<PAGE>
As filed with the Securities and Exchange Commission on February 4, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Form S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
National Equipment Services, Inc.
(Exact name of registrant as specified in its charter)
----------------
Delaware 7359 36-4087016
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
----------------
1800 Sherman Avenue Paul R. Ingersoll
Evanston, Illinois 60201 1800 Sherman Avenue
Telephone: (847) 733-1000 Evanston, Illinois 60201
(Address, including zip code, and Telephone: (847) 733-1000
telephone number, including (Name, address, including zip code,
area code, of registrants' principal and telephone number,
executive offices) including area code, of agent for
service)
Copy to:
H. Kurt von Moltke
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telephone: (312) 861-2295
----------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, 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, 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(d)
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. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Title of Each Class of Maximum Aggregate Amount of
Securities to be Amount to be Offering Price Offering Price Registration
Registered Registered Per Unit (1) (1) Fee
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10% Senior Subordinated
Notes due 2004, Series
D..................... $175,000,000 $1,000 $175,000,000 $48,650
- ------------------------------------------------------------------------------------
Guarantees of 10% Senior
Subordinated Notes due
2004, Series D........ $175,000,000 (2) (2) None
- ------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f).
(2) No further fee is payable pursuant to Rule 457(n).
----------------
The registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrants
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CO-REGISTRANTS
<TABLE>
<CAPTION>
Primary
State or Other Standard I.R.S.
Exact Name of Additional Jurisdiction of Industrial Employer
Registrants as Specified in Incorporation Classification Identification
their Charters or Organization Code Number No.
--------------------------- --------------- -------------- --------------
<S> <C> <C> <C>
Albany Ladder Company, Inc...... New York 7359 14-1295523
BAT Acquisition Corp. .......... Delaware 7359 86-0857699
Carl's Mid South Rent-All Center
Incorporated................... Tennessee 7359 62-1230136
Falconite Aviation, Inc. ....... Delaware 7359 61-1312696
Falconite Equipment, Inc. ...... Illinois 7359 37-0987459
Falconite, Inc. ................ Illinois 7359 31-1490949
Falconite Rebuild Center, Inc. . Kentucky 7359 31-1501864
McCurry & Falconite Equipment
Co., Inc. ..................... Alabama 7359 63-1140920
M&M Properties, Inc. ........... Alabama 7359 63-0895405
NES Acquisition Corp. .......... Delaware 7359 76-0522698
NES East Acquisition Corp. ..... Delaware 7359 36-4209300
NES Michigan Acquisition Corp. . Delaware 7359 38-3388768
Rebel Studio Rentals, Inc. ..... California 7359 93-1172556
Shaughnessy Crane Service, Inc.
............................... Massachusetts 7359 04-2842710
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this Prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This Prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated February 4, 1999
PROSPECTUS
, 1999
[LOGO APPEARS HERE]
National Equipment Services, Inc.
$175,000,000
Offer to exchange our
10% Senior Subordinated Notes due 2004, Series D
for our outstanding
10% Senior Subordinated Notes due 2004, Series C
- --------------------------------------------------------------------------------
Terms of the Exchange Offer
. Expires 5:00 p.m. New . We will not receive any
York City time, proceeds from the
, 1999, unless exchange offer.
extended.
. The exchange of notes
. We will exchange all will not be a taxable
notes that you validly exchange for U.S.
tender and do not federal income tax
validly withdraw. purposes.
. You may withdraw your . The terms of the
tender of notes any exchange notes are
time prior to the substantially identical
expiration of the to your notes, except
exchange offer. for certain transfer
restrictions and
registration rights
relating to your notes.
. The exchange offer is
not subject to any
condition, other than
that it not violate any
applicable law or
interpretation of the
staff of the Securities
and Exchange
Commission.
. There is no existing
market for the exchange
notes, and we do not
intend to apply for
their listing on any
securities exchange.
- --------------------------------------------------------------------------------
For a discussion of certain factors that you should consider prior to
tendering your notes in the exchange offer, see "Risk Factors" beginning on
page 10.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
<PAGE>
This prospectus incorporates important business and financial information
about us that is not included in or delivered with this prospectus. This
information is available without charge to you upon written or oral request to
National Equipment Services, Inc., Attention: Secretary, 1800 Sherman Avenue,
Evanston, Illinois 60201, telephone (847) 733-1000. In order to ensure timely
delivery of these documents, you should make any request by , 1999
(the date five business days prior to the expiration of the exchange offer).
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information contained in this
prospectus is accurate as of any date other than the date on the front of this
prospectus.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 10
The Exchange Offer........................................................ 16
Use of Proceeds........................................................... 24
Capitalization............................................................ 24
Selected Pro Forma Financial Data......................................... 26
Selected Historical Financial Data........................................ 33
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 36
Business.................................................................. 47
Management................................................................ 55
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Security Ownership of Certain Beneficial Owners and Management............. 62
Certain Relationships and Transactions..................................... 63
Description of Certain Indebtedness........................................ 64
Description of Exchange Notes.............................................. 67
Certain United States Federal Income Tax Consequences...................... 94
Plan of Distribution....................................................... 94
Experts.................................................................... 95
Legal Matters.............................................................. 96
Where You Can Find More Information........................................ 96
Index to Financial Statements.............................................. F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
The following summary highlights selected information from this Prospectus
and may not contain all of the information that is important to you. This
Prospectus includes the terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage
you to read this Prospectus in its entirety. Unless otherwise stated in this
Prospectus or unless the context otherwise requires, "we," "us," "our," "NES"
or the "Company" refers to National Equipment Services, Inc., including all of
our 18 acquired businesses. The terms "you" or "your" refer to prospective
investors in the Exchange Notes. The term "Securities Act" refers to the
Securities Act of 1933, as amended. The term "Exchange Act" refers to the
Securities Exchange Act of 1934, as amended.
When we present various financial information on a "pro forma basis," we are
intending to give you a picture of what our business might have looked like if
each of the following had occurred on the first day of the related period: (1)
our acquisitions of the 18 businesses and the related financings, (2) our
initial public stock offering in July 1998, (3) our offering of 10% Senior
Subordinated Notes due 2004 in November 1997, (4) our offerings of 10% Senior
Subordinated Notes due 2004, Series C in December 1998 and January 1999, (5)
certain borrowings under our credit facility and (6) certain adjustments we
describe under the heading "Selected Pro Forma Financial Data."
The Exchange Offer
On December 11, 1998, we privately placed $125.0 million of 10% Senior
Subordinated Notes due 2004, Series C. On January 8, 1999, we privately placed
an additional $50.0 million of 10% Senior Subordinated Notes due 2004, Series
C. We will refer to these notes as the "Outstanding Notes." We will refer to
the 10% Senior Subordinated Notes due 2004, Series D that we are offering as
the "Exchange Notes." All of our subsidiaries guarantee these Outstanding Notes
and will guarantee the Exchange Notes. We wholly own all of our subsidiaries.
Simultaneous with each private placement, we entered into registration rights
agreements with the initial purchasers of the Outstanding Notes. Under the
registration rights agreements, we must deliver this Prospectus to the holders
of our Outstanding Notes and must complete our exchange offer by ,
1999. If we do not complete our exchange offer by , 1999, we must pay
liquidated damages to the holders of the Outstanding Notes until we complete
our exchange offer. You may exchange your Outstanding Notes for Exchange Notes
in our exchange offer. The terms of the Exchange Notes are substantially
identical to the Outstanding Notes, except for certain transfer restrictions
and registration rights relating to your Outstanding Notes. You should read the
discussions under the headings "The Exchange Offer" and "Description of
Exchange Notes" for further information regarding the Exchange Notes.
We believe that you will be able to resell Exchange Notes without complying
with the registration and prospectus delivery provisions of the Securities Act,
if certain conditions are met. You should read the discussion under the heading
"The Exchange Offer" for further information regarding and resales of the
Exchange Notes.
Company Overview
We are a leading participant in the growing and highly fragmented $18 billion
equipment rental industry. We operate through the 18 businesses we acquired
since January 1997 and specialize in the rental of specialty and general
equipment to industrial and construction end-users. We rent over 750 different
types of machinery and equipment and distribute new equipment for nationally
recognized original equipment manufacturers. We also sell used equipment as
well as complementary parts, supplies and merchandise, and provide repair and
maintenance services to our customers.
We are geographically diversified and have 102 locations across 24 states. We
are a leading competitor in each of the geographic markets we serve. For the
twelve months ended September 30, 1998, on a pro forma basis, we generated
revenues, EBITDA and operating income of $301.7 million,
1
<PAGE>
$111.8 million and $58.9 million, respectively. You should read note (e) on
page 9 for an explanation of how we calculate EBITDA.
Our Equipment Fleet
Our management believes that we offer one of the most modern and well
maintained fleets of specialty or general equipment in each of our markets. The
average age of our equipment fleet is approximately three years. Our specialty
equipment includes electric and pneumatic hoists, hydraulic and truck-mounted
cranes, liquid storage tanks, pumps and highway safety equipment. Our general
industrial and construction equipment includes aerial work platforms, air
compressors, cranes, earth-moving equipment and rough terrain forklifts. We
rent and sell this equipment to industrial and construction end-users. These
end-users represented approximately 55% and 43%, respectively, of our revenues
for the twelve months ended September 30, 1998, on a pro forma basis.
Our Management
Our senior management team has significant industry experience and an
impressive track record of acquiring and integrating companies in the equipment
rental industry. Before founding the Company, our senior management team was
responsible for building Brambles Equipment Services, the U.S. equipment rental
business of an Australian public company, into a leading participant in the
industry. At Brambles Equipment Services, our team executed a growth strategy
that combined a disciplined acquisition program with significant organic
growth. Our management believes that their extensive industry experience allows
them to more easily identify quality acquisition targets and successfully
integrate these businesses through effective financial and operating controls
and the proper deployment of capital.
Experienced professionals manage our local operations. These local managers
have an average of over 15 years of experience in the industry and have
extensive knowledge of and relationships in their local markets. These local
managers are typically former owners of the businesses we acquired.
We also benefit from the financial expertise of Golder, Thoma, Cressey,
Rauner, Inc., an established investment firm specializing in the consolidation
of fragmented industries. Golder, Thoma, Cressey, Rauner Fund V, L.P., an
affiliate of Golder, Thoma, Cressey, Rauner, Inc., is our principal equity
investor.
Recent Developments
In the third quarter of 1998, we completed an initial public offering of
7,375,000 shares of our common stock. We received net proceeds of approximately
$92.6 million from our initial public stock offering.
In the fourth quarter of 1998 and the first quarter of 1999, we issued $175.0
million aggregate principal amount of our Outstanding Notes. We relied on an
exemption under the Securities Act and did not register these transactions
under the Securities Act. We received net proceeds of approximately $166.5
million from these debt offerings.
Since our initial public stock offering, we acquired five businesses. These
businesses generated aggregate 1997 revenues of $124.5 million and added an
aggregate of 52 locations to our operations.
Risk Factors
See the section entitled "Risk Factors," beginning on page 10, for a
discussion of certain factors that you should consider before tendering your
Outstanding Notes in exchange for Exchange Notes.
Principal Executive Office
Our headquarters are located at 1800 Sherman Avenue, Evanston, Illinois
60201. Our telephone number is (847) 733-1000.
2
<PAGE>
Summary of the Exchange Offer
Registration Rights We sold $125.0 million principal amount of the
Agreements.............. Outstanding Notes on December 11, 1998 and $50.0
million principal amount of the Outstanding Notes on
January 8, 1999 to the initial purchasers--Salomon
Smith Barney Inc. and First Union Capital Markets
Corp. The initial purchasers then sold the
Outstanding Notes to institutional investors.
Simultaneous with our initial sales of the
Outstanding Notes, we entered into registration
rights agreements with the initial purchasers. These
registration rights agreements require this exchange
offer. This exchange offer satisfies your rights
under the registration rights agreements. After our
exchange offer is over, you will not have any
exchange or registration rights for your Outstanding
Notes.
The Exchange Offer...... We are offering to exchange $175.0 million principal
amount of Exchange Notes for your Outstanding Notes.
To exchange your Outstanding Notes, you must properly
tender them. We will exchange all Outstanding Notes
that you validly tender and do not validly withdraw.
We will issue registered Exchange Notes promptly
after the end of our exchange offer.
Resales................. We believe that you will be able to offer for resale
and transfer the Exchange Notes without complying
with the registration and prospectus delivery
requirements of the Securities Act if:
. you acquire the Exchange Notes in the ordinary
course of your business;
. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate,
in the distribution of the Exchange Notes; and
. you are not an "affiliate" of us, as defined in
Rule 405 of the Securities Act.
If you do not satisfy all of these conditions and you
transfer any Exchange Note without delivering a
proper prospectus or without qualifying for a
registration exemption, you may incur liability under
the Securities Act. We will not assume or indemnify
you against this liability.
If you are a broker-dealer and you are acquiring
Exchange Notes for your own account in exchange for
Outstanding Notes that you acquired through market-
making or other trading activities, you must
acknowledge that you will deliver a proper prospectus
when you transfer any Exchange Notes. If you are a
broker-dealer, you may use this Prospectus for an
offer to resell or transfer of the Exchange Notes.
Expiration Date......... Our exchange offer expires at 5:00 p.m., New York
City time, , 1999, unless we extend the
expiration date.
Conditions to our Our exchange offer is subject to customary
Exchange Offer......... conditions. We may waive some of these conditions.
3
<PAGE>
Procedures for
Tendering Outstanding
Notes..................
We issued the Outstanding Notes as global securities
and deposited them with Harris Trust and Savings
Bank, as book-entry depositary. Harris Trust and
Savings Bank issued a certificateless depositary
interest in each note, which represents a 100%
interest in the notes, to The Depositary Trust
Company. Direct or indirect participants in DTC hold
beneficial interests in the Outstanding Notes through
the certificateless depositary interest. DTC
maintains records of these interests in book-entry
form.
You may tender your Outstanding Notes by book-entry
transfer through DTC's automated tender offer
program. If you want to tender your Outstanding Notes
by a means other than book-entry transfer, you must
complete and sign a letter of transmittal according
to the instructions contained in the letter. You must
deliver the letter of transmittal and any other
documents required by the letter of transmittal to
the exchange agent by mail, facsimile, hand delivery
or overnight carrier. In addition, you must deliver
the Outstanding Notes to the exchange agent or comply
with the procedures for guaranteed delivery. See "The
Exchange Offer--Procedures for Tendering Outstanding
Notes" for more information.
Do not send letters of transmittal and certificates
representing Outstanding Notes to the Company. Send
these documents only to the exchange agent. See "The
Exchange Offer--Exchange Agent" for more information.
Special Procedures for
Beneficial Owners......
If your Outstanding Notes are registered in the name
of a broker, dealer, commercial bank, trust company
or other nominee and you wish to tender your
Outstanding Notes in our exchange offer, you must
contact the registered holder as soon as possible and
instruct it to tender on your behalf and comply with
the instructions we set forth elsewhere in this
Prospectus.
Withdrawal Rights....... You may withdraw your tender of Outstanding Notes at
any time before 5:00 p.m. New York City time on the
date our exchange offer expires.
Appraisal or You do not have any appraisal or dissenters' rights
Dissenters' Rights..... in our exchange offer. If you do not properly tender
your Outstanding Notes, you will not be entitled to
any further registration rights under the
registration rights agreements except under limited
circumstances. However, your Outstanding Notes would
remain outstanding and would be entitled to the
benefits of the indenture. You should read the
discussion under the heading "Risk Factors--
Consequences of a Failure to Exchange Outstanding
Notes" for further information.
Federal Income Tax
Considerations.........
The exchange of notes is not a taxable exchange for
United States federal income tax purposes. You will
not recognize any taxable gain or loss or any
interest income as a result of the exchange. For
additional information regarding United States
federal income tax considerations, you should read
the discussion under the heading "Certain United
States Federal Income Tax Consequences."
4
<PAGE>
Use of Proceeds......... We will not receive any proceeds from the issuance of
the Exchange Notes, and we will pay the expenses of
our exchange offer.
Exchange Agent.......... Harris Trust and Savings Bank is serving as the
exchange agent in our exchange offer. The exchange
agent's address, telephone and facsimile numbers are
listed under the heading "The Exchange Offer--
Exchange Agent" and in the Letter of Transmittal.
5
<PAGE>
Summary of the Exchange Notes
The form and terms of the Exchange Notes are substantially the same as the
form and terms of the Outstanding Notes, except the Exchange Notes are
registered under the Securities Act. As a result, the Exchange Notes will not
bear legends restricting their transfer and will not contain the registration
rights and liquidated damages provisions contained in the Outstanding Notes.
The Exchange Notes represent the same debt as the Outstanding Notes. Both the
Outstanding Notes and the Exchange Notes are governed by the same indenture.
Aggregate Amount........ $175.0 million principal amount of 10% Senior
Subordinated Notes due 2004, Series D.
Maturity Date........... November 30, 2004.
Interest Payment Dates.. May 30 and November 30 of each year, beginning May
30, 1999.
Subsidiary Guarantees... All of our current subsidiaries will fully and
unconditionally and jointly and severally guarantee
the Exchange Notes. We wholly own all of our
subsidiaries. We will refer to our subsidiaries as
"Subsidiary Guarantors." You should read the
discussion under the heading "Description of Exchange
Notes--Subsidiary Guarantees" for further
information.
Subordination........... The Exchange Notes will be general unsecured
obligations of us. They will rank subordinate to all
our existing and future senior debt and will rank
senior or equal to all our existing and future
subordinated indebtedness. Similarly, the guarantees
will be general unsecured obligations of the
Subsidiary Guarantors. They will rank subordinate in
right of payment to all existing and future senior
debt of the Subsidiary Guarantors and will rank
senior or equal in right of payment to all existing
and future subordinated indebtedness of the
Subsidiary Guarantors. As of September 30, 1998, on a
pro forma basis, the Company and the Subsidiary
Guarantors would have had $184.6 million of senior
debt outstanding and $221.2 million of indebtedness
that ranked equal in right of payment to the
Subsidiary Guarantees outstanding. You should read
the discussion under the heading "Risk Factors--
Subordination; Holding Company Structure" for further
information.
Optional Redemption..... We may redeem all or some of the notes at any time on
or after November 30, 2001. In addition, at any time
before November 30, 2000, we may redeem up to 33% of
the total initial amount of the Exchange Notes with
the net proceeds of a public offering of our common
stock. Our optional redemption prices for the
Exchange Notes are contained in this Prospectus under
the heading "Description of Exchange Notes--Optional
Redemption."
Change of Control....... If a change of control of the Company occurs:
(1) we will have the option before November 30,
2001 to redeem all or some of the Exchange Notes
for a price equal to 100% of their principal
amount, plus a premium and plus accrued and
unpaid interest; and
6
<PAGE>
(2) if we do not redeem the Exchange Notes, or if
a change of control occurs after November 30,
2001, you can require us to repurchase all or
some of your Exchange Notes for a price equal to
101% of their principal, plus accrued and unpaid
interest.
You should read the discussions under the headings
"Description of Exchange Notes--Optional Redemption"
and "--Repurchase at the Option of Holders--Change of
Control" for further information.
Certain Covenants....... The indenture contains certain covenants that limit,
among other things, our ability to:
. pay dividends, redeem capital stock or make
certain other restricted payments or
investments;
. incur additional indebtedness or issue
preferred equity interests;
. merge, consolidate or sell all or substantially
all of our assets;
. create liens on assets; and
. enter into certain transactions with affiliates
or related persons.
You should read the discussion under the heading
"Description of Exchange Notes--Certain Covenants"
for further information.
7
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(in thousands, except per share data)
We were founded in June 1996 to acquire and integrate equipment rental
companies. In 1997, we acquired six businesses in separate transactions and
completed the offering of $100.0 million principal amount of our 10% Senior
Subordinated Notes due 2004. In 1998, we acquired twelve businesses in separate
transactions and completed our initial public stock offering. In December 1998
and January 1999, we completed the offerings of the Outstanding Notes. While we
purchased our 18 acquired businesses at various dates during 1997 and 1998, the
following pro forma operating and other data is intended to give you a picture
of what our business might have looked like if (1) all these acquisitions and
the related financings, (2) our initial public stock offering, (3) our November
1997 notes offering, (4) our offerings of the Outstanding Notes and (5) certain
borrowings on our credit facility had occurred on the first day of each period
presented. The following pro forma balance sheet data is intended to give you a
picture of what our business might have looked like if these transactions had
occurred on September 30, 1998. You should read the discussion under the
heading "Capitalization" for further information. It is important that you read
the summary historical and pro forma financial information that we present
below along with "Selected Pro Forma Financial Data," "Selected Historical
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and their
notes that we include elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Nine Months
Ended Nine Months Ended
Year Ended September 30, September 30,
December 31, 1997 1997 1998
------------------- ---------------- ------------------
Pro Pro Pro
Actual Forma(a) Actual Forma(a) Actual Forma(a)
-------- --------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Total revenues......... $ 41,288 $ 270,523 $25,575 $194,520 $137,434 $225,694
Gross profit........... 15,573 110,833 9,585 79,553 60,606 97,573
Operating income....... 6,187 48,237 3,788 35,426 30,430 46,104
Interest expense,
net(b)................ 4,336 44,516 2,439 33,387 16,001 33,387
Income before income
taxes and
extraordinary item.... 1,923 4,168 1,330 2,526 14,684 12,806
Income tax expense..... 818 1,688 519 1,023 5,981 5,186
Income before
extraordinary item.... 1,105 2,480 811 1,503 8,703 7,620
Extraordinary item(c).. -- -- -- -- 1,424 --
Net income............. 1,105 2,480 811 1,503 7,279 7,620
Other Data:
Rental fleet
purchases(d).......... $ 15,336 $ 102,638 $10,781 $90,349 $104,391 $119,150
Rental fleet
depreciation.......... 5,009 36,888 3,143 27,531 17,581 30,859
Non-rental fleet
depreciation and
amortization.......... 1,476 12,429 758 9,137 4,557 9,319
EBITDA(e).............. 12,744 98,001 7,670 72,581 52,823 86,371
Ratio of earnings to
fixed charges......... 1.4x 1.1x 2.1x 1.4x
</TABLE>
<TABLE>
<CAPTION>
At September 30, 1998
---------------------
Actual Pro Forma(a)
-------- ------------
<S> <C> <C> <C> <C> <C>
Balance Sheet
Data:
Cash.......... $ 662 $ 665
Rental
equipment,
net.......... 334,141 338,930
Total assets.. 640,001 650,839
Total debt.... 459,574 469,803
Total
stockholders'
equity....... 131,839 131,839
</TABLE>
8
<PAGE>
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(a) For an explanation of the calculation of the pro forma adjustments, see
"Selected Pro Forma Financial Data."
(b) Includes the following:
<TABLE>
<CAPTION>
Year Nine Months Nine Months
Ended Ended Ended
December 31, September 30, September 30,
1997 1997 1998
------------ --------------- ----------------
Pro Pro Pro
Actual Forma(a) Actual Forma(a) Actual Forma(a)
------ -------- ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash interest expense:
November 1997 notes
offering.................. $ -- $10,000 $ -- $ 7,500 $ 7,500 $ 7,500
Outstanding Notes.......... -- 17,500 -- 13,125 -- 13,125
Credit facility or the
Company's previous credit
facility.................. 3,950 13,160 2,259 9,869 7,314 9,869
------ ------- ------ ------- ------- -------
3,950 40,660 2,259 30,494 14,814 30,494
------ ------- ------ ------- ------- -------
Non-cash charges:
Amortization of debt
issuance costs and
original issue discount
incurred in connection
with our November 1997
notes offering............ 52 621 -- 466 466 466
Amortization of debt
issuance costs and
original issue discount
incurred in connection
with our offering of
Outstanding Notes......... -- 1,415 -- 1,062 -- 1,062
Amortization of loan
origination and other
financing fees incurred in
connection with our
current credit facility or
our previous credit
facility.................. 354 620 180 465 674 465
Interest expense on our
junior subordinated
convertible promissory
note...................... -- 1,200 -- 900 47 900
------ ------- ------ ------- ------- -------
406 3,856 180 2,893 1,187 2,893
------ ------- ------ ------- ------- -------
$4,356 $44,516 $2,439 $33,387 $16,001 $33,387
====== ======= ====== ======= ======= =======
</TABLE>
(c) Represents the write-off of unamortized loan costs of $2,393 less a tax
benefit of $969 associated with our previous credit facility.
(d) Represents purchases of industrial, construction and highway safety
equipment to be held by the Company for rental to customers as part of the
Company's business activities.
(e) Reflects operating income plus other income less other expense, before
interest expense, net, income taxes, rental equipment depreciation and non-
rental depreciation and amortization. We do not intend EBITDA to represent
cash flow from operations or net income as defined by generally accepted
accounting principles. You should not consider it as a measure of liquidity
or an alternative to, or more meaningful than, cash flow from operations or
net income as an indication of our operating performance. We have included
EBITDA because our management believes that certain investors find it
useful in measuring our ability to service our debt.
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RISK FACTORS
You should carefully consider the following factors in addition to the other
information set forth in this Prospectus before making a decision to tender
your notes in the Exchange Offer.
This Prospectus includes certain forward-looking statements concerning the
Company. These statements can be identified by the use of forward-looking terms
such as "may," "will," "believe," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future
expectations, contain projections of results of operations or of financial
condition or state other "forward-looking" information that constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. When considering such forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this Prospectus. The risk factors noted in this section and other
factors noted throughout this Prospectus, including certain risks and
uncertainties, could cause our actual results to differ materially from those
contained in any forward-looking statements. Given these uncertainties, you
should not place undue reliance on such forward-looking statements.
Substantial Leverage; Restrictions Imposed by Terms of Indebtedness
We have incurred significant indebtedness. As of September 30, 1998, on a pro
forma basis, (1) we would have had $469.8 million of indebtedness outstanding
(which amount includes the Outstanding Notes), (2) our stockholders' equity
would have been $131.8 million and (3) there would have been $222.4 million
available for future borrowings under the our credit facility, subject to
availability based on certain financial tests including a borrowing base.
Our high level of indebtedness could have important consequences to you. In
particular:
. we must dedicate a substantial portion of our cash flow from
operations to debt service and not other purposes;
. our high debt level could limit our ability to obtain additional debt
financing in the future for working capital, capital expenditures or
acquisitions; and
. our high debt level could limit our flexibility in reacting to
changes in the industry and economic conditions generally.
Our ability to pay interest on the Exchange Notes, to repay portions of our
long-term indebtedness (including the Exchange Notes, our Series B notes and
borrowings under our credit facility) and to satisfy our other debt obligations
depends upon our future operating performance and the availability of
refinancing indebtedness. This will be affected by prevailing economic
conditions and financial, business and other factors. Many of these factors are
beyond our control.
The indenture governing the Exchange Notes, the indenture governing our
Series B notes and our credit facility contain a number of significant
covenants. These covenants restrict, among other things, our ability to:
. incur additional indebtedness;
. incur liens;
. pay dividends or make certain other restricted payments;
. consummate certain asset sales;
. enter into certain transactions with affiliates;
. impose restrictions on the ability of a subsidiary to pay dividends
or make certain payments to the Company;
. merge or consolidate with any other person; or
. sell all or substantially all of our assets.
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In addition, our credit facility contains other more restrictive covenants
and also requires us to maintain specified financial ratios and satisfy certain
financial tests. Events beyond our control can affect our ability to meet these
financial ratios and tests. We cannot assure you that we will meet them. Our
breach of any of these covenants could result in a default under our credit
facility or our indentures and give our lenders the right to declare all
amounts outstanding to be immediately due and payable. If this happens, we
cannot assure you that we would have enough assets to repay in full that
indebtedness and our other indebtedness, including the Exchange Notes. You
should read the discussions under the headings "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Description of Certain Indebtedness," "Description of Exchange Notes--
Subordination" and "--Certain Covenants" for further information about our
debt.
Subordination
Our payment of principal, premium and interest on the Exchange Notes and the
guarantees will be subordinated to our full payment of all our senior debt,
including indebtedness under our credit facility. This means that if we become
bankrupt, we must first use our assets to repay all our senior debt, including
our credit facility, before we could pay you. As a result, we may not have
sufficient assets remaining to pay amounts due on the Exchange Notes or the
related guarantees. In addition, under certain circumstances, our senior debt
would prohibit us from paying principal, premium or interest on the Exchange
Notes or the guarantees if we default on certain classes of senior debt. As of
September 30, 1998, on a pro forma basis, we would have had $184.6 million of
senior debt outstanding and we would have been able to incur additional senior
debt from time to time, subject to certain restrictions. You should read the
discussions under the headings "Description of Certain Indebtedness" and
"Description of Notes--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock" for further information about our debt.
The Exchange Notes and the guarantees will be general unsecured obligations
of us. They will also be subordinated to all of our secured indebtedness to the
extent of the value of the assets securing that indebtedness. Our credit
facility is currently secured by substantially all of our assets.
Holding Company Structure
We are a holding company and have no significant assets other than our
investments in our subsidiaries. Accordingly, we will rely entirely upon
distributions from our subsidiaries to generate the funds necessary to meet our
obligations to you under the Exchange Notes. Our subsidiaries' ability to pay
dividends to us will depend upon their operating results. It will also be
subject to applicable laws and contractual restrictions contained in our debt
instruments, including our credit facility. You should read the discussion
under the heading "Description of Exchange Notes--Certain Covenants--Dividend
and Other Payment Restrictions Affecting Subsidiaries" for further information
about our subsidiaries' ability to pay dividends to us.
Limitations on Change of Control
If a change of control of the Company occurs, we will be required under
certain circumstances to offer to repurchase for cash the Exchange Notes for
101% of their principal amount plus accrued interest. The holders of our Series
B notes are entitled to similar rights under the indenture governing our Series
B notes. We cannot assure you that we would have sufficient funds to pay the
purchase price for all of the Exchange Notes that we might be required to
purchase upon a change of control. Certain changes of control may also cause a
default under our credit facility, the indenture governing our Series B notes
or our other indebtedness. This would prohibit us from purchasing the Exchange
Notes. In that case, we could seek the consent of our lenders to purchase the
Exchange Notes or could attempt to refinance those borrowings. If we failed to
obtain the consent or repay those borrowings, we would remain prohibited from
purchasing the Exchange Notes. In that case, our failure to purchase tendered
Exchange Notes would constitute a default on the Exchange Notes. If that causes
a default under any senior debt, the subordination provisions of the Exchange
Notes would require that we repay in full our credit facility and any other
senior debt before we could repurchase the Exchange Notes. You should
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read the discussions under the headings "Description of Certain Indebtedness,"
"Description of Exchange Notes--Subordination" and "--Repurchase at the Option
of the Holders--Change of Control" for further information about our debt.
Fraudulent Conveyance
Any of our creditors may file a lawsuit objecting to our obligations under
the Exchange Notes or our use of the proceeds from our Outstanding Notes. A
court could void our obligations under the Exchange Notes, subordinate the
Exchange Notes to our other debt or order the holder to return any amounts paid
for the Outstanding Notes to the Company or to a fund benefitting the creditors
if the court finds we:
(1) intended to defraud a creditor; or
(2) did not receive fair value for the Outstanding Notes and we either
(a) were insolvent or became insolvent by offering the Outstanding Notes,
(b) did not have enough capital to engage in our business or (c) intended
to or believed that we overextended our debt obligations.
Creditors of the Subsidiary Guarantors may also object to their guarantees of
the Exchange Notes. A court could order the relief outlined above for the same
reasons outlined above. In addition, those creditors could claim that since the
Subsidiary Guarantors made their guarantees for the benefit of the Company,
they did not receive fair value for their guarantees.
If a court voided any guarantees, your claims against the Subsidiary
Guarantor would be adversely affected. In that case, you would be a creditor
solely of the Company and any other Subsidiary Guarantor whose guarantee was
not voided. If a court further subordinated your claims against the issuer of
an invalid guarantee, your claims could be subject to the full payment of all
liabilities of that Subsidiary Guarantor. We cannot assure you that there would
be enough assets to satisfy your claims relating to any voided portions of any
of the guarantees.
The measure of insolvency for fraudulent conveyance purposes will vary
depending upon the law applied in any proceeding. Generally, however, the
Company or a Subsidiary Guarantor would be considered insolvent if (1) the sum
of its debts, taking contingent liabilities into account, is greater than the
fair marketable value of all of its assets at a fair valuation or (2) the
present fair marketable value of its assets is less than the amount that would
be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature.
Competition
The equipment rental industry is highly fragmented and competitive. Our
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 our competitors have greater financial resources, are more
geographically diverse and have greater name recognition than us. We may
encounter increased competition from existing competitors or new market
entrants that may be significantly larger and have greater financial and
marketing resources than us. In addition, we may need to lower our prices and
rates if competitors reduce their prices. This could adversely affect our
operating results. Existing or future competitors of the Company also may seek
to compete with us for acquisitions. This could increase the price for
acquisitions or reduce the number of suitable acquisitions. You should read the
discussion under the heading "Business--Competition" for further information
about our competition.
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Ability to Complete and Integrate Acquisitions; Risks Relating to Growth
Strategy
We focus a significant portion of our strategy on pursuing and completing
acquisitions that meet our acquisition criteria. We have acquired and seek to
acquire companies that can benefit from our operations, management and access
to capital. Our ability to grow by acquisition depends upon, and may be limited
by, the availability of suitable acquisition candidates and capital and the
restrictions contained in our credit facility, our indentures and our other
financing arrangements. You should read the discussions under the headings
"Description of Certain Indebtedness" and "Description of Exchange Notes" for
further information about our debt. If the cash we generate internally and the
cash available under our credit facility are not sufficient to provide the
capital we need for acquisitions, we will require additional debt and/or equity
financing. Future debt financings, if available, will increase interest and
amortization expense, increase leverage and decrease income available to fund
acquisitions and expansion. In addition, future debt financings may limit our
ability to withstand competitive pressures and render us more vulnerable to
economic downturns.
Growth by acquisition also involves risks that could adversely affect our
operating results. These risks include: (1) difficulties in integrating the
operations and personnel of acquired companies; (2) difficulties in eliminating
duplicative costs and reducing overhead; and (3) the potential loss of key
employees of acquired companies. In addition, although we perform a due
diligence investigation of each business that we acquire, we may fail or be
unable to discover certain liabilities during our due diligence investigation.
We could be held responsible for such liabilities as a successor owner.
We cannot assure you that we will be able to obtain the capital necessary to
pursue our growth strategy, complete acquisitions on satisfactory terms or
successfully integrate any acquired businesses into our operations and remedy
any undiscovered liabilities. You should read the discussions under the
headings "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources," "Description of
Certain Indebtedness" and "Description of Exchange Notes" for further
information.
Dependence on Key Personnel
Several of our executive officers are important to the direction and
management of the Company. If any of these persons left the Company, our
business and future operations could be materially adversely affected. We
cannot assure you that we would be able to find replacements for them with
comparable business experience. We do not maintain key man life insurance for
these executive officers. You should read the discussion under the heading
"Management--Directors and Executive Officers" for further information about
our management.
General Economic Conditions
We derive a majority of our revenues from customers which are in industries
and businesses that are cyclical in nature and subject to changes in general
economic conditions, such as the construction industry. In addition, because we
conduct our operations in a variety of geographic markets, we are subject to
the economic conditions in each geographic market. General economic downturns
or localized downturns in markets where we have operations, including any
downturns in the construction industry, could have a material adverse effect on
us and our business, results of operations and financial condition.
Golder, Thoma, Cressey, Rauner Fund V, L.P. Has Significant Control Over the
Company
Golder, Thoma, Cressey, Rauner Fund V, L.P. owns and controls a majority of
our common stock. As a result, Golder, Thoma, Cressey, Rauner Fund V, L.P. has
significant control over the election of our board of directors and significant
control over our affairs and management, including corporate transactions such
as mergers, acquisitions, divestitures and asset sales. There may be
circumstances when the interests of Golder, Thoma, Cressey, Rauner Fund V,
L.P., as a stockholder of the Company, could conflict with your interests as a
creditor of the Company. In addition, Golder, Thoma, Cressey, Rauner Fund V,
L.P., as a stockholder of the
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Company, may have an interest in pursuing acquisitions, divestitures or other
transactions that, in its judgment, could enhance its equity investment, even
though the transactions might involve risks to you as a creditor of the
Company. You should read the discussions under the headings "Security Ownership
of Certain Beneficial Owners and Management" and "Certain Relationships and
Transactions--Stockholders Agreement and Registration Agreement" for further
information about Golder, Thoma, Cressey, Rauner Fund V, L.P.'s interest in the
Company.
Environmental Liabilities
Our facilities are subject to federal, state and local environmental
requirements, including those relating to discharges to air, water and land,
the handling and disposal of solid and hazardous waste and the cleanup of
properties affected by hazardous substances. Certain environmental laws impose
substantial penalties for noncompliance, and others impose strict, retroactive,
joint and several liability upon persons responsible for releases of hazardous
substances.
We do not currently anticipate any material adverse effect on our operations
or financial condition as a result of our efforts to comply with, or our
liabilities under, such requirements. Some risk of environmental liability is
inherent in our business, however, and we cannot assure you that material
environmental costs will not arise in the future. You should read the
discussion under the heading "Business--Governmental and Environmental
Regulation" for further information about environmental matters.
Liability and Insurance
Our business exposes us to claims for personal injury or death resulting from
the use of equipment rented or sold by us, from injuries caused in motor
vehicle accidents in which our delivery and service personnel are involved, as
well as workers' compensation claims and other employment-related claims by our
employees. We carry insurance coverage for product liability, general and
automobile liability and employment related claims from various national
insurance carriers. We cannot assure you, however, that existing or future
claims will not exceed the level of our insurance, that we will have sufficient
capital available to pay any uninsured claims or that our insurance will
continue to be available on economically reasonable terms, if at all. You
should read the discussion under the heading "Business--Legal Proceedings" for
further information about pending legal proceedings.
Intangible Assets
Our balance sheet immediately following our exchange offer and after giving
effect to all our completed acquisitions of businesses will include an amount
designated as "goodwill" that represents 31.0% of total assets and 153.0% of
stockholders' equity. Goodwill arises when an acquirer pays more for a business
than the fair value of the tangible and separately measurable intangible net
assets. Generally accepted accounting principles require that this and all
other intangible assets be amortized over the period benefited. Management has
determined that period to be no less than 40 years.
If management were not to give effect to shorter benefit periods of factors
giving rise to a material portion of the goodwill, earnings reported in periods
immediately following the acquisition would be overstated. In later years, we
would be burdened by a continuing charge against earnings without the
associated benefit to income valued by management in arriving at the
consideration paid for the business. Earnings in later years could also be
significantly affected if management determined then that the remaining balance
of goodwill was impaired.
Management has reviewed with its independent accountants all of the factors
and related future cash flows which it considered in arriving at the amount
incurred to acquire each of our acquired businesses. Management concluded that
the anticipated future cash flows associated with intangible assets recognized
in the acquisitions will continue indefinitely, and there is no persuasive
evidence that any material portion will dissipate over a period shorter than 40
years.
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Absence of a Public Market Could Adversely Affect the Value of Exchange Notes
We issued the Outstanding Notes to, and believe they are currently owned by,
a relatively small number of beneficial owners. There has not been any prior
public market for the Outstanding Notes. We have not registered the Outstanding
Notes under the Securities Act and they will be subject to restrictions on
transferability if you do not exchange them for Exchange Notes in our exchange
offer. After our exchange offer, the market for Outstanding Notes not exchanged
in our exchange offer will be even more limited than their existing market.
The Exchange Notes will constitute a new issue of securities with no
established trading market. We do not intend to list the Exchange Notes on any
national securities exchange or seek their admission to trading in the National
Association of Securities Dealers Automated Quotation System. Salomon Smith
Barney Inc. and First Union Capital Markets Corp. have advised us that they
currently intend to make a market in the Exchange Notes. However, they are not
obligated to do so and may discontinue their market making at any time. In
addition, their market making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act. Accordingly, we cannot assure you that
an active public or other market will develop for the Exchange Notes or as to
the liquidity of the trading market for the Exchange Notes. If a trading market
does not develop or is not maintained, you may experience difficulty in
reselling the Exchange Notes or you may be unable to sell them at all. If a
market for the Exchange Notes develops, any such market may be discontinued at
any time.
If a public trading market develops for the Exchange Notes, future trading
prices will depend on many factors. These include, among other things, (1)
prevailing interest rates, (2) our results of operations and (3) the market for
similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including our financial condition, the
Exchange Notes may trade at a discount from their principal amount.
Failure to Follow Exchange Offer Procedures Could Adversely Affect Holders
We will issue the Exchange Notes in exchange for the Outstanding Notes only
after you timely deliver to the exchange agent the Outstanding Notes, a
properly completed and executed letter of transmittal or an agent's message,
and all other required documents. If you want to tender your Outstanding Notes
in exchange for Exchange Notes, you should allow sufficient time to ensure
timely delivery. Neither the exchange agent nor the Company is under any duty
to notify you of defects or irregularities in your tender of Outstanding Notes
for exchange. Outstanding Notes that you do not validly tender will, following
our exchange offer, continue to be subject to the existing transfer
restrictions. In addition, if you tender the Outstanding Notes in our exchange
offer to participate in a distribution of the Exchange Notes, you may be deemed
to have received restricted securities. In that case, you will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resales of the Exchange Notes. You should
read the discussion under the heading "Plan of Distribution" for further
information about our exchange offer procedures.
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THE EXCHANGE OFFER
Purpose of the Exchange Offer
We sold $125.0 million principal amount of the Outstanding Notes on December
11, 1998 and $50.0 million principal amount of the Outstanding Notes on January
8, 1999 to the initial purchasers--Salomon Smith Barney Inc. and First Union
Capital Markets Corp. (collectively, the "Initial Offerings"). The initial
purchasers subsequently resold the Outstanding Notes to institutional
investors.
Simultaneously with each sale of the Outstanding Notes, we entered into
registration rights agreements with the initial purchasers (the "Registration
Rights Agreements"). Under these Registration Rights Agreements, we agreed to
file a registration statement regarding the exchange of the Outstanding Notes
for notes with terms identical in all material respects. We also agreed to use
our reasonable best efforts to cause that registration statement to become
effective with the Securities and Exchange Commission (the "Commission").
Copies of the Registration Rights Agreements have been filed as exhibits to the
registration statement of which this Prospectus is a part.
We are conducting this offer to exchange Exchange Notes for Outstanding Notes
(the "Exchange Offer") to satisfy our contractual obligations under the
Registration Rights Agreements. The form and terms of the Exchange Notes are
the same as the form and terms of the Outstanding Notes, except that the
Exchange Notes will be registered under the Securities Act and holders of the
Exchange Notes will not be entitled to liquidated damages. The Outstanding
Notes provide that, if a registration statement relating to the Exchange Offer
has not been filed by March 11, 1999 and declared effective by May 10, 1999,
the Company will pay liquidated damages on the Outstanding Notes. Upon the
completion of the Exchange Offer, holders of Outstanding Notes will not be
entitled to any liquidated damages on the Outstanding Notes or any further
registration rights under the Registration Rights Agreements, except under
limited circumstances. See "Risk Factors--Failure to Follow Exchange Offer
Procedures Could Adversely Affect Holders" and "Description of Exchange Notes"
for further information regarding the rights of Outstanding Note holders after
the Exchange Offer. The Exchange Offer is not extended to Outstanding Note
holders in any jurisdiction where the Exchange Offer does not comply with the
securities or blue sky laws of that jurisdiction.
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to conduct the Exchange Offer, or if certain holders
of the Outstanding Notes notify the Company that they are not eligible to
participate in, or would not receive freely tradeable Exchange Notes in
exchange for tendered Outstanding Notes in, the Exchange Offer, we will use our
commercially reasonable best efforts to cause to become effective a shelf
registration statement with respect to the resale of the Outstanding Notes. We
also agreed to use our reasonable best efforts to keep the shelf registration
statement effective at least two years after its date of effectiveness.
The term "holder" as used in this section of the Prospectus entitled "The
Exchange Offer" means (1) any person in whose name the Outstanding Notes are
registered on the books of the Company, (2) any other person who has obtained a
properly completed bond power from the registered holder or (3) any person
whose Outstanding Notes are held of record by DTC and who want to deliver such
Outstanding Notes by book-entry transfer at DTC.
Terms of the Exchange Offer
The Company is offering to exchange up to $175.0 million principal amount of
Exchange Notes for a like total principal amount of Outstanding Notes. The
Outstanding Notes also must be tendered properly on or before the Expiration
Date (as defined) and not withdrawn. In exchange for Outstanding Notes properly
tendered and accepted, the Company will issue a like total principal amount of
up to $175.0 million in Exchange Notes.
The Exchange Offer is not conditioned upon holders tendering minimum
principal amount of Outstanding Notes. As of the date of this Prospectus,
$175.0 million aggregate principal amount of Outstanding Notes are outstanding.
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Holders of the Outstanding Notes do not have any appraisal or dissenters'
rights in the Exchange Offer. If holders do not tender Outstanding Notes or
tender Outstanding Notes that the Company does not accept, their Outstanding
Notes will remain outstanding. Any Outstanding Notes will be entitled to the
benefits of the Indenture (as defined), but will not be entitled to any further
registration rights under the Registration Rights Agreements, except under
limited circumstances. See "Risk Factors--Failure to Follow Exchange Offer
Procedures Could Adversely Affect Holders" for more information regarding notes
outstanding after the Exchange Offer.
The "Expiration Date" is 5:00 p.m., New York City time, on , 1999,
unless we extend the Exchange Offer. After the Expiration Date, the Company
will return to the holder any tendered Outstanding Notes that the Company did
not accept for exchange.
Holders exchanging Outstanding Notes will not have to pay brokerage
commissions or fees or transfer taxes if they follow the instructions in the
Letter of Transmittal. The Company will pay the charges and expenses, other
than certain taxes described below, in the Exchange Offer. See "--Fees and
Expenses" for further information regarding fees and expenses.
Neither the Company nor the Company's board of directors recommends you to
tender or not tender Outstanding Notes in the Exchange Offer. In addition, the
Company has not authorized anyone to make any recommendation. You must decide
whether to tender in the Exchange Offer and, if so, the aggregate amount of
Outstanding Notes to tender.
The Company has the right, in accordance with applicable law, at any time:
. to delay the acceptance of the Outstanding Notes;
. to terminate the Exchange Offer if the Company determines that any of the
conditions to the Exchange Offer have not occurred or have not been
satisfied;
. to extend the Expiration Date of the Exchange Offer and keep all
Outstanding Notes tendered other than those notes properly withdrawn; and
. to waive any condition or amend the terms of the Exchange Offer.
If the Company materially changes the Exchange Offer, or if the Company
waives a material condition of the Exchange Offer, the Company will promptly
distribute a prospectus supplement to the holders of the Outstanding Notes
disclosing the change or waiver. The Company also will extend the Exchange
Offer as required by Rule 14e-1 under the Exchange Act.
If the Company exercises any of the rights listed above, it will promptly
give oral or written notice of the action to the Exchange Agent (as defined)
and will issue a release to an appropriate news agency. In the case of an
extension, an announcement will be made no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Acceptance for Exchange and Issuance of Exchange Notes
The Company will issue to the Exchange Agent Exchange Notes for Outstanding
Notes tendered and accepted and not withdrawn promptly after the Expiration
Date. The Exchange Agent might not deliver the Exchange Notes to all tendering
holders at the same time. The timing of delivery depends upon when the Exchange
Agent receives and processes the required documents.
The Company will be deemed to have exchanged Outstanding Notes validly
tendered and not withdrawn when the Company gives oral or written notice to the
Exchange Agent of their acceptance. The Exchange Agent is an agent for the
Company for receiving tenders of Outstanding Notes, Letters of Transmittal and
related documents. The Exchange Agent is also an agent for tendering holders
for receiving Outstanding Notes,
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Letters of Transmittal and related documents and transmitting Exchange Notes to
validly tendering holders. If for any reason, the Company (1) delays the
acceptance or exchange of any Outstanding Notes; (2) extends the Exchange
Offer; or (3) is unable to accept the Exchange Notes, then the Exchange Agent
may, on behalf of the Company and subject to Rule 14e-1(c) under the Exchange
Act, retain tendered notes. Notes retained by the Exchange Agent may not be
withdrawn, except according to the withdrawal procedures outlined below under
"--Withdrawal Rights."
In tendering Outstanding Notes, you must warrant in the Letter of Transmittal
or in an Agent's Message (as defined) that (1) you have full power and
authority to tender, exchange, sell, assign and transfer Outstanding Notes, (2)
the Company will acquire good, marketable and unencumbered title to the
tendered Outstanding Notes, free and clear of all liens, restrictions, charges
and other encumbrances and (3) the Outstanding Notes tendered for exchange are
not subject to any adverse claims or proxies. You also must warrant and agree
that you will, upon request, execute and deliver any additional documents
requested by the Company or the Exchange Agent to complete the exchange, sale,
assignment, and transfer of the Outstanding Notes.
Procedures for Tendering Outstanding Notes
Valid Tender
You may tender your Outstanding Notes by book-entry transfer or by other
means. For book-entry transfer, you must deliver to the Exchange Agent either
(1) a completed and signed Letter of Transmittal or (2) an "Agent's Message,"
meaning a message transmitted to the Exchange Agent by DTC stating that you
agree to be bound by the terms of the Letter of Transmittal. You must deliver
your Letter of Transmittal or the Agent's Message by mail, facsimile, hand
delivery or overnight carrier to the Exchange Agent on or before the Expiration
Date. In addition, to complete a book-entry transfer, you must also either (1)
have DTC transfer the Outstanding Notes into the Exchange Agent's account at
DTC using the Automated Tender Offer Program ("ATOP") procedures for transfer
and obtain a confirmation of such a transfer or (2) follow the guaranteed
delivery procedures described below under "--Guaranteed Delivery Procedures."
If you tender fewer than all of your Outstanding Notes, you should fill in
the amount of notes tendered in the appropriate box on the Letter of
Transmittal. If you do not indicate the amount tendered in the appropriate box,
the Company will assume you are tendering all Outstanding Notes that you hold.
For tendering your Outstanding Notes other than by book-entry transfer, you
must deliver a completed and signed Letter of Transmittal to the Exchange
Agent. Again, you must deliver the Letter of Transmittal by mail, facsimile,
hand delivery or overnight carrier to the Exchange Agent on or before the
Expiration Date. In addition, to complete a valid tender you must either (1)
deliver your Outstanding Notes to the Exchange Agent on or before the
Expiration Date or (2) follow the guaranteed delivery procedures set forth
below under "Guaranteed Delivery Procedures."
Delivery of required documents by whatever method you choose is at your risk.
Delivery is complete when the Exchange Agent actually receives the items to be
delivered. Delivery of documents to DTC in accordance with DTC's procedures
does not constitute delivery to the Exchange Agent. If you choose to deliver by
mail, we recommend that you use registered mail (return receipt requested and
properly insured) or an overnight delivery service. In all cases, you should
allow sufficient time to ensure timely delivery.
Signature Guarantees
You do not need to endorse certificates for the Outstanding Notes or provide
signature guarantees on the Letter of Transmittal unless (a) someone other than
the registered holder tenders the certificate or (b) you
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<PAGE>
complete the box entitled "Special Delivery Instructions" in the Letter of
Transmittal. In the case of (a) or (b) above, you must sign your Outstanding
Note or provide a properly executed bond power, with the signature on the bond
power and on the Letter of Transmittal guaranteed by a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor
institution." Eligible guarantor institutions include: (1) a bank; (2) a
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer; (3) a credit union; (4) a national securities exchange,
registered securities association or clearing agency; or (5) a savings
association that is a participant in a securities transfer association.
Guaranteed Delivery
If you want to tender Outstanding Notes in the Exchange Offer and (1) the
certificates for the Outstanding Notes are not immediately available or all
required documents are unlikely to reach the Exchange Agent on or before the
Expiration Date or (2) you cannot complete a book-entry transfer in time, you
may still tender the Outstanding Notes if you comply with the following
guaranteed delivery procedures:
(a) you tender by or through an Eligible Institution;
(b) you deliver a properly completed and signed Notice of Guaranteed
Delivery, like the form provided with the Letter of Transmittal, to the
Exchange Agent on or before the Expiration Date; and
(c) you deliver the certificates or a confirmation of book-entry transfer
and a properly completed and signed Letter of Transmittal to the Exchange
Agent within three New York Stock Exchange trading days after you execute
the Notice of Guaranteed Delivery.
You may deliver the Notice of Guaranteed Delivery by hand, facsimile or mail
to the Exchange Agent. You must include a guarantee by an Eligible Institution
in the form described in the notice.
Our acceptance of properly tendered Outstanding Notes will constitute a
binding agreement between the tendering holder and us upon the terms and
subject to the conditions of the Exchange Offer.
Determination of Validity
The Company will resolve all questions regarding the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange
of any tendered Outstanding Notes. The Company's resolution of these questions
as well as the Company's interpretation of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal) is final and binding on
all parties. A tender of Outstanding Notes is invalid until all irregularities
have been cured or waived. Neither the Company, any affiliates or assigns of
the Company, the Exchange Agent nor any other person is under any obligation to
give notice of any irregularities in tenders nor will they be liable for
failing to give any such notice. The Company reserves the absolute right, in
its sole and absolute discretion, to reject any tenders determined to be in
improper form or unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any condition or
irregularity in the tender of Outstanding Notes by any holder. The Company need
not waive similar conditions or irregularities in the case of other holders.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
that person must indicate that capacity when signing. In addition, unless
waived by the Company, the person must submit proper evidence satisfactory to
the Company, in its sole discretion, of his or her authority to so act.
A beneficial owner of Outstanding Notes that are held by or registered in the
name of a broker, dealer, commercial bank, trust company or other nominee or
custodian should contact that entity promptly if the holder wants to
participate in the Exchange Offer.
19
<PAGE>
Resale of the Exchange Notes
The Company is exchanging the Outstanding Notes for Exchange Notes based upon
a position set forth by the Staff of the Commission in interpretive letters to
third parties in other similar transactions. The Company will not seek its own
interpretive letter. As a result, the Company cannot assure you that the Staff
will take the same position on this Exchange Offer as it did in interpretive
letters to other parties. Based on the Staff's letters to other parties, we
believe that holders of Exchange Notes, other than broker-dealers, can offer
the notes for resale, resell and otherwise transfer the Exchange Notes without
delivering a prospectus to prospective purchasers. However, prospective holders
must acquire the Exchange Notes in the ordinary course of business and have no
intention of engaging in a distribution of the notes, as a "distribution" is
defined by the Securities Act.
Any holder of Outstanding Notes who is an "affiliate" of the Company or who
intends to distribute Exchange Notes, or any broker-dealer who purchased
Outstanding Notes from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act:
. cannot rely on the Staff's interpretations in the above mentioned
interpretive letters;
. cannot tender Outstanding Notes in the Exchange Offer; and
. must comply with the registration and prospectus delivery
requirements of the Securities Act to transfer the Outstanding Notes,
unless the sale is exempt.
In addition, if any broker-dealer acquired Outstanding Notes for its own
account as a result of market-making or other trading activities and exchanges
the Outstanding Notes for Exchange Notes, the broker-dealer must deliver a
prospectus with any resales of the Exchange Notes.
If you want to exchange your Outstanding Notes for Exchange Notes, you will
be required to affirm that
. you are not an "affiliate" of the Company;
. you are acquiring the Exchange Notes in the ordinary course of your
business;
. you have no arrangement or understanding with any person to
participate in a distribution of the Exchange Notes (within the
meaning of the Securities Act); and
. you are not a broker-dealer, not engaged in, and do not intend to
engage in, a distribution of the Exchange Notes (within the meaning
of the Securities Act).
In addition, we may require you to provide information regarding the number
of "beneficial owners" (within the meaning of Rule 13d-3 under the Exchange
Act) of the Outstanding Notes. Each broker-dealer that receives Exchange Notes
for its own account must acknowledge that it acquired the Outstanding Notes for
its own account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of Exchange
Notes. By making this acknowledgment and by delivering a Prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" under the
Securities Act. Based on the Staff's position in certain interpretive letters,
we believe that broker-dealers who acquired Outstanding Notes for their own
accounts as a result of market-making activities or other trading activities
may fulfill their prospectus delivery requirements with respect to the Exchange
Notes with a prospectus meeting the requirements of the Securities Act.
Accordingly, a broker-dealer may use this Prospectus to satisfy such
requirements. The Company has agreed that a broker-dealer may use this
Prospectus for a period ending 180 days after the Expiration Date or, if
earlier, when a broker-dealer has disposed of all Exchange Notes. See "Plan of
Distribution" for further information. A broker-dealer intending to use this
Prospectus in the resale of Exchange Notes must notify the Company, on or prior
to the Expiration Date, that it is a Participating Broker-Dealer. This notice
may be given in the Letter of Transmittal or may be delivered to the Exchange
Agent. Any Participating Broker-Dealer who is an "affiliate" of the Company may
not rely on the Staff's interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act when
reselling Exchange Notes.
20
<PAGE>
Each Participating Broker-Dealer exchanging Outstanding Notes for Exchange
Notes agrees that, upon receipt of notice from the Company (a) that this
Prospectus contains any statement that makes the Prospectus untrue in any
material respect or that this Prospectus omits to state a material fact
necessary to make the statements contained in this Prospectus, in light of the
circumstances under which they were made, not misleading or (b) of the
occurrence of certain other events specified in the Registration Rights
Agreements, the Participating Broker-Dealer will suspend the sale of Exchange
Notes. A Participating Broker-Dealer will not resell the Exchange Notes until
(1) the Company has amended or supplemented this Prospectus to correct such
misstatement or omission and the Company furnishes copies to the Participating
Broker-Dealer or (2) the Company gives notice that the sale of the Exchange
Notes may be resumed. If the Company gave notice suspending the sale of
Exchange Notes, it shall extend the 180-day period by the number of days
between the date the Company gives notice of suspension and the date
Participating Broker-Dealers receive copies of the amended or supplemented
prospectus or the date the Company gives notice resuming the sale of Exchange
Notes.
Withdrawal Rights
You can withdraw tenders of Outstanding Notes at any time on or before the
Expiration Date.
For a withdrawal to be effective, you must deliver a written, telegraphic,
telex or facsimile transmission of a Notice of Withdrawal to the Exchange Agent
on or before the Expiration Date. The Notice of Withdrawal must specify the
name of the person tendering the Outstanding Notes to be withdrawn, the total
principal amount of Outstanding Notes withdrawn, and the name of the registered
holder of the Outstanding Notes if different from the person tendering the
Outstanding Notes. If you delivered Outstanding Notes to the Exchange Agent,
you must submit the serial numbers of the Outstanding Notes to be withdrawn and
the signature on the Notice of Withdrawal must be guaranteed by an Eligible
Institution, except in the case of Outstanding Notes tendered for the account
of an Eligible Institution. If you tendered Outstanding Notes as a book-entry
transfer, the Notice of Withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of Outstanding Notes and you
must deliver the Notice of Withdrawal to the Exchange Agent by written,
telegraphic, telex or facsimile transmission. You may not rescind withdrawals
of tender. However, Outstanding Notes properly withdrawn may again be tendered
at any time on or before the Expiration Date.
We will determine all questions regarding the validity, form and eligibility
of withdrawal notices. Our determination will be final and binding on all
parties. Neither the Company, any affiliate or assign of the Company, the
Exchange Agent nor any other person is under any obligation to give notice of
any irregularities in any Notice of Withdrawal, nor will they be liable for
failing to give any such notice. Withdrawn Outstanding Notes will be returned
to the holder after withdrawal.
Interest on Exchange Notes
The Exchange Notes will bear interest at a rate of 10% per annum, payable
semi-annually on May 30 and November 30 of each year, commencing May 30, 1999.
Holders of Exchange Notes will receive interest on May 30, 1999 from the date
of original issuance of the Exchange Notes, plus an amount equal to the accrued
interest on the Outstanding Notes. Interest on the Outstanding Notes accepted
for exchange will cease to accrue upon issuance of the Exchange Notes.
Conditions to the Exchange Offer
The Company need not exchange any Outstanding Notes and the Company may
terminate the Exchange Offer, waive any conditions to the Exchange Offer or
amend the Exchange Offer, if any of the following conditions have occurred:
(a) the Staff no longer allows the Exchange Notes to be offered for
resale, resold and otherwise transferred by certain holders without
compliance with the registration and prospectus delivery provisions of the
Securities Act;
21
<PAGE>
(b) a governmental body passes any law, statute, rule or regulation
which, in the Company's opinion, prohibits or prevents the Exchange Offer;
(c) the Commission or any state securities authority issues a stop order
suspending the effectiveness of the registration statement or initiates or
threatens to initiate a proceeding to suspend the effectiveness of the
registration statement; or
(d) the Company is unable to obtain any governmental approval that the
Company believes is necessary to complete the Exchange Offer.
If the Company reasonably believes that any of the above conditions has
occurred, it may (1) terminate the Exchange Offer, whether or not any
Outstanding Notes have been accepted for exchange, (2) waive any condition to
the Exchange Offer or (3) amend the terms of the Exchange Offer in any respect.
If the Company's waiver or amendment materially changes the Exchange Offer, the
Company will promptly disclose the waiver or amendment through a prospectus
supplement, distributed to the registered holders of the Outstanding Notes. The
prospectus supplement also will extend the Exchange Offer as required by Rule
14e-1 of the Exchange Act.
Exchange Agent
We have appointed Harris Trust and Savings Bank to serve as exchange agent
(in such capacity, the "Exchange Agent") for the Exchange Offer. You should
direct all questions and requests for assistance, requests for additional
copies of this Prospectus, the Letter of Transmittal or the Notice of
Guaranteed Delivery to the Exchange Agent at the following address:
Harris Trust and Savings Bank
c/o Harris Trust Company of New York
By Mail: By Facsimile By Overnight Courier or
Wall Street Station Transmission: Hand:
P.O. Box 1010 (for Eligible Wall Street Plaza
New York, NY 10268-1010 Institutions Only) 88 Pine Street, 19th
Attention: Reorganization (212) 701-7636 Floor
Dept. (212) 701-7637 New York, NY 10005
Attention: Reorganization
Dept.
Confirm by Telephone:
(212) 701-7624
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
Fees and Expenses
The Company will pay the Exchange Agent reasonable and customary fees for its
services and reasonable out-of-pocket expenses. The Company will also pay
brokerage houses and other custodians, nominees and fiduciaries their
reasonable out-of-pocket expenses for sending copies of this Prospectus and
related documents to holders of Outstanding Notes and in handling or tendering
for their customers.
The Company will pay the transfer taxes for the exchange of the Outstanding
Notes in the Exchange Offer. If, however, Exchange Notes are delivered to or
issued in the name of a person other than the registered holder, or if a
transfer tax is imposed for any reason other than for the exchange of
Outstanding Notes in the Exchange Offer, then the tendering holder will pay the
transfer taxes. If a tendering holder does not submit satisfactory evidence of
payment of taxes or exemption from taxes with the Letter of Transmittal, the
taxes will be billed directly to the tendering holder.
22
<PAGE>
The Company will not make any payment to brokers, dealers or other nominees
soliciting acceptances in the Exchange Offer.
Accounting Treatment
The Company will record the Exchange Notes at the same carrying value as the
Outstanding Notes. Accordingly, the Company will not recognize any gain or loss
for accounting purposes. The Company intends to amortize the expenses of the
Exchange Offer and issuance of the Outstanding Notes over the term of the
Exchange Notes.
23
<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreements. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes. In
consideration for issuing the Exchange Notes, the Company will receive
Outstanding Notes in like principal amount, the form and terms of which are
substantially the same as the forms and terms of the Exchange Notes (which
replace the Outstanding Notes). The Outstanding Notes surrendered in exchange
for Exchange Notes will be retired and cancelled and cannot be reissued.
Accordingly, the issuance of the Exchange Notes will not result in any increase
or decrease in the indebtedness of the Company. As such, no effect has been
given to the Exchange Offer in the pro forma financial data or capitalization
tables.
The net proceeds to the Company from the sale of the Outstanding Notes in the
Initial Offerings (after deducting discounts, fees and expenses) were utilized
by the Company for the following:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Net Proceeds from the Initial Offerings (1)................... $166,513
========
Uses of Funds:
Repayment of old credit facility............................ $166,513
--------
Total..................................................... $166,513
========
</TABLE>
- --------
(1) Reflects $175,000 aggregate principal amount of Outstanding Notes net of a
$3,712 discount at issuance and net of $4,775 of underwriting, legal,
accounting and other fees and expenses.
CAPITALIZATION
(dollars in thousands)
The following table sets forth the consolidated capitalization of the Company
at September 30, 1998, on an actual basis and on a pro forma basis giving
effect to the Initial Offerings (excluding the receipt of accrued interest) and
the application of the net proceeds therefrom and the acquisition of NES Studio
Rentals (formerly Rebel Studio Rentals) in October 1998. The information in
this table should be read in conjunction with "Selected Pro Forma Financial
Data," "Selected Historical Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
September 30, 1998
--------------------------
Actual Pro Forma
-------- ---------
<S> <C> <C> <C>
Debt:
Credit Facility (as
defined)................. $338,700 (a) $177,641
Series B Notes (as
defined) (b)............. 98,913 98,913
Outstanding Notes (c)..... -- 171,288
Other (d)................. 6,961 6,961
Junior Convertible Note
(as defined) (e)......... 15,000 15,000
-------- --------
Total debt.............. 459,574 469,803
Total stockholders'
equity................. 131,839 131,839
-------- --------
Total capitalization.... $591,413 $601,642
======== ========
</TABLE>
24
<PAGE>
- --------
(a) As of January 31, 1999, $229,000 was outstanding under the Credit Facility.
(b) Reflects unamortized original issue discount of $1,087.
(c) Reflects an aggregate unamortized original issue discount of $3,712 in
connection with the issuance of the Outstanding Notes.
(d) Consists of capital lease obligations of certain of the Company's
subsidiaries.
(e) Consists of a junior subordinated convertible promissory note (the "Junior
Convertible Note") issued to the selling shareholders of Shaughnessy in
connection with the acquisition of Shaughnessy in September 1998. The
Junior Convertible Note accrues interest at 8% per annum and the Company
may prepay any or all of the outstanding principal amount at any time,
except as may be prohibited by any senior debt. The holders of the Junior
Convertible Note have until September 17, 1999 to convert the principal
plus accrued interest to shares of Company common stock equal to such
amount divided by $13. At September 17, 1999, the outstanding principal
plus accrued interest will automatically convert to shares of Company
common stock at the fair market value of the common stock.
25
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
The Company was founded in June 1996 to acquire and integrate equipment
rental companies. In 1997, the Company acquired six businesses in separate
transactions and completed the Series B Notes Offering (as defined). In 1998,
the Company acquired twelve businesses in separate transactions and consummated
the initial public stock offering (the "Initial Stock Offering"). In December
1998 and January 1999, the Company consummated the Initial Offerings. While the
18 acquired businesses (collectively, the "Acquired Businesses") were acquired
at various dates during 1997 and 1998, the following pro forma statements of
operations are presented as if all such acquisitions and the related
financings, the Initial Stock Offering, the Series B Notes Offering, the
Initial Offerings and certain borrowings under the Credit Facility had occurred
on the first day of the related period.
The following selected pro forma financial data have been derived from
Company (the Company herein defined to include the Acquired Businesses)
prepared financial information (and, when applicable, includes adjustments to
conform fiscal periods to calendar periods), the audited and unaudited
Financial Statements and notes thereto of certain of the Acquired Businesses
for certain periods and the audited and unaudited Financial Statements and
notes thereto of the Company since inception, which Financial Statements appear
elsewhere in this Prospectus.
The selected pro forma financial data have been prepared for comparative
purposes only and do not purport to be indicative of the results which would
have been achieved had the purchase of the Acquired Businesses and the related
financings been consummated, the Initial Stock Offering been consummated, the
Series B Notes Offering been consummated, the Initial Offerings been
consummated and certain borrowings under the Credit Facility been made as of
the assumed dates, nor are the results indicative of the Company's future
results. The selected pro forma financial data should be read in conjunction
with "Selected Historical Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements and notes thereto of the Company since inception and certain of the
Acquired Businesses for certain periods and the Unaudited Pro Forma Financial
Statements and notes thereto included elsewhere herein.
26
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
-------------------------------------------------
The Acquired Pro
Company(a) Businesses(b) Adjustments(c) Forma
---------- ------------- -------------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental revenues............ $26,398 $149,871 $ 5,144 $181,413
Rental equipment sales..... 4,186 18,276 2,910 25,372
New equipment sales and
other..................... 10,704 50,853 2,181 63,738
------- -------- -------- --------
Total revenues............... 41,288 219,000 10,235 270,523
------- -------- -------- --------
Cost of Revenues:
Rental equipment
depreciation.............. 5,009 30,538 1,341 (d) 36,888
Cost of rental equipment
sales..................... 2,935 12,028 2,561 17,524
Cost of new equipment
sales..................... 4,872 18,091 1,580 24,543
Other operating expenses... 12,899 67,873 (37)(e) 80,735
------- -------- -------- --------
Total cost of revenues....... 25,715 128,530 5,445 159,690
------- -------- -------- --------
Gross profit................. 15,573 90,470 4,790 110,833
------- -------- -------- --------
Selling, general and
administrative expenses..... 7,910 47,438 (5,181)(f) 50,167
Non-rental depreciation and
amortization................ 1,476 4,397 6,556 (g) 12,429
------- -------- -------- --------
Operating income............. 6,187 38,635 3,415 48,237
Other income (expense), net.. 72 (899) 1,274 (h) 447
Interest expense, net........ 4,336 12,560 27,620 (i) 44,516
------- -------- -------- --------
Income before income taxes... 1,923 25,176 (22,931) 4,168
Income tax expense........... 818 3,514 (2,644)(j) 1,688
------- -------- -------- --------
Net income................... $ 1,105 $ 21,662 $(20,287) $ 2,480
======= ======== ======== ========
EBITDA(k).................... 98,001
</TABLE>
(See Notes to Selected Pro Forma Financial Data)
27
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
-------------------------------------------------
The Acquired Pro
Company(a) Businesses(b) Adjustments(c) Forma
---------- ------------- -------------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental revenues............ $16,168 $109,810 $ 3,831 $129,809
Rental equipment sales..... 2,111 14,320 2,182 18,613
New equipment sales and
other..................... 7,296 37,187 1,615 46,098
------- -------- -------- --------
Total revenues............... 25,575 161,317 7,628 194,520
------- -------- -------- --------
Cost of Revenues:
Rental equipment
depreciation.............. 3,143 22,957 1,431 (d) 27,531
Cost of rental equipment
sales..................... 1,416 9,161 1,921 12,498
Cost of new equipment
sales..................... 4,116 13,609 1,186 18,911
Other operating expenses... 7,315 48,614 98 (e) 56,027
------- -------- -------- --------
Total cost of revenues....... 15,990 94,341 4,636 114,967
------- -------- -------- --------
Gross profit................. 9,585 66,976 2,992 79,553
------- -------- -------- --------
Selling, general and
administrative expenses..... 5,039 33,416 (3,465)(f) 34,990
Non-rental depreciation and
amortization................ 758 3,312 5,067 (g) 9,137
------- -------- -------- --------
Operating income............. 3,788 30,248 1,390 35,426
------- -------- -------- --------
Other income (expense), net.. (19) (403) 909 (h) 487
Interest expense, net........ 2,439 9,061 21,887 (i) 33,387
------- -------- -------- --------
Income before income taxes... 1,330 20,784 (19,588) 2,526
Income tax expense........... 519 3,675 (3,171)(j) 1,023
------- -------- -------- --------
Net income................... $ 811 $ 17,109 $(16,417) $ 1,503
======= ======== ======== ========
EBITDA(k).................... 72,581
</TABLE>
(See Notes to Selected Pro Forma Financial Data)
28
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
-------------------------------------------------
The Acquired Pro
Company(a) Businesses(b) Adjustments(c) Forma
---------- ------------- -------------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental revenues............. $100,251 $66,214 $ 807 $167,272
Rental equipment sales...... 8,197 4,447 -- 12,644
New equipment sales and
other...................... 28,986 16,526 266 45,778
-------- ------- ------- --------
Total revenues................ 137,434 87,187 1,073 225,694
-------- ------- ------- --------
Cost of revenues:
Rental equipment
depreciation............... 17,581 13,809 (531)(d) 30,859
Cost of rental equipment
sales...................... 5,123 2,959 -- 8,082
Cost of new equipment sales. 15,358 6,979 -- 22,337
Other operating expenses.... 38,766 28,117 (40)(e) 66,843
-------- ------- ------- --------
Total cost of revenues........ 76,828 51,864 (571) 128,121
-------- ------- ------- --------
Gross profit.................. 60,606 35,323 1,644 97,573
-------- ------- ------- --------
Selling, general and
administrative expenses...... 25,619 18,852 (2,321)(f) 42,150
Non-rental depreciation and
amortization................. 4,557 2,189 2,573 (g) 9,319
-------- ------- ------- --------
Operating income.............. 30,430 14,282 1,392 46,104
-------- ------- ------- --------
Other income (expense), net... 255 (224) 58 (h) 89
Interest expense, net......... 16,001 6,698 10,688 (i) 33,387
-------- ------- ------- --------
Income before income taxes and
extraordinary item........... 14,684 7,360 (9,238) 12,806
Income taxes.................. 5,981 449 (1,244)(j) 5,186
-------- ------- ------- --------
Income before extraordinary
item......................... 8,703 6,911 (7,994) 7,620
-------- ------- ------- --------
Extraordinary item............ 1,424 -- (1,424)(l) --
-------- ------- ------- --------
Net income.................... $ 7,279 $ 6,911 $(6,570) $ 7,620
======== ======= ======= ========
EBITDA(k)..................... 86,371
</TABLE>
(See Notes to Selected Pro Forma Financial Data)
29
<PAGE>
NOTES TO SELECTED PRO FORMA FINANCIAL DATA
(dollars in thousands, except per share data)
(a) Results for the year ended December 31, 1997 and for the nine months ended
September 30, 1997 represent actual historical 1997 results for the
Company, including results for the Acquired Businesses purchased in the
related 1997 period from the date of acquisition. Results for the nine
months ended September 30, 1998 represent actual historical results for the
Company, including results for the Acquired Businesses purchased in the
respective periods from the date of acquisition.
(b) Results for the year ended December 31, 1997 and for the nine months ended
September 30, 1997 represent combined historical 1997 results for (i) the
Acquired Businesses purchased in the related 1997 period prior to the date
of acquisition and (ii) the Acquired Businesses purchased in 1998. Results
for the nine months ended September 30, 1998 represent combined historical
results for the Acquired Businesses purchased in the respective periods
prior to the date of acquisition.
(c) In each of the following items, reflects the elimination of a location not
purchased from Cormier Equipment as follows:
<TABLE>
<CAPTION>
Year Nine Months
Ended Ended
December 31, September 30,
1997 1997
------------ -------------
<S> <C> <C>
Rental revenues................................ $ 130 $ 130
New equipment sales and other.................. 21 21
----- -----
Total revenues................................. 151 151
Rental equipment depreciation.................. 81 81
Other operating expenses....................... 102 102
----- -----
Total cost of revenues......................... 183 183
----- -----
Gross profit (loss)............................ (32) (32)
Selling, general and administrative expenses... 72 72
Non-rental depreciation and amortization....... 1 1
----- -----
Operating loss................................. $(105) $(105)
===== =====
</TABLE>
In addition, reflects the acquisition of GenEquip, Inc., a business
acquired by Falconite in January 1998, and Aerial Equipment Rental, Inc., a
business acquired by Falconite in May 1998, as follows:
<TABLE>
<CAPTION>
Nine Months Nine Months
Year Ended Ended Ended
December 31, September 30, September 30,
1997 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Rental revenues.................... $ 5,274 $3,959 $ 807
Rental equipment sales............. 2,910 2,184 --
New equipment sales and other...... 2,415 1,807 365
------- ------ -----
Total revenues..................... 10,599 7,950 1,172
------- ------ -----
Rental equipment depreciation...... 1,809 1,355 76
Cost of rental equipment sales..... 2,560 1,920 --
Cost of new equipment sales........ 1,580 1,185 --
Other operating costs.............. 2,503 1,904 435
------- ------ -----
Total cost of revenues............. 8,452 6,364 511
------- ------ -----
Gross profit....................... 2,147 1,586 661
------- ------ -----
Selling, general and administrative
expenses.......................... 1,788 1,289 144
Non-rental depreciation and
amortization...................... 122 92 5
------- ------ -----
Operating income................... 237 205 512
------- ------ -----
Other income, net.................. 180 106 33
Interest expense, net.............. 24 19 16
------- ------ -----
Income before income taxes......... $ 393 $ 292 $529
======= ====== =====
</TABLE>
30
<PAGE>
In addition, reflects the elimination of a location not purchased from
Shaughnessy as follows:
<TABLE>
<CAPTION>
Year Nine Months Nine Months
Ended Ended Ended
December 31, September 30, September 30,
1997 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
New equipment sales and other...... $213 $171 $100
---- ---- ----
Total revenues..................... 213 171 100
---- ---- ----
Other operating costs.............. 207 149 39
---- ---- ----
Total cost of revenues............. 207 149 39
---- ---- ----
Gross profit....................... 6 22 61
---- ---- ----
Selling, general and administrative
expenses.......................... 23 16 92
---- ---- ----
Operating income (loss)............ $(17) $ 6 $(31)
==== ==== ====
</TABLE>
(d) Reflects the impact on rental equipment depreciation resulting from the
application of the Company's depreciation policy rather than those of the
former owners of the Acquired Businesses. In addition, reflects the change
in rental equipment depreciation resulting from the write-up or write-down
of rental equipment assets to fair value arising from purchase accounting.
In addition, reflects the increase in rental equipment depreciation
resulting from the purchase of equipment referred to in note (e) below.
(e) Reflects the elimination of lease expense resulting from the termination of
certain rental equipment leases which occurred with the purchase of the
underlying equipment. Also reflects the rent expense resulting from the
Company's current lease terms as compared to lease terms entered into by
former owners. In addition, reflects the increase in rent expense and
corresponding decrease in depreciation expense and real estate tax expense
resulting from the Company leasing rather than owning certain related
facilities and, conversely, the decrease in rent expense and corresponding
increase in depreciation expense and real estate tax expense resulting from
the termination of certain facility leases which occurred with the purchase
of the underlying facility by the Company. Also, reflects the decrease in
rent expense resulting from the termination of certain facility leases.
(f) Reflects the decrease resulting from differentials between the compensation
levels of former owners of the Acquired Businesses and the terms of the
employment agreements entered into between certain of the former owners and
the Company. The employment agreements provide for bonuses to be paid based
on increased future earnings. Compensation amounts presented reflect
bonuses due based on current operating results. Additional bonuses would be
due if increased earnings levels are achieved.
(g) Reflects the decrease in non-rental depreciation resulting from the
application of the Company's depreciation policy rather than those of the
former owners of the Acquired Businesses. In addition, reflects the
increase in non-rental depreciation resulting from the write-up of
property, plant and equipment to fair value arising from purchase
accounting. Also reflects amortization of goodwill calculated on a goodwill
life of 40 years and amortization of non-compete agreements calculated on
their contract terms of two to five years, in each case specifically
related to the purchases of the Acquired Businesses. The pro forma
adjustments consist of the following:
<TABLE>
<CAPTION>
Year Nine Months Nine Months
Ended Ended Ended
December 31, September 30, September 30,
1997 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Non-rental depreciation......... $1,328 $1,022 $ 485
Amortization of goodwill........ 4,480 3,422 1,875
Amortization of non-compete
agreements..................... 748 623 213
------ ------ ------
$6,556 $5,067 $2,573
====== ====== ======
</TABLE>
31
<PAGE>
(h) Reflects discontinuation and elimination of unrelated businesses previously
operated and related charges incurred by the former owners of certain of
the Acquired Businesses.
(i) Includes the following:
<TABLE>
<CAPTION>
Year Nine Months Nine Months
Ended Ended Ended
December 31, September 30, September 30,
1997 1997 1998
--------------- --------------- ----------------
Pro Pro Pro
Actual Forma(a) Actual Forma(a) Actual Forma(a)
------ -------- ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash interest expense:
Series B Notes Offering... $ -- $10,000 $ -- $ 7,500 $ 7,500 $ 7,500
Outstanding Notes......... -- 17,500 -- 13,125 -- 13,125
Credit Facility or the
Company's previous credit
facility................. 3,950 13,160 2,259 9,869 7,314 9,869
------ ------- ------ ------- ------- -------
3,950 40,660 2,259 30,494 14,814 30,494
------ ------- ------ ------- ------- -------
Non-cash charges:
Amortization of debt
issuance costs and
original issue discount
incurred in connection
with the Series B Notes
Offering................. 52 621 -- 466 466 466
Amortization of debt
issuance costs and
original issue discount
incurred in connection
with the Outstanding
Notes.................... -- 1,415 -- 1,062 -- 1,062
Amortization of loan
origination and other
financing fees incurred
in connection with the
Credit Facility or the
Company's previous credit
facility................. 354 620 180 465 674 465
Interest expense on Junior
Convertible Note (only
payable at term if not
converted)............... -- 1,200 -- 900 47 900
------ ------- ------ ------- ------- -------
406 3,856 180 2,893 1,187 2,893
------ ------- ------ ------- ------- -------
$4,356 $44,516 $2,439 $33,387 $16,001 $33,387
====== ======= ====== ======= ======= =======
</TABLE>
(j) Reflects the income tax rate that would have been in effect if the Acquired
Businesses had been combined and subject to a federal statutory rate up to
35% and the applicable state statutory rate for each of the Acquired
Businesses throughout the period presented.
(k) Reflects operating income plus other income less other expense, before
interest expense, net, income taxes, rental equipment depreciation and non-
rental depreciation and amortization. EBITDA is not intended to represent
cash flow from operations or net income as defined by generally accepted
accounting principles and should not be considered as a measure of
liquidity or an alternative to, or more meaningful than, cash flow from
operations or net income as an indication of the Company's operating
performance. EBITDA is included herein because management believes that
certain investors find it useful in measuring the Company's ability to
service its debt.
(l) Reflects the elimination of the extraordinary item related to unamortized
loan costs of $2,393 less a tax benefit of $969 associated with the
Company's previous credit facility.
