as originally called.
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SECTION 2.06 Voting.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws
as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at
the close of business on the day next preceding the day on which
notice of the meeting shall be given or (b) if notice of the meeting
shall be waived, at the close of business on the day next preceding
the day on which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity
shall be entitled to vote such stock. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
Corporation he shall have expressly empowered the pledgee to vote thereon, in
which case only the pledgee, or his proxy, may represent such stock and vote
thereon. Stock having voting power standing of record in the names of two or
more persons or other entities, whether fiduciaries, members of a partnership,
joint tenants in common, tenants by entirety or otherwise, or with respect to
which two or more persons or other entities have the same fiduciary
relationship, shall be voted in accordance with the provisions of the General
Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At
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any meeting of the stockholders all matters, except as otherwise provided in the
Certificate of Incorporation, in these Bylaws or by law, shall be decided by the
vote of a majority in voting interest of the stockholders present in person or
by proxy and entitled to vote thereat and thereon, a quorum being present. The
vote at any meeting of the Stockholders on any question need not be by ballot,
unless so directed by the chairman of the meeting. On a vote by ballot each
ballot shall be signed by the stockholder voting, or by his proxy, if there be
such proxy, and it shall state the number of shares voted.
SECTION 2.07 List of Stockholders. The Secretary of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 2.08 Judges. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and
shall report the number of shares represented at the meeting and entitled to
vote on such question, shall conduct and accept the votes, and, when the voting
is completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The
judges need not be stockholders of the Corporation, and any officer of the
Corporation may be a judge on any question other than a vote for or against a
proposal in which he shall have a material interest.
SECTION 2.09 Action Without Meeting. Any action required to be taken
at any annual or special meeting of stockholders of the Corporation, or any
action which may be taken at any annual or special meeting of such stockholders,
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<PAGE>
may be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding shares of stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
Board of Directors
SECTION 3.01 General Powers. The property, business and affairs of
the Corporation shall be managed by the Board.
SECTION 3.02 Number and Term of Office. The number of directors
shall not be less than one (1) and not more than ten (10), as determined by the
Board. Each of the directors of the Corporation shall hold office until his
successor shall have been duly elected and shall qualify or until he shall
resign or shall have been removed in the manner hereinafter provided.
SECTION 3.03 Election of Directors. The directors shall initially
consist of the persons elected as such by the incorporator and thereafter shall
be elected annually by the stockholders of the Corporation entitled to vote
thereon and the persons receiving the greatest number of votes, up to the number
of directors to be elected, shall be the directors.
SECTION 3.04 Resignations. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05 Vacancies. Except as otherwise provided in the
Certificate of Incorporation, any vacancy on the Board, whether because of
death, resignation, disqualification, an increase in the number of directors, or
any other cause, may be filled by vote of the majority of the remaining
directors, although less than a quorum. Each director so chosen to fill a
vacancy shall hold office until his successor shall have been elected and shall
qualify or
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until he shall resign or shall have been removed in the manner hereinafter
provided.
SECTION 3.06 Place of Meeting, Etc. The Board may hold any of its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special
meeting of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as
practicable after each annual election of directors and notice of such first
meeting shall not be required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board may be
held at such times as the Board shall from time to time by resolution determine.
If any day fixed for a regular meeting shall be a legal holiday at the place
where the meeting is to be held, then the meeting shall be held at the same hour
and place on the next succeeding business day not a legal holiday. Except as
provided by law, notice of regular meetings need not be given.
SECTION 3.09 Special Meetings. Special meetings of the Board shall
be held whenever called by the President or a majority of the number of
directors then serving on the Board of Directors. Except as otherwise provided
by law notice of the time and place of each such special meeting shall be mailed
to each director, addressed to him at his residence or usual place of business,
at least five (5) days before the day on which the meeting is to be held, or
shall be sent to him at such place by facsimile, wireless, telegraph or cable or
be delivered personally not less than forty-eight (48) hours before the time at
which the meeting is to be held.
Except where otherwise required by law or by these Bylaws, notice of the purpose
of a special meeting need not be given. Notice of any meeting of the Board
shall not be required to be given to any director who is present at such
meeting, except a director who shall attend such meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 3.10 Quorum and Manner of Acting. Except as otherwise
provided in the Certificate of Incorporation, in
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these Bylaws or by law, the presence of a majority of the authorized number of
directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 3.11 Action by Consent. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 3.12 Removal of Directors. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the shares entitled to elect directors of the Corporation given at a
special meeting of the stockholders called for the purpose.
SECTION 3.13 Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.14 Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the extent provided in the resolution of the Board and except as otherwise
limited by law, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board. In the
absence or disqualification of a member of a committee, the
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member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of any such
absent or disqualified member.
ARTICLE IV
Officers
SECTION 4.01 Number. The Board shall elect a President, a Secretary
and a Treasurer and it may, if it so determines, choose a Chairman of the Board
from among its members. The Board may also choose one or more Vice Presidents,
one or more Assistant Secretaries and one or more Assistant Treasurers.
SECTION 4.02 Election, Term of Office and Qualifications. The
officers of the Corporation, except such officers as may be appointed in
accordance with Section 4.03, shall be elected annually by the Board at the
first meeting thereof held after the election thereof. Each officer shall hold
office until his successor shall have been duly chosen and shall qualify or
until his resignation or removal in the manner hereinafter provided.
SECTION 4.03 Assistants, Agents and Employees, Etc. In addition to
the officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
SECTION 4.04 Removal. Any officer, assistant, agent or employee of
the Corporation may be removed, with or without cause, at any time: (i) in the
case of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (ii) in the case of any other officer, assistant,
agent or employee, by any officer of the Corporation or committee of the Board
upon whom or which such power of removal may be conferred by the Board.
SECTION 4.05 Resignations. Any officer or assistant may resign at
any time by giving written notice of his resignation to the Board or the
Secretary of the Corporation. Any such resignation shall take effect at the
time specified therein, or, if the time be not specified, upon
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receipt thereof by the Board or the Secretary, as the case may be; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 4.06 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 4.07 The President. The President of the Corporation shall
be the chief executive officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 4.08 The Vice Presidents. Each Vice President shall have
such powers and perform such duties as the Board may from time to time
prescribe. At the request of the President, or in case of the President's
absence or inability to act upon the request of the Board, a Vice President
shall perform the duties of the President and, when so acting, shall have all
the powers of, and be subject to all the restrictions upon, the President.
SECTION 4.09 The Secretary. The Secretary shall, if present, record
the proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
SECTION 4.10 The Treasurer. The Treasurer shall have the general
care and custody of the funds and securities of the Corporation, and shall
deposit all such funds in the name of the Corporation in such banks, trust
companies or other depositories as shall be selected by the Board. He shall
receive, and give receipts for, moneys due and payable to the Corporation from
any source whatsoever. He shall exercise general supervision over expenditures
and disbursements made by officers, agents and employees of the Corporation and
the preparation of such records and reports in connection therewith as may be
necessary or desirable. He shall, in general, perform all other duties incident
to the
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office of Treasurer and such other duties as from time to time may be
assigned to him by the Board.
SECTION 4.11 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such
officers shall be prevented from receiving such compensation by reason of the
fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained
herein shall preclude any officer from serving the Corporation, or any
subsidiary corporation, in any other capacity and receiving proper compensation
therefor.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01 Execution of Contracts. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances.
SECTION 5.02 Checks, Drafts, Etc. All checks, drafts or other orders
for payment of money, notes or other evidence of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such officer, assistant, agent or attorney
shall give such bond, if any, as the Board may require.
SECTION 5.03 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the
purpose of election for the account of the Corporation, the President, any Vice
President or the Treasurer (or any other officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
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SECTION 5.04 General and Special Bank Accounts. The Board may from
time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. The Board may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
SECTION 6.01 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Treasurer or an Assistant Treasurer. Any of or all of the signatures on
the certificates may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
such certificate, shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, such certificate may nevertheless
be issued by the Corporation with the same effect as though the person who
signed such certificate, or whose facsimile signature shall have been placed
thereupon, were such officer, transfer agent or registrar at the date of issue.
A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 6.04.