32
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(in thousands)
The Company was founded in June 1996 to acquire and integrate equipment
rental companies. In 1997, the Company acquired Aerial Platforms, BAT Rentals,
Equipco Rentals & Sales, Industrial Hoist Services, Lone Star Rentals and
Sprintank in separate transactions. For historical financial data presentation
purposes, Aerial Platforms, BAT Rentals, Equipco Rentals & Sales, Lone Star
Rentals and Sprintank have been identified as the predecessor companies and are
collectively referred to herein as the "Predecessor Companies." The following
selected historical financial data of the Predecessor Companies as of and for
the years ended December 31, 1996 and 1997 (or the corresponding fiscal year)
have been derived from audited Financial Statements and notes thereto included
elsewhere herein. The following selected historical financial data of BAT
Rentals, Equipco Rentals & Sales, Lone Star Rentals and Sprintank as of and for
the year ended December 31, 1995 (or the corresponding fiscal year) have been
derived from audited Financial Statements and notes thereto included elsewhere
herein. The following selected historical financial data of Aerial Platforms as
of and for the year ended December 31, 1995 (or the corresponding fiscal year)
have been derived from unaudited financial statements which have been prepared
on the same basis as the audited Financial Statements and, in the opinion of
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such data. The following
selected historical financial data of the Predecessor Companies as of and for
the years ended December 31, 1993 and 1994 (or the corresponding fiscal year)
have been derived from unaudited financial statements, which have been prepared
on the same basis as the audited Financial Statements and, in the opinion of
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such data.
In July 1998, the Company acquired Falconite concurrent with the Initial
Stock Offering. Due to the materiality of Falconite to the Company on a pro
forma basis, the following selected historical financial data includes results
of Falconite, which year end information has been derived from audited
Financial Statements and notes thereto included elsewhere herein.
The selected historical financial data of the Company as of and for the
period from inception (June 4, 1996) through December 31, 1996 and as of and
for the year ended December 31, 1997 have been derived from audited Financial
Statements and notes thereto appearing elsewhere in this Prospectus.
The selected historical financial data of Falconite and the Company as of and
for the nine months ended September 30, 1997 and 1998 have been derived from
unaudited Financial Statements included elsewhere in this Prospectus which have
been prepared on the same basis as the audited Financial Statements and, in the
opinion of management, reflect all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of such data.
The selected historical financial data should be read in conjunction with the
information contained in "Selected Pro Forma Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and notes thereto included elsewhere herein.
33
<PAGE>
Operating Data
<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December 31, September 30,
--------------------------------------- ----------------
1993 1994 1995 1996 1997(a) 1997 1998
------ ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Predecessor
Companies:(b)
Aerial Platforms
Total revenues......... $1,571 $ 2,039 $ 3,269 $ 4,746 $ 233
Operating income
(loss)................ 356 351 887 998 (8)
Income (loss) before
income taxes.......... 265 266 818 874 (14)
BAT Rentals
Total revenues......... $9,214 $10,932 $12,453 $13,140 $ 3,802
Operating income....... 1,893 2,099 1,973 2,877 757
Income before income
taxes................. 1,956 1,944 1,899 2,801 710
Equipco Rentals & Sales
Total revenues......... $3,080 $ 3,768 $ 5,390 $ 5,832 $ 4,369
Operating income....... 133 216 305 407 911
Income before income
taxes................. 65 124 145 227 837
Lone Star Rentals
Total revenues......... $7,333 $ 8,935 $ 9,703 $ 9,349 $ 1,643
Operating income
(loss)................ 993 1,263 1,103 640 (229)
Income (loss) before
income taxes.......... 598 707 726 381 (254)
Sprintank
Total revenues......... $3,810 $ 5,182 $ 7,879 $ 9,598 $ 6,042
Operating income....... 482 830 1,522 1,503 2,179
Income before income
taxes................. 98 407 655 480 1,616
The Company:
Total revenues......... $ -- $41,288 $25,575 $137,434
Operating income
(loss)................ (336) 6,187 3,788 30,430
Income (loss) before
income taxes and
extraordinary item.... (332) 1,923 1,330 14,684
Falconite:(b)
Total revenues......... $35,661 $48,086 $63,646
Operating income....... 11,306 12,075 11,959
Income before income
taxes and minority
interests............. 8,094 7,959 3,817
</TABLE>
34
<PAGE>
Balance Sheet Data
<TABLE>
<CAPTION>
At December 31,
---------------------------------------- At September 30,
1993 1994 1995 1996 1997 1998
------ ------- ------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Predecessor Companies:
Aerial Platforms
Rental equipment, net.. $ 326 $ 306 $ 1,396 $ 1,758
Total assets........... 921 944 2,455 2,889
Total debt............. 878 549 1,216 1,243
BAT Rentals
Rental equipment, net.. $3,122 $ 3,499 $ 4,434 $ 5,779
Total assets........... 8,603 9,212 10,111 11,504
Total debt............. 2,734 2,659 3,191 3,302
Equipco Rentals & Sales
Rental equipment, net.. $1,112 $ 1,588 $ 2,047 $ 2,553
Total assets........... 2,102 2,750 3,337 4,102
Total debt............. 1,224 1,470 1,846 2,393
Lone Star Rentals
Rental equipment, net.. $4,765 $ 6,954 $ 7,622 $ 6,952
Total assets........... 7,144 9,910 10,094 9,405
Total debt............. 4,301 6,390 6,121 4,983
Sprintank
Rental equipment, net.. $4,664 $ 4,665 $ 8,118 $ 9,741
Total assets........... 6,831 6,807 10,727 12,546
Total debt............. 4,739 4,702 7,370 8,987
The Company:
Rental equipment, net.. $ -- $ 46,801 $334,141
Total assets........... 216 131,137 640,001
Total debt............. -- 98,782 459,574
Total stockholders'
equity................ 106 26,473 131,839
Falconite:
Rental equipment, net.. $ 81,583 $107,721
Total assets........... 117,458 148,068
Total debt............. 60,619 100,200
</TABLE>
- --------
(a) With respect to the Predecessor Companies, includes results prior to
acquisition by the Company. With respect to Falconite, represents actual
1997 results. With respect to the Company, represents actual 1997 results,
including results for the Predecessor Companies and Industrial Hoist
Services after acquisition by the Company.
(b) Operating income and income before income taxes and minority interests
reflect private company expenses such as certain owners' compensation which
would not be included in the Company's results going forward.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands)
The following discussion and analysis of the Company's and certain of its
acquired businesses' results of operations, and the Company's financial
condition and liquidity should be read in conjunction with "Selected Pro Forma
Financial Data" and "Selected Historical Financial Data" and the Financial
Statements and notes thereto included elsewhere herein.
General
NES was founded in June 1996 to acquire and integrate businesses that
specialize in the rental of specialty and general equipment to industrial and
construction end-users. Since January 1997, the Company has acquired 18
businesses in separate transactions. The following discussion of the Company's
pro forma results of operations is presented as if the following transactions
occurred on the first day of the related period: (i) the 18 acquisitions and
the related financings, (ii) the Initial Stock Offering, (iii) the Series B
Notes Offering, (iv) the Initial Offerings and (v) certain borrowings under the
Credit Facility. The Company's pro forma results are based upon adjustments
described in the notes to "Selected Pro Forma Financial Data." Management
believes that the Acquired Businesses and others that the Company will acquire
will benefit from increased access to capital, the support of experienced and
professional senior management, centrally coordinated purchasing and an
increased emphasis on financial management. Therefore, the Company's pro forma
results discussed below do not necessarily represent the results of the Company
had each of the Acquired Businesses been operated by the Company during those
periods.
The Company derives its revenues from four sources: (i) rental of equipment;
(ii) rental equipment sales; (iii) new equipment sales; and (iv) the sale of
complementary parts and services. The Company's primary source of revenue is
the rental of equipment to industrial and construction end-users. The growth of
rental revenues is dependent on several factors, including demand for rental
equipment, the amount and quality of equipment available for rent, rental rates
and general economic conditions. Revenues generated from the sale of used
rental equipment are impacted by price, general economic conditions and the
fleet maintenance programs conducted by the Company. Sales of new equipment are
impacted by price and general economic conditions. Revenues from the sale of
complementary parts and services are primarily affected by equipment rental and
sales volumes.
Cost of revenues consists primarily of rental equipment depreciation, the
cost of new equipment, the net book value of rental equipment sold and other
direct operating costs. Given the varied, and in some cases specialized, nature
of its rental equipment, the Company utilizes a range of periods over which it
depreciates its equipment on a straight line basis. On average, the Company
depreciates its equipment over an estimated useful life of seven years with no
residual value.
36
<PAGE>
The following table sets forth, for the periods indicated, information
derived from the combined, historical and pro forma consolidated statements of
operations of the Company expressed as a percentage of total revenues.
<TABLE>
<CAPTION>
Nine Months Nine Months
Year Ended Ended Ended
Year Ended December 31, September 30, September 30,
December 31, 1996 1997 1997 1998
----------------- ----------------- ----------------- -----------------
Combined Actual Pro Forma Actual Pro Forma Actual Pro Forma
----------------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental revenues......... 67.7% 63.9% 67.0% 63.2% 66.7% 72.9% 74.1%
Rental equipment sales.. 9.7 10.2 9.4 8.3 9.6 6.0 5.6
New equipment sales and
other.................. 22.6 25.9 23.6 28.5 23.7 21.1 20.3
----- ----- ----- ----- ----- ----- -----
Total revenues.......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- -----
Cost of revenues........ 59.6 62.3 59.0 62.5 59.1 55.9 56.8
----- ----- ----- ----- ----- ----- -----
Gross profit............ 40.4% 37.7 41.0 37.5 40.9 44.1 43.2
===== ----- ----- ----- ----- ----- -----
Selling, general and
administrative
expenses............... 19.2 18.5 19.7 18.0 18.6 18.7
Non-rental depreciation
and amortization....... 3.6 4.6 3.0 4.7 3.3 4.1
----- ----- ----- ----- ----- -----
Operating income........ 14.9 17.9 14.8 18.2 22.2 20.4
----- ----- ----- ----- ----- -----
Other income (expense),
net.................... 0.2 0.2 (0.1) 0.3 0.2 0.0
Interest expense, net... 10.5 16.5 9.5 17.2 11.6 14.8
----- ----- ----- ----- ----- -----
Income before income
taxes.................. 4.6 1.6 5.2 1.3 10.8 5.6
Income tax expense...... 1.9 0.7 2.0 0.5 4.5 2.2
----- ----- ----- ----- ----- -----
Income before
extraordinary item..... 2.7 0.9 3.2 0.8 6.3 3.4
Extraordinary item...... -- -- -- -- 1.0 --
----- ----- ----- ----- ----- -----
Net income.............. 2.7% 0.9% 3.2% 0.8% 5.3% 3.4%
===== ===== ===== ===== ===== =====
</TABLE>
Historical Results of Operations--The Company
The Company's historical Financial Statements included herein cover the
period from inception on June 4, 1996 through December 31, 1996, the year ended
December 31, 1997 and the nine months ended September 30, 1998. The Company
believes that comparison of its historical results for such periods are not
meaningful given the fact that (i) the Company did not complete its first
acquisition until January 1997, (ii) the Company completed five additional
acquisitions at different times in 1997 and (iii) the Company completed twelve
additional acquisitions at different times in 1998.
Nine Months Ended September 30, 1998 as Compared to Nine Months Ended September
30, 1997.
Revenues. Total revenues increased from $25,575 to $137,434 from the nine
months ended September 30, 1997 to the nine months ended September 30, 1998.
Rental revenues increased from $16,168 to $100,251. The increases were
primarily the result of the acquisition of 12 additional businesses after the
third quarter of 1997 as well as the inclusion in 1998 of a full three quarters
of results for the businesses acquired during the first nine months of 1997.
Gross Profit. Gross profit increased from $9,585 to $60,606 from the nine
months ended September 30, 1997 to the nine months ended September 30, 1998.
Gross margin increased from 37.5% to 44.1%. This margin improvement was
primarily the result of increased higher margin rental revenues as a percentage
of total revenues.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $5,039 to $25,619 from the nine months
ended September 30, 1997 to the nine months ended September 30, 1998. As a
percentage of total revenues, selling, general and administrative expenses
decreased from 19.7% to 18.6%.
37
<PAGE>
Non-rental Depreciation and Amortization. Non-rental depreciation and
amortization increased from $758 to $4,557 from the nine months ended September
30, 1997 to the nine months ended September 30, 1998.
Operating Income. As a result of the foregoing, operating income increased
from $3,788 for the nine months ended September 30, 1997 to $30,430 or 22.2% of
total revenues for the nine months ended September 30, 1998.
Interest Expense, Net. Interest expense, net increased from $2,439 to $16,001
from the nine months ended September 30, 1997 to the nine months ended
September 30, 1998. This increase was due to additional debt resulting from the
acquisition of 12 additional businesses.
Income Tax Expense. Income tax increased from $519 to $5,981 from the nine
months ended September 30, 1997 to the nine months ended September 30, 1998.
Year Ended December 31, 1997
Revenues. Total revenues were $41,288 for 1997. Rental revenues accounted for
63.9% of such revenues.
Gross Profit. Gross profit was $15,573 for 1997. Gross margin was 37.7% for
1997.
Selling, General and Administrative Expenses. For 1997, selling, general and
administrative expenses were $7,910 or 19.2% of total revenues.
Non-rental Depreciation and Amortization. Non-rental depreciation and
amortization was $1,476 or 3.6% of total revenues for 1997.
Operating Income. Operating income was $6,187 or 15.0% of total revenues for
1997.
Interest Expense, Net. Interest expense, net was $4,336 for 1997.
Income Tax Expense. Income tax expense was $818 for 1997.
Pro Forma and Combined Results of Operations--The Company
Pro Forma Nine Months Ended September 30, 1998 as Compared to Pro Forma Nine
Months Ended September 30, 1997
Revenues. Total revenues increased 16.0%, or $31,174, from $194,520 to
$225,694 from the nine months ended September 30, 1997 to the nine months ended
September 30, 1998. Rental revenue growth accounted for $37,463 or 120% of the
increase, partially offset by a decline in rental equipment sales of $5,969.
Portions of the rental revenue growth were attributable to increased investment
in rental equipment and strong demand for storage tanks at Sprintank and
general equipment at Albany Ladder and Falconite. Revenues from new equipment
sales and other decreased $320 or 0.7%.
Gross Profit. Gross profit increased from $79,553 to $97,573 from the nine
months ended September 30, 1997 to the nine months ended September 30, 1998.
Gross margin increased from 40.9% to 43.2%. This margin improvement was
primarily the result of increased higher margin rental revenues as a percentage
of total revenues.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $34,990 to $42,150 from the nine months
ended September 30, 1997 to the nine months ended September 30, 1998, primarily
reflecting costs incurred to support the growth in the Company's businesses. As
a percentage of total revenues, these costs increased from 18.0% to 18.7%.
Non-Rental Depreciation and Amortization. Non-rental depreciation and
amortization increased from $9,137 to $9,319 from the nine months ended
September 30, 1997 to the nine months ended September 30, 1998. As a percentage
of total revenues, non-rental depreciation and amortization decreased from 4.7%
to 4.1%.
38
<PAGE>
Operating Income. As a result of the foregoing, operating income increased
30.1% from $35,426 or 18.2% of total revenues for the nine months ended
September 30, 1997 to $46,104 or 20.4% of total revenues for the nine months
ended September 30, 1998.
Interest Expense, Net. Interest expense, net was $33,387 for each of the nine
months ended September 30, 1997 and 1998.
Income Tax Expense. Income tax expense was $1,023 for the nine months ended
September 30, 1997 and $5,186 for the nine months ended September 30, 1998.
Pro Forma Year Ended December 31, 1997 as Compared to Combined Year Ended
December 31, 1996
Revenues. Total revenues increased 26.7%, or $57,083, from $213,440 to
$270,523 from 1996 to 1997. Rental revenue growth accounted for $36,848 or
25.5% of such increase. A portion of the rental revenue growth was attributable
to eight locations opened or acquired by Falconite during November and December
1996 and the acquisition of GenEquip, Inc. by Falconite in January 1998 and
Aerial Equipment Rental, Inc. by Falconite in May 1998, which contributed
approximately $16,600 in 1997. The remaining approximately $20,235 of rental
revenue growth resulted primarily from increased capital investment in rental
equipment by the Company. Rental equipment sales increased 22.5%, or $4,666,
reflecting strong demand for the Company's equipment, the dispositions of
certain equipment in order to optimize the average age of the Company's
expanding fleet and the acquisition of GenEquip, Inc. by Falconite. New
equipment sales and other increased $15,569 or 32.3% due to strong demand for
the Company's new hoists and pump equipment as well as strong performances at
Albany Ladder and Falconite.
Gross Profit. Gross profit increased from $86,230 to $110,833 from 1996 to
1997. Gross margin increased from 40.4% to 41.0%.
Pro Forma Year Ended December 31, 1997
Revenues. Total revenues were $270,523. Rental revenues accounted for 67.0%
of total revenues.
Gross Profit. Gross profit was $110,833, or 41.0% of total revenues.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $50,167 or 18.5% of total revenues.
Non-rental Depreciation and Amortization. Non-rental depreciation and
amortization was $12,429, or 4.6% of total revenues.
Operating Income. Operating income was $48,237, or 17.9% of total revenues.
Interest Expense, Net. Interest expense, net was $44,516, or 16.5% of total
revenues.
Income Tax Expense. Income tax expense was $1,688, or 0.7% of total revenues.
Historical Results of Operations--Falconite
Six Months Ended June 30, 1998 as Compared to Six Months Ended June 30, 1997.
Revenues. Total revenues increased 20.1% from $29,780 to $35,761 from the six
months ended June 30, 1997 to the six months ended June 30, 1998. Rental
revenues increased 31.2% from $19,645 to $25,776. These increases resulted
primarily from additional locations opened and acquisitions made during and
after the first quarter of 1997 and capital invested in new rental equipment
during 1997. This increase in rental revenues was partially offset by a
decrease in rental equipment sales due to the purchase by Falconite of a large
amount of
39
<PAGE>
new equipment and the corresponding sale by Falconite in first quarter 1997 of
a large amount of its older rental equipment fleet as well as the sale of a
large piece of used rental equipment during first quarter 1997.
Gross Profit. Gross profit increased from $13,257 for the six months ended
June 30, 1997 to $16,055 for the six months ended June 30, 1998. Gross margin
was 44.5% in 1997 as compared to 44.9% in 1998.
Selling, General & Administrative Expenses. Selling, general and
administrative expenses increased from $5,917 to $8,643 from the six months
ended June 30, 1997 to the six months ended June 30, 1998, primarily reflecting
costs associated with the opening of 5 new locations and the newly acquired
GenEquip, Inc. locations, as well as the opening of Falconite's re-
manufacturing facility in Paducah, Kentucky. In addition, first quarter 1998
selling, general and administrative expenses reflects certain private company
expenses including compensation not recorded in first quarter 1997. As a
percentage of total revenues, these expenses increased from 19.9% to 24.2%,
reflecting the lag between the incurrence of expense and the related growth in
revenues from locations opened.
Non-Rental Depreciation and Amortization. Non-rental depreciation and
amortization increased from $1,183 or 4.0% of total revenues for the six months
ended June 30, 1997 to $1,405 or 3.9% of total revenues for the six months
ended June 30, 1998.
Operating Income. As a result of the foregoing, operating income decreased
from $6,157 or 20.7% of total revenues for the six months ended June 30, 1997
to $6,007 or 16.8% of total revenues for the six months ended June 30, 1998.
Year Ended December 31, 1997 as Compared to Year Ended December 31, 1996.
Revenues. Total revenues increased 32.4% from $48,086 to $63,646 from 1996 to
1997. Rental revenue growth accounted for $12,028 or 77.3% of such increase.
The increase in rental revenues resulted primarily from the contribution of the
eight locations opened or acquired during November and December 1996, which
generated approximately $10,700 in rental revenues in 1997. The balance of the
rental revenue growth was attributable to locations open throughout both
periods, primarily due to an increase in Falconite's rental fleet. Sales of
used rental equipment increased by $1,548 or 20.2% in the recently completed
period, reflecting the opening of new locations and dispositions of certain
equipment in order to optimize the average age of Falconite's expanding fleet.
Revenues from new equipment sales and other increased from $7,529 to $9,513 or
26.4% from 1996 to 1997.
Gross Profit. Gross profit increased from $22,824 to $29,452 from 1996 to
1997. Gross margin decreased from 47.5% to 46.3%, with rental gross margin
decreasing from 57.0% to 52.4% and sales gross margin increasing from 26.9% to
31.7%. The decline in rental gross margin was attributable primarily to an
increase in rental equipment depreciation as a percentage of rental revenues
from 20.7% to 24.7% due to the substantial additions to Falconite's rental
fleet during 1996 and 1997. The increase in sales gross margin is primarily the
result of the sale of selected high margin pieces of equipment during 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $9,985 to $15,065 from 1996 to 1997,
primarily reflecting costs incurred to support the growth in Falconite's
business as well as an increase in executive compensation of $1,200. As a
percentage of revenues, these costs increased from 20.8% to 23.7%, reflecting
the lag between incurrence of expenses and the related growth in revenues from
locations opened in late 1996. In addition, Falconite recorded certain charges
in 1997 aggregating $1,301 resulting from the resolution of certain tax
deficiencies and the termination of certain employment agreements.
Non-Rental Depreciation and Amortization. Non-rental depreciation and
amortization increased from $764 to $2,428 from 1996 to 1997. As a percentage
of total revenues, non-rental depreciation and amortization increased from 1.6%
to 3.8%. This increase was attributable primarily to the locations added in
late 1996 and to additional goodwill amortization of approximately $500 in
1997.
40
<PAGE>
Operating Income. As a result of the foregoing and excluding the
aforementioned charges of $1,301, operating income increased from $12,075, or
25.1% of total revenues in 1996, to $13,260, or 20.8% of total revenues in
1997. Including these charges, operating income was $11,959 or 18.8% of total
revenues in 1997.
Year Ended December 31, 1996 as Compared to Year Ended December 31, 1995
Revenues. Total revenues increased 34.8% from $35,661 to $48,086 from 1995 to
1996. Rental revenue growth accounted for $9,488 or 76.4% of such increase.
Rental revenues increased primarily as a result of additional locations. The
balance of the rental revenue increases were attributable to locations open
throughout both periods, primarily due to an increase in Falconite's rental
fleet. Sales of used rental equipment increased by $2,226 or 40.9% to $7,674 in
1996, reflecting the opening of new locations and Falconite's increased
emphasis on selling used equipment. Revenues from new equipment sales and other
increased from $6,818 to $7,529 or 10.4%.
Gross Profit. Gross profit increased from $17,576 to $22,824 from 1995 to
1996. Gross margin decreased from 49.3% to 47.5% with rental gross margin
decreasing from 61.2% to 57.0%. The decline in rental gross margin was partly
attributable to an increase in rental equipment depreciation due to substantial
additions to Falconite's rental fleet during 1996 as well as to the substantial
underutilization of equipment at one of its divisions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $5,858 to $9,985 from 1995 to 1996,
primarily reflecting facilities, personnel and administrative infrastructure
costs incurred to support the growth in Falconite's business. As a percentage
of total revenues, these expenses increased from 16.4% to 20.8%, reflecting the
lag between incurrence of expenses and the related growth in revenues from new
location openings.
Non-Rental Depreciation and Amortization. Non-rental depreciation and
amortization increased from $412 to $764 from 1995 to 1996. As a percentage of
total revenues, non-rental depreciation and amortization increased from 1.2% to
1.6%. This increase resulted primarily from the addition of locations during
1995, in particular, related transportation equipment and furniture, fixtures
and equipment.
Operating Income. As a result of the foregoing, operating income increased
from $11,306, or 31.7% of total revenues in 1995, to $12,075, or 25.1% of total
revenues in 1996.
Historical Results of Operations--Certain Acquired Businesses
As a result of the timing of their acquisitions by the Company, the Acquired
Businesses' financial results discussed below cover periods of varying lengths.
Accordingly, comparison of historical results for such periods may not be
meaningful.
Aerial Platforms
Aerial Platforms was purchased by NES in February of 1997. All operating
results of Aerial Platforms from the date of acquisition are reflected in the
Company's results.
Seventeen Days Ended February 17, 1997 as Compared to Year Ended January 31,
1997
Revenues. Total revenues were $4,746 for 1997 and $233 for the 17-day period
ended February 17, 1997.
Gross Profit. Gross profit was $2,374 and gross margin was 50.0% for 1997.
Gross profit was $64 and gross margin was 27.5% for the 17-day period ended
February 17, 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $1,302 or 27.4% of total revenues for 1997.
Selling, general and administrative expenses were $64 or 27.5% of total
revenues for the 17-day period ended February 17, 1997.
41
<PAGE>
Lone Star Rentals
Lone Star Rentals was purchased by NES in March of 1997. All operating
results of Lone Star Rentals from the date of acquisition are reflected in the
Company's results.
Period Ended March 16, 1997 as Compared to Year Ended December 31, 1996 as
Compared to Year Ended December 31, 1995
Revenues. Total revenues decreased 3.6% or $354 from $9,703 to $9,349 from
1995 to 1996. Rental revenues decreased $156. For the period ended March 16,
1997, total revenues were $1,643.
Gross Profit. Gross profit decreased $394 from $3,191 or 32.9% of total
revenues in 1995 to $2,797 or 29.9% of total revenues in 1996. For the period
ended March 16, 1997, gross profit was $272 or 16.6% of total revenues.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $70 from $1,918 or 19.8% of total revenues in
1995 to $1,988 or 21.3% of total revenues in 1996. For the period ended March
16, 1997, selling, general and administrative expenses were $475 or 28.9% of
total revenues.
BAT Rentals
BAT Rentals was purchased by NES in April of 1997. All operating results of
BAT Rentals from the date of acquisition are reflected in the Company's
results.
Three Months Ended March 31, 1997 as Compared to Year Ended December 31, 1996
as Compared to Year Ended December 31, 1995
Revenues. Total revenues increased 5.5% or $687 from $12,453 to $13,140 from
1995 to 1996. Rental revenues increased $1,472 or 30.3%. For the three months
ended March 31, 1997, total revenues were $3,802.
Gross Profit. Gross profit increased $744 from 1995 to 1996. Gross margin
increased from 29.2% in 1995 to 33.4% in 1996. For the three months ended March
31, 1997, gross profit was $1,271 and gross margin was 33.4%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from $1,552 or 12.5% of total revenues in
1995 to $1,399 or 10.6% of total revenues in to 1996. For the three months
ended March 31, 1997, selling, general and administrative expenses were $489 or
12.9% of total revenues.
Sprintank
Sprintank was purchased by NES in July of 1997. All operating results of
Sprintank from the date of acquisition are reflected in the Company's results.
Six Months Ended June 30, 1997 as Compared to Year Ended December 31, 1996 as
Compared to Year Ended December 31, 1995
Revenues. Total revenues increased 21.8% or $1,719 from $7,879 to $9,598 from
1995 to 1996. Rental revenue growth accounted for 98.7% or $1,697 of the
increase. For the six months ended June 30, 1997, total revenues were $6,042.
Gross Profit. Gross profit increased from $4,598 or 58.3% of total revenues
in 1995 to $5,981 or 62.3% of total revenues in 1996. For the six months ended
June 30, 1997, gross profit was $4,290 or 71.0% of total revenues.
42
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $2,977 or 37.8% of total revenues in
1995 to $4,333 or 45.1% of total revenues in 1996. For the six months ended
June 30, 1997, selling, general and administrative expenses were $2,028 or
33.6% of total revenues.
Equipco Rentals and Sales
Equipco Rentals and Sales was purchased by NES in July of 1997. All operating
results of Equipco Rentals and Sales from the date of acquisition are reflected
in the Company's results.
Period Ended July 17, 1997 as Compared to Year Ended October 31, 1996 as
Compared to Year Ended October 31, 1995
Revenues. Total revenues increased 8.2% or $442 from $5,390 to $5,832 from
1995 to 1996. Rental revenue growth accounted for 88.7% or $392 of the
increase. For the period ended July 17, 1997, total revenues were $4,369.
Gross Profit. Gross profit increased $321 from 1995 to 1996. Gross profit
increased from $1,728 or 32.0% of total revenues in 1995 to $2,049 or 35.1% of
total revenues in 1996. For the period ended July 17, 1997, gross profit was
$1,810 and gross margin was 41.4%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $1,339 or 24.8% of total revenues in
1995 to $1,519 or 26.0% of total revenues in 1996. For the period ended July
17, 1997, selling, general and administrative expenses were $823 or 18.8% of
total revenues.
Work Safe Supply
Work Safe Supply was purchased by NES in February 1998. All operating results
of Work Safe Supply from the date of acquisition are reflected in the Company's
results.
Year Ended December 31, 1997 as Compared to Year Ended December 31, 1996
Revenues. Total revenues increased 12.1% or $794 from $6,570 to $7,364 from
1996 to 1997. Rental revenue growth accounted for 141.9% or $1,127 of the
increase, partially offset by a decrease in rental equipment sales and other
revenues of $333.
Gross Profit. Gross profit increased from $2,755 or 41.9% of total revenues
in 1996 to $3,424 or 46.5% of total revenues in 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $1,084 or 16.5% of total revenues in
1996 to $1,237 or 16.8% of total revenues in 1997.
Year Ended December 31, 1996 as Compared to Year Ended December 31, 1995
Revenues. Total revenues increased 5.7% or $354 from $6,216 to $6,570 from
1995 to 1996. Rental revenue growth accounted for $190 or 53.7% of the
increase.
Gross Profit. Gross profit increased from $2,633 or 42.4% of total revenues
in 1995 to $2,755 or 41.9% of total revenues in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from $2,485 or 40.0% of total revenues in
1995 to $1,084 or 16.5% of total revenues in 1996.
43
<PAGE>
Cormier Equipment
Cormier Equipment was purchased by NES in March 1998. All operating results
of Cormier Equipment from the date of acquisition are reflected in the
Company's results.
Year Ended December 31, 1997 as Compared to Year Ended December 31, 1996
Revenues. Total revenues decreased $381 from $16,008 to $15,627 from 1996 to
1997.
Gross Profit. Gross profit decreased from $5,423 or 33.9% of total revenues
in 1996 to $5,138 or 32.9% of total revenues in 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from $3,324 or 20.8% of total revenues in
1996 to $3,287 or 21.0% of total revenues in 1997.
Year Ended December 31, 1996 as Compared to Year Ended December 31, 1995
Revenues. Total revenues increased 2.4% or $369 from $15,639 to $16,008 from
1995 to 1996. Rental revenue growth accounted for $276 or 74.8% of the
increase.
Gross Profit. Gross profit increased $25 from $5,398 or 34.5% of total
revenues in 1995 to $5,423 or 33.9% of total revenues in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $2,976 or 19.0% of total revenues in
1995 to $3,324 or 20.8% of total revenues in 1996.
Dragon Rentals
Dragon Rentals was purchased by NES in March 1998. All operating results of
Dragon Rentals from the date of acquisition are reflected in the Company's
results.
Year Ended December 31, 1997 as Compared to Year Ended December 31, 1996
Revenues. Total revenues increased 71.0% or $4,385 from $6,179 to $10,564
from 1996 to 1997. Rental revenue growth accounted for $3,929 or 89.6% of the
increase.
Gross Profit. Gross profit increased $3,056 from $1,442 or 23.3% of total
revenues in 1996 to $4,498 or 42.6% of total revenues in 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1,296 from $870 or 14.1% of total revenues
in 1996 to $2,166 or 20.5% of total revenues in 1997.
Albany Ladder
Albany Ladder was purchased by NES in March 1998. All operating results of
Albany Ladder from the date of acquisition are reflected in the Company's
results.
Year Ended December 31, 1997 as Compared to Year Ended December 31, 1996
Revenues. Total revenues increased 23.0% or $6,393 from $27,811 to $34,204
from 1996 to 1997. Rental revenue growth accounted for $1,548 or 24.2% of the
increase.
Gross Profit. Gross profit increased $1,932 from $9,643 or 34.7% of total
revenues in 1996 to $11,575 or 33.8% of total revenues in 1997.
44
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $695 from $7,101 or 25.5% of total revenues
in 1996 to $7,796 or 22.8% of total revenues in 1997.
Liquidity and Capital Resources--The Company
The Company's primary capital requirements are for the purchase of new rental
equipment fleet and for acquisitions. The Company's other capital expenditures
consist of the purchase of vehicles used for delivery and maintenance and
property, plant and equipment. The Company purchases rental fleet throughout
the year to replace equipment which has been sold as well as to maintain
adequate levels of equipment to meet existing and new customer needs. Combined
rental fleet purchases for the Company and the Acquired Businesses were
$60,844, $74,538, $102,638 and $119,150 in 1995, 1996, 1997 and the nine months
ended September 30, 1998, respectively. As the Company's business strategy
continues to be implemented, rental fleet purchases are expected to increase.
The Company's expenditures for rental fleet (excluding purchases made by the
Acquired Businesses prior to their acquisition by the Company) were
approximately $120,000 in 1998 and are expected to be approximately $120,000 in
1999.
On an actual basis, for the years ended December 31, 1996 and 1997 and the
nine months ended September 30, 1997 and 1998, the Company's net cash (used in)
provided by operations was $(269) and $7,378, respectively, and $6,949 and
$36,504, respectively. On an actual basis, for the years ended December 31,
1996 and 1997 and the nine months ended September 30, 1997 and 1998, the
Company's net cash used in investing activities was $20 and $81,497,
respectively, and $76,997 and $491,198, respectively. On an actual basis, for
the years ended December 31, 1996 and 1997 and the nine months ended September
30, 1997 and 1998, the Company's net cash provided by financing activities was
$301 and $109,789, respectively and $71,640 and $419,674, respectively. Net
cash provided by financing activities consists of equity capital provided by
Golder, Thoma, Cressey, Rauner Fund V, L.P. and members of management, net
borrowings under the Credit Facility and indebtedness under the Series B Notes
Indenture.
In July 1998, the Company entered into the Credit Facility which provides for
a term facility to the Company of $100,000 of term loans and a revolving credit
facility to the Company for up to $300,000 of revolving loans, subject to
availability based on certain financial tests including a borrowing base, to
meet acquisition and expansion needs as well as seasonal working capital and
general corporate requirements. As of September 30, 1998, $338,700 was
outstanding under the Credit Facility. As of September 30, 1998, on a pro forma
basis, $222,359 would have been available for borrowing under the Credit
Facility, subject to calculation of the borrowing base.
The Company believes that the Credit Facility, together with funds generated
by operations, will provide the Company with sufficient liquidity and capital
resources in the near-term to finance its operations and pursue its business
strategy, including acquisitions. Over the long-term, the Company will need
additional financing to continue its acquisition strategy.
Year 2000 Issue
As a part of the Company's strategic information system plan, management
selected one information system to serve as the common system platform for all
operating units. This common system platform is Year 2000 compliant. During
1998, in accordance with its plan, the Company migrated several of the
Company's operating units successfully to this new system. The Company expects
to complete the migration of the remainder of its operating units to the common
system platform in two phases during February 1999 and April 1999. The Company
has invested approximately $550 to date relating to this migration, and
management estimates that the Company will invest an additional $1,100 in the
future to complete the conversion of its remaining operating units to this
common platform. Substantially all costs associated with this migration will be
capitalized. As a result of this conversion, all operating units, transactions
processing and operating systems will be Year 2000 compliant.
45
<PAGE>
The Company selected this information system based on experience with this
system at its largest operating unit. Management believes the migration plan is
realistic and feasible. However, there can be no assurance that the Company
will complete the migration in a timely manner or successfully identify and
resolve all Year 2000 compliance issues or that such problems will not have a
material adverse effect on the Company's business, results of operations or
financial position. Based on available information, the Company does not
believe it faces any material exposure to significant business interruption as
a result of the Year 2000 compliance of its information system. Accordingly,
the Company has not adopted any formal contingency plan in the event that its
plan to migrate to a common system platform is not completed in a timely
manner.
The Company is also in the process of assessing the Year 2000 readiness of
its suppliers and customers. Based on available information, the Company does
not believe it faces any material exposure to significant business interruption
as a result of third party Year 2000 readiness issues. However, to the extent
that these third parties cannot provide the Company with products, services or
systems that meet Year 2000 requirements on a timely basis, or in the event
that Year 2000 issues disrupt such third parties' demand for the Company's
products or services, the Company's business, results of operations or
financial position could be materially adversely affected.
Effect of Inflation
Management believes that inflation has not had a material effect on the
Company.
Recently Issued Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. The Statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. SFAS No. 130 requires
that an enterprise (a) classify items of other comprehensive income by their
nature in a financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position. The
Statement is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The adoption of SFAS No. 130 in 1998 has had
no impact to date as the Company has not had any items of other comprehensive
income in any period presented.
In June 1997, the FASB issued Statement No. 131 ("SFAS 131"), "Disclosure
about Segments of an Enterprise and Related Information." This statement,
effective for financial statements for periods beginning after December 15,
1997, requires that a public business enterprise report financial and
descriptive information about its reportable operating segments. Generally,
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The Company is evaluating the effects of this
pronouncement.
On June 15, 1998, the FASB issued Statement No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities." SFAS 133 is effective for
all fiscal years beginning after June 15, 1999. SFAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of
transaction. The Company does not use derivative instruments and therefore does
not expect that the adoption of SFAS 133 will have a significant effect on the
Company's results of operations or its financial position.
46
<PAGE>
BUSINESS
General
National Equipment Services, Inc. is a leading participant in the growing and
highly fragmented $18 billion equipment rental industry. Through its 18
businesses acquired since January 1997, NES specializes in the rental of
specialty and general equipment to industrial and construction end-users. The
Company rents over 750 different types of machinery and equipment and
distributes new equipment for nationally recognized original equipment
manufacturers. The Company also sells used equipment as well as complementary
parts, supplies and merchandise, and provides repair and maintenance services
to its customers. NES is geographically diversified, with 102 locations across
24 states and is a leading competitor in each of the geographic markets it
serves.
Management believes that the Company offers one of the most modern and well
maintained fleets of specialty or general equipment in each of its markets. The
average age of the Company's equipment fleet is approximately three years.
Specialty equipment includes electric and pneumatic hoists, hydraulic and
truck-mounted cranes, liquid storage tanks, pumps and highway safety equipment.
General industrial and construction equipment includes aerial work platforms,
air compressors, cranes, earth-moving equipment and rough terrain forklifts.
The Company rents and sells this equipment to industrial and construction end-
users, which represented approximately 55% and 43%, respectively, of the
Company's revenues for the twelve months ended September 30, 1998, on a pro
forma basis.
NES is led by a senior management team with significant industry experience
and an impressive track record of acquiring and integrating companies in the
equipment rental industry. Prior to founding the Company, the NES senior
management team was responsible for building Brambles Equipment Services
("Brambles"), the U.S. equipment rental business of an Australian public
company, into a leading participant in the industry. At Brambles, this team
executed a growth strategy that combined a disciplined acquisition program with
significant organic growth. Management believes that the team's extensive
industry experience allows it to more easily identify quality acquisition
targets and successfully integrate these businesses through effective financial
and operating controls and the proper deployment of capital. The Company's
local operations are managed by experienced professionals who have an average
of over 15 years of experience in the industry and have extensive knowledge of
and relationships in their local markets. These managers are typically former
owners of the businesses acquired by the Company. The Company also benefits
from the financial expertise of Golder, Thoma, Cressey, Rauner, Inc., an
established investment firm specializing in the consolidation of fragmented
industries. Golder, Thoma, Cressey, Rauner Fund V, L.P., an affiliate of
Golder, Thoma, Cressey, Rauner, Inc., is the Company's principal equity
investor.
Industry Overview
Revenues for the $18 billion equipment rental industry have grown at a
compound annual rate of approximately 24% from 1984 to 1997 according to
surveys conducted by the Associated Equipment Distributors and have grown in 12
of the past 13 years. Management believes that the equipment rental industry
growth will continue to be driven by the trend among customers to outsource
non-core operations in order to reduce their capital investment and minimize
the downtime, maintenance, repair and storage costs associated with equipment
ownership. While customers traditionally have rented equipment for specific
purposes such as supplementing capacity during peak periods and in connection
with special projects, customers are increasingly looking to rental operators
to provide an ongoing, comprehensive supply of equipment, enabling such
customers to benefit from the economic advantages and convenience of rental.
According to a survey published in 1997 by The CIT Group, contractors intended
to increase the percentage of equipment they rent without a purchase option to
an estimated 15% of their total equipment requirements in 1997 from less than
5% in 1994.
47
<PAGE>
The highly fragmented equipment rental industry consists of a large number of
relatively small independent businesses typically serving discrete local
markets within 30 to 50 miles of the store location, and a small number of
multi-location regional or national operators. According to Rental Equipment
Register, there are more than 12,000 participants in the industry, with the
largest 100 rental companies accounting for approximately 26% of 1997 industry
revenues. Management believes that the rental equipment industry offers
substantial consolidation opportunities for large, well-capitalized equipment
rental companies such as NES. Relative to smaller companies with only one or
two rental locations, multi-regional operators such as NES benefit from a
number of competitive advantages, including access to capital, the ability to
offer a broader range of modern, high-quality equipment, standardized
management information systems, volume purchasing discounts and the ability to
service larger, multi-regional accounts. In addition, management believes that
multi-regional operators are less affected by changes in local economic
conditions.
Growth Strategy
Management believes that NES is well positioned to benefit from industry
trends of growth and consolidation. The Company's strategic objective is to
continue to grow profitably in both existing and new markets by acquiring
additional specialty and general equipment rental companies, by increasing
revenues from industrial customers, by maximizing higher margin rental revenues
and by leveraging its new remanufacturing center. The Company intends to attain
its objective by continuing to execute the following business strategy:
Acquire Specialty and General Equipment Rental Businesses. The Company seeks
to acquire strong and successful specialty and general equipment rental
businesses. For the twelve months ended September 30, 1998, NES generated
approximately 31% and 69% of its revenues on a pro forma basis from specialty
and general equipment businesses, respectively. The Company routinely evaluates
attractive markets for expansion where a leading position can be created by
acquiring an existing business. The Company generally targets acquisition
candidates that (i) are profitable businesses with a proven track record, (ii)
generate a high percentage of revenues from rentals with a significant portion
derived from industrial customers, (iii) are led by a strong management team
that is willing to continue with the business, (iv) have a strong local market
share or participate in a high-growth market and (v) provide opportunities to
expand their customer base through better access to and employment of capital.
The Company also seeks to acquire smaller businesses in locations already
served by the Company that offer product lines or services that are
complementary to those at existing locations. Since January 1997, the Company
has completed 18 acquisitions. Management believes that with over 12,000
participants, the equipment rental industry will continue to offer a
significant number of businesses that fit the Company's acquisition profile.
Increase Revenues from Industrial Customers. The Company is committed to
increasing its revenues derived from industrial customers. Management believes
that these revenues are more stable than revenues from construction customers
due to the fact that industrial customers typically utilize rental equipment
for ongoing and periodic maintenance work on their existing facilities as well
as for material handling applications. Industrial customers tend to rent
equipment for longer periods and use equipment under less severe conditions
than contractors, thereby increasing the Company's equipment utilization and
decreasing the Company's equipment maintenance costs. The good condition and
quality of rental equipment are essential for industrial customers in order to
avoid costly slowdowns or shutdowns of plant facilities. Management believes
that larger well-capitalized companies such as NES are better able to provide
well-maintained and high quality equipment. The Company intends to continue to
expand its industrial customer base by providing additional equipment and
services to its existing industrial customers and establishing new
relationships through its existing businesses as well as through acquisitions.
For the twelve months ended September 30, 1998, on a pro forma basis, revenues
derived from industrial end-users represented approximately 55% of the
Company's total revenues.
Maximize High-Margin Rental Revenues Through Efficient Fleet Management. The
Company is focused on growing its high-margin rental revenues by expanding
fleet inventory, efficiently managing fleet inventory in order to maximize
equipment utilization, optimizing fleet maintenance, and systematically
evaluating the
48
<PAGE>
optimal timing of used equipment sales. The Company's acquisition targets have
typically operated under capital constraints, which prevented them from
purchasing rental equipment sufficient to meet customer demand and consequently
resulted in lost revenue opportunities. In pursuing acquisitions, NES evaluates
the target's customer base and fleet inventory and, following its acquisition,
typically provides capital to expand the equipment fleet and improve
utilization, resulting in significant increases in rental revenues.
Leverage New Remanufacturing Center. As part of the acquisition of Falconite
in July 1998, the Company acquired a recently-constructed 45,000 square foot
equipment remanufacturing facility in the Paducah, Kentucky area. The Company
believes this facility enhances its ability to perform major repair operations,
including rebuilding equipment, and maintain its rental fleet in top condition.
Management anticipates that the center will increase rental gross profit
margins by reducing capital expenditure requirements and related rental
equipment depreciation. The center incorporates four production lines to
simultaneously refurbish equipment by replacing or rebuilding all major
components including engines, transmissions and mechanical, hydraulic and
electrical systems.
Acquired Businesses
NES was founded in June 1996 to acquire and integrate businesses that focus
on the rental of specialty and general equipment to industrial and construction
end-users. Since January 1997, the Company has acquired 18 businesses.
Management believes that with over 12,000 participants, the equipment rental
industry will continue to offer a significant number of acquisition
opportunities. The Company is led by a senior management team with extensive
industry experience. The Company believes this experience allows management to
more easily identify quality acquisition targets and successfully integrate and
optimize these businesses. The following table summarizes the Company's
completed acquisitions to date:
<TABLE>
<CAPTION>
Years in
Acquired Business Products Geographic Focus Business Date Acquired
- ----------------------- ------------------------------------ ------------------------ -------- --------------
<S> <C> <C> <C> <C>
Industrial Hoist
Services Pneumatic and electric hoists National 15 January 1997
Aerial Platforms Aerial work platforms Atlanta, Georgia 14 February 1997
Lone Star Rentals General equipment Gulf Coast 16 March 1997
BAT Rentals General equipment Las Vegas, Nevada 36 April 1997
Sprintank Liquid and specialized storage tanks Gulf Coast 8 July 1997
Equipco Rentals & Sales General equipment Western Virginia 20 July 1997
Genpower Pumps Gulf Coast 14 January 1998
Eagle Scaffolding Scaffolding Las Vegas, Nevada 5 January 1998
Grand Hi-Reach Aerial work platforms Grand Rapids, Michigan 13 February 1998
Work Safe Supply Highway safety equipment Michigan 19 February 1998
Dragon Rentals Liquid storage tanks Gulf Coast 6 March 1998
Cormier Equipment General equipment Eastern Coast 14 March 1998
Albany Ladder Aerial work platforms Northeast 66 March 1998
Falconite Aerial work platforms and cranes Mid-South and Gulf Coast 43 July 1998
R & R Rentals Cranes Gulf Coast 15 July 1998
TSM Highway safety equipment Wisconsin 19 August 1998
Shaughnessy Aerial work platforms and cranes Northeast 83 September 1998
Rebel Studio Rentals Aerial work platforms California 4 October 1998
</TABLE>
Products and Services
The Company's primary business is the rental of equipment to industrial and
construction end-users. In addition, to more fully service its customer base
and leverage its fixed costs, the Company sells complementary parts,
merchandise and rental equipment, acts as a distributor of new equipment on
behalf of original equipment manufacturers and services the equipment it sells
and rents.
49
<PAGE>
Equipment Rentals. The Company rents a broad selection of general equipment
ranging from large equipment such as aerial manlifts, forklifts, light earth-
moving equipment and portable air compressors to small equipment such as hand
tools to industrial and commercial construction customers. The Company's
specialty equipment available for rent includes pumps and highway safety
equipment. The Company is the leading renter of industrial hoists in the United
States and the leading renter of portable storage tanks to the chemical and
petrochemical industries in the Gulf Coast region. The Company's rental
contracts range from a one-day rental contract for a small subcontractor to a
multi-year contract for certain industrial customers, with an overall average
rental period of 19 days. Four categories of equipment represented
approximately 86.6% of the Company's total rental equipment fleet (based on
original equipment cost), on a pro forma basis, at September 30, 1998: (i)
aerial work platforms (49.9%); (ii) forklifts (9.9%); (iii) mobile storage
tanks (10.3%); and (iv) cranes (16.5%). The mix of rental equipment at each of
the Company's locations is a function of the demands of the local customer base
and the focus of the local business. At September 30, 1998, on a pro forma
basis, the original equipment cost of the Company's rental fleet was
approximately $498 million and the weighted average age of the Company's rental
equipment fleet was approximately three years. Approximately 72.8% of the
Company's total revenues for the twelve months ended September 30, 1998, on a
pro forma basis, were derived from the rental of equipment.
Sales of Rental Equipment. The Company routinely sells rental equipment to
adjust the size and composition of its rental fleet to changing market
conditions and as part of its ongoing commitment to maintain a new, top quality
fleet. The Company achieves favorable sales prices for its rental equipment due
to its strong preventive maintenance program and its practice of selling rental
equipment before it becomes irreparable or obsolete. Senior management works
with local operating management to optimize the timing of sales of rental
equipment by taking into account maintenance costs, rental demand patterns and
resale prices. The Company sells rental equipment to its existing rental
customers, as well as to domestic and international used equipment buyers. For
the twelve months ended September 30, 1998, on a pro forma basis, revenues from
the sale of rental equipment accounted for approximately 6.3% of the Company's
total revenues.
Sales of New Equipment. The Company is a distributor for certain original
equipment manufacturers, including JLG Industries, Inc., Genie Industries,
Condor (a division of TIME Manufacturing Company), Strato-Lift and Terex Corp.
(d/b/a Marklift) (aerial work platforms and booms), Manitex Crane and Broderson
Crane (cranes), The Gradall Company, Sky Trak, Gehl Equipment and Tovel Mfg.
(rough-terrain forklifts), Atlas-Copco Industrial Compressors, Inc. and Mitsui
Inc. (d/b/a Airman) (air compressors), Mustang Manufacturing, Inc. (skid steer
loaders), Thompson Pump & Manufacturing Co. (pumps), Multiquip Inc.
(generators) and Komatsu Forklift USA, Inc. (industrial forklifts). The Company
believes that the volume of its equipment purchases creates significant
purchasing power with suppliers, which leads to favorable prices and terms on
equipment purchased for its rental fleet and for sale as new equipment. The
Company's ability to sell new equipment offers flexibility to its customers and
enhances the Company's customer relations. Approximately 11.2% of the Company's
total revenues for the twelve months ended September 30, 1998, on a pro forma
basis, were derived from the sale of new equipment.
Sales of Parts and Merchandise; Service and Repair. The Company also sells a
wide range of parts and merchandise, including saw blades, drill bits, shovels,
goggles, hard hats and other safety gear, as a complement to its core equipment
rental business. These sales enable the Company to attract and retain customers
by offering the convenience of "one-stop shopping." The Company also provides
repair and maintenance services in connection with the equipment it sells as a
complement to its core business. Revenues generated from sales of parts and
merchandise and service and repair accounted for approximately 9.7% of the
Company's total revenues for the twelve months ended September 30, 1998, on a
pro forma basis.
Customers
Management estimates that the Company currently has more than 10,000
customers, ranging from "Fortune 500" companies to small contractors. For the
twelve months ended September 30, 1998, on a pro forma basis, zero customers
accounted for more than 1.0% of the Company's total revenues, and the
50
<PAGE>
Company's top five customers represented less than 3.0% of total revenues.
Customers look to the Company as an ongoing, comprehensive source of rental
equipment because of the economic advantages and convenience of renting, as
well as the high costs associated with equipment ownership. The Company's
primary customer base can be classified by the following categories: (i)
industrial, including manufacturers, petrochemical facilities, chemical
companies, paper mills and public utilities and (ii) commercial and residential
construction, repair and renovation, including contractors. In addition to
maintaining its historically strong relationship with local customers, the
Company is increasing its emphasis on larger national and multi-regional
accounts. For the twelve months ended September 30, 1998, on a pro forma basis,
industrial, construction and other customers accounted for approximately 54.7%,
42.9% and 2.4% of the Company's total revenues, respectively.
Industrial. The Company's industrial customers, many of whom operate 24 hours
per day, utilize the Company to outsource their equipment requirements to
reduce the capital investment and minimize the ongoing maintenance, repair and
storage costs associated with equipment ownership. Management believes that the
Company is well-positioned to take advantage of the increasing trend among
industrial customers to outsource equipment needs. In addition, the Company's
specialty products, such as hoists and tanks, are tailored to meet the needs of
industrial end-users. Management believes that given its multi-regional
presence, NES is well positioned to increase its industrial revenue base. The
Company intends to expand its industrial customer base by providing additional
equipment and services to its existing industrial customers and establishing
new relationships through its existing businesses as well as through
acquisitions.
Construction. The Company's construction customers include "Fortune 500"
companies, national and regional contractors and subcontractors involved in
construction projects such as (i) chemical plants and other manufacturing
facilities, (ii) roads, bridges and highways, (iii) schools, hospitals and
airports, and (iv) residential developments and apartment buildings. According
to a survey published in 1997 by The CIT Group, contractors intended to
increase the percentage of equipment they rent without a purchase option to an
estimated 15% of their total equipment requirements in 1997 from an estimated
5% in 1994. Management believes the Company is a leading supplier of rental
equipment to contractors in its markets and is well positioned to benefit from
any increased rental of equipment by such customers.
Management Information Systems
The Company has made significant investments in its information systems.
These information systems integrate customer tracking systems that allow the
sales force, through use of lap top computers, to track customer requirements,
while coordinating with inside sales and logistics personnel to ensure that
customer demands are met on a timely basis. These systems also provides real-
time rental management data that allows management to monitor asset
utilization, rental rates, repairs and maintenance, and inventory levels by
region, location, equipment classification, and individual rental item. These
systems are fully integrated into a financial package that tracks profitability
by branch and region, enabling the Company to implement a decentralized
management structure.
Operations
The Company's equipment rental yards typically include: (i) a customer
service center and showroom displaying selected rental equipment, new equipment
offered for sale and related merchandise; (ii) an equipment service area; and
(iii) equipment storage facilities. Each rental center is staffed by an average
of approximately 15 employees, including a manager, an assistant manager, sales
people, back office clerks, truck drivers, mechanics and yard personnel. The
rental center employees' knowledge of the equipment enables them to recommend
the best equipment for a customer's particular application. Each rental center
manager is responsible for all aspects of the center's operation, including
establishing rental rates, selecting equipment and determining employee
compensation at such location.
51
<PAGE>
Sales
The Company offers rental equipment and related services primarily through
its sales force, consisting of 50 sales managers who oversee 185 sales people.
The sales force at each location is knowledgeable about all of the services and
products provided at that location. Sales managers and representatives
regularly call on contractors' job sites and industrial facilities in their
sales territories, often assisting customers in planning for their equipment
requirements. The Company also provides its sales force with extensive
training, including frequent in-house training by supplier representatives,
regarding the operating features and maintenance requirements of its equipment.
Members of the Company's sales force generally earn commissions on all
equipment rentals and sales that they generate.
Purchasing and Suppliers
Management believes that, as a result of the Company's size, it is able to
purchase equipment directly from manufacturers at favorable prices. The Company
has developed strong relationships with many leading original equipment
manufacturers, including JLG Industries, Inc., Genie Industries, Condor (a
division of TIME Manufacturing Company), Strato-Lift, Terex Corp. (d/b/a
Marklift), Manitex Crane, Broderson Crane, The Gradall Company, Sky Trak, Gehl
Equipment, Tovel Mfg., Atlas-Copco Industrial Compressors, Inc., Mitsui Inc.
(d/b/a Airman), Mustang Manufacturing, Inc., Thompson Pump & Manufacturing Co.,
Multiquip, Inc. and Komatsu Forklift USA, Inc., and operates as a distributor
for certain lines of equipment in several of its markets. The Company intends
to acquire businesses that are distributors for other vendors, thus allowing
the Company to purchase from additional sources. During the twelve months ended
September 30, 1998, on a pro forma basis, the Company purchased approximately
$131,439 million of rental equipment, of which approximately 45% was obtained
from its top five suppliers. No single supplier accounted for more than 17% of
the Company's total purchases. The Company believes it could readily replace
any of its suppliers if necessary.
Locations and Properties
The Company operates 102 equipment rental locations in the following 24
states: Alabama (6), Arkansas (1), California (1), Florida (2), Georgia (5),
Illinois (1), Indiana (4), Kentucky (6), Louisiana (7), Maine (5),
Massachusetts (4), Michigan (7), Mississippi (1), Missouri (1), Nevada (2), New
Hampshire (2), New York (5), Pennsylvania (1), Rhode Island (1), Tennessee (7),
Texas (25), Vermont (1), Virginia (1) and Wisconsin (6). The Company's
properties typically include an outside storage yard and a small building
containing offices, a maintenance center and, in certain locations, a retail
showroom. The Company owns 12 of its equipment rental locations and leases the
other 90, as well as its approximately 1,400 square foot headquarters space in
Evanston, Illinois. The net book value of owned facilities was approximately
$4.2 million at September 30, 1998, on a pro forma basis, and the average
annual lease expense on each leased facility was approximately $48,000 in 1997.
The Company's leases have terms expiring from 1999 to 2007, with the majority
of its leases having renewal options. Management believes that none of the
Company's leased facilities, individually, is material to the Company's
operations and that all of these leases can be readily replaced at similar
terms. The Company's interests in each of these properties secure borrowings
under the Credit Facility.
Competition
The equipment rental industry is highly fragmented and competitive. Many of
the markets in which the Company operates are served by numerous competitors,
ranging from national and multi-regional companies such as Hertz Equipment
Rental Corporation (an affiliate of Ford Motor Company), NationsRent, Inc.,
Neff Corp., Prime Services, Inc., Rental Service Corporation and United
Rentals, Inc., to small, independent businesses with a limited number of
locations. Management believes that participants in the equipment rental
industry compete on the basis of availability and quality of equipment,
service, delivery, time and price. Geographic territories for competition are
usually limited to 50 to 75 miles due to servicing requirements and
transportation costs of the equipment. Certain specialized equipment renters,
such as Industrial Hoist Services, compete on a larger regional or national
basis. In general, management believes that national and multi-regional
52
<PAGE>
operators, such as the Company, enjoy substantial competitive advantages over
small, independent rental businesses that cannot afford to maintain the
comprehensive rental equipment fleet and high level of maintenance and service
that the Company offers. See "Risk Factors--Competition."
Employees
At December 31, 1998, the Company had a total of 1,553 employees. Only 294 of
the Company's employees are represented by unions, and management believes that
its relationship with all of its employees is excellent. The Company is
committed to, and has realized significant benefits from, its formal employee
training programs. Management believes that this investment in training and
safety awareness programs for employees is a competitive advantage that
positions the Company to be responsive to customer needs.
Governmental and Environmental Regulation
The Company's facilities are subject to various evolving federal, state and
local environmental requirements, including those relating to discharges to
air, water and land, the handling and disposal of solid and hazardous waste and
the cleanup of properties affected by hazardous substances. Certain
environmental laws impose substantial penalties for noncompliance, and others,
such as the federal Comprehensive Environmental Response, Compensation, and
Liability Act, as amended, impose strict, retroactive, joint and several
liability upon persons responsible for releases of hazardous substances.
In connection with its corporate acquisitions, the Company usually obtains
environmental assessments from independent environmental consultants. These
assessments generally consist of a site visit, historical record review,
interviews with key personnel and preparation of a report. The purpose of the
consultant's work is to identify potential environmental conditions or
compliance issues associated with the subject property and operations. Based on
these assessments, the Company believes that its operations have been and are
operated in substantial compliance with environmental requirements and that it
has no material liabilities arising under environmental requirements. Some risk
of environmental liability is inherent in the nature of the Company's business,
however, and the Company might in the future incur material costs to meet
current or more stringent compliance, cleanup or other obligations pursuant to
environmental laws.
The Company is currently evaluating whether it must take additional steps at
some locations to ensure compliance with certain environmental laws, including
those relating to the discharge of stormwater and wastewater from the washing
of vehicles and other equipment. The Company does not believe any costs
associated with these efforts will have a material adverse effect on the
Company's operating results or financial position.
The Company dispenses petroleum products from aboveground and underground
storage tanks located at some locations that it operates. The Company maintains
an environmental compliance program designed to minimize the potential for
leaks and spills, to ensure proper maintenance of records and to keep track of
the regular testing and monitoring of tank systems. There can be no assurance,
however, that these tank systems have been or will at all times remain free
from leaks or that the use of these tanks has not or will not result in spills
or other releases. The Company does not believe that the presence or operation
of these tanks will have a material adverse effect on the Company's operating
results or financial position.
The Company uses hazardous substances, such as solvents, to clean and
maintain its rental equipment fleet and generates wastes, such as used motor
oil, radiator fluid and solvents, that are stored on site and disposed of at
off-site locations. Under various environmental laws, the Company could be
liable for contamination at sites where hazardous substances used in its
operations have been disposed of or otherwise released.
The Company believes that its compliance with environmental laws has not had
a material adverse effect on the Company's operating results, financial
condition or competitive position to date. See "Risk Factors--Environmental
Liabilities."
53
<PAGE>
Legal Proceedings
On December 15, 1998, NES Studio Equipment (a subsidiary of the Company) and
one of its employees was served with a complaint filed in the Superior Court of
the State of California in the County of Los Angeles. The complaint alleges
unfair competition, unfair business practices, interference with prospective
economic relations, breach of fiduciary duty, unjust enrichment, breach of
written contract and breach of good faith and fair dealing arising out of the
hiring of the employee from a competitor in August 1998 and seeks, among other
things, compensatory damages and impressment of a constructive trust over the
revenue derived from such activities. NES Studio Equipment (formerly Rebel
Studio Rentals) was acquired by the Company in October 1998 for approximately
$5.8 million. The Company is currently evaluating the proceedings and intends
to vigorously defend itself. Based upon all information known to the Company at
this time, the Company does not believe that the proceedings will have a
material adverse effect on the Company's financial condition.
From time to time, the Company has been and is involved in various other
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.
54
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information as of December 31, 1998
with respect to the directors and executive officers of the Company and each of
the Subsidiary Guarantors.
<TABLE>
<CAPTION>
Name Age Positions
- ------------------------ --- -------------------------------------------------------------
<S> <C> <C>
Kevin Rodgers........... 48 Chief Executive Officer, President and Director of the
Company, Albany Ladder Company, Inc. ("Albany"), BAT
Acquisition Corp. ("BAT"), Carl's Mid South Rent-All Center
Incorporated ("CMSRACI"), Falconite Aviation, Inc. ("FAI"),
Falconite Equipment, Inc. ("FEI"), Falconite, Inc.
("Falconite"), Falconite Rebuild Center, Inc. ("FRCI"),
McCurry & Falconite Equipment Co., Inc. ("M&FECI"), M&M
Properties, Inc. ("M&MPI"), NES Acquisition Corp. ("NES
Acquisition"), NES East Acquisition Corp. ("NES East"), NES
Michigan Acquisition Corp. ("NES Michigan"), Rebel Studio
Rentals, Inc. ("RSR") and Shaughnessy Crane Service, Inc.
("SCS")
Dennis O'Connor......... 49 Chief Financial Officer of the Company, Albany, BAT, CMSRACI,
FAI, FEI, Falconite, FRCI, M&FECI, M&MPI, NES Acquisition,
NES East, NES Michigan, RSR and SCS
James O'Neil............ 54 Chief Operating Officer of the Company
Paul Ingersoll.......... 33 Vice President of Corporate Development and Secretary of the
Company; Vice President, Secretary and Treasurer of Albany,
BAT, CMSRACI, FAI, FEI, Falconite, FRCI, M&FECI, M&MPI, NES
Acquisition, NES East, NES Michigan, RSR and SCS
Carl Thoma.............. 50 Chairman of the Board of the Company; Director of Albany,
BAT, CMSRACI, FAI, FEI, Falconite, FRCI, M&FECI, M&MPI, NES
Acquisition, NES East, NES Michigan, RSR and SCS
William Kessinger....... 32 Director of the Company, Albany, BAT, CMSRACI, FAI, FEI,
Falconite, FRCI, M&FECI, M&MPI, NES Acquisition, NES East,
NES Michigan, RSR and SCS
John Grove.............. 77 Director of the Company
Ronald St. Clair........ 61 Director of the Company
</TABLE>
Kevin Rodgers. Mr. Rodgers has been President, Chief Executive Officer and a
director of the Company since he founded the Company with Golder, Thoma,
Cressey, Rauner Fund V, L.P. in June 1996. Prior thereto, Mr. Rodgers served as
Chief Executive Officer of Brambles Equipment Services, Inc. and Brambles
Records Management, Inc. from 1991 to June 1996. From 1991 to 1996, Mr. Rodgers
also held the position of Executive Director of Brambles USA, a subsidiary of
Brambles Industries Limited, an Australian public company with worldwide
revenues of over US $2.5 billion. From 1979 to 1990, Mr. Rodgers held several
positions at Morgan Equipment Company, a privately held heavy equipment
dealership with worldwide sales of approximately $300 million, including Chief
Executive Officer of Morgan Equipment's Australian operations from 1986 to
1990.
Dennis O'Connor. Mr. O'Connor has been Chief Financial Officer of the Company
since August 1996. Prior thereto, Mr. O'Connor served as Chief Financial
Officer of Brambles Equipment Services, Inc. from November 1991 to August 1996,
where Mr. O'Connor directed the financial and administrative functions for its
seven operating divisions and assisted in operations management. From May 1986
to May 1990, Mr. O'Connor held various positions at Morgan Equipment Company,
including Chief Financial Officer and General Manager.
55
<PAGE>
James O'Neil. Mr. O'Neil has been Chief Operating Officer of the Company
since September 1998. Prior thereto, Mr. O'Neil served as President of the
Company's Sprintank division from the date of the Company's acquisition of
Sprintank in July 1997 to September 1998 and had also served as President of
Sprintank from January 1996 to the date of such acquisition. From November 1992
to December 1995, Mr. O'Neil served as President and Chief Operating Officer of
Encycle/Texas, Inc., a metal concentrate and waste recycling company.
Previously, Mr. O'Neil held various senior executive management positions with
Laidlaw Environmental Services, Inc. and Tricil Environmental Response, Inc.
Paul Ingersoll. Mr. Ingersoll has been Vice President of Corporate
Development and Secretary of the Company since June 1996. Prior thereto, Mr.
Ingersoll served as Assistant to the Executive Director of Brambles USA from
March 1992 to May 1996 and as Financial Analyst from November 1989 to March
1992. During his tenure at Brambles, Mr. Ingersoll closed 19 acquisitions
related to equipment services and records management.
Carl Thoma. Mr. Thoma is Chairman of the Board of the Company and has served
as a director of the Company since its founding in June 1996. Mr. Thoma is the
Managing Partner of Thoma Cressey Equity Partners, a private equity investment
company in Chicago, Illinois, Denver, Colorado and San Francisco, California
formed in December 1997 as a successor to Golder, Thoma, Cressey, Rauner, Inc.
He also co-founded and has been a Managing Director of Golder, Thoma, Cressey,
Rauner, Inc., the general partner of Golder, Thoma, Cressey, Rauner Fund V,
L.P. and its predecessor funds, in Chicago, Illinois since 1980. Mr. Thoma is
also a director of Global Imaging, Inc., Outsource Partners, Inc. and Paging
Network, Inc.
William Kessinger. Mr. Kessinger has served as a director of the Company
since its founding in June 1996. Mr. Kessinger is a Principal of GTCR Golder
Rauner, LLC, a private equity investment company in Chicago, Illinois formed in
January 1998 as a successor to Golder, Thoma, Cressey, Rauner, Inc. Mr.
Kessinger joined Golder, Thoma, Cressey, Rauner, Inc. in May 1995 and has been
a Principal since September 1997. Prior thereto, Mr. Kessinger was a Principal
with The Parthenon Group from July 1994 to May 1995. From August 1992 to June
1994, Mr. Kessinger attended Harvard Business School and received his MBA.
Prior to that time, Mr. Kessinger served as an Associate with Prudential Asset
Management Asia from August 1988 to June 1992. Mr. Kessinger is also a director
of Answerthink Consulting Group, Inc., Excaliber, Inc., Global Imaging, Inc.,
National Computer Print, Inc. and Users, Inc.
John Grove. Mr. Grove has served as a director of the Company since May 1998.
Mr. Grove co-founded JLG Industries, Inc., a manufacturer of hydraulically-
operated machinery specializing in aerial work platforms, in 1969 and served as
Chairman and Chief Executive Officer until his retirement in 1993. Prior to
1969, Mr. Grove co-founded Grove Manufacturing Co. and developed the modern
hydraulic crane. Mr. Grove is also a director of Falling Spring Corp.,
Truckcraft Corporation and Sentry Trust, Inc.
Ronald St. Clair. Mr. St. Clair has served as a director of the Company since
October 1997. Mr. St. Clair founded High Reach Equipment, an aerial platform
rental company headquartered in Baton Rouge, Louisiana. In 1993, Mr. St. Clair
sold High Reach Equipment to Brambles Equipment Services, Inc. In 1994, Mr. St.
Clair retired from High Reach Equipment.
The Company's Board of Directors (the "Board of Directors" or the "Board")
currently consists of five directors, who are divided into three classes, with
terms expiring at the Company's annual meetings of stockholders in 1999, 2000
and 2001. Mr. St. Clair's term will expire at the 1999 annual meeting. Mr.
Rodgers' and Mr. Kessinger's terms will expire at the 2000 annual meeting. Mr.
Thoma's and Mr. Grove's terms will expire at the 2001 annual meeting. Each
director is elected to serve for the remaining term of any vacancy filled by
the director or until the third succeeding annual meeting of stockholders (if
elected at an annual meeting of stockholders) or until a successor is duly
elected. The Board has the power to appoint the officers of the Company. Each
officer will hold office for such term as may be prescribed by the Board and
until such person's successor is chosen and qualified or until such person's
death, resignation or removal.
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<PAGE>
Compensation of Directors
Directors of the Company currently do not receive a salary or an annual
retainer for their services, except for (i) Mr. St. Clair, who receives an
annual fee of $40,000 and (ii) Mr. Grove, who receives an annual fee of $8,000
and fees of $1,500 for each Board meeting (or $500 if such Board meeting is
telephonic) and $500 for each Board committee meeting Mr. Grove attends. The
Company expects that new non-employee directors not otherwise affiliated with
the Company or its stockholders will be paid an annual cash retainer. All
directors are reimbursed for out-of-pocket expenses related to their service as
directors, including expenses incurred in connection with attending meetings.
Directors may also be issued options pursuant to the Incentive Plan (as
defined). See "--Long Term Incentive Plan."
In connection with the Initial Stock Offering, the Company granted each of
Mr. Grove and Mr. St. Clair, under the Incentive Plan, an option to acquire
10,000 shares of Common Stock that will vest in equal daily installments over
the five year period ending July 13, 2003. The Company granted such options at
an option price equal to the public offering price. In addition, at each
anniversary of the Initial Stock Offering, the Company intends to grant each of
Mr. Grove and Mr. St. Clair, under the Incentive Plan, an option to acquire
2,000 shares of Common Stock that will vest in equal daily installments over
the five year period commencing on the date of grant. The Company intends to
grant such options at an option price equal to the fair market value of the
Common Stock on the date of grant.
Compensation of Executive Officers
The compensation of executive officers of the Company will be determined by
the Board of Directors of the Company. The following table sets forth
information regarding the compensation paid or accrued by the Company to the
Chief Executive Officer and each of the Company's other executive officers (the
"Named Executive Officers") for services rendered to the Company in all
capacities during 1996 and 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------- -------------------------------
Awards Payouts
----------------------- -------
Securities
Other Annual Restricted Underlying LTIP All Other
Name and Salary Bonus Compensation Stock Options/SARs Payouts Compensation
Principal Position Year ($) ($) ($) Awards ($) ($) ($) ($)
- ------------------------ ---- ------- ------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kevin Rodgers(1)........ 1997 225,000 112,500 -- -- -- -- 10,125(2)
President, Chief 1996 131,250(3) -- -- -- -- -- --
Executive Officer and
Director
Dennis O'Connor(4)...... 1997 125,000 62,500 -- -- -- -- 4,545(5)
Chief Financial Officer 1996 44,015(6) -- -- -- -- -- 30,741(7)
Paul Ingersoll(8)....... 1997 80,000 40,000 -- -- -- -- 3,200(9)
Vice President and 1996 52,464(10) -- -- -- -- -- --
Secretary
</TABLE>
- --------
(1) Mr. Rodgers became an employee of the Company effective June 4, 1996.
(2) The amount shown includes $4,500 of Company 401(k) matching contributions
under the Savings Plan (as defined) and a $5,625 profit sharing
contribution under the Savings Plan.
(3) The amount shown includes $43,750 of accrued salary paid in 1997 pursuant
to Mr. Rodgers' employment agreement upon the Company's acquisition of
equipment rental businesses meeting certain financial criteria.
(4) Mr. O'Connor became an employee of the Company effective August 19, 1996.
57
<PAGE>
(5) The amount shown includes $2,045 of Company 401(k) matching contributions
under the Savings Plan and a $2,500 profit sharing contribution under the
Savings Plan.
(6) The amount shown includes $10,909 of accrued salary paid in 1997 pursuant
to Mr. O'Connor's employment agreement upon the Company's acquisition of
equipment rental businesses meeting certain financial criteria.
(7) The amount shown represents reimbursement for relocation and moving
expenses.
(8) Mr. Ingersoll became an employee of the Company effective June 4, 1996.
(9) The amount shown includes $1,600 of Company 401(k) matching contributions
under the Savings Plan and a $1,600 profit sharing contribution under the
Savings Plan.
(10) The amount shown includes $13,116 of accrued salary paid in 1997 pursuant
to Mr. Ingersoll's employment agreement upon the Company's acquisition of
equipment rental businesses meeting certain financial criteria. In
addition, the amount shown includes $5,797 of salary paid by the Company
for work Mr. Ingersoll performed for Golder, Thoma, Cressey, Rauner, Inc.
prior to June 4, 1996 to prepare for the organization and formation of the
Company.
Management Employment Agreements
Kevin Rodgers. Mr. Rodgers is party to a senior management agreement with the
Company dated as of June 4, 1996, as amended. Under the agreement, Mr. Rodgers
will receive an annual base salary of $250,000, which amount shall be reviewed
(but not reduced) annually by the Board in its sole discretion. Mr. Rodgers
will be eligible for a bonus of up to 50% of his base salary, which the Board
anticipates awarding if Mr. Rodgers meets or exceeds annual operational and
financial objectives agreed to by the Board and Mr. Rodgers. If the Company has
not met or exceeded its financial or operational objectives, the Board in its
discretion may award Mr. Rodgers a bonus of less than 50% of his base salary.
Mr. Rodgers will also be entitled to all other benefits as are approved by the
Board and made available to the Company's senior management.
Under the agreement, Mr. Rodgers purchased 96 shares of Class B Common Stock
at a price of $10 per share. In addition, under the agreement, Mr. Rodgers
agreed to purchase (upon consummation of certain additional investments by
Golder, Thoma, Cressey, Rauner Fund V, L.P. in the Company) up to an additional
7,904 shares of Class B Common Stock at a price of $10 per share; provided that
Mr. Rodgers was entitled to purchase all or any portion of such shares at a
price of $10 per share at such earlier time as Mr. Rodgers determined. Mr.
Rodgers purchased all 7,904 of such additional shares in January 1997. All
shares of Class B Common Stock owned by Mr. Rodgers will vest over a five-year
period beginning March 1997. In connection with and immediately prior to the
consummation of the Initial Stock Offering each share of Class B Common Stock
owned by Mr. Rodgers was converted into Common Stock. Upon completion of the
Initial Stock Offering, the portions of the agreement which restrict the
transfer of the Company's securities were terminated.
Mr. Rodgers' employment with the Company will continue until terminated by
the resignation, death or disability of Mr. Rodgers or by the Board in its good
faith judgment that termination of Mr. Rodgers' employment is in the best
interests of the Company. In the event Mr. Rodgers' employment is terminated
(i) by the Company without cause, (ii) by Mr. Rodgers with good reason or (iii)
as a result of Mr. Rodgers' death or disability, until the end of the six-month
period commencing on the date of his termination, the Company shall pay to Mr.
Rodgers (or his estate) his annual base salary and allow Mr. Rodgers to
continue to participate in all of the Company's medical, disability and life
insurance plans to the extent permitted by the Company's insurance carriers at
a cost not materially in excess of the Company's cost for such insurance
immediately prior to the date of termination. In addition, the Company shall
have the option to extend the severance period to the second anniversary of the
date of termination, during which period the Company shall pay to Mr. Rodgers
(or his estate) his annual base salary and allow Mr. Rodgers to continue to
participate in all of the Company's medical, disability and life insurance
plans to the extent permitted by the Company's insurance carriers at a cost not
materially in excess of the Company's cost for such insurance immediately prior
to the date of termination. Mr. Rodgers has agreed not to compete with the
Company during the term of his employment and
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<PAGE>
for six months thereafter and during the extended period (if any) and has
agreed not to solicit any employees or customers of the Company during the two
years following the date of termination of his employment.
Dennis O'Connor. Mr. O'Connor is party to a senior management agreement with
the Company dated as of December 31, 1996, as amended. Under the agreement, Mr.
O'Connor will receive an annual base salary of $165,000, which amount shall be
reviewed (but not reduced) annually by the Company's Chief Executive Officer
with the approval of the Board in its sole discretion. Mr. O'Connor will also
be entitled to all other benefits as are approved by the Board and made
available to the Company's senior management.
Under the agreement, Mr. O'Connor purchased 24 shares of Class B Common Stock
at a price of $10 per share. In addition, under the agreement, Mr. O'Connor
agreed to purchase (upon consummation of certain additional investments by
Golder, Thoma, Cressey, Rauner Fund V, L.P. in the Company) up to an additional
1,976 shares of Class B Common Stock at a price of $10 per share; provided that
Mr. O'Connor was entitled to purchase all or any portion of such shares at a
price of $10 per share at such earlier time or times as Mr. O'Connor
determined. Mr. O'Connor purchased all 1,976 of such additional shares in
January 1997. All shares of Class B Common Stock owned by Mr. O'Connor will
vest over a five-year period beginning March 1997. In connection with and
immediately prior to the consummation of the Initial Stock Offering, each share
of Class B Common Stock owned by Mr. O'Connor was converted into Common Stock.
Upon completion of the Initial Stock Offering, the portions of the agreement
which restrict the transfer of the Company's securities were terminated.
Mr. O'Connor's employment with the Company will continue until terminated by
the resignation, death or disability of Mr. O'Connor or by the Board in its
good faith judgment that termination of Mr. O'Connor's employment is in the
best interests of the Company. In the event Mr. O'Connor's employment is
terminated (i) by the Company without cause, (ii) by Mr. O'Connor with good
reason or (iii) as a result of Mr. O'Connor's death or disability, until the
end of the six-month period commencing on the date of his termination, the
Company shall pay to Mr. O'Connor (or his estate) his annual base salary and
allow Mr. O'Connor to continue to participate in all of the Company's medical,
disability and life insurance plans to the extent permitted by the Company's
insurance carriers at a cost not materially in excess of the Company's cost for
such insurance immediately prior to the date of termination. In addition, the
Company shall have the option to extend the severance period to the second
anniversary of the date of termination, during which period the Company shall
pay to Mr. O'Connor (or his estate) his annual base salary and allow Mr.
O'Connor to continue to participate in all of the Company's medical, disability
and life insurance plans to the extent permitted by the Company's insurance
carriers at a cost not materially in excess of the Company's cost for such
insurance immediately prior to the date of termination. Mr. O'Connor has agreed
not to compete with the Company during the term of his employment and for six
months thereafter and during the extended period (if any) and has agreed not to
solicit any employees or customers of the Company during the two years
following the date of termination of his employment.
Paul Ingersoll. Mr. Ingersoll is party to a senior management agreement with
the Company dated as of June 4, 1996, as amended. Under the agreement, Mr.
Ingersoll will receive an annual base salary of $120,000, which amount shall be
reviewed (but not reduced) annually by the Company's Chief Executive Officer
with the approval of the Board in its sole discretion. Mr. Ingersoll will also
be entitled to all other benefits as are approved by the Board and made
available to the Company's senior management.
Under the agreement, Mr. Ingersoll purchased 12 shares of Class B Common
Stock at a price of $10 per share. In addition, under the agreement, Mr.
Ingersoll agreed to purchase (upon consummation of certain additional
investments by Golder, Thoma, Cressey, Rauner Fund V, L.P. in the Company) up
to an additional 988 shares of Class B Common Stock at a price of $10 per
share; provided that Mr. Ingersoll was entitled to purchase all or any portion
of such shares at a price of $10 per share at such earlier time or times as Mr.
Ingersoll determined. Mr. Ingersoll purchased all 988 of such additional shares
in January 1997. All shares of Class B Common Stock owned by Mr. Ingersoll will
vest over a five-year period beginning March 1997. In connection with and
immediately prior to the consummation of the Initial Stock Offering, each share
of Class B
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Common Stock owned by Mr. Ingersoll was converted into Common Stock. Upon
completion of the Initial Stock Offering, the portions of the agreement which
restrict the transfer of the Company's securities were terminated.
Mr. Ingersoll's employment with the Company will continue until terminated by
the resignation, death or disability of Mr. Ingersoll or by the Board in its
good faith judgment that termination of Mr. Ingersoll's employment is in the
best interests of the Company. In the event Mr. Ingersoll's employment is
terminated (i) by the Company without cause, (ii) by Mr. Ingersoll with good
reason or (iii) as a result of Mr. Ingersoll's death or disability, until the
end of the six-month period commencing on the date of his termination, the
Company shall pay to Mr. Ingersoll (or his estate) his annual base salary and
allow Mr. Ingersoll to continue to participate in all of the Company's medical,
disability and life insurance plans to the extent permitted by the Company's
insurance carriers at a cost not materially in excess of the Company's cost for
such insurance immediately prior to the date of termination. In addition, the
Company shall have the option to extend the severance period to the second
anniversary of the date of termination, during which period the Company shall
pay to Mr. Ingersoll (or his estate) his annual base salary and allow Mr.
Ingersoll to continue to participate in all of the Company's medical,
disability and life insurance plans to the extent permitted by the Company's
insurance carriers at a cost not materially in excess of the Company's cost for
such insurance immediately prior to the date of termination. Mr. Ingersoll has
agreed not to compete with the Company during the term of his employment and
for six months thereafter and during the extended period (if any) and has
agreed not to solicit any employees or customers of the Company during the two
years following the date of termination of his employment.
Compensation Committee Interlocks and Insider Participation
In 1996 and 1997, the Company had no compensation committee or other
committee of the Board performing similar functions. Accordingly, decisions
concerning compensation of executive officers were made by the entire Board.