SECTION 6.02 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer
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clerk or a transfer agent appointed as provided in Section 6.03, and upon
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. The person in whose name shares of stock
stand on the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation. Whenever any transfer of shares shall be
made for collateral security, and not absolutely, such fact shall be so
expressed in the entry of transfer if, when the certificate or certificates
shall be presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
SECTION 6.03 Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In
any case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.05 Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action. If in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
stockholders or expressing consent to corporate action without a meeting the
Board shall not fix such a record date, the record date for determining
stockholders for such purpose shall be the close of business on the day on which
the Board shall adopt the resolution relating thereto. A determination of
stockholders entitled to notice of or to vote
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at a meeting of stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
ARTICLE VII
Indemnification
SECTION 7.01 Action, Etc., Other Than by or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer or employee of the
Corporation, or that, being such a director, officer or employee, he is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise (all persons serving or having served in such capacities hereinafter
referred to as "indemnitees"), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful;
PROVIDED, HOWEVER, that, except as provided in Section 7.06 hereof with respect
to proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with any proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by two-thirds of the board of directors of the corporation. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the indemnitee did not act in good faith and
in a manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 7.02 Actions, Etc., by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was an indemnitee (as defined above) against
expenses (including attorneys'
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fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 7.03 To the extent that an indemnitee of the Corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 7.01 or 7.02, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
SECTION 7.04 Determination of Right of Indemnification. Any
indemnification under Section 7.01 or 7.02 (unless ordered by a court) shall be
made by the Corporation unless a determination is reasonably and promptly made
(i) by the Board by a majority vote of a quorum consisting of directors who were
not parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders, that such person acted in bad faith and in a manner that such
person did not believe to be in or not opposed to the best interests of the
Corporation, or, with respect to any criminal proceeding, that such person
believed or had reasonable cause to believe that his conduct was unlawful.
SECTION 7.05 Advances of Expenses. Expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding or any appeal
therefrom shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding if the Corporation shall have received an
undertaking by or on behalf of the director or officer to repay any amounts so
advanced in the event that he is ultimately determined not to be entitled to be
indemnified by the Corporation as authorized in this Article. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board deems appropriate.
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SECTION 7.06 Right of Indemnitee to Indemnification Upon Application.
Any indemnification pursuant to Sections 7.01 and 7.04 or 7.02 and 7.04, or any
advance made pursuant to Section 5 of this Article shall be made promptly, and
in any event within ninety (90) days, in the case of indemnification, and thirty
(30) days, in the case of an advancement, of the receipt by the secretary of the
corporation of the written request of the indemnitee, unless with respect to
applications under Section 7.01, 7.02 or 7.05, a determination is promptly made
by the board of directors or by a majority vote of disinterested directors that
the indemnitee acted in a manner set forth in such Sections as to justify the
Corporation's not indemnifying or making an advance to the indemnitee. In the
event no quorum of disinterested directors is obtainable, the board of directors
shall promptly direct that independent legal counsel shall decide whether the
indemnitee acted in the manner set forth in such Sections as to justify the
Corporation's not indemnifying or making an advance to the indemnitee. The
right to indemnification or advances as granted by this Article shall be
enforceable by the indemnitee in any court of competent jurisdiction, if the
board or independent legal counsel denies the claim, in whole or in part, or if
no disposition of such claim is made within ninety days. The indemnitee's costs
and expenses incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.
SECTION 7.07 Other Rights and Remedies. The rights provided by or
granted pursuant to this Article shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation, any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
indemnitee's official capacity and as to action in another capacity while vested
with such official capacity. All rights provided pursuant to this Article shall
be deemed to be provided by a contract between the Corporation and the
indemnitee who serves in such official capacity at any time while these bylaws
are in effect and are intended to be retroactive and available with respect to
actions taken in an official capacity or actions taken while vested with such
official capacity prior to the adoption hereof. Any repeal or modification of
any provisions hereof shall not affect any rights or obligations existing at the
time of such repeal or modification.
SECTION 7.08 Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was an indemnitee against any liability asserted against him and incurred by
him in any
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such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article. The Corporation may create a trust fund, grant
a security interest or use other means (including, without limitation, a letter
of credit) to ensure the payment of such sums as may become necessary to effect
indemnification as provided herein.
SECTION 7.09 Constituent Corporations. For the purposes of this
Article, references to "the Corporation" shall include in addition to the
resulting corporation any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
SECTION 7.10 Other Enterprises, Fines, and Serving at Corporation's
Request. For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
SECTION 7.11 Beneficiaries of This Article. The rights provided by
or granted pursuant to the provisions of this Article shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
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ARTICLE VIII
Miscellaneous
SECTION 8.01 Fiscal Year. The fiscal year of the Corporation shall
be determined by resolution of the Board.
SECTION 8.02 Seal. The Board shall provide a corporate seal, which
shall be in the form of a circle and shall bear the name of the Corporation and
words and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
SECTION 8.03 Waiver of Notices. Whenever notice is required to be
given by these Bylaws or the Certificate of Incorporation, the person entitled
to said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.04 Amendments. These Bylaws, or any of them, may be
altered, amended or repealed, and new Bylaws may be made, (i) by the Board, by
vote of a majority of the number of directors then in office as directors,
acting at any meeting of the Board, or (ii) by the stockholders holding shares
of a class of stock entitled to vote for the election of directors, at any
annual meeting of stockholders, without previous notice, or at any special
meeting of stockholders, provided that notice of such proposed amendment,
modification, repeal or adoption is given in the notice of special meeting. Any
Bylaws made or altered by the stockholders may be altered or repealed by either
the Board or the stockholders.
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HOLDINGS GUARANTEE
HOLDINGS GUARANTEE, dated as of December 1, 1994, made by PRIME HOLDING,
INC., a Delaware corporation (the "GUARANTOR") in favor of THE CIT
GROUP/BUSINESS CREDIT, INC., a New York corporation, as collateral agent (in
such capacity, the "COLLATERAL AGENT") for (i) the banks and other financial
institutions (the "LENDERS")that are parties to the Credit Agreement (as
hereafter defined) and (ii) from and after the date the Hedge Lender has entered
into a Hedge Lender Agency Agreement (as defined below) with the Collateral
Agent, the Hedge Lender
W I T N E S S E T H :
WHEREAS, Prime Acquisition Corp., a Delaware corporation (the "COMPANY"),
is party to a Credit Agreement, dated as of the date hereof, with Chemical Bank,
as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT"), the
Collateral Agent and the Lenders (as the same may be amended, supplemented or
otherwise modified from time to time the "CREDIT AGREEMENT");
WHEREAS, the Company and the Hedge Lender are now or may become parties to
one or more Interest Rate Agreement;
WHEREAS, pursuant to the terms of the Credit Agreement, the Lenders
severally agreed to make certain Extensions of Credit (as hereinafter defined)
to the Company;
WHEREAS, the Guarantor owns directly all of the issued and outstanding
common and preferred stock of the Company;
WHEREAS, the Guarantor will derive substantial direct and indirect benefit
from the making of the Extensions of Credit;
WHEREAS, under the Credit Agreement, the obligation of the Lenders to make
the Extensions of Credit to the Company on and after the date hereof is
conditioned upon, among other things, the execution and delivery by the
Guarantor of this Guarantee; and
WHEREAS, it is a condition to the obligation of the Hedge Lender to enter
into any Interest Rate Agreement that the Guarantor execute and deliver this
Guarantee;
NOW, THEREFORE, in consideration of the premises and to induce the Lenders
to enter into the Credit Agreement and to make their respective Extensions of
Credit to the Company under the Credit Agreement and to induce the Hedge Lender
to enter into the Interest Rate Agreement, the Guarantor hereby agrees with and
for the benefit of the Collateral Agent, the Lenders and the Hedge Lender as
follows:
<PAGE>
1. DEFINED TERMS. As used in this Guarantee, terms defined in the Credit
Agreement or in the preamble or recitals hereto are used herein as therein
defined, and the following terms shall have the following meanings:
"CREDIT OBLIGATIONS" shall mean the unpaid principal amount of,
and interest on (including interest accruing on or after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Company, whether or
not a claim for such post-filing or post-petition interest is
allowed), the Loans and all other obligations and liabilities of the
Company to the Administrative Agent, the Collateral Agent, the Issuing
Lender or the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, the
Credit Agreement, any Letter of Credit or L/C Application, the other
Credit Documents, the Interest Rate Agreement with respect to any
obligations arising under or in connection with any of the Credit
Documents and any other document executed and delivered or given in
connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs,
expenses (including, without limitation, all reasonable fees and
disbursements of counsel to the Administrative Agent, the Collateral
Agent, the Issuing Lender or the Lenders that are required to be paid
by the Company pursuant to the terms of the Credit Agreement) or
otherwise.