Other than Kevin Rodgers, there were no officers or employees of the Company
who participated in deliberations concerning such compensation matters.
401(k) Profit Sharing Plan
The Company maintains a savings plan (the "Savings Plan") qualified under
Section 401(a) and 401(k) of the Internal Revenue Code. Generally, all
employees of the Company in the United States who are at least 21 years of age
and who have completed six months of service are eligible to participate in the
Savings Plan. For each employee who elects to participate in the Savings Plan
and makes a contribution thereto, the Company makes a matching contribution of
50% of the first 5% of annual compensation contributed. In addition, the
Company may make discretionary profit sharing contributions under the Savings
Plan. The maximum contribution for any participant for any year is the maximum
amount permitted under Internal Revenue Code.
Committees of the Board of Directors
The Company has two standing committees of its Board of Directors: the
Compensation Committee (the "Compensation Committee") and the Audit Committee
(the "Audit Committee"). The Audit Committee, which currently consists of
Messrs. Thoma, Kessinger and Grove, is responsible for making recommendations
to the Board of Directors regarding the selection of independent auditors,
reviewing the results and scope of the audit and other services provided by the
Company's independent accountants and reviewing and evaluating the Company's
audit and control functions. The Compensation Committee, which currently
consists of Messrs. Thoma, Kessinger and St. Clair, makes recommendations
regarding the Incentive Plan and decisions concerning salaries and incentive
compensation for executive officers, key employees and consultants of the
Company.
The Board of Directors may also create other committees, including an
executive committee and a nominating committee.
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Long Term Incentive Plan
The Company has established the National Equipment Services, Inc. Long Term
Incentive Plan (the "Incentive Plan"). A maximum of 2,200,000 shares of Common
Stock, subject to adjustment, have been initially authorized for the granting
of stock options under the Incentive Plan. Options granted under the Incentive
Plan may be either "incentive stock options," which qualify for special tax
treatment under the Internal Revenue Code, or nonqualified stock options. The
purposes of the Incentive Plan are to advance the interests of the Company and
stockholders by providing Company employees with an additional incentive to
continue their efforts on behalf of the Company, as well as to attract to the
Company people of experience and ability. The Incentive Plan is intended to
comply with Rule 16b-3 of the Exchange Act.
All officers, directors and other key employees and consultants of the
Company or its subsidiaries are eligible to participate under the Incentive
Plan, as deemed appropriate by the Compensation Committee of the Board of
Directors. Eligible employees will not pay any cash consideration to the
Company to receive the options. The Incentive Plan is administered by the
Compensation Committee of the Board of Directors. The exercise price for
incentive stock options must be no less than the fair market value of the
Common Stock on the date of grant. The exercise price of nonqualified stock
options is not subject to any limitation based upon the then current market
value of the Common Stock. Options will expire no later than the tenth
anniversary of the date of grant. An option holder will be able to exercise
options from time to time, subject to vesting. Options will vest immediately
upon death or disability of a participant. Upon termination for cause or at
will by the Company, the unvested portion of the options will be forfeited.
Subject to the above conditions, the exercise price, duration of the options
and vesting provisions will be set by the Compensation Committee of the Board
of Directors in its discretion.
In connection with the Initial Stock Offering, the Company granted stock
options to purchase 912,000 shares of Common Stock to certain directors and
members of management, including Messrs. O'Connor and Ingersoll who each
received options to purchase 40,000 shares of Common Stock at the initial
public offering price. Such options vest in equal daily installments over the
five year period ending July 13, 2003. The options have a term of ten years.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of December 31, 1998 by
(i) each stockholder known by the Company to own beneficially five percent or
more of the outstanding shares of the Company's Common Stock, (ii) each current
director of the Company, (iii) each Named Executive Officer of the Company and
(iv) all directors of the Company and executive officers of the Company as a
group. As of December 31, 1998, there were 24,121,885 shares of Common Stock
outstanding. To the knowledge of the Company, each stockholder has sole voting
and investment power with respect to the shares indicated as beneficially
owned, unless otherwise indicated in a footnote. Unless otherwise indicated,
the business address of each person is the Company's corporate address.
<TABLE>
<CAPTION>
Number of
Shares(1) Percent(2)
---------- ----------
<S> <C> <C>
Golder, Thoma, Cressey, Rauner Fund V, L.P.(3)........... 13,861,142 57.5%
Kevin Rodgers(4)......................................... 1,112,100 4.6
Dennis O'Connor(5)....................................... 283,085 1.2
Paul Ingersoll(6)........................................ 150,085 *
Carl Thoma(7)............................................ 13,861,142 57.5
William Kessinger(7)..................................... 13,861,142 57.5
John Grove(8)............................................ 11,271 *
Ronald St. Clair......................................... 72,652 *
All Directors and Executive Officers as a Group (7
persons)(7)............................................. 15,490,335 64.2
</TABLE>
- --------
* Less than one percent.
(1) The number of shares includes shares of Common Stock subject to options
exercisable within 60 days of December 31, 1998.
(2) Shares subject to options exercisable within 60 days of December 31, 1998
are considered outstanding for the purpose of determining the percentage of
the class held by the holder of such option, but not for the purpose of
computing the percentage held by others.
(3) Includes 24,287 shares of Common Stock held by GTCR Associates V, a
partnership affiliated with Golder, Thoma, Cressey, Rauner Fund V, L.P. The
address of each of Golder, Thoma, Cressey, Rauner Fund V, L.P. and GTCR
Associates V is 6100 Sears Tower, Chicago, Illinois 60606.
(4) Includes 1,112,000 shares of Common Stock owned by Mr. Rodgers' family
limited partnership, Rodgers Investment Partners, L.P., as to which he
disclaims beneficial ownership.
(5) The shares of Common Stock beneficially owned by Mr. O'Connor include 5,085
shares subject to options.
(6) The shares of Common Stock beneficially owned by Mr. Ingersoll include
5,085 shares subject to options.
(7) Includes 13,836,855 shares of Common Stock held by Golder, Thoma, Cressey,
Rauner Fund V, L.P., of which GTCR V, L.P. is the general partner, and also
includes 24,287 shares of Common Stock held by GTCR Associates V. Each of
Messrs. Thoma and Kessinger is a principal of Golder, Thoma, Cressey,
Rauner, Inc., the general partner of GTCR V, L.P. and the managing general
partner of GTCR Associates V, and therefore may be deemed to share
investment and voting control over the shares of Common Stock held by
Golder, Thoma, Cressey, Rauner Fund V, L.P. and GTCR Associates V. Each of
Messrs. Thoma and Kessinger disclaims beneficial ownership of the shares of
Common Stock owned by Golder, Thoma, Cressey, Rauner Fund V, L.P. and GTCR
Associates V. The address of each of these holders is 6100 Sears Tower,
Chicago, Illinois 60606.
(8) The shares of Common Stock beneficially owned by Mr. Grove include 1,271
shares subject to options.
(9) The shares of Common Stock beneficially owned by Mr. St. Clair include
1,271 shares subject to options.
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<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Reclassification and Stock Split
Immediately prior to the consummation of the Initial Stock Offering, each
outstanding share of the Company's Class B Common Stock was converted into one
share of Common Stock and each outstanding share of the Company's Class A
Common Stock (the "Old Preference Stock") was converted into a number of shares
of Common Stock based on a specified formula. Each share of Old Preference
Stock was converted into approximately 1,040 shares of Common Stock. Each share
of Common Stock was then split into 139 shares of Common Stock.
Certain Loans to Executives
The Company loaned $64,000 to Mr. Rodgers, $20,000 to Mr. O'Connor and
$10,000 to Mr. Ingersoll pursuant to promissory notes (the "Executive Notes")
to finance their purchase of the Company's securities. See "Management--
Management Employment Agreements." Each of the Executive Notes is secured by a
pledge of the securities purchased with such Executive Note pursuant to an
Executive Stock Pledge Agreement between the Company and each of Messrs.
Rodgers, O'Connor and Ingersoll. The Executive Notes bear interest at a rate
per annum equal to the applicable federal rate as set forth in Section 1274(d)
of the Internal Revenue Code of 1986, as amended. The principal amount of the
Executive Notes and all interest accrued thereon mature in part on June 4,
2006, with the remainder maturing on January 6, 2007. The Executive Notes may
be prepaid in full or in part at any time.
Professional Services Agreement
In connection with the formation of the Company, the Company entered into a
Professional Services Agreement (the "Professional Services Agreement") with
Golder, Thoma, Cressey, Rauner, Inc. pursuant to which Golder, Thoma, Cressey,
Rauner, Inc. provided financial and management consulting services to the
Company. Under the Professional Services Agreement, Golder, Thoma, Cressey,
Rauner, Inc. received an annual management fee of $200,000 (plus reimbursement
of out-of-pocket expenses) and a fee of 1% of the amount of debt or equity
capital raised by the Company from any source, for their assistance in
obtaining such capital. For the period from inception (June 4, 1996) through
December 31, 1996, the Company had paid or accrued $0 in fees under the
Professional Services Agreement. For the year ended December 31, 1997, the
Company had paid or accrued $1,047,238 in fees under the Professional Services
Agreement. The agreement was terminated upon the consummation of the Initial
Stock Offering, and no fee was paid with respect to the issuance of Common
Stock in the Initial Stock Offering.
Stockholders Agreement and Registration Agreement
In connection with the formation of the Company, the Company and its
stockholders entered into a Stockholders Agreement dated as of June 4, 1996
(the "Stockholders Agreement") which (i) provided for the designation of the
Board of Directors of the Company, (ii) imposed certain restrictions on the
transfer of shares of the Company, (iii) required the stockholders to take
certain actions upon the approval by a majority of the stockholders in
connection with an initial public offering or a sale of the Company, (iv)
required the Company to offer to sell shares to the stockholders under certain
circumstances upon authorization of an issuance or sale of additional shares
and (v) granted certain of the stockholders certain participation rights in
connection with a sale of shares by other stockholders. The Stockholders
Agreement was terminated upon consummation of the Initial Stock Offering.
In connection with the formation of the Company, the Company and its
stockholders entered into a Registration Agreement dated as of June 4, 1996
(the "Registration Agreement") pursuant to which the Stockholders have the
right in certain circumstances and, subject to certain conditions, to require
the Company to register shares of the Company's Common Stock held by them under
the Securities Act. Under the Registration Agreement, except in limited
circumstances, the Company is obligated to pay all expenses in connection with
such registration.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Credit Facility
On July 17, 1998 (the "Borrowing Date"), the Company, as borrower, each of
Albany Ladder Company, Inc., BAT Acquisition Corp., Carl's Mid South Rent-All
Center Incorporated, Falconite Aviation, Inc., Falconite Equipment, Inc.,
Falconite Inc., Falconite Rebuild Center, Inc., McCurry & Falconite Equipment
Co., Inc., M&M Properties, Inc., NES Acquisition Corp., NES East Acquisition
Corp. and NES Michigan Acquisition Corp., as guarantors (collectively, the
"Guarantors" and, together with the Company, the "Obligors"), entered into a
credit agreement (as amended, the "Credit Facility") with First Union National
Bank, as agent, and certain other financial institutions (the "Banks").
Shaughnessy and NES Studio Rentals (formerly Rebel Studio Rentals) later joined
as additional Guarantors upon their acquisition by the Company. The Credit
Facility provides to the Company a $100.0 million term loan and up to $300.0
million of revolving loans (with a letter of credit subfacility not to exceed
$25.0 million), subject to availability based on certain financial tests
including a borrowing base (which is based on a percentage of eligible
receivables, eligible parts and supplies inventory, eligible rental equipment
and eligible equipment held for resale). The Credit Facility was used to
refinance indebtedness under the Company's old credit facility and to finance
the acquisition of Falconite. Subject to certain restrictions, the Credit
Facility may be used to finance future permitted acquisitions and for working
capital and other general corporate purposes. The Credit Facility ranks senior
in right of payment to the Notes.
Repayment. Outstanding term loans and revolving loans under the Credit
Facility must be repaid on the fifth anniversary of the Borrowing Date.
Revolving loans made pursuant to the Credit Facility may be borrowed, repaid
and reborrowed, without premium or penalty, from time to time until the fifth
anniversary of the Borrowing Date, subject to the satisfaction of certain
conditions on the date of any such borrowing.
Security; Guaranty. The obligations of the Obligors under the Credit Facility
are jointly and severally secured by all of the Obligors' existing and future
property, subject to certain exceptions. In addition, the Company has pledged
the stock of each of its subsidiaries and Falconite has pledged the stock of
each of its subsidiaries as further security for the obligations under the
Credit Facility. In addition, the obligations of the Company under the Credit
Facility are guaranteed by each of the Guarantors and certain of the Company's
future subsidiaries.
Interest. At the Company's option, the interest rate per annum applicable to
the loans under the Credit Facility will be a fluctuating rate of interest
measured by reference to one or a combination of the following: (i) the Base
Rate (as defined in the Credit Facility), plus the applicable borrowing margin
or (ii) the relevant LIBOR Rate (as defined in the Credit Facility), plus the
applicable borrowing margin. The applicable borrowing margin under the Credit
Facility will range from 0.00% to 1.25% for Base Rate-based borrowings and
1.25% to 2.50% for LIBOR Rate-based borrowings. Both Base Rate and LIBOR rate
interest on the Credit Facility will be determined quarterly based on the ratio
of Total Funded Debt (as defined in the Credit Facility) to EBITDA (as defined
in the Credit Facility).
Fees. The Company has agreed to pay certain fees in connection with the
Credit Facility, including (i) letter of credit fees, (ii) agency and lender's
fees and (iii) unused line fees. Unused line fees are payable quarterly at a
rate per annum ranging from 0.3125% to 0.50% on the undrawn amounts of the
revolving loan commitment under the Credit Facility based on the ratio of Total
Funded Debt to EBITDA.
Covenants. The Credit Facility requires the Company to meet certain financial
tests, including maintaining (i) a minimum interest coverage ratio of (A) 2.25
to 1.0 for each fiscal quarter ending prior to March 31, 1999 and (B) 2.50 to
1.0 for each fiscal quarter ending on or after March 31, 1999; (ii) a maximum
total debt leverage ratio of (A) 4.75 to 1.0 for each fiscal quarter ending
prior to March 31, 1999, (B) 4.50 to 1.0 for each fiscal quarter ending on or
after March 31, 1999 but prior to December 31, 1999 and (C) 4.25 to 1.0 for
each fiscal quarter ending on or after December 31, 1999; (iii) a maximum
senior debt leverage ratio of (A) 3.50 to 1.0 for each fiscal quarter ending
prior to March 31, 1999, (B) 3.25 to 1.0 for the fiscal quarter ending June 30,
1999, (C) 3.0 to 1.0 for the fiscal quarter ending September 30, 1999 and (D)
2.75 to 1.0 for each fiscal quarter
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<PAGE>
ending on or after December 31, 1999 (provided that in the event the Company
elects in certain circumstances to reduce by 0.25% its borrowing margins under
the Credit Facility, the maximum allowable senior debt leverage ratio for each
corresponding period shall be reduced by 0.25); (iv) a minimum consolidated net
worth of $100,000,000, increased on a cumulative basis as of the end of each
fiscal quarter of the Company, commencing with the fiscal quarter ending
December 31, 1997, by an amount equal to (A) 50% of Consolidated Net Income (as
defined in the Credit Facility) for the fiscal quarter then ended (without any
deductions for any losses) and (B) 100% of the Net Cash Proceeds (as defined in
the Credit Facility) of issuances of capital stock by the Company and the
Guarantors occurring subsequent to the Borrowing Date. The Credit Facility also
contains covenants which, among other things, restrict the ability of the
Obligors (subject to certain exceptions) to incur liens, incur indebtedness,
sell assets, engage in mergers, amend their certificates of incorporation or
bylaws, guarantee debt, declare dividends or redeem or repurchase capital
stock, make loans and investments, transact with affiliates, issue additional
securities, modify material contracts, grant liens, engage in sale-leaseback
transactions and make capital expenditures. The Credit Facility also requires
the Obligors to satisfy certain customary affirmative covenants and to make
certain customary indemnifications to the Banks and the agent under the Credit
Facility.
Events of Default. The Credit Facility contains customary events of default,
including payment defaults, breach of representations or warranties, covenant
defaults, certain events of bankruptcy and insolvency, ERISA violations,
judgment defaults, cross-defaults to certain other indebtedness and a change in
control of the
Company. Upon the occurrence of an event of default under the Credit Facility
the Banks could, among other things, (1) make a demand for immediate payment of
all amounts due and owing under the Credit Facility, (2) terminate all
commitments to make revolving loans under the Credit Facility, and (3) enforce
their rights under the Credit Facility and the security documents relating
thereto, either judicially or otherwise, including, among other things, the
right to sell the Company's assets and retain the proceeds to the extent of
amounts due and owing under the Credit Facility.
Series B Senior Subordinated Notes
On November 25, 1997, the Company issued $100.0 million aggregate principal
amount of 10% Senior Subordinated Notes due 2004 (the "Original Notes") and
related guarantees pursuant to an Indenture (the "Series B Notes Indenture")
dated November 25, 1997, as supplemented, among the Company, the subsidiary
guarantors identified therein and Harris Trust and Savings Bank, as trustee, in
a transaction not registered under the Securities Act in reliance upon an
exemption under the Securities Act (the "Series B Notes Offering"). The
Original Notes accrued interest from their original issuance date at the rate
of 10% per annum and had substantially similar provisions as the Exchange Notes
with respect to redemption, changes in control, ranking, asset sales and other
restrictive covenants. On September 16, 1998, pursuant to its Registration
Statement on Form S-4 (File No. 333-43553) filed with the Commission on
December 31, 1997 and declared effective on September 15, 1998, the Company
offered to exchange $1,000 principal amount of its 10% Senior Subordinated
Notes due 2004, Series B (the "Series B Notes") for each $1,000 principal
amount outstanding of the Original Notes. The form and terms of the Series B
Notes are the same as the form and terms of the Original Notes (which they
replaced) except that (i) the Series B Notes bear a Series B designation,
(ii) the Series B Notes have been registered under the Securities Act and,
therefore, do not bear legends restricting the transfer thereof and (iii) the
holders of the Series B Notes are not entitled to any registration rights. The
exchange offer was consummated on October 20, 1998, with all $100.0 million
principal amount of the Original Notes being tendered for exchange. As a
result, the Company currently has $100.0 million of Series B Notes outstanding;
no Original Notes remain outstanding.
The Series B Notes are general unsecured obligations of the Company,
subordinated in right of payment to all current and future Senior Debt (as
defined in the Series B Notes Indenture). The Series B Notes mature on November
30, 2004. Cash interest accrues on the Series B Notes at a rate of 10% and is
payable semi-annually on May 30 and November 30 of each year. The Series B
Notes are fully and unconditionally guaranteed (the "Series B Subsidiary
Guarantees") by all the Subsidiary Guarantors.
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After November 30, 2001, the Series B Notes are redeemable at the Company's
option, in whole or in part, at the prices set forth in the Series B Notes
Indenture plus accrued and unpaid interest, if any, to the redemption date. The
Company may also redeem up to 33% of the Series B Notes on or prior to November
25, 2000 with the net cash proceeds of a public offering of common stock of the
Company. In addition, at any time on or prior to November 30, 2001, the Company
may redeem the Series B Notes upon the occurrence of or in connection with a
Change of Control (as defined in the Series B Notes Indenture).
Junior Convertible Note
On September 17, 1998, the Company issued the $15.0 million Junior
Convertible Note in connection with its acquisition of all of the issued and
outstanding capital stock of Shaughnessy. The Company issued the Junior
Convertible Note to the former stockholders of Shaughnessy. The Junior
Convertible Note accrues interest at the rate of 8% per annum and the Company
may prepay all or any portion of the outstanding principal amount of the Junior
Convertible Note at any time, except as may be prohibited by any debt which is
not by its terms on parity with or subordinated to the Junior Convertible Note.
In addition, at any time prior to September 17, 1999, the holders of the Junior
Convertible Note may elect to convert the principal amount of the Junior
Convertible Note, plus accrued interest, into the number of shares of Common
Stock equal to such amount divided by $13.00. In the event the Junior
Convertible Note has not been prepaid in full or converted into shares of
Common Stock as described in the preceding sentence, then on September 17, 1999
the outstanding principal amount of the Junior Convertible Note, plus accrued
interest, will automatically convert into a number of shares of Common Stock
having a fair market value equal to the principal amount of the Junior
Convertible Note plus accrued and unpaid interest.
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DESCRIPTION OF EXCHANGE NOTES
General
The Exchange Notes will be issued as a separate series pursuant to an
Indenture dated December 11, 1998 (the "Indenture") among the Company, the
Subsidiary Guarantors and Harris Trust and Savings Bank, as trustee (the
"Trustee"). The form and terms of the Exchange Notes are the same as the form
and terms of the Outstanding Notes (which they replace) except that (1) the
Exchange Notes bear a Series D designation and a different CUSIP number from
the Outstanding Notes, (2) the Exchange Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting their
transfer, and (3) the holders of Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreements. Any Outstanding Notes that
remain outstanding after completion of the Exchange Offer, together with the
Exchange Notes issued in connection with the Exchange Offer, will be treated as
a single class of securities under the Indenture. The term "Notes" used in this
Prospectus refers collectively to the Outstanding Notes and the Exchange Notes.
The terms of the Exchange Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (the
"Trust Indenture Act"). Because this section of the Prospectus merely
summarizes the terms of the Exchange Notes, you should read the Indenture and
the Trust Indenture Act for more complete information regarding the terms of
the Exchange Notes. Copies of the Indenture and the Registration Rights
Agreements can be obtained by following the instructions contained in this
Prospectus under the heading "Where You Can Find More Information." You will
find the definitions of certain capitalized terms used in the following summary
under the heading "--Certain Definitions." For purposes of this summary, the
term "Company" refers only to National Equipment Services, Inc. and not to any
of its Subsidiaries.
The Notes will be general unsecured obligations of the Company, will rank
subordinate in right of payment to all existing and future Senior Debt of the
Company, will rank equal in right of payment to the Series B Notes and future
senior subordinated Indebtedness of the Company and will rank senior in right
of payment to all existing and future subordinated Indebtedness of the Company.
As of September 30, 1998, on a pro forma basis, there would have been $184.6
million of Senior Debt of the Company and the Subsidiary Guarantors outstanding
and $221.2 million of equal Indebtedness of the Company and the Subsidiary
Guarantors outstanding. As of September 30, 1998, on a pro forma basis, the
Company, through its Subsidiaries, would have had additional liabilities
(including trade payables) aggregating approximately $64.2 million. The
Indenture allows the Company to incur additional Senior Debt in the future.
All of the Company's Subsidiaries are currently Restricted Subsidiaries.
However, under certain circumstances, the Company will be able to designate
current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries will not be subject to many of the restrictive covenants set forth
in the Indenture.
Principal, Maturity and Interest
The Notes are limited in aggregate principal amount to $175.0 million and
will mature on November 30, 2004. Interest on the Notes will accrue at the rate
of 10% per annum and will be payable semi-annually in arrears on May 30 and
November 30, commencing on May 30, 1999, to Holders of record on the
immediately preceding May 15 and November 15. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest
has been paid, from December 11, 1998. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. Principal, premium, if
any, and interest and liquidated damages on the Notes will be payable at the
office or agency of the Company maintained for such purpose within the City and
State of New York or, at the option of the Company, payment of interest and
liquidated damages may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
provided that all payments of principal, premium, if any, interest and
liquidated damages with respect to Notes the Holders of which have given wire
transfer instructions to the Company will be required to be made by wire
transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Company, the Company's
office or agency in New
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York will be the office of the Trustee maintained for such purpose. The Company
will issue the Notes in denominations of $1,000 and integral multiples thereof.
Subordination
The payment of principal of, premium, if any, and interest on the Notes will
be subordinated in right of payment, as set forth in the Indenture, to the
prior payment in full of all Senior Debt, whether outstanding on the date of
the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before the Holders of Notes will be
entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Debt are paid in full, any distribution to
which the Holders of Notes would be entitled shall be made to the holders of
Senior Debt (except that Holders of Notes may receive and retain Permitted
Junior Securities and payments made from the trust described under the heading
"--Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under the
heading "--Legal Defeasance and Covenant Defeasance") if (1) a default in the
payment of the principal of, premium, if any, or interest on Designated Senior
Debt occurs and is continuing beyond any applicable period of grace or (2) any
other default occurs and is continuing with respect to Designated Senior Debt
that permits holders of the Designated Senior Debt as to which such default
relates to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Company or the holders of any
Designated Senior Debt. Payments on the Notes may and shall be resumed (a) in
the case of a payment default, upon the date on which such default is cured or
waived and (b) in case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the maturity
of any Designated Senior Debt has been accelerated. No new period of payment
blockage may be commenced unless and until (1) 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (2) all
scheduled payments of principal, premium, if any, and interest on the Notes
that have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default shall have been cured or waived for a
period of not less than 90 consecutive days.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
Because payment on the Notes is subordinated to payment on the Senior Debt,
in the event of a liquidation or insolvency, Holders of Notes may recover less
ratably than creditors of the Company who are holders of Senior Debt. On a pro
forma basis, $184.6 million of Senior Debt and $221.2 million of equal
Indebtedness of the Company and the Subsidiary Guarantors was outstanding as of
September 30, 1998. The Indenture limits, subject to certain financial tests,
the amount of additional Indebtedness, including Senior Debt, that the Company
and its Subsidiaries can incur. See "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" for further information.
Subsidiary Guarantees
The Company's payment obligations under the Notes will be fully and
unconditionally and jointly and severally guaranteed (the "Subsidiary
Guarantees") by the Subsidiary Guarantors. The Subsidiary Guarantee of each
Subsidiary Guarantor will be general unsecured obligations of such Subsidiary
Guarantor, will rank
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subordinate in right of payment to all existing and future Senior Debt of such
Subsidiary Guarantor, will rank equal in right of payment to the Series B
Subsidiary Guarantees and future senior subordinated Indebtedness of such
Subsidiary Guarantor and will rank senior in right of payment to all existing
and future subordinated Indebtedness of such Subsidiary Guarantor. The
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be
limited so as not to constitute a fraudulent conveyance under applicable law.
See, however, "Risk Factors--Fraudulent Conveyance" for further information.
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person), another corporation, Person or entity whether or not affiliated with
such Subsidiary Guarantor unless:
(1) except in the case of a merger of such Subsidiary Guarantor with or
into the Company or another Subsidiary Guarantor and subject to the
provisions of the following paragraph, the Person formed by or surviving
any such consolidation or merger (if other than such Subsidiary Guarantor)
assumes all the obligations of such Subsidiary Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Registration Rights
Agreement;
(2) immediately after giving effect to such transaction, no Event of
Default exists; and
(3) except in the case of a merger of such Subsidiary Guarantor with or
into the Company or another Subsidiary Guarantor, the Company would be
permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio,
immediately after giving effect to such transaction, to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the covenant described below under the caption "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture. See "--Repurchase at Option of Holders--Asset Sales" for more
information.
Optional Redemption
Except as described in the following paragraphs, the Company will not have
the option to redeem the Notes prior to November 30, 2001. Beginning November
30, 1999, the Company will have the option to redeem the Notes, in whole or in
part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and liquidated damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period
beginning on November 30 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001......................................................... 105.000%
2002......................................................... 102.500%
2003 and thereafter.......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to November 20, 2000, the
Company may on any one or more occasions redeem up to 33% of the aggregate
principal amount of Notes issued under the Indenture at a redemption price of
110% of the principal amount thereof, plus accrued and unpaid interest and
liquidated damages thereon, if any, to the redemption date, with the net cash
proceeds of a public offering of common stock of the Company; provided that at
least 67% of the aggregate principal amount of Notes remain
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outstanding immediately after the occurrence of such redemption (excluding
Notes held by the Company and its Subsidiaries); and provided, further, that
such redemption shall occur within 45 days of the date of the closing of such
public offering.
In addition, at any time on or prior to November 30, 2001, the Company will
have the option to redeem the Notes as a whole but not in part upon the
occurrence of or in connection with a Change of Control, upon not less than 30
nor more than 60 days' notice (but in no event may any such redemption occur
prior to or more than 90 days after the occurrence of such Change of Control),
at a redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and plus accrued and unpaid interest and liquidated
damages, if any, to the redemption date, subject to the right of Holders on the
relevant record date to receive interest due on the relevant interest payment
date.
"Applicable Premium" means, with respect to a Note at any redemption date,
the greater of (i) 1.0% of the principal amount of such Note or (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at November 30, 2001 (such redemption price being set forth in the table above)
plus (2) all required interest payments due on such Note through November 30,
2001 (excluding accrued but unpaid interest), computed using a discount rate
equal to the Treasury Rate plus 75 basis points, over (B) the principal amount
of such Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H. 15(519)
which has become publicly available at least two Business Days prior to the
redemption date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the redemption date to November 30, 2001, provided, however, that
if the period from the redemption date to November 30, 2001 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the redemption date to November 30, 2001
is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, the Trustee
will select Notes for redemption in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed,
or, if the Notes are not so listed, on a pro rata basis, by lot or by such
method as the Trustee deems fair and appropriate; provided that no Notes of
$1,000 or less shall be redeemed in part. Notices of redemption will be mailed
by first class mail at least 30 but not more than 60 days before the redemption
date to each Holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note will state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. Notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on
Notes or portions of them called for redemption.
Mandatory Redemption
The Company will not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
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Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and liquidated damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
issue a press release announcing the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
In the event of a Change of Control, there can be no assurance that the
Company will have or be able to acquire sufficient funds to pay to purchase
price for all of the Notes that the Company might be required to purchase. In
addition, the holders of the Series B Notes are entitled to similar rights
under the Series B Notes Indenture upon the occurrence of a Change of Control.
In addition, the Credit Facility currently prohibits the Company from
purchasing any Notes prior to maturity, and also provides that certain change
of control events with respect to the Company would constitute a default
thereunder. Any future credit agreements or other agreements relating to Senior
Debt to which the Company becomes a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when the Company
is prohibited from purchasing Notes, the Company could seek the consent of its
lenders to the purchase of Notes or could attempt to refinance the borrowings
that contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited from purchasing
Notes. In such case, the Company's failure to purchase tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute as default under the Credit Facility. In such circumstances, the
subordination provisions in the Indenture would restrict payments to the
Holders of Notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
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"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole to any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act) other than a Principal or
a Related Party of a Principal (as defined below);
(2) the adoption by the Company of a plan relating to its liquidation or
dissolution;
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person" (as
defined above), other than the Principals and their Related Parties,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition), directly
or indirectly, of more than 50% of the Voting Stock of the Company
(measured by voting power rather than number of shares); or
(4) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
The definition of Change of Control includes any transaction described in the
preceding sentence that is approved by the Board of Directors.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Restricted Subsidiaries taken as a whole to another Person or group may
be uncertain.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (1) was a member of such Board of
Directors on the date of the Indenture, (2) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or (3) was nominated for election or elected to such
Board of Directors pursuant to Golder, Thoma, Cressey, Rauner Fund V, L.P.'s
rights under the Stockholders Agreement.
"Principals" means Golder, Thoma, Cressey, Rauner Fund V, L.P. and its
affiliates and Messrs. Kevin Rodgers, Dennis O'Connor and Paul Ingersoll,
members of their immediate families and trusts of which such persons are the
beneficiaries.
"Related Party" with respect to any Principal means (1) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (2) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (1).
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) of the assets
or Equity Interests issued or sold or otherwise disposed of; and
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(2) at least 75% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of cash; provided that the amount
of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets and as to which the Company or
such Restricted Subsidiary is released from further liability and (y) any
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are contemporaneously
(subject to ordinary settlement periods) converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received), shall
be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the
Company may apply such Net Proceeds, at its option, (a) to repay Senior Debt,
or (b) to the acquisition of a majority of the assets of, or a majority of the
Voting Stock of, another Permitted Business, the making of a capital
expenditure or the acquisition of other long-term assets or properties
(including, without limitation, equipment) that are used or useful in a
Permitted Business. Pending the final application of any such Net Proceeds, the
Company may temporarily reduce revolving credit borrowings or otherwise invest
such Net Proceeds in any manner that is not prohibited by the Indenture. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $7.0 million,
the Company will be required to make an offer to all Holders of Notes and all
holders of equal Indebtedness containing provisions similar to those set forth
in the Indenture with respect to offers to purchase or redeem with the proceeds
of sales of assets (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes and such other Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and liquidated
damages, if any, thereon to the date of purchase, in accordance with the
procedures set forth in the Indenture and such other Indebtedness. To the
extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use such Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount of Notes and
such other Indebtedness tendered into such Asset Sale Offer surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes and such other Indebtedness to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
Certain Covenants
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the direct
or indirect holders of the Company's or any of its Restricted Subsidiaries'
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or to the Company or a Restricted Subsidiary of the Company); (2)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent
of the Company; (3) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is equal with or subordinated to the Notes, except a payment of interest or
principal at Stated Maturity; or (4) make any Restricted Investment (all such
payments and other actions set forth in clauses (1) through (4) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
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(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after November 25, 1997 (excluding Restricted Payments
permitted by clauses (2), (3), (4), (6) and (8) of the next succeeding
paragraph), is less than the sum, without duplication, of (1) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after November 25, 1997 to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(2) 100% of the aggregate net cash proceeds received by the Company since
November 25, 1997 as a contribution to its common equity capital or from
the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus (3)
to the extent that any Restricted Investment that was made after November
25, 1997 is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial
amount of such Restricted Investment, plus (4) in the event the Company or
any Restricted Subsidiary makes any Investment in a Person that, as a
result of or in connection with such Investment, becomes a Restricted
Subsidiary, an amount equal to the Company's or any Restricted Subsidiary's
existing Restricted Investment in such Person that was previously treated
as a Restricted Payment.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any equal or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company)
of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c)(2) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of equal
or subordinated Indebtedness with the net cash proceeds from an incurrence
of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of the Company
to the holders of any class of its common Equity Interests on a pro rata
basis;
(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary
of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $1.0 million in any twelve-month
period and no Default or Event of Default shall have occurred and be
continuing immediately after such transaction;
(6) the making and consummation of an Asset Sale Offer to holders of
Indebtedness equal with or subordinate to the Notes in accordance with the
provisions described above under "Asset Sales;"
(7) the making of loans to officers and directors of the Company or any
Restricted Subsidiary, the proceeds of which are contemporaneously used to
purchase common stock of the Company, in an amount not to exceed $5.0
million at any one time outstanding;
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(8) the repurchase, redemption, defeasance, retirement, refinancing or
acquisition for value or payment of principal of subordinated or equal
Indebtedness at a purchase price not greater than 101% of the principal
amount of such subordinated or equal Indebtedness in the event of a Change
of Control pursuant to a provision similar to the "--Repurchase at the
Option of the Holders--Change of Control" provisions above; provided,
however, that prior to the repurchase of any subordinated Indebtedness and
concurrently with the repurchase of any equal Indebtedness, the Company has
made an offer to purchase as provided in "Repurchase at the Option of the
Holders--Change of Control" above with respect to the Notes and has
repurchased all Notes validly tendered for payment in connection with such
offer to purchase; and
(9) the making of additional Restricted Payments in an amount not to
exceed $5.0 million.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing selected by the Board of Directors if such fair market value exceeds
$5.0 million. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed,
together with a copy of any fairness opinion or appraisal required by the
Indenture.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Restricted Subsidiaries to issue any shares of
preferred stock; provided, however, that the Company may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock and the
Subsidiary Guarantors may incur Indebtedness or issue preferred stock if the
Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock or preferred stock is issued would have
been at least 2.0 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock or preferred stock had been
issued, as the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness under the Credit Facility; provided that the aggregate
principal amount of all Indebtedness (with letters of credit being
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deemed to have a principal amount equal to the maximum potential liability
of the Company and the Subsidiary Guarantors thereunder) outstanding under
the Credit Facility after giving effect to such incurrence does not exceed
the greater of (a) $115.0 million or (b) the Borrowing Base;
(2) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness represented by the Notes and the Subsidiary Guarantees in an
aggregate principal amount of $125.0 million outstanding on the date of the
Indenture;
(4) the incurrence by the Company or any of the Subsidiary Guarantors of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Company or such Subsidiary Guarantor, in an aggregate principal amount not
to exceed $10.0 million at any time outstanding;
(5) the incurrence by the Company or any of the Subsidiary Guarantors of
Indebtedness in connection with the acquisition of assets or a new
Subsidiary; provided that such Indebtedness was incurred by the prior owner
of such assets or such Subsidiary prior to such acquisition by the Company
or one of the Subsidiary Guarantors and was not incurred in connection
with, or in contemplation of, such acquisition by the Company or one of the
Subsidiary Guarantors; and provided further that the principal amount (or
accreted value, as applicable) of such Indebtedness, together with any
other outstanding Indebtedness incurred pursuant to this clause (5) and any
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (5), does not exceed
$10.0 million at any time outstanding;
(6) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph hereof or clauses (1), (2) or (3) of
this paragraph or this clause (6);
(7) the incurrence by the Company or any of the Subsidiary Guarantors of
intercompany Indebtedness or preferred stock between or among the Company
and any of the Subsidiary Guarantors; provided, however, that (A) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness or preferred stock being held by a Person other than the
Company or a Subsidiary Guarantor and (B) any sale or other transfer of any
such Indebtedness or preferred stock to a Person that is not either the
Company or a Subsidiary Guarantor shall be deemed, in each case, to
constitute an incurrence of such Indebtedness or an issuance of such
preferred stock by the Company or such Subsidiary Guarantor, as the case
may be, that was not permitted by this clause (7);
(8) the incurrence by the Company or any of the Subsidiary Guarantors of
Hedging Obligations;
(9) the guarantee by the Company or any of the Subsidiary Guarantors of
Indebtedness of the Company or a Subsidiary Guarantor that was permitted to
be incurred by another provision of this covenant;
(10) the incurrence by the Company or any of the Subsidiary Guarantors of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (10), not to exceed $10.0
million; and
(11) the incurrence by the Company's Unrestricted Subsidiaries of Non-
Recourse Debt, provided, however, that if any such Indebtedness ceases to
be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (11).
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in clauses (1) through (11) above or is entitled to
be incurred pursuant to the first paragraph of this covenant, the Company
shall, in its
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sole discretion, classify such item of Indebtedness in any manner that complies
with this covenant. Accrual of interest, accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Stock for purposes of this covenant; provided, in each
such case, that the amount thereof is included in Fixed Charges of the Company
as accrued.
Liens
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned
or hereafter acquired, or any income or profits therefrom or assign or convey
any right to receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (1)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (x) on
its Capital Stock or (y) with respect to any other interest or participation
in, or measured by, its profits, or (b) pay any Indebtedness owed to the
Company or any of its Restricted Subsidiaries, (2) make loans or advances to
the Company or any of its Restricted Subsidiaries or (3) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries.
However, the foregoing restrictions will not apply to encumbrances or
restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on November 25, 1997, (b) the Credit Facility as in effect as of the
date of the Indenture, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are not
materially more restrictive, taken as a whole, with respect to such dividend
and other payment restrictions than those contained in the Credit Facility as
in effect on the date of the Indenture, (c) the Indenture and the Notes, (d)
applicable law, (e) any instrument or contract of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such instrument or contract was entered into
in connection with or in contemplation of such acquisition), which encumbrance
or restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person, so
acquired, (f) customary non-assignment provisions in leases and other
agreements entered into in the ordinary course of business and consistent with
past practices, (g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (3) above on the property so acquired, (h) any agreement for the sale of
a Restricted Subsidiary that restricts distributions by that Restricted
Subsidiary pending its sale, (i) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced (as
determined in good faith by the Board of Directors), (j) secured Indebtedness
otherwise permitted to be incurred pursuant to the provisions of the covenant
described above under the caption "--Liens" that limits the right of the debtor
to dispose of the assets securing such Indebtedness, (k) provisions with
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business and (l) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall acquire or create another Subsidiary after the date of the
Indenture (other than an Unrestricted Subsidiary), then such newly acquired or
created Subsidiary shall become a Subsidiary Guarantor and execute a
Supplemental Indenture in accordance with the terms of the Indenture.
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Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless:
(1) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
(2) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall
have been made assumes all the obligations of the Company under the
Registration Rights Agreements, the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Event of Default exists; and
(4) except in the case of a merger of the Company with or into a
Subsidiary Guarantor, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or
to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred
at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (1) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (2) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (1) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing selected by the Board of Directors.
Notwithstanding the foregoing, the following items shall not be deemed to be
Affiliate Transactions:
(1) any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) payment of reasonable directors fees to Persons who are not otherwise
Affiliates of the Company;
(4) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "--Restricted Payments" as well
as transactions that do not constitute Restricted Payments by
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virtue of exceptions set forth in the definitions of "Investments" and
"Permitted Investments" set forth below under the caption "Certain
Definitions;"
(5) reasonable indemnity provided on behalf of officers, directors,
employees, consultants or agents of the Company or any of its Restricted
Subsidiaries as determined in good faith by the Company's Board of
Directors; and
(6) any transactions undertaken pursuant to any contractual obligations
or rights in existence on November 25, 1997 (as in effect on such date) as
described herein under the caption "Certain Relationships and
Transactions."
Anti-Layering
The Indenture provides that (1) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes, and (2) no Subsidiary Guarantor will
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to the Senior
Debt of such Subsidiary Guarantor and senior in any respect in right of payment
to the Subsidiary Guarantees.
Business Activities
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, engage in any business other than Permitted
Businesses, except to such extent as would not be material to the Company and
its Restricted Subsidiaries taken as a whole.
Payments for Consent
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder of any Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders of the Notes that consent, waive or agree
to amend in the time frame, on the terms and subject to the conditions set
forth in the solicitation documents relating to such consent, waiver or
agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (1) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" that describes
the financial condition and results of operations of the Company and its
consolidated Subsidiaries and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (2) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports, in each case within the
time periods specified in the Commission's rules and regulations. In addition,
following the consummation of the exchange offer contemplated by the
Registration Rights Agreements whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available
to securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as is required for an offer or sale of the
Notes to qualify for an exemption under Rule 144A, it will furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
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Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default:
(1) default for 30 days in the payment when due of interest on, or
liquidated damages with respect to, the Notes (whether or not prohibited by
the subordination provisions of the Indenture);
(2) default in payment when due of the principal of or premium, if any,
on the Notes (whether or not prohibited by the subordination provisions of
the Indenture);
(3) failure by the Company or any of its Subsidiaries to comply with the
provisions described under the captions "--Repurchase at the Option of
Holders--Change of Control," "--Asset Sales," "--Certain Covenants--
Restricted Payments" or "--Incurrence of Indebtedness and Issuance of
Preferred Stock," and such default continues for ten days;
(4) failure by the Company or any of its Subsidiaries for 60 days after
notice to comply with any of its other agreements in the Indenture or the
Notes;
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date of the Indenture, which default (a) is caused by
a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10 million or more;
(6) failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $10 million, not covered by insurance,
which judgments are not paid, discharged or stayed for a period of 60 days;
(7) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries; and
(8) except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Subsidiary
Guarantor, or any Person acing on behalf of any Subsidiary Guarantor, shall
deny or disaffirm its obligations under its Subsidiary Guarantee (other
than by reason of release pursuant to the Indenture).
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Subsidiary or any
group of Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or
Event of Default (except a Default or Event of Default relating to the payment
of principal or interest) if it determines that withholding notice is in their
interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
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The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations and the obligations of the Subsidiary Guarantors discharged with
respect to the outstanding Notes ("Legal Defeasance") except for (1) the rights
of Holders of outstanding Notes to receive payments in respect of the principal
of, premium, if any, and interest and liquidated damages on such Notes when
such payments are due from the trust referred to below, (2) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (3) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (4) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
and liquidated damages on the outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the Holders of
the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had
not occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
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(4) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound, including, without limitation, the Credit Facility;
(6) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that all conditions precedent provided
for relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture, the
Notes or the Subsidiary Guarantees may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
and any existing default or compliance with any provision of the Indenture, the
Notes or the Subsidiary Guarantees may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes (other
than provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any
Note;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default
that resulted from such acceleration);
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(5) make any Note payable in money other than that stated in the Notes;
(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(7) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders"); or
(8) make any change in the foregoing amendment and waiver provisions. In
addition, any amendment to the provisions of Article 10 or Article 12 of
the Indenture (which relate to subordination) will require the consent of
the Holders of at least 75% in aggregate principal amount of the Notes then
outstanding if such amendment would adversely affect the rights of Holders
of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company, the Subsidiary Guarantors and the Trustee may amend or supplement
the Indenture, the Notes or the Subsidiary Guarantees to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
obligations to Holders of Notes in the case of a merger or consolidation or
sale of all or substantially all of the Company's assets, to make any change
that would provide any additional rights or benefits to the Holders of Notes or
that does not adversely affect the legal rights under the Indenture of any such
Holder, to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act or to
provide for additional Subsidiary Guarantors in accordance with the terms of
the Indenture.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
Additional Information
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreements without charge by writing to National Equipment
Services, Inc., 1800 Sherman Avenue, Evanston, Illinois 60201; Attention:
Secretary.
Book-Entry, Delivery and Form
Except as set forth in the next paragraph, the Notes to be resold as set
forth herein will initially be issued in the form of one or more Global Notes
(the "Global Notes"). The Global Notes will be deposited on the date of the
closing of the sale of the Notes offered hereby (the "Closing Date") with, or
on behalf of, The Depository Trust Company (the "Depositary") and registered in
the name of Cede & Co., as nominee of the Depositary (such nominee being
referred to herein as the "Global Note Holder").
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Notes that are issued as described below under the caption "--Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Upon the transfer of Certificated Securities,
such Certificated Securities may, unless all Global Notes have previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred,
subject to the transfer restrictions set forth in the Indenture.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depositary's system
is also available to other entities such as banks, brokers, dealers and trust
companies (collectively, the "Indirect Participants" or the "Depositary's
Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. Persons who are not
Participants may beneficially own securities held by or on behalf of the
Depositary only thorough the Depositary's Participants or the Depositary's
Indirect Participants.
The Company expects that pursuant to procedures established by the Depositary
(1) upon deposit of the Global Notes, the Depositary will credit the accounts
of Participants with portions of the principal amount of the Global Notes and
(2) ownership of the Notes evidenced by the Global Notes will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by the Depositary (with respect to the interests of the Depositary's
Participants), the Depositary's Participants and the Depositary's Indirect
Participants. Prospective purchasers are advised that the laws of some states
require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer Notes evidenced
by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of
any Notes evidenced by the Global Notes. Beneficial owners of Notes evidenced
by the Global Notes will not be considered the owners or Holders thereof under
the Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
liquidated damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Notes. The Company believes, however, that it is currently the policy
of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
Certificated Securities
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Notes in the form of Certificated Securities. Upon any such issuance, the
Trustee is required to register such Certificated Securities in the name of,
and cause the same to
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be delivered to, such person or persons (or the nominee of any thereof). In
addition, if (1) the Company notifies the Trustee in writing that the
Depositary is no longer willing or able to act as a depositary and the Company
is unable to locate a qualified successor within 90 days or (2) the Company, at
its option, notifies the Trustee in writing that it elects to cause the
issuance of Notes in the form of Certificated Securities under the Indenture,
then, upon surrender by the Global Note Holder of its Global Note, Notes in
such form will be issued to each person that the Global Note Holder and the
Depositary identify as being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Same Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, premium, if any, interest and liquidated
damages, if any), be made by wire transfer of immediately available funds to
the accounts specified by the Global Note Holder. With respect to Certificated
Securities, the Company will make all payments of principal, premium, if any,
interest and liquidated damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Company expects that secondary trading in the Certificated
Securities will also be settled in immediately available funds.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (1) Indebtedness
of any other Person existing at the time such other Person is merged with or
into or became a Subsidiary of such specified Person, including, without
limitation, Indebtedness incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Subsidiary of such
specified Person, and (2) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person, in each case to the extent not repaid within
five days after the date of the acquisition.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Asset Sale" means (1) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales and leases of inventory and equipment in the
ordinary course of business consistent with past practices (provided that the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole will be
governed by the provisions of the Indenture described above under the caption
"--Repurchase at the Option of Holders--Change of Control" and/or the
provisions described above under the caption "--Certain Covenants--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant) and (2) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (1) or (2), whether in a single
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transaction or a series of related transactions (a) that have a fair market
value in excess of $2.0 million or (b) for net proceeds in excess of $2.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (1) a transfer of assets by the Company to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company
or to another Wholly Owned Restricted Subsidiary; (2) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary to the Company or to another
Wholly Owned Restricted Subsidiary; (3) a Restricted Payment that is permitted
by the covenant described above under the caption "--Certain Covenants--
Restricted Payments;" (4) the creation of any Lien not prohibited by the
covenant described above under the caption "Certain Covenants Liens;" and (5)
the conversion of Cash Equivalents into cash.
"Borrowing Base" means, as of any date, an amount equal to the sum of (a) 85%
of the face amount of all accounts receivable owned by the Company and its
Restricted Subsidiaries as of such date that are not more than 90 days past
due, plus (b) 50% of the book value of the parts and supplies inventory owned
by the Company and its Restricted Subsidiaries as of such date, plus (c) 80% of
the orderly liquidation value of the rental equipment owned by the Company and
its Restricted Subsidiaries as of such date, plus (d) 80% of the cost of the
new equipment owned by the Company and its Restricted Subsidiaries as of such
date, all calculated on a consolidated basis and in accordance with GAAP. To
the extent that information is not available as to the amount of accounts
receivable or inventory or equipment as of a specific date, the Company may
utilize the most recent available information for purposes of calculating the
Borrowing Base.
"Capital Lease Obligation" means, at the time any determination thereof is to
be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance
with GAAP.
"Capital Stock" means (1) in the case of a corporation, corporate stock, (2)
in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (4) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means (1) United States dollars, (2) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States is pledged in support thereof) having maturities of not more
than six months from the date of acquisition, (3) certificates of deposit and
eurodollar time deposits with maturities of one year or less from the date of
acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Thompson Bank Watch Rating
of "B" or better, (4) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the qualifications
specified in clause (3) above, (5) commercial paper having a rating of at least
A-2 by Standard & Poor's Corporation or at least P-2 by Moody's Investors
Service, Inc. or at least an equivalent rating category of another nationally
recognized securities rating agency and in each case maturing within one year
after the date of acquisition and (6) money market funds at least 95% of the
assets of which constitute Cash Equivalents of the kinds described in clauses
(1)--(5) of this definition.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (1) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (2) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net
Income, plus (3) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any
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deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligation, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income, plus (4) depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (including non-cash
write-ups and non-cash charges relating to inventory and fixed assets) of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income plus (5) an amount equal to 1/3 of the
Consolidated Lease Expense of such person and its Subsidiaries for such period,
to the extent that any such expense was deducted in computing such Consolidated
Net Income, minus (6) non-cash items increasing such Consolidated Net Income
for such period, in each case, on a consolidated basis and determined in
accordance with GAAP. Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, and the depreciation and amortization and
other non-cash charges of, a Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that the Net Income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if
a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Lease Expense" means, with respect to any Person for any
period, the aggregate rental obligations of such Person and its consolidated
Restricted Subsidiaries determined on a consolidated basis in accordance with
GAAP payable in respect of such period under leases of real and/or personal
property (net of income from subleases thereof, but including taxes, insurance,
maintenance and similar expenses that the lessee is obligated to pay under the
terms of such leases), whether or not such obligations are reflected as
liabilities or commitments on a consolidated balance sheet of such Person and
its Restricted Subsidiaries or in the notes thereto.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (1) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (2) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement (other than the Credit Facility as in effect as of
the date of the Indenture, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are not
materially more restrictive, taken as a whole, with respect to such
restrictions on dividends and similar distributions than those contained in the
Credit Facility as in effect on the date of the Indenture), instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its stockholders, (3) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded, (4) the cumulative effect of a
change in accounting principles shall be excluded and (5) the Net Income (but
not loss) of any Unrestricted Subsidiary shall be excluded, whether or not
distributed to the Company or one of its Restricted Subsidiaries, for purposes
of the covenant described under the caption "-- Certain Covenants--Incurrence
of Indebtedness and Issuance of Preferred Stock," and shall be included for
purposes of the covenant described under the caption "--Certain Covenants--
Restricted Payments" but only to the extent of the amount of dividends or
distributions paid in cash to the Company or one of its Restricted
Subsidiaries.
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"Credit Facility" means that certain Credit Agreement, dated as of July 17,
1998, by and among the Company, as Borrower, NES Acquisition Corp., BAT
Acquisition Corp., NES East Acquisition Corp., NES Michigan Acquisition Corp.,
Albany Ladder Company, Inc., Falconite, Inc., Falconite Equipment, Inc., M&M
Properties, Inc., Carl's Mid South Rent-All Center Incorporated, Falconite
Rebuild Center, Inc., Falconite Aviation, Inc. and McCurry & Falconite
Equipment Co., Inc., as Guarantors, First Union National Bank, as Agent and
Lender, and American National Bank and Trust Company of Chicago, Comerica Bank,
The CIT Group/Business Credit, Inc. and Mercantile Business Credit Inc., as
Lenders, providing for a term loan and revolving credit borrowings, including
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including,
without limitation, increasing the amount of available borrowings thereunder or
adding Subsidiaries of the Company as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement, whether by the same or any other agent,
lender or group of lenders, whether contained in one or more agreements.
Shaughnessy Crane Service, Inc. and Rebel Studio Rentals, Inc. joined as
additional guarantors under the Credit Facility upon their acquisition by the
Company.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (1) any Indebtedness outstanding under the
Credit Facility and (2) any other Senior Debt permitted under the Indenture the
principal amount of which is $25.0 million or more and that has been designated
by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of
a Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such
repurchase or redemption complies with the covenant described above under the
caption "--Certain Covenants--Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $2.0 million in aggregate principal
amount of Indebtedness of the Company and its Restricted Subsidiaries (other
than Indebtedness under the Credit Facility) in existence on November 25, 1997,
until such amounts are repaid.
"Fixed Charges" means, with respect to any Person and its Restricted
Subsidiaries for any period, the sum, without duplication, of (1) the
consolidated interest expense of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued (including, without limitation,
amortization of debt issuance costs (other than debt issuance costs incurred in
connection with the Series B Notes Offering, the Credit Facility and the
Company's former credit facility) and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations) and (2) the consolidated interest of
such Person and its Restricted Subsidiaries that was capitalized during such
period, and (3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries
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(whether or not such Guarantee or Lien is called upon), (4) the product of (a)
all dividend payments, whether or not in cash, on any series of preferred stock
of such Person or any of its Restricted Subsidiaries, other than dividend
payments on Equity Interests payable solely in Equity Interests of the Company
(other than Disqualified Stock) or to the Company or a Restricted Subsidiary of
the Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP and (5) an amount equal to
1/3 of the Consolidated Lease Expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued.
"Fixed Charge Coverage Ratio" means with respect to any Person and its
Restricted Subsidiaries for any period, the ratio of the Consolidated Cash Flow
of such Person and its Restricted Subsidiaries for such period to the Fixed
Charges of such Person and its Restricted Subsidiaries for such period. In the
event that the referent Person or any of its Restricted Subsidiaries incurs,
assumes, Guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems preferred stock subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (1) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated (A) without giving effect to clause (3) of
the proviso set forth in the definition of Consolidated Net Income and (B)
after giving pro forma effect to net cost savings that the Company reasonably
believes in good faith could have been achieved during the four-quarter
reference period as a result of such acquisition, which cost savings could then
be reflected in pro forma financial statements under GAAP, and (2) the
Consolidated Cash Flow attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (3) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (1) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (2) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or
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representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
(other than letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
as well as all Indebtedness of others secured by a Lien on any asset of such
Person (whether or not such Indebtedness is assumed by such Person) and, to the
extent not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person. The amount of any Indebtedness outstanding as of any date
shall be (1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount and (2) the principal amount thereof, together
with any interest thereon that is more than 30 days past due, in the case of
any other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect
of preferred stock dividends, excluding, however, (1) any gain (but not loss),
together with any related provision for taxes on such gain (but not loss),
realized in connection with (a) any Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (2) any extraordinary or nonrecurring gain or
loss, together with any related provision for taxes on such extraordinary or
nonrecurring gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale, any reserve for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP and any reserve established in
accordance with GAAP for liabilities associated with such assets that are the
subject of such Asset Sale (including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale), all as determined in good faith and reflected in an Officers'
Certificate delivered to the Trustee, provided, that the amount of any such
reserve shall be deemed to constitute Net Cash Proceeds at the time such
reserve shall have been reversed or is not otherwise required to be retained as
a reserve.
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"Non-Recourse Debt" means Indebtedness (1) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender and (2) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes) of the Company or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (3) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the Credit Facility, whether or not such interest is an allowed claim under
applicable law), penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any Indebtedness.
"Permitted Business" means any business or activities conducted by the
Company on the date of the Indenture, any business or activities related,
ancillary or complementary to such business or activities, and any business or
activities reasonably developed, derived or extended from such business or
activities.
"Permitted Investments" means (a) any Investment in the Company or in a
Subsidiary Guarantor, (b) any Investment in Cash Equivalents, (c) any
Investment by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment (1) such Person becomes a Wholly
Owned Restricted Subsidiary of the Company or (2) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Wholly Owned
Restricted Subsidiary of the Company, (d) any Investment made as a result of
the receipt of non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales", (e) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company and (f) other Investments in any Person
having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (e)
that are at the time outstanding, not to exceed $5.0 million.
"Permitted Junior Securities" means Equity Interests in the Company or any
Subsidiary Guarantor or debt securities that are subordinated to all Senior
Debt (and any debt securities issued in exchange for Senior Debt) to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt pursuant to Article 10 of the Indenture.
"Permitted Liens" means the following Liens securing Indebtedness or trade
payables: (1) Liens to secure the Notes or the Subsidiary Guarantees; (2) Liens
in favor of the Company or a Subsidiary Guarantor; (3) Liens on property of a
Person existing at the time such Person is merged into or consolidated with the
Company or any Subsidiary of the Company; provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or consolidated
with the Company; (4) Liens on property existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition; (5)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (6) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (4) of the second paragraph of
the covenant entitled "Incurrence of Indebtedness" covering only the assets
acquired with such Indebtedness; (7) Liens existing on November 25, 1997; (8)
Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not exceed $5.0
million at any one time outstanding and that (a) are not incurred in connection
with the borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (b) do not in the
aggregate materially detract from the value of the property or materially
impair the use thereof in the operation
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of business by the Company or such Subsidiary; (9) Liens on stock or assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries; (10) Liens on assets of the Company or any Subsidiary Guarantor
to secure Senior Debt of the Company or such Subsidiary Guarantor that was
permitted by the Indenture to be incurred; and (11) Liens to secure any
refinancings, renewals, extensions, modifications or replacements
(collectively, "refinancings") (or successive refinancings), in whole or in
part, of any Indebtedness secured by Liens referred to in clauses (3), (4), (7)
and (10) above so long as such Lien does not extend to any other property
(other than improvements thereto).
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that: (1) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of premiums and reasonable
expenses incurred in connection therewith); (2) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (4) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means (1) all Indebtedness under the Credit Facility and all
Hedging Obligations with respect thereto, whether outstanding on the date of
the Indenture or thereafter created, (2) any other Indebtedness permitted to be
incurred by the Company or a Subsidiary Guarantor under the terms of the
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes or the Subsidiary Guarantees and (3) all Obligations with
respect to the foregoing. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (w) any liability for federal, state,
local or other taxes owed or owing by the Company or a Subsidiary Guarantor,
(x) any Indebtedness between or among the Company, any of its Subsidiaries or
any of its other Affiliates, (y) any trade payables or (z) that portion of any
Indebtedness that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (1) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the
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occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (2) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantors" means each of (1) Albany Ladder Company, Inc., BAT
Acquisition Corp., Carl's Mid South Rent-All Center Incorporated, Falconite
Aviation, Inc., Falconite Equipment, Inc., Falconite, Inc., Falconite Rebuild
Center, Inc., McCurry & Falconite Equipment Co., Inc., M&M Properties, Inc.,
NES Acquisition Corp., NES East Acquisition Corp., NES Michigan Acquisition
Corp., Rebel Studio Rentals, Inc. and Shaughnessy Crane Service, Inc. and (2)
any other Subsidiary that executes a Subsidiary Guarantee in accordance with
the provisions of the Indenture, and their respective successors and assigns.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (x) to subscribe for additional Equity Interests or (y)
to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results; (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under
the caption "--Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock,"
the Company shall be in default of such covenant). The Board of Directors of
the Company may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (1) such Indebtedness is permitted under the
covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period, and (2) no Default or Event of Default would be in existence
following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (1) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (2) the then outstanding
principal amount of such Indebtedness.
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"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based on the current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations,
judicial authority and administrative rulings and practice. There can be no
assurance that the Internal Revenue Service (the "Service") will not take a
contrary view, and no ruling from the Service has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conditions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences to holders. Certain holders (including
insurance companies, tax-exempt organizations, financial institutions, broker-
dealers, foreign corporations and persons who are not citizens or residents of
the United States) may be subject to special rules not discussed below. The
Company recommends that each holder consult such holder's own tax advisor as to
the particular tax consequences of exchanging such holder's Outstanding Notes
for Exchange Notes, including the applicability and effect of any state, local
or foreign tax laws.
The Company believes that the exchange of Outstanding Notes for Exchange
Notes pursuant to the Exchange Offer will not be treated as an "exchange" for
United States federal income tax purposes because the Exchange Notes will not
be considered to differ materially in kind or extent from the Outstanding
Notes. Rather, the Exchange Notes received by a holder will be treated as a
continuation of the Outstanding Notes in the hands of such holder. As a result,
there will be no United States federal income tax consequences to holders
exchanging Outstanding Notes for Exchange Notes pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Outstanding Notes where such Outstanding Notes were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that for a period of 180 days after the Expiration Date
it will make the Prospectus, as amended or supplemented, available to any
Participating Broker-Dealer for use in connection with any such resale. In
addition, until , 1999 (90 days after the commencement of the
Exchange Offer), all dealers effecting transactions in the Exchange Notes may
be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market,
in negotiated transactions, through the writing of options on the Exchange
Notes or a combination of such methods of resale, at market prices prevailing
at the time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such Participating Broker-Dealer and/or the
purchasers of any such Exchange Notes. Any Participating Broker-Dealer that
resells the Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
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For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such documents
in the Letter of Transmittal.
EXPERTS
The consolidated financial statements of National Equipment Services, Inc. as
of December 31, 1997 and 1996 and for the year ended December 31, 1997 and the
period from inception (June 4, 1996) through December 31, 1996 included in this
Prospectus have been included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of Aerial Platforms, Inc. as of January 31, 1997 and
February 17, 1997 and for the year ended January 31, 1997 and the seventeen
days ended February 17, 1997 included in this Prospectus have been included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of Lone Star Rentals, Inc. as of December 31, 1995
and 1996 and March 16, 1997 and for each of the two years in the period ended
December 31, 1996 and for the period from January 1, 1997 through March 16,
1997 included in this Prospectus have been included in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The financial statements of BAT Rentals, Inc. as of December 31, 1995 and
1996 and March 31, 1997 and for each of the two years in the period ended
December 31, 1996 and for the three months ended March 31, 1997 included in
this Prospectus have been included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of Sprintank and Sprintank Mobile Storage (divisions
of Sprint Industrial Services, Inc.) as of December 31, 1995 and 1996 and June
30, 1997 and for each of the two years in the period ended December 31, 1996
and for the six months ended June 30, 1997 included in this Prospectus have
been included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements of MST Enterprises, Inc. d/b/a Equipco Rentals and
Sales as of October 31, 1995 and 1996 and as of July 17, 1997 and for each of
the two years in the period ended October 31, 1996 and for the period from
November 1, 1996 through July 17, 1997 included in this Prospectus have been
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Work Safe Supply Co., Inc. as of
December 31, 1996 and 1997 and for each of the three years in the period ended
December 31, 1997 included in this Prospectus have been included in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements of Genpower Pump & Equipment, Inc. as of December
31, 1997 and for the year then ended included in this Prospectus have been
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of Albany Ladder Company, Inc. as of December 31,
1996 and 1997 and for each of the two years in the period ended December 31,
1997 included in this Prospectus have been included in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
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The financial statements of Dragon Rentals (a wholly owned division of The
Modern Group, Inc.) as of December 31, 1996 and 1997 and for the years then
ended included in this Prospectus have been included in reliance on the report
of Lawrence, Blackburn Meek Maxey & Co. P.C., independent accountants, given on
the authority of said firm as experts in accounting and auditing.
The financial statements of Cormier Equipment Corporation as of December 31,
1996 and 1997 and for the three years ended December 31, 1997 included in this
Prospectus have been included in reliance on the report of Albin, Randall &
Bennett, Certified Public Accountants, given on the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of Falconite, Inc. and subsidiaries as
of December 31, 1997 and for the year then ended included in this Prospectus
have been included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of Falconite, Inc. and subsidiaries as
of December 31, 1996 and for each of the years in the two-year period ended
December 31, 1996 included in this Prospectus have been included in reliance on
the report of KPMG LLP independent accountants, given on the authority of said
firm as experts in accounting and auditing.
The financial statements of R&R Rentals, Inc. as of December 31, 1997 and for
the year then ended included in this Prospectus have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in accounting and auditing.
The financial statements of Shaughnessy Crane Service, Inc. as of December
31, 1996 and 1997 and for each of the three years ended December 31, 1997
included in this Prospectus have been included in reliance on the report of
Wolf & Company, P.C., independent accountants, given on the authority of said
firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the Exchange Notes offered hereby will be
passed upon for the Company by Kirkland & Ellis, Chicago, Illinois (a
partnership which includes professional corporations).
WHERE YOU CAN FIND MORE INFORMATION
The Company has filed with the Commission a Registration Statement on Form S-
4 (the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the
Exchange Notes being offered hereby. The Prospectus does not contain all the
information set forth in the Exchange Offer Registration Statement. For further
information with respect to the Company and the Exchange Offer, reference is
made to the Exchange Offer Registration Statement. Statements made in the
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Exchange Offer
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange Act,
and in accordance therewith files periodic reports and other information with
the Commission. The Subsidiary Guarantors will not file separate periodic
reports and other information with the Commission. The Exchange Offer
Registration Statement, including the exhibits thereto, and periodic reports
and other information filed by the Company with
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the Commission can be inspected and copied at the Commission's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional
offices located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New
York, New York 10048, at prescribed rates. You may obtain information on the
operation of the Public Reference Room by calling the Commission at 1-800-SEC-
0330. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov. The Company's Common Stock is traded on the New York Stock
Exchange, and such reports and other information can also be inspected and
copied at the offices of the New York Stock Exchange.
In addition, the Company has agreed that, whether or not it is required to do
so by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will furnish to the holders of the Notes and, to the
extent permitted by applicable law or regulation, file with the Commission (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
was required to file such Forms, including for each a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, a report thereof by the Company's
independent certified public accountants and (ii) all reports that would be
required to be filed on Form 8-K if it were required to file such reports. In
addition, for so long as any of the Notes remain outstanding, the Company has
agreed to make available to any prospective purchaser of the Notes or
beneficial owner of the Notes, in connection with any sale thereof, the
information required by Rule 144A(d)(4) under the Securities Act.
The Company, a corporation organized under the laws of Delaware, has its
principal executive offices located at 1800 Sherman Avenue, Evanston, Illinois
60201; its telephone number is (847) 733-1000.
97
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
National Equipment Services, Inc. and Subsidiaries
Financial Statements -- December 31, 1996, December 31, 1997 and
September 30, 1998 (unaudited)
Report of Independent Accountants....................................... F-4
Consolidated Balance Sheets............................................. F-5
Consolidated Statements of Operations................................... F-6
Consolidated Statements of Cash Flows................................... F-7
Consolidated Statements of Changes in Stockholders' Equity.............. F-8
Notes to Consolidated Financial Statements.............................. F-9
Aerial Platforms, Inc.
Financial Statements -- January 31, 1997 and February 17, 1997
Report of Independent Accountants....................................... F-19
Balance Sheets.......................................................... F-20
Statements of Operations................................................ F-21
Statements of Cash Flows................................................ F-22
Statements of Changes in Stockholder's Equity........................... F-23
Notes to Financial Statements........................................... F-24
Lone Star Rentals, Inc.
Financial Statements -- December 31, 1995 and 1996 and March 16, 1997
Report of Independent Accountants....................................... F-29
Balance Sheets.......................................................... F-30
Statements of Operations................................................ F-31
Statements of Cash Flows................................................ F-32
Statements of Changes in Stockholder's Equity........................... F-33
Notes to Financial Statements........................................... F-34
BAT Rentals, Inc.
Financial Statements -- December 31, 1995 and 1996 and March 31, 1997
Report of Independent Accountants....................................... F-40
Balance Sheets.......................................................... F-41
Statements of Operations................................................ F-42
Statements of Cash Flows................................................ F-43
Statements of Changes in Stockholder's Equity........................... F-44
Notes to Financial Statements........................................... F-45
Sprintank and Sprintank Mobile Storage (divisions of Sprint Industrial
Services, Inc.)
Financial Statements -- December 31, 1995 and 1996 and June 30, 1997
Report of Independent Accountants....................................... F-50
Balance Sheets.......................................................... F-51
Statements of Operations................................................ F-52
Statements of Cash Flows................................................ F-53
Statements of Changes in Divisional Equity.............................. F-54
Notes to Financial Statements........................................... F-55
MST Enterprises, Inc. d/b/a Equipco Rentals and Sales
Financial Statements -- October 31, 1995 and 1996 and July 17, 1997
Report of Independent Accountants....................................... F-60
Balance Sheets.......................................................... F-61
Statements of Operations................................................ F-62
Statements of Cash Flows................................................ F-63
Statements of Changes in Stockholder's Equity........................... F-64
Notes to Financial Statements........................................... F-65
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Work Safe Supply Co., Inc.
Consolidated Financial Statements -- December 31, 1995, 1996 and 1997
Report of Independent Accountants....................................... F-70
Consolidated Balance Sheets............................................. F-71
Consolidated Statements of Operations................................... F-72
Consolidated Statements of Cash Flows................................... F-73
Consolidated Statements of Changes in Stockholder's Equity.............. F-74
Notes to Consolidated Financial Statements.............................. F-75
Genpower Pump & Equipment, Inc.
Financial Statements -- December 31, 1997
Report of Independent Accountants....................................... F-79
Balance Sheet........................................................... F-80
Statement of Operations................................................. F-81
Statement of Changes in Stockholder's Equity............................ F-82
Statement of Cash Flows................................................. F-83
Notes to Financial Statements........................................... F-84
Cormier Equipment Corporation
Financial Statements -- December 31, 1995, 1996 and 1997
Independent Auditors' Report............................................ F-89
Balance Sheets.......................................................... F-90
Statements of Earnings and Retained Earnings............................ F-91
Statements of Cash Flows................................................ F-92
Notes to Financial Statements........................................... F-93
Dragon Rentals (division of The Modern Group, Inc.)
Financial Statements -- December 31, 1996 and 1997
Report of Independent Accountants....................................... F-95
Balance Sheets.......................................................... F-96
Statements of Income and Expenses....................................... F-97
Statements of Cash Flows................................................ F-98
Notes to Financial Statements........................................... F-99
Albany Ladder Company, Inc.
Financial Statements -- December 31, 1996 and 1997
Report of Independent Accountants....................................... F-104
Balance Sheet........................................................... F-105
Statements of Operations................................................ F-106
Statements of Cash Flows................................................ F-107
Statements of Changes in Stockholder's Equity........................... F-108
Notes to Financial Statements........................................... F-109
Falconite, Inc. and Subsidiaries
Consolidated Financial Statements--December 31, 1995, 1996, 1997 and
June 30, 1998 (unaudited)
Reports of Independent Accountants...................................... F-113
Consolidated Balance Sheets............................................. F-115
Consolidated Statements of Income....................................... F-116
Consolidated Statements of Shareholders' Equity......................... F-117
Consolidated Statements of Cash Flows................................... F-118
Notes to Consolidated Financial Statements.............................. F-119
R&R Rentals, Inc.
Financial Statements -- December 31, 1997
Report of Independent Accountants....................................... F-131
Balance Sheet........................................................... F-132
Statement of Operations................................................. F-133
Statement of Changes in Stockholder's Equity............................ F-134
Statement of Cash Flows................................................. F-135
Notes to Financial Statements........................................... F-136
</TABLE>
F-2
<PAGE>
<TABLE>
<S> <C>
Shaughnessy Crane Service, Inc.
Financial Statements--December 31, 1996 and 1997
Independent Auditors' Report........................................... F-140
Balance Sheets......................................................... F-141
Statements of Income................................................... F-142
Statements of Changes in Stockholders' Equity.......................... F-143
Statements of Cash Flows............................................... F-144
Notes to Financial Statements.......................................... F-145
National Equipment Services, Inc. and Subsidiaries Unaudited Pro Forma
Combined Financial Statements
Introduction to Unaudited Pro Forma Financial Statements............... F-151
Unaudited Pro Forma Statements of Operations........................... F-152
Notes to Unaudited Pro Forma Financial Statements...................... F-156
</TABLE>
F-3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of National Equipment Services, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity, present fairly, in all material respects, the financial
position of National Equipment Services, Inc. and subsidiaries at December 31,
1996 and December 31, 1997, and the results of its operations and its cash
flows for the period from inception (June 4, 1996) through December 31, 1996
and the year ended December 31, 1997 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
April 1, 1998, except for the information in Note 13 as to which the date is
January 5, 1999
F-4
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1996 1997 1998
------------ ------------ -------------
(Unaudited)
<S> <C> <C> <C>
Assets:
Cash and cash equivalents............. $ 12 $ 35,682 $ 662
Accounts receivable, net of allowance
for doubtful accounts of $0, $254 and
$1,771, respectively................. -- 8,356 50,191
Inventory, net........................ -- 2,239 13,888
Rental equipment, net................. -- 46,801 334,141
Property and equipment, net........... 17 3,012 25,025
Intangible assets, net................ -- 27,937 204,773
Loan origination costs, net........... -- 6,270 6,164
Prepaid and other assets, net......... 187 840 5,157
----- -------- --------
Total assets........................ $ 216 $131,137 $640,001
===== ======== ========
Liabilities and Stockholders' Equity:
Accounts payable...................... $ -- $ 2,489 $ 18,627
Accrued interest...................... -- 1,066 3,896
Accrued expenses and other
liabilities.......................... 110 2,327 26,065
Debt.................................. -- 98,782 459,574
----- -------- --------
Total liabilities................... 110 104,664 508,162
Commitments and contingencies (Note 10)
Stockholders' Equity:
Class A Common stock, $0.01 par, 50,000
shares authorized, 0, 25,011, 25,221
and 0, respectively, shares issued and
outstanding........................... -- 1 --
Class B Common stock, $0.01 par,
150,000 shares authorized, 30,108,
89,900, 90,100 and 0, respectively,
shares issued and outstanding......... 1 1 --
Common stock, $0.01 par value,
100,000,000 shares authorized,
24,121,885 shares issued and
outstanding........................... -- -- 241
Additional paid-in capital............. 301 25,663 123,511
Retained earnings (accumulated
deficit).............................. (195) 910 8,189
Stock subscriptions receivable......... (1) (102) (102)
----- -------- --------
Total stockholders' equity.......... 106 26,473 131,839
----- -------- --------
Total liabilities and stockholders'
equity............................. $ 216 $131,137 $640,001
===== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except net income per share data)
<TABLE>
<CAPTION>
For the
Period From
Inception
(June 4, For the Nine
1996) For the Months Ended
Through Year Ended September 30,
December 31, December 31, -----------------------
1996 1997 1997 1998
------------ ------------ ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Rental revenues............. $ -- $26,398 $16,168 $100,251
Rental equipment sales...... -- 4,186 2,111 8,197
New equipment sales and
other...................... -- 10,704 7,296 28,986
------ ------- ------- --------
Total revenues............ -- 41,288 25,575 137,434
------ ------- ------- --------
Cost of Revenues:
Rental equipment
depreciation............... -- 5,009 3,143 17,581
Cost of rental equipment
sales...................... -- 2,935 1,416 5,123
Cost of new equipment sales. -- 4,872 4,116 15,358
Other operating expenses.... -- 12,899 7,315 38,766
------ ------- ------- --------
Total cost of revenues.... -- 25,715 15,990 76,828
------ ------- ------- --------
Gross profit................. -- 15,573 9,585 60,606
Selling, general and
administrative expenses..... 333 7,910 5,039 25,619
Non-rental depreciation and
amortization................ 3 1,476 758 4,557
------ ------- ------- --------
Operating income (loss)...... (336) 6,187 3,788 30,430
Other income (expense), net.. -- 72 (19) 255
Interest income (expense),
net......................... 4 (4,336) (2,439) (16,001)
------ ------- ------- --------
Income (loss) before income
taxes and extraordinary
item........................ (332) 1,923 1,330 14,684
Income tax expense (benefit). (137) 818 519 5,981
------ ------- ------- --------
Income (loss) before
extraordinary item.......... (195) 1,105 811 8,703
Extraordinary charge--
extinguishment of debt, net
of taxes.................... -- -- -- 1,424
------ ------- ------- --------
Net income (loss)............ $ (195) $ 1,105 $ 811 $ 7,279
====== ======= ======= ========
Basic earnings per common
share
Earnings before
extraordinary charge...... $(0.05) $ 0.09 $ 0.07 $ 0.51
Extraordinary charge....... -- -- -- 0.09
------ ------- ------- --------
Net earnings................. $(0.05) $ 0.09 $ 0.07 $ 0.42
====== ======= ======= ========
Average number of common
shares used in basic
calculation................. 4,185 12,128 12,023 17,136
====== ======= ======= ========
Diluted earnings per common
share
Earnings before
extraordinary charge...... $(0.05) $ 0.08 $ 0.06 $ 0.48
Extraordinary charge....... -- -- -- 0.08
------ ------- ------- --------
Net earnings................. $(0.05) $ 0.08 $ 0.06 $ 0.40
====== ======= ======= ========
Average number of common
shares used in diluted
calculation................. 4,185 13,915 13,501 18,385
====== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the
Period From
Inception
(June 4, For the For the
1996) Year Nine Months
Through Ended Ended September 30,
December 31, December 31, -----------------------
1996 1997 1997 1998
------------ ------------ ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operating Activities:
Net income (loss)........... $(195) $ 1,105 $ 811 $ 7,279
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and
amortization.............. 3 6,892 4,086 22,138
Gain on sale of equipment.. -- (1,446) (720) (3,120)
Loss on extinguishment of
long-term debt............ -- -- -- 1,424
Changes in operating assets
and liabilities:
Accounts receivable....... -- (1,335) (623) (8,526)
Inventory................. -- 202 (234) (660)
Prepaid and other assets.. (187) 139 (1,313) (628)
Accounts payable.......... -- 1,620 2,217 851
Accrued expenses and other
liabilities.............. 110 201 2,725 17,746
----- --------- -------- ---------
Net cash provided by (used
in) operating activities... (269) 7,378 6,949 36,504
----- --------- -------- ---------
Investing Activities:
Net cash paid for
acquisitions............... -- (68,910) (67,703) (389,939)
Purchases of rental
equipment.................. -- (15,336) (10,781) (104,391)
Proceeds from sale of rental
equipment.................. -- 4,186 2,118 8,197
Purchases of property and
equipment.................. (20) (1,473) (656) (5,132)
Proceeds from sale of
property and equipment..... -- 36 25 67
----- --------- -------- ---------
Net cash used in investing
activities................. (20) (81,497) (76,997) (491,198)
----- --------- -------- ---------
Financing Activities:
Proceeds from long-term
debt....................... -- 222,307 121,493 391,060
Payments on long-term debt.. -- (131,119) (70,928) (59,513)
Net proceeds from sales of
common stock............... 301 25,263 24,155 98,087
Payments of loan origination
costs...................... -- (6,662) (3,080) (9,960)
----- --------- -------- ---------
Net cash provided by
financing activities....... 301 109,789 71,640 419,674
----- --------- -------- ---------
Net increase (decrease) in
cash and cash equivalents.. 12 35,670 1,592 (35,020)
Cash and cash equivalents at
beginning of period........ -- 12 12 35,682
----- --------- -------- ---------
Cash and cash equivalents at
end of period.............. $ 12 $ 35,682 $ 1,604 $ 662
===== ========= ======== =========
Supplemental Non-Cash Flow
Information:
Cash paid for interest...... $ -- $ 2,707 $ -- $ --
===== ========= ======== =========
Cash paid for income taxes.. $ -- $ 1,113 $ 397 $ 926
===== ========= ======== =========
Non cash issuance of stock.. $ 1 $ 101 $ -- $ --
===== ========= ======== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common Stock Retained
--------------- Additional Earnings Stock Total
Common Class A Class B Paid-In (Accumulated Subscriptions Stockholders'
Stock Shares Shares Capital Deficit) Receivable Equity
------ ------- ------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued at
inception
(June 4, 1996)......... $ -- $ -- $ 1 $ 301 $ -- $ (1) $ 301
Net loss................ -- -- -- -- (195) -- (195)
---- ---- --- -------- ------ ----- --------
Balance at December 31,
1996................... -- -- 1 301 (195) (1) 106
Sale of shares.......... -- 1 -- 25,362 -- (101) 25,262
Net income.............. -- -- -- -- 1,105 -- 1,105
---- ---- --- -------- ------ ----- --------
Balance at December 31,
1997................... -- 1 1 25,663 910 (102) 26,473
---- ---- --- -------- ------ ----- --------
Impact of shares issued
in conjunction with the
initial public
offering............... 241 (1) (1) 97,848 -- -- 98,087
Net income (unaudited).. -- -- -- -- 7,279 -- 7,279
---- ---- --- -------- ------ ----- --------
Balance at September 30,
1998 (unaudited)....... $241 $ 0 $ 0 $123,511 $8,189 $(102) $131,839
==== ==== === ======== ====== ===== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
National Equipment Services, Inc. ("NES") was organized on June 4, 1996
under the laws of Delaware for the purpose of owning and operating equipment
rental facilities by means of acquiring existing businesses. NES is primarily
involved in the rental of equipment to construction and industrial users. NES
operates from locations in Alabama, Georgia, Louisiana, Nevada, Texas and
Virginia.
Principles of consolidation
The consolidated financial statements include accounts of NES and its
subsidiaries. All intercompany transactions and balances have been eliminated.
Financial statement presentation
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 date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim financial data
The interim financial data is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for fair statements of financial position and
results of operations for the interim periods.