"CREDIT TERMINATION DATE" means the date on which the Credit
Obligations have been paid in full, the Commitments have been
terminated and either no Letters of Credit are outstanding or each
outstanding Letter of Credit has been cash collateralized so that it
is fully secured to the satisfaction of the Collateral Agent, the
Administrative Agent and the Managing Agents.
"EVENT OF DEFAULT" means (a) prior to the Credit Termination
Date, an Event of Default as defined in the Credit Agreement and (b)
on and after the Credit Termination Date, any event or circumstance
which would (including any event or circumstance which with the giving
of notice, the lapse of time or both, would) permit the Hedge Lender
to terminate the Interest Rate Agreements to which it is a party.
"EXTENSIONS OF CREDIT" shall mean (i) all loans or advances made
to the Company under any Credit Document, (ii) all Letters of Credit
issued for the account of the Company under any Credit Document, (iii)
all other extensions of credit to or for the benefit of the Company
under any Credit Document and (iv) to the extent not otherwise
included in the foregoing, all Credit Obligations.
"HEDGE LENDER AGENCY AGREEMENT" shall mean an Agency Agreement
substantially in the form of Exhibit C to the Company Security
Agreement.
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"HEDGE LENDER AGREEMENT OBLIGATIONS" shall mean all amounts now
or hereafter owing by the Company to the Hedge Lender under the
Interest Rate Protection Agreements or hereunder.
"INTEREST RATE PROTECTION TERMINATION DATE" means the later of
(a) the date on which all of the Interest Rate Agreements with the
Hedge Lender shall have been terminated and (b) the date on which all
amounts payable by the Company to the Hedge Lender under all of the
Interest Rate Agreements with the Hedge Lender shall have been paid in
full.
"OBLIGATIONS" shall mean (i) the Credit Obligations and (ii) the
Hedge Lender Agreement Obligations.
2. GUARANTEE. (a) The Guarantor hereby, unconditionally and irrevocably,
guarantees to the Collateral Agent, the Lenders and the Hedge Lender and their
respective successors, indorsees, transferees and assigns, the prompt and
complete payment by the Company when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, and the Guarantor further agrees
to pay any and all expenses (including, without limitation, all reasonable fees
and disbursements of counsel) which may be paid or incurred by the
Administrative Agent, the Collateral Agent, the Issuing Lender, any Lender or
the Hedge Lender in enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the Obligations and/or
enforcing any rights with respect to, or collecting against the Guarantor under
this Guarantee.
(b) No payment or payments made by any of the Company, the Guarantor, any
other guarantor or any other Person or received or collected by the Collateral
Agent, any Lender or the Hedge Lender from the Company, the Guarantor, any other
guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of the Guarantor hereunder which
shall, notwithstanding any such payment or payments other than payments made by
the Guarantor in respect of the Obligations or payments received or collected
from the Guarantor in respect of the Obligations, remain liable for the
Obligations until the Obligations are paid in full, the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Collateral Agent, the Administrative Agent and the Managing
Agents.
(c) The Guarantor agrees that whenever, at any time, or from time to time,
it shall make any payment to the Collateral Agent, any Lender or the Hedge
Lender on account of its liability hereunder, it will notify the Collateral
Agent in writing that such payment is made under this Guarantee for such
purpose.
3. RIGHT OF SET-OFF. Upon the occurrence of any Event of Default under
any Credit Document, the Guarantor hereby irrevocably authorizes (i) each
Lender, prior to the Credit Termination Date, or (ii) the Hedge Lender,
thereafter, at any time and from time to time without notice to the Guarantor,
any such notice being expressly waived by the Guarantor, to set off and
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appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
the Hedge Lender, as the case may be, to or for the credit or the account of the
Guarantor, or any part thereof in such amounts as such Lender or the Hedge
Lender, as the case may be, may elect, against and on account of the obligations
and liabilities of the Guarantor to such Lender or the Hedge Lender, as the case
may be, hereunder or under the Credit Agreement, the Notes, the other Credit
Documents, or the Interest Date Agreements as such Lender or the Hedge Lender,
as the case may be, may elect, whether or not (i) the Collateral Agent or any
Lender prior to the Credit Termination Date or (ii) the Hedge Lender,
thereafter, has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. Each Lender and the
Hedge Lender agrees to notify the Guarantor promptly of any such set-off and the
application made by such Lender or the Hedge Lender, as the case may be,
PROVIDED that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender and the Hedge Lender
under this paragraph are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which such Lender or the Hedge
Lender may have.
4. NO SUBROGATION. Notwithstanding any payment or payments made by the
Guarantor hereunder or any set-off or application of funds of the Guarantor by
any Lender or the Hedge Lender, the Guarantor shall not be entitled to be
subrogated to any of the rights of the Collateral Agent, any Lender or the Hedge
Lender against the Company or any collateral security or guarantee or right of
offset held by any Lender or the Hedge Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek any
contribution or reimbursement from the Company in respect of payments made by
the Guarantor hereunder, until all amounts owing to the Administrative Agent,
the Collateral Agent, the Managing Agents, the Lenders and the Hedge Lender by
the Company on account of the Obligations are paid in full and the Commitments
are terminated.
5. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF RIGHTS.
The Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against the Guarantor and without notice to or further
assent by the Guarantor, any demand for payment of any of the Obligations made
by the Administrative Agent, the Collateral Agent, the Issuing Lender, any
Lender or the Hedge Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent, the Collateral Agent, the
Issuing Lender, any Lender or the Hedge Lender and the Credit Agreement, the
Notes, the other Credit Documents, any Letter of Credit, the Interest Rate
Agreements and any other collateral security document or other guarantee or
document in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent, the Collateral
Agent, the Issuing Lender, any Lender and/or the Hedge Lender may deem advisable
from time to time, and any collateral security, guarantee or right of offset at
any time held by the Collateral Agent, any Lender or the Hedge Lender for the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Collateral Agent, any
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<PAGE>
Lender nor the Hedge Lender shall have any obligation to protect, secure,
perfect or insure any Lien at any time held by it as security for the
Obligations or for this Guarantee or any property subject thereto. When making
any demand hereunder against the Guarantor, the Collateral Agent, any Lender or
the Hedge Lender may, but shall be under no obligation to, make a similar demand
on any other guarantor, and any failure by the Collateral Agent, any Lender or
the Hedge Lender to make any such demand or to collect any payments from any
such other guarantor or any release of any such other guarantor shall not
relieve the Guarantor in respect of which a demand or collection is not made,
and shall not impair or affect the rights and remedies, express or implied, or
as a matter of law, of the Collateral Agent, any Lender or the Hedge Lender
against the Guarantor. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
6. GUARANTEE ABSOLUTE AND UNCONDITIONAL. The Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent, the
Collateral Agent, the Issuing Lender, any Lender or the Hedge Lender upon this
Guarantee or acceptance of this Guarantee, the Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon this Guarantee; and all
dealings between the Company or the Guarantor and the Administrative Agent, the
Collateral Agent, the Issuing Lender, any Lender or the Hedge Lender shall
likewise be conclusively presumed to have been had or consummated in reliance
upon this Guarantee. The Guarantor waives diligence, presentment, protest,
demand for payment and notice of default or nonpayment to or upon the Company or
the Guarantor with respect to the Obligations. The Guarantor understands and
agrees that this Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Credit Agreement, the Notes, any other
Credit Document, the Letters of Credit, the Interest Rate Agreements, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the
Administrative Agent, the Collateral Agent, the Issuing Lender, any Lender or
the Hedge Lender, (b) any defense, set-off or counterclaim (other than a defense
of payment or performance) which may at any time be available to or be asserted
by the Company against the Administrative Agent, the Collateral Agent, the
Issuing Lender, any Lender or the Hedge Lender, or (c) any other circumstance
whatsoever (with or without notice to or knowledge of the Company or the
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of any of the Company for the Obligations, or of the
Guarantor under this Guarantee, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against the Guarantor, the Collateral
Agent, any Lender and/or the Hedge Lender may, but shall be under no obligation
to, pursue such rights and remedies as it may have against the Company or any
other Person or against any collateral security or guarantee for the Obligations
or any right of offset with respect thereto, and any failure by the Collateral
Agent, any Lender or the Hedge Lender to pursue such other rights or remedies or
to collect any payments from the Company or any such other Person or to realize
upon any such collateral security or guarantee or to exercise any such right of
offset, or any release of the Company or any such other Person or any such
collateral security, guarantee or right of offset, shall not relieve the
Guarantor of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of the
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<PAGE>
Collateral Agent, any Lender or the Hedge Lender against the Guarantor. This
Guarantee shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon the Guarantor and the successors and
assigns thereof, and shall inure to the benefit of the Collateral Agent and the
Lenders and the Hedge Lender, and their respective successors, indorsees,
transferees and assigns, until the later of the Credit Termination Date and the
Interest Rate Protection Termination Date notwithstanding that from time to time
during the term of the Credit Agreement the Company may be free from any
Obligations.
7. REINSTATEMENT. This Guarantee shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
the Obligations is rescinded or must otherwise be restored or returned by the
Collateral Agent, any Lender or the Hedge Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company or of the
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Company or the
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
8. PAYMENTS. The Guarantor hereby guarantees that payments hereunder
will be paid in U.S. Dollars to the Administrative Agent without set-off or
counterclaim at the office of the Administrative Agent located at 270 Park
Avenue, New York, New York 10017, U.S.A. or at such other office as the
Collateral Agent or, after the Credit Termination Date, the Hedge Lender may
notify to the Guarantors in accordance with Section 15.
9. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby represents and
warrants that:
(a) it is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation
and has the corporate power and authority and the legal right to own
and operate its property, to lease the property it operates and to
conduct the business in which it is currently engaged;
(b) it is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct or proposed conduct of
its business requires such qualification and is in compliance with all
Requirements of Law except to the extent that the failure to comply
therewith could not reasonably be expected to have a material adverse
effect on its business, operations, assets or financial or other
condition or on its ability to perform its obligations under this
Guarantee or the other Credit Documents to which it is a party;
(c) it has the corporate power and authority and the legal right
to execute and deliver, and to perform its obligations under, this
Guarantee and the other Credit Documents to which the Guarantor is a
party and to grant the Liens granted by it pursuant to the other
Credit Documents to which the Guarantor is a party, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of this Guarantee and the other Credit Documents to
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<PAGE>
which the Guarantor is a party and to grant the Liens granted by it
pursuant to the Credit Documents to which it is a party;
(d) it owns all of the issued and outstanding shares of all
classes of Capital Stock of the Company and has no Subsidiaries other
than the Company;
(e) no consent, license, permit, approval or authorization of,
or filing with, or notice or report to, or registration, filing or
declaration with, or other act by or in respect of, any arbitrator or
Governmental Authority and no consent of any other Person (including,
without limitation, any stockholder or creditor of such Guarantor), is
required in connection with the execution, delivery, performance,
validity or enforceability by or against the Guarantor of this
Guarantee and the other Credit Documents to which the Guarantor is a
party;
(f) this Guarantee and the other Credit Documents to which the
Guarantor is a party have been duly executed and delivered on behalf
of the Guarantor and each of this Guarantee and the other Credit
Documents to which the Guarantor is a party constitutes a legal, valid
and binding obligation of the Guarantor enforceable against the
Guarantor in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity;
(g) the execution, delivery and performance of this Guarantee
and the other Credit Documents to which the Guarantor is a party do
not and will not violate any Requirement of Law or any material
Contractual Obligation of the Guarantor and will not result in the
creation or imposition of any Lien on any of the properties or
revenues of the Guarantor pursuant to any Requirement of Law or
Contractual Obligation other than the Liens created by the Holdings
Pledge Agreement;
(h) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge
of the Guarantor, threatened by or against the Guarantor or against
any of its properties or revenues (i) with respect to this Guarantee
or the other Credit Documents to which the Guarantor is a party or any
of the transactions contemplated hereby or thereby or (ii) which could
have a material adverse effect on the business, operations, property
or financial condition of the Guarantor and its Subsidiaries taken as
a whole or on the ability of the Guarantor to perform its obligations
under this Guarantee or the other Credit Documents to which it is a
party; and
(i) the Guarantor has filed or caused to be filed all tax
returns required to be filed by it, and has paid all taxes due on said
returns or on any assessments made against it (other than (a) those
the amount or validity of which is currently being contested in good
faith by appropriate proceedings for which adequate reserves have been
provided on its books and (b) those which, individually or in
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<PAGE>
the aggregate, are not material to the Guarantor and its Subsidiaries taken
as a whole).
The Guarantor agrees that the foregoing representations and warranties shall be
deemed to have been made by the Guarantor on each Borrowing Date occurring on or
after the date hereof under the Credit Agreement on and as of such Borrowing
Date as though made hereunder on and as of such Borrowing Date.
10. COVENANTS. The Guarantor hereby covenants and agrees with the
Collateral Agent, the Lenders and the Hedge Lender that, from and after the date
of this Guarantee until the Obligations are paid in full and the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Collateral Agent, the Administrative Agent and the Managing
Agents, the Guarantor shall engage in no business other than holding the Capital
Stock of the Company, and businesses incidental thereto.
11. SEVERABILITY. Any provision of this Guarantee which 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 not invalidate or render unenforceable such provision in any
other jurisdiction.
12. PARAGRAPH HEADINGS. The paragraph headings used in this Guarantee are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
13. NO WAIVER; CUMULATIVE REMEDIES. None of the Administrative Agent, the
Collateral Agent, the Issuing Lender, any Lender or the Hedge Lender shall by
any act (except by a written instrument pursuant to paragraph 14 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default or event of default under any
Credit Document or in any breach of any of the terms and conditions hereof. No
failure to exercise, nor any delay in exercising, on the part of the Collateral
Agent, any Lender or the Hedge Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Collateral Agent, any Lender or the Hedge Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Collateral Agent, such Lender or the Hedge Lender would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
14. INTEGRATION; WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING
LAW. This Guarantee represents the agreement of the Guarantor with respect to
the subject matter hereof and there are no promises or representations by the
Collateral Agent, any Lender or the Hedge Lender relative to the subject matter
hereof not reflected herein or in the other Credit Documents. None of the terms
or provisions of this Guarantee may be waived, amended,
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supplemented or otherwise modified except by a written instrument executed by
the Guarantor and the Collateral Agent, PROVIDED that any provision of this
Guarantee may be waived by the Collateral Agent and the Lenders in a letter or
agreement executed by the Collateral Agent or by telex or facsimile transmission
from the Collateral Agent. This Guarantee shall be binding upon the successors
and assigns of the Guarantor and shall inure to the benefit of the Collateral
Agent, the Lenders and the Hedge Lender and their respective successors and
assigns. THIS GUARANTEE SHALL BE GOVERNED BY, AND BE CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
15. NOTICES. All notices, requests and demands to or upon the Guarantor
or the Collateral Agent, any Lender or the Hedge Lender to be effective shall be
in writing or by telecopy or telex and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered by hand,
or, in the case of mail, three days after deposit in the postal system, first
class postage pre-paid, or, in the case of telecopy notice, confirmation of
receipt received, or, in the case of telex notice, when sent, answerback
received, addressed to a party at the address provided for such party in the
Credit Agreement or Schedule I hereto, as the case may be, or to such other
address as may be hereafter notified to the parties hereto or to the Hedge
Lender at the address provided for such party in its Interest Rate Agreement.
16. COUNTERPARTS. This Guarantee may be executed by one or more of the
parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
17. AUTHORITY OF COLLATERAL AGENT. The Guarantor acknowledges that the
rights and responsibilities of the Collateral Agent under this Guarantee with
respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Guarantee shall, as between the Collateral Agent and the Lenders, be governed by
the Credit Agreement and by such other agreements with respect thereto as may
exist from time to time among them and as between the Collateral Agent and the
Hedge Lender, be governed by the Hedge Lender Agency Agreement, but, as between
the Collateral Agent and the Guarantor, the Collateral Agent shall be
conclusively presumed to be acting as agent for the Lenders and the Hedge Lender
with full and valid authority so to act or refrain from acting, and the
Guarantor shall not be under any obligation, or entitlement, to make any inquiry
respecting such authority.
18. SUBMISSION TO JURISDICTION; WAIVERS. (a) The Guarantor hereby
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Guarantee or any other Credit Document, or
for recognition and enforcement of any judgment in respect thereof, to
the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern
District of New York, and appellate courts from any thereof;
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(ii) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in an inconvenient court
and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be affected by mailing a copy thereof by registered or
certified mail, postage pre-paid, to the Guarantor at its address set
forth on Schedule I hereto or at such other address of which the
Collateral Agent shall have been notified pursuant to paragraph 14;
and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit
the right to sue in other jurisdiction.