Cash and cash equivalents
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
Inventory
NES's inventories primarily consist of parts and new equipment held for
sale. Inventories are stated at the lower of cost, determined by the first-in,
first-out method, or market.
Rental equipment
Rental equipment is recorded at invoice cost. Depreciation for rental
equipment acquired is computed using the straight-line method over 5 to 15
year useful lives with no salvage value. Accumulated depreciation on rental
equipment was $4,763,000 at December 31, 1997.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
Property and equipment
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
The estimated useful lives for property and equipment range from 5 to 7
years for machinery and equipment, 5 to 7 years for furniture and fixtures and
3 to 5 years for vehicles.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and 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.
F-9
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Adoption of new accounting pronouncement
Since inception, NES adopted Statement of Financial Accounting Standards
(SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and Long-
Lived Assets to be Disposed of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the assets' carrying amounts and related goodwill exceed the
undiscounted cash flows estimated to be generated by those assets. SFAS No.
121 also requires impairment losses to be recorded when the carrying amount of
long-lived assets that are expected to be disposed of exceeds their fair
values, net of disposal costs. SFAS No. 121 did not have a material impact on
NES's financial position or results of operations the period from inception
(June 4, 1996) through December 31, 1996 or year ended December 31, 1997.
Earnings per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128 "Earnings per Share." For the company, SFAS No. 128 will be
effective for the year ended December 31, 1997. SFAS No. 128 simplifies the
standards required under current accounting rules for computing earnings per
share and replaces the presentation of primary earnings per share and fully
diluted earnings per share with a presentation of basic earnings per share
("basic EPS") and diluted earnings per share ("diluted EPS"). Basic EPS
excludes dilution and is determined by dividing income available to common
stockholders by the weighted average number of common shares outstanding
during the period. Diluted EPS reflects the potential dilution that could
occur if securities and other contracts to issue common stock were exercised
or converted into common stock. Diluted EPS is computed similarly to fully
diluted earnings per share under current accounting rules. The implementation
of SFAS No. 128 is calculated based on the Company's net income (loss) as
presented on its statement of operations and based on share amounts after
giving effect to the Company's planned exchange of Class A and Class B into
newly established common stock and the split of such shares described in Note
14 and summarized below:
<TABLE>
<CAPTION>
For the Period
From Inception
(June 4, 1996) For the For the Nine Months
Through Year Ended Ended September 30,
December 31, December 31, -----------------------
1996 1997 1997 1998
-------------- ------------ ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income................. $ 195 $ 1,105 $ 811 $ 7,279
Plus interest on 8%
convertible debentures.... -- -- -- 26
====== ======= ======= =======
Income available to common
stockholder............... 195 1,105 811 7,305
====== ======= ======= =======
Basic weighted average
shares:
Total Common Shares after
giving effect to (i) the
exchange of Class A
Common and Class B Common
and (ii) the split....... 4,185 12,707 12,023 17,136
Effect of dilutive
securities
Unvested stock............ -- 1,443 1,478 1,185
Convertible debt.......... -- -- -- 64
------ ------- ------- -------
Diluted weighted average
shares.................... 4,185 14,150 13,501 18,358
====== ======= ======= =======
Basic EPS.................. $(0.05) $ 0.09 $ 0.07 $ 0.42
====== ======= ======= =======
Diluted EPS................ $(0.05) $ 0.08 $ 0.06 $ 0.40
====== ======= ======= =======
</TABLE>
Options to purchase 1,260,000 shares of Common Stock at the initial public
offering price will be granted to certain members of management prior to
consummation of the Company's initial public offering. The options will vest
over five years from the grant date and will expire ten years from the grant
date. The options were not included in the computation of diluted EPS because
the exercise price of the options equals the market price of the Common Stock
on the date of grant.
F-10
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pro Forma Earnings per Share
Pro forma earnings per share presented below was computed under SFAS No. 128
"Earnings per Share" based on the weighted average number of common shares
outstanding during the period after giving retroactive effect to the exchange
of the Company's Class A and Class B common stock to the Company's newly
established common stock, the split of the Company's newly established common
stock, the Company's planned initial public offering of common stock and the
conversion of the Falconite 8% convertible subordinated promissory notes
described in Notes 13 and 14. All common shares and stock options issued have
been included as outstanding for the entire period using the treasury stock
method and the estimated public offering price per share.
<TABLE>
<CAPTION>
For the
For the Nine Months
Year Ended Ended
December 31, September 30,
1997 1998
------------ -------------
<S> <C> <C>
Pro forma net income per share (unaudited):
Basic............................................. $ 0.21 $ 0.42
Diluted........................................... $ 0.22 $ 0.41
Pro forma weighted average shares outstanding
(unaudited):
Basic............................................. 22,679 22,937
Diluted........................................... 25,276 25,276
</TABLE>
Reporting Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and
losses) in a full set of general-purpose financial statements. The Statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS No. 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. The Statement is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements
for earlier periods provided for comparative purposes is required. The
adoption of SFAS No. 130 in the first quarter of 1998 had no impact as the
Company had no items of other comprehensive income in any period presented.
Intangible Assets
Intangible assets consist of the excess cost over acquired net assets
("goodwill") which has been capitalized and is being amortized on a straight
line basis over 40 years. Whenever events or changes in circumstances indicate
that the carrying amount of goodwill may not be recoverable, NES reviews the
carrying value of goodwill for impairment based on the undiscounted operating
cash flows of the related business unit. Accumulated amortization on goodwill
was $445,000, at December 31, 1997. Non-compete agreements are stated at cost
and amortized over the lives of the agreements.
Loan origination costs
Loan origination costs are stated at cost and amortized to interest expense
using the effective interest method over the life of the loan. Amortization
expense related to loan origination costs aggregated $392,000 for the year
ended December 31, 1997.
Fair value of financial instruments
The carrying amounts reported in the consolidated balance sheets for cash,
trade accounts receivable, accounts payable and other liabilities approximate
fair value due to the immediate to short-term maturity of these financial
instruments. The fair value of the Senior Subordinated Notes is based on
quoted market prices and
F-11
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
approximates the carrying value at December 31, 1997. The carrying value of
bank debt approximates fair value as the interest on the bank debt is reset
every 30 to 90 days to reflect current market rates.
Concentration of credit risk
Financial instruments that potentially subject NES to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction and industrial customers. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
customers and NES's geographic dispersion. NES performs credit evaluations of
its customers' financial condition and generally does not require collateral
on accounts receivable. NES maintains an allowance for doubtful accounts on
its receivables based upon expected collectibility. Allowance for doubtful
accounts was $0 and $254,000 at December 31, 1996 and December 31, 1997,
respectively.
Rental revenues
Rental revenues are recognized ratably over the lease term. Sales revenues
are recognized at the point of delivery.
Income taxes
Provisions are made to record deferred income taxes in recognition of items
reported differently for financial reporting purposes than for federal and
state income tax purposes. NES records deferred income taxes using the
liability method in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The Company and its
subsidiaries will file a consolidated tax return for the year ending December
31, 1997.
Related party transactions
As disclosed in these financial statements, NES has participated in certain
transactions with related parties.
2. Acquisitions
In 1997, NES purchased the following rental equipment companies:
<TABLE>
<CAPTION>
Acquisition Date Company Location Purchase Price
- ---------------- -------------------------------------- ---------------- --------------
<S> <C> <C> <C>
January 6, 1997......... Brazos Rental & Tool, Inc., Industrial
Crane Maintenance Systems, Inc.
and Safe Load Work Products, Inc. Brazoria, TX $ 5,000,000
February 18, 1997....... Aerial Platforms, Inc. Atlanta, GA $ 4,150,000
March 17, 1997.......... Lone Star Rentals, Inc. Houston, TX $10,950,000
April 1, 1997........... BAT Rentals, Inc. Las Vegas, NV $15,900,000
July 1, 1997............ Sprintank Houston, TX $25,300,000
July 18, 1997........... MST Enterprises, Inc. Harrisonburg, VA $ 6,000,000
</TABLE>
The purchase prices above are subject to a customary purchase price
adjustment mechanism and assumption of certain seller liabilities.
The following pro forma financial information represents the unaudited pro
forma results of operations as if the aforementioned acquisitions had been
completed on January 1, 1996 and January 1, 1997, after giving effect to
certain adjustments including increased depreciation and amortization of
property and equipment and other assets and interest expense for acquisition
debt. These pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of the results of operations which would
have been achieved had these acquisitions been completed as of these dates,
nor are the results indicative of NES's future results of operations.
F-12
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
For the Year For the Year
Ended Ended
December 31, December 31,
1996 1997
(Unaudited) (Unaudited)
------------ -------------
(in thousands)
<S> <C> <C>
Revenues....................................... $48,040 $56,858
Operating income............................... 9,012 10,382
Net income..................................... 158 1,143
</TABLE>
3. Inventory
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1997
-------------
<S> <C>
New equipment............................................... $1,127
Parts....................................................... 1,200
Contractor supplies......................................... 382
Other....................................................... 20
------
2,729
Less: reserve............................................... (490)
------
$2,239
======
</TABLE>
4. Property and Equipment
Property and equipment, net, consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------ ------------
<S> <C> <C>
Leasehold improvements.......................... $-- $ 190
Machinery and equipment......................... 20 333
Furniture and fixtures.......................... -- 470
Vehicles........................................ -- 2,641
--- ------
20 3,634
Less: accumulated depreciation.................. (3) (622)
--- ------
$17 $3,012
=== ======
</TABLE>
Property and equipment depreciation expense aggregated $3,000 and $656,000
for the period from inception (June 4, 1996) through December 31, 1996 and the
year ended December 31, 1997, respectively.
5. Intangible Assets
Intangible assets consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Non-compete agreements....................................... $ 2,455
Goodwill..................................................... 26,253
Origination costs............................................ 48
-------
28,756
Less: accumulated amortization............................... (819)
-------
$27,937
=======
</TABLE>
Amortization expense aggregated $819,000 for the year ended December 31,
1997.
F-13
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------ ------------
<S> <C> <C>
Accrued salaries and benefits................... $110 $ 589
Sales tax payable............................... -- 244
Accrued income taxes............................ -- 333
Accrued property taxes.......................... -- 314
Other........................................... -- 847
---- ------
$110 $2,327
==== ======
</TABLE>
7. Debt
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Senior subordinated notes, interest at 10% payable semi-
annually, due November 30, 2004............................ $98,782
Revolving credit facility loans, interest at the federal
funds rate plus 0.5% or prime rate both plus 1.0%, or the
eurodollar rate plus 2.5%, due no later than July 1, 2002.. --
Term loan, interest at the federal funds rate plus 0.5% or
prime rate both plus 1.0%, or the eurodollar rate plus
2.5%, principal payments due quarterly of $625 through June
1, 1998, $875 through June 1, 1999 and $1,125 through June
1, 2001.................................................... --
-------
$98,782
=======
</TABLE>
On November 20, 1997, NES issued $100 million of Senior Subordinated Notes
(the "Existing Notes") at a discount netting proceeds of $98,767,000. NES
accretes the original issue discount over the term of the Existing Notes using
the effective interest method. The Existing Notes mature on November 30, 2004.
Interest on the Existing Notes accrues at a rate of 10% per year and is
payable semi-annually in arrears on May 30 and November 30 commencing on May
30, 1998.
The Existing Notes are redeemable at the option of the Company at any time
after November 30, 2001 at a redemption price of 105% of the principal amount
from November 30, 2001 to November 29, 2002, at 102.5% from November 30, 2002
to November 29, 2003 and 100% after November 30, 2003, plus accrued and unpaid
interest. The Company may at any time prior to November 30, 2000 on any one or
more occasions redeem up to 33% of the aggregate principal amount of the
Existing Notes at a redemption price of 110% or the principal amount plus
accrued and unpaid interest with the net cash proceeds of a public offering of
common stock of NES within 45 days of the closing of such public offering. In
addition, at any time prior to November 30, 2001, the Existing Notes may be
redeemed as a whole, at the option of NES, upon the occurrence of or in
connection with a change of control. Upon certain changes in control, the
noteholders will have the right to require redemption at a cash price of 101%
of the principal amount plus accrued and unpaid interest.
All of the Company's wholly-owned subsidiaries make full, unconditional,
joint and several guarantees of the Existing Notes. The separate financial
statements of each of these wholly-owned subsidiaries are not presented as
management believes they are not individually meaningful for presentation. The
Company's holding company has no operations separate from its investments in
these subsidiaries.
F-14
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On July 1, 1997, NES entered into a credit facility agreement with First
Union Commercial Corporation (the "Credit Agreement"). The Credit Agreement
provides for a secured revolving line of credit of $100 million and a term
loan of $15 million. Interest accrues at rates of the greater of the annual
Federal Funds Rate plus 0.5% or the prime rate both plus 0.5% to 1.25% based
on NES's leverage ratio or at a rate of LIBOR/(1 - eurodollar reserve
percentage). Principal payments for credit facility loans (to be applied first
to the term loan and if necessary to revolving loans) are due annually at the
lesser of 25% of excess cash flow or $1 million. Principal payments for the
term loan are due quarterly at $625,000 for the first four quarters, $875,000
for the next four quarters and $1,125,000 for the next eight quarters.
Substantially all assets and stock of NES are pledged as collateral for the
credit facility. NES pays commitment fees of 0.375% to 0.5% on the unused
portion of the outstanding line of credit balance on NES's leverage ratio. The
term loan was repaid as of December 31, 1997.
The Indenture for the Existing Notes and the Credit Agreement contain a
number of covenants that, among other things, require NES to maintain certain
financial ratios and set certain limitations on the granting of liens, asset
sales, additional indebtedness, transactions with affiliates, restricted
payments, investments and issuances of stock. NES is in compliance with all
covenants.
The average interest rate for the year ended December 31, 1997 was 9.8%. NES
incurred interest expense of $76,000 on borrowings from related parties for
the year ended December 31, 1997.
8. Income Taxes
The income tax provision is comprised of current federal and state income
tax expense (benefit) of $(137,100) and $818,000 for the period from inception
(June 4, 1996) through December 31, 1996 and year ended December 31, 1997,
respectively. Deferred tax expense (benefit) for such periods has been
immaterial.
The provision for income taxes differs from the amount of income tax
determined by applying the U.S. statutory federal income tax rate of 34% to
income before income taxes as a result of the following (in thousands):
<TABLE>
<CAPTION>
For the Period
From Inception
(June 4, 1996) For the
Through Year Ended
December 31, December 31,
1996 1997
-------------- -------------
<S> <C> <C>
Federal income taxes......................... $(113) $654
State income taxes, net of federal benefit... (16) 94
Other........................................ (8) 70
----- ----
$(137) $818
===== ====
</TABLE>
Deferred income tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year
in which the differences are expected to reverse. Deferred income tax expenses
or credits are based on the changes in the deferred income tax assets or
liabilities from period to period.
Deferred taxes have been provided for the temporary differences between the
financial reporting bases and the tax bases of NES's assets and liabilities as
follows (in thousands):
<TABLE>
<S> <C>
Allowances for doubtful accounts.................................. $ 78
Inventory......................................................... 167
Non-compete agreements............................................ 83
Minimum tax credits............................................... 90
Installment sale income........................................... (23)
Property, plant and equipment..................................... (314)
Goodwill.......................................................... (153)
-----
$ (72)
=====
</TABLE>
F-15
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Common Stock
On June 4, 1996, in connection with the formation of NES, NES authorized
25,000 shares of Class A Common Stock (24,250 of which were reserved for
issuance to NES's majority stockholder), par value $0.01, and 150,000 shares
of Class B Common Stock (75,000 of which were reserved for issuance to NES's
majority stockholder), par value $0.01. On October 28, 1997, the authorized
shares of Class A Common Stock were increased to 50,000.
Each calendar quarter, each share of Class A Common is entitled to a yield
in the amount of 10% per year of the sum of such share's unreturned original
cost plus the unpaid yield for all prior quarters. As of December 31, 1997,
the unpaid yield on the Class A Common aggregated $1,608,000. Class A Common
stockholders, as a class, are entitled to a number of votes equal to 10% of
the number of votes allocable to all Common Stock. Upon any distribution,
Class A Common stockholders are entitled to (i) the unpaid yield, (ii) any
unreturned original cost of the shares and (iii) 10% of any remaining
distribution. Class B Common stockholders are entitled to 90% of any remaining
distribution after payment to the Class A Common stockholders of all payments
under clause (i) and (ii) set forth in the preceding sentence. Additionally,
only in the event of a successful initial public offering can the Class A
Common stockholders require a mandatory redemption of any or all of the shares
attributable to the unpaid yield and original cost of the shares.
NES may not declare additional distributions or dividends other than the
amounts described above for Class A Common shares, issue any debt securities
containing equity features, sell or dispose of more than 5% of the
consolidated assets of the Company in any transaction or series of related
transactions, acquire an interest in a business, acquire a business outside of
the rental equipment industry, or enter into certain related party
transactions, without the consent of a majority of the Class A Common and
Class B Common stockholders.
Class B Common stock sold to executives of NES vests over a 5 year period.
Unpaid notes receivable of $1,000 and $102,000 as of December 31, 1996 and
December 31, 1997, respectively, from executives of NES for shares of Class B
Common stock are classified as stock subscriptions receivable.
10. Commitments and Contingencies
Operating leases
NES leases certain facilities, office equipment and vehicles under operating
leases some of which contain renewal options. Rental expense was $660 for the
year ended December 31, 1997.
Future minimum rental commitments as of December 31, 1997 under
noncancelable operating leases are (in thousands):
<TABLE>
<S> <C>
1998............................................................... $ 842
1999............................................................... 567
2000............................................................... 507
2001............................................................... 483
2002............................................................... 181
Thereafter......................................................... 213
------
$2,793
======
</TABLE>
Legal matters
NES is party to legal proceedings and potential claims arising in the
ordinary course of its business. In the opinion of management, the ultimate
resolution of these matters will have no material adverse effect on NES's
financial position, results of operations or cash flows.
F-16
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Employee Benefit Plans
The Company sponsors a profit sharing and 401(k) plan (the "Plan") in which
employees over 21 years of age with greater than one-half year of service are
eligible. Under the Plan, NES contributes a discretionary percentage (2.5% for
the year ended December 31, 1997) of each eligible employee's base annual
wages to a trust out of its net profits. In addition, eligible employees can
defer up to 15% of their salary with a partially matching contribution by NES
of 50% of the first 5% of the employee contribution. The employer
contributions vest over a five year period. Contributions by NES to the Plan
were $165,000 for year ended December 31, 1997.
12. Related Party Transactions
Pursuant to a Professional Services Agreement dated January 6, 1997, NES
pays management fees of $200,000 per year and investment fees of 1% of all
debt and equity financings of NES to an affiliate of NES's majority
stockholder, who owns 95.0% of the Class A Common stock and 83% of the Class B
Common stock. Total fees paid during the year ended December 31, 1997 were
$417,000 and fees owed at December 31, 1997 were $630,000.
In connection with several of the acquisitions, NES entered into lease
agreements for certain facilities with employees of NES who were prior owners
of the acquired companies. Amounts due under these leases are included in the
future minimum rental commitments under noncancelable operating leases
schedule in Note 10 above.
Stock subscriptions receivable of $1,000 and $102,000 as of December 31,
1996 and 1997, respectively, relate to notes due from officers of NES related
to purchases of Class B Common Stock and are secured by the purchased Class B
Common shares. Interest on the notes accrues at the federal funds rate and is
payable in full at maturity on June 4, 2006 or upon termination of employment.
Accrued interest on these notes was $0 and $8,000 for the period from
inception (June 4, 1996) through December 31, 1996 and the year ended December
31, 1997, respectively.
13. Subsequent Events
Subsequent to year end, NES purchased the following rental equipment
companies:
<TABLE>
<CAPTION>
Purchase
Acquisition Date Company Location Price
---------------- ------- -------- -----------
<C> <S> <C> <C>
Genpower Pump and Equipment
January 12, 1998 Co............................. Deer Park, TX $ 8,000,000
Eagle Scaffolding and Equipment
January 16, 1998 Co............................. Las Vegas, NV $ 3,290,000
January 23, 1998 Grand Hi-Reach, Inc............ Byron Center, MI $ 8,120,000
February 4, 1998 Work Safe Supply Company, Inc.. Grandville, MI $ 7,845,000
Dragon Rentals (division of The
March 2, 1998 Modern Group, Inc.)............ Beaumont, TX $23,000,000
March 4, 1998 Cormier Equipment Corporation.. Oakland, ME $27,500,000
March 30, 1998 Albany Ladder.................. Albany, NY $43,454,000
</TABLE>
The purchase prices above are subject to a customary purchase price
adjustment mechanism and assumption of certain seller liabilities. These
acquisitions will be accounted for under the purchase method based on the
purchase prices. Under the purchase method of accounting NES will allocate the
costs of these acquisitions, as of the respective closing dates, to the assets
acquired and liabilities assumed based on their respective fair values.
The operating results of these acquisitions will be included in NES's
consolidated results of operations from the date of acquisition. The following
pro forma financial information represents the unaudited pro forma results of
operations as if the aforementioned acquisitions had been completed on January
1, 1996 and January 1, 1997, after giving effect to certain adjustments
including increased depreciation and amortization of property and equipment
and intangible assets and interest expense for acquisition debt. These pro
forma results have been
F-17
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
prepared for comparative purposes only and do not purport to be indicative of
the results of operations which would have been achieved had these
acquisitions been completed as of these dates, nor are the results indicative
of NES's future results of operations.
<TABLE>
<CAPTION>
For the Year For the Year
Ended Ended
December 31, December 31,
1996 1997
(Unaudited) (Unaudited)
------------ ------------
(in thousands)
<S> <C> <C>
Revenues........................................ $120,475 $146,000
Operating income................................ 19,234 26,821
Net income...................................... 751 5,439
</TABLE>
Additionally, in July 1998, NES acquired Falconite, Inc., a rental equipment
company with operations in nine southern and midwestern states for $171.25
million and $3.75 million of 8% convertible subordinated promissory notes.
This acquisition closed concurrent with the initial public offering of the
Company's stock. In addition, the Company purchased R&R Rentals in July 1998
for $27.5 million. The Company also purchased Traffic Signing & Marketing,
Inc. in August 1998 for approximately $7.1 million and Shaughnessy Crane
Service, Inc. in September 1998 for approximately $80.0 million. In October
1998, the Company purchased Rebel Studio Rentals, Inc. for approximately $5.8
million.
In December 1998, NES issued $125 million of Senior Subordinated Notes (the
"Series C Notes") at a discount netting proceeds of $122,287,500. NES accretes
the original issue discount over the term of the Series C Notes using the
effective interest method. The Series C Notes mature on November 30, 2004.
Interest on the Series C Notes accrues at a rate of 10% per year and is
payable semi-annually on May 30 and November 30 of each year, commencing on
May 30, 1999.
F-18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of Aerial
Platforms, Inc. and the Board of Directors
of National Equipment Services, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of cash flows and of changes in stockholder's equity, present
fairly, in all material respects, the financial position of Aerial Platforms,
Inc. at January 31, 1997 and February 17, 1997, and the results of its
operations and its cash flows for the year ended January 31, 1997 and the
seventeen days ended February 17, 1997 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
November 4, 1997
F-19
<PAGE>
AERIAL PLATFORMS, INC.
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
January 31, February 17,
1997 1997
----------- ------------
<S> <C> <C>
Assets:
Cash................................................. $ 213 $ 265
Accounts receivable, net............................. 666 654
Inventory............................................ 72 71
Prepaid and other assets............................. 31 57
Rental equipment, net................................ 1,758 1,752
Property and equipment, net.......................... 149 134
------ ------
Total assets....................................... $2,889 $2,933
====== ======
Liabilities and Stockholder's Equity:
Accounts payable..................................... $ 75 $ 137
Accrued expenses and other liabilities............... 108 133
Income taxes......................................... 148 142
Debt................................................. 1,243 1,214
------ ------
Total liabilities.................................. 1,574 1,626
Commitments and contingencies (Note 7)
Common stock, $0.01 par, 10,000 shares authorized, 500
shares issued and outstanding........................ 1 1
Paid-in capital....................................... -- --
Retained earnings..................................... 1,314 1,306
------ ------
Total stockholder's equity......................... 1,315 1,307
------ ------
Total liabilities and stockholder's equity......... $2,889 $2,933
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
AERIAL PLATFORMS, INC.
STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Seventeen
Year Ended Days Ended
January 31, February 17,
1997 1997
----------- ------------
<S> <C> <C>
Revenues:
Rental revenues....................................... $3,385 $127
Rental equipment sales................................ 496 24
New equipment sales................................... 693 66
Other................................................. 172 16
------ ----
Total revenues...................................... 4,746 233
------ ----
Cost of Revenues:
Rental equipment expenses............................. 697 41
Rental equipment depreciation......................... 257 15
Cost of rental equipment sales........................ 184 19
Cost of new equipment sales........................... 569 59
Direct operating expenses............................. 665 35
------ ----
Total cost of revenues.............................. 2,372 169
------ ----
Gross profit........................................... 2,374 64
Selling, general and administrative expenses........... 1,302 64
Non-rental depreciation and amortization............... 74 8
------ ----
Operating (loss) income................................ 998 (8)
Interest income (expense), net......................... (124) (6)
------ ----
Income (loss) before income taxes...................... 874 (14)
Income tax expense (benefit)........................... 353 (6)
------ ----
Net (loss) income...................................... $ 521 $ (8)
====== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
AERIAL PLATFORMS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Seventeen
Year Ended Days Ended
January 31, February 17,
1997 1997
----------- ------------
<S> <C> <C>
Operating Activities:
Net income (loss).................................... $ 521 $ (8)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation........................................ 331 23
Loss (gain) on sale of equipment.................... (304) 2
Deferred income taxes............................... (118) --
Changes in operating assets and liabilities:
Accounts receivable................................ (231) 12
Inventories........................................ (17) 1
Prepaid and other assets........................... (21) (26)
Accounts payable................................... 22 62
Accrued expenses and other liabilities............. (18) 19
----- ----
Net cash provided by operating activities............ 165 85
----- ----
Investing Activities:
Purchases of rental equipment........................ (803) (28)
Proceeds from sale of rental equipment............... 496 24
Purchases of property and equipment.................. (12) --
Proceeds from sale of property and equipment......... -- --
----- ----
Net cash used in investing activities................ (319) (4)
----- ----
Financing Activities:
Proceeds from long-term debt......................... 468 --
Payments on long-term debt........................... (441) (29)
----- ----
Net cash provided by (used in) financing activities.. 27 (29)
----- ----
Net increase (decrease) in cash...................... (127) 52
Cash at beginning of period.......................... 340 213
----- ----
Cash at end of period................................ $ 213 $265
===== ====
Supplemental Non-Cash Flow Information:
Cash paid for interest............................... $ 122 $ 12
===== ====
Cash paid for income taxes........................... $ 398 $ --
===== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
AERIAL PLATFORMS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock
------------- Total
Stated Paid-in Retained Stockholder's
Shares Value Capital Earnings Equity
------ ------ ------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 31, 1996........ 500 $ 1 $-- $ 793 $ 794
Net income......................... -- -- -- 521 521
--- --- --- ------ ------
Balance at January 31, 1997........ 500 1 -- 1,314 1,315
Net income (loss).................. -- -- -- (8) (8)
--- --- --- ------ ------
Balance at February 17, 1997....... 500 $ 1 $-- $1,306 $1,307
=== === === ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
AERIAL PLATFORMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
Aerial Platforms, Inc. ("Aerial") is a C corporation primarily involved in
the short-term rental of platform aerial lifts, and to a lesser extent,
selling related new and used equipment. Aerial's principal customers are
construction contractors located in the Atlanta, Georgia area. Aerial operates
from one leased facility located in Norcross (Atlanta), Georgia.
Financial statement presentation
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 date of the financial
statements and the reported amounts of revenue and expenses during the
reporting periods. Actual results could differ from those estimates.
Rental revenue
Rental revenue is recognized ratably over the expected lease term.
Rental equipment
Rental equipment consists of platform aerial lifts and is recorded at cost.
Depreciation for rental equipment acquired is computed using the straight-line
method over an estimated five to seven year useful life with no salvage value.
Accumulated depreciation on rental equipment was approximately $1,960,000 and
$1,947,000 at January 31, 1997 and February 17, 1997, respectively.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
Property and equipment
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets. The
estimated useful lives for property and equipment range from three to five
years for vehicles and delivery equipment, and five to seven years for tools,
yard equipment and furniture and fixtures.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property 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 the statement of operations.
Adoption of new accounting pronouncement
On February 1, 1996, Aerial adopted Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed of, which requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the assets' carrying amounts exceed the
undiscounted cash flows estimated to be generated by those assets. SFAS No.
121 also requires impairment losses to be recorded when the carrying amount of
long-lived assets that are expected to be disposed of exceed their fair
values, net of disposal costs. Adoption of SFAS No. 121 did not have a
material impact on Aerial's financial position at January 31, 1997 or results
of operations for the year then ended.
F-24
<PAGE>
AERIAL PLATFORMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Inventories
Aerial's inventories of $72,000 and $71,000 at January 31, 1997 and February
17, 1997, respectively, consist primarily of spare parts held for use in
servicing and repairing platform aerial lifts. Inventories are stated at the
lower of cost, determined by the first-in, first-out method, or market.
Fair value of financial instruments
The carrying amounts reported in the balance sheets for trade accounts
receivable, accounts payable and accrued expenses and other liabilities
approximate fair value due to the short-term nature of these financial
instruments. The fair value of notes receivable and notes payable is
determined using current interest rates for similar instruments as of February
17, 1997 and approximates the carrying value of these notes.
Concentration of credit risk
Financial instruments that potentially subject Aerial to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction customers located in one geographical location. Aerial
generally does not require collateral on accounts receivable. Aerial maintains
an allowance for doubtful accounts on its receivables based upon expected
collectibility. Allowance for doubtful accounts was $24,000 and $24,250 at
January 31, 1997 and February 17, 1997, respectively.
Advertising costs
Aerial advertises primarily through trade journals and the media.
Advertising costs are expensed as incurred.
Income taxes
Deferred income tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year
in which the differences are expected to reverse. Deferred income tax expenses
or benefits are based on the changes in the deferred income tax assets or
liabilities from period to period.
2. Property and Equipment
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
January 31, February 17,
1997 1997
----------- ------------
<S> <C> <C>
Vehicles and delivery equipment.................. $122 $ 122
Tools and yard equipment......................... 212 196
Furniture and fixtures........................... 33 33
---- -----
367 351
Less: accumulated depreciation................... (218) (217)
---- -----
$149 $ 134
==== =====
</TABLE>
3. Prepaid and Other Assets
Prepaid and other assets consists of the following (in thousands):
<TABLE>
<CAPTION>
January 31, February 17,
1997 1997
----------- ------------
<S> <C> <C>
Officer and employee advances.................... $22 $36
Other............................................ 9 21
--- ---
$31 $57
=== ===
</TABLE>
F-25
<PAGE>
AERIAL PLATFORMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
January 31, February 17,
1997 1997
----------- ------------
<S> <C> <C>
Sales taxes payable.............................. $ 48 $ 56
Accrued benefit plan contributions............... 53 52
Accrued salaries................................. -- 12
Other............................................ 7 13
---- ----
$108 $133
==== ====
</TABLE>
5. Debt
<TABLE>
<CAPTION>
January 31, February 17,
1997 1997
----------- ------------
(in thousands)
<S> <C> <C>
Note payable in monthly installments of $16,850 plus
interest at the prime rate plus 1.5% (prime rate at
January 31, 1997 and February 17, 1997 was 8.25%)
with the final payment due in February 1999. (See
Note 9)............................................. $ 421 $ 404
Notes payable in monthly installments of
approximately $12,062 including interest at the
prime rate plus 1.5% with the final payments due at
varying dates through November 2000. (See Note 9)... 219 214
Note payable in monthly installments of approximately
$6,828 including interest at the prime rate plus
1.5% with final payment due July 1999. (See Note 9). 190 190
Note payable in monthly installments of approximately
$7,780 including interest at the prime rate plus
1.5% with final payment due in September 1999. (See
Note 9)............................................. 219 213
Note payable in monthly installments of approximately
$1,993 including interest at the prime rate plus
1.5% with final payment due in September 2001. (See
Note 9)............................................. 59 58
Note payable in monthly installments of approximately
$4,420 including interest at the prime rate plus 2%
with the final payment due in May 1998. (See Note
9).................................................. 65 65
Notes payable in monthly installments of $4,994
including interest of 10%, 9% and 11%, with the
final payments due in February 1997, July 1999 and
February 1999, respectively. (See Note 9)........... 70 70
------ ------
Total debt......................................... $1,243 $1,214
====== ======
</TABLE>
6. Income Taxes
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended Seventeen Days Ended
January 31, 1997 February 17, 1997
---------------- --------------------
<S> <C> <C>
Current:
Federal............................ $191 $(5)
State.............................. 34 (1)
Deferred:
Federal............................ 109 --
State.............................. 19 --
---- ---
$353 $(6)
==== ===
</TABLE>
F-26
<PAGE>
AERIAL PLATFORMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The provision for income taxes differs from the amount of income tax
determined by applying the U.S. statutory federal income tax rate of 34% to
income before income taxes as a result of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended Seventeen Days Ended
January 31, 1997 February 17, 1997
---------------- --------------------
<S> <C> <C>
(Loss) income at statutory rate.... $297 $ (5)
Effect of state taxes, net......... 51 (1)
Other.............................. 5 --
---- -----
$353 $ (6)
==== =====
</TABLE>
Deferred tax assets (liabilities) are as follows (in thousands):
<TABLE>
<CAPTION>
January 31, February 17,
1997 1997
----------- ------------
<S> <C> <C>
Depreciation..................................... $(153) $(153)
Allowance for doubtful accounts.................. 10 10
----- -----
Net deferred tax liability....................... $(143) $(143)
===== =====
</TABLE>
7. Commitments and Contingencies
Operating leases
Aerial conducts its operations in leased facilities under an operating lease
which expires in May 1998. Aerial also leases vehicles and certain rental
equipment under cancelable and noncancelable lease agreements which expire at
varying dates through July 2000. Rental expense was $658,000 and $45,000 for
the year ended January 31, 1997 and seventeen days ended February 17, 1997,
respectively.
Future minimum rental commitments as of February 17, 1997 under
noncancelable operating leases are (in thousands):
<TABLE>
<S> <C>
1998................................................................. $118
1999................................................................. 95
2000................................................................. 77
2001................................................................. 20
2002................................................................. --
----
$310
====
</TABLE>
Legal matters
Aerial is party to legal proceedings and claims arising in the ordinary
course of its business. In the opinion of management, the ultimate resolution
of these matters will have no material adverse effect on Aerial's financial
position, results of operations or cash flows.
8. Employee Benefit Plan
During the year ended January 31, 1995, Aerial established a simplified
employee pension plan covering substantially all employees. Employees meeting
certain age and length of service requirements are eligible to participate.
Employee contributions are permitted up to a maximum of 10% of covered
compensation. There are no required matching contributions by Aerial since
Aerial's contributions are at the discretion of the Board of Directors.
Aerial's contributions were $43,000 and $0 for the year ended January 31, 1997
and the seventeen days ended February 17, 1997, respectively.
F-27
<PAGE>
AERIAL PLATFORMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
9. Subsequent Events
On February 17, 1997, Aerial's sole shareholder sold all of the outstanding
common stock of Aerial to National Equipment Services, Inc. ("NES") in
exchange for a $3,750,000 cash payment (subject to a customary purchase price
adjustment mechanism), a $500,000 promissory note ($350,000 of which is in
consideration for the common stock of Aerial and $150,000 of which is in
consideration for certain non-compete covenants given by the sole shareholder
of Aerial's common stock) and the assumption of certain liabilities and
obligations. Aerial's results of operations are included with NES subsequent
to February 17, 1997.
At such closing, NES paid the remaining principal and accrued interest on
the notes payable to Fidelity National Bank in the amount of $1,219,600.
Additionally, NES purchased all of the leased rental equipment at February 17,
1997 for approximately $1,889,000.
F-28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of Lone Star
Rentals, Inc. and the Board of Directors of
National Equipment Services, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of cash flows and of changes in stockholder's equity, present
fairly, in all material respects, the financial position of Lone Star Rentals,
Inc. at December 31, 1995 and 1996 and March 16, 1997, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996 and for the period ended March 16, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
November 4, 1997
F-29
<PAGE>
LONE STAR RENTALS, INC.
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31, March 16,
1995 1996 1997
------------ ------------ ---------
<S> <C> <C> <C>
Assets:
Cash...................................... $ 88 $ 89 $ --
Accounts receivable, net.................. 1,338 1,187 1,193
Inventory................................. 338 622 708
Rental equipment, net..................... 7,622 6,952 6,688
Property and equipment, net............... 262 178 165
Prepaid and other assets.................. 446 377 382
------- ------ ------
Total assets............................ $10,094 $9,405 $9,136
======= ====== ======
Liabilities and Stockholder's Equity:
Accounts payable.......................... $ 236 $ 408 $ 660
Accrued expenses and other liabilities.... 257 293 274
Debt...................................... 5,481 4,529 4,348
Obligations under capital leases.......... 640 454 410
------- ------ ------
Total liabilities....................... 6,614 5,684 5,692
------- ------ ------
Commitments and contingencies (Note 9)
Stockholder's equity....................... 3,480 3,721 3,444
------- ------ ------
Total liabilities and stockholder's
equity................................. $10,094 $9,405 $9,136
======= ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
LONE STAR RENTALS, INC.
STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Year Ended
December 31, Period Ended
-------------- March 16,
1995 1996 1997
------ ------ ------------
<S> <C> <C> <C>
Revenues:
Rental revenue.................................... $8,324 $8,168 $1,455
Sales of equipment and supplies................... 1,379 1,181 188
------ ------ ------
Total revenues.................................. 9,703 9,349 1,643
------ ------ ------
Cost of Revenues:
Rental equipment expense.......................... 2,398 2,485 594
Rental equipment depreciation..................... 1,356 1,440 242
Cost of equipment and supplies.................... 1,079 888 119
Direct operating expenses......................... 1,679 1,739 416
------ ------ ------
Total cost of revenues.......................... 6,512 6,552 1,371
------ ------ ------
Gross profit (loss)................................ 3,191 2,797 272
Selling, general and administrative expense........ 1,918 1,988 475
Non-rental depreciation and amortization........... 170 169 26
------ ------ ------
Operating (loss) income............................ 1,103 640 (229)
Other income....................................... 231 271 139
Interest income (expense) net...................... (608) (530) (164)
------ ------ ------
Net income (loss).................................. $ 726 $ 381 $ (254)
====== ====== ======
Pro forma tax provision (benefit) (unaudited):
Income (loss) before income taxes................. $ 726 $ 381 $ (254)
Pro forma provision (benefit) for income taxes.... 254 133 (89)
------ ------ ------
Pro forma net income (loss)....................... $ 472 $ 248 $ (165)
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
LONE STAR RENTALS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended
December 31, Period Ended
---------------- March 16,
1995 1996 1997
------- ------- ------------
<S> <C> <C> <C>
Operating Activities:
Net income..................................... $ 726 $ 381 $(254)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................. 1,526 1,609 268
Gain on sale of equipment..................... (184) (175) --
Changes in operating assets and liabilities:
Accounts receivable.......................... (192) 151 (6)
Inventory.................................... 318 (284) (86)
Prepaid and other assets..................... 20 69 (5)
Accounts payable............................. (71) 172 252
Accrued expenses and other liabilities....... 30 36 (19)
------- ------- -----
Net cash provided by operating activities...... 2,173 1,959 150
------- ------- -----
Investing Activities:
Purchases of rental equipment.................. (3,019) (1,595) 9
Proceeds from sale of rental equipment......... 1,013 733 --
Purchases of property and equipment............ (51) (6) --
Proceeds from sale of property and equipment... 76 2 --
------- ------- -----
Net cash provided by (used in) investing
activities.................................... (1,981) (866) 9
------- ------- -----
Financing Activities:
Proceeds from debt............................. 2,871 1,640 --
Payments on debt............................... (2,881) (2,592) (225)
Dividends paid................................. (231) (140) (23)
------- ------- -----
Net cash used in financing activities.......... (241) (1,092) (248)
------- ------- -----
Net increase (decrease) in cash................ (49) 1 (89)
Cash at beginning of period.................... 137 88 89
------- ------- -----
Cash at end of period.......................... $ 88 $ 89 $ --
======= ======= =====
Supplemental Non-Cash Flow Information:
Cash paid for interest......................... $ 607 $ 529 $ 164
======= ======= =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
LONE STAR RENTALS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(in thousands)
<TABLE>
<CAPTION>
Stockholder's
Equity
-------------
<S> <C>
Balance at December 31, 1994...................................... $2,985
Net income........................................................ 726
Dividends......................................................... (231)
------
Balance at December 31, 1995...................................... 3,480
Net income........................................................ 381
Dividends......................................................... (140)
------
Balance at December 31, 1996...................................... 3,721
Net income........................................................ (254)
Dividends......................................................... (23)
------
Balance at March 16, 1997......................................... $3,444
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
LONE STAR RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
Lone Star Rentals, Inc. ("Lone Star") is an S Corporation primarily involved
in the short-term rental of general purpose construction equipment, and to a
lesser extent, selling complementary parts, merchandise and new and used
equipment to commercial and residential construction companies, industrial
enterprises, homeowners and other customers. Lone Star operates from five
separate locations, four of which are in the Houston, Texas metropolitan area
and one of which is in Corpus Christi, Texas. Lone Star's executive offices
are located in Houston, Texas.
Rental revenues
Rental revenues are recognized upon the earliest occurrence of either the
return of the equipment or the end of one month's rental term. For rental
contracts greater than one month, rental revenues are recognized notably over
the contract period.
Inventory
Lone Star's inventories primarily consist of items such as equipment, hand
tools and accessories held for resale. Inventories are stated at the lower of
cost, determined by the first-in, first-out method and replacement value, or
market.
Rental equipment
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using the straight line method over an estimated average
7-year useful life with no salvage value.
Ordinary maintenance and repairs costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
Property and equipment
Property and equipment is recorded at cost. Depreciation is computed using
the straight line method over the estimated useful lives of the assets.
The estimated useful lives for property and equipment range from 7 to 25
years for buildings, 3 to 7 years for vehicles, delivery and yard equipment,
and 1 to 7 years for fixtures and leasehold improvements.
Ordinary maintenance and repairs costs are charged to operations as
incurred. When property and 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.
Fair value of financial instruments
The carrying amounts reported in the balance sheets for trade accounts
receivable, accounts payable and other liabilities approximate fair value due
to the immediate to short-term maturity of these financial instruments. The
fair value of notes receivable and notes payable using current interest rates
for similar instruments as of December 31, 1995 and 1996 and March 16, 1997
approximates their carrying value as the underlying instruments include
provisions to adjust interest rates to approximate fair market value.
F-34
<PAGE>
LONE STAR RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Concentration of credit risk
Financial instruments that potentially subject Lone Star to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction and industrial customers. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
customers and Lone Star's geographic dispersion. Lone Star performs credit
evaluations of its customers' financial condition and generally does not
require collateral on accounts receivable.
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 certain assets and
liabilities, and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the related reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Advertising costs
Lone Star advertises primarily through trade journals and the media.
Advertising costs are expensed as incurred.
Income taxes
Lone Star's parent is a subchapter S corporation, taxes are the
responsibility of the individual shareholders of the parent. The pro forma
provision for income taxes approximate what Lone Star's tax provision would be
if subject to income taxes as a C corporation.
Related party transactions
As disclosed in these financial statements, Lone Star has participated in
certain transactions with related parties.
2. Inventory
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
December
31,
--------- March 16,
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
Equipment............................................. $142 $411 $490
Parts and supplies.................................... 196 211 218
---- ---- ----
$338 $622 $708
==== ==== ====
</TABLE>
F-35
<PAGE>
LONE STAR RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. Rental Equipment
Rental equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------- March 16,
1995 1996 1997
------- ------- ---------
<S> <C> <C> <C>
Air compressors and tools..................... $ 1,479 $ 1,590 $ 1,584
Compaction and concrete....................... 985 919 866
Earth moving equipment........................ 3,913 4,023 3,954
Forklifts, highreach and scaffolding.......... 1,581 1,574 1,365
Generators and lighting....................... 693 620 607
Plumbing and painting......................... 287 273 276
Trenchers and trailers........................ 232 457 455
Pumps......................................... 527 507 510
Welders....................................... 644 570 569
Other......................................... 731 717 719
------- ------- -------
11,072 11,250 10,905
Less: accumulated depreciation................ (3,450) (4,298) (4,217)
------- ------- -------
$ 7,622 $ 6,952 $ 6,688
======= ======= =======
</TABLE>
4. Property and Equipment
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December
31,
------------ March 16,
1995 1996 1997
----- ----- ---------
<S> <C> <C> <C>
Vehicles and delivery equipment................... $ 303 $ 300 $ 300
Furniture and fixtures............................ 254 268 268
Leasehold improvements............................ 43 43 43
Building improvements............................. 127 127 127
----- ----- -----
727 738 738
Less: accumulated depreciation.................... (465) (560) (573)
----- ----- -----
$ 262 $ 178 $ 165
===== ===== =====
</TABLE>
5. Prepaid and Other Assets
Prepaid and other assets consists of the following (in thousands):
<TABLE>
<CAPTION>
December
31,
--------- March 16,
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
Non-compete agreement................................. $438 $363 $350
Other................................................. 8 14 32
---- ---- ----
$446 $377 $382
==== ==== ====
</TABLE>
Lone Star has entered into a non-compete agreement with a former owner which
expires on December 1, 2002. The original cost of $750,000 is being amortized
over a ten year life using the straight line method.
F-36
<PAGE>
LONE STAR RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
December
31,
--------- March 16,
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
Customer deposits..................................... $ 21 $ 25 $ 30
Sales tax payable..................................... 49 44 24
Payroll tax payable................................... 1 7 --
Accrued property tax payable.......................... 172 173 203
Other................................................. 14 44 17
---- ---- ----
$257 $293 $274
==== ==== ====
</TABLE>
7. Debt
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------- March 16,
1995 1996 1997
------ ------ ---------
<S> <C> <C> <C>
Current portion of debt:
Floor plan payable Homelite...................... $ 78 $ 14 $ --
Floor plan payable Kubota........................ 11 171 245
Floor plan payable Nations....................... -- 131 123
Floor plan payable Mitsui........................ 19 -- --
Current notes payable Pinemont................... 400 649 649
Current notes payable Texas Commerce............. -- -- --
Current portion of long-term debt................ 2,290 1,725 1,517
------ ------ ------
Total current debt............................. 2,798 2,690 2,534
------ ------ ------
Long-term portion of debt:
Notes payable Pinemont Bank...................... 267 133 133
Merchants Park Bank vehicles..................... 22 11 11
Merchants Park Bank building and land............ 6 1 1
Notes payable Case Credit........................ 515 685 685
Notes payable Chicago Pneumatic.................. 56 18 18
Notes payable Ingersoll Rand..................... 115 25 14
Notes payable John Deere......................... 374 252 252
Notes payable Kubota Credit...................... 203 46 46
Notes payable Mitsui............................. 254 177 163
Notes payable Miller Services.................... 121 19 19
Notes payable Orix............................... 214 28 28
Notes payable Jack Fulton........................ 532 444 444
Notes payable Navistar........................... 4 -- --
------ ------ ------
Total long-term debt........................... 2,683 1,839 1,814
------ ------ ------
Total debt..................................... $5,481 $4,529 $4,348
====== ====== ======
</TABLE>
Interest and principal is payable monthly or quarterly at rates ranging from
5.7% to 12%. The note agreements include restrictions as to limitations upon
certain ratios of liabilities to net worth and upon the minimum net worth of
Lone Star. Lone Star is in compliance with covenants in all agreements.
Substantially all rental equipment, property and equipment, and accounts
receivable of Lone Star are pledged as collateral for the bank line of credit
demand notes, and notes related to purchases of certain businesses.
F-37
<PAGE>
LONE STAR RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
On bank notes payable, Lone Star incurred interest expense of $605,000,
$778,000 and $66,000 for the periods ended December 31, 1995 and December 31,
1996 and March 16, 1997, respectively.
Maturities of debt are as follows at March 16, 1997 (in thousands):
<TABLE>
<S> <C>
1997............................................................... $2,534
1998............................................................... 878
1999............................................................... 523
2000............................................................... 287
2001............................................................... 126
------
$4,348
======
</TABLE>
8. Obligations under capital leases
Capitalized leases recorded as assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
December
31,
------------ March 16,
1995 1996 1997
----- ----- ---------
<S> <C> <C> <C>
Compaction and concrete........................... $ 180 $ 180 $ 180
Forklifts, highreach and scaffolding.............. 81 81 81
Trenchers and trailers............................ 254 254 254
Pumps............................................. 245 245 245
Other............................................. 46 46 46
----- ----- -----
806 806 806
Less: accumulated depreciation.................... (127) (249) (270)
----- ----- -----
$ 679 $ 557 $ 536
===== ===== =====
</TABLE>
Obligations under capital leases consists of the following (in thousands):
<TABLE>
<CAPTION>
December
31,
--------- March 16,
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
Leases payable AEL/Reli............................... $466 $244 $ 55
Leases payable Associated............................. 73 156 338
Leases payable Bankers Leasing........................ 28 6 --
Leases payable Clark Financials....................... 50 34 14
Leases payable Manifest Group......................... 23 14 3
---- ---- ----
640 454 410
==== ==== ====
Current portion....................................... 267 284 223
---- ---- ----
Long-term portion..................................... $373 $170 $187
==== ==== ====
</TABLE>
Future minimum lease payments as of March 16, 1997 are (in thousands):
<TABLE>
<S> <C>
1997................................................................. $267
1998................................................................. 117
1999................................................................. 51
2000................................................................. 18
Thereafter........................................................... --
----
$453
====
</TABLE>
F-38
<PAGE>
LONE STAR RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
9. Commitments and Contingencies
Operating leases
Lone Star leases certain facilities under operating leases which contain
renewal options and provide for periodic cost of living adjustments. Rental
expense was $241,000 and $236,000 for the years ended December 31, 1995 and
1996 respectively, and $49,000 for the period ended March 16, 1997.
Future minimum rental commitments as of March 16, 1997 under non-cancelable
operating leases are (in thousands):
<TABLE>
<S> <C>
1997............................................................... $ 192
1998............................................................... 242
1999............................................................... 242
2000............................................................... 242
2001............................................................... 242
Thereafter......................................................... 51
------
$1,211
======
</TABLE>
Legal matters
Lone Star is party to legal proceedings and potential claims arising in the
ordinary course of its business. Management believes that the ultimate
resolution of these matters will have no material adverse effect on Lone
Star's financial position, results of operations or cash flows.
10. Subsequent events
On March 17, 1997, Lone Star's owner sold substantially all of Lone Star's
assets to NES Acquisition Corp., a wholly owned subsidiary of National
Equipment Services, Inc. for a $10,579,711 cash payment (subject to a
customary purchase price adjustment mechanism), a promissory note in the
principal amount of $500,000 ($350,000 of which is in partial consideration
for such assets and $150,000 of which is in consideration for certain non-
compete covenants by Lone Star's former owner) and the assumption of certain
liabilities and obligations.
F-39
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder
of BAT Rentals, Inc. and the Board of Directors
of National Equipment Services, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in stockholder's equity and of cash flows, present
fairly, in all material respects, the financial position of BAT Rentals, Inc.
at December 31, 1995 and 1996 and March 31, 1997, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996 and for the three months ended March 31, 1997, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
November 4, 1997
F-40
<PAGE>
BAT RENTALS, INC.
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31, March 31,
1995 1996 1997
------------ ------------ ---------
<S> <C> <C> <C>
Assets:
Cash and cash equivalents................. $ 1,879 $ 1,750 $ 1,609
Accounts receivable, net.................. 1,107 1,322 1,574
Inventory, net............................ 672 645 530
Rental equipment, net..................... 4,434 5,779 5,945
Property and equipment, net............... 1,976 1,855 1,808
Prepaid and other assets.................. 43 153 30
------- ------- -------
Total assets............................ $10,111 $11,504 $11,496
======= ======= =======
Liabilities and Stockholders' Equity:
Accounts payable.......................... $ 126 $ 36 $ 84
Accrued expenses and other liabilities.... 200 121 216
Debt...................................... 3,191 3,302 2,891
------- ------- -------
Total liabilities....................... 3,517 3,459 3,191
Common stock, $10 par, 1,000 shares
authorized, 700 shares issued and
outstanding.............................. 7 7 7
Other paid-in capital..................... 2 2 2
Retained earnings......................... 7,514 8,965 9,225
Treasury stock............................ (929) (929) (929)
------- ------- -------
Total stockholders' equity.............. 6,594 8,045 8,305
------- ------- -------
Total liabilities and stockholders'
equity................................. $10,111 $11,504 $11,496
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
BAT RENTALS, INC.
STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
For the Years Ended For the Three
------------------------- Months Ended
December 31, December 31, March 31,
1995 1996 1997
------------ ------------ ------------- ---
<S> <C> <C> <C> <C>
Revenues:
Rental revenues................... $ 4,856 $ 6,328 $1,457
Rental equipment sales............ 2,486 2,879 995
New equipment sales............... 4,733 3,547 1,250
Other............................. 378 386 100
------- ------- ------
Total revenues.................. 12,453 13,140 3,802
------- ------- ------
Cost of Revenues:
Rental equipment expenses......... 80 184 12
Rental equipment depreciation..... 2,059 2,576 707
Cost of rental equipment sales.... 968 1,411 352
Cost of new equipment sales....... 4,052 2,961 1,010
Direct operating expense.......... 1,653 1,623 450
------- ------- ------
Total cost of revenues.......... 8,812 8,755 2,531
------- ------- ------
Gross profit....................... 3,641 4,385 1,271
Selling, general and administrative
expenses.......................... 1,552 1,399 489
Non-rental depreciation and
amortization...................... 116 109 25
------- ------- ------
Operating income................... 1,973 2,877 757
Other income (expense), net........ 29 120 (1)
Interest income (expense), net..... (103) (196) (46)
------- ------- ------
Net income......................... $ 1,899 $ 2,801 $ 710
======= ======= ======
Pro Forma Tax Provision
(Unaudited):
Income before income taxes......... $ 1,899 $ 2,801 $ 710
Pro forma provision for income
taxes.............................. 646 952 241
------- ------- ------
Pro forma net income............... $ 1,253 $ 1,849 $ 469
======= ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE>
BAT RENTALS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Years Ended For the Three
------------------------- Months Ended
December 31, December 31, March 31,
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
Operating Activities:
Net income............................ $ 1,899 $ 2,801 $ 710
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation......................... 2,175 2,685 732
Gain on sale of equipment............ (1,527) (1,468) (657)
Changes in operating assets and
liabilities:
Accounts receivable................. (27) (215) (252)
Inventories......................... (42) 26 115
Prepaid and other assets............ 45 (110) 123
Accounts payable.................... 76 (90) 48
Accrued expenses and other
liabilities........................ 110 (79) 95
------- ------- ------
Net cash provided by operating
activities............................ 2,709 3,550 914
------- ------- ------
Investing Activities:
Purchases of rental equipment......... (3,953) (5,332) (1,211)
Proceeds from sale of rental
equipment............................ 2,486 2,879 995
Purchases of property and equipment... (52) (2) --
Proceeds from sale of property and
equipment............................ -- 14 23
------- ------- ------
Net cash used in investing activities.. (1,519) (2,441) (193)
------- ------- ------
Financing Activities:
Proceeds from long-term debt.......... 1,303 1,465 --
Payments on long-term debt............ (771) (1,353) (412)
Dividends paid........................ (1,500) (1,350) (450)
------- ------- ------
Net cash used in financing activities.. (968) (1,238) (862)
------- ------- ------
Net increase (decrease) in cash and
cash equivalents...................... 222 (129) (141)
Cash and cash equivalents at beginning
of period............................. 1,657 1,879 1,750
------- ------- ------
Cash and cash equivalents at end of
period................................ $ 1,879 $ 1,750 $1,609
======= ======= ======
Supplemental Non-Cash Flow Information:
Cash paid for interest................ $ 227 $ 244 $ 56
======= ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-43
<PAGE>
BAT RENTALS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock Total
------------------- Paid-In Treasury Retained Stockholders'
Shares Stated Value Capital Stock Earnings Equity
------ ------------ ------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994................... 700 $ 7 $ 2 $(929) $ 7,115 $ 6,195
Net income.............. -- -- -- -- 1,899 1,899
Dividends............... -- -- -- -- (1,500) (1,500)
--- --- --- ----- ------- -------
Balance at December 31,
1995................... 700 7 2 (929) 7,514 6,594
Net income.............. -- -- -- -- 2,801 2,801
Dividends............... -- -- -- -- (1,350) (1,350)
--- --- --- ----- ------- -------
Balance at December 31,
1996................... 700 7 2 (929) 8,965 8,045
Net income.............. -- -- -- -- 710 710
Dividends............... -- -- -- -- (450) (450)
--- --- --- ----- ------- -------
Balance at March 31,
1997................... 700 $ 7 $ 2 $(929) $ 9,225 $ 8,305
=== === === ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE>
BAT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
BAT Rentals, Inc. ("BAT") is an S corporation primarily involved in the
sale, financing and rental of construction equipment to construction
contractors and industrial companies. BAT operates from one facility in Las
Vegas, Nevada.
Financial statement presentation
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 date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Rental revenues
Rental revenues are recognized ratably over the lease term. Sales revenues
are recognized at the point of delivery.
Cash and cash equivalents
Cash and cash equivalents are short-term highly liquid investments with
original maturities of three months or less.
Inventory
BAT's inventories primarily consist of parts and new equipment held for
sale. Inventories are stated at the lower of cost, determined by the first-in,
first-out method, or market.
Rental equipment
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using the straight-line and accelerated methods over an
estimated 5 to 7 year useful life with no salvage value.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
Property and equipment
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line and accelerated methods over the estimated useful lives of
the assets.
The estimated useful lives for property and equipment range from 31.5 years
for buildings, 5 to 7 years for machinery and equipment, 5 to 7 years for
furniture and fixtures and 3 to 5 years for vehicles.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and 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.
Adoption of new accounting pronouncement
On January 1, 1996, BAT adopted Statement of Financial Accounting Standards
(SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and Long-
Lived Assets to be Disposed of, which requires
F-45
<PAGE>
BAT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the assets' carrying amounts exceed
the undiscounted cash flows estimated to be generated by those assets. SFAS
No. 121 also requires impairment losses to be recorded when the carrying
amount of long-lived assets that are expected to be disposed of, exceed their
fair values, net of disposal costs. Adoption of SFAS No. 121 did not have a
material impact on BAT's financial position at March 31, 1997 or results of
operations for the period then ended.
Fair value of financial instruments
The carrying amounts reported in the balance sheets for trade accounts
receivable, accounts payable and accrued expenses and other liabilities
approximate fair value due to the immediate to short-term maturity of these
financial instruments. The fair value of long-term debt is determined using
current interest rates for similar instruments as of March 31, 1997 and
approximates the carrying value of the debt due to the fact that the
underlying instruments include provisions to adjust note balances and interest
rates to approximate fair market value.
Concentration of credit risk
Financial instruments that potentially subject BAT to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction and industrial customers. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
customers and BAT's geographic dispersion. BAT performs credit evaluations of
its customers' financial condition and generally does not require collateral
on accounts receivable. BAT maintains an allowance for doubtful accounts on
its receivables based upon expected collectibility. Allowance for doubtful
accounts was $116,200, $116,200 and $96,300 at March 31, 1997, December 31,
1996 and 1995, respectively.
Income taxes
BAT has elected S corporation status under the U.S. Internal Revenue Code.
Pursuant to this election, BAT's income, deductions and credits are reported
on the income tax returns of BAT's stockholders for federal purposes and,
accordingly, no provision for federal income taxes has been made. Pro forma
income taxes are calculated at a statutory tax rate of 34%.
Related party transactions
As disclosed in these financial statements, BAT has participated in certain
transactions with related parties.
2. Inventory
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
December
31,
---------- March 31,
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
New equipment....................................... $342 $365 $300
Parts............................................... 418 438 381
Contractor supplies................................. 77 75 76
Other............................................... 7 8 14
---- ---- ----
844 886 771
Less: reserve....................................... (172) (241) (241)
---- ---- ----
Total inventory, net................................ $672 $645 $530
==== ==== ====
</TABLE>
F-46
<PAGE>
BAT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. Rental Equipment
Rental equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------- March 31,
1995 1996 1997
------ ------- ---------
<S> <C> <C> <C>
Rental equipment............................... $9,387 $11,397 $11,545
Less: accumulated depreciation................. (4,953) (5,618) (5,600)
------ ------- -------
Rental equipment, net.......................... $4,434 $ 5,779 $ 5,945
====== ======= =======
</TABLE>
4. Property and Equipment
Property and equipment, net, consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------- March 31,
1995 1996 1997
------ ------ ---------
<S> <C> <C> <C>
Land and land improvements...................... $ 807 $ 807 $ 807
Building........................................ 1,336 1,336 1,336
Machinery and shop equipment.................... 60 63 68
Furniture and fixtures.......................... 424 440 442
Vehicles........................................ 910 889 838
------ ------ ------
Total property and equipment, at cost........... 3,537 3,535 3,491
Less: accumulated depreciation.................. (1,561) (1,680) (1,683)
------ ------ ------
Property and equipment, net..................... $1,976 $1,855 $1,808
====== ====== ======
</TABLE>
5. Prepaid and Other Assets
Prepaid and other assets consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------- March 31,
1995 1996 1997
------ ------ ---------
<S> <C> <C> <C>
Receivable from EPA............................... $ -- $ 108 $--
Prepaid insurance................................. 29 31 5
Prepaid advertising............................... 7 7 3
Other............................................. 7 7 22
----- ------ ---
$ 43 $ 153 $30
===== ====== ===
</TABLE>
6. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
December
31,
--------- March 31,
1995 1996 1997
---- ---- ---------
<S> <C> <C> <C>
Accrued expenses...................................... $ 72 $ 21 $ 68
Sales tax payable..................................... 52 54 78
Accrued profit sharing................................ -- 46 70
Accrued equipment sales payable....................... 76 -- --
---- ---- ----
$200 $121 $216
==== ==== ====
</TABLE>
F-47
<PAGE>
BAT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. Debt
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------- March 31,
1995 1996 1997
------ ------ ---------
<S> <C> <C> <C>
Notes payable, secured by rental equipment,
payable through various dates ending February
2000, interest rates ranging from 7.9% to prime
plus 1%........................................ $1,295 $1,630 $1,428
Notes payable, related party, secured by rental
equipment, with interest ranging from 7.5% to
prime plus 1%.................................. 177 223 188
Notes payable, secured by trust deed on property
and buildings, with interest at prime plus 1%
maturing May 1997.............................. 167 -- --
Notes payable, shareholder, secured by rental
equipment with interest at prime plus 1%,
minimum rate of 9.75%.......................... 328 288 245
Revolving credit line, secured by rental
equipment and inventory, with a limit of
$1,250,000. Interest payable monthly at Bank of
America's reference rate plus 0.65%............ 1,009 814 871
Other contracts payable, secured by rental
equipment and inventory, due upon sale of
collateral or within one year of the date of
purchase if not sold........................... 215 347 159
------ ------ ------
Total debt...................................... $3,191 $3,302 $2,891
====== ====== ======
</TABLE>
BAT's agreement with the bank provides for a secured revolving line of
credit of $1,250,000 maturing no later than May 31, 1997. The bank and senior
note agreements include restrictions as to limitations upon certain ratios of
liabilities to net worth and upon the minimum net worth of BAT. BAT is in
compliance with covenants in all agreements. Substantially all of BAT's assets
are pledged as collateral for the long-term debt.
Maturities of debt are as follows at March 31, 1997 (in thousands):
<TABLE>
<S> <C>
1997............................................................... $1,685
1998............................................................... 800
1999............................................................... 397
2000............................................................... 9
2001............................................................... --
Thereafter......................................................... --
------
$2,891
======
</TABLE>
Legal matters
BAT is party to legal proceedings and claims arising in the ordinary course
of its business. Management believes that the ultimate resolution of these
matters will have no material adverse effect on BAT's financial position,
results of operations or cash flows.
F-48
<PAGE>
BAT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. Employee Benefit Plans
BAT sponsors a profit sharing plan (the "Plan") in which employees with
greater than one year of service are eligible. Under the Plan, BAT contributes
15% of each eligible employee's base annual wages to a trust out of its net
profits. Effective January 1, 1997, five percent of the eligible employee's
wages are deposited into a 401(k) plan and the remaining 10% portion is
contributed to a separate profit sharing plan. In addition, eligible employees
can defer up to 10% of their salary with a partially matching contribution by
BAT. The employer contributions vest over a seven year period. Contributions
by BAT to the Plan were $195,100, $198,500 and $0 for the years ended December
31, 1995 and 1996 and the period ended March 31, 1997, respectively.
9. Related Party Transactions
Paul Bronken, President and beneficial owner of a majority of the shares of
BAT, and H. L. Butler, an employee and officer of BAT, loaned the Company
approximately $110,700 and $325,200 during the years ended December 31, 1995
and 1996, respectively, to finance rental equipment purchases. Interest
expense related to these loans was $46,000, $48,200 and $11,200 for the years
ended December 31, 1995 and 1996 and the three months ended March 31, 1997,
respectively.
10. Subsequent Events
On April 1, 1997, BAT's owner sold substantially all of BAT's assets to BAT
Acquisition Corp., a wholly owned subsidiary of National Equipment Services,
Inc., for a $15.4 million cash payment.
F-49
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Sprint Industrial Services, Inc. and
the Board of Directors of
National Equipment Services, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in divisional equity and of cash flows, present
fairly, in all material respects, the financial position of Sprintank and
Sprintank Mobile Storage (divisions of Sprint Industrial Services, Inc.) at
December 31, 1995, December 31, 1996, and June 30, 1997 and the results of its
operations and its cash flows for the years ended December 31, 1995 and 1996
and the six months ended June 30, 1997 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
November 4, 1997
F-50
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June
December 31, December 31, 30,
1995 1996 1997
------------ ------------ -------
<S> <C> <C> <C>
Assets:
Cash......................................... $ 14 $ 238 $ 373
Accounts receivable, net..................... 1,922 1,829 2,089
Inventory.................................... -- -- 261
Rental equipment, net........................ 8,118 9,741 10,477
Property and equipment, net.................. 584 607 757
Prepaid expenses and other assets............ 89 131 105
------- ------- -------
Total assets............................... $10,727 $12,546 $14,062
======= ======= =======
Liabilities and Divisional Equity:
Accounts payable............................. $ 201 $ 24 $ 282
Accrued expenses and other liabilities....... 182 263 381
Debt......................................... 7,370 8,987 8,624
------- ------- -------
Total liabilities.......................... 7,753 9,274 9,287
------- ------- -------
Intercompany.................................. 1,382 1,054 837
Commitments and contingencies (Note 8)
Divisional equity............................. 1,592 2,218 3,938
------- ------- -------
Total liabilities and divisional equity.... $10,727 $12,546 $14,062
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Year Ended
------------------------- Six Months
December 31, December 31, Ended June
1995 1996 30, 1997
------------ ------------ ----------
<S> <C> <C> <C>
Revenues:
Rental revenues.......................... $7,475 $ 9,172 $5,715
Other income............................. 404 426 327
------ ------- ------
Total revenues......................... 7,879 9,598 6,042
------ ------- ------
Cost of Revenues:
Rental equipment expenses................ 1,648 1,395 470
Rental equipment depreciation............ 1,376 2,025 1,109
Direct operating expenses................ 257 197 173
------ ------- ------
Total cost of revenues................. 3,281 3,617 1,752
------ ------- ------
Gross profit.............................. 4,598 5,981 4,290
Selling, general and administrative
expenses................................. 2,977 4,333 2,028
Non-rental depreciation and amortization.. 99 145 83
------ ------- ------
Operating income.......................... 1,522 1,503 2,179
Other income (expense), net............... 1 14 (10)
Interest income (expense), net............ (868) (1,037) (553)
------ ------- ------
Net income................................ $ 655 $ 480 $1,616
====== ======= ======
Pro Forma Tax Provision (Unaudited):
Income before income taxes............... $ 655 $ 480 $1,616
Pro forma provision for income taxes..... 229 168 566
------ ------- ------
Pro forma net income..................... $ 426 $ 312 $1,050
====== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-52
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended
------------------------- Six Months Ended
December 31, December 31, June 30,
1995 1996 1997
------------ ------------ ----------------
<S> <C> <C> <C>
Operating Activities:
Net income......................... $ 655 $ 480 $ 1,616
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation...................... 1,475 2,170 1,192
Changes in operating assets and
liabilities:
Accounts receivable.............. (779) 93 (260)
Inventory........................ -- -- (261)
Prepaid expenses and other
assets.......................... 206 (42) 26
Accounts payable................. 166 (177) 258
Accrued expenses and other
liabilities..................... 335 (247) (99)
------- ------- -------
Net cash provided by operating
activities......................... 2,058 2,277 2,472
------- ------- -------
Investing Activities:
Purchases of rental equipment...... (4,725) (3,716) (1,879)
Purchases of property and
equipment......................... (100) (100) (198)
------- ------- -------
Net cash used in investing
activities.......................... (4,825) (3,816) (2,077)
------- ------- -------
Financing Activities:
Proceeds from long-term debt....... 2,682 2,768 19
Payments on long-term debt......... -- (631) (883)
Capital contribution............... 161 146 114
Net proceeds from (payments on)
line of credit.................... (80) (520) 500
Dividends paid..................... -- -- (10)
------- ------- -------
Net cash provided by (used in)
financing activities............... 2,763 1,763 (260)
------- ------- -------
Net increase (decrease) in cash..... (4) 224 135
Cash at beginning of period......... 18 14 238
------- ------- -------
Cash at end of period............... $ 14 $ 238 $ 373
======= ======= =======
Supplemental Non-Cash Flow
Information:
Cash paid for interest............. $ 658 $ 901 $ 460
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-53
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
STATEMENTS OF CHANGES IN DIVISIONAL EQUITY
(in thousands)
<TABLE>
<CAPTION>
Total
Divisional Equity
-----------------
<S> <C>
Balance at December 31, 1994.................................. $ 776
Net income.................................................... 655
Capital Contribution.......................................... 161
------
Balance at December 31, 1995.................................. 1,592
Net income.................................................... 480
Capital Contribution.......................................... 146
------
Balance at December 31, 1996.................................. 2,218
Net Income.................................................... 1,616
Capital Contribution.......................................... 114
Dividends..................................................... (10)
------
Balance at June 30, 1997...................................... $3,938
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-54
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
Sprintank and Sprintank Mobile Storage (divisions of Sprint Industrial
Services, Inc.) ("Sprintank") are primarily involved in the short-term rental
of industrial storage equipment to chemical manufacturing, and refining
industries. At June 30, 1997, Sprintank had seven equipment rental locations
in Texas, Louisiana, and Alabama.
Financial statement presentation
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 date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Rental revenues
Rental revenues are recognized upon the earliest occurrence of either the
return of the equipment or the end of one month's rental term. For rental
contracts greater than one month, rental revenues are recognized ratably over
the contract period.
Rental equipment
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using the straight-line method over an estimated useful
life with no salvage value. Estimated useful lives of rental equipment ranged
from three to ten years. Accumulated depreciation on rental equipment was
$3,209,000, $4,963,000 and $5,901,000 at December 31, 1995 and 1996 and June
30, 1997, respectively.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal.
Property and equipment
Property and equipment is recorded at cost. Depreciation is computed using
the straight line method over the estimated useful lives of the assets.
The estimated useful lives for property and equipment range from five to
seven years for vehicles, delivery and shop equipment, and three to ten years
for office furniture and leasehold improvements.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and 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.
Inventory
Sprintank's inventories primarily consist of items such as tires for
replacement on delivery vehicles and are not for sale or rental. Inventories
are stated at the lower of average cost or market.
F-55
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Fair value of financial instruments
The carrying amounts reported in the balance sheets for trade accounts
receivable, accounts payable and other liabilities approximate fair value due
to the immediate to short-term maturity of these financial instruments. The
fair value of notes payable and is determined using current interest rates for
similar instruments as of the years ended December 31, 1995 and 1996 and the
period ended June 30, 1997 and approximates the carrying value of these notes
due to the fact that the underlying instruments include provisions to adjust
note balances and interest rates to approximate fair market value.
Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of certain assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the related reported amounts of
revenue and expenses during the reporting period. Such estimates and
assumptions include those made regarding the estimated useful lives of
depreciable assets. Actual results could differ from those estimates.
Management believes that its estimates are reasonable.
Concentration of credit risk
Financial instruments that potentially subject Sprintank to significant
concentrations of credit risk consist primarily of trade accounts receivable
from industrial customers. Concentrations of credit risk with respect to trade
accounts receivable are limited due to the number of large customers with
recurring rentals. Sprintank performs credit evaluations of its customers'
financial condition and does not require collateral on accounts receivable.
Sprintank maintains an allowance for doubtful accounts on its receivables
based upon expected collectibility. Allowance for doubtful accounts was $0,
$20,000 and $0 at December 31, 1995 and 1996 and June 30, 1997, respectively.
Related party transactions
As disclosed in these financial statements, Sprintank has participated in
certain transactions with related parties during the current and previous
years until acquisition of substantially all of the assets of Sprintank by a
wholly owned subsidiary of National Equipment Services, Inc. (see Note 8). In
the opinion of management, all transactions with related parties have been
conducted at arm's-length.
Income taxes
Sprintank's parent is a subchapter S corporation. Taxes are the
responsibility of the individual shareholders of the parent. The pro forma
provision for divisional income taxes approximates Sprintank's tax provision
on a stand alone basis.
F-56
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. Rental Equipment
Rental equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31, June
---------------- 30,
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Trailers....................................... $ 4,774 $ 5,921 $ 6,890
Frac tanks..................................... 4,420 5,669 6,068
Tanks.......................................... 1,097 1,332 1,373
Dewatering boxes............................... 261 448 452
Vacuum boxes................................... 210 442 550
Phase separator................................ 273 274 276
Rolloff boxes.................................. 208 201 253
Other.......................................... 84 417 516
------- ------- -------
11,327 14,704 16,378
Less: accumulated depreciation................. (3,209) (4,963) (5,901)
------- ------- -------
$ 8,118 $ 9,741 $10,477
======= ======= =======
</TABLE>
3. Property and Equipment
Property and equipment, net, consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------- June 30,
1995 1996 1997
----- ------ --------
<S> <C> <C> <C>
Vehicles and delivery equipment................... $ 732 $ 881 $1,057
Shop equipment.................................... 55 135 156
Office equipment.................................. 175 46 47
----- ------ ------
962 1,062 1,260
Less: accumulated depreciation.................... (378) (455) (503)
----- ------ ------
$ 584 $ 607 $ 757
===== ====== ======
</TABLE>
4. Prepaid Expenses and Other Assets
Prepaid expenses and other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------- June 30,
1995 1996 1997
------ ------ --------
<S> <C> <C> <C>
Prepaid insurance.................................. $ 56 $ 118 $ 73
Other.............................................. 33 13 32
----- ------ ----
$ 89 $ 131 $105
===== ====== ====
</TABLE>
F-57
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
December
31,
--------- June 30,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Payroll accruals....................................... $ 10 $ 85 $ 79
Deferred franchise taxes............................... 52 75 187
Taxes payable.......................................... 43 47 59
Accrued interest....................................... 49 42 21
Other.................................................. 28 14 35
---- ---- ----
$182 $263 $381
==== ==== ====
</TABLE>
6. Intercompany
Interest on intercompany advances between Sprint Industrial Services, Inc.
and Sprintank were imputed at a rate of 12% and is included in interest
expense and treated as contributed capital.
7. Debt
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------- June 30,
1995 1996 1997
------ ------ --------
<S> <C> <C> <C>
Intercompany note payable to a related party,
interest 12% for the year ended December 31,
1995............................................. $ 100 $ -- $ --
Notes payable to stockholders, interest at various
rates ranging from 9% to 12%..................... 462 3,230 3,250
Revolving line of credit of $700,000, $1,000,000
and $1,000,000 for December 31, 1995, December
31, 1996 and June 30, 1997, respectively. In
1995, interest is payable monthly at prime plus
2%. For the periods ending December 31, 1996 and
June 30, 1997, interest is payable quarterly at
the bank's prime rate............................ 520 -- 500
Notes payable to a bank, interest and principal
payable monthly or quarterly at rates ranging
from 5.7% to 12% for the periods ending December
31, 1995, December 31, 1996 and June 30, 1997.... 6,192 5,682 4,840
Notes payable--insurance, interest and principal
payable monthly at rates ranging from 7.43% to
8.50% for the periods ending December 31, 1995,
December 31, 1996 and June 30, 1997,
respectively..................................... 96 75 34
------ ------ -------
$7,370 $8,987 $ 8,624
====== ====== =======
</TABLE>
Sprintank's agreement with the bank provided for a secured line of credit of
$700 in 1995, maturing no later than April 30, 1996. At December 31, 1995,
$520 was borrowed against the line of credit. At December 31, 1996, Sprintank
had a secured line of credit for $1,000, maturing no later than April 30,
1997. At December 31, 1996, nothing was borrowed against the line. During
1997, the $1,000 line of credit was amended, extending the maturity date to no
later than April 30, 1998. At June 30, 1997, $500 was borrowed against the
line of credit.
F-58
<PAGE>
SPRINTANK AND SPRINTANK MOBILE STORAGE
(DIVISIONS OF SPRINT INDUSTRIAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The bank note agreements include restrictions as to limitations upon certain
ratios of liabilities to net worth and upon the minimum net worth of
Sprintank. Sprintank is in compliance with covenants in all agreements.
Substantially all rental equipment, property and equipment, and accounts
receivable of Sprintank are pledged as collateral for the bank line of credit,
demand notes, and notes related to purchases of certain businesses.
Sprintank incurred interest expense of $64, $357 and $192 on borrowings from
related parties in the periods ended December 31, 1995, December 31, 1996 and
June 30, 1997, respectively.
On bank notes payable, Sprintank incurred interest expense of $643, $536 and
$247 for the periods ended December 31, 1995, December 31, 1996 and June 30,
1997, respectively.
8. Commitments and Contingencies
Operating leases
Sprintank leases certain facilities under operating leases which contain
renewal options and provide for periodic cost of living adjustments. Rental
expense was $96, $87, and $53, for the years ended December 31, 1995 and 1996
and for the period ended June 30, 1997, respectively.
Future minimum rental commitments as of June 30, 1997 under noncancelable
operating leases are (in thousands):
<TABLE>
<S> <C>
1997................................................................. $ 29
1998................................................................. 96
1999................................................................. 82
2000................................................................. 77
2001................................................................. 74
Thereafter........................................................... 287
----
$645
====
</TABLE>
Legal matters
Sprintank is not a party to any legal proceedings or claims as of June 30,
1997.
9. Subsequent Events
On June 30, 1997, Sprintank's owner sold substantially all of Sprintank's
assets to NES Acquisition Corp., a wholly owned subsidiary of National
Equipment Services, Inc., for a $25,256,431 cash payment (subject to a
customary purchase price adjustment mechanism) and the assumption of certain
liabilities and obligations.
F-59
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders
of MST Enterprises, Inc. (d/b/a
Equipco Rentals & Sales) and the Board of Directors
of National Equipment Services, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of cash flows and of changes in stockholder's equity, present
fairly, in all material respects, the financial position of MST Enterprises,
Inc. (d/b/a Equipco Rentals & Sales) at October 31, 1995 and 1996, and at July
17, 1997 and the results of its operations and its cash flows for each of the
two years in the period ended October 31, 1996, and for the period from
November 1, 1996 through July 17, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audits 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
November 4, 1997
F-60
<PAGE>
MST ENTERPRISES, INC.
d/b/a EQUIPCO RENTALS & SALES
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
July
October 31, October 31, 17,
1995 1996 1997
----------- ----------- ------
<S> <C> <C> <C>
Assets:
Cash........................................... $ 95 $ 207 $ 84
Accounts receivable, net....................... 523 580 642
Inventory...................................... 186 206 352
Rental equipment net........................... 2,047 2,553 3,007
Property and equipment, net.................... 333 337 221
Prepaid and other assets....................... 153 219 276
------ ------ ------
Total assets................................. $3,337 $4,102 $4,582
====== ====== ======
Liabilities and Stockholders' Equity:
Accounts payable............................... $ 470 $ 513 $ 384
Accrued expenses and other liabilities......... 241 281 387
Debt........................................... 1,846 2,393 2,396
------ ------ ------
Total liabilities............................ 2,557 3,187 3,167
------ ------ ------
Commitments and contingencies (Note 9)
Common stock, $10 par, 2,500 shares authorized,
1,000 shares issued and outstanding........... 10 10 10
Retained earnings.............................. 770 905 1,405
------ ------ ------
Total stockholders' equity................... 780 915 1,415
------ ------ ------
Total liabilities and stockholders' equity... $3,337 $4,102 $4,582
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-61
<PAGE>
MST ENTERPRISES, INC.
d/b/a EQUIPCO RENTALS & SALES
STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Year Ended
----------------------- Period Ended
October 31, October 31, July 17,
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Rental revenues.......................... $3,213 $3,605 $2,835
Rental equipment sales................... 552 391 447
New equipment sales...................... 1,581 1,805 1,055
Other.................................... 44 31 32
------ ------ ------
Total revenues......................... 5,390 5,832 4,369
------ ------ ------
Cost of Revenues:
Rental equipment expenses................ 264 355 141
Rental equipment depreciation............ 934 1,163 890
Cost of rental equipment sales........... 118 181 125
Cost of new equipment sales.............. 1,461 1,232 691
Other direct operating expenses.......... 885 852 712
------ ------ ------
Total cost of revenues................. 3,662 3,783 2,559
------ ------ ------
Gross profit.............................. 1,728 2,049 1,810
Selling, general and administrative
expenses................................. 1,339 1,519 823
Non-rental depreciation and amortization.. 84 123 76
------ ------ ------
Operating income.......................... 305 407 911
Other income (expense), net............... -- (37) 20
Interest income (expense), net............ (160) (143) (94)
------ ------ ------
Income before income taxes................ 145 227 837
Income tax expense........................ 63 92 337
------ ------ ------
Net income................................ $ 82 $ 135 $ 500
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-62
<PAGE>
MST ENTERPRISES, INC.
d/b/a EQUIPCO RENTALS & SALES
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended
----------------------- Period Ended
October 31, October 31, July 17,
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Operating Activities:
Net income............................... $ 82 $ 135 $ 500
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation............................ 1,034 1,294 967
Gain on sale of equipment............... (434) (144) (325)
Changes in operating assets and
liabilities:
Accounts receivable.................... (84) (57) (62)
Inventory.............................. 7 (20) (146)
Prepaid and other assets............... 6 (66) (57)
Accounts payable....................... 13 43 (129)
Accrued expenses and other liabilities. 116 40 106
------ ------ ------
Net cash provided by operating
activities.............................. 740 1,225 854
------ ------ ------
Investing Activities:
Purchases of rental equipment............ (1,568) (1,820) (1,443)
Proceeds from sale of rental equipment... 609 295 424
Purchases of property and equipment...... (203) (239) --
Proceeds from sale of property and
equipment............................... -- 105 39
------ ------ ------
Net cash used in investing activities.... (1,162) (1,659) (980)
------ ------ ------
Financing Activities:
Proceeds from long-term debt............. 875 1,465 700
Payments on long-term debt............... (499) (919) (697)
------ ------ ------
Net cash provided by financing
activities.............................. 376 546 3
------ ------ ------
Net increase (decrease) in cash.......... (46) 112 (123)
Cash at beginning of period.............. 141 95 207
------ ------ ------
Cash at end of period.................... $ 95 $ 207 $ 84
====== ====== ======
Supplemental Non-Cash Flow Information:
Cash paid for interest................... $ 172 $ 152 $ 108
====== ====== ======
Cash paid for income taxes............... $ 23 $ 215 $ 300
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-63
<PAGE>
MST ENTERPRISES, INC.
d/b/a EQUIPCO RENTALS & SALES
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands except share amounts)
<TABLE>
<CAPTION>
Common Stock
------------- Total
Stated Paid-in Retained Stockholders'
Shares Value Capital Earnings Equity
------ ------ ------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at October 31, 1994........ 1,000 $10 $-- $ 688 $ 698
Net income......................... -- -- -- 82 82
----- --- --- ------ ------
Balance at October 31, 1995........ 1,000 10 -- 770 780
Net income......................... -- -- -- 135 135
----- --- --- ------ ------
Balance at October 31, 1996........ 1,000 10 -- 905 915
Net income......................... -- -- -- 500 500
----- --- --- ------ ------
Balance at July 17, 1997........... 1,000 $10 $-- $1,405 $1,415
===== === === ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE>
MST ENTERPRISES, INC.
d/b/a EQUIPCO RENTALS & SALES
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
MST Enterprises, Inc. (d/b/a Equipco Rentals & Sales) ("Equipco") is a C
corporation primarily involved in the short-term rental and sales of general
purpose construction equipment to industrial and construction companies. The
Company operates from one facility in Harrisonburg, Virginia.