(b) The Guarantor and the Collateral Agent, on behalf of itself, the
Lenders and the Hedge Lender, hereby unconditionally waive trial by jury in any
legal action or proceeding referred to in paragraph (a) above.
19. RIGHTS OF THE HEDGE LENDER. (a) The Collateral Agent shall have no
obligation whatsoever to the Hedge Lender, whether as agent, trustee or
otherwise, except as expressly provided herein, in any other Credit Document or
in the Hedge Lender Agency Agreement, and the Collateral Agent may waive, amend,
supplement or otherwise modify any provision of this Guarantee or release any
Obligation hereunder in accordance with the terms hereof, all without consulting
with or obtaining the consent of the Hedge Lender. The Hedge Lender shall have
no right to enforce any provisions of the Guarantee before the Credit
Termination Date.
(b) The Collateral Agent shall cease to be a party hereto and all rights
and obligations hereunder shall be automatically assigned and transferred to the
Hedge Lender (without any action on the part of the Collateral Agent) from and
after the Credit Termination Date. After the Credit Termination Date, all
rights and obligations so assigned by the Collateral Agent to the Hedge Lender
shall no longer be subject to (i) any requirement that the consent of the
Managing Agents, the Administrative Agent, the Required Lenders and/or the
Lenders be obtained or (ii) any requirement that any decision be the joint
determination of the Managing Agents, the Administrative Agent and/or the
Collateral Agent.
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(c) The Hedge Lender shall cease to be a party hereto from and after the
Interest Rate Protection Termination Date.
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be
duly executed and delivered by its duly authorized officer as of the day and
year first above written.
PRIME HOLDING, INC.
By: /s/ Christopher J. O'Brien
------------------------------------
Name: Christopher J. O'Brien
Title: Vice President,
Secretary and Treasurer
THE CIT GROUP/BUSINESS CREDIT, INC., as
Collateral Agent
By: /s/ David Kaplowitz
------------------------------------
Name: David Kaplowitz
Title Vice President
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SCHEDULE I
Holdings Guarantee
------------------
Address of Guarantor
--------------------
Prime Holding, Inc.
c/o INVESTCORP International, Inc.
280 Park Avenue
Floor 37 West
New York, New York 10017
Attention: Chris O'Brien
Telex: 4976829 INCORP
Telecopy: (212) 983-7073
With a copy to:
Prime Acquisition Corp.
16225 Park Ten Place
Suite 200
Houston, Texas 77084
Attention:
Telecopy:
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Charles K. Marquis, Esq.
Telex: 177920 GIBTRASK NYK
Telecopy: (212) 949-7606
<PAGE>
HOLDINGS PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of December 1, 1994, made by PRIME HOLDING,
INC., a Delaware corporation (the "PLEDGOR"), in favor of THE CIT GROUP/BUSINESS
CREDIT, INC., a New York corporation, as collateral agent (in such capacity, the
"COLLATERAL AGENT") for (i) the several lenders (the "LENDERS") from time to
time parties to the Credit Agreement, dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among Prime Acquisition Corp., a Delaware corporation (the "COMPANY"), the
Lenders, Chemical Bank, a New York banking corporation, as administrative agent
(the "ADMINISTRATIVE AGENT"), and the Collateral Agent and (ii) from and after
the date the Hedge Lender has entered into a Hedge Lender Agency Agreement (as
defined below) with the Collateral Agent, the Hedge Lender.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make loans to, and the Issuing Lender (as defined in the Credit
Agreement) has agreed to issue and certain of the Lenders have agreed to
participate in certain letters of credit for the account of the Company upon the
terms and subject to the conditions set forth therein, such loans being
evidenced by the notes issued by the Company;
WHEREAS, the Company and the Hedge Lender are now or may become
parties to one or more Interest Rate Agreements;
WHEREAS, the Pledgor is the owner of the shares of Pledged Stock (as
hereinafter defined) issued by the Company listed on Schedule I hereto;
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective loans to, and the obligation of the Issuing Lender to
issue and the Lenders to participate in letters of credit for the account of,
the Company under the Credit Agreement that the Pledgor shall have executed and
delivered this Pledge Agreement to the Collateral Agent for the ratable
benefit of the Lenders and the Hedge Lender; and
WHEREAS, it is a condition to the obligation of the Hedge Lender to
enter into any Interest Rate Agreement that the Pledgor execute and deliver this
Pledge Agreement;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent, the Collateral Agent, the Issuing Lender and the Lenders
to enter into the Credit Agreement and to induce the Lenders to make their
respective loans and the Issuing Lender to issue and the Lenders to participate
in the letters of credit under the Credit Agreement
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and to induce the Hedge Lender to enter into the Interest Rate Agreement, the
Pledgor hereby agrees with the Collateral Agent, for the ratable benefit of the
Lenders and the Hedge Lender, as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms that are
defined in the Credit Agreement and used herein are so used as so defined, and
the following terms shall have the following meanings:
"CODE" means the Uniform Commercial Code from time to time in
effect in the State of New York.
"COLLATERAL" means the Pledged Stock and all Proceeds.
"CREDIT OBLIGATIONS" shall mean the unpaid principal amount of, and
interest on (including interest accruing on or after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for such post-filing
or post-petition interest is allowed), the Loans and all other obligations and
liabilities of the Company to the Administrative Agent, the Collateral Agent,
the Issuing Lender or the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Credit Agreement, any Letter
of Credit or L/C Application, the other Credit Documents, the Interest Rate
Agreement with respect to any obligations arising under or in connection with
any of the Credit Documents and any other document executed and delivered or
given in connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all reasonable fees and disbursements of counsel
to the Administrative Agent, the Collateral Agent, the Issuing Lender or to the
Lenders that are required to be paid by the Company pursuant to the terms of the
Credit Agreement) or otherwise.
"CREDIT TERMINATION DATE" means the date on which the Credit
Obligations have been paid in full, the Commitments have been terminated and
either no Letters of Credit are outstanding or each outstanding Letter of Credit
has been cash collateralized so that it is fully secured to the satisfaction of
the Collateral Agent, the Administrative Agent and the Managing Agents.
"EVENT OF DEFAULT" means (a) prior to the Credit Termination Date, an
Event of Default as defined in the Credit Agreement and (b) on and after the
Credit Termination Date, any event or circumstance which would (including any
event or circumstance which with the giving of notice, the lapse of time or
both, would) permit the Hedge Lender to terminate the Interest Rate Agreements
to which it is a party.
"HEDGE LENDER AGENCY AGREEMENT" shall mean an Agency Agreement
substantially in the form of Exhibit C to the Company Security Agreement.
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"HEDGE LENDER AGREEMENT OBLIGATIONS" shall mean all amounts now or
hereafter owing by the Company to the Hedge Lender under the Interest Rate
Protection Agreements or hereunder.
"INTEREST RATE PROTECTION TERMINATION DATE" means the later of (a) the
date on which all of the Interest Rate Agreements with the Hedge Lender shall
have been terminated and (b) the date on which all amounts payable by the
Company to the Hedge Lender under all of the Interest Rate Agreements with the
Hedge Lender shall have been paid in full.
"OBLIGATIONS" means (i) the Credit Obligations and (ii) the Hedge
Lender Agreement Obligations.
"PLEDGE AGREEMENT" means this Pledge Agreement, as amended,
supplemented or otherwise modified from time to time.
"PLEDGED STOCK" means the shares of capital stock of the Company
listed on Schedule I hereto, together with all stock certificates, options or
rights of any nature whatsoever that may be issued or granted by the Company to
the Pledgor while this Pledge Agreement is in effect.
"PROCEEDS" means all "proceeds", as such term is defined in Section 9-
306(1) of the Code on the date hereof, of the Pledged Stock, and, in any event,
shall include, without limitation, all dividends or other income from the
Pledged Stock, collections thereon or distributions with respect thereto.
2. PLEDGE; GRANT OF SECURITY INTEREST. The Pledgor hereby delivers
to the Collateral Agent, for the ratable benefit of the Lenders and the Hedge
Lender, all certificates or instruments representing or evidencing the Pledged
Stock on the date hereof, and hereby transfers and grants to the Collateral
Agent, for the ratable benefit of the Lenders and the Hedge Lender, a first
priority security interest in all of the Pledgor's right, title and interest in
the Collateral, as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations.
3. STOCK POWERS. Concurrently with the delivery to the Collateral
Agent of each certificate representing one or more shares of Pledged Stock to
the Collateral Agent, the Pledgor shall deliver an undated stock power covering
such certificate, duly executed in blank by the Pledgor.
4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants that:
(a) the shares of Pledged Stock constitute (i) all the issued and
outstanding shares of all classes of the Capital Stock of the Company owned by
the Pledgor and (ii) on the date hereof, all the issued and outstanding shares
of all classes of the Capital Stock of the Company;
(b) all the shares of Pledged Stock have been duly and validly issued
and are fully paid and nonassessable;
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(c) the Pledgor is the record and beneficial owner of the Pledged
Stock, free of any and all Liens or options in favor of, or claims of, any other
Person, except the Lien created by this Pledge Agreement; and
(d) upon delivery to the Collateral Agent of the stock certificates
evidencing the Pledged Stock, the Lien granted pursuant to this Pledge Agreement
will constitute a valid, perfected first priority Lien on the Collateral
(except, with respect to Proceeds, only to the extent permitted by Section 9-306
of the Code), enforceable as such against all creditors of the Pledgor and any
Persons purporting to purchase any Collateral from the Pledgor.
The Pledgor agrees that the foregoing representations and warranties
shall be deemed to have been made by the Pledgor on each Borrowing Date
occurring on or after the date hereof under the Credit Agreement, on and as of
such Borrowing Date as though made hereunder on and as of such date.
5. COVENANTS. The Pledgor covenants and agrees with the Collateral
Agent, the Lenders and the Hedge Lender that, from and after the date of this
Pledge Agreement until the Obligations are paid in full and the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Collateral Agent, the Administrative Agent and the Managing
Agents:
(a) If the Pledgor shall, as a result of its ownership of the Pledged
Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights in respect of capital stock of the Company, whether in addition to, in
substitution of, as a conversion of, or in exchange for any shares of the
Pledged Stock, or otherwise in respect thereof, the Pledgor shall accept the
same as the agent of the Collateral Agent, the Lenders and the Hedge Lender,
hold the same in trust for the Collateral Agent, the Lenders and the Hedge
Lender and deliver the same forthwith to the Collateral Agent in the exact form
received, duly indorsed by the Pledgor to the Collateral Agent, if required,
together with an undated stock power covering such certificate duly executed in
blank by the Pledgor and with, if the Collateral Agent, the Administrative Agent
and the Managing Agents so request, signature guaranteed, to be held by the
Collateral Agent, subject to the terms hereof, as additional collateral security
for the Obligations.
(b) Without the prior written consent of the Collateral Agent, the
Pledgor will not (i) sell, assign, transfer, exchange, or otherwise dispose of,
or grant any option with respect to, the Collateral, or (ii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any Person with
respect to, any of the Collateral, or any interest therein, except for the Lien
provided for by this Pledge Agreement. The Pledgor will defend the right, title
and interest of the Administrative Agent, the Collateral Agent, the Issuing
Lender, the Lenders and the Hedge Lender in and to the Collateral against the
claims and demands of all Persons whomsoever.
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(c) At any time and from time to time, upon the written request of
the Collateral Agent, the Administrative Agent and the Managing Agents, and at
the sole expense of the Pledgor, the Pledgor will promptly and duly execute and
deliver such further instruments and documents and take such further actions as
the Collateral Agent, the Administrative Agent and the Managing Agents may
reasonably request for the purposes of obtaining or preserving the full benefits
of this Pledge Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note, other instrument or chattel paper, such
note, instrument or chattel paper shall be immediately delivered to the
Collateral Agent, duly endorsed in a manner satisfactory to the Collateral
Agent, to be held as Collateral pursuant to this Pledge Agreement.
(d) The Pledgor agrees to pay, and to save the Administrative Agent,
the Collateral Agent, the Issuing Lender, the Lenders and the Hedge Lender
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all stamp, excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Pledge Agreement.
6. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default shall
have occurred and be continuing, the Pledgor shall be permitted to receive all
cash dividends paid by the Company to the extent permitted in the Credit
Agreement in respect of the Pledged Stock and to exercise all voting and
corporate rights with respect to the Pledged Stock, PROVIDED, HOWEVER, that the
Pledgor agrees that it shall not vote in any way which would be inconsistent
with or result in any violation of any provision of the Credit Agreement, the
Notes, the Security Documents or any of the other Credit Documents. The
Collateral Agent shall, at the Pledgor's sole cost and expense, execute and
deliver (or cause to be executed and delivered) to the Pledgor all proxies and
other instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights that it is entitled
to exercise pursuant to this Section 6.
7. RIGHTS OF THE LENDERS AND THE COLLATERAL AGENT. (a) If an Event
of Default shall occur and be continuing, (i) the Collateral Agent shall have
the right to receive any and all cash dividends paid in respect of the Pledged
Stock and make application thereof to the Obligations in such order as the
Collateral Agent, the Administrative Agent and the Managing Agents may jointly
determine, and (ii) all shares of the Pledged Stock may be registered in the
name of the Collateral Agent or its nominee, and, subject to the terms of this
Agreement, the Collateral Agent or its nominee may thereafter exercise (A) all
voting, corporate and other rights pertaining to such shares of the Pledged
Stock at any meeting of shareholders of the Company or otherwise and (B) any and
all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such shares of the Pledged Stock as if it
were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of the Company, or upon the exercise by the Pledgor or
the Collateral Agent of any right, privilege or option pertaining to such shares
of the Pledged Stock, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as it may determine), all without liability except to
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<PAGE>
account for property actually received by it and except for its gross negligence
or willful misconduct or failure to comply with the provisions of Section 12,
but the Collateral Agent shall have no duty to the Pledgor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
(b) The rights of the Administrative Agent, the Collateral Agent, the
Issuing Lender, the Lenders and the Hedge Lender hereunder shall not be
conditioned or contingent upon the pursuit by the Administrative Agent, the
Collateral Agent, the Issuing Lender, any Lender or the Hedge Lender of any
right or remedy against any other Person which may be or become liable in
respect of all or any part of the Obligations or against any collateral security
therefor, guarantee therefor or right of offset with respect thereto. None of
the Administrative Agent, the Collateral Agent, the Issuing Lender, any Lender
or the Hedge Lender shall be liable for any failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so, nor
shall the Collateral Agent be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Pledgor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof.
The Collateral Agent agrees to release promptly to the Pledgor any dividends,
cash, securities, instruments and other property paid, payable or otherwise
distributed in respect of the Collateral which it may receive under Section 7(a)
if, prior to the occurrence of an acceleration of any of the Obligations, all
Defaults and Events of Default have been waived or are no longer continuing.
(c) The Collateral Agent may execute any of its duties under this
Pledge Agreement by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The
Collateral Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care, except as
otherwise provided in subsection 10.3 of the Credit Agreement.
8. REMEDIES. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the terms of the
Credit Agreement, the Collateral Agent, with the consent of the Administrative
Agent and the Managing Agents, on behalf of the Lenders and the Hedge Lender,
may exercise, in addition to all other rights and remedies granted in this
Pledge Agreement and in any other instrument or agreement securing, evidencing
or relating to the Obligations, all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, the Collateral
Agent, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Pledgor, the Company or any other Person (all and each
of which demands, defenses, advertisements and notices are hereby waived), with
the consent of the Administrative Agent and the Managing Agents may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give option
or options to purchase or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of the Administrative Agent, the Collateral
Agent,
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the Issuing Lender, any Lender or the Hedge Lender or elsewhere upon such terms
and conditions as it may deem commercially reasonable and at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk. The Administrative Agent, the Collateral Agent, the Issuing
Lender, any Lender or the Hedge Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Pledgor, which right or equity is
hereby waived or released. The Collateral Agent promptly shall apply any
Proceeds from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the Collateral or in
any way relating to the Collateral or the rights of the Administrative Agent,
the Collateral Agent, the Issuing Lender, the Lenders and the Hedge Lender
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements of counsel to the Administrative Agent, and/or the Collateral
Agent, to the payment in whole or in part of the Obligations, in such order as
the Collateral Agent, the Administrative Agent and the Managing Agents may elect
subject to subsection 4.9 of the Credit Agreement, and only after such
application and after the payment by the Collateral Agent of any other amount
required by any provision of law, including, without limitation, Section 9-
504(1)(c) of the Code, need the Collateral Agent account for the surplus, if
any, to the Pledgor. To the extent permitted by applicable law, the Pledgor
waives all claims, damages and demands it may acquire against the Administrative
Agent, the Collateral Agent, the Issuing Lender, any Lender or the Hedge Lender
arising out of the lawful exercise by them of any rights hereunder. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition. The Pledgor further waives and
agrees not to assert any rights or privileges which it may acquire under Section
9-112 of the Code. The Pledgor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay the Obligations and the fees and disbursements of any attorneys employed by
the Collateral Agent or any Lender to collect such deficiency.
9. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the Collateral
Agent, the Administrative Agent and the Managing Agents shall jointly determine
to exercise its right to sell any or all of the Pledged Stock pursuant to
Section 8 hereof, and if in the joint opinion of the Collateral Agent, the
Administrative Agent and the Managing Agents it is necessary or advisable to
have the Pledged Stock, or that portion thereof to be sold, registered under the
provisions of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the
Pledgor will cause the Company to (i) execute and deliver, and cause the
directors and officers of the Company to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the joint opinion of the Collateral Agent, the Administrative Agent and
the Managing Agents, necessary or advisable to register the Pledged Stock, or
that portion thereof to be sold, under the provisions of the Securities Act,
(ii) use its best efforts to cause the registration statement relating thereto
to become effective and to remain effective for a period of 90 days from the
date of the first public offering of the Pledged Stock, or that portion thereof
to be sold, and (iii) make all amendments thereto and/or to the related
prospectus that, in the joint opinion of the Collateral Agent, the
Administrative Agent and the Managing Agents, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. The
Pledgor agrees to cause the Company to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions that the Collateral
Agent, the Administrative Agent and the Managing
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Agents shall reasonably designate and to make available to its security holders,
as soon as practicable, an earnings statement (which need not be audited) that
will satisfy the provisions of Section 11(a) of the Securities Act.
(b) The Pledgor recognizes that the Collateral Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers that will be obliged to agree, among
other things, to acquire such securities for their own account for investment
and not with a view to the distribution or resale thereof. The Pledgor
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale conducted
in a manner that the Collateral Agent, the Administrative Agent and the Managing
Agents in good faith jointly believe to be commercially reasonable under the
circumstances shall be deemed to have been made in a commercially reasonable
manner. The Collateral Agent shall be under no obligation to delay the sale of
any of the Pledged Stock for the period of time necessary to permit the Company
to register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if the Company would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Stock, pursuant to this Section 9 valid and
binding and in compliance with any and all other applicable Requirements of Law.
The Pledgor further agrees that a breach of any of the covenants contained in
this Section 9 will cause irreparable injury to the Administrative Agent, the
Collateral Agent, the Issuing Lender, the Lenders and the Hedge Lender, that the
Administrative Agent, the Collateral Agent, the Issuing Lender, the Lenders and
the Hedge Lender have no adequate remedy at law in respect of such breach and,
as a consequence, that each and every covenant contained in this Section 9 shall
be specifically enforceable against the Pledgor, and the Pledgor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants.
10. NO SUBROGATION. Notwithstanding any payment or payments made by
the Pledgor hereunder, or any setoff or application of funds of the Pledgor by
any Lender or the Hedge Lender, or the receipt of any amounts by the
Administrative Agent, the Collateral Agent, the Issuing Lender, any Lender or
the Hedge Lender with respect to any of the Collateral, the Pledgor shall not be
entitled to be subrogated to any of the rights of the Administrative Agent, the
Collateral Agent, the Issuing Lender, any Lender or the Hedge Lender against the
Company or against any other collateral security held by the Administrative
Agent, the Collateral Agent, the Issuing Lender, any Lender or the Hedge Lender
for the payment of the Obligations, nor shall the Pledgor seek any reimbursement
from the Company in respect of payments made by the Pledgor in connection with
the Collateral, or amounts realized by the Administrative Agent, the Collateral
Agent, the Issuing Lender, any Lender or the Hedge Lender in connection with the
Collateral, until all amounts owing to the Administrative Agent, the Collateral
Agent, the Managing Agents, the Lenders and the Hedge Lenders by the Company on
account of the Obligations are paid in full and the Commitments are terminated.
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11. AMENDMENTS, ETC., WITH RESPECT TO THE OBLIGATIONS. The Pledgor
shall remain obligated hereunder, and the Collateral shall remain subject to the
Lien granted hereby, notwithstanding that, without any reservation of rights
against the Pledgor, and without notice to or further assent by the Pledgor, any
demand for payment of any of the Obligations made by the Administrative Agent,
the Collateral Agent, the Issuing Lender, any Lender or the Hedge Lender may be
rescinded by the Administrative Agent, the Collateral Agent, the Issuing Lender,
such Lender or the Hedge Lender, and any of the Obligations continued, and the
Obligations, or the liability of the Company or any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Administrative Agent, the Collateral Agent, the
Issuing Lender, any Lender or the Hedge Lender, and the Credit Agreement, the
Notes, the Security Documents, the other Credit Documents, the Interest Rate
Agreements and any other documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, as the Lenders (or the Required Lenders, as the case may be) or the Hedge
Lender may deem advisable from time to time, and any guarantee, right of offset
or other collateral security at any time held by the Administrative Agent, the
Collateral Agent, the Issuing Lender, any Lender or the Hedge Lender for the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released. None of the Administrative Agent, the Collateral Agent, the Issuing
Lender, any Lender or the Hedge Lender shall have any obligation to protect,
secure, perfect or insure any other Lien at any time held by it as security for
the Obligations or any property subject thereto. The Pledgor waives any and all
notice of the creation, renewal, extension or accrual of any of the Obligations
and notice of or proof of reliance by the Administrative Agent, the Collateral
Agent, the Issuing Lender, any Lender or the Hedge Lender upon this Pledge
Agreement; the Obligations, and any of them shall conclusively be deemed to have
been created, contracted or incurred in reliance upon this Pledge Agreement; and
all dealings between the Company and the Pledgor, on the one hand, and the
Administrative Agent, the Collateral Agent, the Issuing Lender, the Hedge Lender
and the Lenders, on the other, shall likewise be conclusively presumed to have
been had or consummated in reliance upon this Pledge Agreement. The Pledgor
waives diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon the Company or the Pledgor with respect to the
Obligations.
12. LIMITATION ON DUTIES REGARDING COLLATERAL. The Collateral Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Collateral Agent deals with
similar securities and property for its own account. None of the Administrative
Agent, the Collateral Agent, the Issuing Lender, any Lender, the Hedge Lender or
any of their respective directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Pledgor or otherwise.
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13. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
14. SEVERABILITY. Any provision of this Pledge Agreement which 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 not invalidate or render
unenforceable such provision in any other jurisdiction.
15. SECTION HEADINGS. The section headings used in this Pledge
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. NO WAIVER; CUMULATIVE REMEDIES. None of the Administrative Agent,
the Collateral Agent, the Issuing Lender, any Lender or the Hedge Lender shall
by any act (except by a written instrument pursuant to Section 17 hereof) be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
default of any obligation under any Credit Document or in any breach of any of
the terms and conditions hereof or thereof. No failure to exercise, nor any
delay in exercising, on the part of the Administrative Agent, the Collateral
Agent, the Issuing Lender, any Lender or the Hedge Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Administrative Agent, the Collateral Agent, the Issuing Lender,
any Lender or the Hedge Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent, the Collateral Agent, the Issuing Lender, such Lender or
the Hedge Lender would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any other rights or remedies provided by law.
17. INTEGRATION; WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS;
GOVERNING LAW. This Pledge Agreement represents the agreement of Holdings with
respect to the subject matter hereof and there are no promises or
representations by the Collateral Agent, any Lender or the Hedge Lender relative
to the subject matter hereof not reflected herein or in the other Credit
Documents. None of the terms or provisions of this Pledge Agreement may be
amended, supplemented or otherwise modified except by a written instrument
executed by the Pledgor and the Collateral Agent, provided that any provision of
this Pledge Agreement may be waived by the Collateral Agent in a letter or
agreement executed by the Collateral Agent or by telex or facsimile transmission
from the Collateral Agent. This Pledge Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of the
Administrative Agent, the Collateral Agent, the Issuing Lender, the Lenders and
the Hedge Lender and their respective successors and assigns. THIS PLEDGE
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
10
<PAGE>
18. NOTICES. Notices by the Collateral Agent to the Pledgor or the
Company may be given by mail, by telex or by facsimile transmission, addressed
or transmitted to the Pledgor or the Company at its address or transmission
number set forth in subsection 11.2 of the Credit Agreement in the case of the
Company and on Schedule II hereto in the case of the Pledgor and shall be
effective (a) in the case of mail, three days after deposit in the postal
system, first class postage pre-paid, and (b) in the case of telex or facsimile
notices, when sent. The Pledgor and the Company may change their respective
addresses and transmission numbers by written notice to the Collateral Agent.