Financial statement presentation
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 date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Rental revenues
Rental revenues are recognized as earned over the lease term. Sales revenues
are recognized at the point of delivery.
Rental equipment
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using accelerated methods over periods approximating five
years.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
Property and equipment
Property and equipment is recorded at cost. Depreciation is computed using
accelerated methods ranging from three to five years.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and 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.
Adoption of new accounting pronouncement
On January 1, 1996, Equipco adopted Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed of, which requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the assets' carrying amounts exceed the
undiscounted cash flows estimated to be generated by those assets. SFAS No.
121 also requires impairment losses to be recorded when the carrying amount of
long-lived assets that are expected to be disposed of, exceed their fair
values, net of disposal costs. Adoption of SFAS No. 121 did not have a
material impact on Equipco's financial position at July 17, 1997 or results of
operations for the period then ended.
F-65
<PAGE>
MST ENTERPRISES, INC.
d/b/a EQUIPCO RENTALS & SALES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Inventory
Equipco's inventories are valued at average costs and consist primarily of
items such as hand tools and accessories held for resale.
Fair value of financial instruments
The carrying amounts reported in the balance sheets for trade accounts
receivable, accounts payable and other liabilities approximate fair value due
to the immediate to short-term maturity of these financial instruments. The
fair value of notes receivable and notes payable is determined using current
interest rates for similar instruments as of July 17, 1997 and approximates
the carrying value of these notes due to the fact that the underlying
instruments include provisions to adjust note balances and interest rates to
approximate fair market value.
Concentration of credit risk
Financial instruments that potentially subject Equipco to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction and industrial customers. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
customers and Equipco's geographic dispersion. Equipco performs credit
evaluations of its customers' financial condition and generally does not
require collateral on accounts receivable. Equipco maintains an allowance for
doubtful accounts on its receivables based upon expected collectibility.
Allowance for doubtful accounts was $40,000, $20,000 and $30,000 at October
31, 1995 and 1996 and July 17, 1997, respectively.
Income taxes
Deferred income tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year
in which the differences are expected to reverse. Deferred income tax expenses
or benefits are based on the changes in the deferred income tax assets or
liabilities from period to period.
Related party transactions
As disclosed in these financial statements, Equipco has participated in
certain transactions with related parties.
2. Inventory
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
October
31,
---------- July 17,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Merchandise.......................................... $199 $224 $382
Less: reserve........................................ (13) (18) (30)
---- ---- ----
Total inventory, net............................... $186 $206 $352
==== ==== ====
</TABLE>
F-66
<PAGE>
MST ENTERPRISES, INC.
d/b/a EQUIPCO RENTALS & SALES
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. Rental Equipment
Rental equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
October 31, July
---------------- 17,
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Gross rental equipment......................... $ 4,669 $ 6,098 $ 6,992
Less: accumulated depreciation................. (2,622) (3,545) (3,985)
------- ------- -------
$ 2,047 $ 2,553 $ 3,007
======= ======= =======
</TABLE>
4. Property and Equipment
Property and equipment, net, consists of the following (in thousands):
<TABLE>
<CAPTION>
October 31,
------------ July 17,
1995 1996 1997
----- ----- --------
<S> <C> <C> <C>
Vehicles........................................... $ 474 $ 625 $ 509
Computer hardware.................................. 80 52 53
Furniture and fixtures............................. 49 30 28
Leaseholds......................................... 35 34 27
Farm assets........................................ 241 13 --
----- ----- -----
879 754 617
Less: accumulated depreciation..................... (546) (417) (396)
----- ----- -----
$ 333 $ 337 $ 221
===== ===== =====
</TABLE>
5. Prepaid and Other Assets
Prepaid and other assets consists of the following (in thousands):
<TABLE>
<CAPTION>
October
31,
--------- July 17,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Notes receivable....................................... $ 71 $155 $246
Investments............................................ 44 44 --
Prepaid expenses....................................... 38 20 30
---- ---- ----
$153 $219 $276
==== ==== ====
</TABLE>
Notes receivable consists of $95,000 at July 17, 1997 due from a third party
for the sale of non-business assets. Interest on the note accrues at 8%
annually and payment of principal and interest is due quarterly through
September 2003.
Also included in notes receivable is a related party receivable of $55,700
at July 17, 1997. Interest on the note receivable accrues at the IRS blended
rate (5.85% at July 17, 1997). Annual principal installments of $1,899 plus
accrued interest are due through March 1999.
F-67
<PAGE>
MST ENTERPRISES, INC.
d/b/a EQUIPCO RENTALS & SALES
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
October
31,
--------- July 17,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Accrued salaries and wages............................. $168 $ 85 $ 55
Other accrued expenses and liabilities................. 73 196 332
---- ---- ----
$241 $281 $387
==== ==== ====
</TABLE>
7. Debt
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
October 31, July
------------- 17,
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Notes payable to related parties, due 12/01/96,
interest payable monthly at the Crestar Bank rate
plus 2.0%........................................ $ 490 $ -- $ --
Revolving line of credit, interest payable monthly
at the lessor of prime or 30 day libor plus 1.5%. 1,356 2,393 2,396
------ ------ ------
$1,846 $2,393 $2,396
====== ====== ======
</TABLE>
Equipco's line of credit provides $2,500,000 of available credit at October
31, 1995, October 31, 1996 and July 17, 1997. The line of credit is secured by
substantially all of Equipco's assets.
Maturities of debt are as follows at July 17, 1997 (in thousands):
<TABLE>
<S> <C>
1997............................................................... $ 147
1998............................................................... 502
1999............................................................... 390
2000............................................................... 303
2001............................................................... 235
Thereafter......................................................... 819
------
$2,396
======
</TABLE>
8. Income Taxes
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
October
31,
---------- July 17,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Current:
Federal.............................................. $ 71 $73 $294
State................................................ 13 13 52
Deferred:
Federal.............................................. (18) 5 (7)
State................................................ (3) 1 (2)
---- --- ----
$ 63 $92 $337
==== === ====
</TABLE>
F-68
<PAGE>
MST ENTERPRISES, INC.
d/b/a EQUIPCO RENTALS & SALES
NOTES TO FINANCIAL STATEMENTS--(Continued)
The provision for income taxes differs from the amount of income tax
determined by applying the U.S. statutory federal income tax rate of 34% to
income before income taxes as a result of the following (in thousands):
<TABLE>
<CAPTION>
October
31,
--------- July 17,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
(Loss) income at statutory rate........................ $49 $77 $285
Effect of state taxes, net............................. 9 14 51
Other.................................................. 5 1 1
--- --- ----
$63 $92 $337
=== === ====
</TABLE>
Deferred tax liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
October
31,
--------- July 17,
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Inventory reserves..................................... $ 5 $ 7 $12
Allowance for doubtful accounts........................ 16 8 12
--- --- ---
Net deferred tax liability............................. $21 $15 $24
=== === ===
</TABLE>
9. Commitments and Contingencies
Operating leases
Equipco leases certain facilities under operating leases on a month-to-month
basis. Rent expense totaled $189,600, $189,600 and $118,500 for the years
ended October 31, 1995 and 1996 and for the period ended July 17, 1997,
respectively.
Legal matters
Equipco is party to legal proceedings and claims arising in the ordinary
course of its business. Management believes that the ultimate resolution of
these matters will have no material adverse effect on Equipco's financial
position, results of operations or cash flows.
10. Employee Benefit Plans
The Company sponsors a defined contribution pension plan (the "Plan").
Employees meeting eligibility requirements are automatically enrolled in the
Plan. The Plan does not permit employee contributions and Equipco's
contributions are discretionary as determined by the Board of Directors.
Equipco's contributions to the plan totaled $10,000, $20,000 and $0 for each
of the years ended October 31, 1995 and 1996 and for the period ended July 17,
1997, respectively.
11. Subsequent Events
On July 18, 1997 Equipco's owner sold all of the outstanding common stock of
Equipco to National Equipment Services, Inc. in exchange for a $5,980,000 cash
payment (subject to a customary purchase price adjustment mechanism).
F-69
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Work Safe Supply Company, Inc. and the Board of Directors
of National Equipment Services, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity, present fairly, in all material respects, the financial
position of Work Safe Supply Company, Inc. and subsidiaries at December 31,
1997 and 1996, and the results of their operations and their cash flows for
each of the three years in the period then ended, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
March 4, 1998
F-70
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Assets:
Cash and cash equivalents........................................ $ 666 $ 383
Accounts receivable, net......................................... 2,647 3,279
Inventory, net................................................... 107 345
Rental equipment, net............................................ 1,425 1,983
Property and equipment, net...................................... 324 269
Prepaid and other assets......................................... 27 191
------ ------
Total assets................................................. $5,196 $6,450
====== ======
Liabilities and Stockholders' Equity:
Accounts payable................................................. $ 288 $ 444
Accrued expenses and other liabilities........................... 157 207
Note payable--shareholder........................................ 798 579
------ ------
Total liabilities............................................ 1,243 1,230
------ ------
Commitments and contingencies (Note 8)
Common stock, $1 par, 50,000 shares authorized, 13,500 shares
issued and outstanding.......................................... 13 13
Retained earnings................................................ 3,940 5,207
------ ------
Total stockholders' equity................................... 3,953 5,220
------ ------
Total liabilities and stockholders' equity................... $5,196 $6,450
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-71
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Revenues:
Rental revenues........................................ $5,068 $5,258 $6,385
Rental equipment sales................................. 627 774 891
Other.................................................. 521 538 88
------ ------ ------
Total revenues...................................... 6,216 6,570 7,364
------ ------ ------
Cost of Revenues:
Rental equipment expenses.............................. 685 753 867
Rental equipment depreciation.......................... 601 683 835
Cost of rental equipment sales......................... 376 464 588
Direct operating expense............................... 1,921 1,915 1,650
------ ------ ------
Total cost of revenues.............................. 3,583 3,815 3,940
------ ------ ------
Gross profit............................................ 2,633 2,755 3,424
Selling, general and administrative expenses............ 2,485 1,084 1,237
Non-rental depreciation................................. 78 115 80
------ ------ ------
Operating income........................................ 70 1,556 2,107
Other income (expense), net............................. (47) (57) 8
Interest income (expense), net.......................... (28) (47) (22)
------ ------ ------
Net income (loss)....................................... $ (5) $1,452 $2,093
====== ====== ======
Pro Forma Tax Provision (Unaudited):
Income (loss) before income taxes...................... $ (5) $1,452 $2,093
Pro forma provision (benefit) for income taxes......... (2) 494 712
------ ------ ------
Pro forma net income (loss)............................ $ (3) $ 958 $1,381
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-72
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Years
Ended December 31,
--------------------
1995 1996 1997
---- ------ ------
<S> <C> <C> <C>
Operating Activities:
Net income (loss)....................................... $ (5) $1,452 $2,093
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 679 798 915
Gain on sale of equipment.............................. -- -- (51)
Changes in operating assets and liabilities:
Accounts receivable................................... (2) (327) (632)
Inventories........................................... (15) (10) (238)
Prepaid and other assets.............................. (5) 8 (164)
Accounts payable...................................... 69 (21) 156
Accrued expenses and other liabilities................ 106 (763) 50
---- ------ ------
Net cash provided by operating activities................ 827 1,137 2,129
---- ------ ------
Investing Activities:
Purchases of rental equipment........................... (783) (1,082) (1,277)
Purchases of property and equipment..................... (127) (116) (90)
---- ------ ------
Net cash (used) in investing activities.................. (910) (1,198) (1,367)
---- ------ ------
Financing Activities:
Proceeds from shareholder loan.......................... 584 43 34
Payments on shareholder loan............................ (296) (98) (253)
Dividends paid.......................................... -- -- (826)
---- ------ ------
Net cash (used) provided in financing activities......... 288 (55) (1,045)
---- ------ ------
Net increase (decrease) in cash and cash equivalents..... 205 (116) (283)
Cash and cash equivalents at beginning of period......... 577 782 666
---- ------ ------
Cash and cash equivalents at end of period............... $782 $ 666 $ 383
==== ====== ======
Disclosure of Cash Flow Information:
Cash paid for interest.................................. $ 1 $ 10 $ 3
==== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-73
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock
------------- Total
Stated Retained Stockholders'
Shares Value Earnings Equity
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994............... 13,500 $13 $2,493 $2,506
Net loss................................... -- -- (5) (5)
------ --- ------ ------
Balance at December 31, 1995............... 13,500 13 2,488 2,501
Net income................................. -- -- 1,452 1,452
------ --- ------ ------
Balance at December 31, 1996............... 13,500 13 3,940 3,953
Net income................................. -- -- 2,093 2,093
Dividends.................................. -- -- (826) (826)
------ --- ------ ------
Balance at December 31, 1997............... 13,500 $13 $5,207 $5,220
====== === ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-74
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
Work Safe Supply Company, Inc. (the "Company") is an S corporation involved
in the rental and sale of traffic safety equipment primarily in the State of
Michigan. Operations of the Company are conducted from the corporate
headquarters in Grand Rapids, Michigan and three additional facilities also
located in Michigan.
Principles of consolidation
The consolidated financial statements include accounts of the Company and
its subsidiaries. All intercompany transactions and balances have been
eliminated.
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 date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
Inventory
Inventory consist primarily of supplies used in the Company's operations.
Inventory are stated at the lower of cost, determined by the first-in, first-
out method, or market.
Rental equipment
Rental equipment is recorded at invoice cost. Depreciation for rental
equipment acquired is computed using straight-line and accelerated methods
over 3 to 5 year useful lives with no salvage value.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
Property and equipment
Property and equipment is recorded at invoice cost. Depreciation is computed
using straight-line and accelerated methods over the estimated useful lives of
the assets.
The estimated useful lives for property and equipment are 31.5 years for
buildings, 5 to 7 years for machinery and equipment, 5 to 7 years for
furniture and fixtures and 3 to 5 years for vehicles.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and 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.
F-75
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Fair value of financial instruments
The carrying amounts reported in the balance sheets for cash, trade accounts
receivable, accounts payable and accrued expenses and other liabilities
approximate fair value due to the immediate to short-term maturity of these
financial instruments. The fair value of long-term debt is determined using
current interest rates for similar type instruments and approximates the
carrying value of the debt as of December 31, 1997.
Concentration of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction customers. Concentrations of credit risk with respect to
trade accounts receivable are limited due to the large number of customers and
the Company's geographic dispersion. The Company performs credit evaluations
of its customers' financial condition and generally does not require
collateral on accounts receivable. The Company maintains an allowance for
doubtful accounts on its receivables based upon expected collectibility. The
allowance for doubtful accounts was $174,000 and $198,000 at December 31, 1996
and 1997, respectively.
Rental revenues
Rental revenues are recognized ratably over the lease term. Sales revenues
are recognized at the point of delivery.
Income taxes
The Company has elected S corporation status under the U.S. Internal Revenue
Code. Pursuant to this election, the Company's income, deductions and credits
are reported on the income tax returns of its stockholders for federal
purposes and, accordingly, no provision for federal income taxes has been
made. Pro forma income taxes reflected on the statement of operations have
been calculated at the federal statutory rate of 34%.
Related party transactions
The Company has participated in certain transactions with related parties as
disclosed in the notes to these consolidated financial statements.
2. Rental Equipment
Rental equipment consists of the following at December 31, (in thousands):
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Rental equipment.......................................... $3,415 $4,767
Less: accumulated depreciation............................ (1,990) (2,784)
------ ------
Rental equipment, net..................................... $1,425 $1,983
====== ======
</TABLE>
Depreciation expense on rental equipment totaled $601,000, $683,000 and
$835,000 for the years ended December 31, 1995, 1996 and 1997, respectively.
F-76
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Property and Equipment
Property and equipment, net, consists of the following at December 31, (in
thousands):
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Land.......................................................... $ 7 $ 7
Building...................................................... 110 110
Shop equipment................................................ 160 166
Office equipment.............................................. 77 91
Vehicles...................................................... 450 336
---- ----
Total property and equipment, at cost......................... 804 710
Less: accumulated depreciation................................ (480) (441)
---- ----
Property and equipment, net................................... $324 $269
==== ====
</TABLE>
Depreciation expense on property and equipment totaled $78,000, $115,000 and
$80,000 for the years ended December 31, 1995, 1996 and 1997, respectively.
4. Prepaid and Other Assets
Prepaid and other assets consists of the following December 31, (in
thousands):
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Notes receivable, related party................................ $-- $120
Other assets................................................... 27 71
--- ----
$27 $191
=== ====
</TABLE>
Notes receivable consists of a non-interest bearing related party receivable
with annual payments of $24,000 due on June 1 of each year, commencing on June
1, 1998.
5. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following at December
31, (in thousands):
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Accrued expenses............................................... $ 26 $ 41
Accrued salaries and benefits.................................. 49 57
Accrued state taxes............................................ 61 96
Other liabilities.............................................. 21 13
---- ----
$157 $207
==== ====
</TABLE>
6. Employee Benefit Plans
The Company sponsors a profit sharing and 401(k) plan (the "Plan") in which
employees meeting eligibility requirements may elect to participate. Company
contributions to the Plan are discretionary and employee vesting in Company
contributions occur ratably over a six year period. Company contributions
totaled $34,000, $49,000 and $42,000 for the years ended December 31, 1995,
1996 and 1997, respectively.
F-77
<PAGE>
WORK SAFE SUPPLY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Related Party Transactions
The Company has unsecured notes payable due to shareholders totaling
$798,000 and $579,000 at December 31, 1996 and 1997, respectively. The notes
payable are non-interest bearing and payable upon demand. Imputed interest on
the notes payable is calculated using published Applicable Federal Rates (AFR)
in effect during the periods. Imputed interest totaled $34,000, $43,000 and
$34,000 for the years ended December 31, 1995, 1996 and 1997, respectively.
Effective March 1997, the Company entered into a lease agreement for office
space with its shareholders on a month-to-month basis for $3,000 per month.
Rent expense under this obligation totaled $36,000 for the year ended December
31, 1997.
8. Commitments and Contingencies
The Company has entered various vehicle and equipment operating leases with
third parties which expire at various dates through January 2001. The Company
has also entered into operating leases with related and third parties for
office space which expire at various dates through December 2000. Rental
expense incurred by the Company related to these leases totaled $69,000,
$97,000 and $111,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.
Future minimum rental commitments as of December 31, 1997 under
noncancelable operating leases are (in thousands):
<TABLE>
<S> <C>
1998............................................................... $115
1999............................................................... 73
2000............................................................... 29
2001............................................................... 2
-----
$219
=====
</TABLE>
9. Subsequent Events
On February 15, 1998, the Company's shareholders sold substantially all of
the assets of the Company to National Equipment Services, Inc., for
approximately $7.6 million.
F-78
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Genpower Pump & Equipment, Inc. and the
Board of Directors of
National Equipment Services, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of cash flows and of changes in stockholders' equity present
fairly, in all material respects, the financial position of Genpower Pump &
Equipment, Inc. at December 31, 1997, and the results of its operations and
its cash flows for the year ended December 31, 1997, in conformity with
generally accepted accounting principles. 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 audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
March 3, 1998
F-79
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
BALANCE SHEET
December 31, 1997
(in thousands)
<TABLE>
<S> <C>
Assets
Cash and cash equivalents............................................. $ 20
Accounts receivable, net.............................................. 2,073
Inventory............................................................. 561
Rental equipment, net................................................. 1,920
Property and equipment, net........................................... 192
Deferred tax asset.................................................... 44
------
Total assets........................................................ $4,810
======
Liabilities and Stockholders' Equity
Accounts payable...................................................... $ 699
Accrued expenses and other liabilities................................ 799
Debt.................................................................. 833
Notes payable--related parties........................................ 176
------
Total liabilities................................................... 2,507
------
Commitments and contingencies (Note 9)
Common stock, $1.00 par value; 1,000,000 shares authorized; 10,000
shares issued and outstanding......................................... 10
Retained earnings...................................................... 3,233
Treasury stock (Note 1)................................................ (940)
------
Total stockholders' equity.......................................... 2,303
------
Total liabilities and stockholders' equity.......................... $4,810
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-80
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
(in thousands)
<TABLE>
<S> <C>
Revenues:
Rental revenues....................................................... $ 7,110
Rental equipment sales................................................ 161
New equipment sales................................................... 4,393
Other................................................................. 437
-------
Total revenues...................................................... 12,101
-------
Cost of revenues:
Rental equipment expenses............................................. 1,344
Rental equipment depreciation......................................... 560
Cost of rental equipment sales........................................ 111
Cost of new equipment sales........................................... 3,108
Direct operating expenses............................................. 1,519
-------
Total cost of revenues.............................................. 6,642
-------
Gross profit........................................................... 5,459
Selling, general and administrative expenses........................... 2,797
Nonrental depreciation and amortization................................ 37
-------
Operating income....................................................... 2,625
Other income, net...................................................... 13
Interest expense, net.................................................. (103)
-------
Income before income taxes............................................. 2,535
Income tax expense..................................................... 859
-------
Net income............................................................. $ 1,676
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-81
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(in thousands)
<TABLE>
<CAPTION>
Treasury
Common stock stock
------------- --------------
Stated Stated Retained
value Shares value earnings Total
Shares ------ ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996........ 10 $ 10 (3) $(940) $1,557 $ 627
Net income.......................... 1,676 1,676
--- ---- ----- ----- ------ ------
Balance at December 31, 1997........ 10 $ 10 (3) $(940) $3,233 $2,303
=== ==== ===== ===== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-82
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
STATEMENT OF CASH FLOWS
Year Ended December 31, 1997
(in thousands)
<TABLE>
<S> <C>
Operating activities:
Net income............................................................ $1,676
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................ 597
Gain on sale of equipment............................................ (37)
Changes in operating assets and liabilities:
Accounts receivable................................................. (1,250)
Inventory........................................................... (329)
Prepaid and other assets............................................ (3)
Accounts payable.................................................... 237
Accrued expenses and other liabilities.............................. 389
------
Net cash provided by operating activities.............................. 1,280
------
Investing activities:
Purchases of rental equipment......................................... (1,317)
Proceeds from sale of rental equipment................................ 205
Purchases of property and equipment................................... (9)
Proceeds from sale of property and equipment.......................... 8
------
Net cash used in investing activities.................................. (1,113)
------
Financing activities:
Proceeds from debt.................................................... 845
Payments on debt...................................................... (1,532)
------
Net cash used in financing activities.................................. (687)
------
Net decrease in cash and cash equivalents.............................. (520)
Cash at beginning of period............................................ 540
------
Cash at end of period.................................................. $ 20
======
Supplemental noncash flow information:
Cash paid for federal income taxes.................................... $ 139
======
Cash paid for interest................................................ $ 123
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-83
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. Organization and Summary of Significant Accounting Policies
Organization
Genpower Pump & Equipment, Inc. ("Genpower") is a C Corporation primarily
involved in the short-term rental and sales of pumps, generators, hoses,
fittings and other related equipment to the petrochemical and construction
industries. Genpower operates from nine separate locations along the Texas
Gulf Coast. Genpower's executive offices are located in Deer Park, Texas.
Rental Revenues
Rental revenues are recognized upon the return of the equipment for daily
rentals, after 3 days for weekly rentals or after 17 days for monthly rentals.
For rental contracts greater than one month, rental revenues are recognized
notably over the contract period.
Cash and Cash Equivalents
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
Inventory
Genpower's inventories primarily consist of items such as pumps and
generators held for resale and hoses, fittings and other maintenance parts.
Inventories are stated at the lower of cost, determined by the first-in,
first-out method and replacement value or market.
Rental Equipment
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using the double-declining balance and straight-line
methods over an estimated average seven-year useful life.
Ordinary maintenance and repairs costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed using
the double-declining balance and straight-line methods over the estimated
useful lives of the assets.
The estimated useful lives for property and equipment is seven years for
machinery, five years for vehicles and five to seven years for furniture and
fixtures.
Ordinary maintenance and repairs costs are charged to operations as
incurred. When property and 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.
F-84
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Fair Value of Financial Instruments
The carrying amounts reported in the combined balance sheets for trade
accounts receivable, accounts payable and other liabilities approximate fair
value due to the immediate to short-term maturity of these financial
instruments. The fair value of notes receivable and notes payable using
current interest rates for similar instruments at December 31, 1997
approximates their carrying value as the underlying instruments include
provisions to adjust interest rates to approximate fair market value.
Concentration of Credit Risk
Financial instruments that potentially subject Genpower to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction and industrial customers. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
customers and Genpower's geographic dispersion. Genpower performs credit
evaluations of its customers' financial condition and generally does not
require collateral on accounts receivable. The allowance for doubtful accounts
was $129,132 at December 31, 1997.
Treasury Stock
Genpower records its treasury stock using the cost method.
Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of certain assets and
liabilities, and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the related reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Advertising Costs
Genpower advertises primarily through trade journals. Advertising costs are
expensed as incurred.
Income Taxes
Deferred income tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year
in which the differences are expected to reverse. Deferred income tax expenses
or benefits are based on the changes in the deferred income tax assets or
liabilities from period to period.
Related Party Transactions
As disclosed in these financial statements, Genpower has participated in
certain transactions with related parties.
2. Inventory
Inventory consists of the following at December 31, 1997 (in thousands):
<TABLE>
<S> <C>
Equipment............................................................ $309
Parts and supplies................................................... 252
----
$561
====
</TABLE>
F-85
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. Rental Equipment
Rental equipment consists of the following at December 31, 1997 (in
thousands):
<TABLE>
<S> <C>
Pumps............................................................ $ 2,053
Air compressors.................................................. 478
Generators....................................................... 259
Engines.......................................................... 159
Lite towers...................................................... 80
Hoses............................................................ 75
Compaction equipment............................................. 64
Pipe plugs....................................................... 34
Forklifts........................................................ 23
Trailers......................................................... 10
-------
3,235
Less--accumulated depreciation................................... (1,315)
-------
$ 1,920
=======
</TABLE>
Depreciation expense for the year ended December 31, 1997 is $560,000.
4. Property and Equipment
Property and equipment consists of the following at December 31, 1997 (in
thousands):
<TABLE>
<S> <C>
Vehicles and delivery equipment.................................... $ 368
Furniture and equipment............................................ 33
-----
401
Less--accumulated depreciation..................................... (209)
-----
$ 192
=====
</TABLE>
Depreciation expense for the year ended December 31, 1997 is $6,000.
5. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consists of the following at December
31, 1997 (in thousands):
<TABLE>
<S> <C>
Sales tax payable................................................... $ 18
Payroll tax payable................................................. 27
Federal income tax payable.......................................... 754
----
$799
====
</TABLE>
F-86
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Debt
<TABLE>
<S> <C>
Debt consists of the following at December 31, 1997 (in
thousands):
Floor plan payable to Honda, secured by rental equipment, finance
charges ranging from 12% to 18%................................. $ 62
Notes payable to Ingersol Rand, secured by rental equipment,
payable through various dates ending December 2000, interest
rate at prime plus 1% payable monthly........................... 176
Notes payable to Gorman-Rupp, secured by rental equipment,
payable through various dates ending March 2000, interest rates
ranging from 8.25% to 9.5% payable monthly...................... 335
Term note payable to a bank, principal payable monthly plus
interest at 9% payable monthly with the final payment due in
February 1999................................................... 208
Revolving line of credit of $500, interest payable monthly plus
interest at 8.5% payable monthly................................ 52
-----
Total debt..................................................... 833
Less--current maturities......................................... (611)
-----
Total long-term debt........................................... $ 222
=====
</TABLE>
The Company also has a revolving line of credit of $1,000,000 with no draws
outstanding at December 31, 1997.
On January 12, 1998, pursuant to the Purchase Agreement, all of the
outstanding debt of the Company was paid off by NES.
Maturities of long-term debt are as follows at December 31, 1997:
<TABLE>
<S> <C>
1998................................................................. $611
1999................................................................. 179
2000................................................................. 43
----
$833
====
</TABLE>
7. Income Taxes
The provision for income taxes is comprised of the following at December 31,
1997 (in thousands):
<TABLE>
<S> <C>
Current provision................................................... $892
Deferred credit..................................................... (33)
----
$859
====
</TABLE>
The provision for income taxes differs from the amount of income tax
determined by applying the U.S. statutory federal income tax return of 34% to
income before taxes as a result of nondeductible entertainment expenses.
The deferred income tax assets consists of the increase in allowance for
doubtful accounts, which is not deductible for tax purposes until the accounts
are written off the books.
F-87
<PAGE>
GENPOWER PUMP & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. Commitments and Contingencies
Operating Leases
Genpower leases certain facilities and vehicles under operating leases which
contain renewal options and provide for periodic cost-of-living adjustments.
Rental expense was $65,083 for the year ended December 31, 1997.
Future minimum rental commitments at December 31, 1997 under noncancelable
operating leases are (in thousands):
<TABLE>
<S> <C>
1998................................................................. $198
1999................................................................. 32
----
$230
====
</TABLE>
Legal Matters
Genpower is party to legal proceedings and potential claims in the ordinary
course of its business. Management believes that the ultimate resolution of
these matters will have no material adverse effect on Genpower's financial
position, results of operations or cash flows.
9. Related Party Transactions
Genpower entered into an agreement in February 1996 with two of its
stockholders for the acquisition of approximately one-third of its common
stock. Consideration for the stock and a covenant not to compete was $800,000
in cash and subordinated notes payable for $200,000 due and paid in February
1997.
Genpower's stockholders advanced the company $284,603 at June 1997. The
amount payable at December 31, 1997 was $175,996.
Genpower leases its Texas City location from a related party for $1,600 per
month. The Company also provides the services of two employees to the related
party at no charge. Salaries of the employees as of December 31, 1997 were
approximately $66,401.
10. Subsequent Event
On January 12, 1998, Genpower's owners sold all of the outstanding common
stock to NES Acquisition Corp., a wholly-owned subsidiary of National
Equipment Services, Inc. for a $7,614,500 cash payment (subject to a customary
purchase price adjustment mechanism), a promissory note in the principal
amount of $235,500 and the assumption of certain liabilities and obligations.
F-88
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Cormier Equipment Corporation:
We have audited the accompanying balance sheets of Cormier Equipment
Corporation as of December 31, 1997 and 1996, and the related statements of
earnings and retained earnings and cash flows for the years ended December 31,
1997, 1996 and 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
from 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 Cormier Equipment
Corporation as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995 in conformity with generally accepted accounting principles.
/s/ Albin, Randall & Bennett, Certified Public Accountants
Lewiston, Maine
February 3, 1998
(Except for Note 8, as to which the date is March 4, 1998)
F-89
<PAGE>
CORMIER EQUIPMENT CORPORATION
BALANCE SHEETS
December 31, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Assets
Current Assets:
Cash.................................................. $ 4,500 $ 4,703
Trade receivables, net of allowance for doubtful
accounts of $82,670 in 1997 and $151,368 in 1996..... 2,208,216 2,152,042
Notes receivable--current portion..................... -0- 39,453
Merchandise inventories............................... 723,366 1,838,379
Prepaid expenses and deposits......................... 32,813 29,814
----------- -----------
Total current assets................................ 2,968,895 4,064,391
----------- -----------
Small tools, net of amortization....................... 1,518 9,548
----------- -----------
Equipment held for rental:
Construction equipment................................ 14,664,968 14,971,691
Less accumulated depreciation......................... 9,519,326 10,106,937
----------- -----------
Net equipment held for rental....................... 5,145,642 4,864,754
----------- -----------
Property and equipment:
Land.................................................. 63,500 63,500
Buildings............................................. 244,818 244,818
Leasehold improvements................................ 321,337 414,641
Transportation equipment.............................. 920,154 958,197
Shop equipment........................................ 109,032 107,104
Office equipment and furniture........................ 306,301 318,118
----------- -----------
1,965,142 2,106,378
Less accumulated depreciation......................... 896,180 1,109,089
----------- -----------
Net property and equipment.......................... 1,068,962 997,289
----------- -----------
Other assets:
Notes receivable, less current portion................ -0- 164,072
Cash surrender value of life insurance................ 2,940 2,440
----------- -----------
Total other assets.................................. 2,940 166,512
----------- -----------
$ 9,187,957 $10,102,494
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Note payable--line of credit.......................... 1,510,616 $3,179,734
Current portion of long-term debt..................... 968,518 434,531
Current portion of capital lease obligations.......... 19,215 39,972
Accounts payable...................................... 606,982 397,809
State income taxes payable............................ 64,684 41,815
Accrued payroll and other expenses.................... 502,551 638,473
----------- -----------
Total current liabilities........................... 3,672,566 4,732,334
----------- -----------
Long-term liabilities:
Long-term debt, less current portion.................. 85,200 635,864
Capital lease obligations, less current portion....... 19,471 7,213
----------- -----------
Total long-term liabilities......................... 104,671 643,077
----------- -----------
Stockholders' equity:
Common stock $.10 par value, authorized 2,000,000
shares; 784,000 shares issued; 588,000 and 783,000
shares outstanding in 1997 and 1996.................. 78,400 78,400
Additional paid-in capital............................ 24,416 24,416
Retained earnings..................................... 5,310,414 6,111,355
----------- -----------
5,413,230 6,214,171
Less treasury stock at cost, 196,000 shares in 1997
and 1,000 shares in 1996............................. 2,510 1,487,088
----------- -----------
Total stockholders' equity.......................... 5,410,720 4,727,083
----------- -----------
$ 9,187,957 $10,102,494
=========== ===========
</TABLE>
F-90
<PAGE>
CORMIER EQUIPMENT CORPORATION
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
Years Ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Rental income........................... $11,816,864 $12,092,502 $12,107,635
Sales of equipment and supplies......... 3,822,109 3,915,875 3,519,304
----------- ----------- -----------
15,638,973 16,008,377 15,626,939
----------- ----------- -----------
Cost of Revenues:
Equipment rental........................ 1,780,180 1,472,319 1,515,490
Depreciation and amortization........... 2,041,570 2,530,942 2,749,382
Equipment and supplies.................. 2,565,979 2,613,244 2,157,968
Other costs and expenses................ 3,852,981 3,968,434 4,066,539
----------- ----------- -----------
10,240,710 10,584,939 10,489,379
----------- ----------- -----------
Gross profit............................. 5,398,263 5,423,438 5,137,560
Operating expenses....................... 2,975,747 3,324,143 3,287,112
----------- ----------- -----------
Operating income......................... 2,422,516 2,099,295 1,850,448
----------- ----------- -----------
Other Income (Expense):
Interest expense, net................... (165,623) (123,341) (302,271)
Gain on sale of fixed assets............ 25,615 20,560 13,404
----------- ----------- -----------
Total other income (expense).......... (140,008) (102,781) (288,867)
----------- ----------- -----------
Earnings before state income taxes....... 2,282,508 1,996,514 1,561,581
State income taxes....................... 41,100 37,620 8,000
----------- ----------- -----------
Net earnings............................. 2,241,408 1,958,894 1,553,581
Retained earnings at beginning of year... 3,568,732 4,549,510 5,310,414
Distributions paid....................... (1,260,630) (1,197,990) (752,640)
----------- ----------- -----------
Retained earnings at end of year......... $ 4,549,510 $ 5,310,414 $ 6,111,355
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-91
<PAGE>
CORMIER EQUIPMENT CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
Operating Activities:
Net earnings............................ 2,241,408 1,958,894 $ 1,553,581
Adjustments to reconcile net earnings to
net cash
provided by operating activities:
Depreciation and amortization.......... 2,056,487 2,587,300 2,826,937
(Decrease) increase in allowance for
doubtful accounts..................... (380) 39,248 (68,699)
Gain on sale of fixed assets........... (251,805) (437,914) (620,941)
Decrease in cash surrender value of
life insurance........................ 1,334 -0- 500
Decrease (increase) in operating
assets:
Trade receivables..................... (300,242) (18,154) 124,873
Merchandise inventories............... 262,263 395,007 (1,115,013)
Small tools........................... -0- -0- (8,031)
Prepaid expenses and deposits......... (15,283) (18) 2,999
Increase (decrease) in operating
liabilities:
Accounts payable...................... 401,313 3,690 (209,173)
State income taxes payable............ 12,857 (37) (22,869)
Accrued payroll and other expenses.... 163,865 (143,603) 135,922
---------- ----------- -----------
Net cash provided by operating
activities........................ 4,571,817 4,384,413 2,600,086
---------- ----------- -----------
Investing Activities:
Purchases of small tools................ (190,525) -0- -0-
Purchase of equipment held for rental... (1,775,301) (1,789,805) (1,450,912)
Purchase of property and equipment...... (323,996) (609,914) (212,440)
Proceeds from sale of fixed assets...... 353,272 539,651 851,632
Loans made.............................. -0- -0- (203,525)
---------- ----------- -----------
Net cash used for investing
activities........................ (1,936,550) (1,860,068) (1,015,245)
---------- ----------- -----------
Financing Activities:
New borrowings (repayments) on line of
credit................................. (470,000) (189,384) 1,669,118
Principal payments on long-term
liabilities............................ (900,219) (1,148,302) (1,016,538)
Purchase of treasury stock.............. -0- -0- (1,484,578)
Distributions paid...................... (1,260,630) (1,197,990) (752,640)
---------- ----------- -----------
Net cash used for financing
activities........................ (2,630,849) (2,535,676) (1,584,638)
---------- ----------- -----------
Increase (decrease) in cash........ 4,418 (11,331) 203
Cash at beginning of year............... 11,413 15,831 4,500
---------- ----------- -----------
Cash at end of year...................... 15,831 4,500 $ 4,703
========== =========== ===========
Schedule of Noncash Investing and
Financing Activities:
Purchase of equipment held for rental... 2,645,458 3,529,079 $2,492,626
Less proceeds from long-term debt....... (927,621) (1,739,274) (1,041,714)
---------- ----------- -----------
Net cash paid for purchase of
equipment held for rental......... 1,717,837 1,789,805 $ 1,450,912
========== =========== ===========
Supplemental Disclosure of Cash Flow
Information:
Cash paid for interest.................. 168,767 127,121 $ 273,342
Cash paid for state income taxes........ 28,244 37,657 30,868
</TABLE>
See accompanying notes to financial statements.
F-92
<PAGE>
CORMIER EQUIPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Operations
Cormier Equipment Corporation (the Company) rents and sells equipment and
supplies to paper and construction industries located primarily in the eastern
United States.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Merchandise inventories
Equipment and supplies held for sale are stated at the lower of cost (first-
in, first-out) or market (net realizable value). Certain equipment in
inventory which is rented on an interim basis is stated at cost reduced by a
percentage of rental receipts.
Small tools
The Company expensed small tools as purchased in 1997 and 1996. Prior to
1996 small tools were recorded at cost and amortized on a straight-line basis
over twenty-four months. The effect of the new treatment of small tools was to
increase cost of revenues and decrease net earnings by approximately $115,000
in 1996.
Equipment held for rental
Construction equipment is stated at cost. Depreciation is computed using
accelerated methods over the estimated lives of the assets.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed using
estimated service lives of the respective assets using both straight-line and
accelerated methods.
Income taxes
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
federal corporate income taxes on its taxable income. Instead, the
stockholders are liable for individual income taxes on their respective share
of the Company's taxable income.
Advertising costs
Advertising costs are generally charged to operations in the year incurred
and totaled approximately $29,500, $34,000 and $35,000 for the years ended
December 31, 1995, 1996 and 1997, respectively.
2. Notes Receivable
Notes receivable are due from partnerships whose partners are also company
shareholders. The notes, totaling $203,525 at December 31, 1997, provide for
monthly payments, including interest at 8.75%, over a period of five years.
3. Indebtedness
The Company has a $6,000,000 revolving equipment line of credit of which
$2,820,266 was unused at December 31, 1997. Advances on the credit line are
payable on demand and bear interest at the Wall Street Journal base rate, 8.5%
at December 31, 1997. The credit line is secured by inventory, trade
receivables, machinery and equipment, and furniture and fixtures.
F-93
<PAGE>
CORMIER EQUIPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Installment notes payable with monthly installments
of varying amounts, including interest, secured by
specific equipment and vehicles, certain notes are
with 0% interest, others are with interest ranging
from 6.0% to 8.25%................................. 1,053,718 $1,070,395
Less current portion of long-term debt.............. 968,518 434,531
--------- ----------
85,200 $ 635,864
========= ==========
</TABLE>
Future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1998............................................................. $434,531
1999............................................................. 356,712
2000............................................................. 279,152
</TABLE>
4. Capital Lease Obligations
Included in property and equipment are office equipment at a cost of $57,464
and construction equipment at a cost of $43,610 which were acquired under
capital lease agreements. Future minimum lease payments under the capital
leases are as follow:
<TABLE>
<S> <C>
1998............................................................. $39,972
1999............................................................. 7,213
-------
Total minimum lease payments................................... $47,185
=======
</TABLE>
5. Lease Commitments
The Company presently leases four of its operating locations under operating
lease agreements with partnerships whose partners are also company
shareholders. These four operating leases and other real estate rental
obligations currently require monthly rental payments of $25,000 with various
provisions for increases and renewals. Rent expense was $274,000, $298,500,
and $318,175, for the years ended December 31, 1995, 1996, and 1997,
respectively.
Minimum future lease obligations are as follows:
<TABLE>
<S> <C>
1998............................................................ $300,015
1999............................................................ 25,885
2000............................................................ 8,325
--------
Total minimum future lease obligations........................ $334,225
========
</TABLE>
6. Benefit Plan
The Company sponsors a 401(k) savings and profit-sharing plan covering
substantially all employees as eligibility requirements are met. The Company
makes payments to the plan, in proportion to voluntary employee contributions.
Employer contributions were $14,442 for 1995, $18,103 for 1996 and $21,215 for
1997.
7. Related Party Transactions
During the normal course of business, the Company rents equipment from the
Walton Company, which has certain common shareholders. Equipment rentals from
Walton Company totaled approximately $356,000 in 1995, $355,000 in 1996 and
$373,000 in 1997.
8. Subsequent Events
On March 4, 1998, the Company's stockholders sold substantially all of the
assets of the Company for an amount in excess of book value.
F-94
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
The Modern Group, Inc.
Beaumont, Texas
We have audited the accompanying balance sheets of Dragon Rentals (a wholly
owned division of The Modern Group, Inc.--a Texas Corporation) as of December
31, 1996 and 1997, and the related statements of income and expenses, and cash
flows for the years then ended. These financial statements are the
responsibility of the Division'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 Dragon Rentals as of
December 31, 1996 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ LAWRENCE, BLACKBURN MEEK MAXEY & CO. P.C.
Beaumont, Texas
March 3, 1998
F-95
<PAGE>
DRAGON RENTALS
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1997
---------- -----------
<S> <C> <C>
Assets:
Cash and cash equivalents.............................. $ 38,477 $ 46,065
Accounts receivable, net of allowance for doubtful
accounts of $268,000 and $152,000, respectively....... 1,534,297 3,105,747
Accounts receivable-related party...................... 19,000 144,651
Inventory.............................................. 86,150
Merchandise for resale................................. 691,203
Rental equipment, net.................................. 2,286,286 11,718,619
Property and equipment, net............................ 418,221 853,151
Prepaid and other assets............................... 52,709 66,851
---------- -----------
Total assets......................................... $5,040,193 $16,021,234
========== ===========
Liabilities:
Accounts payable....................................... $ 219,340 $ 268,489
Revolving line of credit............................... 1,793,774
Accrued interest....................................... 5,215 118,432
Accrued expenses and other liabilities................. 989,693 716,788
Accrued expense-related party.......................... 308,969 25,107
Capital leases payable................................. 86,185
Income tax payable..................................... 36,759
Deferred income taxes.................................. 423,400 635,000
Debt................................................... 1,509,368 9,898,312
---------- -----------
Total liabilities.................................... 3,492,744 13,542,087
---------- -----------
Divisional Equity...................................... 1,547,449 2,479,147
---------- -----------
Total liabilities and divisional equity.............. $5,040,193 $16,021,234
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-96
<PAGE>
DRAGON RENTALS
STATEMENTS OF INCOME AND EXPENSES
<TABLE>
<CAPTION>
Years Ended December
31,
-----------------------
1996 1997
---------- -----------
<S> <C> <C>
Revenues:
Rental revenues....................................... $4,978,701 $ 8,907,284
Other................................................. 1,199,807 1,656,880
---------- -----------
Total revenues...................................... 6,178,508 10,564,164
---------- -----------
Cost of Revenues:
Rental equipment expenses............................. 3,674,471 4,061,952
Rental equipment depreciation......................... 353,224 844,581
Direct operating expenses............................. 708,751 1,159,865
---------- -----------
Total cost of revenues.............................. 4,736,446 6,066,398
---------- -----------
Gross profit........................................... 1,442,062 4,497,766
Selling, general and administrative expenses........... 869,878 2,165,785
Non-rental depreciation and amortization............... 46,526 59,000
---------- -----------
Operating income....................................... 525,658 2,272,981
Other income (expense), net............................ (102,501) (669,922)
Interest income (expense), net......................... (161,537) (674,811)
---------- -----------
Income before income taxes............................. 261,620 928,248
Income tax expense..................................... 90,641 211,600
---------- -----------
Net income............................................. $ 170,979 $ 716,648
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-97
<PAGE>
DRAGON RENTALS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1996 1997
----------- ------------
<S> <C> <C>
Operating Activities:
Net income......................................... $ 170,979 $ 716,648
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 399,920 903,578
Gain on sale of equipment......................... (46,986) (10,878)
Provision for doubtful accounts................... (19,912) 257,562
Changes in operating assets and liabilities:
Accounts receivable............................... (572,619) (1,829,012)
Accounts receivable--related party................ 0 (125,651)
Inventory......................................... (232,490) (86,150)
Merchandise for resale............................ 0 691,203
Prepaid and other assets.......................... (13,181) (14,142)
Accounts payable.................................. 492,074 49,149
Accrued interest.................................. 0 113,217
Accrued expenses and other liabilities............ 289,407 (259,092)
Accrued expenses--related party................... 0 (283,862)
Income tax payable................................ 0 (36,759)
Deferred income taxes............................. (71,337) 211,600
----------- ------------
Net cash provided by operating activities........... 395,855 297,411
----------- ------------
Investing Activities:
Purchases of rental equipment...................... (749,748) (10,140,812)
Purchases of property and equipment................ (49,000) (689,280)
Proceeds from sale of property and equipment....... 65,221 70,129
----------- ------------
Net cash used in investing activities............... (733,527) (10,759,963)
----------- ------------
Financing Activities:
Net advances on line of credit..................... 0 1,793,774
Capital contributions.............................. 5,768 0
Proceeds from long-term debt....................... 1,894,367 11,550,621
Payments on long-term debt......................... (1,529,650) (2,960,440)
Proceeds from capital leases....................... 0 120,947
Payments of capital lease obligations.............. 0 (34,762)
----------- ------------
Net cash provided by financing activities........... 370,485 10,470,140
----------- ------------
Net increase in cash and cash equivalents........... 32,813 7,588
Cash and cash equivalents at beginning of period.... 5,664 38,477
----------- ------------
Cash and cash equivalents at end of period.......... $ 38,477 $ 46,065
=========== ============
Supplemental Non-Cash Flow Information:
Cash paid for interest............................. $ 166,034 $ 675,057
=========== ============
Cash paid for income taxes......................... $ 161,978 $ 36,759
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-98
<PAGE>
DRAGON RENTALS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
Note 1--Summary of Significant Accounting Policies:
Nature of Business
Dragon Rentals (a wholly owned division of The Modern Group, Inc.) engages
primarily in the rental of storage containers to the waste disposal industry
in southeast Texas and southern Louisiana.
Accounting Basis
The Division utilizes the accrual method of accounting for financial
statement reporting and the cash method for federal income tax purposes. Under
the accrual method, revenue is recognized when earned instead of when received
and expenses are recognized when incurred instead of when actually paid.
Property and Depreciation
Property and equipment are carried at cost. Depreciation is computed on the
straight-line method for financial reporting purposes and accelerated methods
for income tax purposes. Financial statement depreciation expense was $399,920
and $903,578 for the periods ended December 31, 1996 and 1997, respectively.
Income Tax
Deferred income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Deferred taxes
provided for accumulated temporary differences due to basis differences for
assets and liabilities for financial reporting and income tax purposes. The
Division's temporary differences are due to accelerated depreciation for tax
purposes over financial reporting purposes and the use of the cash method for
federal income tax reporting.
Allowance for Doubtful Accounts
The Division establishes an allowance for uncollectible trade accounts
receivable based on historical collection experience and management's
evaluation of collectibility of outstanding accounts receivable. The allowance
for doubtful accounts was $152,600 and $268,000 as of December 31, 1996 and
1997, respectively.
Cash
For purpose of the cash flow statements, cash includes operating funds on
deposit at the bank.
Concentration of Risk
The division has deposits in financial institutions that may, from time to
time, exceed the $100,000 federally insured limits.
Concentrations of Credit
The Division's services are primarily provided to customers throughout the
Southeast Texas region; mainly within the petro-chemical industry and are
subject to the economic sensitive industry cycles as such.
Reclassifications
Certain reclassifications have been made to the 1996 financial statements to
conform with the 1997 financial statement presentation. Such reclassifications
have had no effect on net earnings as previously reported.
F-99
<PAGE>
DRAGON RENTALS
NOTES TO FINANCIAL STATEMENTS--(Continued)
Advertising
The Division has elected to expense advertising costs as incurred.
Advertising expense was $90,944 and $81,264 for the periods ended December 31,
1996 and 1997, respectively.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Inventories
Inventories are stated at the lower of cost or market with costs charged to
jobs determined by the weighted average cost method.
Note 2--Long-Term Debt
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Initial term loan with Wells Fargo Bank, secured
by accounts receivable, general intangibles,
inventory, and equipment and fixtures. The note
is payable in monthly installments of $141,047,
including interest of 1.00% above bank prime,
with a due date of July 19, 2000. $ $9,872,572
Equipment acquisition note with Wells Fargo Bank,
secured by accounts receivable, general
intangibles, inventory, and equipment and
fixtures. The note is payable in monthly
installments of $15,285, including interest of
1.00% above bank prime, with a due date of July
19, 2000. 1,710,852
Note payable for general insurance, secured by
contractor equipment. The note is payable in
monthly installments of $1,063, including
interest, maturing in January, 1999. 13,812
Notes payable to individuals, collateralized by
equipment. The notes are payable in various
installments, including interest from 11.25% to
14.68%, maturing in of before December, 1999. 358,670 97,267
Note payable to Community Bank, collateralized by
equipment. The note is payable in monthly
installments of $38,812, including interest at
10.75%, maturing in April, 1997. 1,125,548
Notes payable to Ford Motor Credit, secured by a
vehicle, payable in monthly installments of
$1,104, including interest at 9.00%, maturing in
November, 1997. 23,222
Note payable to GMAC, secured by a vehicle,
payable in monthly installments of $668,
including interest at 11.75%, maturing in March,
1997............................................ 1,928
---------- ----------
1,509,368 11,694,503
Less amount allocated to manufacturing division.. 1,796,191
---------- ----------
$1,509,368 $9,898,312
========== ==========
</TABLE>
F-100
<PAGE>
DRAGON RENTALS
NOTES TO FINANCIAL STATEMENTS--(Continued)
A schedule of maturities of long-term debt is as follows for the year ended
December 31, 1997:
<TABLE>
<S> <C>
1998.......................................................... $ 1,957,936
1999.......................................................... 1,904,866
2000.......................................................... 7,831,701
2001 and thereafter........................................... 0
-----------
$11,694,503
===========
</TABLE>
Note 3--Note Payable--Accounts Receivable Financing:
In accordance with the asset-based financing arrangement, Wells Fargo
(lender) advances funds to the Division upon receipt of the customer account
and reduces the accumulated advances upon collection of the account. Interest
is payable monthly at the prime rate plus 1/2%. The agreement expires on July
19, 2000. The note payable is secured by a general business security agreement
on all assets of the Division. The amount outstanding on this note was
$1,793,774 at December 31, 1997.
Note 4--Related Party Transactions:
The Division has identified the following related party transactions with
management and companies in which management has full ownership:
(1) The Division provides personnel and administrative services and
shares certain building expenses with a related company, Modern, Inc. Prior
to August 1, 1997 all personnel and management services cost were borne by
Modern, Inc.
As of December 31, 1997, Modern, Inc. owned Dragon Rentals $125,651.
As of December 31, 1996, Dragon Rentals owed Modern, Inc. $308,969.
(2) At December, 31, 1997 and 1996, Dragon Rentals had a $19,000 note
receivable from Will Crenshaw, the sole shareholder of Modern, Inc., a
related party.
(3) The Division has a lease agreement with Will Crenshaw, sole
shareholder of Modern, Inc., for the rental of yard space to hold
containers when they are not out on rent. At December 31, 1997 the Division
owed accrued rent of $25,000 to Mr. Crenshaw.
Note 5--Economic Dependence:
Historically, the Division purchased 100% of the waste containers used in
its business from Modern, Inc., a related party. For the years ended December
31, 1996 and 1997, the Division had purchases of $657,500 and $1,864,486,
respectively. However, on July 19, 1997, the Division purchased the
manufacturing facility from Modern, Inc., and from that point forward began
manufacturing the container boxes. This restructuring enabled the Division to
become more efficient by building container boxes at a lessor cost.
Note 6--Income Taxes:
In accordance with the provisions of Statement of Financial Accounting
Standards No. 109, " Accounting for Income Taxes", the Division has reflected
the tax consequences on future years differences between the tax basis of
assets and liabilities and their financial reporting amounts.
The sources of deferred income taxes and the tax effect of each follows:
<TABLE>
<CAPTION>
1996 1997
-------- -----------
<S> <C> <C>
Accumulated depreciation temporary differences..... $407,287 $ 998,157
Effect of cash method of accounting................ 16,113 699,273
Net operating loss carryforward.................... (1,062,430)
-------- -----------
$423,400 $ 635,000
======== ===========
</TABLE>
F-101
<PAGE>
DRAGON RENTALS
NOTES TO FINANCIAL STATEMENTS--(Continued)
The components of corporate income tax expense are as follows for the year
ended December 31:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Current tax expense...................................... $36,759 $
Deferred tax expense..................................... 53,882 211,600
------- --------
$90,641 $211,600
======= ========
</TABLE>
Note 7--Property and Equipment:
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Land improvements.................................. $ 21,668 $ 21,668
Building........................................... 13,458
Machinery and equipment............................ 64,851 155,998
Furniture and fixtures............................. 18,842 31,388
Autos and trucks................................... 587,922 1,053,315
Capital jobs in progress........................... 41,031
--------- ----------
693,283 1,316,858
Accumulated depreciation........................... (275,062) (463,707)
--------- ----------
$ 418,221 $ 853,151
========= ==========
</TABLE>
Note 8--Rental Equipment:
<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C> <C>
Rental Equipment................................. $2,875,021 $12,977,642
Accumulated depreciation......................... (588,735) (1,259,023)
---------- -----------
$2,286,286 $11,718,619
========== ===========
</TABLE>
Note 9--Operating Lease Obligations:
The Division conducts its operations in southeast Texas and southern
Louisiana from leased facilities with varying terms ranging from one year to
five years. The leases provide for renewal options ranging from four years to
nine years. The Division also has incurred a certain operating lease for
equipment used in its operations. The lease has a term of five years. Future
minimum obligations at December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998.......................................................... $ 231,900
1999.......................................................... 229,600
2000.......................................................... 181,500
2001.......................................................... 660,000
2002 and thereafter........................................... 30,000
----------
Total minimum lease payments required....................... $1,333,000
==========
</TABLE>
Note 10--Capital Lease Obligations:
During 1997, the Division acquired equipment under the provisions of long-
term leases. For financial reporting purposes, minimum lease payments relating
to the equipment have been capitalized. The leases expire in or before
February, 2000. The leased property under the capital leases as of December
31, 1997 has a cost of $120,947 accumulated amortization of $9,664 and a net
book value of $111,283. Amortization of the leased property is included in
depreciation expense.
F-102
<PAGE>
DRAGON RENTALS
NOTES TO FINANCIAL STATEMENTS--(Continued)
The future minimum lease payments under the capital leases and the net
present value of the future lease payments at December 31, 1997 are as
follows:
<TABLE>
<S> <C>
Total minimum lease payments..................................... $95,952
Less amount representing interest................................ 9,767
-------
Present value of net minimum lease payments...................... $86,185
=======
</TABLE>
Note 11--Prepaid and Other Assets:
Prepaid and other assets consists of the following at December 31,
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Prepaid insurance........................................ $ 4,699 $21,353
Prepaid real estate taxes................................ 8,482
Deferred charges......................................... 15,970
Other receivable......................................... 9,528 9,528
Rental lease deposits.................................... 30,000 20,000
------- -------
$52,709 $66,851
======= =======
</TABLE>
Note 12--Accrued Expenses and Other Liabilities:
Accrued expenses and other liabilities consists of the following at December
31,
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Payable to investors.................................... $721,052 $
Customer deposits....................................... 76,136
Accrued expenses........................................ 77,859 346,814
Accrued franchise tax................................... 8,721
Accrued payroll......................................... 102,458
Accrued sales tax....................................... 105,925 267,517
-------- --------
$989,693 $716,789
======== ========
</TABLE>
Note 13--Inventory:
Inventory consist of the following at December 31, 1997:
<TABLE>
<S> <C>
Steel............................................................. $18,916
Purchased parts................................................... 56,794
Work in process................................................... 10,440
-------
$86,150
=======
</TABLE>
Note 14--Subsequent Events:
On March 2, 1998 Dragon Rentals was sold to National Equipment Services,
Inc. National Equipment Services Inc. is primarily involved in the rental of
equipment to construction and industrial users from locations in Alabama,
Georgia, Louisiana, Nevada, Texas and Virginia.
F-103
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Albany Ladder Company, Inc. and the Board of Directors
of National Equipment Services, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of cash flows and of changes in stockholder's equity, present
fairly, in all material respects, the financial position of Albany Ladder
Company, Inc. at December 31, 1996 and 1997, and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
1997 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
September 3, 1998
F-104
<PAGE>
ALBANY LADDER COMPANY, INC.
BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------ ------------
<S> <C> <C>
Assets:
Cash and cash equivalents........................... $ 112 $ 87
Marketable securities............................... 74 104
Accounts receivable, net............................ 4,814 5,951
Inventory........................................... 2,786 2,878
Rental equipment, net............................... 12,945 15,116
Property and equipment, net......................... 2,506 2,139
Prepaid and other assets............................ 406 927
------- -------
Total assets..................................... $23,643 $27,202
======= =======
Liabilities and Stockholders' Equity:
Accounts payable.................................... $ 717 $ 980
Accrued expenses and other liabilities.............. 780 1,020
Notes payable--shareholder.......................... 370 370
Notes payable....................................... 10,425 11,900
------- -------
Total liabilities................................ 12,292 14,270
Commitments and contingencies (Note 9)
Common stock:
Class A shares, $100 par, 1,200 shares authorized,
246 shares issued and outstanding ................. 25 25
Class B shares, $100 par, 2,000 shares authorized,
941 shares issued and outstanding ................. 94 94
Additional paid-in capital........................... 333 333
Retained earnings.................................... 10,840 12,391
Unrealized gain on marketable securities available
for sale............................................ 59 89
------- -------
Total stockholders' equity....................... 11,351 12,932
------- -------
Total liabilities and stockholders' equity....... $23,643 $27,202
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-105
<PAGE>
ALBANY LADDER COMPANY, INC.
STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
For the Year
Ended December 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Revenues:
Rental revenues.......................................... $ 16,862 $ 18,410
Rental equipment sales................................... 1,056 1,885
New equipment sales...................................... 7,033 8,931
Other.................................................... 2,860 4,978
--------- ---------
Total revenues........................................ 27,811 34,204
--------- ---------
Cost of Revenues:
Rental equipment depreciation............................ 3,014 3,445
Cost of rental equipment sales........................... 452 721
Cost of new equipment sales.............................. 5,851 7,725
Direct operating expense................................. 8,851 10,738
--------- ---------
Total cost of revenues................................ 18,168 22,629
--------- ---------
Gross profit.............................................. 9,643 11,575
Selling, general and administrative expenses.............. 7,101 7,796
Non-rental depreciation................................... 580 640
--------- ---------
Operating income.......................................... 1,962 3,139
Other income, net......................................... 59 117
Interest expense, net..................................... (716) (846)
--------- ---------
Net income................................................ $ 1,305 $ 2,410
========= =========
Pro Forma Tax Provision (Unaudited):
Income before income taxes............................... $ 1,305 $ 2,410
Pro forma provision for income taxes..................... (522) (964)
--------- ---------
Pro forma net income..................................... $ 783 $ 1,446
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-106
<PAGE>
ALBANY LADDER COMPANY, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Year
Ended December 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Operating Activities:
Net income.............................................. $ 1,305 $ 2,410
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 3,594 4,085
Gain on sale of equipment.............................. (604) (987)
Changes in operating assets and liabilities:
Accounts receivable................................... (370) (1,172)
Inventories........................................... (90) (92)
Prepaid and other assets.............................. (186) (483)
Accounts payable...................................... 16 262
Accrued expenses and other liabilities................ 158 239
--------- ---------
Net cash provided by operating activities................ 3,823 4,262
--------- ---------
Investing Activities:
Purchases of rental equipment........................... (4,545) (6,516)
Proceeds from sale of rental equipment.................. 1,056 1,885
Purchases of property and equipment..................... (864) (284)
Proceeds from sale of property and equipment............ 5 13
--------- ---------
Net cash used in investing activities.................... (4,348) (4,902)
--------- ---------
Financing Activities:
Proceeds from long-term debt............................ 11,475 12,104
Payments on long-term debt.............................. (10,350) (10,630)
Capital contribution.................................... 333 --
Dividends paid.......................................... (994) (859)
--------- ---------
Net cash provided by financing activities............... 464 615
--------- ---------
Net increase (decrease) in cash......................... (61) (25)
Cash at beginning of period............................. 173 112
--------- ---------
Cash at end of period................................... $ 112 $ 87
========= =========
Supplemental Non-Cash Flow Information:
Cash paid for interest.................................. $ 710 $ 811
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-107
<PAGE>
ALBANY LADDER COMPANY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock
---------------------- Total
Class A Class B Stated Paid-In Unrealized Retained Stockholders'
Shares Shares Value Capital Gain Earnings Equity
------- ------- ------ ------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... 246 941 $119 -- $40 $10,529 $10,688
Net income.............. -- -- -- -- -- 1,305 1,305
Increase in unrealized
gain................... -- -- -- -- 19 -- 19
Dividends............... -- -- -- -- -- (994) (994)
Capital contribution.... -- -- -- 333 -- -- 333
--- --- ---- ---- --- ------- -------
Balance at December 31,
1996................... 246 941 119 333 59 10,840 11,351
Net income.............. -- -- -- -- -- 2,410 2,410
Increase in unrealized
gain................... -- -- -- -- 30 -- 30
Dividends............... -- -- -- -- -- (859) (859)
--- --- ---- ---- --- ------- -------
Balance at December 31,
1997................... 246 941 $119 $333 $89 $12,391 $12,932
=== === ==== ==== === ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-108
<PAGE>
ALBANY LADDER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
Albany Ladder Company, Inc. (the Company) is primarily engaged in the sale
and rental of lifts, scaffolding, and contractor equipment and operates from
seven locations located in New York, Pennsylvania, and Vermont.
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 the
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Rental revenues are recognized ratably over the lease term. Sales revenues
are recognized at the point of delivery.
Cash and cash equivalents
Cash and cash equivalents are short-term highly liquid investments with
original maturities of three months or less.
Inventory
The Company's inventories primarily consist of parts and new equipment held
for sale. Inventories are stated at the lower of cost, determined by the
average cost or specific identification method, or market.
Rental equipment
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using the straight-line and accelerated methods over an
estimated 5 to 8 year useful life.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
Property and equipment
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
The estimated useful lives for property and equipment range from 5 years for
machinery, equipment and automobiles, to 10 years for leasehold improvements.
Ordinary repairs and maintenance costs are charged to operations as
incurred. When property and 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.
F-109
<PAGE>
ALBANY LADDER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Fair value of financial instruments
The carrying amounts reported in the balance sheets for marketable
securities, trade accounts receivable, accounts payable and accrued expenses
and other liabilities approximate fair value due to the immediate to short-
term maturity of these financial instruments. The fair value of long-term debt
is determined using current interest rates for similar instruments and
approximates the carrying value of the debt as of December 31, 1996 and 1997.
Concentration of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of trade accounts receivable
from construction and industrial customers. Concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
customers and the Company's geographic dispersion. The Company performs credit
evaluations of its customers' financial condition and generally does not
require collateral on accounts receivable. The Company maintains an allowance
for doubtful accounts on its receivables based upon expected collectibility.
Allowance for doubtful accounts was $329 and $372 at December 31, 1996 and
1997, respectively.
Income taxes
The Company has elected S corporation status under the U.S. Internal Revenue
Code. Pursuant to this election, the Company's income, deductions and credits
are reported on the income tax returns of the Company's stockholders for
federal purposes and, accordingly, no provision for federal income taxes has
been made. Pro forma income taxes are calculated at a statutory tax rate of
40%.
2. Inventory
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------ ------------
<S> <C> <C>
New equipment......................................... $ 671 $ 693
Parts and supplies.................................... 1,492 1,541
Scaffolding and ladders............................... 508 525
Other................................................. 115 119
------ ------
Total inventory....................................... $2,786 $2,878
====== ======
</TABLE>
3. Rental Equipment
Rental equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------ ------------
<S> <C> <C>
Rental equipment...................................... $27,225 $30,990
Less: accumulated depreciation........................ (14,280) (15,874)
------- -------
Rental equipment, net................................. $12,945 $15,116
======= =======
</TABLE>
4. Property and Equipment
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------ ------------
<S> <C> <C>
Leasehold improvements.......................... $ 588 $ 617
Vehicles........................................ 3,421 3,370
Machinery and shop equipment.................... 468 471
Computer equipment.............................. 744 847
------ ------
Total property and equipment, at cost........... 5,221 5,305
Less: accumulated depreciation.................. (2,715) (3,166)
------ ------
Property and equipment, net..................... $2,506 $2,139
====== ======
</TABLE>
F-110
<PAGE>
ALBANY LADDER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Prepaid and Other Assets
Prepaid and other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------ ------------
<S> <C> <C>
Prepaid expenses...................................... $163 $225
Employee and other receivables........................ 243 702
---- ----
$406 $927
==== ====
</TABLE>
6. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------ ------------
<S> <C> <C>
Accrued salaries and benefits......................... $337 $ 388
Sales tax payable..................................... 126 163
Accrued insurance..................................... 117 232
Accrued professional fees............................. 77 107
Other................................................. 123 130
---- ------
$780 $1,020
==== ======
</TABLE>
7. Notes Payable
Notes payable consist of a secured revolving line of credit of $13,350,000
maturing no later than August 31, 1999. The Company has the right to elect
various interest rate options under the agreement. These options include
floating rates fluctuating with the bank's prime rate and fixed rates for
varying periods fluctuating with published LIBOR or treasury rates. Interest
payments are due monthly. Interest rates in effect were as follows (dollar
amounts in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------ ------------
<S> <C> <C>
Interest at 6.97%..................................... $ 9,300 $ --
Interest at 8.00%..................................... 1,125 --
Interest at 7.31%..................................... -- 10,025
Interest at 8.25%..................................... -- 1,875
------- -------
Total notes payable................................... $10,425 $11,900
======= =======
</TABLE>
The bank agreement includes restrictions as to limitations upon certain
ratios of liabilities to net worth and upon the minimum net worth of the
Company. The Company is in compliance with these covenants. Substantially all
of the Company's assets are pledged as collateral for the long-term debt.
Maturities of debt are as follows at December 31, 1997 (in thousands):
<TABLE>
<S> <C>
1998.............................................................. $ --
1999.............................................................. 11,900
Thereafter........................................................ --
-------
$11,900
=======
</TABLE>
Interest expense on long-term debt was $664 and $795 for the years ended
December 31, 1996 and 1997, respectively.
F-111
<PAGE>
ALBANY LADDER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. Notes Payable--Shareholder
Notes payable--shareholder consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------ ------------
<S> <C> <C>
Note payable, shareholder, unsecured, due on demand
with interest payable monthly at prime plus 3%...... $170 $170
Note payable, shareholder, unsecured, due on demand
with interest payable monthly at prime plus 1%...... 200 200
---- ----
Total notes payable--shareholder................. $370 $370
==== ====
</TABLE>
Interest expense on shareholder debt was $38 and $39 for the years ended
December 31, 1996 and 1997, respectively.
9. Commitments and Contingencies
The Company leases office and warehouse space at eight locations. The leases
have varying expiration dates through April 2001, with certain leases
containing extension options. In addition to the monthly rental payments,
these leases also require payment of the related utilities, maintenance, and
real estate taxes for the respective properties.
The Company also leases various vehicles and equipment. The leases have
varying expiration dates through October 2002.
Rental expense totaled $487,000 and $570,000 for the years ended December
31, 1996 and 1997, respectively.
Future minimum lease obligations are as follows at December 31, 1997 (in
thousands):
<TABLE>
<S> <C>
1998................................................................ $ 404
1999................................................................ 312
2000................................................................ 181
2001................................................................ 67
2002................................................................ 12
-----
$976
=====
</TABLE>
10. Employee Benefit Plans
The Company sponsors a 401(k) profit sharing plan (the "Plan"). Employees
meeting certain age and length of service requirements are eligible to
participate in the Plan. The Company makes contributions varying with the
level of employee participation, up to certain limits. The Company contributed
$153,000 and $157,000 to the plan during the years ended December 31, 1996 and
1997, respectively.
11. Subsequent Events
On March 30, 1998, the Company's owners sold all of the outstanding Class A
and B shares of common stock to National Equipment Services, Inc. in exchange
for a $28,811,000 cash payment (less a $2,000,000 million reserve).
F-112
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Falconite, Inc.:
We have audited the accompanying consolidated balance sheet of Falconite,
Inc. and subsidiaries (the Company) as of December 31, 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows
for the years ended December 31, 1995 and 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Falconite, Inc. and subsidiaries as of December 31, 1996 and the results of
their operations and their cash flows for the years ended December 31, 1995
and 1996, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
St. Louis, Missouri
February 20, 1997
F-113
<PAGE>
Report of Independent Accountants
To the Board of Directors
and Shareholders of Falconite, Inc.
We have audited the accompanying consolidated balance sheet of Falconite,
Inc. and Subsidiaries as of December 31, 1997, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the year
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 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 consolidated financial position of Falconite,
Inc. and Subsidiaries as of December 31, 1997, and the consolidated results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
Louisville, Kentucky
February 6, 1998, except for the information in Note 6
as to which the date is March 23, 1998 and the information in
Note 12 as to which the date is April 1, 1998
F-114
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
------------------------- -----------------
1996 1997 1998
------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents........ $ 416,000 $ 820,000 $ 809,000
Trade accounts receivable, less
allowance for doubtful accounts
of $522,000, $431,000 and
$447,000, respectively.......... 7,294,000 9,281,000 10,534,000
Due from affiliated companies and
related parties................. 453,000 -- --
Income taxes receivable.......... 136,000 382,000 373,000
Inventories...................... 1,615,000 1,596,000 3,171,000
Rental equipment, principally
machinery, at cost less
accumulated depreciation of
$12,989,000, $21,489,000 and
$27,105,000, respectively....... 81,583,000 107,721,000 116,315,000
Operating property and equipment,
net............................. 7,018,000 10,542,000 11,479,000
Excess of cost over net assets of
purchased businesses, less
accumulated amortization........ 17,059,000 16,279,000 16,860,000
Prepaid and other assets, at cost
less accumulated amortization... 1,884,000 1,447,000 1,696,000
------------ ------------ ------------
$117,458,000 $148,068,000 $161,237,000
============ ============ ============
Liabilities and Shareholders'
Equity
Trade accounts payable........... $ 13,587,000 $ 2,184,000 $ 5,040,000
Accrued expenses................. 657,000 2,196,000 1,613,000
Accrued interest payable......... 140,000 666,000 798,000
Revolving lines of credit........ 27,152,000 91,416,000 101,652,000
Obligations under capital lease.. 1,600,000 4,093,000 3,351,000
Term debt........................ 31,867,000 4,691,000 3,597,000
Deferred income taxes............ 7,801,000 9,645,000 9,644,000
Due to affiliated companies and
related parties................. 121,000 39,000 31,000
Other liabilities................ 377,000 742,000 629,000
------------ ------------ ------------
Total liabilities.............. 83,302,000 115,672,000 126,355,000
------------ ------------ ------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, Falconite, Inc.,
$0.01 par value; authorized,
1,000,000 shares; issued and
outstanding, zero shares........ -- -- --
Common stock, $0.01 par value;
authorized, 50,000,000 shares;
issued and outstanding,
8,330,000 shares................ 83,000 83,000 83,000
Additional paid-in capital....... 20,250,000 20,250,000 20,250,000
Due from affiliated companies and
related parties................. -- (2,144,000) (1,161,000)
Retained earnings................ 13,823,000 14,207,000 15,710,000
------------ ------------ ------------
Total shareholders' equity..... 34,156,000 32,396,000 34,882,000
------------ ------------ ------------
$117,458,000 $148,068,000 $161,237,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-115
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Years Ended For the Six Months
December 31, Ended June 30,
------------------------------------- ------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Equipment rentals...... $23,395,000 $32,883,000 $44,911,000 $19,645,000 $25,776,000
New equipment sales.... 4,393,000 4,058,000 4,659,000 2,096,000 3,602,000
Rental equipment sales. 5,448,000 7,674,000 9,222,000 5,485,000 2,729,000
Sales of parts,
supplies, and
equipment............. 979,000 1,391,000 1,680,000 1,052,000 1,550,000
Service revenues and
other income.......... 1,446,000 2,080,000 3,174,000 1,502,000 2,104,000
----------- ----------- ----------- ----------- -----------
Total revenues....... 35,661,000 48,086,000 63,646,000 29,780,000 35,761,000
----------- ----------- ----------- ----------- -----------
Cost of revenues:
Cost of equipment
rentals, excluding
equipment rental
depreciation.......... 4,651,000 7,332,000 10,284,000 4,634,000 6,494,000
Equipment rental
depreciation.......... 4,437,000 6,823,000 11,114,000 5,095,000 6,767,000
Cost of new equipment
sales................. 3,651,000 3,104,000 4,103,000 1,823,000 3,058,000
Cost of rental
equipment sales....... 4,332,000 6,697,000 7,582,000 4,349,000 2,142,000
Cost of sales of parts,
supplies, equipment,
and other services.... 1,014,000 1,306,000 1,111,000 622,000 1,245,000
----------- ----------- ----------- ----------- -----------
Total cost of
revenues............ 18,085,000 25,262,000 34,194,000 16,523,000 19,706,000
----------- ----------- ----------- ----------- -----------
Gross profit........ 17,576,000 22,824,000 29,452,000 13,257,000 16,055,000
Selling, general, and
administrative
expenses............... 5,858,000 9,985,000 15,065,000 5,917,000 8,643,000
Depreciation and
amortization, excluding
equipment rental
depreciation........... 412,000 764,000 2,428,000 1,183,000 1,405,000
----------- ----------- ----------- ----------- -----------
Operating income..... 11,306,000 12,075,000 11,959,000 6,157,000 6,007,000
----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest income........ 41,000 32,000 55,000 21,000 38,000
Interest expense....... (3,213,000) (4,330,000) (7,382,000) (3,158,000) (4,570,000)
Non-capitalized
offering costs........ -- -- (1,000,000) -- --
Other, net............. (40,000) 182,000 185,000 17,000 28,000
----------- ----------- ----------- ----------- -----------
(3,212,000) (4,116,000) (8,142,000) (3,120,000) (4,504,000)
----------- ----------- ----------- ----------- -----------
Income before income
taxes and minority
interests........... 8,094,000 7,959,000 3,817,000 3,037,000 1,503,000
Income taxes............ 2,893,000 2,328,000 1,859,000 1,264,000 --
Minority interests...... 1,429,000 1,714,000 -- -- --
----------- ----------- ----------- ----------- -----------
Net income........... $ 3,772,000 $ 3,917,000 $ 1,958,000 1,773,000 $ 1,503,000
=========== =========== =========== =========== ===========
Pro forma net income
data:
Net income as reported. $ 3,772,000 $ 3,917,000 -- -- --
Pro forma adjustment to
provision for income
taxes................. 124,000 666,000 -- -- --
----------- ----------- ----------- ----------- -----------
Pro forma net income... $ 3,648,000 $ 3,251,000 -- -- --
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-116
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1996 and 1997 and the Six Months Ended
June 30, 1998
<TABLE>
<CAPTION>
Due From
Falconite, Inc. Combined Companies' Affiliated
Common Stock Common Stock Additional Companies Total
----------------- -------------------- Paid-in and Related Retained Shareholders'
Shares Amount Shares Amount Capital Parties Earnings Equity
--------- ------- --------- ---------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... -- -- 14,000 $ 131,000 $ 87,000 -- $ 6,509,000 $ 6,727,000
Common stock issued by
McCurry and Falconite,
Inc.................... -- -- 1,000 1,000 -- -- -- 1,000
Net income.............. -- -- -- -- -- -- 3,772,000 3,772,000
Capital distribution to
shareholder of McCurry
& Falconite Equipment
Company, Inc........... -- -- -- -- -- -- (160,000) (160,000)
--------- ------- -------- ---------- ----------- ----------- ----------- -----------
Balance at January 1,
1996................... -- -- 15,000 $ 132,000 $ 87,000 -- $10,121,000 $10,340,000
Net income.............. -- -- -- -- -- -- 3,917,000 3,917,000
Capital distribution to
shareholder of McCurry
& Falconite Equipment
Company, Inc........... -- -- -- -- -- -- (215,000) (215,000)
Formation of Falconite,
Inc. and
Recapitalization
Agreement transactions. 8,330,000 $83,000 (15,000) (132,000) 20,163,000 -- -- 20,114,000
--------- ------- -------- ---------- ----------- ----------- ----------- -----------
Balance at December 31,
1996................... 8,330,000 83,000 -- -- 20,250,000 -- 13,823,000 34,156,000
Net income.............. -- -- -- -- -- -- 1,958,000 1,958,000
Capital distribution to
shareholder of McCurry
& Falconite Equipment
Company, Inc........... -- -- -- -- -- -- (1,574,000) (1,574,000)
Due from affiliated
companies and related
parties................ -- -- -- -- -- $(2,144,000) -- (2,144,000)
--------- ------- -------- ---------- ----------- ----------- ----------- -----------
Balance at December 31,
1997................... 8,330,000 $83,000 -- -- $20,250,000 $(2,144,000) $14,207,000 $32,396,000
Net income (unaudited).. -- -- -- -- -- -- 1,503,000 1,503,000
Due from affiliated
companies and related
parties (unaudited).... -- -- -- -- -- 983,000 -- 983,000
--------- ------- -------- ---------- ----------- ----------- ----------- -----------
Balance at June 30, 1998
(unaudited)............ 8,330,000 $83,000 -- -- $20,250,000 $(1,161,000) $15,710,000 $34,882,000
========= ======= ======== ========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-117
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months
For the Years Ended December 31, Ended June 30,
---------------------------------------- --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)..... $ 3,772,000 $ 3,917,000 $ 1,958,000 $ 1,773,000 $ 1,503,000
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization......... 4,849,000 7,587,000 13,542,000 6,277,000 8,172,000
Minority interests.... 1,429,000 1,714,000 -- -- --
Provision for losses
on trade accounts
receivable........... 323,000 891,000 297,000 166,000 59,000
Provision for deferred
income taxes......... 2,308,000 2,208,000 1,844,000 1,036,000 --
Net gain on sale of
rental equipment and
operating property
and equipment........ (987,000) (978,000) (1,788,000) (1,187,000) (608,000)
Change in operating
assets and
liabilities, net of
effect of business
acquisitions:
Trade accounts
receivable.......... (2,302,000) (2,139,000) (2,284,000) (207,000) (1,310,000)
Due from affiliated
companies and
related parties..... (173,000) (140,000) (1,691,000) (1,062,000) 983,000
Income taxes
receivable.......... -- (136,000) (246,000) -- 6,000
Inventories.......... 226,000 (989,000) 19,000 204,000 (1,574,000)
Prepaid and other
assets.............. (89,000) (752,000) 420,000 (464,000) (1,429,000)
Trade accounts
payable, accrued
expenses, and
accrued interest
payable............. 245,000 12,052,000 (9,338,000) (4,454,000) 2,405,000
Income taxes payable. (274,000) (33,000) -- 228,000 --
Due to affiliated
companies and
related parties..... (97,000) (240,000) (82,000) 742,000 (8,000)
Other liabilities.... 64,000 299,000 365,000 (114,000) (114,000)
------------ ------------ ------------ ------------ ------------
Net cash provided by
(used in) operating
activities......... 9,294,000 23,261,000 3,016,000 2,938,000 8,085,000
------------ ------------ ------------ ------------ ------------
Cash flows from
investing activities:
Acquisitions of rental
operations, net of
cash acquired........ (451,000) (3,094,000) -- -- (8,934,000)
Proceeds from sales of
rental equipment and
operating assets..... 5,622,000 7,936,000 11,419,000 5,835,000 2,903,000
Capital expenditures
for rental equipment. (29,100,000) (41,092,000) (42,552,000) (32,120,000) (8,840,000)
Capital expenditures
for operating
property and
equipment............ (1,829,000) (3,229,000) (5,726,000) (3,783,000) (1,097,000)
------------ ------------ ------------ ------------ ------------
Net cash used in
investing
activities......... (25,758,000) (39,479,000) (36,859,000) (30,068,000) (15,968,000)
------------ ------------ ------------ ------------ ------------
Cash flows from
financing activities:
Net borrowings under
revolving lines of
credit............... 7,899,000 12,746,000 64,264,000 39,475,000 9,824,000
Proceeds form issuance
of term debt......... 33,261,000 22,100,000 15,559,000 7,420,000 5,000
Principal payments on
term debt and
obligations under
capital lease........ (25,190,000) (18,039,000) (44,002,000) (19,155,000) (1,957,000)
Proceeds from issuance
of common stock...... 1,000 -- -- -- --
Capital distributions
to shareholders...... (160,000) (215,000) (1,574,000) -- --
Capital distributions
to minority
shareholder.......... (160,000) (216,000) -- -- --
------------ ------------ ------------ ------------ ------------
Net cash provided by
financing
activities......... 15,651,000 16,376,000 34,247,000 27,740,000 7,872,000
------------ ------------ ------------ ------------ ------------
Net increase (decrease)
in cash and cash
equivalents........... (813,000) 158,000 404,000 610,000 (11,000)
Cash and cash
equivalents at
beginning of year..... 1,071,000 258,000 416,000 416,000 820,000
------------ ------------ ------------ ------------ ------------
Cash and cash
equivalents at end
year.................. $ 258,000 $ 416,000 $ 820,000 $ 1,026,000 $ 809,000
============ ============ ============ ============ ============
Supplemental cash flow
disclosures:
Cash paid for:
Interest.............. $ 3,227,000 $ 4,319,000 $ 6,857,000 $ 3,159,000 $ 4,437,000
Income taxes.......... 912,000 505,000 382,000 200,000 --
Noncash financing
activities:
Refinancings of term
debt................. -- 8,346,000 -- -- --
Purchase of equipment
with capital leases.. 1,119,000 296,000 3,376,000 560,000 529,000
Reduction in term debt
due to sale of
property............. 1,123,000 -- -- -- --
Term debt entered into
for purchases of
businesses and
covenants not to
compete.............. 150,000 450,000 -- -- --
Loan costs funded by
debt................. -- -- 384,000 -- --
Noncash consideration
for acquisitions of
minority interest.... -- 20,287,000 -- -- --
</TABLE>
F-118
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
a) Principles of Consolidation:
Falconite, Inc. (Falconite or the Company) was formed on December 31, 1996
when the shareholders of Falconite Equipment, Inc. (Falconite Equipment),
formerly known as Falconite, Inc., M&M Properties, Inc., d/b/a M&M Equipment
Company (M&M Equipment), and McCurry and Falconite Equipment Company, Inc.