19. COUNTERPARTS. This Pledge Agreement may be executed by one or
more of the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
20. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO THE COMPANY. The
Pledgor hereby authorizes and instructs the Company to comply with any
instruction received by it from the Collateral Agent, the Administrative Agent
and the Managing Agents in writing that (a) states that an Event of Default has
occurred and is continuing and (b) is otherwise in accordance with the terms of
this Pledge Agreement, without any other or further instructions from the
Pledgor, and the Pledgor agrees that the Company shall be fully protected in so
complying.
21. AUTHORITY OF THE COLLATERAL AGENT. The Pledgor acknowledges that
the rights and responsibilities of the Collateral Agent under this Pledge
Agreement with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, voting right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Pledge Agreement shall, as between the Collateral Agent and
the Lenders, be governed by the Credit Agreement and by such other agreements
with respect thereto as may exist from time to time among them and as between
the Collateral Agent and the Hedge Lender be governed by the Hedge Lender Agency
Agreement, but, as between the Collateral Agent and the Pledgor, the Collateral
Agent shall be conclusively presumed to be acting as agent for the Lenders and
the Hedge Lender with full and valid authority so to act or refrain from acting,
and neither the Pledgor nor the Company shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
22. TERMINATION. This Agreement shall terminate upon the later of the
Credit Termination Date and the Interest Rate Protection Termination Date. Upon
such termination, the Collateral Agent shall on its behalf and on behalf of the
Lenders reassign and redeliver (or cause to be reassigned and redelivered) to
the Pledgor, or to such person or persons as the Pledgor shall designate or to
whomever may be lawfully entitled to receive such surplus, against receipt, such
of the Collateral (if any) as shall not have been sold or otherwise applied by
the Collateral Agent pursuant to the terms hereof and shall still be held by it
hereunder, together with appropriate instruments of reassignment and release.
Any such reassignment shall be without recourse upon or warranty by the
Collateral Agent (other than a warranty that the Collateral Agent has not
assigned its rights and interests hereunder to any other Person) and at the sole
cost and expense of the Pledgor.
11
<PAGE>
23. RIGHTS OF THE HEDGE LENDER. (a) The Collateral Agent shall have
no obligation whatsoever to the Hedge Lender, whether as agent, trustee or
otherwise, except as expressly provided herein, in any other Credit Document or
in the Hedge Lender Agency Agreement, and the Collateral Agent may waive, amend,
supplement or otherwise modify any provision of this Pledge Agreement or release
any Collateral hereunder in accordance with the terms hereof, all without
consulting with or obtaining the consent of the Hedge Lender. The Hedge lender
shall have no right to enforce any provisions of this Pledge Agreement before
the Credit Termination Date.
(b) The Collateral Agent shall cease to be a party hereto and all
rights and obligations hereunder shall be automatically assigned and transferred
to the Hedge Lender (without any action on the part of the Collateral Agent)
from and after the Credit Termination Date. After the Credit Termination Date,
all rights and obligations so assigned by the Collateral Agent to the Hedge
Lender shall no longer be subject to (i) any requirement that the consent of the
Managing Agents, the Administrative Agent, the Required Lenders and/or the
Lenders be obtained or (ii) any requirement that any decision be the joint
determination of the Managing Agents, the Administrative Agent and/or the
Collateral Agent.
(c) The Hedge Lender shall cease to be a party hereto from and after
the Interest Rate Protection Termination Date.
IN WITNESS WHEREOF, the undersigned have caused this Pledge Agreement to
be duly executed and delivered as of the date first above written.
PRIME HOLDING, INC.
By: /s/ Christopher J. O'Brien
------------------------------------
Name: Christopher J. O'Brien
Title: Vice President,
Secretary and Treasurer
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Collateral Agent
By: /s/
------------------------------------
Name:
Title:
12
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The Company referred to in the foregoing Pledge Agreement hereby
acknowledges receipt of a copy thereof and agrees to be bound thereby and to
comply with the terms thereof insofar as such terms are applicable to it. The
Company agrees to notify the Collateral Agent promptly in writing of the
occurrence of any of the events described in Section 5(a) of the Pledge
Agreement. The Company further agrees that the terms of Section 9(c) of the
Pledge Agreement shall apply to it, MUTATIS MUTANDIS, with respect to all
actions that may be required of it under or pursuant to or arising out of
Section 9 of the Pledge Agreement.
PRIME ACQUISITION CORP.
By: /s/ Christopher J. O'Brien
--------------------------
Name: Christopher J. O'Brien
Title: Vice President,
Secretary and Treasurer
13
<PAGE>
SCHEDULE I
Holdings Pledge Agreement
DESCRIPTION OF PLEDGED STOCK
Class Stock Certificate No. of
Issuer of Stock No. Shares
------ -------- ---------- ------
Prime Acquisition
Corp. Common 1 5,000
Prime Acquisition
Corp. Preferred 1 5,000
<PAGE>
SCHEDULE II
Holdings Pledge Agreement
ADDRESS OF PLEDGOR
Prime Holding, Inc.
c/o INVESTCORP International, Inc.
280 Park Avenue
Floor 37 West
New York, New York 10017
Attention: Christopher J. O'Brien
Telex: 4976829 INCORP
Telecopy: (212) 983-7073
With a copy to:
Prime Acquisition Corp.
16225 Park Ten Place
Suite 200
Houston, TX 77084
Attention: Chief Financial Officer
Telecopy:
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Charles K. Marquis, Esq.
Telex: 177920 GIBTRASK NYK
Telecopy: (212) 949-7606
<PAGE>
EXHIBIT 22.1
SUBSIDIARIES OF PRIME SERVICE, INC.
Prime Service, Inc. owns 100% of the capital stock of Primeco Inc. a Texas
corporation.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated August 30, 1996 on our audits of the consolidated financial
statements of Prime Service, Inc. and Subsidiary, as well as our report dated
August 30, 1996 on our audits of Alpine Equipment Rentals and Supply Company. We
also consent to the reference to our firm under the caption "Experts".
COOPERS & LYBRAND L.L.P.
Houston, Texas
September 6, 1996
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Houston, Texas
September 5, 1996
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
Our report dated April 8, 1996, contains an explanatory paragraph that states
that Vibroplant U.S., Inc. changed its method of computing depreciation in 1995
and its method of accounting for income taxes in 1994.
KPMG PEAT MARWICK LLP
Fort Worth, Texas
September 5, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 178 120
<SECURITIES> 0 0
<RECEIVABLES> 37,392 47,777
<ALLOWANCES> 925 1,472
<INVENTORY> 17,399 23,376
<CURRENT-ASSETS> 54,044 69,801
<PP&E> 204,132 <F1> 275,341 <F1>
<DEPRECIATION> 2,259 3,819
<TOTAL-ASSETS> 391,979 493,979
<CURRENT-LIABILITIES> 42,575 37,010
<BONDS> 265,000 344,000
0 0
0 0
<COMMON> 10 11
<OTHER-SE> 60,966 73,502
<TOTAL-LIABILITY-AND-EQUITY> 391,979 493,979
<SALES> 89,968 57,181
<TOTAL-REVENUES> 242,787 153,456
<CGS> 75,970 45,704
<TOTAL-COSTS> 173,950 102,524
<OTHER-EXPENSES> 48,048 26,346
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 30,546 18,239
<INCOME-PRETAX> (9,757) 6,347
<INCOME-TAX> (2,368) 3,205
<INCOME-CONTINUING> (7,389) 3,142
<DISCONTINUED> 0 0
<EXTRAORDINARY> (1,268) 0
<CHANGES> 0 0
<NET-INCOME> (8,657) 3,142
<EPS-PRIMARY> (8.66) 2.89
<EPS-DILUTED> (8.66) 2.89
<FN>
<F1> INCLUDES EQUIPMENT FOR RENT AND IS NET OF ACCUMULATED DEPRECIATION.
</FN>
</TABLE>