(M&F Equipment) entered into a Recapitalization Agreement. Pursuant to the
terms of the Recapitalization Agreement, the shareholders of Falconite
Equipment, M&M Equipment, and M&F Equipment exchanged their common shares for
common shares of Falconite (the Recapitalization). The exchange of shares was
accounted for at historical basis for the controlling shareholders of
Falconite and at fair market value for the minority interests in M&M Equipment
and M&F Equipment.
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. Prior to formation of the Company, the
historical financial statements of Falconite Equipment, M&M Equipment, and M&F
Equipment were combined for financial reporting purposes. For purposes of
these financial statements, the 1996 and 1997 consolidated financial
statements and the 1995 combined financial statements will be referred to as
consolidated financial statements. All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
The consolidated statements of income reflect the 49% minority interest
through December 31, 1996 for M&M Equipment and M&F Equipment when the
remaining interests were purchased by Falconite.
In January 1990, M&M Equipment was formed by two shareholders of Falconite
Equipment and a third party. Subsequent to its formation, M&M Equipment was
considered an entity under common control as the controlling shareholders of
Falconite Equipment owned 51% of M&M Equipment. The combined financial
statements for the year ended December 31, 1995 reflect the 49% minority
interest.
In October 1993, Falconite Equipment acquired a 70% ownership of Erzinger
Equipment Co. (Erzinger). Subsequently, on September 10, 1996, Falconite
Equipment acquired the remaining 30% of Erzinger. The minority interest is
reflected through September 10, 1996. For the period September 10, 1996
through December 31, 1996, Erzinger is accounted for as a wholly owned
subsidiary of Falconite Equipment.
In March 1995, a shareholder of Falconite Equipment and the minority
shareholder of M&M Equipment created a Subchapter S corporation, M&F
Equipment. M&F Equipment has been operated as a branch of M&M Equipment since
its inception. The consolidated financial statements reflect the operations of
M&F Equipment since inception and reflect the minority shareholder's interest
in M&F Equipment through December 31, 1996. On December 31, 1996, as part of
the Recapitalization, the Subchapter S Corporation election was terminated.
The consolidated balance sheets are presented in an unclassified format, as
management believes it more accurately reflects its operations and presents
its financial position on a basis comparable to other companies in its
industry.
b) Description of Business:
Falconite, an Illinois corporation, through its wholly owned subsidiaries,
is engaged primarily in a single-industry segment--the rental, sales, and
service of cranes, other lift equipment, and smaller equipment ranging from
pumps and generators to larger equipment such as backhoes and forklifts.
Falconite's operations are based in certain southern and midwestern states.
c) Cash Equivalents:
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
F-119
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
d) Inventories:
Inventories consist of parts, supplies and small tools. Inventories are
stated at cost. Cost is determined using the first-in, first-out method.
e) Rental Equipment and Operating Property and Equipment:
Rental equipment and operating property and equipment are stated at cost.
Rental equipment and operating property and equipment under capital leases are
stated at the present value of future minimum lease payments at the inception
of the lease.
Depreciation is calculated on the straight-line method over the estimated
useful lives of the assets. Prior to January 1, 1997, M&M Equipment assigned a
salvage value of 25% to its rental equipment purchases, whereas Falconite
Equipment did not provide for a salvage value on its rental equipment.
Equipment held under capital leases and leasehold improvements are amortized
on the straight-line basis over the shorter of the lease term or estimated
useful life of the asset.
Amortization of assets under capital leases is included in depreciation
expense. Prior to January 1, 1997, depreciation expense was computed over the
following useful lives in years:
<TABLE>
<CAPTION>
Falconite M&M
Equipment Equipment
--------- ---------
<S> <C> <C>
Rental equipment:
Cranes.............................................. 10-15 10
Lift equipment...................................... 10 10
Other heavy equipment............................... 7 7
Miscellaneous....................................... 2-5 5-7
Operating equipment:
Buildings........................................... 45 --
Other buildings and leasehold improvements.......... 20-40 39
Vehicles............................................ 5 5
Furniture and fixtures.............................. 5 5-7
Computer equipment.................................. 3 5-7
</TABLE>
Rental equipment acquired subsequently to January 1, 1997 is being
depreciated using the straight-line method, after giving effect to an
estimated salvage value as follows:
<TABLE>
<CAPTION>
Useful Life Salvage
Type of Equipment In Years Value
----------------- ----------- -------
<S> <C> <C>
Large (28 tons and greater) cranes.................... 15 25%
Small (less than 28 tons) cranes...................... 10 10
Large lifts........................................... 10 10
Small lifts........................................... 7 10
Forklifts............................................. 7 10
Dirt moving........................................... 7 10
Other small equipment................................. 5 10
Vehicles and trailers................................. 5 --
</TABLE>
The change in depreciation policy did not have a material effect on the
consolidated financial statements.
Equipment reported under the classification of "rental equipment," although
primarily utilized within the rental aspect of the business, is available for
sale in the ordinary course of business and is recorded at the lower of cost,
net of accumulated depreciation, or market. Rental equipment sold by the
Company is sold "as is."
F-120
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
f) Excess of Cost Over Net Assets of Purchased Businesses:
Excess of cost over net assets of purchased businesses (goodwill) is
amortized on a straight-line basis over the expected periods to be benefited,
generally 5 to 30 years. The Company assesses the recoverability of this
intangible asset by determining whether the amortization of the goodwill
balance over its remaining life can be recovered through the undiscounted
future operating cash flows of the acquired operation. The amount of goodwill
impairment, if any, is measured based on projected future operating cash flows
on a discounted basis.
g) Income Taxes:
Income taxes are accounted for under the asset and liability method.
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 losses 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. 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.
Prior to January 1, 1997, M&F Equipment had elected S corporation status in
accordance with the provisions of Subchapter S of the Internal Revenue Code.
Pursuant to this election, the taxable income of M&F Equipment was reported in
the federal and state income tax returns of the shareholders. Accordingly, a
provision for federal and state income taxes that is payable by an S
corporation has not been reflected in the accompanying consolidated financial
statements. The pro forma income tax adjustment included on the consolidated
statements of income represents federal income tax expense that would have
been incurred had M&F Equipment been a C corporation.
h) Allowance for Doubtful Accounts:
The Company determines the allowance for doubtful accounts by reserving
specific trade accounts receivable and providing an estimate based on the
aging of the trade receivables. The Company recognized bad debt expense of
$323,000, $891,000 and $297,000 for the years ended December 31, 1995, 1996
and 1997, respectively. The Company writes off trade receivables when
considered uncollectible.
i) Use of Estimates:
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
j) Concentrations of Risks:
Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and trade accounts receivable. The Company places its cash with high quality
financial institutions in amounts that from time to time exceed federally
insured limits. No losses have been incurred on such deposits.
Falconite's customers are primarily concentrated in the construction and
manufacturing industries and are dependent on those industries. Management
believes it has addressed this concentration by expanding its operations
throughout certain southern and midwestern states. Falconite performs ongoing
credit evaluations of
F-121
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
its customers' financial condition but does not require collateral to support
customer receivables. In certain instances, Falconite may file a mechanic's
lien to protect its interest.
k) Revenue Recognition:
Equipment rental and delivery charge revenue is recognized when earned.
New and used equipment sales and revenues from the sale of parts and
supplies are recognized when title passes to the purchaser usually at the time
of delivery or pickup. When equipment is sold, the cost consists of actual
costs in the case of new equipment and the net book value in the case of used
equipment.
Revenue associated with repairs and maintenance of equipment owned or rented
by customers is recognized when earned. Fees for repairs and maintenance on
equipment owned by customers of the Company are either paid by the customer or
reimbursed to the Company under the original manufacturer's warranty
agreement. Revenue associated with the warranty work is recognized when
earned.
l) Deferred Costs:
Debt issuance costs are amortized to interest expense over the term of the
related debt, utilizing the interest method. Debt issuance costs are included
in prepaid and other assets.
Falconite had deferred costs of approximately $427,000 as of December 31,
1996, in connection with a planned initial public offering that was in
process. These costs as well as $573,000 of costs incurred during 1997 have
been written off during the current year.
m) Interim Financial Data:
The interim financial data is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for fair statements of financial position and
results of operations and of cash flows for the interim periods.
2. Acquisitions:
In December 1995, Falconite Equipment acquired the assets of a rental
company located in Calvert City, Kentucky. This acquisition was accounted for
under the purchase method, with the operating results being included within
the consolidated financial statements since the date of the acquisition. The
total purchase price was approximately $585,000, for which Falconite
recognized total goodwill of approximately $100,000 which is being amortized
on a straight-line basis over a five-year period.
In September 1996, Falconite purchased the 30% minority interest of Erzinger
for approximately $875,000 in cash, a note payable, certain assets of
Erzinger, and entered into covenants not to compete for $450,000. The
covenants not to compete are being amortized on a straight-line basis over the
life of the agreements, two years. The acquisition was accounted for using the
purchase method, with the operating results of Erzinger included in the
consolidated operating results since the date of the original acquisition. The
operating results have been adjusted to reflect the minority shareholder's
interest in the operating results for the respective periods disclosed. Total
goodwill of $543,000 is being amortized on a straight-line basis over a five-
year period.
In November 1996, M&M Equipment acquired various pieces of rental equipment
from a rental company in Tallahassee, Florida for $653,000. The total purchase
price was $1,053,000 which included $400,000 in covenants not to compete.
Covenants not to compete are being amortized over three years.
In December 1996, Falconite Equipment acquired the assets of another rental
company in Calvert City, Kentucky. This acquisition was accounted for under
the purchase method, with the operating results being included in the
consolidated financial statements since the date of acquisition. The total
purchase price was
F-122
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
$300,000, for which Falconite Equipment recognized total goodwill of
approximately $86,000. Goodwill for this acquisition is being amortized on a
straight-line basis over a five-year period.
In December 1996, Falconite Equipment acquired 100% of the outstanding
common stock of a rental company with locations in Fort Campbell, Kentucky and
Clarksville, Tennessee. This acquisition was accounted for under the purchase
method, with the operating results being included in the consolidated
financial statements since the date of acquisition. The total purchase price
was $985,000, for which Falconite Equipment recognized total goodwill of
approximately $286,000, which is being amortized on a straight-line basis over
a five-year period.
As part of the Recapitalization, on December 31, 1996, Falconite purchased
the 49% minority interest in M&M Equipment by exchanging 1,225,000 shares of
its common stock. The 49% minority interest in M&M Equipment's net assets
acquired were recorded at their estimated fair market value of $20,080,000
whereas the remaining 51% was recorded at the historical cost of such assets.
The excess of the purchase price over the fair market value of the net assets
acquired of $16,178,000 was recorded as goodwill, and is being amortized on a
straight-line basis over its expected useful life of 30 years.
3. Fair Value of Financial Instruments:
The Company estimates the fair value of financial instruments using quoted
market prices when available, or fair values which are based on estimates
using present value or other valuation techniques. Those techniques are
significantly affected by the assumption used, including the discount rate and
estimates of future cash flows. In that regard the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instrument.
The use of different market assumptions and estimation methodologies may have
a material effect on the estimated fair value amounts. The aggregate fair
value amounts referred to do not represent the underlying value of Falconite.
Because of their relatively short maturities, generally the estimated fair
values of the Company's financial instruments approximate their carrying
amounts on the consolidated balance sheets. The estimated fair value of term
debt with adjustable rates approximate their carrying amounts. For fixed rate
instruments, the estimated fair values are calculated using a discounted cash
flow calculation that applies current incremental borrowing rates for similar
types of arrangements. At December 31, 1996 and 1997, there were no material
differences between the carrying amount and the fair value of term debt.
4. Operating Property and Equipment, Net:
Operating property and equipment, net at December 31, 1996 and 1997 consist
of the following:
<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C> <C>
Land, buildings and leasehold improvements......... $1,608,000 $ 5,002,000
Transportation equipment........................... 6,044,000 5,820,000
Furniture, fixtures and equipment.................. 871,000 2,120,000
---------- -----------
8,523,000 12,942,000
Less accumulated depreciation and amortization..... 1,505,000 2,400,000
---------- -----------
$7,018,000 $10,542,000
========== ===========
</TABLE>
5. Leases:
Falconite is party to several operating leases for transportation equipment
and certain office and warehouse facilities that expire at various times
through the year 2003. These leases require Falconite to pay all executory
costs such as maintenance and insurance. Rental expense for operating leases
for the years ended December 31, 1995, 1996 and 1997 was $303,000, $396,000
and $571,000, respectively.
F-123
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In addition to the above, Falconite leases various facilities and equipment
from its shareholders. The facility leases are on varying terms ranging from
one year to ten years. Management believes these lease arrangements reflect
those that could be obtained from a third party. Total rent expense associated
with these leases for the years ended December 31, 1995, 1996 and 1997 was
$278,000, $689,000 and $629,000, respectively.
Future minimum lease payments under operating leases (with initial or
remaining lease terms in excess of one year) as of December 31, 1997 were as
follows:
<TABLE>
<CAPTION>
Year
Ending Operating
December 31, Leases
------------ ----------
<S> <C>
1998......................................................... $1,396,000
1999......................................................... 1,065,000
2000......................................................... 818,000
2001......................................................... 681,000
2002......................................................... 466,000
Thereafter................................................... 1,260,000
----------
Total minimum lease payments.................................. $5,686,000
==========
</TABLE>
Falconite has capitalized certain rental and transportation equipment under
various lease agreements. The book value of these leased assets is included in
the recorded amounts for rental equipment and operating property and
equipment.
A schedule of future minimum lease payments under capital leases at December
31, 1997 consisted of the following:
<TABLE>
<CAPTION>
Year
Ending
December 31, Amount
------------ ----------
<S> <C>
1998......................................................... $2,957,000
1999......................................................... 648,000
2000......................................................... 375,000
2001......................................................... 252,000
2002......................................................... 136,000
----------
Total minimum lease payments.................................. 4,368,000
Less amount representing imputed interest..................... 275,000
----------
Present value of minimum payments............................. $4,093,000
==========
</TABLE>
F-124
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Revolving Lines of Credit and Term Debt:
Term debt at December 31, 1997 and 1996 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
----------- ----------
<S> <C> <C>
Notes payable with Nations Bank of Tennessee,
N.A., with monthly principal and interest
payments of $30,368 maturing in 2002; interest
stated at LIBOR (8.47% at December 31, 1997)
plus 2.5%...................................... -- $3,362,000
Various notes payable, with varying monthly
principal and interest payments; interest rates
ranging from 7.0% to 9.75% at December 31,
1997, with maturities ranging from January 1,
1998 to September 30, 2002..................... $15,472,000 1,329,000
Various notes payable with Southwest Bank of St.
Louis, with monthly payments of principal and
interest; interest rates ranging from prime
(8.25% at December 31, 1996) plus .75% to 10%.. 8,346,000 --
Notes payable with Citizens Bank & Trust, with
monthly payments of principal and interest at
prime (8.25% at December 31, 1996),
collateralized by a guarantee of the majority
shareholder.................................... 6,850,000 --
Notes payable with GE Capital, with monthly
principal and interest payments of $11,217;
interest at the 30 days' commercial paper rate
(5.41% at December 31, 1996) plus 2.08%........ 1,088,000 --
Note payable with the Kentucky Development
Finance Authority, with monthly principal and
interest payments of $2,660 maturing in 2000;
interest stated at a fixed rate of 5.06%,
collateralized by real estate.................. 111,000 --
----------- ----------
$31,867,000 $4,691,000
=========== ==========
</TABLE>
Annual maturities of term debt at December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................................... $1,238,000
1999........................................................... 389,000
2000........................................................... 348,000
2001........................................................... 185,000
2002........................................................... 109,000
Thereafter..................................................... 2,422,000
----------
Total........................................................ $4,691,000
==========
</TABLE>
The Citicorp Facility is comprised of a revolving line of credit extended to
Falconite Equipment and M&M Equipment. The total amount of credit available
under the Citicorp Facility is limited to a borrowing base equal to the lesser
of (i) $100 million, of which $2 million is available as a swingline
subfacility; or (ii) a formula based on accounts receivable, parts inventory,
transportation equipment owned by the Company and rental and resale equipment
inventory. The obligations of Falconite Equipment and M&M Equipment under the
Citicorp Facility are collateralized by substantially all of the assets of
Falconite Equipment and M&M Equipment. The Citicorp Facility has financial
covenants regarding tangible net worth, debt ratios and debt coverage. The
Company was not in compliance with certain loan provisions at December 31,
1997, but received waivers from the lender for these violations, effectively
through the term of the facility, on March 23, 1998. The Citicorp Facility
also contains covenants and provisions that restrict, among other things,
Falconite Equipment's and
F-125
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
M&M Equipment's ability to: (i) incur liens on its property; (ii) engage in
certain sales of assets; (iii) merge or consolidate with or acquire another
person or engage in other fundamental changes; (iv) engage in certain
transactions with affiliates; and (v) commit to make capital expenditures in
excess of certain preset limits. The Citicorp Facility provides for certain
events of default. At December 31, 1997, the principal amount outstanding
under the Citicorp Facility was $81,900,000, and the interest rate on such
borrowings was 8.1875% (30 day LIBOR plus 2.5%). At December 31, 1997, $9.6
million of additional borrowings were available to Falconite Equipment and M&M
Equipment under the Citicorp Facility. The obligations of Falconite Equipment
and M&M Equipment under the Citicorp Facility are guaranteed by the Company,
certain subsidiaries of the Company, Ralph W. McCurry and Michael A.
Falconite.
The Deutsche Facility is comprised of a line of credit, which amount is
determined at Deutsche's sole discretion, extended to M&M Equipment for the
purchase of equipment from certain designated manufacturers. The obligations
of M&M Equipment under the Deutsche Facility are collateralized by all of M&M
Equipment's inventory and equipment manufactured by such designated
manufacturers, including all accounts, rights, instruments and proceeds
arising from such inventory and equipment. The Deutsche Facility has financial
covenants and provisions regarding tangible net worth and debt ratios. The
Company was not in compliance with certain loan provisions at December 31,
1997, but received waivers from the lender for these violations, effectively
through the term of the facility, on March 23, 1998. The obligations of M&M
Equipment under the Deutsche Facility are guaranteed by Falconite Equipment,
Ralph W. McCurry and Wanda R. McCurry. At December 31, 1997, the principal
amount outstanding under the Deutsche Facility was $9,516,000, and the
interest rate on such borrowings was 9.5%.
7. Income Taxes:
Income tax expense consists of:
<TABLE>
<CAPTION>
Current Deferred Total
-------- ---------- ----------
<S> <C> <C> <C>
Year ended December 31, 1995:
Federal................................ $565,000 $2,011,000 $2,576,000
State and local........................ 20,000 297,000 317,000
-------- ---------- ----------
$585,000 $2,308,000 $2,893,000
======== ========== ==========
Year ended December 31, 1996:
Federal................................ $196,000 $2,006,000 $2,202,000
State and local........................ (76,000) 202,000 126,000
-------- ---------- ----------
$120,000 $2,208,000 $2,328,000
======== ========== ==========
Year ended December 31, 1997:
Federal................................ $ 13,000 $1,598,000 $1,611,000
State and local........................ 2,000 246,000 248,000
-------- ---------- ----------
$ 15,000 $1,844,000 $1,859,000
======== ========== ==========
</TABLE>
Income tax expense for the years ended December 31, 1996 and 1997 differed
from the amounts computed by applying the federal income tax rate of 34% to
income before income taxes as a result of the following:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Computed "expected" tax expense....... $2,752,000 $2,706,000 $1,298,000
Increased (reduction) in income taxes
resulting from:
Nontaxable M&F Equipment income..... (124,000) (666,000) --
State and local income taxes, net of
federal income tax benefit......... 209,000 84,000 164,000
Amortization........................ -- -- 349,000
Other, net.......................... 56,000 204,000 48,000
---------- ---------- ----------
$2,893,000 $2,328,000 $1,859,000
========== ========== ==========
</TABLE>
F-126
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
From the time of its inception, March 20, 1995, through December 31, 1996,
M&F Equipment was taxed as an S corporation under Subchapter S of the Internal
Revenue Code. The pro forma income tax adjustments included on the
consolidated statements of income represent federal income tax expense that
would have been required had M&F Equipment been a C corporation. M&F
Equipment's undisturbed earnings of $1,574,000 were distributed in September
1997.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1996 and 1997 are presented below:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Deferred tax assets:
Trade accounts receivable, principally due
to allowance for doubtful accounts........ $ 195,000 $ 161,000
Alternative minimum tax credit
carryforwards............................. 1,713,000 1,713,000
Net operating loss carryforwards........... 1,402,000 4,168,000
Sales tax accruals......................... -- 223,000
Inventory obsolescence reserves............ 175,000 56,000
Other...................................... 175,000 205,000
------------ ------------
Net deferred tax assets.................. 3,660,000 6,526,000
Deferred tax liability:
Rental and operating property and
equipment, principally due to difference
in depreciation........................... (11,461,000) (16,171,000)
------------ ------------
Net deferred tax liability............... $ (7,801,000) $ (9,645,000)
============ ============
</TABLE>
At December 31, 1997, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $11.1 million which are available
to offset future federal taxable income through the year 2011. The net
operating loss carryforwards are primarily attributable to M&M Equipment and
may be subject to certain limitations. The Company expects to pursue certain
tax planning strategies that management believes make it more likely than not
that the Company will recover the tax benefit of the net operating loss
carryforwards.
In addition, as of December 31, 1997, the Company had alternative minimum
tax credit carryforwards of approximately $1,713,000 which are available to
reduce future federal regular income taxes, if any, over an indefinite period.
8. Employee Benefit Plans:
Prior to August 1, 1997, Falconite Equipment had a discretionary profit-
sharing plan covering substantially all of its employees. Profit-sharing
expense was funded through annual contributions to the plan. There were no
contributions to the plan during 1996 and 1997. Falconite Equipment also
contributes to a union-administered pension plan as required. Falconite
Equipment's contributions to these plans for the years ended December 31,
1995, 1996 and 1997 totaled $71,000, $45,000 and $105,000, respectively.
Falconite Equipment could, under certain circumstances, be liable for unfunded
vested benefits or other expenses of jointly administered union plans. At this
time, Falconite has not established any liabilities because withdrawal from
these plans is not probable.
M&M Equipment has a discretionary 401(k) plan covering substantially all of
its employees. Plan expense is funded through annual contributions. For the
years ended December 31, 1995, 1996 and 1997, M&M Equipment contributions
totaled $38,000, $60,000 and $86,000, respectively. As of July 1, 1997,
Falconite has a discretionary 401(k) plan covering substantially all of its
employees. For the year ended December 31, 1997, Falconite contributions
totaled $70,000.
F-127
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Related Party Transactions:
The individual companies included in the consolidated financial statements
enter into various related party transactions with affiliated companies and
shareholders of the individual companies.
A summary of receivables/payables included in the consolidated balance sheet
as of December 31, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Due from affiliated companies and related parties:
Note receivable--officer.......................... $ 77,000 $ 101,000
Note receivable--majority shareholder............. 332,000 483,000
Due from F&F Leasing.............................. 44,000 16,000
Due from E&F Leasing.............................. -- 200,000
Due from M&F Investments.......................... -- 1,344,000
-------- ----------
$453,000 $2,144,000
======== ==========
Due to affiliated companies and related parties:
Due to F&F Leasing................................ $ 42,000 --
Notes payable--majority shareholder............... 79,000 $ 39,000
-------- ----------
$121,000 $ 39,000
======== ==========
</TABLE>
A summary of expenses included in the consolidated statements of income for
the years ended December 31, 1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Building rent expense paid to affiliates and
related parties:
Rent paid to F&F Leasing.................. $ 63,000 $200,000 $137,000
Rent paid to an officer................... 30,000 30,000 --
Rent paid to M&F Investments.............. 13,000 122,000 247,000
Rent paid to the minority shareholder of
M&M...................................... 22,000 -- --
Rent paid to E&F Leasing.................. 27,000 188,000 246,000
-------- -------- --------
$155,000 $540,000 $630,000
======== ======== ========
Equipment rent expense paid to F&F Leasing.. $123,000 $149,000 --
======== ======== ========
Interest expense paid to director........... $ 19,000 $ 11,000 $ 5,000
======== ======== ========
Management fee paid to officers:
From M&M Equipment........................ $ 28,000 $ 28,000 --
From Erzinger............................. 31,000 36,000 --
-------- -------- --------
$ 59,000 $ 64,000 --
======== ======== ========
</TABLE>
Falconite Equipment and M&M Equipment lease buildings from affiliated
companies for which the companies pay monthly rental to the affiliated
companies pursuant to various lease agreements. Falconite Equipment leased its
Erzinger facility from E&F Leasing, a related party, through July 31, 1996 for
approximately $24,000 a month. Effective August 1, 1996, the monthly rental
was reduced to $15,000 retroactive to January 1, 1996, such that no rent
expense was incurred in August or September 1996. The ongoing agreed-upon
monthly rent will be $17,500 per month.
F-128
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Commitments and Contingencies:
Department of Revenue Notifications
During 1995, Falconite Equipment received a notification from the Illinois
Department of Revenue asserting deficiencies in Illinois' use taxes for the
period from July 1989 to May 1995. The asserted deficiencies, which totaled
approximately $520,000 plus interest and penalties, result from Falconite
Equipment's rental of equipment to customers within the State of Illinois and
complexities of how use taxes should be calculated. Falconite Equipment is in
the process of challenging the asserted deficiencies.
During 1996, Falconite Equipment received a notification from the Tennessee
Department of Revenue asserting certain deficiencies in Tennessee sales tax
for the period from 1991 to 1996. The sales tax liability was settled during
1997 for $307,000
Management, after consultation with counsel, believes the ultimate outcome
of the alleged deficiencies will not result in a material impact on Falconite
Equipment's consolidated financial position, results of operations or cash
flows although resolution in any year or quarter could be material to the
results of operations or cash flows for that period. Accrued expenses have
been recorded within the range of management's best estimate of the probable
loss.
Government and Environmental Regulations
Falconite and its operations are subject to various federal, state, and
local laws and regulations governing, among other things, worker safety, air
emissions, water discharge, and the generation, handling, storage,
transportation, treatment, and disposal of hazardous substances and wastes.
Under such laws, an owner or lessee of real estate may be liable for the costs
of removal or remediation of certain hazardous or toxic substances located on,
in or emanating from, such property, as well as related costs of investigation
and property damage. Such laws often impose such liability without regard to
whether the owner or lessee knew of, or was responsible for, the presence of
such hazardous or toxic substances. In addition, Falconite dispenses petroleum
products from above-ground storage tanks located at certain rental locations
that it owns or leases. Falconite maintains an environmental compliance
program that includes the implementation of required technical and operational
activities designed to minimize the potential for leaks and spills, the
maintenance of records, and the regular testing and monitoring of tank
systems. Falconite also uses hazardous materials such as solvents to clean and
maintain its rental equipment fleet. In addition, Falconite generates and
disposes waste such as used motor oil, radiator fluid, and solvents, and may
be liable under various federal, state, and local laws for an environmental
contamination at facilities where its waste is or has been disposed. While
there can be no assurance that the Company's operations have been operated in
compliance with governmental regulations, in the opinion of management, the
ultimate disposition of any matters, that may arise, will not have a material
adverse effect on Falconite's consolidated financial position, results of
operations or cash flows although resolution in any year or quarter could be
material to the results of operations or cash flows for that period.
Legal Proceedings
Falconite 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
Falconite's consolidated financial position, results of operations or cash
flows although resolution in any year or quarter could be material to the
results of operations or cash flows for that period.
Commitments for Capital Expenditures
Falconite has outstanding firm commitments for capital expenditures of
approximately $549,000 at December 31, 1997. The commitments relate to the
purchasing of additional rental equipment and the replacement of older lease
fleet assets.
F-129
<PAGE>
FALCONITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Workers' Compensation
Falconite is fully insured, subject to varying deductibles, for workers'
compensation claims in substantially all states in which it operates. In the
remaining states, Falconite provides for workers' compensation claims through
incurred loss retrospective policies. Management believes any potential
liability for estimated claims, including the effect of any retroactive
premium adjustments, is immaterial.
11. Business and Credit Concentrations:
Falconite engages in the rental of equipment to a variety of industrial and
construction customers which are significantly impacted by the U.S. economy as
well as the regional and local economies. Management believes diversifying
into other states reduces the impact of events or conditions in a particular
region, such as regional slowdowns, adverse weather and other factors. In
addition, Falconite'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 Falconite under its
variable rate credit facilities.
Most of Falconite's customers are located in a four-state area: Kentucky,
Tennessee, Alabama and Missouri. No single customers accounted for more than
1% of Falconite's consolidated sales in 1996 and 1997, and no trade account
receivable from any customer exceeded $289,000 at December 31, 1997. Falconite
estimates an allowance for doubtful accounts based on the creditworthiness of
its customers as well as general economic conditions. Consequently, an adverse
change in those factors could affect management's estimate of its bad debts.
12. Subsequent Events:
In January 1998, the Company purchased the assets of Genequip, Inc., an
equipment rental company with locations in Louisville and Lexington, Kentucky
and Indianapolis, Indiana. The total purchase price was $10,037,000 and was
accounted for using the purchase method.
On April 1, 1998, the Company's owners entered into a definitive and binding
agreement to sell all of the outstanding shares of common stock to National
Equipment Services, Inc. in exchange for $62,000,000 in cash and $3,750,000 of
subordinated promissory notes which bear interest at 8%.
F-130
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of
R&R Rentals, Inc. and the
Board of Directors of
National Equipment Services, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of cash flows and of changes in stockholder's equity present
fairly, in all material respects, the financial position of R&R Rentals, Inc.
at December 31, 1997, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles. 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 audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
September 3, 1998
F-131
<PAGE>
R&R RENTALS, INC.
BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Assets
Cash and cash equivalents........................................ $ 991
Restricted cash.................................................. 500
Trade accounts receivable, net................................... 1,425
Rental equipment, net............................................ 10,740
Property and equipment, net...................................... 260
Prepaids and other assets........................................ 11
Notes receivable--related party.................................. 1,868
-------
Total assets.................................................. $15,795
=======
Liabilities and Stockholder's Equity
Accounts payable................................................. $ 232
Accrued expenses and other liabilities........................... 409
Notes payable.................................................... 14,670
-------
Total liabilities............................................. 15,311
-------
Commitments and contingencies (Note 7)
Common stock, $1.00 par value; 1,000,000 shares authorized;
1,000 shares issued and outstanding............................. 1
Retained earnings................................................ 483
-------
Total stockholder's equity.................................... 484
-------
Total liabilities and stockholder's equity.................... $15,795
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-132
<PAGE>
R&R RENTALS, INC.
STATEMENT OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
-----------------
<S> <C>
Revenues:
Rental revenues............................................. $ 6,811
Other....................................................... 1,556
Revenue from rental equipment sales......................... 212
-------
Total revenues............................................ 8,579
-------
Cost of revenues:
Rental equipment expenses................................... 2,320
Rental equipment depreciation............................... 2,208
Direct operating expenses................................... 1,734
Cost of equipment sales..................................... 128
-------
Total cost of revenues.................................... 6,390
-------
Gross profit.................................................. 2,189
Selling, general and administrative expenses.................. 1,937
Nonrental depreciation........................................ 128
-------
Operating income.............................................. 124
Other income (expense), net................................... 87
Interest income (expense), net................................ (1,171)
-------
Net loss...................................................... $ (960)
=======
Pro Forma Tax Benefit (unaudited):
Loss before income taxes.................................... $ (960)
Pro forma benefit for income taxes.......................... 326
-------
Pro forma net loss.......................................... $ (634)
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-133
<PAGE>
R&R RENTALS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common stock
-------------
Stated Retained
Shares value earnings Total
------ ------ -------- ------
<S> <C> <C> <C> <C>
Balance at December 31, 1996..................... 1 $ 1 $1,443 $1,444
Net loss......................................... (960) (960)
--- --- ------ ------
Balance at December 31, 1997..................... 1 $ 1 $ 483 $ 484
=== === ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-134
<PAGE>
R&R RENTALS, INC.
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
-----------------
<S> <C>
Operating activities:
Net loss.................................................... $ (960)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation............................................... 2,336
Gain on sale of equipment.................................. (91)
Changes in operating assets and liabilities:
Trade accounts receivable................................. (449)
Restricted cash........................................... 500
Notes receivable.......................................... (1,616)
Prepaid and other assets.................................. 17
Accounts payable.......................................... 21
Accrued expenses and other liabilities.................... 137
-------
Net cash provided by operating activities................ (105)
-------
Investing activities:
Purchases of rental equipment............................... (5,110)
Proceeds from sale of rental equipment...................... 212
Purchases of property and equipment......................... (67)
Proceeds from sale of property and equipment................ 26
-------
Net cash used in investing activities.................... (4,939)
-------
Financing activities:
Proceeds from debt.......................................... 5,295
Payments on debt............................................ (1,651)
-------
Net cash provided by financing activities................ 3,644
-------
Net decrease in cash and cash equivalents................... (1,400)
Cash and cash equivalents at beginning of period............ 2,391
-------
Cash and cash equivalents at end of period.................. $ 991
=======
Supplemental noncash flow information:
Cash paid for interest...................................... $ 1,135
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-135
<PAGE>
R&R RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. Organization and Summary of Significant Accounting Policies
Organization
R&R Rentals, Inc. (R&R) is an S Corporation primarily involved in the rental
of cranes and air lift equipment to various customers in the petrochemical and
construction industries throughout the Texas Gulf Coast, with minimal rentals
in the Louisiana Gulf Coast area. R&R's Corporate offices and main rental
yards, located in Mont Belvieu, Texas, is owned by R&R's sole shareholder who
leases this facility to R&R for $3,500 per month.
Rental Revenues
Rental revenues are recognized ratably over the contract period.
Cash and Cash Equivalents
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less when purchased.
Rental Equipment
Rental equipment is recorded at cost. Depreciation for rental equipment
acquired is computed using the straight-line method over a seven-year useful
life.
Ordinary maintenance and repairs costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts. Proceeds
from the disposal and the related net book value of the equipment are
recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of equipment sales in the statement of operations.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
The estimated useful lives for property and equipment is five years for
vehicles and seven years for furniture and fixtures.
Ordinary maintenance and repairs costs are charged to operations as
incurred. When property and 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.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheets for trade accounts
receivable, notes receivable, accounts payable and accrued expenses and other
liabilities approximate fair value due to the immediate to short-term maturity
of these financial instruments. The fair value of debt at December 31, 1997
approximates carrying value as the debt instruments reflect current interest
rates for similar instruments or because the underlying instruments include
variable interest rates that fluctuate with the market rate.
Concentration of Credit Risk
Financial instruments that potentially subject R&R to significant
concentrations of credit risk consist primarily of trade accounts receivable
from petrochemical and construction customers. Concentrations of credit
F-136
<PAGE>
R&R RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
risk with respect to trade accounts receivable are limited due to the large
number of customers and R&R's geographic dispersion. R&R performs credit
evaluations of its customers' financial condition and generally does not
require collateral on accounts receivable. The allowance for doubtful accounts
was $239,000 at December 31, 1997.
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 certain assets and
liabilities, and disclosure of contingent assets and liabilities at the date
of the financial statements and the related reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
Advertising Costs
R&R advertises primarily through trade journals. Advertising costs are
expensed as incurred.
Income Taxes
R&R has elected S corporation status under the U.S. Internal Revenue Code.
Pursuant to this election, R&R's income, deductions and credit are reported on
the income tax returns of its sole shareholder for federal purposes and,
accordingly, no provision for federal income taxes has been made. Pro forma
income taxes reflected on the statement of operations have been calculated at
the federal statutory rate of 34%.
Related Party Transactions
As disclosed in these financial statements, R&R has participated in certain
transactions with related parties.
2. Restricted Cash
Restricted cash of $500,000 at December 31, 1997 represents amounts pledged
to Debis Financial Services in accordance with the terms and provisions of the
Debis Financial Services debt agreement.
3. Rental Equipment
Rental equipment consist of the following at December 31, 1997 (in
thousands):
<TABLE>
<S> <C>
Cranes........................................................... $14,417
Truck cranes..................................................... 2,775
Lifts............................................................ 1,996
-------
19,188
Less--accumulated depreciation................................... 8,448
-------
$10,740
=======
</TABLE>
Rental equipment depreciation expense for the year ended December 31, 1997
is $2,208,000.
4. Property and Equipment
Property and equipment consists of the following at December 31, 1997 (in
thousands):
<TABLE>
<S> <C>
Vehicles and delivery equipment..................................... $685
Leasehold improvements.............................................. 135
Furniture and equipment............................................. 127
----
947
Less--accumulated depreciation...................................... (687)
----
$260
====
</TABLE>
Depreciation on property and equipment for the year ended December 31, 1997
is $128,000.
F-137
<PAGE>
R&R RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Notes receivable--related party
Notes receivable at December 31, 1997 consists of $1,648,000 due from the
Company's sole shareholder and $220 due from certain associates of the
Company's sole shareholder. These demand notes receivable accrue interest at
6%, which approximated Applicable Federal Rates (AFR) at December 31, 1997.
6. Accrued Expenses and Other Liabilities:
Accrued expenses and other liabilities consists of the following at December
31, 1997 (in thousands):
<TABLE>
<S> <C>
Interest payable.................................................... $141
Insurance premiums payable.......................................... 28
Sales taxes payable................................................. 155
Property taxes payable.............................................. 70
Payroll taxes payable............................................... 6
Other liabilities................................................... 9
----
$409
====
</TABLE>
7. Debt
Debt consists of the following at December 31, 1997 (in thousands):
<TABLE>
<S> <C>
Notes payable to Debis Financial Services, secured by rental
equipment, payable through various dates ending July 2004, interest
rate fixed through month 48; at which time the rate is reset to prime
plus 1.75% for the remainder of the note term; requires $500,000 to
be pledged to Debis Financial Services (Note 2)...................... $ 6,267
Notes payable to Federal Financial Credit Inc., secured by rental
equipment, payable through various dates ending December 2003,
interest rates ranging from 0% for the first twelve months to prime
plus 2.50%, reset monthly............................................ 3,369
Note payable to Contractor's Finance Co., secured by rental equipment,
payable April 2002, interest rate ranging from 8.9% to 9.5%.......... 1,191
Floor plan payable to Mitsubishi Acceptance Corp. Financing, secured
by rental equipment, payable through various dates ending October
2002; interest rate fixed at 8.50%................................... 3,341
Note payable to Associates Leasing Inc., secured by rental equipment,
payable May 2000, interest rate of 14.15%............................ 380
Notes payable to Bayshore National Bank, secured by vehicles, payable
through various dates ending October 2000, fixed interest rates
ranging from 7.0% to 9.0% ........................................... 122
-------
Total debt........................................................ 14,670
Less--current maturities.............................................. 2,126
-------
Total long-term debt.............................................. 12,544
=======
</TABLE>
On July 24, 1998, pursuant to the Purchase Agreement, all of the outstanding
debt of the Company was paid off (see Note 11).
Maturities of R&R debt are as follows at December 31, 1997:
<TABLE>
<S> <C>
1998.............................................................. $ 2,126
1999.............................................................. 2,238
2000.............................................................. 2,252
2001.............................................................. 2,372
2002.............................................................. 2,320
Thereafter........................................................ 3,362
-------
$14,670
=======
</TABLE>
F-138
<PAGE>
R&R RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. Commitments and Contingencies
Operating Leases
R&R leases certain rental equipment, facilities and vehicles under operating
leases. Rental expense was $479,000 for the year ended December 31, 1997.
Future minimum rental commitments at December 31, 1997 under noncancelable
operating leases, expiring through 2003, are (in thousands):
<TABLE>
<S> <C>
1998............................................................... $ 675
1999............................................................... 663
2000............................................................... 642
2001............................................................... 620
2002............................................................... 221
Thereafter......................................................... 5
------
$2,826
======
</TABLE>
9. Legal Matters
R&R is party to legal proceedings and potential claims arising in the
ordinary course of its business. Management believes that the ultimate
resolution of these matters will have no material adverse effect on R&R's
financial position, results of operations or cash flows.
10. Subsequent Event
On June 30, 1998, R&R's sole shareholder sold all of the outstanding common
stock to NES Acquisition Corp., a wholly-owned subsidiary of National
Equipment Services, Inc. for $27,600,000 (subject to a customary purchase
price adjustment mechanism). The terms of the stock sale and purchase
agreement required $14,073,000 of the purchase price to be used at closing to
discharge fully the outstanding balance of R&R's indebtedness secured by the
assets acquired in the stock purchase.
F-139
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders' of
Shaughnessy Crane Service, Inc.
Boston, Massachusetts
We have audited the accompanying balance sheets of Shaughnessy Crane
Service, Inc., as of December 31, 1997 and 1996 and the related statements of
income, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1997. 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 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 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 Shaughnessy Crane Service,
Inc. as of December 31, 1997 and 1996, and the results of its operations and
its cash flows for each of the years in the three-year period ended December
31, 1997 in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, Shaughnessy Crane
Service, Inc. received an offer by an unrelated company to purchase 100% of
the issued and outstanding shares of Shaughnessy Crane Service, Inc.
/s/ Wolf & Company, P.C.
Boston, Massachusetts
July 17, 1998
F-140
<PAGE>
SHAUGHNESSY CRANE SERVICE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS December 31,
------ -----------------------
1997 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 79,007 $ 703,050
Accounts receivable, net of allowance for doubtful
accounts of $361,858 and $457,000.................. 6,648,627 6,104,464
Accounts receivable, affiliates (Note 3)............ 691,647 840,369
Note receivable, affiliate--current portion (Note
3)................................................. 15,198 14,034
Due from officers, stockholders and employees, net
(Note 3)........................................... 83,942 53,319
Refundable income taxes............................. 29,267 --
Prepaid expenses and other current assets........... 250,647 82,409
----------- -----------
Total current assets.............................. 7,798,335 7,797,645
----------- -----------
Property and equipment, net (Note 5).................. 26,597,863 24,282,883
----------- -----------
Other assets:
Cash surrender value of officers' life insurance,
net of policy loans of $550,328 and $382,320....... 798,487 578,661
Investment in affiliate (Note 3).................... 602,993 505,793
Note receivable, affiliate--net of current portion
(Note 3)........................................... 23,715 38,913
Other assets........................................ 276,969 540,855
----------- -----------
Total other assets................................ 1,702,164 1,664,222
----------- -----------
$36,098,362 $33,744,750
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Note payable, bank (Note 6)......................... $ -- $ 1,500,000
Note payable, other (Note 7)........................ 135,580 --
Accounts payable.................................... 512,802 193,999
Accounts payable, affiliates (Note 3)............... 908,095 16,933
Accrued expenses and other current liabilities...... 630,548 826,069
Income taxes payable................................ -- 85,028
Deferred income taxes (Note 8)...................... 186,000 187,000
----------- -----------
Total current liabilities......................... 2,373,025 2,809,029
Deferred income taxes, noncurrent (Note 8)............ 464,000 413,000
----------- -----------
Total liabilities................................. 2,837,025 3,222,029
----------- -----------
Commitments and contingencies (Notes 2, 8 and 10)
Stockholders' equity (Note 8):
Common stock, no par value; 88,000 shares
authorized; 52,000 shares issued in 1997 (88,000
shares issued in 1996)............................. 12,700 12,700
Retained earnings................................... 33,248,637 39,418,244
----------- -----------
33,261,337 39,430,944
Less cost of 36,000 shares reacquired for the
treasury............................................. -- (8,908,223)
----------- -----------
Total stockholders' equity........................ 33,261,337 30,522,721
----------- -----------
$36,098,362 $33,744,750
=========== ===========
</TABLE>
See independent auditors' report and accompanying notes to financial
statements.
F-141
<PAGE>
SHAUGHNESSY CRANE SERVICE, INC.
STATEMENTS OF INCOME
(Note 3)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues................................ $31,261,394 $26,924,389 $26,814,717
Cost of revenues........................ 16,957,003 13,361,525 15,042,337
----------- ----------- -----------
Gross profit.......................... 14,304,391 13,562,864 11,772,380
General and administrative expenses..... 6,387,707 5,718,840 10,217,568
----------- ----------- -----------
Income from operations................ 7,916,684 7,844,024 1,554,812
Interest and dividend income, net....... 84,687 100,773 108,833
Interest expense........................ (125,045) (372,642) --
Other income (expense), net............. 202,265 391,380 (24,620)
----------- ----------- -----------
Income before provision for state
income taxes......................... 8,078,591 7,963,535 1,639,025
Provision for state income taxes (Note
8)..................................... 341,975 356,000 129,000
----------- ----------- -----------
Net income.......................... $ 7,736,616 $ 7,607,535 $ 1,510,025
=========== =========== ===========
</TABLE>
See independent auditors' report and accompanying notes to financial
statements.
F-142
<PAGE>
SHAUGHNESSY CRANE SERVICE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Net
Unrealized
Loss on
Securities Total
Common Retained Available Treasury Stockholders'
Stock Earnings for Sale Stock Equity
------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1994................... $12,700 $32,008,684 $(91,488) $ -- $31,929,896
Net income.............. -- 1,510,025 -- -- 1,510,025
Dividend distributions
paid for taxes......... -- (1,500,000) -- -- (1,500,000)
Change in net unrealized
loss on securities
available for sale..... -- -- 91,488 -- 91,488
Purchase of 36,000
shares of treasury
stock.................. -- -- -- (8,908,223) (8,908,223)
------- ----------- -------- ----------- -----------
Balance at December 31,
1995................... 12,700 32,018,709 -- (8,908,223) 23,123,186
Net income.............. -- 7,607,535 -- 7,607,535
Dividend distributions
paid for taxes......... -- (208,000) -- -- (208,000)
------- ----------- -------- ----------- -----------
Balance at December 31,
1996................... 12,700 39,418,244 -- (8,908,223) 30,522,721
Net income.............. -- 7,736,616 -- -- 7,736,616
Cancellation of 36,000
shares held in the
treasury and
restoration to
authorized and unissued
shares................. -- (8,908,223) -- 8,908,223 --
Dividend distributions
paid for taxes......... -- (4,998,000) -- -- (4,998,000)
------- ----------- -------- ----------- -----------
Balance at December 31,
1997................... $12,700 $33,248,637 $ -- $ -- $33,261,337
======= =========== ======== =========== ===========
</TABLE>
See independent auditors' report and accompanying notes to financial
statements.
F-143
<PAGE>
SHAUGHNESSY CRANE SERVICE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1997 1996 1995
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................... $ 7,736,616 $ 7,607,535 $ 1,510,025
Adjustments to reconcile net income
to net cash provided by operating
activities:
Equity in (income) loss of
affiliate......................... (97,200) 6,955 (67,202)
Depreciation....................... 4,109,118 3,414,915 2,739,866
Accretion of investment securities,
net............................... -- -- (8,715)
Amortization of intangible asset... 13,333 13,333 3,889
Gain on sale of property and
equipment......................... (91,028) (470,001) (40,337)
Gain on sale of investment
securities........................ -- -- (18,665)
(Increase) decrease in cash
surrender value of officers' life
insurance......................... (387,834) (254,403) 47,842
Deferred income taxes.............. 50,000 1,000 70,000
Decrease (increase) in operating
assets:
Accounts receivable.............. (544,163) 1,097,701 (1,076,281)
Accounts receivable, affiliates.. 148,722 (285,022) 1,130,050
Due from officers, stockholders
and employees, net.............. (30,623) (1,070) (676,496)
Investment in and advances to
joint venture................... -- (5,944) 40,944
Refundable income taxes.......... (29,267) 98,494 (85,215)
Prepaid expenses and other
current assets.................. (168,238) 190,546 (37,093)
Other assets..................... 250,553 (7,025) (91,299)
Increase (decrease) in operating
liabilities:
Accounts payable................. 318,803 (41,898) (28,743)
Accounts payable, affiliates..... 891,162 3,031 (3,243)
Accrued expenses and other
current liabilities............. (195,521) (192,120) (213,732)
Income taxes payable............. (85,028) 85,028 --
----------- ------------ -----------
Net cash provided by operating
activities..................... 11,889,405 11,261,055 3,195,595
----------- ------------ -----------
Cash flows from investing activities:
Payments to former stockholders...... -- (9,255,464) --
Purchase of investment securities.... -- -- (140,575)
Proceeds from sales and maturities of
investment securities............... -- -- 3,570,642
Proceeds from sale of property and
equipment........................... 1,357,317 2,724,707 1,123,658
Purchases of property and equipment.. (7,690,387) (7,189,111) (7,498,299)
Issuance of note receivable,
affiliate........................... -- -- (73,000)
Principal payments received on note
receivable, affiliate............... 14,034 12,958 7,095
Issuance of notes receivable......... -- -- (75,000)
Principal payments received on notes
receivable.......................... -- 65,000 10,000
Investment in affiliate.............. -- -- (212,018)
Increase in borrowings against cash
surrender value of life insurance... 168,008 165,640 16,600
----------- ------------ -----------
Net cash used by investing
activities..................... (6,151,028) (13,476,270) (3,270,897)
----------- ------------ -----------
Cash flows from financing activities:
Proceeds from note payable, bank..... -- 7,500,000 --
Principal payment on note payable,
bank................................ (1,500,000) (6,000,000) --
Dividend distributions paid for
taxes............................... (4,998,000) (208,000) (1,500,000)
Proceeds from note payable, other.... 664,990 -- --
Principal payments on note payable,
other............................... (529,410) -- --
Acquisition of treasury stock........ -- -- (100,000)
----------- ------------ -----------
Net cash provided (used) by financing
activities........................... (6,362,420) 1,292,000 (1,600,000)
----------- ------------ -----------
Net decrease in cash and cash
equivalents.......................... (624,043) (923,215) (1,675,302)
Cash and cash equivalents at beginning
of year.............................. 703,050 1,626,265 3,301,567
----------- ------------ -----------
Cash and cash equivalents at end of
period............................... $ 79,007 $ 703,050 $ 1,626,265
=========== ============ ===========
Supplemental cash flow information:
State income taxes paid, net of
refunds............................. $ 406,269 $ 171,479 $ 144,215
Interest paid........................ 107,725 358,431 --
</TABLE>
See independent auditors' report and accompanying notes to financial
statements.
F-144
<PAGE>
SHAUGHNESSY CRANE SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996 and 1995
1. Summary of Significant Accounting Policies
Nature of business
Shaughnessy Crane Service, Inc. ("Shaughnessy" or the "Company") is engaged
in the rental of hydraulic cranes and aerial lifts, millwrighting and
warehousing activities for their customers which are primarily located in the
northeast region of the United States. These business activities are conducted
through separate divisions of the Company, the results of which are combined
in the financial statements. All intracompany transactions for the combined
divisions have been eliminated. The Company also has entered into transactions
with affiliated companies, the results of which are included in these
financial statements. (See Note 3.)
Concentrations of credit risk
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of cash and cash equivalents
and trade receivables. The Company's cash and cash equivalents generally
exceed insurance limitations and are placed in high quality financial services
organizations. The Company's concentration of credit risk with respect to
trade receivables is limited due to the credit history and geographic
diversity of its customer base. One customer comprised 12% and 11% of trade
accounts receivable at December 31, 1997 and 1996, respectively.
Use of estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
the balance sheet date and amounts of revenues and expenses recorded during
the reporting period. Actual results could differ from those estimates and it
is at least reasonably possible that a change in estimates will occur in the
near term. Such estimates primarily relate to the allowance for doubtful
accounts, the depreciable lives of property and equipment, deferred income
taxes and accrued expenses.
Revenue recognition
The Company recognizes revenues from its rental contracts, its principal
business, ratably over the term of the agreement.
Cash equivalents
Cash equivalents amounting to approximately $69,000 and $974,000 at December
31, 1997 and 1996, respectively, consist of Cayman and Nassau Eurodollars
purchased with maturities of ninety days or less. These investments are not
held at federally insured institutions. Cash equivalents are stated at cost
plus accrued interest.
Property and equipment
Property and equipment is stated at cost less accumulated depreciation. For
financial statement purposes, depreciation expense is provided over the
estimated useful lives of the assets using straight-line and accelerated
methods. A summary of the estimated useful lives follows:
<TABLE>
<CAPTION>
Classification Estimated Useful Lives
-------------- ----------------------
<S> <C>
Buildings and improvements......................... 31.5 years
Rental equipment................................... 3 to 10 years
Motor trucks....................................... 4 to 10 years
Furniture and fixtures............................. 10 years
</TABLE>
See independent auditors' report.
F-145
<PAGE>
SHAUGHNESSY CRANE SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
See independent auditors' report.
Expenditures for maintenance, repairs and minor renewals are charged to
expense as incurred. Significant improvements and major renewals are
capitalized.
For income tax purposes, costs of property and equipment are depreciated
utilizing the accelerated cost recovery system and the modified accelerated
cost recovery system.
Investments in affiliate and joint venture
The Company accounts for its investments in affiliate and joint venture
under the equity method of accounting reflecting as other income (expense) in
its financial statements its pro rata share of earnings (losses) of the
affiliate or joint venture.
Income taxes
The Company, with the consent of its stockholders, elected to have its
earnings taxed in accordance with Subchapter S of Chapter 1 of the Internal
Revenue Code of 1986, as amended. Accordingly, for federal income tax
purposes, the Company's earnings are taxed directly to its stockholders and no
provision for federal income taxes is required. The Company's earnings in
Massachusetts are also taxed directly to its stockholders at the state's
individual income tax rate and assessed to the Company at the Massachusetts
Subchapter S income tax rate.
The provision for state income taxes is based on the elements of income and
expense as provided in the income statement and also include in the current
period any changes in tax rates from those previously used in determining
deferred tax assets and liabilities.
Deferred state income taxes are provided on temporary differences in the
recording of revenues and expenses in different periods for income tax and
financial statement reporting purposes. The temporary differences result
primarily from using accelerated methods of depreciation on certain fixed
assets for income tax purposes and the straight-line method for financial
reporting purposes and the use of the cash basis of reporting for two of the
Company's divisions for income tax purposes.
2. Subsequent Event
The Company received an offer from an unrelated third party to purchase 100%
of the issued and outstanding shares of the Company. The terms of the proposed
transaction are subject to further negotiations.
If the Company is sold and an automatic termination of the S Corporation
status occurs, the Company may be required to reinstate deferred income taxes
of approximately $6.3 million (see Note 8). Additionally, under the terms of
the offer, the Company would be required to distribute certain assets,
aggregating approximately $5.5 million, prior to the closing of the sale.
Consequently, the Company's net worth would be reduced by both of these
transactions.
3. Related Party Transactions
Shaughnessy and Ahern Company, Inc. and Power Lifts, Inc.
The Company has a 22% ownership interest in Shaughnessy and Ahern Company,
Inc. and is affiliated with Power Lifts, Inc. through common ownership and
management. The statement of income includes approximately $1,731,000,
$1,378,000 and $1,238,000 of revenues and $273,000, $213,000 and $2,552,000 of
purchases from the affiliates for the years ended December 31, 1997, 1996 and
1995, respectively. In addition, the Company
F-146
<PAGE>
SHAUGHNESSY CRANE SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
See independent auditors' report.
receives an expense reimbursement in the form of management fees from the
affiliates. The management fees amounted to approximately $1,167,000,
$1,090,000 and $871,000 for the years ended December 31, 1997, 1996 and 1995,
respectively, and have been reported net against general and administrative
expenses in the Company's statement of income.
The Company's investment in Shaughnessy and Ahern Company, Inc. consists of
the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year.................. $505,793 $512,748 $445,546
Equity in earnings (loss)--current year....... 97,200 (6,955) 67,202
-------- -------- --------
Balance at end of year........................ $602,993 $505,793 $512,748
======== ======== ========
</TABLE>
Boston Crane & Rigging, Inc.
The Company also engages in transactions with Boston Crane & Rigging, Inc.
which is owned by family members of an officer/stockholder. The statement of
income includes revenues of approximately $198,000, $436,000 and $285,000 and
sub-contract costs of $72,000, $49,000 and $126,000 with this affiliate for
the years ended December 31, 1997, 1996 and 1995, respectively. In addition,
the Company earned rental income under a tenant-at-will arrangement with
Boston Crane & Rigging, Inc. amounting to $20,000, $36,000 and $36,000 for the
years ended December 31, 1997, 1996 and 1995, respectively.
In connection with the acquisition of equipment, Boston Crane & Rigging,
Inc. borrowed $73,000 on June 1, 1995 from the Company. The note requires
monthly payments of $1,480 including principal and interest at 8% through May
31, 2000.
Accounts receivable and accounts payable, affiliates
Accounts receivable, affiliates and accounts payable, affiliates consists of
the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Accounts
Receivable Accounts Payable
----------------- ----------------
Affiliate 1997 1996 1997 1996
--------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
Shaughnessy and Ahern Company, Inc..... $412,492 $485,458 $863,503 $10,305
Boston Crane & Rigging, Inc............ 279,155 354,911 44,592 6,628
-------- -------- -------- -------
Total.............................. $691,647 $840,369 $908,095 $16,933
======== ======== ======== =======
</TABLE>
Due from officers, stockholders and employees, net
Amounts due from and to officers, stockholders and employees generally
require interest at the Applicable Federal Rate (5.88%, 5.74% and 6.38% for
the years ended December 31, 1997, 1996 and 1995, respectively). Interest
income amounted to $32,016, $20,418 and $25,000, and interest expense amounted
to $17,320, $14,211 and $9,530 on these related party borrowings for the years
ended December 31, 1997, 1996 and 1995, respectively.
4. Investment in and Advances to Joint Venture
In 1992, the Company entered into a joint venture agreement with an
unrelated company to bid and perform construction work as defined in the
agreement. The Company shares 50% of the profits and losses derived from
F-147
<PAGE>
SHAUGHNESSY CRANE SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
See independent auditors' report.
the venture. Reported losses on the joint venture of $84,056 and $165,944 are
included in other income (expense) in the Company's statement of income during
the years ended December 31, 1996 and 1995, respectively.
5. Property and Equipment
At December 31, 1997 and 1996, property and equipment consists of the
following:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Land, buildings and improvements.............. $ 4,320,664 $ 4,320,664
Rental equipment.............................. 41,900,988 37,342,655
Motor trucks.................................. 2,852,729 2,525,550
Furniture and fixtures........................ 42,732 42,732
------------ ------------
49,117,113 44,231,601
Less accumulated depreciation................. (22,519,250) (19,948,718)
------------ ------------
Property and equipment, net................... $ 26,597,863 $ 24,282,883
============ ============
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1996 and 1995
amounted to $4,109,118, $3,414,915 and $2,739,866, respectively.
6. Purchase Agreement and Note Payable, Bank
On August 31, 1995, the Company entered into a purchase agreement (the
"Agreement") with former stockholders and trusts controlled by certain former
stockholders. Pursuant to the terms of this Agreement, the Company acquired
the former stockholders' legal and beneficial interests in the Company, its
affiliate, Shaughnessy and Ahern Company, Inc., and in certain real estate
used for operations by the Company. The Company also entered into non-
competition agreements with certain of the former stockholders.
In connection with the purchase agreement, a liability to former
stockholders was incurred as follows in 1995 for the following: treasury
stock--$8,908,223, investment in affiliate--$445,546, purchase of real
estate--$800,000, intangible asset and other--$200,003, Accrued interest--
$154,210, and due from stockholders--$(740,500) resulting in a net liability
of $9,767,482, of which $512,018 was paid during 1995.
In January, 1996 the Company paid the remaining amount due to the former
stockholders with the assistance of a $7,500,000 term promissory note with a
bank. The note was secured by substantially all the Company's assets and
guaranteed by certain officer/stockholders. Interest on the note was at the
bank's prime rate (8.25% at December 31, 1996), and the terms of the note
required monthly principal payments of $100,000 beginning in February, 1996
with a scheduled maturity of May 12, 2002. The Company made principal paydowns
on the note of $6,000,000 in 1996 and paid the remaining principal balance of
$1,500,000 during 1997. Interest expense related to the bank promissory note
amounted to $83,103 and $332,130 during the years ended December 31, 1997 and
1996, respectively.
Also, in connection with this Agreement, the Company paid certain of the
former stockholders $4,358,157 representing primarily past compensation as
well as severance and other payments related to the Agreement. These expenses
are included in general and administrative expenses during the year ended
December 31, 1995.
7. Note Payable, Other
During 1997, the Company financed its insurance premiums through a short
term note payable in the amount of $664,990. The note bears interest at 5.81%
and requires monthly payments of principal and interest in the
F-148
<PAGE>
SHAUGHNESSY CRANE SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
See independent auditors' report.
amount of $68,283. Interest expense related to this note payable amounted to
$24,622 during the year ended December 31, 1997.
8. Income Taxes
As described in Note 1, the Company elected to be taxed in accordance with
Subchapter S of the Internal Revenue Code. Accordingly, for both Federal and
state income tax purposes, the Company's earnings are taxed directly to its
stockholders. During 1997, 1996 and 1995 the Company distributed $4,998,000,
$208,000 and $1,500,000, respectively, to its stockholders to cover the taxes
assessed to the stockholders as a result of the Company's income in 1997, 1996
and 1995 that was allocated to them.
The Company's earnings in Massachusetts are also assessed to the Company at
the Massachusetts Subchapter S income tax rate. The provision for state income
taxes for the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Current........................................ $291,975 $355,000 $ 59,000
Deferred....................................... 50,000 1,000 70,000
-------- -------- --------
$341,975 $356,000 $129,000
======== ======== ========
</TABLE>
In 1987 when the Company elected to have its earnings taxed in accordance
with Subchapter S of the Internal Revenue Code, deferred income taxes were
reversed and credited to retained earnings. If the Company lost or revoked its
S Corporation status, deferred federal income taxes and additional deferred
state income taxes would be reinstated and charged against income at that time
for financial reporting purposes. (See Note 2).
9. Pension Plans
Defined benefit plans
The Company participates in various multi-employer union administered
defined benefit pension plans that cover the Company's union employees. Total
contributions by the Company to such plans amounted to $500,707, $373,071 and
$504,399 during 1997, 1996 and 1995, respectively.
The Employee Retirement Income Security Act of 1974, as amended by the
Multi-Employers Pension Plan Amendment Act of 1980, imposes certain
liabilities upon employers who are contributors to multi-employer plans in the
event of such employer's withdrawal from such a plan or upon termination of
such a plan. The share of the plan's unfunded vested liabilities allocable to
the Company, and for which it may be contingently liable, is not ascertainable
at this time.
Defined contribution plan
The Company also has a defined contribution pension plan that covers all
full time non-union employees meeting certain eligibility requirements.
Contributions are based on a specified percentage of qualifying compensation
as determined by the Board of Directors, not to exceed limits established
under the Internal Revenue Code (15% for 1997 and 1996 and 12% for 1995).
Pension expense amounted to $399,348, $363,968 and $277,392 for the years
ended December 31, 1997, 1996 and 1995, respectively.
401(k) plan
Effective September 1, 1997, the Company adopted a 401(k) Plan whereby
employees reaching the age of 21 and having completed at least 11 months of
service become eligible to participate in the Plan. Employees
F-149
<PAGE>
SHAUGHNESSY CRANE SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS--(Concluded)
may defer a percentage of their compensation subject to certain limits based
on federal tax laws. The Company matches a specified percentage of employee
deferrals as determined by the Board of Directors (3% for 1997). The Company's
expense related to matching contributions under the 401(k) Plan amounted to
$28,656 for the year ended December 31, 1997.
10. Commitments and Contingencies
Lease commitments
The Company has long-term leases for business premises that require minimum
future rental payments of $12,168 through February, 1998 at which time they
will be a tenant-at-will. Rent expense under these leases amounted to
$148,851, $153,176 and $22,500 for the years ended December 31, 1997, 1996 and
1995, respectively.
The Company also leases property for its own operations from an unrelated
organization under a tenant-at-will agreement. Rent expense under such
arrangements amounted to $3,253, $3,078 and $95,205, for the years ended
December 31, 1997, 1996 and 1995, respectively.
Other contingencies
The Company is one of the defendants in actions filed by the beneficial
owners of a minority interest in an affiliate. The claims assert, among other
things, that the defendants usurped opportunities of the affiliate. It is not
clear what relief is sought at this time. The Company intends to vigorously
contest these claims and believe they have meritorious defenses.
See independent auditors' report.
F-150
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
National Equipment Services, Inc. (the "Company") was founded in June 1996 to
acquire and integrate equipment rental companies. In 1997, the Company acquired
six businesses in separate transactions and sold $100.0 million of 10% Senior
Subordinated Notes due 2004, Series B (the "Series B Notes Offering"). In 1998,
the Company acquired twelve businesses in separate transactions and consummated
the Company's initial public stock offering (the "Initial Stock Offering"). In
December 1998 and January 1999, the Company sold $175.0 million of 10% Senior
Subordinated Notes due 2004, Series C (the "Outstanding Notes"). While the
Acquired Businesses (Acquired Businesses herein defined to mean all of the
eighteen acquired businesses) were acquired at various dates during 1997 and
1998, the following Unaudited Pro Forma Financial Statements are presented as
if all such acquisitions and the related financings, the Initial Stock
Offering, the Series B Notes Offering, the Outstanding Notes and certain
borrowings under the Credit Facility had occurred on the first day of the
related period.
The following Unaudited Pro Forma Financial Statements have been derived from
Company (the Company herein defined to include the Acquired Businesses)
prepared financial information (and, when applicable, includes adjustments to
conform fiscal periods to calendar periods), the audited and unaudited
Financial Statements and notes thereto of certain of the Acquired Businesses
for certain periods and the audited and unaudited Financial Statements and
notes thereto of the Company since inception, which Financial Statements appear
elsewhere in this Prospectus.
The Unaudited Pro Forma Financial Statements have been prepared for
comparative purposes only and do not purport to be indicative of the results
which would have been achieved had the purchase of the Acquired Businesses and
the related financings been consummated, the Initial Stock Offering been
consummated, the Series B Notes Offering been consummated, the Outstanding
Notes been consummated and certain borrowings under the Credit Facility been
made as of the assumed dates, nor are the results indicative of the Company's
future results. The Unaudited Pro Forma Financial Statements should be read in
conjunction with "Selected Historical Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Financial Statements and notes thereto of the Company since inception and
certain of the Acquired Businesses for certain periods included elsewhere
herein.
F-151
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
The Lone Work
Company (a) Aerial (b) Star (b) BAT (b) Sprintank (b) Equipco (b) Safe (b) Genpower (b)
----------- ---------- -------- ------- ------------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental revenue.. $26,398 $ 406 $1,455 $1,457 $5,715 $2,180 $6,385 $7,110
Rental equipment
sales........... 4,186 51 188 995 -- 332 891 161
New equipment
sales and other. 10,704 237 -- 1,350 327 877 88 4,830
------- ----- ------ ------ ------ ------ ------ ------
Total revenues 41,288 694 1,643 3,802 6,042 3,389 7,364 12,101
------- ----- ------ ------ ------ ------ ------ ------
Rental equipment
expense:
Rental equipment
depreciation.... 5,009 47 242 707 1,109 710 835 560
Cost of rental
equipment sales. 2,935 34 119 352 -- 97 588 111
Cost of new
equipment sales 4,872 180 -- 1,010 -- 570 -- 3,108
Direct operating
expenses........ 12,899 277 1,010 462 643 641 2,517 2,863
------- ----- ------ ------ ------ ------ ------ ------
Cost of
revenues........ 25,715 538 1,371 2,531 1,752 2,018 3,940 6,642
------- ----- ------ ------ ------ ------ ------ ------
Gross profit.... 15,573 156 272 1,271 4,290 1,371 3,424 5,459
------- ----- ------ ------ ------ ------ ------ ------
Selling, general
and admin.
expenses........ 7,910 249 475 489 2,028 684 1,237 2,797
Non-rental
depreciation.... 1,476 8 26 25 83 33 80 37
------- ----- ------ ------ ------ ------ ------ ------
Operating
income.......... 6,187 (101) (229) 757 2,179 654 2,107 2,625
------- ----- ------ ------ ------ ------ ------ ------
Other income
(expense), net.. 72 -- 139 (1) (10) 20 8 13
Interest income
(expense), net.. (4,336) (16) (164) (46) (553) (73) (22) (103)
------- ----- ------ ------ ------ ------ ------ ------
Income before
income taxes.... 1,923 (117) (254) 710 1,616 601 2,093 2,535
Income taxes
(benefit)....... 818 (6) -- -- -- 240 -- 859
------- ----- ------ ------ ------ ------ ------ ------
Net income
(loss).......... $ 1,105 $(111) $ (254) $ 710 $1,616 $ 361 $2,093 $1,676
======= ===== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1997
--------------------------------------------------------------------------------------------------------
Grand Albany R&R
Eagle (b) CEC (b) Dragon (b) Hi-Reach (b) Ladder (b) Falconite (b) Rentals (b) Shaughnessy (b) TSM (b)
--------- -------- ---------- ------------ ---------- ------------- ----------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental revenue.. $1,067 $12,107 $8,907 $5,568 $18,410 $44,911 $6,811 $18,681 $5,629
Rental equipment
sales........... -- 960 -- 953 1,885 9,222 212 830 1,596
New equipment
sales and other. 612 2,685 1,657 1,108 13,909 9,513 1,556 11,751 130
--------- -------- ---------- ------------ ---------- ------------- ----------- --------------- --------
Total revenues 1,679 15,752 10,564 7,629 34,204 63,646 8,579 31,262 7,355
--------- -------- ---------- ------------ ---------- ------------- ----------- --------------- --------
Rental equipment
expense:
Rental equipment
depreciation.... 80 2,742 844 885 3,445 11,114 2,208 3,675 838
Cost of rental
equipment sales. -- 339 -- 636 721 7,582 128 419 902
Cost of new
equipment sales 23 391 -- 334 7,725 4,103 -- 647 --
Direct operating
expenses........ 776 6,925 5,222 3,125 10,738 11,395 4,054 12,084 3,217
--------- -------- ---------- ------------ ---------- ------------- ----------- --------------- --------
Cost of
revenues........ 879 10,397 6,066 4,980 22,629 34,194 6,390 16,825 4,957
--------- -------- ---------- ------------ ---------- ------------- ----------- --------------- --------
Gross profit.... 800 5,355 4,498 2,649 11,575 29,452 2,189 14,437 2,398
--------- -------- ---------- ------------ ---------- ------------- ----------- --------------- --------
Selling, general
and admin.
expenses........ 327 3,241 2,166 1,534 7,796 15,065 1,937 6,070 981
Non-rental
depreciation.... -- 250 59 107 640 2,428 128 435 11
--------- -------- ---------- ------------ ---------- ------------- ----------- --------------- --------
Operating
income.......... 473 1,864 2,273 1,008 3,139 11,959 124 7,932 1,406
--------- -------- ---------- ------------ ---------- ------------- ----------- --------------- --------
Other income
(expense), net.. 8 -- (670) 14 117 (815) 87 188 (1)
Interest income
(expense), net.. (33) (302) (675) (462) (846) (7,327) (1,171) (41) (201)
--------- -------- ---------- ------------ ---------- ------------- ----------- --------------- --------
Income before
income taxes.... 448 1,562 928 560 2,410 3,817 (960) 8,079 1,204
Income taxes
(benefit)....... -- 8 212 -- -- 1,859 -- 342 --
--------- -------- ---------- ------------ ---------- ------------- ----------- --------------- --------
Net income
(loss).......... $ 448 $ 1,554 $ 716 $ 560 $ 2,410 $ 1,958 $ (960) $ 7,737 $1,204
========= ======== ========== ============ ========== ============= =========== =============== ========
</TABLE>
<TABLE>
----------------------------------
Pro Forma
Adjust-
Rebel (b) ments (c) Combined
--------- ------------- ---------
<S> <C> <C> <C>
Revenues:
Rental revenue.. $3,072 $ 5,144 $181,413
Rental equipment
sales........... -- 2,910 25,372
New equipment
sales and other. 223 2,181 63,738
--------- ------------- ---------
Total revenues 3,295 10,235 270,523
--------- ------------- ---------
Rental equipment
expense:
Rental equipment
depreciation.... 497 1,341 (d) 36,888
Cost of rental
equipment sales. -- 2,561 17,524
Cost of new
equipment sales -- 1,580 24,543
Direct operating
expenses........ 1,924 (37)(e) 80,735
--------- ------------- ---------
Cost of
revenues........ 2,421 5,445 159,690
--------- ------------- ---------
Gross profit.... 874 4,790 110,833
--------- ------------- ---------
Selling, general
and admin.
expenses........ 362 (5,181)(f) 50,167
Non-rental
depreciation.... 47 6,556 (g) 12,429
--------- ------------- ---------
Operating
income.......... 465 3,415 48,237
--------- ------------- ---------
Other income
(expense), net.. 4 1,274 (h) 447
Interest income
(expense), net.. (525) (27,620)(i) (44,516)
--------- ------------- ---------
Income before
income taxes.... (56) (22,931) 4,168
Income taxes
(benefit)....... -- (2,644)(j) 1,688
--------- ------------- ---------
Net income
(loss).......... $ (56) $(20,287) $ 2,480
========= ============= =========
</TABLE>
(See Notes to Unaudited Pro Forma Financial Statements)
F-152
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
The Lone Work
Company(a) Aerial(b) Star(b) BAT(b) Sprintank(b) Equipco(b) Safe(b) Genpower(b)
---------- --------- ------- ------ ------------ ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental
revenue......... $16,168 $ 406 $1,455 $1,457 $5,715 $2,180 $4,045 $5,232
Rental
equipment
sales........... 2,111 51 188 995 -- 332 520 121
New equipment
sales and
other........... 7,296 237 -- 1,350 327 877 51 3,816
------- ----- ------ ------ ------ ------ ------ ------
Total revenues.. 25,575 694 1,643 3,802 6,042 3,389 4,616 9,169
------- ----- ------ ------ ------ ------ ------ ------
Rental equipment
expense:
Rental
equipment
depreciation.... 3,143 47 242 707 1,110 710 525 393
Cost of rental
equipment
sales........... 1,416 34 119 352 -- 97 343 83
Cost of new
equipment
sales........... 4,116 180 -- 1,010 -- 570 -- 2,441
Direct
operating
expenses........ 7,315 277 1,010 462 643 641 1,439 1,984
------- ----- ------ ------ ------ ------ ------ ------
Cost of
revenues........ 15,990 538 1,371 2,531 1,753 2,018 2,307 4,901
------- ----- ------ ------ ------ ------ ------ ------
Gross profit.... 9,585 156 272 1,271 4,289 1,371 2,309 4,268
------- ----- ------ ------ ------ ------ ------ ------
Selling, general
and admin.
expenses........ 5,039 249 475 489 2,028 684 879 1,897
Non-rental
depreciation.... 758 8 26 25 83 33 47 26
------- ----- ------ ------ ------ ------ ------ ------
Operating
income.......... 3,788 (101) (229) 757 2,178 654 1,383 2,345
------- ----- ------ ------ ------ ------ ------ ------
Other income
(expense), net... (19) -- 139 (1) (10) 19 29 1
Interest income
(expense), net.. (2,439) (16) (164) (46) (553) (73) (17) (67)
------- ----- ------ ------ ------ ------ ------ ------
Income before
income taxes.... 1,330 (117) (254) 710 1,615 600 1,395 2,279
Income taxes
(benefit)....... 519 (6) -- -- -- 240 -- 762
------- ----- ------ ------ ------ ------ ------ ------
Net income
(loss).......... $ 811 $(111) $ (254) $ 710 $1,615 $ 360 $1,395 $1,517
======= ===== ====== ====== ====== ====== ====== ======
<CAPTION>
Nine Months Ended September 30, 1997
------------------------------------------------------------------------------------------------------
Grand Hi- Albany R&R
Eagle(b) CEC(b) Dragon(b) Reach(b) Ladder(b) Falconite(b) Rentals(b) Shaughnesay(b) TSM(b) Rebel(b)
-------- ------- --------- --------- --------- ------------ ---------- -------------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental
revenue......... $ 830 $8,740 $6,285 $3,942 $12,927 $32,159 $4,952 $13,318 $3,862 $2,305
Rental
equipment
sales........... -- 746 -- 617 1,345 7,720 -- 609 1,076 --
New equipment
sales and
other........... 435 2,018 1,148 774 10,239 6,911 990 7,786 61 167
-------- ------- --------- --------- --------- ------------ ---------- -------------- ------- --------
Total revenues.. 1,265 11,504 7,433 5,333 24,511 46,790 5,942 21,713 4,999 2,472
-------- ------- --------- --------- --------- ------------ ---------- -------------- ------- --------
Rental equipment
expense:
Rental
equipment
depreciation.... 60 2,022 587 672 2,568 8,011 1,619 2,724 587 373
Cost of rental
equipment
sales........... -- 264 -- 387 483 6,299 -- 289 411 --
Cost of new
equipment
sales........... 17 286 -- 202 5,478 2,971 20 434 -- --
Direct
operating
expenses........ 597 5,129 3,632 2,116 7,286 8,065 2,729 8,172 2,989 1,443
-------- ------- --------- --------- --------- ------------ ---------- -------------- ------- --------
Cost of
revenues........ 674 7,701 4,219 3,377 15,815 25,346 4,368 11,619 3,987 1,816
-------- ------- --------- --------- --------- ------------ ---------- -------------- ------- --------
Gross profit.... 591 3,803 3,214 1,956 8,696 21,444 1,574 10,094 1,012 656
-------- ------- --------- --------- --------- ------------ ---------- -------------- ------- --------
Selling, general
and admin.
expenses........ 250 2,324 1,506 867 5,884 9,716 1,348 4,255 293 272
Non-rental
depreciation.... -- 184 42 101 482 1,778 96 337 9 35
-------- ------- --------- --------- --------- ------------ ---------- -------------- ------- --------
Operating
income.......... 341 1,295 1,666 988 2,330 9,950 130 5,502 710 349
-------- ------- --------- --------- --------- ------------ ---------- -------------- ------- --------
Other income
(expense), net... -- -- (414) 1 78 (541) 138 162 (7) 3
Interest income
(expense), net.. (25) (222) (417) (356) (640) (4,988) (893) (36) (154) (394)
-------- ------- --------- --------- --------- ------------ ---------- -------------- ------- --------
Income before
income taxes.... 316 1,073 835 633 1,768 4,421 (625) 5,628 549 (42)
Income taxes
(benefit)....... -- 21 206 -- -- 2,196 -- 256 -- --
-------- ------- --------- --------- --------- ------------ ---------- -------------- ------- --------
Net income
(loss).......... $ 316 $1,052 $ 629 $ 633 $ 1,768 $ 2,225 $ (625) $ 5,372 $ 549 $ (42)
======== ======= ========= ========= ========= ============ ========== ============== ======= ========
<CAPTION>
Nine Months Ended September 30, 1997
------------------------------------
Pro Forma
Adjustments(c) Combined
--------------- ---------
<S> <C> <C>
Revenues:
Rental
revenue......... $ 3,831 $129,809
Rental
equipment
sales........... 2,182 18,613
New equipment
sales and
other........... 1,615 46,098
--------------- ---------
Total revenues.. 7,628 194,520
--------------- ---------
Rental equipment
expense:
Rental
equipment
depreciation.... 1,431 (d) 27,531
Cost of rental
equipment
sales........... 1,921 12,498
Cost of new
equipment
sales........... 1,186 18,911
Direct
operating
expenses........ 98 (e) 56,027
--------------- ---------
Cost of
revenues........ 4,636 114,967
--------------- ---------
Gross profit.... 2,992 79,553
--------------- ---------
Selling, general
and admin.
expenses........ (3,465)(f) 34,990
Non-rental
depreciation.... 5,067 (g) 9,137
--------------- ---------
Operating
income.......... 1,390 35,426
--------------- ---------
Other income
(expense), net... 909 (h) 487
Interest income
(expense), net.. (21,887)(i) (33,387)
--------------- ---------
Income before
income taxes.... (19,588) 2,526
Income taxes
(benefit)....... (3,171)(j) 1,023
--------------- ---------
Net income
(loss).......... $(16,417) $ 1,503
=============== =========
</TABLE>
(See Notes to Unaudited Pro Forma Financial Statements)
F-153
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
----------------------------------------------------------------------------------------------------
The Work Grand Albany R&R
Company (a) Safe (b) Eagle (b) CEC (b) Dragon (b) Hi-Reach (b) Ladder (b) Falconite (b) Rentals (b)
----------- -------- --------- ------- ---------- ------------ ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental Revenue.. $100,251 $ 24 $54 $1,770 $1,871 $ 336 $4,612 $28,495 $4,832
Rental Equipment
sales........... 8,197 -- -- 256 -- 30 449 2,992 --
New equipment
sales and other. 28,986 23 30 901 125 28 3,537 7,941 758
-------- ----- --- ------ ------ ----- ------ ------- ------
Total revenues.. 137,434 47 84 2,927 1,996 394 8,598 39,428 5,590
-------- ----- --- ------ ------ ----- ------ ------- ------
Rental equipment
expense:
Rental equipment
depreciation.... 17,581 23 5 376 160 47 877 7,390 1,192
Cost of rental
equipment sales. 5,123 -- -- 52 -- 21 146 2,351 --
Cost of new
equipment sales. 15,358 13 1 441 -- -- 1,918 4,606 --
Direct operating
expenses........ 38,766 61 29 1,170 989 282 2,816 7,332 2,468
-------- ----- --- ------ ------ ----- ------ ------- ------
Cost of
revenues........ 76,828 97 35 2,039 1,149 350 5,757 21,679 3,660
-------- ----- --- ------ ------ ----- ------ ------- ------
Gross profit.... 60,606 (50) 49 888 847 44 2,841 17,749 1,930
-------- ----- --- ------ ------ ----- ------ ------- ------
Selling, general
and admin.
expense......... 25,619 60 12 429 410 129 2,486 9,492 1,015
Non-rental
depreciation.... 4,557 28 -- 39 11 7 160 1,504 69
-------- ----- --- ------ ------ ----- ------ ------- ------
Operating
income.......... 30,430 (138) 37 420 426 (92) 195 6,753 846
-------- ----- --- ------ ------ ----- ------ ------- ------
Other income
(expense), net.. 255 -- 12 -- (126) 2 58 24 --
Interest income
(expense), net.. (16,001) (46) (3) (90) (127) (19) (216) (4,997) (669)
-------- ----- --- ------ ------ ----- ------ ------- ------
Income before
income taxes.... 14,684 (184) 46 330 173 (109) 37 1,780 177
Income taxes.... 5,981 -- -- -- -- -- -- -- --
-------- ----- --- ------ ------ ----- ------ ------- ------
Income before
extraordinary
item............ 8,703 (184) 46 330 173 (109) 37 1,780 177
-------- ----- --- ------ ------ ----- ------ ------- ------
Extraordinary
item............ 1,424 -- -- -- -- -- -- -- --
-------- ----- --- ------ ------ ----- ------ ------- ------
Net income...... $ 7,279 $(184) $46 $ 330 $ 173 $(109) $ 37 $ 1,780 $ 177
======== ===== === ====== ====== ===== ====== ======= ======
<CAPTION>
Pro Forma
Shaughnessy (b) TSM (b) Rebel (b) Adjustments (c) Combined
--------------- -------- --------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Rental Revenue.. $19,407 $3,273 $1,540 $ 807 $167,272
Rental Equipment
sales........... -- 720 -- -- 12,644
New equipment
sales and other. 2,953 72 158 266 45,778
--------------- -------- --------- ---------------- ---------
Total revenues.. 22,360 4,065 1,698 1,073 225,694
--------------- -------- --------- ---------------- ---------
Rental equipment
expense:
Rental equipment
depreciation.... 2,805 525 409 (531)(d) 30,859
Cost of rental
equipment sales. -- 389 -- -- 8,082
Cost of new
equipment sales. -- -- -- -- 22,337
Direct operating
expenses........ 9,639 2,223 1,108 (40)(e) 66,843
--------------- -------- --------- ---------------- ---------
Cost of
revenues........ 12,444 3,137 1,517 (571) 128,121
--------------- -------- --------- ---------------- ---------
Gross profit.... 9,916 928 181 1,644 97,573
--------------- -------- --------- ---------------- ---------
Selling, general
and admin.
expense......... 4,232 262 325 (2,321)(f) 42,150
Non-rental
depreciation.... 325 5 41 2,573 (g) 9,319
--------------- -------- --------- ---------------- ---------
Operating
income.......... 5,359 661 (185) 1,392 46,104
--------------- -------- --------- ---------------- ---------
Other income
(expense), net.. (12) 15 (197) 58 (h) 89
Interest income
(expense), net.. 55 (123) (463) (10,688)(i) (33,387)
--------------- -------- --------- ---------------- ---------
Income before
income taxes.... 5,402 553 (845) (9,238) 12,806
Income taxes.... 225 224 -- (1,244)(j) 5,186
--------------- -------- --------- ---------------- ---------
Income before
extraordinary
item............ 5,177 329 (845) (7,994) 7,620
--------------- -------- --------- ---------------- ---------
Extraordinary
item............ -- -- -- (1,424)(k) --
--------------- -------- --------- ---------------- ---------
Net income...... $ 5,177 $ 329 $ (845) $ (6,570) $ 7,620
=============== ======== ========= ================ =========
</TABLE>
(See Notes to Unaudited Pro Forma Financial Statements)
F-154
<PAGE>
NOTES TO SELECTED PRO FORMA FINANCIAL DATA
(dollars in thousands, except per share data)
(a) Results for the year ended December 31, 1997 and for the nine months ended
September 30, 1997 represent actual historical 1997 results for the
Company, including results for the Acquired Businesses purchased in the
related 1997 period from the date of acquisition. Results for the nine
months ended September 30, 1998 represent actual historical results for
the Company, including results for the Acquired Businesses purchased in
the respective periods from the date of acquisition.
(b) Results for the year ended December 31, 1997 and for the nine months ended
September 30, 1997 represent combined historical 1997 results for (i) the
Acquired Businesses purchased in the related 1997 period prior to the date
of acquisition and (ii) the Acquired Businesses purchased in 1998. Results
for the nine months ended September 30, 1998 represent combined historical
results for the Acquired Businesses purchased in the respective periods
prior to the date of acquisition.
(c) In each of the following items, reflects the elimination of a location
not purchased from Cormier Equipment as follows:
<TABLE>
<CAPTION>
Year Nine Months
Ended Ended
December 31, September 30,
1997 1997
------------ -------------
<S> <C> <C>
Rental revenues................................ $ 130 $ 130
New equipment sales and other.................. 21 21
----- -----
Total revenues................................. 151 151
Rental equipment depreciation.................. 81 81
Other operating expenses....................... 102 102
----- -----
Total cost of revenues......................... 183 183
----- -----
Gross profit (loss)............................ (32) (32)
Selling, general and administrative expenses... 72 72
Non-rental depreciation and amortization....... 1 1
----- -----
Operating loss................................. $(105) $(105)
===== =====
</TABLE>
In addition, reflects the acquisition of GenEquip, Inc., a business
acquired by Falconite in January 1998, and Aerial Equipment Rental, Inc., a
business acquired by Falconite in May 1998, as follows:
<TABLE>
<CAPTION>
Nine Months Nine Months
Year Ended Ended Ended
December 31, September 30, September 30,
1997 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Rental revenues.................... $ 5,274 $3,959 $ 807
Rental equipment sales............. 2,910 2,184 --
New equipment sales and other...... 2,415 1,807 365
------- ------ -----
Total revenues..................... 10,599 7,950 1,172
------- ------ -----
Rental equipment depreciation...... 1,809 1,355 76
Cost of rental equipment sales..... 2,560 1,920 --
Cost of new equipment sales........ 1,580 1,185 --
Other operating costs.............. 2,503 1,904 435
------- ------ -----
Total cost of revenues............. 8,452 6,364 511
------- ------ -----
Gross profit....................... 2,147 1,586 661
------- ------ -----
Selling, general and administrative
expenses.......................... 1,788 1,289 144
Non-rental depreciation and
amortization...................... 122 92 5
------- ------ -----
Operating income................... 237 205 512
------- ------ -----
Other income, net.................. 180 106 33
Interest expense, net.............. 24 19 16
------- ------ -----
Income before income taxes......... $ 393 $ 292 $529
======= ====== =====
</TABLE>
F-155
<PAGE>
In addition, reflects the elimination of a location not purchased from
Shaughnessy as follows:
<TABLE>
<CAPTION>
Year Nine Months Nine Months
Ended Ended Ended
December 31, September 30, September 30,
1997 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
New equipment sales and other...... $213 $171 $100
---- ---- ----
Total revenues..................... 213 171 100
---- ---- ----
Other operating costs.............. 207 149 39
---- ---- ----
Total cost of revenues............. 207 149 39
---- ---- ----
Gross profit....................... 6 22 61
---- ---- ----
Selling, general and administrative
expenses.......................... 23 16 92
---- ---- ----
Operating income (loss)............ $(17) $ 6 $(31)
==== ==== ====
</TABLE>
(d) Reflects the impact on rental equipment depreciation resulting from the
application of the Company's depreciation policy rather than those of the
former owners of the Acquired Businesses. In addition, reflects the change
in rental equipment depreciation resulting from the write-up or write-down
of rental equipment assets to fair value arising from purchase accounting.
In addition, reflects the increase in rental equipment depreciation
resulting from the purchase of equipment referred to in note (e) below.
(e) Reflects the elimination of lease expense resulting from the termination of
certain rental equipment leases which occurred with the purchase of the
underlying equipment. Also reflects the rent expense resulting from the
Company's current lease terms as compared to lease terms entered into by
former owners. In addition, reflects the increase in rent expense and
corresponding decrease in depreciation expense and real estate tax expense
resulting from the Company leasing rather than owning certain related
facilities and, conversely, the decrease in rent expense and corresponding
increase in depreciation expense and real estate tax expense resulting from
the termination of certain facility leases which occurred with the purchase
of the underlying facility by the Company. Also, reflects the decrease in
rent expense resulting from the termination of certain facility leases.
(f) Reflects the decrease resulting from differentials between the compensation
levels of former owners of the Acquired Businesses and the terms of the
employment agreements entered into between certain of the former owners and
the Company. The employment agreements provide for bonuses to be paid based
on increased future earnings. Compensation amounts presented reflect
bonuses due based on current operating results. Additional bonuses would be
due if increased earnings levels are achieved.
(g) Reflects the decrease in non-rental depreciation resulting from the
application of the Company's depreciation policy rather than those of the
former owners of the Acquired Businesses. In addition, reflects the
increase in non-rental depreciation resulting from the write-up of
property, plant and equipment to fair value arising from purchase
accounting. Also reflects amortization of goodwill calculated on a goodwill
life of 40 years and amortization of non-compete agreements calculated on
their contract terms of two to five years, in each case specifically
related to the purchases of the Acquired Businesses. The pro forma
adjustments consist of the following:
F-156
<PAGE>
<TABLE>
<CAPTION>
Year Nine Months Nine Months
Ended Ended Ended
December 31, September 30, September 30,
1997 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Non-rental depreciation......... $1,328 $1,022 $ 485
Amortization of goodwill........ 4,480 3,422 1,875
Amortization of non-compete
agreements..................... 748 623 213
------ ------ ------
$6,556 $5,067 $2,573
====== ====== ======
</TABLE>
(h) Reflects discontinuation and elimination of unrelated businesses previously
operated and related charges incurred by the former owners of certain of
the Acquired Businesses.
(i) Includes the following:
<TABLE>
<CAPTION>
Year Nine Months Nine Months
Ended Ended Ended
December 31, September 30, September 30,
1997 1997 1998
--------------- --------------- ----------------
Pro Pro Pro
Actual Forma(a) Actual Forma(a) Actual Forma(a)
------ -------- ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash interest expense:
Series B Notes Offering... $ -- $10,000 $ -- $ 7,500 $ 7,500 $ 7,500
Outstanding Notes......... -- 17,500 -- 13,125 -- 13,125
Credit Facility or the
Company's previous credit
facility................. 3,950 13,160 2,259 9,869 7,314 9,869
------ ------- ------ ------- ------- -------
3,950 40,660 2,259 30,494 14,814 30,494
------ ------- ------ ------- ------- -------
Non-cash charges:
Amortization of debt
issuance costs and
original issue discount
incurred in connection
with the Series B Notes
Offering................. 52 621 -- 466 466 466
Amortization of debt
issuance costs and
original issue discount
incurred in connection
with the Outstanding
Notes.................... -- 1,415 -- 1,062 -- 1,062
Amortization of loan
origination and other
financing fees incurred
in connection with the
Credit Facility or the
Company's previous credit
facility................. 354 620 180 465 674 465
Interest expense on Junior
Convertible Note (only
payable at term if not
converted)............... -- 1,200 -- 900 47 900
------ ------- ------ ------- ------- -------
406 3,856 180 2,893 1,187 2,893
------ ------- ------ ------- ------- -------
$4,356 $44,516 $2,439 $33,387 $16,001 $33,387
====== ======= ====== ======= ======= =======
</TABLE>
(j) Reflects the income tax rate that would have been in effect if the Acquired
Businesses had been combined and subject to a federal statutory rate up to
35% and the applicable state statutory rate for each of the Acquired
Businesses throughout the period presented.
(k) Reflects the elimination of the extraordinary item related to unamortized
loan costs of $2,393 less a tax benefit of $969 associated with the
Company's previous credit facility.
F-157
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$175,000,000
National Equipment Services, Inc.
Offer to exchange our
10% Senior Subordinated Notes due 2004, Series D for our outstanding
10% Senior Subordinated Notes due 2004, Series C
------------
PROSPECTUS
, 1999
------------
Until , 1999 (90 days after commencement of this offering), all dealers
that effect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the dealers' obligation to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Company, BAT, FAI, NES Acquisition, NES East and NES Michigan. The
Company and each of BAT, FAI, NES Acquisition, NES East and NES Michigan are
incorporated under the laws of the State of Delaware. Section 145 of the
General Corporation Law of the State of Delaware ("Section 145") provides that
a Delaware corporation may indemnify any persons who are, or are threatened to
be made, parties 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 such corporation), by reason of the fact
that such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the corporation's best interests and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any persons who are, or are
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorney's fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit, provided such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests except
that no indemnification is permitted without judicial approval if the officer
or director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director has actually and reasonably incurred. Section
145 further provides that the indemnification provisions of Section 145 shall
not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office.
The certificates of incorporation, as amended (if applicable), of each of
the Company, BAT, FAI, NES Acquisition, NES East and NES Michigan provide
that, to the fullest extent permitted by the General Corporation Law of the
State of Delaware, no director of the corporation shall be liable to the
corporation or its stockholders for monetary damages arising from a breach of
fiduciary duty owed to the corporation or its stockholders.
Article V of the by-laws of each of the Company, BAT, FAI, NES Acquisition,
NES East and NES Michigan provides that any person who was or is a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he, or a person of whom he is the legal representative, is or
was a director or officer of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust or
other enterprise, shall be indemnified and held harmless by the corporation to
the fullest extent to which it is empowered to do so unless prohibited from
doing so by the General Corporation Law of the State of Delaware, as may be
amended (but only to the extent such amendment permits the corporation to
provide broader indemnification rights than were permitted prior to such
amendment) against expense, liability and loss (including attorneys' fees
actually and reasonably incurred by such person in connection with such
proceeding) and such indemnification shall continue as to an indemnitee who
has ceased to a be a director, officer, employee or agent and shall inure to
the benefit of the indemnitee's heirs, executors and administrators, provided
that, such person shall be indemnified only (subject to certain limited
exceptions) in connection with a proceeding initiated by such person only if
such proceeding was authorized by the board of directors of the corporation.
The right to indemnification of such person shall be a contract right and
shall include
II-1
<PAGE>
the right to be paid expenses incurred in defending any proceeding in advance
of its final disposition. In addition, the Company has agreed to indemnify and
hold harmless Mr. Grove against all expense, liability and loss reasonably
incurred or suffered by Mr. Grove in connection with any alligation that his
membership on the Board conflicts with or breaches the terms of a
noncompetition convenant to which Mr. Grove is a party.
Section 9(B)(1) of the certificate of incorporation of FAI provides that any
person who was or is a party, or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a director or
officer of the corporation or is or was a director, officer, employee or agent
of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as
a director, officer, employee or agent, shall be indemnified and held harmless
by the corporation against all expense, liability and loss (including
attorney's fees and expenses, judgments, fines, ERISA excise taxes and
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators. Section 9(B)(1) of the certificate of incorporation of FAI
further provides that the corporation may, by action of its board of
directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the above indemnification of directors and
officers. Section 9(B)(3) of the certificate of incorporation of FAI provides
that the indemnification provisions referred to above shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, provision of the certificate of incorporation, by-law, agreement,
vote of stockholders or disinterested directors or otherwise.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise, against any liability asserted against him and incurred by him
in any such capacity, arising out of his status as such, whether or not the
corporation would otherwise have the power to indemnify him under Section 145.
Article V of the by-laws of each of the Company, BAT, NES Acquisition, NES
East and NES Michigan provides that such corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee, fiduciary, or agent of such corporation or was
serving at the request of such corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by
him or her in any such capacity, whether or not the corporation would have the
power to indemnify such person against such liability under Article V of its
by-laws. Section 9(B)(4) of the certificate of incorporation of FAI authorizes
the corporation to maintain insurance, at its expense, to protect itself and
any director, officer, employee or agent of the corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss.
All of the directors and officers of each of the Company and BAT, FAI, NES
Acquisition, NES East and NES Michigan are covered by insurance policies
maintained and held in effect by such corporation against certain liabilities
for actions taken in such capacities, including liabilities under the
Securities Act of 1933.
Albany. Albany is incorporated under the laws of the State of New York.
Pursuant to the statutes of the State of New York, a director or officer of a
corporation is entitled, under specified circumstances, to indemnification by
the corporation against reasonable expenses, including attorneys' fees,
incurred by him in connection with the defense of a civil or criminal
proceeding to which he has been made, or threatened to be made, a party by
reason of the fact that he was such director or officer. In certain
circumstances, indemnity is provided against judgments, fines and amounts paid
in settlement. In general, indemnification is available where the director or
officer acted in good faith, for a purpose such director or officer reasonably
believed to be in the
II-2
<PAGE>
best interests of the corporation. Specific court approval is required in some
cases. The foregoing statement is qualified in its entirety by reference to
Sections 715, 717 and 721 through 725 of the New York Business Corporation Law
("NYBCL").
Section 10 of the certificate of incorporation of Albany provides that, to
the maximum extent now or thereafter permitted by the laws of the State of New
York, including but not limited to Article 7 of the NYBCL or its successor
statutes, and without further action by the stockholders or directors of
Albany, or any court, Albany will indemnify its officers, directors and
stockholders who are made or threatened to be made a party to any action or
proceeding whatsoever whether administrative, civil or criminal, in any court,
agency or forum whatsoever, brought by or on behalf of any party whomsoever by
reason of the fact that such person was an officer, director or stockholder of
Albany, or of a corporation in which the stockholders of Albany were also
stockholders and which is thereafter merged into Albany, against judgments,
fines, amounts paid in settlements and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such actual
or threatened action or proceeding, or any appeal therein and so far as
permitted by law, stockholders, officers and directors of Albany shall not be
personally liable to Albany or its stockholders for monetary damages for
breach of fiduciary duty, except for liability fixed by judgment or other
final adjudication which establishes that such acts were acts committed in bad
faith or were the result of actual and deliberate dishonesty and were material
to the cause of action so adjudicated, or for any transaction from which the
stockholder, officer or director derived a financial profit or other advantage
to which he was not legally entitled. In addition, the certificate of
incorporation of Albany provides that if the laws of the State of New York are
later amended to permit corporate action further eliminating or limiting the
personal liability of stockholders, officers and directors, then the liability
of a stockholder, officer or director of Albany shall be eliminated or limited
to the fullest extent permitted by the New York State Law, as so amended.
All of the directors and officers of Albany are covered by insurance
policies maintained and held in effect by Albany against certain liabilities
for actions taken in such capacities, including liabilities under the
Securities Act of 1933.
CMSRACI. CMSRACI is incorporated under the laws of the State of Tennessee.
The Tennessee Business Corporation Act sets forth in Sections 48-18-502
through 48-18-508 the circumstances governing the indemnification of
directors, officers, employees and agents of a corporation against liability
incurred in the course of their official capacities. Section 48-18-502
provides that a corporation may indemnify any director against liability
incurred in connection with a proceeding if the director acted in good faith
and the director reasonably believed, in the case of conduct in his or her
official capacity with the corporation, that such conduct was in the
corporation's best interest, or, in all other cases, that his or her conduct
was at least not opposed to the best interests of the corporation and, in
connection with any criminal proceeding, the director had no reasonable cause
to believe that his or her conduct was unlawful. In actions brought by or in
the right of the corporation, however, Section 48-18-502 provides that no
indemnification may be made if the director or officer is adjudged to be
liable to the corporation. Similarly, Section 48-15-502 prohibits
indemnification in connection with any proceeding charging improper personal
benefit to a director, whether or not involving action in the director's
official capacity, if such director is adjudged liable on the basis that a
personal benefit was improperly received. In cases where the director is
wholly successful, on the merits or otherwise, in the defense of any
proceeding instigated because of his or her status as a director of a
corporation, Section 48-18-503 mandates that the corporation indemnify the
director against reasonable expenses incurred in the proceeding.
Notwithstanding the foregoing, Section 48-18-505 provides that a court of
competent jurisdiction, upon application, may order that a director or officer
be indemnified for reasonable expenses incurred if, in consideration of all
relevant circumstances, the court determines that such individual is fairly
and reasonably entitled to indemnification, whether or not the standard of
conduct set forth above was met. Officers, employees, and agents who are not
directors are entitled, through the provisions of Section 48-18-507 to the
same degree of indemnification afforded to directors under Sections 48-18-503
and 48-18-505.
Section 48-18-508 provides that a corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer,
employee, or agent of the corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was serving at the request of the
corporation as a director,
II-3
<PAGE>
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or
other enterprise, against liability asserted against or incurred by the
individual in that capacity or arising from the individual's status as a
director, officer, employee, or agent, whether or not the corporation would
have the power to indemnify the individual.
All directors and officers of CMSRACI are covered by insurance policies
maintained and held in effect by CMSRACI against certain liabilities for
actions taken in such capacities, including liabilities under the Securities
Act of 1933.
Falconite and FEI. Falconite and FEI are incorporated under the laws of the
State of Illinois. Under Section 8.75 of the Illinois Business Corporation Act
of 1983, a corporation is empowered, subject to the procedures and limitations
stated therein, to 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 or she is or was a director, officer, employee or agent of the
corporation or who is or was serving or had served at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise 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 such person acted in good faith and in a manner he or she
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 or her conduct was unlawful. In actions
brought by or in the right of the corporation, however, Section 8.75 provides
that no indemnification may be made without judicial approval if the director
or officer is adjudged to be liable to the corporation. In addition, Section
8.75 provides that to the extent that a director, officer, employee or agent
of a corporation has been successful, on the merits or otherwise, in the
defense of any action, suit or proceeding or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by such person in connection
therewith. Section 8.75 further provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a
person may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors, or otherwise, and that such indemnification shall
continue as to a director, officer, employee or agent of the corporation who
has ceased to serve in such capacity, and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Article XI of the articles of incorporation and Article IX of the by-laws of
Falconite provide that 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 or she is a director, officer, employee or agent
of the corporation, or who is serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorney's fees), judgements, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with such action, suit or
proceeding, if such person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination
of any action, suit or proceeding by judgement, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the corporation or, with respect to any criminal action or
proceeding, that the person had reasonable cause to believe that his or her
conduct was unlawful. In actions brought by or in the right of the
corporation, however, the articles of incorporation and by-laws provide that
no indemnification may be made if the director, officer, employee or agent is
adjudged to be liable for negligence or misconduct in the performance of his
or her duty to the corporation, unless, and only to the extent that the court
in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability, in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
such expenses as the
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court shall deem proper. In addition, Article XI of the articles of
incorporation and Article IX of the by-laws of Falconite provide that to the
extent that a director, officer, employee or agent of the corporation has been
successful, on the merits or otherwise, in the defense of any action, suit or
proceeding referred to above, the corporation must indemnify him against the
expenses (including attorney's fees) actually and reasonably incurred. Article
XI of the articles of incorporation and Article IX of the by-laws of Falconite
further provide that, to the fullest extent permitted by the law, the
indemnification provisions referred to above shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
any other by-law, agreement, vote of shareholders or disinterested directors,
or otherwise, both as to action in his or her official capacity and as to
action in another capacity while holding such office, and shall 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.
Section 8.75 also provides that a corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or who is serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of his or her status as such, whether or not the corporation
would have the power to indemnify such person against such liability.
Article XI of the articles of incorporation and Article IX of the by-laws of
Falconite further authorize the corporation to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent
of the corporation, or who 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, against any liability asserted
against such person and incurred by such person in any such capacity, or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify such person against such liability under the
provisions of Article XI of the articles of incorporation and Article IX of
the by-laws.
All directors and officers of Falconite and FEI are covered by insurance
policies maintained and held in effect by Falconite and FEI against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
FRCI. FRCI is incorporated under the laws of the State of Kentucky. Under
Section 271B.8-510 of the Kentucky Business Corporation Act of 1988, as
amended, a corporation may indemnify a director against liability incurred in
a proceeding if the director conducted himself in good faith, and the director
believed, in the case of conduct in his official capacity as a director of the
corporation, his conduct was in the corporation's best interest or, in all
other cases, his conduct was at least not opposed to the corporation's best
interests, and in the case of any criminal proceeding, the director had no
reasonable cause to believe his conduct was unlawful. The termination of a
proceeding by judgement, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent shall not be, of itself, determinative that the
director did not meet the standard of conduct described above.
A corporation may not indemnify a director under the above-referenced
section in connection with a proceeding by or in the right of the corporation
in which the director is adjudged liable to the corporation or any other
proceeding charging improper personal benefit to the director, whether or not
involving action in his official capacity, in which the director is adjudged
liable on the basis that personal benefit was improperly received by him.
Indemnification permitted under Section 271B.8-510 in connection with a
proceeding by or in the right of the corporation shall be limited to
reasonable expenses incurred in connection with the proceeding. Section
271B.8-560 provides that a Kentucky corporation may indemnify its officers,
employees and agents to the same extent as directors.
Unless limited by a corporation's articles of incorporation, Section 271B.8-
520 further provides mandatory indemnification against reasonable expenses
incurred in connection with a proceeding for each director and officer who is
wholly successful, on the merits or otherwise, in the defense of any
proceeding to which such director or officer was made a party because of their
official capacity with the corporation. Additionally, Section
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271B.8-570 provides that a corporation may purchase and maintain insurance on
behalf of directors, officers, employees or agents of the corporation against
liability asserted against or incurred by such party in their respective
capacity with the corporation.
All directors and officers of FRCI are covered by insurance policies
maintained and held in effect by FRCI against certain liabilities for actions
taken in such capacities, including liabilities under the Securities Act of
1933.
M&FECI and M&MPI. M&FECI and M&MPI are incorporated under the laws of the
State of Alabama. Section 10-2B-8.51 of the 1994 Alabama Business Corporation
Act provides that a corporation may indemnify an individual made a party to a
proceeding because he is or was a director of the company against liability
incurred in the proceeding if the individual conducted himself in good faith
and, in the case of conduct in his official capacity with the company,
reasonably believed that his conduct was in the best interests of the company
or, in all other cases that the conduct was at least not opposed to the best
interests of the company, and, in the case of any criminal proceeding, he has
no reasonable cause to believe his conduct was unlawful. A corporation may not,
however, indemnify a director under Section 10-2B-8.51 in connection with a
proceeding by or in the right of the corporation in which the director was
adjudged liable to the corporation; or in connection with any other proceeding
charging improper personal benefit of the director in which the director was
adjudged liable on the basis that personal benefit was improperly received by
him.
Sections 10-2B-8.52 and 10-2B-8.56 provide that a corporation shall indemnify
a director or officer who was successful in the defense of any proceeding, or
of any claim, issue or matter in such proceeding, where he was a party because
he is or was a director or officer of the corporation, against reasonable
expenses incurred in connection therewith, notwithstanding that he was not
successful on any other claim, issue or matter in any such proceeding.
Sections 10-2B-8.53 and 10-2B-8.56(b) provide that a corporation may pay for
or reimburse the reasonable expenses incurred by a director, officer, employee
or agent of the corporation who is a party to a proceeding in advance of final
disposition of the proceeding if such individual furnishes the corporation a
written affirmation of good faith belief that he met the standard of conduct
required for permissive indemnification set forth in Section 10-2B-8.51; and
such individual furnishes the corporation a written undertaking to repay the
advance if it is ultimately determined that such person did not meet such
standard of conduct or is not otherwise entitled to indemnification under
Section 8.51 unless indemnification is approved by the court under Section
8.54; and, a determination is made that the facts then known to those making
the determination would not preclude indemnification.
Article X of the by-laws of M&FECI provides that each director, officer,
employee or agent of the corporation 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, administrative, criminal or investigative (other
than an act by or in the right of the corporation) by reason of the fact he is
or was a director, officer, employee or agent of the corporation, or 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, against expenses (including attorney's fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit or investigation proceeding if he acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interest of the
corporation or other organization above, 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 for negligence or willful misconduct in
the performance of his duty to the corporation unless and only to the extent
that the court in which such action or suit was brought shall determine upon
application there, despite the adjudication or liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such expenses which such court shall deem proper. The termination
of any action, suit or proceeding by judgement, order or settlement shall not,
of itself, create a presumption that the person did not act in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation.
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Section 10-2B-8.57 further provides that a corporation may purchase and
maintain insurance, or furnish similar protection (including but not limited
to trust funds, self-insurance reserves, or the like), on behalf of an
individual who is or was a director, officer, employee, or agent of the
corporation, or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture trust, employee benefit plan,
or other enterprise, against liability asserted against or incurred by him or
her in that capacity or arising from his or her status as a director, officer,
employee, or agent, whether or not the corporation would have power to
indemnify him or her against the same liability.
Article X of the by-laws of M&FECI further provides that the corporation may
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation has the power to indemnify him against such liability under the
law of the State of Alabama.
All directors and officers of M&FECI and M&MPI are covered by insurance
policies maintained and held in effect by M&FECI and M&MPI against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
RSR. RSR is incorporated under the laws of the State of California. Subject
to certain limitations, Section 317 of the California General Corporations
Code provides in part that a corporation shall have power to indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of the corporation to
procure a judgment in its favor) by reason of the fact that the person is or
was an agent (which term includes officers and directors) of the corporation,
against expenses, judgments, fines, settlements, and other amounts actually
and reasonably incurred in connection with the proceeding if that person acted
in good faith and in a manner the person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of the person was unlawful.
The California indemnification statute, as provided in Section 317 of the
California General Corporations Code (noted above), is nonexclusive and allows
a corporation to expand the scope of indemnification provided, whether by
provisions in its bylaws or by agreement, to the extent authorized in the
corporation's articles. RSR's bylaws provides that RSR may indemnify any
Director, Officer, agent or employee as to those liabilities and on those
terms and conditions as are specified in Section 317 and that RSR shall have
the right to purchase and maintain insurance on behalf of any such persons
whether or not the corporation would have the power to indemnify such person
against the liability insured against.
All of the directors and officers of RSR are covered by insurance polices
maintained and held in effect by RSR against certain liabilities for actions
taken in such capacities, including liability under the Securities Act of
1933.
SCS. SCS is incorporated under the laws of the State of Massachusetts.
Section 67 of Chapter 156B of the Massachusetts General Laws, or the
Massachusetts Business Corporation Law (the "MBCL"), provides that the
indemnification of directors, officers, employees and other agents of a
corporation, and persons who serve at its request as directors, officers,
employees or other agents of another organization, or who serve at its request
in any capacity with respect to any employee benefit plan, may be provided by
it to whatever extent shall be specified in or authorized by (i) the articles
of organization, (ii) a by-law adopted by the stockholders or (iii) a vote
adopted by the holders of a majority of the shares of stock entitled to vote
on the election of directors. Except as the articles of organization or by-
laws otherwise require, indemnification of any persons who are not directors
of the corporation may be provided by it to the extent authorized by the
directors. Such indemnification may include payment by the corporation of
expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon receipt of
an undertaking by
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the person indemnified to repay such payment if he shall be adjudicated to be
entitled to indemnification, which undertaking may be accepted without
reference to the financial ability of such person to make repayment. Any such
indemnification may be provided although the person to be indemnified is no
longer an officer, director, employee or agent of the corporation or of such
other organization or no longer serves with respect to any such employee
benefit plan. Section 67 further provides that no indemnification shall be
provided for any person with respect to any matter as to which he shall have
been adjudicated in any proceeding not to have acted in good faith in the
reasonable belief that his action was in the best interest of the corporation
or to the extent that such matter relates to service with respect to any
employee benefit plan, in the best interests of the participants or
beneficiaries of such employee benefit plan.
Article V of the by-laws of SCS provides that SCS shall indemnify any
director or officer (including directors or officers who serve at SCS's
request as directors, officers, employees, fiduciaries or other agents of
another organization) against all expense, liability and loss in connection
with or arising out of any claim, or any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") brought
against such person by reason of being or having been such a director or
officer or serving in a representative capacity. In addition, Article V of the
by-laws of SCS provides that SCS may indemnify such director or officer in
connection with a proceeding initiated by such person only if such proceeding
was authorized by the board of directors. Article V provides that such
indemnification shall apply even though at the time of such claim, action, or
proceeding such a person is no longer a director or officer of SCS.
Article V further provides that expenses reasonably incurred in defending
any proceeding of the character described in the preceding paragraph shall,
unless the board of directors otherwise determines, be advanced by SCS prior
to final disposition thereof upon receipt of an undertaking by the recipient
to repay all such advances if it is ultimately determined by the board of
directors that such person is not entitled to indemnification.
Section 13(b)(1 1/2) of Chapter 156B of the MBCL permits a corporation to
include in its articles of organization a provision eliminating or limiting
the personal liability of a director to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, provided that
such provision shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 61
or 62 of the MBCL (relating to unlawful payment of dividends, unlawful stock
purchase and redemption and loans to insiders) or (iv) for any transaction
from which the director derived an improper personal benefit.
Article 6 of SCS's Restated Articles of Organization provides that no
director of SCS shall be liable to SCS or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to SCS or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 61 or 62 of
Chapter 156B of the MBCL or (iv) for any transaction in which the director
derived an improper personal benefit.
Section 67 of the MBCL also affords a Massachusetts corporation the power to
obtain insurance on behalf of its directors and officers against liabilities
incurred by them in those capacities. Article V of the by-laws of SCS allows
SCS to maintain insurance for any current or former director, officer,
employee, fiduciary or agent of SCS or other organizations (if serving at the
request of SCS) against any liability asserted against such person or incurred
by such person in such capacity, whether or not SCS would have the power to
indemnify such person against such liability.
All of the directors and officers of SCS are covered by insurance policies
maintained and held in effect by SCS against certain liabilities for actions
taken in such capacities, including liabilities under the Securities Act of
1933.
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Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Company (1)
3.2 Restated By-laws of the Company (1)
3.3 Certificate of Incorporation of NES Michigan Acquisition
Corp. (2)
3.4 By-laws of NES Michigan Acquisition Corp. (2)
3.5 Certificate of Incorporation of NES Acquisition Corp. (2)
3.6 By-laws of NES Acquisition Corp. (2)
3.7 Certificate of Incorporation of BAT Acquisition Corp. (2)
3.8 By-laws of BAT Acquisition Corp. (2)
3.9 Certificate of Incorporation of NES East Acquisition Corp. (2)
3.10 By-laws of NES East Acquisition Corp. (2)
3.11 Certificate of Incorporation of Albany Ladder Company,
Inc. (2)
3.12 By-laws of Albany Ladder Company, Inc. (2)
3.13(i) Articles of Incorporation of Falconite, Inc. (2)
3.13(ii) Articles of Amendment to the Articles of Incorporation of
Falconite, Inc. (2)
3.14 Amended and Restated By-laws of Falconite, Inc. (2)
3.15 Charter of Carl's Mid South Rent-All Center Incorporated. (2)
3.16 By-laws of Carl's Mid South Rent-All Center Incorporated. (2)
3.17 Certificate of Incorporation of Falconite Aviation, Inc. (2)
3.18 By-laws of Falconite Aviation, Inc. (2)
3.19(i) Articles of Incorporation of Falconite Equipment, Inc.
(f/k/a Falconite, Inc.). (2)
3.19(ii) Articles of Amendment to the Articles of Incorporation of
Falconite Equipment, Inc. (f/k/a Falconite, Inc.). (2)
3.20 By-laws of Falconite Equipment, Inc. (f/k/a Falconite,
Inc.). (2)
3.21 Articles of Incorporation of Falconite Rebuild Center,
Inc. (2)
3.22 By-laws of Falconite Rebuild Center, Inc. (2)
3.23 Articles of Incorporation of McCurry & Falconite Equipment
Co., Inc. (2)
3.24 By-laws of McCurry & Falconite Equipment Co., Inc. (2)
3.25 Articles of Incorporation of M&M Properties, Inc. (2)
3.26 By-laws of M&M Properties, Inc. (2)
3.27 Articles of Incorporation of Rebel Studio Rentals, Inc.
3.28 By-laws of Rebel Studio Rentals, Inc.
3.29 Restated Articles of Organization of Shaughnessy Crane
Service, Inc.
3.30 Amended and Restated By-laws of Shaughnessy Crane Service,
Inc.
4.1(i) Indenture dated November 25, 1997 by and among the
Company, the subsidiary guarantors named therein and
Harris Savings and Trust Company, as trustee. (2)
4.1(ii) Supplemental Indenture dated April 1, 1998 by and among
NES East Acquisition Corp., NES Michigan Acquisition
Corp., Albany Ladder Company, Inc. and Harris Savings and
Trust Company, as trustee. (2)
</TABLE>
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<TABLE>
<C> <S> <C>
4.1(iii) Supplemental Indenture dated July 23, 1998 by and among
Falconite, Inc., Carl's Mid South Rent-All Center
Incorporated, Falconite Aviation, Inc., Falconite
Equipment, Inc., Falconite Rebuild Center, Inc., McCurry &
Falconite Equipment Co., Inc., M&M Properties, Inc. and
Harris Savings and Trust Company, as trustee. (2)
4.2 Forms of Series B 10% Senior Subordinated Notes (contained
in Exhibit 4.1(i) as Exhibit A thereto). (2)
4.3 Form of Subsidiary Guarantee relating to Series B Senior
Subordinated Notes (contained in Exhibit 4.1(i) as Exhibit
D thereto). (2)
4.4 Registration Rights Agreement dated as of November 25,
1997 among the Company, Aerial Platforms, Inc., NES
Acquisition Corp., BAT Acquisition Corp., MST Enterprises,
Inc. and the initial purchasers named therein. (2)
4.5 Purchase Agreement dated as of November 20, 1997 among the
Company, Aerial Platforms, Inc., NES Acquisition Corp.,
BAT Acquisition Corp., MST Enterprises, Inc. and the
initial purchasers named therein. (2)
4.6(i) Credit Agreement dated as of July 17, 1998 by and among
the Company, as Borrower, NES Acquisition Corp., BAT
Acquisition Corp., NES East Acquisition Corp., NES
Michigan Acquisition Corp., Albany Ladder Company, Inc.,
Falconite, Inc., Falconite Equipment, Inc., M&M
Properties, Inc., Carl's Mid South Rent-All Center
Incorporated, Falconite Rebuild Center, Inc., Falconite
Aviation, Inc. and McCurry & Falconite Equipment Co.,
Inc., as Guarantors, certain financial institutions, as
Lenders, and First Union National Bank, as Lender and
Agent. (2)
4.6(ii) Syndication Amendment and Assignment dated as of August 7,
1998 by and among the Company, as Borrower, NES
Acquisition Corp., BAT Acquisition Corp., NES East
Acquisition Corp., NES Michigan Acquisition Corp., Albany
Ladder Company, Inc., Falconite, Inc., Falconite
Equipment, Inc., M&M Properties, Inc., Carl's Mid South
Rent-All Center Incorporated, Falconite Rebuild Center,
Inc., Falconite Aviation, Inc. and McCurry & Falconite
Equipment Co., Inc., as Guarantors, certain financial
institutions, as Lenders, and First Union National Bank,
as Lender and Agent. (2)
4.7 Pledge Agreement dated as of July 17, 1998 by and among
the Company, NES Acquisition Corp., BAT Acquisition Corp.,
NES East Acquisition Corp., NES Michigan Acquisition
Corp., Albany Ladder Company, Inc., Falconite, Inc.,
Falconite Equipment, Inc., M&M Properties, Inc., Carl's
Mid South Rent-All Center Incorporated, Falconite Rebuild
Center, Inc., Falconite Aviation, Inc., McCurry &
Falconite Equipment Co., Inc. and First Union National
Bank, as Agent. (2)
4.8 Security Agreement dated as of July 17, 1998 among the
Company, NES Acquisition Corp., BAT Acquisition Corp., NES
East Acquisition Corp., NES Michigan Acquisition Corp.,
Albany Ladder Company, Inc., Falconite, Inc., Falconite
Equipment, Inc., M&M Properties, Inc., Carl's Mid South
Rent-All Center Incorporated, Falconite Rebuild Center,
Inc., Falconite Aviation, Inc., McCurry & Falconite
Equipment Co., Inc. and First Union National Bank, as
Agent. (2)
4.9 Junior Subordinated Convertible Promissory Note, dated
September 17, 1998, in the principal amount of $15,000,000 (3)
4.10 Indenture dated December 11, 1998 by and among the
Company, the Subsidiary Guarantors and Harris Savings and
Trust Company, as trustee.
4.11 Forms of Series C and Series D 10% Senior Subordinated
Notes (contained in Exhibit 4.10 as Exhibit A thereto).
</TABLE>
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<TABLE>
<C> <S> <C>
4.12 Form of Subsidiary Guarantee relating to Series C and
Series D 10% Senior Subordinated Notes (contained in
Exhibit 4.10 as Exhibit D thereto).
4.13 Registration Rights Agreement dated as of December 11,
1998 among the Company, Albany Ladder Company, Inc., BAT
Acquisition Corp., Carl's Mid South Rent-All Center
Incorporated, Falconite Aviation, Inc., Falconite
Equipment, Inc., Falconite, Inc., Falconite Rebuild
Center, Inc., McCurry & Falconite Equipment Co., Inc., M&M
Properties, Inc., NES Acquisition Corp., NES East
Acquisition Corp., NES Michigan Acquisition Corp., Rebel
Studio Rentals, Inc., Shaughnessy Crane Service, Inc. and
the Initial Purchasers.
4.14 Purchase Agreement dated as of December 8, 1998 among the
Company, Albany Ladder Company, Inc., BAT Acquisition
Corp., Carl's Mid South Rent-All Center Incorporated,
Falconite Aviation, Inc., Falconite Equipment, Inc.,
Falconite, Inc., Falconite Rebuild Center, Inc., McCurry &
Falconite Equipment Co., Inc., M&M Properties, Inc., NES
Acquisition Corp., NES East Acquisition Corp., NES
Michigan Acquisition Corp., Rebel Studio Rentals, Inc.,
Shaughnessy Crane Service, Inc. and the Initial
Purchasers.
4.15 Registration Rights Agreement dated as of January 8, 1999
among the Company, Albany Ladder Company, Inc., BAT
Acquisition Corp., Carl's Mid South Rent-All Center
Incorporated, Falconite Aviation, Inc., Falconite
Equipment, Inc., Falconite, Inc., Falconite Rebuild
Center, Inc., McCurry & Falconite Equipment Co., Inc., M&M
Properties, Inc., NES Acquisition Corp., NES East
Acquisition Corp., NES Michigan Acquisition Corp., Rebel
Studio Rentals, Inc., Shaughnessy Crane Service, Inc. and
the Initial Purchasers.
4.16 Purchase Agreement dated as of January 5, 1999 among the
Company, Albany Ladder Company, Inc., BAT Acquisition
Corp., Carl's Mid South Rent-All Center Incorporated,
Falconite Aviation, Inc., Falconite Equipment, Inc.,
Falconite, Inc., Falconite Rebuild Center, Inc., McCurry &
Falconite Equipment Co., Inc., M&M Properties, Inc., NES
Acquisition Corp., NES East Acquisition Corp., NES
Michigan Acquisition Corp., Rebel Studio Rentals, Inc.,
Shaughnessy Crane Service, Inc. and the Initial
Purchasers.
5.1 Opinion and consent of Kirkland & Ellis.
10.1(i) Professional Services Agreement dated as of June 4, 1996
by and between the Company and Golder, Thoma, Cressey,
Rauner Fund IV, L.P. (2)
10.1(ii) Amendment No. 1 to Professional Services Agreement dated
as of December 31, 1996 between the Company and Golder,
Thoma, Cressey, Rauner Fund IV, L.P. (2)
10.2 Purchase Agreement dated as of June 4, 1996 between the
Company and Golder, Thoma, Cressey, Rauner Fund IV, L.P. (2)
10.3(i) Stockholders Agreement dated as of June 4, 1996 by and
between the Company, Golder, Thoma, Cressey, Rauner Fund
IV, L.P. and certain Executives named therein. (2)
10.3(ii) Amendment No. 1 to Stockholders Agreement dated December
31, 1996 by and among the Company, Golder, Thoma, Cressey,
Rauner Fund IV, L.P. and certain Executives named therein. (2)
10.4(i) Registration Agreement dated as of June 4, 1996 between
the Company and Golder, Thoma, Cressey, Rauner Fund IV,
L.P. and certain Executives named therein. (2)
10.4(ii) Amendment No. 1 to Registration Agreement dated as of
December 31, 1996 by and among the Company, Golder, Thoma,
Cressey, Rauner Fund IV, L.P. and certain Executives named
therein. (2)
</TABLE>
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<TABLE>
<C> <S> <C>
10.4(iii) Amendment No. 2 to Registration Agreement dated as of July
24, 1998 by and among the Company, Golder, Thoma, Cressey,
Rauner Fund IV, L.P. and R & R Rentals, Inc. (2)
10.5(i) Senior Management Agreement dated as of June 4, 1996
between the Company and Kevin Rodgers.* (2)
10.5(ii) Amendment No. 1 to Senior Management Agreement dated
December 31, 1996 between the Company and Kevin Rodgers.* (2)
10.6(i) Senior Management Agreement dated as of June 4, 1996
between the Company and Paul Ingersoll.* (2)
10.6(ii) Amendment No. 1 to Senior Management Agreement dated
December 31, 1996 between the Company and Paul Ingersoll.* (2)
10.7 Senior Management Agreement dated as of December 31, 1996
between the Company and Dennis O'Connor.* (2)
10.8 Executive Stock Pledge Agreement dated as of June 4, 1996
between the Company and Kevin Rodgers. (2)
10.9 Executive Stock Pledge Agreement dated as of June 4, 1996
between the Company and Paul Ingersoll. (2)
10.10 Executive Stock Pledge Agreement dated as of December 31,
1996 between the Company and Dennis O'Connor. (2)
10.11 Promissory Note dated as of January 6, 1997 by Kevin
Rodgers in favor of the Company in the principal amount of
$63,232. (2)
10.12 Promissory Note dated as of January 6, 1997 by Paul
Ingersoll in favor of the Company in the principal amount
of $9,880. (2)
10.13 Promissory Note dated as of January 6, 1997 by Dennis
O'Connor in favor of the Company in the principal amount
of $19,760. (2)
10.14 Securities Transfer Agreement dated as of December 31,
1996 by and among the Company, Golder, Thoma, Cressey,
Rauner Fund IV, L.P., Golder, Thoma, Cressey, Rauner Fund
V, L.P., Kevin Rodgers, Paul Ingersoll and Dennis
O'Connor. (2)
10.15 Asset Purchase Agreement dated as of January 6, 1997 by
and among NES Acquisition Corp., Industrial Crane
Maintenance Systems, Inc., Brazos Rental & Tool, Inc.,
Safe Work Load Products, Inc. and certain stockholders of
the Sellers referred to therein. (2)
10.16 Stock Purchase Agreement dated as of February 18, 1997 by
and among Aerial Platforms, Inc., Carter B. Wilson and the
Company. (2)
10.17 Asset Purchase Agreement dated as March 17, 1997 by among
NES Acquisition Corp., Lone Star Rentals, Inc. and James
Horsley. (2)
10.18 Asset Purchase Agreement dated as of April 1, 1997 by and
among, BAT Acquisition Corp., BAT Rentals, Inc. and Paul
B. Bronken. (2)
10.19 Asset Purchase Agreement dated as of July 1, 1997 by and
among NES Acquisition Corp., Sprint Industrial Services,
Inc., Joseph B. Swinbank and Donald Poarch. (2)
10.20 Stock Purchase Agreement dated as of July 18, 1997 by and
among MST Enterprises, Inc., the stockholders of MST
Enterprises, Inc. and National Equipment Services, Inc. (2)
10.21 Asset Purchase Agreement dated as of January 16, 1998 by
and among McNabb Enterprises, Inc., the stockholders of
McNabb Enterprises, Inc. and BAT Acquisition Corp. (2)
</TABLE>
II-12
<PAGE>
<TABLE>
<C> <S> <C>
10.22 Asset Purchase Agreement dated as of January 23, 1998 by
and among NES Michigan Acquisition Corp., Grand Hi-Reach,
Inc. and Allen Baker. (2)
10.23 Stock Purchase Agreement dated as of January 12, 1998 by
and among Genpower Pump & Equipment Co., Inc., the
stockholders of Genpower Pump & Equipment Co., Inc. and
the Company. (2)
10.24 Asset Purchase Agreement dated as of February 4, 1998 by
and among NES Michigan Acquisition Corp., Work Safe Supply
Co., Inc., Dan J. Babcock and Kathy Babcock. (2)
10.25 Asset Purchase Agreement dated as of March 2, 1998 by and
among The Modern Group, Inc., the Stockholders of The
Modern Group, Inc., Southeast Texas Intermediary, Inc. and
NES Acquisition Corp. (2)
10.26 Asset Purchase Agreement dated as of February 9, 1998 by
and between Cormier Equipment Corporation and NES
Acquisition Corp. (2)
10.27 Assignment and Assumption Agreement dated as of March 4,
1998 among NES Acquisition Corp. and NES East Acquisition
Corp. (2)
10.28 Lease dated January 6, 1997 by and between ES&L Service
and NES Acquisition Corp. (2)
10.29 Lease Agreement dated as of May 30, 1990 by and between
Weeks Super Partnership, LTD and Aerial Platforms, Inc. (2)
10.30 Lease Agreement dated as of March 17, 1997 by and between
James Horsley and NES Acquisition Corp. relating to 3440
Red Bluff Road, Pasadena, Texas. (2)
10.31 Lease dated as of April 1, 1997 by and between BAT
Rentals, Inc. and BAT Acquisition Corp. (2)
10.32 Lease Agreement dated as of July 18, 1997 by and between
March S. Trubitz, Suellen Trubitz and MST Enterprises,
Inc. (2)
10.33 Stock Purchase Agreement dated as of March 9, 1998 by and
among the Company, Albany Ladder Company, Inc. and the
stockholders of Albany Ladder Company, Inc. (2)
10.34 Stock Purchase Agreement dated as of April 1, 1998 by and
among the Company, Falconite, Inc. and the stockholders of
Falconite, Inc. (2)
10.35 National Equipment Services, Inc. 1998 Long Term Incentive
Plan.* (1)
10.36 Asset Purchase Agreement dated as of July 24, 1998 by and
among NES Acquisition Corp., R&R Rentals, Inc. and the
stockholders of R&R Rentals, Inc. (2)
10.37 Form of Underwriting Agreement among the Company, Salomon
Smith Barney, Smith Barney, Inc., William Blair & Company,
L.L.C., Credit Suisse First Boston Corporation, Donaldson,
Lufkin & Jenrette Securities Corporation and NationsBanc
Montgomery Securities LLC. (1)
10.38 Stock Purchase Agreement dated as of September 1, 1998 by
and among the Company, Shaughnessy Crane Service, Inc. and
the stockholders of Shaughnessy Crane Service, Inc. (3)
10.39 Employment Letter Agreement dated September 10, 1998 by
and between the Company and James W. O'Neil. (4)
11.1 Statement re Computation of Per Share Earnings. Not
required because the relevant computations can be clearly
determined from the material contained in the financial
statements included herein.
12.1 Statement Regarding Computation of Ratios of Earnings to
Fixed Charges.
</TABLE>
II-13
<PAGE>
<TABLE>
<C> <S> <C>
21.1 Subsidiaries of the Company.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Albin, Randall & Bennett.
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of KPMG LLP.
23.5 Consent of Lawrence, Blackburn Meek Maxey & Co. P.C.
23.6 Consent of Wolf & Company, P.C.
23.7 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney of Directors and Officers of the
Company, Albany Ladder Company, Inc., BAT Acquisition
Corp., Carl's Mid South Rent-All Center Incorporated,
Falconite Aviation, Inc., Falconite Equipment, Inc.,
Falconite, Inc., Falconite Rebuild Center, Inc., McCurry &
Falconite Equipment Co., Inc., M&M Properties, Inc., NES
Acquisition Corp., NES East Acquisition Corp., NES
Michigan Acquisition Corp., Rebel Studio Rentals, Inc. and
Shaughnessy Crane Service, Inc.
25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
</TABLE>
- --------
*Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 333-49223).
(2) Incorporated by reference to the Company's Registration Statement on Form
S-4 (File No. 333-43553).
(3) Incorporated by reference to the Company's Current Report on Form 8-K
dated September 17, 1998 (File No. 001-14163).
(4) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1998 (File No. 001-14163).
(b) Financial Statement Schedules.
Schedule I--National Equipment Services, Inc. (Parent Company Only)--
Condensed Financial Information of Registrant.
Schedule II--National Equipment Services, Inc. and Subsidiaries--Valuation
and Qualifying Accounts and Reserves.
Item 22. Undertakings.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and 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
Securities Act of 1933 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 Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-14
<PAGE>
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction that was not
the subject of and included in the registration statement when it became
effective.
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, National
Equipment Services, Inc. has duly caused this Registration Statement on Form
S-4 to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Evanston, State of Illinois, on February 4, 1999.
National Equipment Services, Inc.
/s/ Paul R. Ingersoll
By: _________________________________
Paul R. Ingersoll
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Chairman of the Board
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
* Director
___________________________________________
John L. Grove
* Director
___________________________________________
Ronald St. Clair
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of National Equipment Services, Inc. pursuant to the Power of
Attorney executed by such officers and directors and filed with the
Securities and Exchange Commission.
/s/ Paul R. Ingersoll
_____________________________________
Paul R. Ingersoll
Attorney-in-fact
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Albany Ladder
Company, Inc. has duly caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Evanston, State of Illinois, on February 4, 1999.
Albany Ladder Company, Inc.
/s/ Paul R. Ingersoll
By: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of Albany Ladder Company Inc. pursuant to the Power of
Attorney executed by such officers and directors and filed with the
Securities and Exchange Commission.
/s/ Paul R. Ingersoll
_____________________________________
Paul R. Ingersoll
Attorney-in-fact
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, BAT Acquisition
Corp. has duly caused this Registration Statement on Form S-4 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Evanston, State of Illinois, on February 4, 1999.
BAT Acquisition Corp.
/s/ Paul R. Ingersoll
By:__________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of BAT Acquisition Corp. pursuant to the Power of Attorney
executed by such officers and directors and filed with the Securities and
Exchange Commission.
/s/ Paul R. Ingersoll
_____________________________________
Paul R. Ingersoll
Attorney-in-fact
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Carl's Mid South
Rent-All Center Incorporated has duly caused this Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Evanston, State of Illinois, on February 4, 1999.
Carl's Mid South Rent-All Center
Incorporated
/s/ Paul R. Ingersoll
By: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of Carl's Mid South Rent-All Center Incorporated pursuant to
the Power of Attorney executed by such officers and directors and filed
with the Securities and Exchange Commission.
/s/ Paul R. Ingersoll
_____________________________________
Paul R. Ingersoll
Attorney-in-fact
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Falconite
Aviation, Inc. has duly caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Evanston, State of Illinois, on February 4, 1999.
Falconite Aviation, Inc.
/s/ Paul R. Ingersoll
By: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of Falconite Aviation, Inc. pursuant to the Power of Attorney
executed by such officers and directors and filed with the Securities and
Exchange Commission.
/s/ Paul R. Ingersoll
_____________________________________
Paul R. Ingersoll
Attorney-in-fact
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Falconite
Equipment, Inc. has duly caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Evanston, State of Illinois, on February 4, 1999.
Falconite Equipment, Inc.
/s/ Paul R. Ingersoll
By: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of Falconite Equipment, Inc. pursuant to the Power of
Attorney executed by such officers and directors and filed with the
Securities and Exchange Commission.
/s/ Paul R. Ingersoll
_____________________________________
Paul R. Ingersoll
Attorney-in-fact
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Falconite, Inc.
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Evanston,
State of Illinois, on February 4, 1999.
Falconite, Inc.
/s/ Paul R. Ingersoll
By: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of Falconite, Inc. pursuant to the Power of Attorney executed
by such officers and directors and filed with the Securities and Exchange
Commission.
/s/ Paul R. Ingersoll
_____________________________________
Paul R. Ingersoll
Attorney-in-fact
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Falconite
Rebuild Center, Inc. has duly caused this Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Evanston, State of Illinois, on February 4, 1999.
Falconite Rebuild Center, Inc.
/s/ Paul R. Ingersoll
By: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of Falconite Rebuild Center, Inc. pursuant to the Power of
Attorney executed by such officers and directors and filed with the
Securities and Exchange Commission.
/s/ Paul R. Ingersoll
_____________________________________
Paul R. Ingersoll
Attorney-in-fact
II-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, McCurry &
Falconite Equipment Co., Inc. has duly caused this Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Evanston, State of Illinois, on February 4, 1999.
McCurry & Falconite Equipment Co.,
Inc.
/s/ Paul R. Ingersoll
By: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of McCurry & Falconite Equipment Co., Inc. pursuant to the
Power of Attorney executed by such officers and directors and filed with
the Securities and Exchange Commission.
/s/ Paul R. Ingersoll
_____________________________________
Paul R. Ingersoll
Attorney-in-fact
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, M&M Properties,
Inc. has duly caused this Registration Statement on Form S-4 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Evanston, State of Illinois, on February 4, 1999.
M&M Properties, Inc.
/s/ Paul R. Ingersoll
By: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of M&M Properties, Inc. pursuant to the Power of Attorney
executed by such officers and directors and filed with the Securities and
Exchange Commission.
/s/ Paul R. Ingersoll
_____________________________________
Paul R. Ingersoll
Attorney-in-fact
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, NES Acquisition
Corp. has duly caused this Registration Statement on Form S-4 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Evanston, State of Illinois, on February 4, 1999.
NES Acquisition Corp.
/s/ Paul R. Ingersoll
By: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of NES Acquisition Corp. pursuant to the Power of Attorney
executed by such officers and directors and filed with the Securities and
Exchange Commission.
/s/ Paul R. Ingersoll
_____________________________________
Paul R. Ingersoll
Attorney-in-fact
II-26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, NES East
Acquisition Corp. has duly caused this Registration Statement on Form S-4 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Evanston, State of Illinois, on February 4, 1999.
NES East Acquisition Corp.
/s/ Paul R. Ingersoll
By: _________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of NES East Acquisition Corp. pursuant to the Power of
Attorney executed by such officers and directors and filed with the
Securities and Exchange Commission.
/s/ Paul R. Ingersoll
_____________________________________
Paul R. Ingersoll
Attorney-in-fact
II-27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, NES Michigan
Acquisition Corp. has duly caused this Registration Statement on Form S-4 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Evanston, State of Illinois, on February 4, 1999.
NES Michigan Acquisition Corp.
/s/ Paul R. Ingersoll
By___________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
* The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of NES Michigan Acquisition Corp. pursuant to the Power of
Attorney executed by such officers and directors and filed with the
Securities and Exchange Commission.
/s/ Paul R. Ingersoll
- -------------------------------------
Paul R. Ingersoll
Attorney-in-fact
II-28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Rebel Studio
Rentals, Inc. has duly caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Evanston, State of Illinois, on February 4, 1999.
Rebel Studio Rentals, Inc.
/s/ Paul R. Ingersoll
By___________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
* The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of Rebel Studio Rentals, Inc. pursuant to the Power of
Attorney executed by such officers and directors and filed with the
Securities and Exchange Commission.
/s/ Paul R. Ingersoll
- -------------------------------------
Paul R. Ingersoll
Attorney-in-fact
II-29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Shaughnessy
Crane Service, Inc. has duly caused this Registration Statement on Form S-4 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Evanston, State of Illinois, on February 4, 1999.
Shaughnessy Crane Service, Inc.
/s/ Paul R. Ingersoll
By___________________________________
Paul R. Ingersoll
Vice President, Treasurer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on February 4, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
* President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Kevin P. Rodgers
* Chief Financial Officer (Principal
___________________________________________ Financial Officer and Principal
Dennis J. O'Connor Accounting Officer)
* Director
___________________________________________
Carl D. Thoma
* Director
___________________________________________
William C. Kessinger
</TABLE>
- --------
* The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers
and directors of Shaughnessy Crane Service, Inc. pursuant to the Power of
Attorney executed by such officers and directors and filed with the
Securities and Exchange Commission.
/s/ Paul R. Ingersoll
- -------------------------------------
Paul R. Ingersoll
Attorney-in-fact
II-30
<PAGE>
SCHEDULE I
NATIONAL EQUIPMENT SERVICES, INC.
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------ ------------
<S> <C> <C>
Assets:
Cash and cash equivalents.......................... $ 12 $ 34,789
Property and equipment, net........................ 17 87
Investment in subsidiaries......................... -- 86,504
Loan origination costs, net........................ -- 6,270
Prepaid and other assets, net...................... 187 222
----- --------
Total assets..................................... $ 216 $127,872
===== ========
Liabilities:
Accounts payable................................... $ -- $ 1,140
Accrued interest................................... -- 1,057
Accrued expenses and other liabilities............. 110 420
Debt............................................... -- 98,782
----- --------
Total liabilities................................ 110 101,399
Commitments and contingencies (Note 5)
Stockholders' Equity:
Class A Common stock, $0.01 par, 50,000 shares
authorized, 0 and 25,011 shares issued and
outstanding, respectively......................... -- 1
Class B Common stock, $0.01 par, 150,000 shares
authorized, 30,108 and 89,900 shares issued and
outstanding, respectively......................... 1 1
Additional paid-in capital......................... 301 25,663
Retained earnings (accumulated deficit)............ (195) 910
Stock subscriptions receivable..................... (1) (102)
----- --------
Total stockholders' equity....................... 106 26,473
----- --------
Total liabilities and stockholders' equity....... $ 216 $127,872
===== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-1
<PAGE>
SCHEDULE I
NATIONAL EQUIPMENT SERVICES, INC.
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
For the Period
from Inception
(June 4, 1996) For the Year
Through Ended
December 31, December 31,
1996 1997
-------------- ------------
<S> <C> <C>
Equity in net income of subsidiaries................ $ -- $2,060
Selling, general and administrative expenses........ 333 1,352
Non-rental depreciation and amortization............ 3 54
----- ------
Operating income (loss)............................. (336) 654
Other income, net................................... -- 1,155
Interest income (expense), net...................... 4 (704)
----- ------
Income (loss) before income taxes................... (332) 1,105
Income tax benefit.................................. (137) --
----- ------
Net income (loss)................................... $(195) $1,105
===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-2
<PAGE>
SCHEDULE I
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
(PARENT COMPANY ONLY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Period
from Inception
(June 4, 1996) For the Year
Through Ended
December 31, December 31,
1996 1997
-------------- ------------
<S> <C> <C>
Operating Activities:
Net income (loss)................................ $(195) $ 1,105
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................. 3 447
Undistributed equity income in subsidiaries.... -- (2,060)
Changes in operating assets and liabilities:
Prepaid and other assets..................... (187) (72)
Accounts payable............................. -- 1,140
Accrued expenses and other liabilities....... 110 1,367
----- ---------
Net cash provided by (used in) operating
activities................................ (269) 1,927
----- ---------
Investing Activities:
Net cash paid for acquisitions................... -- (68,994)
Investment in subsidiaries....................... -- (15,450)
Purchases of property and equipment.............. (20) (88)
----- ---------
Net cash used in investing activities...... (20) (84,532)
----- ---------
Financing Activities:
Proceeds from long-term debt..................... -- 222,307
Payments on long-term debt....................... -- (123,526)
Net proceeds from sales of common stock.......... 301 25,263
Payments of loan origination costs............... -- (6,662)
----- ---------
Net cash provided by financing activities.. 301 117,382
----- ---------
Net increase in cash and cash equivalents.......... 12 34,777
Cash and cash equivalents at beginning of period... -- 12
----- ---------
Cash and cash equivalents at end of period......... $ 12 $ 34,789
===== =========
Supplemental Non-Cash Flow Information:
Cash paid for interest........................... $ -- $ 2,707
===== =========
Cash paid for income taxes....................... $ -- $ 1,113
===== =========
Non-cash issuance of stock....................... $ 1 $ 101
===== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-3
<PAGE>
SCHEDULE I
NATIONAL EQUIPMENT SERVICES, INC.
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common Stock Retained Total
--------------- Additional Earnings Stock Stock-
Class A Class B Paid-In (Accumulated Subscriptions holders'
Shares Shares Capital Deficit) Receivable Equity
------- ------- ---------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Shares issued at
inception (June 4,
1996).................. $-- $ 1 $ 301 $ -- $ 1) $ 301
Net loss................ -- -- -- (195) -- (195)
---- --- ------- ------ ----- -------
Balance at December 31,
1996................... -- 1 301 (195) (1) 106
Sale of shares.......... 1 -- 25,362 -- (101) 25,262
Net income.............. -- -- -- 1,105 -- 1,105
---- --- ------- ------ ----- -------
Balance at December 31,
1997................... $ 1 $ 1 $25,663 $ 910 $(102) $26,473
==== === ======= ====== ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-4
<PAGE>
1. Organization and Summary of Significant Accounting Policies
Organization
National Equipment Services, Inc. ("NES") was organized on June 4, 1996
under the laws of Delaware for the purpose of owning and operating equipment
rental facilities by means of acquiring existing businesses. NES is primarily
involved in the rental of equipment to construction and industrial users. NES
operates from locations in Alabama, Georgia, Louisiana, Nevada, Texas and
Virginia.
Financial statement presentation
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 date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
Adoption of new accounting pronouncement
Since inception, NES adopted Statement of Financial Accounting Standards
(SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and Long-
Lived Assets to be Disposed of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the assets' carrying amounts and related goodwill exceed the
undiscounted cash flows estimated to be generated by those assets. SFAS No.
121 also requires impairment losses to be recorded when the carrying amount of
long-lived assets that are expected to be disposed of exceeds their fair
values, net of disposal costs. SFAS No. 121 did not have a material impact on
NES's financial position or results of operations for the period from
inception (June 4, 1996) through December 31, 1996 or year ended December 31,
1997.
Reporting Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and
losses) in a full set of general-purpose financial statements. The Statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS No. 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. The Statement is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements
for earlier periods provided for comparative purposes is required. The Company
intends to adopt SFAS No. 130 in 1998.
Loan origination costs
Loan origination costs are stated at cost and amortized to interest expense
using the effective interest method over the life of the loan. Amortization
expense related to loan origination costs aggregated $392,000 for the year
ended December 31, 1997.
Fair value of financial instruments
The carrying amounts reported in the consolidated balance sheets for cash,
trade accounts receivable, accounts payable and other liabilities approximate
fair value due to the immediate to short-term maturity of these financial
instruments. The fair value of the Senior Subordinated Notes is based on
quoted market prices and approximates the carrying value at December 31, 1997.
The carrying value of bank debt approximates fair value as the interest on the
bank debt is reset every 30 to 90 days to reflect current market rates.
S-5
<PAGE>
Income taxes
Provisions are made to record deferred income taxes in recognition of items
reported differently for financial reporting purposes than for federal and
state income tax purposes. NES records deferred income taxes using the
liability method in accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. The Company and its
subsidiaries will file a consolidated tax return for the year ended December
31, 1997.
Related party transactions
As disclosed in these financial statements, NES has participated in certain
transactions with related parties.
2. Acquisitions
In 1997, NES purchased the following rental equipment companies:
<TABLE>
<CAPTION>
Acquisition Purchase
Date Company Location Price
----------- ----------------------------- ---------------- -----------
<S> <C> <C> <C>
January 6, 1997 Brazos Rental & Tool, Inc.,
Industrial Crane Maintenance
Systems, Inc., and Safe Load
Work Products, Inc. Brazoria, TX $ 5,000,000
February 18, Aerial Platforms, Inc.
1997 Atlanta, GA $ 4,150,000
March 17, 1997 Lone Star Rentals, Inc. Houston, TX $10,950,000
April 1, 1997 BAT Rentals, Inc. Las Vegas, NV $15,900,000
July 1, 1997 Sprintank Houston, TX $25,300,000
July 18, 1997 MST Enterprises, Inc. Harrisonburg, VA $ 6,000,000
</TABLE>
The purchase prices above are subject to a customary purchase price
adjustment mechanism and assumption of certain seller liabilities.
The following pro forma financial information represents the unaudited pro
forma results of operations as if the aforementioned acquisitions had been
completed on January 1, 1996 and January 1, 1997, after giving effect to
certain adjustments including increased depreciation and amortization of
property and equipment and other assets and interest expense for acquisition
debt. These pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of the results of operations which would
have been achieved had these acquisitions been completed as of these dates,
nor are the results indicative of NES's future results of operations.
<TABLE>
<CAPTION>
For the Year For the Year
Ended Ended
December 31, December 31,
1996 1997
(Unaudited) (Unaudited)
------------ ------------
(in thousands)
<S> <C> <C>
Revenues........................................ $48,040 $56,858
Operating income................................ 9,012 10,382
Net income...................................... 158 1,143
</TABLE>
S-6
<PAGE>
3. Debt
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Senior subordinated notes, interest at 10% payable semi-
annually, due November 30, 2004............................ $98,782
Revolving credit facility loans, interest at the federal
funds rate plus 0.5% or prime rate both plus 1.0%, or the
eurodollar rate plus 2.5%, due no later than July 1, 2002.. --
Term loan, interest at the federal funds rate plus 0.5% or
prime rate both plus 1.0%, or the eurodollar rate plus
2.5%, principal payments due quarterly of $625 through June
1, 1998, $875 through June 1, 1999 and $1,125 through June
1, 2001.................................................... --
-------
$98,782
=======
</TABLE>
On November 20, 1997, NES issued $100 million of Senior Subordinated Notes
(the "Notes") at a discount netting proceeds of $98,767,000. NES accretes the
original issue discount over the term of the Notes using the effective
interest method. The Notes mature on November 30, 2004. Interest on the Notes
accrues at a rate of 10% per year and is payable semi-annually in arrears on
May 30 and November 30 commencing on May 30, 1998.
The Notes are redeemable at the option of the Company at any time after
November 30, 2001 at a redemption price of 105% of the principal amount from
November 30, 2001 to November 29, 2002, at 102.5% from November 30, 2002 to
November 29, 2003 and 100% after November 30, 2003, plus accrued and unpaid
interest. The Company may at any time prior to November 30, 2000 on any one or
more occasions redeem up to 33% of the aggregate principal amount of the Notes
at a redemption price of 110% of the principal amount plus accrued and unpaid
interest with the net cash proceeds of a public offering of common stock of
NES within 45 days of the closing of such public offering. In addition, at any
time prior to November 30, 2001, the Notes may be redeemed as a whole, at the
option of NES, upon the occurrence of or in connection with a change of
control. Upon certain changes in control, the noteholders will have the right
to require redemption at a cash price of 101% of the principal amount plus
accrued and unpaid interest.
All of the Company's wholly-owned subsidiaries make full, unconditional,
joint and several guarantees of the notes. The separate financial statements
of each of these wholly-owned subsidiaries are not presented as management
believes they are not individually meaningful for presentations.
On July 1, 1997, NES entered into a credit facility agreement with First
Union Commercial Corporation (the "Credit Agreement"). The Credit Agreement
provides for a secured revolving line of credit of $100 million and a term
loan of $15 million. Interest accrues at rates of the greater of the annual
Federal Funds Rate plus 0.5% or the prime rate both plus 0.5% to 1.25% based
on NES's leverage ratio or at a rate of LIBOR/(1- eurodollar reserve
percentage) plus 2.0% to 2.75% based on NES's leverage ratio. Principal
payments for credit facility loans (to be applied first to the term loan and
if necessary to revolving loans) are due annually at the lesser of 25% of
excess cash flow or $1 million. Principal payments for the term loan are due
quarterly at $625,000 for the first four quarters, $875,000 for the next four
quarters and $1,125,000 for the next eight quarters. Substantially all assets
and stock of NES are pledged as collateral for the credit facility. NES pays
commitment fees of 0.5% to 0.375% on the unused portion of the outstanding
line of credit balance based on NES's leverage ratio. The term loan was repaid
as of December 31, 1997.
The Indenture for the Notes and the Credit Agreement contain a number of
covenants that, among other things, require NES to maintain certain financial
ratios and set certain limitations on the granting of liens, assets sales,
additional indebtedness, transactions with affiliates, restricted payments,
investments and issuances of stock. NES is in compliance with all covenants.
S-7
<PAGE>
The average interest rate for the year ended December 31, 1997 was 9.8%. NES
incurred interest expense of $76,000 on borrowings from related parties for
the year ended December 31, 1997.
4. Income Taxes
The income tax provision is comprised of current federal and state income
tax benefit of $(137,100) for the period from inception (June 4, 1996) through
December 31, 1996. Deferred tax benefit for this period was immaterial.
The provision for income taxes differs from the amount of income tax
determined by applying the U.S. statutory federal income tax rate of 34% to
income before income taxes as a result of the following (in thousands):
<TABLE>
<CAPTION>
For the Period
From Inception
(June 4, 1996) For the Year
Through Ended
December 31, December 31,
1996 1997
-------------- ------------
<S> <C> <C>
Federal income taxes.......................... $(113) $654
State income taxes, net of federal benefit.... (16) 94
Other......................................... (8) 70
----- ----
$(137) $818
===== ====
</TABLE>
For the year ended December 31, 1997, the income tax provision was recorded
at the subsidiary level.
5. Common Stock
On June 4, 1996, in connection with the formation of NES, NES authorized
25,000 shares of Class A Common stock (24,250 of which were reserved for
issuance to NES's majority stockholder), par value $0.01, and 150,000 shares
of Class B Common stock (75,000 of which were reserved for issuance to NES's
majority stockholder), par value $0.01. On October 28, 1997, the authorized
shares of Class A Common stock were increased to 50,000.
Each calendar quarter, each share of Class A Common is entitled to a yield
in the amount of 10% per year of the sum of such share's unreturned original
cost plus the unpaid yield for all prior quarters. As of December 31, 1997,
the unpaid yield on the Class A Common aggregated $1,608,000. Class A Common
stockholders, as a class, are entitled to a number of votes equal to 10% of
the number of votes allocable to all Common Stock. Upon any distribution,
Class A Common stockholders are entitled to (i) the unpaid yield, (ii) any
unreturned original cost of the shares and (iii) 10% of any remaining
distribution. Class B Common stockholders are entitled to 90% of any remaining
distribution after payment to the Class A Common stockholders of all payments
under clauses (i) and (ii) set forth in the preceding sentence. Additionally,
only in the event of a successful initial public offering can the Class A
Common stockholders require a mandatory redemption of any or all of the shares
attributable to the unpaid yield and original cost of the shares.
NES may not declare additional distributions or dividends other than the
amounts described above for Class A Common shares, issue any debt securities
containing equity features, sell or dispose of more than 5% of the
consolidated assets of the Company in any transaction or series of related
transactions, acquire an interest in a business, acquire a business outside of
the rental equipment industry, or enter into certain related party
transactions, without the consent of a majority of the Class A Common and
Class B Common stockholders.
Class B Common stock sold to executives of NES vests over a 5 year period.
Unpaid notes receivable of $1,000 and $102,000 as of December 31, 1996 and
December 31, 1997, respectively, from executives of NES for shares of Class B
Common stock are classified as stock subscriptions receivable.
S-8
<PAGE>
6. Commitments and Contingencies
NES is party to legal proceedings and potential claims arising in the
ordinary course of its business. In the opinion of management, the ultimate
resolution of these matters will have no material adverse effect on NES's
financial position, results of operations or cash flows.
7. Employee Benefit Plans
The Company sponsors a profit sharing and 401(k) plan (the "Plan") in which
employees over 21 years of age with greater than one-half year of service are
eligible. Under the Plan, NES contributes a discretionary percentage (2.5% for
the year ended December 31, 1997) of each eligible employee's base annual
wages to a trust out of its net profits. In addition, eligible employees can
defer up to 15% of their salary with a partially matching contribution by NES
of 50% of the first 5% of the employee contribution. The employer
contributions vest over a five year period. Contributions to the Plan were
made by the Company's subsidiaries.
8. Related Party Transactions
Pursuant to a Professional Services Agreement dated January 6, 1997, NES
pays management fees of $200,000 per year and investment fees of 1% of all
debt and equity financings of NES to an affiliate of NES's majority
stockholder, who owns 95.0% of the Class A Common stock and 83% of the Class B
Common stock. Total fees paid during the year ended December 31, 1997 were
$417,000 and fees owed at December 31, 1997 were $630,000.
In connection with several of the acquisitions, NES entered into lease
agreements for certain facilities with employees of NES who were prior owners
of the acquired companies. Amounts due under these leases are included in the
future minimum rental commitments under noncancelable operating leases
schedule in Note 10 above.
Stock subscriptions receivable of $1,000 and $102,000 as of December 31,
1996 and 1997, respectively, relate to notes due from officers of NES related
to purchases of Class B Common Stock and are secured by the purchased Class B
Common shares. Interest on the notes accrues at the federal funds rate and is
payable in full at maturity on June 4, 2006 or upon termination of employment.
Accrued interest on these notes was $0 and $8,000 for the period from
inception (June 4, 1996) through December 31, 1996 and the year ended December
31, 1997, respectively.
9. Subsequent Events
Subsequent to year end, NES purchased the following rental equipment
companies:
<TABLE>
<CAPTION>
Acquisition
Date Company Location Price
----------- ------- -------- -----------
<S> <C> <C> <C>
January
12, 1998 Genpower Pump and Equipment Co. Deer Park, TX $ 8,000,000
January
16, 1998 Eagle Scaffolding and Equipment Co. Las Vegas, NV $ 3,290,000
January
23, 1998 Grand Hi-Reach, Inc. Byron Center, MI $ 8,120,000
February
4, 1998 Work Safe Supply Company, Inc. Grandville, MI $ 7,845,000
March 2, Dragon Rentals (division of
1998 The Modern Group, Inc.) Beaumont, TX $23,000,000
March 4,
1998 Cormier Equipment Corporation Oakland, ME $27,500,000
March 30,
1998 Albany Ladder Albany, NY $43,454,000
</TABLE>
The purchase prices above are subject to a customary purchase price
adjustment mechanism and assumption of certain seller liabilities. These
acquisitions will be accounted for under the purchase method based on the
purchase prices. Under the purchase method of accounting NES will allocate the
costs of these acquisitions, as of the respective closing dates, to the assets
acquired and liabilities assumed based on their respective fair values.
S-9
<PAGE>
The operating results of these acquisitions will be included in NES's
consolidated results of operations from the date of acquisition. The following
pro forma financial information represents the unaudited pro forma results of
operations as if the aforementioned acquisitions had been completed on January
1, 1996 and January 1, 1997, after giving effect to certain adjustments
including increased depreciation and amortization of property and equipment
and intangible assets and interest expense for acquisition debt. These pro
forma results have been prepared for comparative purposes only and do not
purport to be indicative of the results of operations which would have been
achieved had these acquisitions been completed as of these dates, nor are the
results indicative of NES's future results of operations.
<TABLE>
<CAPTION>
For the Year For the Year
Ended Ended
December 31, December 31,
1996 1997
(Unaudited) (Unaudited)
------------ ------------
(in thousands)
<S> <C> <C>
Revenues........................................ $120,475 $146,000
Operating income................................ 19,234 26,821
Net income...................................... 751 5,439
</TABLE>
Additionally, subsequent to year end, NES entered into a definitive purchase
agreement to acquire Falconite, Inc., a rental equipment company with
operations in nine southern and midwestern states for $171.25 million and
$3.75 million of 8% convertible subordinated promissory notes. This pending
acquisition is planned to close in 1998 in connection with an initial public
offering of the Company's stock.
S-10
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
Schedule II--Valuation and Qualifying Accounts and Reserves
(Amounts in thousands of dollars)*
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- --------------- ---------------------- -------- -----------------
Additions
----------------------
(2)
(1) Charged
Charged to other
Balance at to cost and accounts-- Write- Balance at
Description January 1, 1997 expenses describe offs December 31, 1997
- ----------- --------------- ----------- ---------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $ 0 $479 $ 0 $225 $254
Reserve for obsolete
inventory.............. $ 0 $732 $ 0 $242 $490
</TABLE>
- --------
*There were no valuation and qualifying accounts and reserves as of December
31, 1996 or during the period then ended.
S-11
<PAGE>
Exhibit 3.27
ARTICLES OF INCORPORATION
OF
REBEL STUDIO RENTALS, INC.
a California corporation
I
The name of this corporation is Rebel Studio Rentals, Inc.
II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the general corporation
laws of California, other than the banking business, the trust company business
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this corporation's
initial agent for service of process is:
IRWIN R. MILLER
16133 Ventura Blvd., Suite 920
Encino, CA 91436-2444
IV
This corporation is authorized to issue only one class of shares of
stock, and the total number of shares which this corporation is authorized to
issue is 1,000, the issued shares shall be half of record by not more than 35
shareholders.
V
This corporation is a close corporation.
DATED: February 16, 1995
/S/ Irwin R. Miller
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IRWIN R. MILLER
Incorporator
IRWIN R. MILLER
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Exhibit 3.28
REBEL STUDIO RENTALS, INC.
Bylaws
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(A California Corporation)
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. TIME. An annual meeting for the election of directors and for the
transaction of any other proper business and any special meeting shall be held
on the date and at the time as the Board of Directors shall from time to time
fix.
Time of Meeting: 1:00 o'clock P.M.
Date of Meeting: The first Monday of March each year
Section 2. PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of California, as the Directors may, from
time to time, fix. Whenever the Directors shall fail to fix such place, the
meetings shall be held at the principal executive office of the corporation.
Section 3. CALL. Annual meetings may be called by the Directors, by the
Chairman of the Board, if any, Vice Chairman of the Board, if any, the
President, if any, the Secretary, or by any officer instructed by the Directors
to call the meeting. Special meetings may be called in like manner and by the
holders of shares entitled to cast not less than ten percent of the votes at the
meeting being called.
Section 4. NOTICE. Written notice stating the place, day and hour of each
meeting, and, in the case of a special meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall by given not less than ten days
(or not less than any such other minimum period of days as may be prescribed by
the General Corporation Law) or more than sixty days (or more than any such
maximum period of days as may be prescribed by the General Corporation Law)
before the date of the meeting, by mail, personally, or by other means of
written communication, charges prepaid by or at the direction of the Directors,
the President, if any, the Secretary or the officer or persons calling the.
meeting, addressed to each shareholder at his address appearing on the books of
the corporation or given by him to the corporation for the purpose of notice,
or, if no such address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at least once
in a newspaper of general circulation in the county in which the said principal
executive office is located.
Such notice shall be deemed to be delivered when deposited in the United
States mail with first class postage therein prepaid, or sent by other means of
written communication addressed to the shareholder at his address as it appears
on the stock transfer books of the corporation. The notice of any meeting at
which directors are to be elected shall include the names of nominees intended
at the time of notice to be presented by management for election. At an annual
meeting of shareholders,
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any matter relating to the affairs of the corporation, whether or not stated in
the notice of the meeting, may be brought up for action except matters which the
General Corporation Law requires to be stated in the notice of the meeting. The
notice of any annual or special meeting shall also include, or be accompanied
by, any additional statements, information, or documents prescribed by the
General Corporation Law. When a meeting is adjourned to another time or place,
notice of the adjourned meeting need not be given if the time and place thereof
are announced at the meeting at which the adjournment is taken; provided that,
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
Section 5. CONSENT. The transaction of any meeting, however called and noticed,
and wherever held, shall be as valid as though had a meeting duly held after
regular call and notice, if a quorum is present and if, either before or after
the meeting, each of the shareholders or his proxy signs a written waiver of
notice or a consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance of a
person at a meeting constitutes a waiver of notice of such meeting, except when
the person objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting shall not constitute a waiver of any right to object to
the consideration of matters required by the General Corporation Law to be
included in the notice if such objection is expressly made at the meeting.
Except as otherwise provided in subdivision (f) of Section 601 of the General
Corporation Law, neither the business to be transacted at nor the purpose of any
regular or special meeting need be specified in any written waiver of notice.
Section 6. CONDUCT OF MEETING. Meetings of the shareholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting -- the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, if any, a Vice-President, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but, if neither the
Secretary nor an Assistant Secretary is present, the Chairman of the meeting
shall appoint a secretary of the meeting.
Section 7. PROXY REPRESENTATION. Every shareholder may authorize another person
or persons to act as his proxy at a meeting or by written action. No proxy shall
be valid after the expiration of eleven months from the date of its execution
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the person executing it prior to the vote or written action pursuant
thereto, except as otherwise provided by the General Corporation Law. As used
herein, a "proxy" shall be deemed to mean a written authorization signed by a
shareholder or a shareholder's attorney in fact giving another person or persons
power to vote or consent in writing with respect to the shares of such
shareholder, and "Signed" as used herein shall be deemed to me an the placing of
such shareholder's name on the proxy, whether by manual signature, typewriting,
telegraphic transmission or otherwise by such shareholder or such shareholder's
attorney in fact.
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Where applicable, the form of any proxy shall comply with the provisions of
Section 604 of the General Corporation Law.
Section 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the Board of
Directors may appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed, or, if any
persons so appointed fail to appear or refuse to act, the Chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election, or persons to replace
any of those who so fail or refuse, at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one or
more shareholders or proxies, the majority of shares represented shall determine
whether one or three inspectors are to be appointed.
The inspectors of election shall determine the number of shares outstanding
and the voting power of each, the shares represented at the meeting, the
existence of a quorum, the authenticity, validity, and effect of proxies,
receive votes, ballots, if any, or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result, and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders. If there are three inspectors of election,
the decision, act, or certificate of a majority shall be effective in all
respects as the decision, act, or certificate of all.
Section 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
subsidiary shall not be entitled to vote on any matter. A subsidiary for these
purposes is defined as a corporation, the shares of which possessing more than
25% of the total combined voting power of all classes of shares entitled to
vote, are owned directly or indirectly through one or more subsidiaries.
Section 10. QUORUM; VOTE; WRITTEN CONSENT. The holders of a majority of the
voting shares shall constitute a quorum at a meeting of shareholders for the
transaction of any business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum. In the absence
of a quorum, any meeting of shareholders may be adjourned from time to time by
the vote of a majority of the shares represented thereat, but no other business
may be transacted except as hereinbefore provided.
In the election of directors, a plurality of the votes cast shall elect. No
shareholder shall be entitled to exercise the right of cumulative voting at a
meeting for the election of directors unless the candidate's name or the
candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
such candidates in nomination.
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Except as otherwise provided by the General Corporation Law, the Articles
of Incorporation or these Bylaws, any action required or permitted to be taken
at a meeting at which a quorum is present shall be authorized by the affirmative
vote of a majority of the shares represented at the meeting.
Except in the election of directors by written consent in lieu of a
meeting, and except as may otherwise be provided by the General Corporation Law,
the Articles of Incorporation or these Bylaws, any action which may be taken at
any annual or special meeting may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, shall be
signed by holders of shares 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. Directors may not be
elected by written consent except by unanimous written consent of all shares
entitled to vote for the election of directors. Notice of any shareholder
approval pursuant to Section 310, 317. 1201 or 2007 without a meeting by less
than unanimous written consent shall be given at least ten days before the
consummation of the action authorized by such approval, and prompt notice shall
be given of the taking of any other corporate action approved by shareholders
without a meeting by less than unanimous written consent to those shareholders
entitled to vote who have not consented in writing.
Section 11. BALLOT. Elections of directors at a meeting need not be by ballot
unless a shareholder demands election by ballot at the election and before the
voting begins. In all other matters, voting need not be by ballot.
Section 12. SHAREHOLDERS' AGREEMENTS. Notwithstanding the above provisions in
the event this corporation elects to become a close corporation, an agreement
between two or more shareholders thereof, if in writing and signed by the
parties thereof, may provide that in exercising any voting rights the shares
held by them shall be voted as provided therein or in Section 706, and may
otherwise modify these provisions as to shareholders' meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. FUNCTIONS. The business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
its Board of Directors. The Board of Directors may delegate the management of
the day-to-day operation of the business of the corporation to a management
company or other person, provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any lawful
capacity.
Each director shall exercise such powers and otherwise perform such duties
in good faith, in the manner such director believes to be in the best interests
of the corporation, and with care, including reasonable inquiry, using ordinary
prudence, as a person in a like position would use under
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similar circumstances. (Section 309).
Section 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions of
section 1, in the event that this corporation shall elect to become a close
corporation as defined in Section 186, its shareholders may enter into a
Shareholders' Agreement as provided in Section 300 (b). Said Agreement may
provide for the exercise of corporate powers and the management of the business
and affairs of this corporation by the shareholders, provided however such
agreement shall, to the extent and so long as the discretion or the powers of
the Board in its management of corporate affairs is controlled by such
agreement, impose upon each shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Section 300 (d).
Section 3. QUALIFICATIONS AND NUMBER. A director need not be a shareholder of
the corporation, a citizen, of the United States, or a resident of the State of
California. The authorized number of directors constituting the Board of
Directors until further changed shall be three. Thereafter, the authorized
number of directors constituting the Board shall be at least three provided
that, whenever the corporation shall have only two shareholders, the number of
directors may be at least two, and, whenever the corporation shall have only one
shareholder, the number of directors may be at least one. Subject to the
foregoing provisions, the number of directors may be changed from time to time
by an amendment of these Bylaws adopted by the shareholders. Any such amendment
reducing the number of directors to fewer than five cannot be adopted if the
votes cast against its adoption at a meeting or the shares not consenting in
writing in the case of action by written consent are equal to more than sixteen
and two-thirds percent of the outstanding shares. No decrease in the authorized
number of directors shall have the effect of shortening the term of any
incumbent director.
Section 4. ELECTION AND TERM. The initial Board of Directors shall consist of
the persons elected at the meeting of the incorporator, all of whom shall hold
office until the first annual meeting of shareholders and until their successors
have been elected and qualified, or until their earlier resignation or removal
from office. Thereafter, directors who are elected to replace any or all of the
members of the initial Board of Directors or who are elected at an annual
meeting of shareholders, and directors who are- elected in the interim to fill
vacancies, shall hold office until the next annual meeting of shareholders and
until their successors have been elected and qualified, or until their earlier
resignation, removal from office, or death. In the interim between annual
meetings of shareholders or of special meetings of shareholders called for the
election of directors, any vacancies in the Board of Directors, including
vacancies resulting from an increase in the authorized number of directors which
have not been filled by the shareholders, including any other vacancies which
the General Corporation Law authorizes directors to fill, and including
vacancies resulting from the removal of directors which are not filled at the
meeting of shareholders at which any such removal has been effected, if the
Articles of Incorporation or a By-Law adopted by the shareholders so provides,
may be filled by the vote of a majority of the directors then in office or of
the sole remaining director, although less than a quorum exists. Any director
may resign effective upon giving written notice to the Chairman of the Board, if
any, the President, the Secretary or the Board
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of Directors, unless the notice specifies a later time for the effectiveness of
such resignation. If the resignation is effective at a future time, a successor
may be elected to the office when the resignation becomes effective.
The shareholders may elect a director at any time to fill any vacancy which
the directors are entitled to fill, but which they have not filled. Any such
election by written consent shall require the consent of a majority of the
shares.
Section 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
corporation may indemnify any Director, officer, agent or employee as to those
liabilities and on those terms and conditions as are specified in Section 317.
In any event, the corporation shall have the right to purchase and maintain
insurance on behalf of any such persons whether or not the corporation would
have the power to indemnify such person against the liability insured against.
Section 6. MEETINGS.
TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
PLACE. Meetings may be held at any place, within or without the State of
California, which has been designated in any notice of the meeting, or, if not
stated in said notice, or, if there is no notice given, at the place designated
by resolution of the Board of Directors.
CALL. Meetings may be called by the Chairman of the Board, if any and
acting, by the Vice Chairman of the Board, if any, by the President, if any, by
any Vice President or Secretary, or by any two directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular meetings
for which the time and place have been fixed by the Board of Directors. Special
meetings shall be held upon at least four days' notice by mail or upon at least
forty-eight hours' notice delivered personally or by telephone or telegraph.
Notice of a meeting need not be given to any director who signs a waiver of
notice, whether before or after the meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice to such
director. A notice or waiver of notice need not specify the purpose of any
regular or special meeting of the Board of Directors.
Section 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION. In the event
only one director is required by the Bylaws or Articles of Incorporation, then
any reference herein to notices, waivers, consents, meetings or other actions by
a majority or quorum of the directors shall be deemed to refer to such notice,
waiver, etc., by such sole director who shall have all the rights and duties and
shall be entitled to exercise all of the powers and shall assume all the
responsibilities otherwise herein described as given to a Board of Directors.
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Section 8. QUORUM AND ACTION. A majority of the authorized number of directors
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided such majority shall constitute at least either one-third of the
authorized number of directors or at least two directors, whichever is larger,
or unless the authorized number of directors is only one. A majority of the
directors present, whether or not a quorum is present, may adjourn any meeting
to another time and place. If the meeting is adjourned for more than twenty-four
hours, notice of any adjournment to another time or place shall be given prior
to the time of the adjourned meeting to the directors, if any, who were not
present at the time of the adjournment. Except as the Articles of Incorporation,
these Bylaws and the General Corporation Law may otherwise provide, the act or
decision done or made by a majority of the Directors present at a meeting duly
held at which a quorum is present shall be the act of the Board of Directors.
Members of the Board of Directors may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another, and participation by such
use shall be deemed to constitute presence in person at any such meeting.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, provided that any action
which may be taken is approved by at least a majority of the required quorum for
such meeting.
Section 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, the Vice Chairman of the Board, if any and if present and
acting, shall preside at all meetings. Otherwise, the President, if any and
present and acting, or any director chosen by the Board, shall preside.
Section 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any
individual director may be removed from office without cause by approval of the
holders of at least a majority of the shares provided, that unless the entire
Board is removed, an individual director shall not be removed when the votes
cast against such removal, or not consenting in writing to such removal would be
sufficient to elect such director if voted cumulatively at an election of
directors at which the same total number of votes were cast, or, if such action
is taken by written consent, in lieu of a meeting, all shares entitled to vote
were voted, and the entire number of directors authorized at the time of the
director's most recent election were then being elected. If any or all directors
are so removed, new directors may be elected at the same meeting or by such
written consent. The Board of Directors may declare vacant the office of any
director who has been declared of unsound mind by an order of court or convicted
of a felony.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted by a
majority of the authorized number of directors, may designate one or more
committees, each consisting of two or more directors to serve at the pleasure of
the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any absent
member at any meeting of such committee. Any such committee, to the extent
provided in the
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resolution of the Board of Directors, shall have all the -authority of the Board
of Directors except such authority as may not be delegated by the provisions of
the General Corporation Law.
Section 12. INFORMAL ACTION. The transactions of any meeting of the Board of
Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting each of the directors not
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 13. WRITTEN ACTION. Any action required or permitted to be taken may be
taken without a meeting if all of the members of the Board of Directors shall
individually or collectively consent in writing to such action. Any such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a Chairman of the
Board or a President or both, a Secretary and a Chief Financial Officer. The
corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article. One person may hold two or more offices.
Section 2. ELECTION. The officers of the corporation, except such officers as
may be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such
other officers as the business of the corporation may require, each of whom
shall hold off ice for such period, have such authority and perform such duties
as are provided in the Bylaws or as the Board of Directors may from time to time
determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with or
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board, or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the Board of
Directors, or to the President, or to the Secretary of the corporation. Any such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified
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therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any of f ice because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in the Bylaws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there shall be
such an officer, shall, if present, preside at all meetings of the Board of
Directors, and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by the
Bylaws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex officio a member of all the standing
committees, including the Executive Committee, if any, and shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or the Bylaws.
Section 8. VICE PRESIDENT. In the absence or disability of the President, the
Vice Presidents, in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the Board of Directors, shall
perform all 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. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors
or the Bylaws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of
minutes at the principal off ice or such other place as the Board of Directors
may order, of all meetings of Directors and Shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Directors' meetings, the
number of shares present or represented at Shareholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office or
at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to by given, notice of all the meetings
of the shareholders and of the Board of Directors required by the Bylaws or by
law to be given, and he shall keep the
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seal of the corporation in safe custody, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or by
the Bylaws.
Section 10. CHIEF FINANCIAL OFFICER. This officer shall keep and maintain, or
cause to be kept and maintained in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares. The books of account shall at all reasonable times be open to inspection
by any director.
This officer shall deposit all monies and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, shall render to the President and directors,
whenever they request it, an account of all his transactions and of the
financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or the
Bylaws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
Section 1. CERTIFICATES FOR SHARES. Each certificate for shares of the
corporation shall set forth therein the name of the record holder of the shares
represented thereby, the number of shares and the class or series of shares
owned by said holder, the par value, if any, of the shares represented thereby,
and such other statements, as applicable, prescribed by Sections 416 - 419,
inclusive, and other relevant Sections of the General Corporation Law of the
State of California (the "General Corporation Law") and such other statements,
as applicable, which may be prescribed by the Corporate Securities Law of the
State of California and any other applicable provision of the law. Each such
certificate issued shall be signed in the name of the corporation by the
Chairman of the Board of Directors, if any, or the Vice Chairman of the Board of
Directors, if any, the President, if any, or a Vice President, if any, and by
the Chief Financial Officer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. Any or all of the signatures on a certificate for shares
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate for
shares shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
In the event that the corporation shall issue the whole or any part of its
shares as partly paid and subject to call for the remainder of the consideration
to be paid therefor, any such certificate for shares shall set forth thereon the
statements prescribed by Section 409 of the General Corporation Law.
Section 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation may issue
a new certificate for shares or for any other security in the place of any other
certificate theretofore issued by it, which is alleged to have been lost, stolen
or destroyed. As a condition to
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such issuance, the corporation may require any such owner of the allegedly lost,
stolen or destroyed certificate or any such owner's legal representative to give
the corporation a bond, or other adequate security, sufficient to indemnify it
against any claim that may be made against it, including any expense or
liability, on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. SHARE TRANSFERS. Upon compliance with any provisions of the General
corporation Law and/or the Corporate Securities Law of 1968 which may restrict
the transferability of shares, transfers of shares of the corporation shall be
made only on the record of shareholders 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 of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes, if
any, due thereon.
Section 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may
determine the shareholders entitled to notice of any meeting or to vote or be
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 lawful
action, the Board of Directors may fix, in advance a record date, which shall
not be more than sixty days or fewer than ten days prior to the date of such
meeting or more than sixty days prior to any other action.
If the Board of Directors shall not have fixed a record date as aforesaid,
the record date for determining shareholders entitled to notice of or to vote at
a meeting of shareholders shall be at the close of business on the business day
next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held; the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors has been taken, shall be the day on which the first
written consent is given; and the record date for determining shareholders for
any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, or the sixtieth day
prior to the day of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than forty-five days from the date set for the original
meeting.
Except as may be otherwise provided by the General Corporation Law,
shareholders on the record date shall be entitled to notice and to vote or to
receive any dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date.
Section 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other
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<PAGE>
corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any vice President or
any other person authorized by resolution of the Board of Directors.
Section 6. MEANING OF CERTAIN TERMS. As used in these Bylaws in respect of the
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to assent or consent or dissent in writing in
lieu of a meeting, as the case may be, the term "share" or "shares" or
"shareholder" or "shareholders" refers to an outstanding share or shares and to
a holder or holders record or outstanding shares when the corporation is
authorized to issue only one class of shares, and said reference is also
intended to include any outstanding share or shares and any holder or holders of
record of outstanding shares of any class upon which or upon whom the Articles
of Incorporation confer such rights here there are two or more classes or series
of shares or upon which or upon whom the General Corporation Law confers such
rights notwithstanding that the Articles of Incorporation may provide for more
than one class or series of shares, one or more of which are limited or denied
such rights thereunder.
Section 7. CLOSE CORPORATION CERTIFICATES. All certificates representing shares
of this corporation, in the event it shall elect to become a close corporation,
shall contain the legend required by Section 418(c).
ARTICLE V
EFFECT OF SHAREHOLDERS' AGREEMENT-CLOSE CORPORATION
Any Shareholders' Agreement authorized by Section 300(b) shall only be
effective to modify the terms of these Bylaws if this corporation elects to
become a close corporation with appropriate filing of or amendment to its
Articles as required by Section 202 and shall terminate when this corporation
ceases to be a close corporation. Such an agreement cannot waive or alter
Sections 158 (defining close corporations), 202 (requirements of Articles of
Incorporation), 500 and 501 relative to distributions, ill (merger), 1201(e)
(reorganization) or Chapters 15 (Records and Reports, 16 (Rights of Inspection),
18 (Involuntary Dissolution) or 2 (Crimes and Penalties). Any other provisions
of the Code or these Bylaws may be altered or waived thereby, but to the extent
they are not so altered or waived, these Bylaws shall be applicable.
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS - HOW EXECUTED
The Board of Directors, except as in the 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. Such
authority may be general or confined to specific instances. Unless so authorized
by the Board of Directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or agreement, or to pledge its
credit, or to render it liable for any purposes or any amount, except as
provided in Section 313 of the Corporations Code.
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<PAGE>
ARTICLE VII
CONTROL OVER BYLAWS
After the initial Bylaws of the corporation shall have been adopted by the
incorporator or incorporators of the corporation, the Bylaws may be amended or
repealed or new Bylaws may be adopted by the shareholders entitled to exercise a
majority of the voting power or by the Board of Directors; provided, however,
that the Board of Directors shall have no control over any By-Law which fixes -
or changes the authorized number of directors of the corporation; provided,
further, than any control over the Bylaws herein vested in the Board of
Directors shall be subject to the authority of the aforesaid shareholders to
amend or repeal the Bylaws or to adopt new Bylaws; and provided further that any
By-Law amendment or new By-Law which changes the minimum number of directors to
fewer than five shall require authorization by the greater proportion of voting
power of the shareholders as hereinbefore set forth.
ARTICLE VIII
BOOKS AND RECORDS
Section 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at its
principal executive office in the State of California, or, if its principal
executive office is not in the State of California, the original or a copy of
the Bylaws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. if the principal
executive office of the corporation is outside the State of California, and, if
the corporation has no principal business office in the State of California, it
shall upon request of any shareholder furnish a copy of the Bylaws as amended to
date.
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees, if any, of the Board of Directors. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, a record of its shareholders, giving the names and addresses
of all shareholders and the number and class of shares held by each. Such
minutes shall be in written form. Such other books and records shall be kept
either in written form or in any other form capable of being converted into
written form.
Section 2. RECORD OF PAYMENTS. All checks, drafts or other orders or payment of
money, notes or other evidences 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 shall be determined from time to time by
resolution of the Board of Directors.
Section 3. ANNUAL REPORT. Whenever the corporation shall have fewer than one
hundred shareholders, the Board of Directors shall not be required to cause to
be sent to the shareholders of the corporation the annual report prescribed by
Section 1501 of the General Corporation Law unless it shall determine that a
useful purpose would be served by causing the same to be sent or unless the
Department of Corporations, pursuant to the provisions of the Corporate
Securities Law of 1968,
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<PAGE>
shall direct the sending of the same.
-15-
<PAGE>
Exhibit 3.29
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
RESTATED ARTICLES OF ORGANIZATION
General Laws, Chapter 156B, Section 72
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
restated articles of organization. The fee for filing this certificate is
prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the
Commonwealth of Massachusetts.
--------------------
We, John J. Shaughnessy, President, and Michael P. Shaughnessy, Clerk of
Shaughnessy Crane Service, Inc. located at 346 D Street, Boston, MA 02127, do
hereby certify that the following restatement of the articles of organization of
the corporation was duly adopted at a meeting held on September 15, 1995, by
vote of 88,000 shares of Common Stock out of 88,000 shares outstanding, being at
least two-thirds of each class of stock outstanding and entitled to vote and of
each class or series of stock adversely affected thereby.
1. The above by which the corporation shall be known to:
Shaughnessy Crane Service, Inc.
2. The purpose management activities of every type and description and to
perform and engage in all activities connected therewith.
To engage in all aspects of the crane and rigging business; and To
carry on any business or other activity which may be lawfully carried
on by a corporation organized under the Business Corporation Law of
the Commonwealth of Massachusetts, whether or not related to those
referred to hereinabove.
NOTE: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate on 8 1/2" x 11"
sheets of paper leaving a left hand margin of at least 1 inch for
binding. Additions to more than one article may be continued on a
single sheet so long as each article requiring each such addition is
clearly indicated.
<PAGE>
3. The total number of shares and the par value, if any, of each class of
stock which the corporation is authorized to issue as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------
CLASS OF STOCK WITHOUT PAR VALUE WITH PAR VALUE
-----------------------------------------
NUMBER OF SHARES NUMBER OF PAR
SHARES VALUE
------------------------------------------------------------
<S> <C> <C> <C>
Preferred
------------------------------------------------------------
------------------------------------------------------------
Common 300,000
------------------------------------------------------------
</TABLE>
*4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting
powers, qualifications, special or relative rights or privileges as to
each class thereof and any series now established:
None
*5. The restrictions, if any, imposed by the articles of organization upon
the transfer of shares of stock of any class are as follows:
None
*6. Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary
dissolution, or for limiting, defining or regulating the powers of the
corporation, or of its directors or stockholders, or of any class of
stockholders:
See Continuation Sheets 6A and 6B attached hereto.
*If there are no provisions state "None".
<PAGE>
Continuation Sheet 6A
---------------------
PROVISIONS AS TO INTERCOMPANY DEALINGS
The Corporation may enter into contracts or transact business with one or
more of its directors, officers or stockholders or with any corporation,
organization or other concern in which any one or more of its directors,
officers or stockholders are directors, officers, stockholders or are otherwise
interested and may enter into other contracts or transactions in which any one
or more of its directors, officers or stockholders is in any way interested;
and, in the absence of fraud, no such contract or transaction shall be
invalidated or in any way affected by the fact that such directors, officers or
stockholders of the Corporation have or may have interests which are or might be
adverse to the interest of the Corporation even though the vote or action of
directors, officers or stockholders having such adverse interests may have been
necessary to obligate the Corporation upon such contract or transaction. At any
meeting of the Board of Directors of the Corporation (or of any duly authorized
committee thereof) at which any such contract or transaction shall be authorized
or ratified, any such director or directors may vote or act there with like
force and effect as if he had no such interest, provided in such case the nature
of such interest shall be disclosed or shall have been known to the directors or
a majority thereof. A general notice that a director or officer is interested in
any corporation or other concern of any kind above referred to shall be a
sufficient disclosure as to the nature of such interest of such director or
officer with respect to all contracts and transactions with such corporation or
other concern. No director shall be disqualified from holding office as director
or officer of the Corporation by reason of any such adverse interests, unless
the Board of Directors shall determine that such adverse interest is detrimental
to the interests of the Corporation.
PROVISION RELATIVE TO THE PLACE OF MEETINGS
OF STOCKHOLDERS
Meetings of stockholders of the Corporation may be held anywhere in the
United States.
PROVISIONS RELATIVE TO MAKING, AMENDING AND
REPEALING BY-LAWS
The By-Laws of the Corporation may provide that the directors (as well as
the stockholders) may make, amend or repeal the By-Laws in whole or in part to
the extent permitted by law, subject to the limitations contained in such By-
Laws.
PROVISIONS RELATIVE TO BECOMING A PARTNER
The Corporation may be a partner in any business enterprise which the
Corporation would have the power to conduct by itself.
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<PAGE>
Continuation Sheet 6B
---------------------
LIMITATIONS ON DIRECTOR LIABILITY
No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of law, (iii) under
Section 61 or 62 of Chapter 156B of the General Laws of the Commonwealth of
Massachusetts or (iv) for any transaction in which the director derived an
improper personal benefit. No amendment or repeal of any provision of this
paragraph, directly or by adoption of an inconsistent provision of these
Articles of Organization, shall apply to or have any effect on any liability or
alleged liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
-2-
<PAGE>
*We further certify that the foregoing restated articles of organization
effect no amendments to the articles of organization of the corporation as
heretofore amended, except amendments to the following articles 2, 5, 6
(*If there are no such amendments, state "None".)
Briefly describe amendments in space below:
Articles 2, 5 and 6 are amended and restated in their entirety.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto
signed our names this 15th day of September, in the year 1995.
/S/ John J. Shaughnessy
-----------------------------------------
John J. Shaughnessy, President
/S/ Michael P. Shaughnessy
-----------------------------------------
Michael P. Shaughnessy, Clerk
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
I hereby approve the within restated articles of organization and, the
filing fee in the amount of $500 having been paid, said articles are deemed to
have been filed with me this 20th day of September, 1995.
/S/ William Francis Galvin
-----------------------------------------
William Francis Galvin
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF RESTATED ARTICLES OF ORGANIZATION TO BE SENT
TO: James H. Wickersham
Hill & Barlow
One International Place, Boston, MA 02110
Telephone: (617) 428-3000
--------------
<PAGE>
Exhibit 3.30
AMENDED AND RESTATED BY-LAWS
OF
SHAUGHNESSY CRANE SERVICE, INC.
A Massachusetts corporation
(Adopted on September 17, 1998)
ARTICLE I
---------
OFFICES
-------
Section 1. Resident Office. The resident office of the corporation in the
Commonwealth of Massachusetts shall be located at 346 D. Street, South Boston,
MA 02127. The name of the corporation's resident agent at such address shall be
Stephen A. Shaughnessy. The resident office and/or resident agent of the
corporation may be changed from time to time by action of the board of
directors.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the Commonwealth of Massachusetts, as the
board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall be
determined by the chief executive officer of the corporation; provided, that if
the chief executive officer does not act, the board of directors shall determine
the date, time and place of such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
called for any purpose and may be held at such time and place, within or without
the Commonwealth of Massachusetts, as shall be stated in a notice of meeting or
in a duly executed waiver of notice thereof. Such meetings may be called at any
time by the board of directors or the chief executive officer and shall be
called by the chief executive officer upon the written request of holders of
shares entitled to cast not less than a majority of the votes at the
<PAGE>
meeting, such written request shall state the purpose or purposes of the meeting
and shall be delivered to the chief executive officer.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the Commonwealth of Massachusetts, as the place
of meeting for any annual meeting or for any special meeting called by the board
of directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
Section 4. Notice. Whenever stockholders are required or permitted to take
action at a meeting, written or printed notice stating the place, date, time,
and, in the case of special meetings, the purpose or purposes, of such meeting,
shall be given to each stockholder entitled to vote at such meeting not less
than seven days before the date of the meeting. All such notices shall be
delivered, either personally or by mail, by or at the direction of the board of
directors, the chief executive officer or the secretary, and if mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
postage prepaid, addressed to the stockholder at his, her or its address as the
same appears on the records of the corporation. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends 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 5. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least ten (10) days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting arranged in alphabetical order, 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 6. Quorum. The holders of a majority of the outstanding shares of
capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the articles of organization. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy at
the meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time
and place, notice need not be given of the adjourned meeting if the time and
place thereof are
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<PAGE>
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of an
applicable law or of the articles of organization a different vote is required,
in which case such express provision shall govern and control the decision of
such question.
Section 9. Voting Rights. Except as otherwise provided by the Business
Corporation Law of the Commonwealth of Massachusetts or by the articles of
organization of the corporation or any amendments thereto and subject to Section
3 of Article VI hereof, every stockholder shall at every meeting of the
stockholders be entitled to one (1) vote in person or by proxy for each share of
common stock held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the stockholders,
and before any voting commences, all proxies filed at or before the meeting
shall be submitted to and examined by the secretary or a person designated by
the secretary, and no shares may be represented or voted under a proxy that has
been found to be invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise provided in the
articles of organization, 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, 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 and bearing the dates of
signature of the stockholders who signed the consent or consents,
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<PAGE>
shall be signed by all of the holders of outstanding stock. All consents
properly delivered in accordance with this section shall be deemed to be
recorded when so delivered. Any action taken pursuant to such written consent or
consents of the stockholders shall have the same force and effect as if taken by
the stockholders at a meeting thereof.
ARTICLE III
-----------
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors
which shall constitute the board shall be three (3). Thereafter, the number of
directors shall be established from time to time by resolution of the board. The
directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote in the
election of directors. The directors shall be elected in this manner at the
annual meeting of the stockholders, except as provided in Section 4 of this
Article III. Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board of
directors may be removed at any time, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
Whenever the holders of any class or series are entitled to elect one or more
directors by the provisions of the corporation's articles of organization, the
provisions of this section shall apply, in respect to the removal without cause
of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole. Any director may resign at any time upon written
notice to the corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director. Each director so chosen shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected board
of directors shall be held without other notice than this by-law immediately
after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such
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<PAGE>
place as shall from time to time be determined by resolution of the board.
Special meetings of the board of directors may be called by or at the request of
the chief executive officer on at least twenty-four (24) hours notice to each
director, either personally, by telephone, by mail, or by telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors 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, which to the
extent provided in such resolution or these by-laws shall have and may exercise
the powers of the board of directors in the management and affairs of the
corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors or
any committee thereof may participate in and act at any meeting of such board or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
-5-
<PAGE>
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends 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. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
articles of organization, any action required or permitted to be taken at any
meeting of the board of directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
ARTICLE IV
----------
OFFICERS
--------
Section 1. Number. The officers of the corporation shall be elected by the
board of directors and shall consist of a president, a chief executive officer,
chief financial officer, one or more vice-presidents, secretary, clerk, a
treasurer, and such other officers and assistant officers as may be deemed
necessary or desirable by the board of directors. Any number of offices may be
held by the same person. In its discretion, the board of directors may choose
not to fill any office for any period as it may deem advisable.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. The president, treasurer and clerk shall be elected annually by the
board of directors at the first meeting of the board of directors held after
each annual meeting of stockholders or as soon there after as conveniently may
be. Vacancies may be filled or new offices created and filled at any meeting of
the board of directors. Each officer shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors
may be removed by the board of directors whenever in its judgment the best
interests of the
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<PAGE>
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. The President. The president need not be a member of the board
of the corporation; shall preside at all meetings of the stockholders and board
of directors at which he is present; subject to the powers of the board of
directors, shall have general charge of the business, affairs and property of
the corporation, and control over its officers, agents and employees; and shall
see that all orders and resolutions of the board of directors are carried into
effect. The president shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation. The president shall
have such other powers and perform such other duties as may be prescribed by the
board of directors or as may be provided in these by-laws.
Section 7. Chief Executive Officer. The chief executive officer of the
corporation, subject to the powers of the board of directors, shall have general
and active management of the business of the corporation; and shall see that all
orders and resolutions of the board of directors are carried into effect. The
chief executive officer shall have such other powers and perform such other
duties as may be prescribed by the board of directors or as may be provided in
these by-laws.
Section 8. Chief Financial Officer and Treasurer. The chief financial
officer of the corporation shall, under the direction of the chief executive
officer, be responsible for all financial and accounting matters and for the
direction of the offices of treasurer and controller. The chief financial
officer shall have such other powers and perform such other duties as may be
prescribed by the president, the chief executive officer or the board of
directors or as may be provided in these by-laws.
Section 9. Vice-presidents. The vice-president, or if there shall be more
than one, the vice-presidents in the order determined by the board of directors
or by the president, shall, in the absence or disability of the president, act
with all of the powers and be subject to all the restrictions of the president.
The vice-presidents shall also perform such other
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duties and have such other powers as the board of directors, the president or
these by-laws may, from time to time, prescribe.
Section 10. The Clerk and Assistant Clerk. The clerk shall attend all
meetings of the board of directors, all meetings of the committees thereof and
all meetings of the stockholders and record all the proceedings of the meetings
in a book or books to be kept for that purpose. Under the president's
supervision, the clerk shall give, or cause to be given, all notices required to
be given by these by-laws or by law; shall have such powers and perform such
duties as the board of directors, the president or these by-laws may, from time
to time, prescribe; and shall have custody of the corporate seal of the
corporation. The clerk, or an assistant clerk, shall have authority to affix the
corporate seal to any instrument requiring it and when so affixed, it may be
attested by his signature or by the signature of such assistant clerk. The board
of directors may give general authority to any other officer to affix the seal
of the corporation and to attest the affixing by his signature. The assistant
clerk, or if there be more than one, the assistant clerks in the order
determined by the board of directors, shall, in the absence or disability of the
clerk, perform the duties and exercise the powers of the clerk and shall perform
such other duties and have such other powers as the board of directors, the
president, or clerk may, from time to time, prescribe.
Section 11. The Secretary and Assistant Secretaries. The secretary or any
assistant secretary shall perform such other duties and have such other powers
as the board of directors, the president or these by-laws may, from time to
time, prescribe.
Section 12. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 14. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
---------
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
-------------------------------------------------
Section 1. Nature of Indemnity. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the
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fact that he, or a person of whom he is the legal representative, is or was a
director or officer, of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, fiduciary, or agent of another
corporation or of a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless by the corporation to the fullest extent which
it is empowered to do so unless prohibited from doing so by the Business
Corporation Law of the Commonwealth of Massachusetts, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the corporation to provide broader indemnification
rights than said law permitted the corporation to provide prior to such
amendment) against all expense, liability and loss (including attorneys' fees
actually and reasonably incurred by such person in connection with such
proceeding) and such indemnification shall inure to the benefit of his heirs,
executors and administrators; provided, however, that, except as provided in
Section 2 hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the board of directors of the corporation. The
right to indemnification conferred in this Article V shall be a contract right
and, subject to Sections 2 and 5 hereof, shall include the right to be paid by
the corporation the expenses incurred in defending any such proceeding in
advance of its final disposition. The corporation may, by action of its board
of directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall be
made promptly, and in any event within thirty (30) days, upon the written
request of the director or officer. If a determination by the corporation that
the director or officer is entitled to indemnification pursuant to this Article
V is required, and the corporation fails to respond within sixty (60) days to a
written request for indemnity, the corporation shall be deemed to have approved
the request. If the corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within thirty (30) days, the right to indemnification
or advances as granted by this Article V shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and expenses
incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the Business Corporation
Law of the Commonwealth of Massachusetts for the corporation to indemnify the
claimant for the amount claimed, but the burden of such defense shall be on the
corporation. Neither the failure of the corporation (including its board of
directors, independent legal counsel, or its stockholders) to have made a
determination prior to the
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<PAGE>
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in the Business Corporation Law of the Commonwealth of Massachusetts, nor
an actual determination by the corporation (including its board of directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the articles of organization, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation 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 against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section
1 of this Article V in defending a proceeding shall be paid by the corporation
in advance of such proceeding's final disposition unless otherwise determined by
the board of directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the Business Corporation Law of the Commonwealth of
Massachusetts or other applicable law are in effect, and any repeal or
modification of this Article V or any such law shall not affect any
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rights or obligations then existing with respect to any Commonwealth of facts or
proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
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 this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
----------
CERTIFICATES OF STOCK
---------------------
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president and the treasurer or an assistant treasurer of
the corporation, certifying the number of shares of a specific class or series
owned by such holder in the corporation. If such a certificate is countersigned
(1) by a transfer agent or an assistant transfer agent other than the
corporation or its employee or (2) by a registrar, other than the corporation or
its employee, the signature of any such president, vice-president, treasurer, or
assistant treasurer may be facsimiles. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
corporation whether because of death, resignation or otherwise before such
certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the corporation. All certificates for shares shall
be consecutively numbered or otherwise identified. The name of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the corporation. Shares of stock
of the corporation shall only be transferred on the books of the corporation by
the holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization, and
other matters as the corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that
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event, it shall be the duty of the corporation to issue a new certificate to the
person entitled thereto, cancel the old certificate or certificates, and record
the transaction on its books. The board of directors may appoint a bank or trust
company organized under the laws of the United States or any state thereof to
act as its transfer agent or registrar, or both in connection with the transfer
of any class or series of securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. 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, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by the
board of directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the close of business
on the next day preceding the day on which notice is given, or if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In order
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the Commonwealth of Massachusetts, its
principal place of business, or an officer or agent of the corporation
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having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the board of directors and prior action by the board of
directors is required by statute, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the board of directors adopts the
resolution taking such prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
ARTICLE VII
-----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the corporation,
subject to the provisions of the articles of organization, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in
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cash, in property, or in shares of the capital stock, subject to the provisions
of the articles of organization. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
any other purpose and the directors may modify or abolish any such reserve in
the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal,
Massachusetts". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in
any other corporation held by the corporation shall be voted by the chief
executive officer, unless the board of directors specifically confers authority
to vote with respect thereto, which authority may be general or confined to
specific instances, upon some other person or officer. Any
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person authorized to vote securities shall have the power to appoint proxies,
with general power of substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered
office in the Commonwealth of Massachusetts or at its principal place of
business.
Section 9. Section Headings. Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the articles of
organization, the Business Corporation Law of the Commonwealth of Massachusetts
or any other applicable law, the provision of these by-laws shall not be given
any effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
------------
AMENDMENTS
----------
These by-laws may be amended, altered, or repealed and new by-laws adopted
at any meeting of the board of directors by a majority vote. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of the same powers.
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EXHIBIT 4.10
EXECUTION COPY
================================================================================
NATIONAL EQUIPMENT SERVICES, INC.
THE SUBSIDIARY GUARANTORS PARTY HERETO
________________________________________
10% SENIOR SUBORDINATED NOTES DUE 2004
________________________________________
___________________
INDENTURE
DATED AS OF DECEMBER 11, 1998
___________________
HARRIS TRUST AND SAVINGS BANK
Trustee
===============================================================================
<PAGE>
Indenture, dated as of December 11, 1998, among National Equipment
Services, Inc., a Delaware corporation, (the "Company"), Albany Ladder Company,
Inc., a New York corporation ("Albany"), BAT Acquisition Corp., a Delaware
corporation ("BAT"), NES Acquisition Corp., a Delaware corporation ("NES
Acquisition"), NES East Acquisition Corp., a Delaware corporation ("NES East"),
NES Michigan Corporation, a Delaware corporation ("NES Michigan"), Falconite,
Inc., an Illinois corporation ("Falconite"), Carl's Mid South Rent-All Center
Incorporated, a Tennessee corporation ("Carl's"), Falconite Aviation, Inc., a
Delaware corporation ("Falconite Aviation"), Falconite Equipment, Inc., an
Illinois corporation ("Falconite Equipment"), Falconite Rebuild Center, Inc., a
Kentucky corporation ("Falconite Rebuild"), M&M Properties, Inc., an Alabama
corporation ("M&M"), McCurry & Falconite Equipment Co., Inc. ("M&F"), Rebel
Studio Rentals, Inc., a California corporation ("Rebel") and Shaughnessy Crane
Service, Inc., a Massachusetts corporation ("Shaughnessy") (each of Albany, BAT,
NES Acquisition, NES East, NES Michigan, Falconite, Carl's, Falconite Aviation,
Falconite Equipment, Falconite Rebuild, M&M, M&F, Rebel and Shaughnessy, a
"Subsidiary Guarantor" and together with any Subsidiary of the Company that
executes a Subsidiary Guarantee substantially in the form of Exhibit D attached
---------
hereto, the "Subsidiary Guarantors") and Harris Trust and Savings Bank, as
trustee (the "Trustee").
The Company, the Subsidiary Guarantors and the Trustee agree as follows for
the benefit of each other and for the equal and ratable benefit of the holders
of the Company's 10% Senior Subordinated Notes due 2004, Series C (the "Senior
Subordinated Notes") and the new 10% Senior Subordinated Notes due 2004, Series
D (the "New Senior Subordinated Notes" and, together with the Senior
Subordinated Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person, in each case to the
extent not repaid within five days after the date of the acquisition.
"Additional Notes" means up to $50.0 million aggregate principal amount of
Notes (other than the Initial Notes) issued under this Indenture in accordance
with Sections 2.02 and 4.09 hereof, as part of the same series as the Initial
Notes.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Premium" means, with respect to a Note at any redemption date,
the greater of (i)
1
<PAGE>
1.0% of the principal amount of such Note or (ii) the excess of (A) the present
value at such time of (1) the redemption price of such Note at November 30, 2001
(such redemption price being set forth in Section 3.07 hereof) plus (2) all
required interest payments due on such Note through November 30, 2001 (excluding
accrued but unpaid interest), computed using a discount rate equal to the
Treasury Rate plus 75 basis points, over (B) the principal amount of such Note.
"Applicable Procedures" means applicable procedures of the Depositary.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales and leases of inventory and equipment in the
ordinary course of business consistent with past practices (provided that the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole will be
governed by Section 4.13 and/or Article 5 hereof and not by Section 4.10 hereof)
and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries
of Equity Interests of any of the Company's Restricted Subsidiaries, in the case
of either clause (i) or (ii), whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $2.0 million
or (b) for net proceeds in excess of $2.0 million. Notwithstanding the
foregoing, the following items shall not be deemed to be Asset Sales: (i) a
transfer of assets by the Company to a Wholly Owned Restricted Subsidiary or by
a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary; (ii) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary; (iii) a Restricted Payment that is permitted by Section 4.07 hereof;
(iv) the creation of any Lien not prohibited by Section 4.12 hereof; and (v) the
conversion of Cash Equivalents into cash.
"Bankruptcy Law" means title 11, U.S. Code or any similar Federal or state
law for the relief of debtors.
"Board of Directors" means, unless otherwise specified, the Board of
Directors of the Company or any authorized committee thereof.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification.
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
85% of the face amount of all accounts receivable owned by the Company and its
Restricted Subsidiaries as of such date that are not more than 90 days past due,
plus (b) 50% of the book value of the parts and supplies inventory owned by the
Company and its Restricted Subsidiaries as of such date, plus (c) 80% of the
orderly liquidation value of the rental equipment owned by the Company and its
Restricted Subsidiaries as of such date, plus (d) 80% of the cost of the new
equipment owned by the Company and its Restricted Subsidiaries as of such date,
all calculated on a consolidated basis and in accordance with GAAP. To the
extent that information is not available as to the amount of accounts receivable
or inventory or equipment as of a specific date, the Company may utilize the
most recent available information for purposes of calculating the Borrowing
Base.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
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"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the date
of acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Thompson Bank Watch Rating
of "B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above, (v) commercial paper having a rating of at
least A-2 by Standard & Poor's Corporation or at least P-2 by Moody's Investors
Service, Inc. or at least an equivalent rating category of another nationally
recognized securities rating agency and in each case maturing within one year
after the date of acquisition and (vi) money market funds at least 95% of the
assets of which constitute Cash Equivalents of the kinds described in clauses
(i) - (v) of this definition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than a Principal or a Related Party of a Principal; (ii)
the adoption by the Company of a plan relating to its liquidation or
dissolution; (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power rather than
number of shares); or (iv) the first day on which a majority of the members of
the Board of Directors of the Company are not Continuing Directors.
"Company" means National Equipment Services, Inc., a Delaware corporation,
unless and until a successor replaces the Company in accordance with Article 5
hereof, and thereafter includes such successor.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
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Capital Lease Obligation, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash expenses (including non-cash write-ups and
non-cash charges relating to inventory and fixed assets) of such Person and its
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash expenses were deducted in computing such Consolidated Net
Income plus (v) an amount equal to 1/3 of the Consolidated Lease Expense of such
person and its Subsidiaries for such period, to the extent that any such expense
was deducted in computing such Consolidated Net Income, minus (vi) non-cash
items increasing such Consolidated Net Income for such period, in each case, on
a consolidated basis and determined in accordance with GAAP. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Subsidiary of a
Person shall be added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent (and in the same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Lease Expense" means, with respect to any Person for any
period, the aggregate rental obligations of such Person and its consolidated
Restricted Subsidiaries determined on a consolidated basis in accordance with
GAAP payable in respect of such period under leases of real and/or personal
property (net of income from subleases thereof, but including taxes, insurance,
maintenance and similar expenses that the lessee is obligated to pay under the
terms of such leases), whether or not such obligations are reflected as
liabilities or commitments on a consolidated balance sheet of such Person and
its Restricted Subsidiaries or in the notes thereto.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement (other than the Credit Facility as in effect as of
the date hereof, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
provided that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are not materially more
restrictive, taken as a whole, with respect to such restrictions or dividends
and similar distributions than those contained in the Credit Facility as in
effect on the date hereof), instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income (but not loss) of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to the Company or one
of its Restricted Subsidiaries, for purposes of Section 4.09 hereof, and shall
be included for purposes of Section 4.07 hereof, but only to the extent of the
amount of dividends or distributions paid in cash to the Company or one of its
Restricted Subsidiaries.
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"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date hereof, (ii) was nominated for election or elected to such
Board of Directors with the approval of a majority of the Continuing Directors
who were members of such Board at the time of such nomination or election or
(iii) was nominated for election or elected to such Board of Directors pursuant
to GTCR Fund V's rights under the Stockholders Agreement dated as of June 4,
1996 among the Company and its stockholders.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 13.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facility" means that certain Credit Agreement, dated as of July 1,
1998, by and among the Company, as Borrower, NES Acquisition Corp., BAT
Acquisition Corp., NES East Acquisition Corp., NES Michigan Acquisition Corp.,
Albany Ladder Company, Inc., Falconite, Inc., Falconite Equipment, Inc., M&M
Properties, Inc., Carl's Mid South Rent-All Center Incorporated, Falconite
Rebuild Center, Inc., Falconite Aviation, Inc. and McCurry & Falconite Equipment
Co., Inc., as Guarantors, First Union National Bank, as Agent and Lender, and
American National Bank and Trust Company of Chicago, Comerica Bank, The CIT
Group/Business Credit, Inc. and Mercantile Business Credit Inc., as Lenders,
providing for a term loan and revolving credit borrowings, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including, without limitation, increasing
the amount of available borrowings thereunder or adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement,
whether by the same or any other agent, lender or group of lenders, whether
contained in one or more agreements. Shaughnessy Crane Service, Inc. and Rebel
Studio Rentals, Inc. joined as additional guarantors under the Credit Facility
upon their acquisition by the Company.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Definitive Notes" means Notes that are in the form of Exhibit A attached
---------
hereto (but without including the text referred to in footnotes 1 and 3
thereto).
"Depositary" means, with respect to the Global Note, the Person specified
in Section 2.03 hereof as the Depositary with respect to such Note, until a
successor shall have been appointed and become such pursuant to the applicable
provision of this Indenture, and thereafter, "Depositary" shall mean or include
such successor.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Credit Facility and (ii) any other Senior Debt permitted under this Indenture
the principal amount of which is $25.0 million or more and that has been
designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date
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that is 91 days after the date on which the Notes mature; provided, however,
that any Capital Stock that would constitute Disqualified Stock solely because
the holders thereof have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall
not constitute Disqualified Stock if the terms of such Capital Stock provide
that the Company may not repurchase or redeem any such Capital Stock pursuant to
such provisions unless such repurchase or redemption complies with Section 4.07
hereof.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer by the Company to Holders to exchange
Senior Subordinated Notes for New Senior Subordinated Notes.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Existing Indebtedness" means up to $2.0 million in aggregate principal
amount of Indebtedness of the Company and its Restricted Subsidiaries (other
than Indebtedness under the Company's former credit facility) in existence on
November 25, 1997, until such amounts are repaid.
"Existing Notes" means the Company's 10% Senior Subordinated Notes due
2004, Series B.
"Existing Subsidiary Guarantees" means the guarantees of the Existing Notes
by the Subsidiary Guarantors.
"Fixed Charges" means, with respect to any Person and its Restricted
Subsidiaries for any period, the sum, without duplication, of (i) the
consolidated interest expense of such Person and its Restricted Subsidiaries for
such period, whether paid or accrued (including, without limitation,
amortization of debt issuance costs (other than debt issuance costs incurred in
connection with the offering of the Existing Notes, the Credit Facility and the
Company's former credit facility) and original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest of such Person and
its Restricted Subsidiaries that was capitalized during such period, and (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Restricted Subsidiaries or secured by a Lien on assets
of such Person or one of its Restricted Subsidiaries (whether or not such
Guarantee or Lien is called upon), (iv) the product of (a) all dividend
payments, whether or not in cash, on any series of preferred stock of such
Person or any of its Restricted Subsidiaries, other than dividend payments on
Equity Interests payable solely in Equity Interests of the Company (other than
Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company,
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP and (v) an amount equal to 1/3 of the
Consolidated Lease Expense of such Person and its Restricted Subsidiaries for
such period, whether paid or accrued.
"Fixed Charge Coverage Ratio" means with respect to any Person and its
Restricted Subsidiaries for any period, the ratio of the Consolidated Cash Flow
of such Person and its Restricted Subsidiaries for
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such period to the Fixed Charges of such Person and its Restricted Subsidiaries
for such period. In the event that the referent Person or any of its Restricted
Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than
revolving credit borrowings) or issues or redeems preferred stock subsequent to
the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated (A) without giving
effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income and (B) after giving pro forma effect to net cost
savings that the Company reasonably believes in good faith could have been
achieved during the four-quarter reference period as a result of such
acquisition, which cost savings could then be reflected in pro forma financial
statements under GAAP, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Global Note" means the permanent global note that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 3
to the form of the Note attached hereto as Exhibit A, and that is deposited with
---------
and registered in the name of the Depositary or its nominee, representing Notes
initially sold in reliance on Rule 144A.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"GTCR Fund V" means Golder, Thoma, Cressey, Rauner Fund V, L.P., an
affiliate of Golder, Thoma, Cressey, Rauner, Inc.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
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"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount and (ii) the
principal amount thereof, together with any interest thereon that is more than
30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"Indirect Participant" means a Person who holds an interest through a
Participant.
"Initial Notes" means the first $125.0 million aggregate principal amount
of Notes issued under this Indenture on the date hereof.
"Initial Purchasers" means Salomon Smith Barney Inc. and First Union
Capital Markets, a division of Wheat First Securities, Inc.
"Insolvency or Liquidation Proceedings" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding, relative to the Company or to the creditors
of the Company, as such, or to the assets of the Company, or (ii) any
liquidation, dissolution, reorganization or winding up of the Company, whether
voluntary or involuntary and involving insolvency or bankruptcy, or (iii) any
assignment for the benefit of creditors or any other marshalling of assets and
liabilities of the Company.
"Institutional Accredited Investor" means an "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of Section 4.07 hereof.
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"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no additional interest
shall accrue for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means, at any time of determination, all liquidated
damages then owing pursuant to the terms of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain or
loss, together with any related provision for taxes on such extraordinary or
nonrecurring gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale, any reserve for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP and any reserve established in
accordance with GAAP for liabilities associated with such assets that are the
subject of such Asset Sale (including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale), all as determined in good faith and reflected in an Officers'
Certificate delivered to the Trustee, provided, that the amount of any such
reserve shall be deemed to constitute Net Cash Proceeds at the time such reserve
shall have been reversed or is not otherwise required to be retained as a
reserve.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes) of the Company or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company
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or any of its Restricted Subsidiaries.
"Notes" has the meaning assigned to it in the preamble to this Indenture.
The Initial Notes and the Additional Notes shall be treated as a single class
for all purposes under this Indenture.
"Note Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto, as provided in Section 2.01.
"Obligations" means any principal, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the Credit Facility, whether or not such interest is an allowed
claim under applicable law), penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any
Indebtedness.
"Offering" means the offering of Senior Subordinated Notes pursuant to the
Offering Memorandum.
"Offering Memorandum" means the offering memorandum, dated December 8,
1998, relating to the offering of the Senior Subordinated Notes.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer or the principal accounting officer of
the Company, that meets the requirements of Section 13.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 13.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Participant" means a Person who has an account with the Depositary.
"payment in full" (together with any correlative phrases e.g. "paid in
full" and "pay in full") means (i) with respect to any Senior Debt other than
Senior Debt under or in respect of the Credit Facility, payment in full thereof
or due provision for payment thereof (x) in accordance with the terms of the
agreement or instrument pursuant to which such Senior Debt was issued or is
governed or (y) otherwise to the reasonable satisfaction of the holders of such
Senior Debt, which shall include, in any Insolvency or Liquidation Proceeding,
approval by such holders, individually or as a class, of the provision for
payment thereof, and (ii) with respect to Senior Debt under or in respect of the
Credit Facility, payment in full thereof in cash or Cash Equivalents.
"Permitted Business" means any business or activities conducted by the
Company on the date hereof, any business or activities related, ancillary or
complementary to such business or activities, and any business or activities
reasonably developed, derived or extended from such business or activities.
"Permitted Investments" means (a) any Investment in the Company or in a
Subsidiary Guarantor, (b) any Investment in Cash Equivalents, (c) any Investment
by the Company or any Restricted Subsidiary of the Company in a Person, if as a
result of such Investment (i) such Person becomes a Wholly Owned Restricted
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or
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into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the
Company, (d) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.10 hereof, (e) any acquisition of assets solely in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of the Company
and (f) other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (e) that are at the time outstanding, not to exceed
$5.0 million.
"Permitted Junior Securities" means Equity Interests in the Company or any
Subsidiary Guarantor or debt securities that are subordinated to all Senior Debt
(and any debt securities issued in exchange for Senior Debt) to substantially
the same extent as, or to a greater extent than, the Notes are subordinated to
Senior Debt pursuant to Article 10 hereof.
"Permitted Liens" means the following Liens securing Indebtedness or trade
payables: (i) Liens to secure the Notes or the Subsidiary Guarantees; (ii) Liens
in favor of the Company or a Subsidiary Guarantor; (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with the
Company or any Subsidiary of the Company; provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or consolidated
with the Company; (iv) Liens on property existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition; (v)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (vi) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (iv) of the second paragraph of
Section 4.09 hereof covering only the assets acquired with such Indebtedness;
(vii) Liens existing on November 25, 1997; (viii) Liens incurred in the ordinary
course of business of the Company or any Subsidiary of the Company with respect
to obligations that do not exceed $5.0 million at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary course
of business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Subsidiary; (ix) Liens on stock or assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries; (x) Liens on assets of the Company or any Subsidiary Guarantor to
secure Senior Debt of the Company or such Subsidiary Guarantor that was
permitted by this Indenture to be incurred; and (xii) Liens to secure any
refinancings, renewals, extensions, modifications or replacements (collectively,
"refinancings") (or successive refinancings), in whole or in part, of any
Indebtedness secured by Liens referred to in clauses (iii), (iv), (vii) and (x)
above so long as such Lien does not extend to any other property (other than
improvements thereto).
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of premiums and reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded
11
<PAGE>
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Principals" means GTCR Fund V and its Affiliates and Messrs. Kevin
Rodgers, Dennis O'Connor and Paul Ingersoll, members of their immediate families
and trusts of which such persons are the beneficiaries.
"Private Placement Legend" means the legend initially set forth on the
Senior Subordinated Notes in the form set forth in Section 2.06(g) hereof.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A under
the Securities Act.
"Redemption Date" with respect to any Notes, means the date on which such
Notes are redeemed by the Company pursuant to Section 3.07 of this Indenture.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of December 11, 1998, by and among the Company, the Subsidiary
Guarantors and the Initial Purchasers, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Notes, one or more registration rights agreements between the Company and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, related to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Representative" means the agent with respect to the Credit Facility, or
any Person performing a similar function with respect to other Senior Debt.
"Responsible Officer" means any officer within the Corporate Trust
Department of the Trustee (or any successor group of the Trustee) with direct
responsibility for the administration of this Indenture and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Beneficial Interest" means any beneficial interest of a
Participant or Indirect Participant in the Global Note.
"Restricted Broker Dealer" has the meaning set forth in the Registration
Rights Agreement.
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"Restricted Global Note" means the Global Note, which shall bear the
Private Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) all Indebtedness under the Credit Facility and all
Hedging Obligations with respect thereto, whether outstanding on the date hereof
or thereafter created, (ii) any other Indebtedness permitted to be incurred by
the Company or a Subsidiary Guarantor under the terms of this Indenture, unless
the instrument under which such Indebtedness is incurred expressly provides that
it is on a parity with or subordinated in right of payment to the Notes or the
Subsidiary Guarantees and (iii) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will not
include (w) any liability for federal, state, local or other taxes owed or owing
by the Company or a Subsidiary Guarantor, (x) any Indebtedness between or among
the Company, any of its Subsidiaries or any of its other Affiliates, (y) any
trade payables or (z) that portion of any Indebtedness that is incurred in
violation of this Indenture.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
" Subsidiary Guarantors" means each of (i) Albany Ladder Company, Inc., BAT
Acquisition Corp., Carl's Mid South Rent-All Center Incorporated, Falconite
Aviation, Inc., Falconite Equipment, Inc., Falconite, Inc., Falconite Rebuild
Center, Inc., McCurry & Falconite Equipment Co., Inc., M&M Properties, Inc., NES
Acquisition Corp., NES East Acquisition Corp., NES Michigan Acquisition Corp.,
13
<PAGE>
Rebel Studio Rentals, Inc. and Shaughnessy Crane Service, Inc. and (ii) any
other Subsidiary that executes a Subsidiary Guarantee in accordance with the
provisions of this Indenture, and their respective successors and assigns.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the Trust
Indenture Act of 1939; provided, however, that in the event that the Trust
Indenture Act of 1939 is amended after such date, "TIA" means, to the extent
required by such amendment, the Trust Indenture Act of 1939 as so amended.
"Transfer Restricted Securities" means Notes or beneficial interests
therein that bear or are required to bear the Private Placement Legend.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H. 15(519)
which has become publicly available at least two Business Days prior to the
redemption date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the redemption date to November 30, 2001, provided, however, that if
the period from the redemption date to November 30, 2001 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the redemption date to November 30, 2001
is less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Global Note" means the Global Note that does not and is not
required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (e) has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by Section 4.07 hereof. If, at any time,
any Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09 hereof, the Company shall be in
default of such covenant).
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The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
Section 4.09 hereof, calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
<TABLE>
<CAPTION>
Section 1.02. Other Definitions.
Defined in
Term Section
<S> <C>
"Affiliate Transaction".................... 4.11
"Asset Sale Offer"......................... 3.09
"Change of Control Offer".................. 4.13
"Change of Control Payment"................ 4.13
"Change of Control Payment Date"........... 4.13
"Covenant Defeasance"...................... 8.03
"DTC"...................................... 2.03
"Event of Default"......................... 6.01
"Excess Proceeds".......................... 4.10
"incur".................................... 4.09
"Legal Defeasance"......................... 8.02
"Offer Amount"............................. 3.09
"Offer Period"............................. 3.09
"Paying Agent"............................. 2.03
"Payment Default".......................... 6.01
"Permitted Debt"........................... 4.09
"Purchase Date"............................ 3.09
"Registrar"................................ 2.03
"Restricted Payments"...................... 4.07
"Subsidiary Guarantees".................... 11.01
</TABLE>
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Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company, each Subsidiary Guarantor
and any successor obligor upon the Notes.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by the Commission rule under the
TIA have the meanings so assigned to them therein.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined herein has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include the
singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement or successor sections or
rules adopted by the Commission from time to time.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
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The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A attached hereto. The Notes may have
---------
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
initially shall be issued in denominations of $1,000 and integral multiples
thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company, the Subsidiary
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
(a) Global Note. Notes offered and sold to QIBs in reliance on Rule
144A shall be issued initially in the form of the Global Note, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with a
custodian of the Depositary, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the Global
Note may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee as hereinafter
provided.
The Global Note shall represent such of the outstanding Notes as shall
be specified therein and shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges, redemptions and
transfers of interests. Any endorsement of the Global Note to reflect the amount
of any increase or decrease in the amount of outstanding Notes represented
thereby shall be made by the Trustee or the Note Custodian, at the direction of
the Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.06 hereof.
Except as set forth in Section 2.06 hereof, the Global Note may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to
the Global Note deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(b), authenticate and deliver the Global Note that (i) shall be
registered in the name of the Depositary or the nominee of the Depositary and
(ii) shall be delivered by the Trustee to the Depositary or pursuant to the
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
Participants shall have no rights either under this Indenture with
respect to the Global Note held on their behalf by the Depositary or by the Note
Custodian as custodian for the Depositary or under the Global Note, and the
Depositary may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of the Global Note for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Participants, the
operation of customary practices of such Depositary governing the exercise of
the rights of an owner of a beneficial interest in the Global Note.
(c) Definitive Notes. Notes issued in certificated form shall be
substantially in the form of Exhibit A attached hereto (but without including
---------
the text referred to in footnotes 1 and 3 thereto).
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Section 2.02. Execution and Authentication.
An Officer shall sign the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture. The form of Trustee's certificate of
authentication to be borne by the Notes shall be substantially as set forth in
Exhibit A hereto.
- ---------
The Trustee shall, upon a written order of the Company signed by an
Officer directing the Trustee to authenticate the Notes, authenticate Notes for
original issue up to the aggregate principal amount stated in paragraph 4 of the
Notes. The Trustee shall, upon written order of the Company signed by an
Officer, authenticate New Senior Subordinated Notes for original issuance in
exchange for a like principal amount of Senior Subordinated Notes exchanged in
the Exchange Offer or otherwise exchanged for New Senior Subordinated Notes
pursuant to the terms of the Registration Rights Agreement. The aggregate
principal amount of Notes outstanding at any time may not exceed the aggregate
principal amount stated in paragraph 4 of the Notes, except as provided in
Section 2.07 hereof.
The Trustee may (at the Company's expense) appoint an authenticating
agent acceptable to the Company to authenticate Notes. An authenticating agent
may authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with the
Company or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and (ii) an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Note.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Note. The
Company initially appoints the Trustee to act as the Registrar and Paying Agent
with respect to the Definitive Notes.
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Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent shall hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium or Liquidated Damages, if any, or interest on the Notes, and shall
notify the Trustee of any default by the Company in making any such payment.
While any such default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall
have no further liability for the money. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any
bankruptcy or reorganization proceedings relating to the Company, the Trustee
shall serve as Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company and/or the Subsidiary Guarantors shall furnish to
the Trustee at least seven (7) Business Days before each interest payment date
and at such other times as the Trustee may request in writing, a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of the Holders of Notes and the Company and the Subsidiary Guarantors
shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Beneficial Interests in the Global Note. The
transfer and exchange of beneficial interests in the Global Note shall be
effected through the Depositary, in accordance with this Indenture and the
procedures of the Depositary therefor, which shall include restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Beneficial interests in the Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in the
Global Note in accordance with the transfer restrictions set forth in subsection
(g) of this Section 2.06 or in the Unrestricted Global Note in accordance with
subsection (g)(iv).
(b) Transfer and Exchange of Definitive Notes. When Definitive Notes are
presented by a Holder to the Registrar with a request to register the transfer
of the Definitive Notes or to exchange such Definitive Notes for an equal
principal amount of Definitive Notes of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested only if:
(i) the Definitive Notes are presented or surrendered for
registration of transfer or exchange, endorsed and containing a
signature guarantee or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney and contains a signature
guarantee, duly authorized in writing; and
(ii) in the case of Definitive Notes that are Transfer Restricted
Securities, the Registrar has received the following
documentation, as applicable (all of which may be submitted by
facsimile):
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(A) if such Transfer Restricted Security is being delivered to
the Registrar by a Holder for registration in the name of
such Holder, without transfer, or such Transfer Restricted
Security is being transferred to the Company or any of its
Subsidiaries, a certification to that effect from such
Holder (in substantially the form of Exhibit B-1 hereto); or
-----------
(B) if such Transfer Restricted Security is being transferred to
a QIB in accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in accordance
with Rule 144 under the Securities Act or pursuant to an
effective registration statement under the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit B-1 hereto); or
-----------
(C) if such Transfer Restricted Security is being transferred to
a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit B-1 hereto); or
-----------
(D) if such Transfer Restricted Security is being transferred to
an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs (B)
and (C) above, a certification to that effect from such
Holder (in substantially the form of Exhibit B-1 hereto), a
-----------
certification substantially in the form of Exhibit C hereto,
---------
and, if such transfer is in respect of an aggregate
principal amount of Notes of less than $100,000, an Opinion
of Counsel reasonably acceptable to the Company that such
transfer is in compliance with the Securities Act; or
(E) if such Transfer Restricted Security is being transferred in
reliance on any other exemption from the registration
requirements of the Securities Act, a certification to that
effect from such Holder (in substantially the form of
Exhibit B-1 hereto) and an Opinion of Counsel from such
-----------
Holder or the transferee to the effect that such transfer is
in compliance with the Securities Act.
(c) Transfer of a Beneficial Interest in the Global Note for a Definitive
Note.
(i) Any Person having a beneficial interest in the Global Note may
upon request, subject to the Applicable Procedures, exchange such
beneficial interest for a Definitive Note. Upon receipt by the
Trustee of written instructions or such other form of
instructions as is customary for the Depositary, from the
Depositary or its nominee on behalf of any Person having a
beneficial interest in the Global Note, and, in the case of a
Transfer Restricted Security, the following additional
information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial
owner, a certification to that effect from such Person (in
substantially the form of Exhibit B-2 hereto);
-----------
(B) if such beneficial interest is being transferred to a QIB in
accordance with
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Rule 144A under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 144
under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from the transferor (in
substantially the form of Exhibit B-2 hereto);
-----------
(C) if such beneficial interest is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a
certification to that effect from the transferor (in
substantially the form of Exhibit B-2 hereto);
-----------
(D) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs (B)
and (C) above, a certification to that effect from such
Holder (in substantially the form of Exhibit B-2 hereto), a
-----------
certification substantially in the form of Exhibit C hereto,
---------
and, if such transfer is in respect of an aggregate
principal amount of Notes of less than $100,000, an Opinion
of Counsel reasonably acceptable to the Company that such
transfer is in compliance with the Securities Act; or
(E) if such beneficial interest is being transferred in reliance
on any other exemption from the registration requirements of
the Securities Act, a certification to that effect from the
transferor (in substantially the form of Exhibit B-2 hereto)
-----------
and an Opinion of Counsel from the transferee or the
transferor reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in compliance
with the Securities Act,
in which case the Trustee or the Note Custodian, at the direction
of the Trustee, shall, in accordance with the standing
instructions and procedures existing between the Depositary and
the Note Custodian, cause the aggregate principal amount of the
Global Note to be reduced accordingly and, following such
reduction, the Company shall execute and, the Trustee shall
authenticate and deliver to the transferee a Definitive Note in
the appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial interest in
the Global Note pursuant to this Section 2.06(c) shall be
registered in such names and in such authorized denominations as
the Depositary, pursuant to instructions from its direct or
Indirect Participants or otherwise, shall instruct the Trustee.
The Trustee shall deliver such Definitive Notes to the Persons in
whose names such Notes are so registered. Following any such
issuance of Definitive Notes, the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced the
aggregate principal amount of the Global Note to reflect the
transfer.
(d) Restrictions on Transfer and Exchange of the Global Note.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), the Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
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(e) Transfer and Exchange of a Definitive Note for a Beneficial Interest
in the Global Note. When a Definitive Note is presented by a Holder to the
Registrar with a request to register the transfer of the Definitive Note to a
Person who is required or permitted to take delivery thereof in the form of an
interest in the Global Note, or to exchange such Definitive Note for an equal
interest in the Global Note, the Registrar shall register the transfer or make
the exchange as requested only if (i) the Definitive Note is presented or
surrendered for registration of transfer or exchange, endorsed and containing a
signature guarantee or accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by such Holder or by his attorney-in
- -fact and containing a signature guarantee, duly authorized in writing and (ii)
in the case of Definitive Notes that are Transfer Restricted Securities (other
than Transfer Restricted Securities that are being exchanged or transferred in
accordance with the transfer restrictions set forth in subsection (g)(iv) of
this Section 2.06), the Registrar has received the following documentation, as
applicable (all of which may be submitted by facsimile):
(A) if such Transfer Restricted Security is being delivered to
the Registrar by a Holder for registration in the name of
such Holder, without transfer, or such Transfer Restricted
Security is being transferred to the Company or any of its
Subsidiaries, a certification to that effect from such
Holder (in substantially the form of Exhibit B-1 hereto); or
-----------
(B) if such Transfer Restricted Security is being transferred to
a QIB in accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in accordance
with Rule 144 under the Securities Act or pursuant to an
effective registration statement under the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit B-1 hereto); or
-----------
(C) if such Transfer Restricted Security is being transferred to
an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the
Securities Act other than those listed in subparagraph (B)
above, a certification to that effect from such Holder (in
substantially the form of Exhibit B-1 hereto), a
-----------
certification substantially in the form of Exhibit C hereto,
---------
and, if such transfer is in respect of an aggregate
principal amount of Notes of less than $100,000, an Opinion
of Counsel reasonably acceptable to the Company that such
transfer is in compliance with the Securities Act; or
(D) if such Transfer Restricted Security is being transferred in
reliance on any other exemption from the registration
requirements of the Securities Act, a certification to that
effect from such Holder (in substantially the form of
Exhibit B-1 hereto) and an Opinion of Counsel from such
-----------
Holder or the transferee reasonably acceptable to the
Company and to the Registrar to the effect that such
transfer is in compliance with the Securities Act.
The Trustee shall (or, if at any time the Trustee ceases to be the
Registrar, shall upon receipt from the Registrar of written notification that
the foregoing documentation has been received by the Registrar) cancel the
Definitive Note and increase or cause to be increased the aggregate principal
amount of the Global Note accordingly. If no part of the Global Note is then
outstanding, the Company shall execute and the Trustee shall authenticate a new
Global Note in the appropriate principal amount.
(f) Authentication of Definitive Notes in Absence of Depositary. If at any
time:
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(i) the Depositary for the Notes notifies the Company that the
Depositary is unwilling or unable to continue as Depositary
for the Global Note and a successor Depositary for the
Global Note is not appointed by the Company within 90 days
after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive
Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Note in exchange for such Global Note. Neither
the Company nor the Trustee will be liable for any delay by the Depositary in
identifying the beneficial owners of Notes and the Company and the Trustee may
conclusively rely on, and will be protected in relying on, instructions from the
Depositary for all purposes.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii), (iii)
and (iv), each Note certificate evidencing the Global Note
and Definitive Notes (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR")
IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED
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STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by the
Global Note) pursuant to Rule 144 under the Securities Act or
pursuant to an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
Definitive Note that does not bear the legend set forth in
(i) above and rescind any restriction on the transfer of
such Transfer Restricted Security upon receipt of a
certification from the transferring holder substantially in
the form of Exhibit B-1 hereto; and
-----------
(B) in the case of any Transfer Restricted Security represented
by the Global Note, such Transfer Restricted Security shall
not be required to bear the legend set forth in (i) above,
but shall continue to be subject to the provisions of
Section 2.06(a) and (b) hereof; provided, however, that with
respect to any request for an exchange of a Transfer
Restricted Security that is represented by the Global Note
for a Definitive Note that does not bear the legend set
forth in (i) above, which request is made in reliance upon
Rule 144, the Holder thereof shall certify in writing to the
Registrar that such request is being made pursuant to Rule
144 (such certification to be substantially in the form of
Exhibit B-2 hereto).
-----------
(iii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by the
Global Note) in reliance on any exemption from the registration
requirements of the Securities Act (other than exemptions
pursuant to Rule 144A or Rule 144 under the Securities Act) in
which the Holder or the transferee provides an Opinion of Counsel
to the Company and the Registrar in form and substance reasonably
acceptable to the Company and the Registrar (which Opinion of
Counsel shall also state that the transfer restrictions contained
in the legend are no longer applicable):
(A) in the case of any Transfer Restricted Security that is a
Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
Definitive Note that does not bear the legend set forth in
(i) above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security represented
by a Global Note, such Transfer Restricted Security shall
not be required to bear the legend set forth in (i) above,
but shall continue to be subject to the provisions of
Section 2.06(a) and (b) hereof.
(iv) Notwithstanding the foregoing, upon the consummation of the
Exchange Offer in accordance with the Registration Rights
Agreement, the Company shall issue and,
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upon receipt of an authentication order in accordance with
Section 2.02 hereof, the Trustee shall authenticate (i) an
Unrestricted Global Note in aggregate principal amount equal to
the principal amount of the Restricted Beneficial Interests
tendered for acceptance by Persons that certify in the applicable
letter of transmittal that they (x) are acquiring the Notes in
the ordinary course of business, (y) are not participating in the
distribution of the Notes and (z) are not affiliates (as defined
in Rule 144) of the Company and accepted for exchange in the
Exchange Offer and (ii) Definitive Notes that do not bear the
Private Placement Legend in an aggregate principal amount equal
to the principal amount of the Definitive Notes accepted for
exchange in the Exchange Offer, subject to delivery by such
Person of the certification described in clause (i). Concurrently
with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the Restricted Global Note to be
reduced accordingly and the Company shall execute and the Trustee
shall authenticate and deliver to the Persons designated by the
Holders of Definitive Notes so accepted Definitive Notes in the
appropriate principal amount.
(h) Cancellation and/or Adjustment of the Global Note. At such time
as all beneficial interests in the Global Note have been exchanged for
Definitive Notes, redeemed, repurchased or cancelled, the Global Note shall be
returned to or retained and cancelled by the Trustee in accordance with Section
2.11 hereof. At any time prior to such cancellation, if any beneficial interest
in the Global Note is exchanged for Definitive Notes, redeemed, repurchased or
cancelled, the principal amount of Notes represented by the Global Note shall be
reduced accordingly and an endorsement shall be made on the Global Note, by the
Trustee or the Notes Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall
authenticate the Global Note and Definitive Notes at
the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any
stamp or transfer tax or similar governmental charge
payable in connection therewith (other than any such
stamp or transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections
2.10, 3.06, 4.10, 4.13 and 9.05 hereto).
(iii) All Definitive Notes and the Global Note issued upon
any registration of transfer or exchange of the Global
Note or Definitive Notes shall be the valid
obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this
Indenture, as the Global Note or Definitive Notes
surrendered upon such registration of transfer or
exchange.
(iv) The Registrar shall not be required:(A) to issue, to
register the transfer of or to exchange Notes during a
period beginning at the
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opening of fifteen (15) Business Days before the day of
any selection of Notes for redemption under Section
3.02 hereof and ending at the close of business on the
day of selection, (B) to register the transfer of or to
exchange any Note so selected for redemption in whole
or in part, except the unredeemed portion of any Note
being redeemed in part, or (C) to register the transfer
of or to exchange a Note between a record date and the
next succeeding interest payment date.
(v) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the
Company may deem and treat the Person in whose name any
Note is registered as the absolute owner of such Note
for the purpose of receiving payment of principal of
and interest on such Notes and for all other purposes,
and neither the Trustee, any Agent nor the Company
shall be affected by notice to the contrary.
(vi) The Trustee shall authenticate the Global Note and
Definitive Notes in accordance with the provisions of
Section 2.02 hereof.
Notwithstanding anything herein to the contrary, as to any certifications and
certificates delivered to the Registrar pursuant to this Section 2.06, the
Registrar's duties shall be limited to confirming that any such certifications
and certificates delivered to it are in the form of Exhibits B-1, B-2 and C
attached hereto. The Registrar shall not be responsible for confirming the
truth or accuracy of representations made in any such certifications or
certificates.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company and the
Trustee receives evidence to their satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by an Officer of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company and the Trustee may
charge for their expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding.
Except as set forth in Section 2.09 hereof, a Note does not cease to be
outstanding because the Company or any Subsidiary Guarantor or an Affiliate of
the Company or any Subsidiary Guarantor holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
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<PAGE>
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding for all purposes of this Indenture and,
among other things, shall cease to accrue interest.
If, pursuant to Section 8.01 hereof, the Company elects to have Section
8.02 or 8.03 hereof be applied to all outstanding Notes, the Notes shall be
deemed "outstanding" only for the purposes set forth in Section 8.02 or 8.03, as
applicable.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or any Subsidiary Guarantor, or by any Affiliate of the Company or any
Subsidiary Guarantor, shall be considered as though not outstanding, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Notes a Responsible
Officer of the Trustee knows are so owned shall be so disregarded.
Notwithstanding the foregoing, Notes that are to be acquired by the Company or
any Subsidiary Guarantor or an Affiliate of the Company or any Subsidiary
Guarantor pursuant to an exchange offer, tender offer or other agreement shall
not be deemed to be owned by such entity until legal title to such Notes passes
to such entity.
Section 2.10. Temporary Notes.
Until Definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by an Officer of the Company. Temporary Notes shall be
substantially in the form of Definitive Notes but may have variations that the
Company considers appropriate for temporary Notes. Without unreasonable delay,
the Company shall prepare and the Trustee shall upon receipt of a written order
of the Company signed by an Officer authenticate Definitive Notes in exchange
for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver to the Trustee for cancellation any
Notes previously authenticated and delivered hereunder or which the Company may
have acquired in any manner whatsoever, and all Notes so delivered shall be
promptly cancelled by the Trustee. All Notes surrendered for registration of
transfer, exchange or payment, if surrendered to any Person other than the
Trustee, shall be delivered to the Trustee. The Trustee and no one else shall
cancel all Notes surrendered for registration of transfer, exchange, payment,
replacement or cancellation. Subject to Section 2.07 hereof, the Company may
not issue new Notes to replace Notes that it has redeemed or paid or that have
been delivered to the Trustee for cancellation. All cancelled Notes held by the
Trustee shall be destroyed and certification of their destruction delivered to
the Company, unless by a written order, signed by an Officer of the Company, the
Company shall direct that cancelled Notes be returned to it.
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Section 2.12. Defaulted Interest.
If the Company or any Subsidiary Guarantor defaults in a payment of
interest on the Notes, it shall pay the defaulted interest in any lawful manner
plus, to the extent lawful, interest payable on the defaulted interest, to the
Persons who are Holders on a subsequent special record date, which date shall be
at the earliest practicable date but in all events at least five (5) Business
Days prior to the payment date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall fix or cause to be fixed each
such special record date and payment date, and shall promptly thereafter, notify
the Trustee of any such date. At least fifteen (15) days before the special
record date, the Company (or the Trustee, in the name and at the expense of the
Company) shall mail or cause to be mailed to Holders a notice that states the
special record date, the related payment date and the amount of such interest to
be paid.
Section 2.13. Record Date.
The record date for purposes of determining the identity of Holders of the
Notes entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA (S)
316 (c).
Section 2.14. Computation of Interest.
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Section 2.15. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number, and if it does
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes and that reliance may be placed only on
the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45
days but not more than 60 days before a redemption date (unless a shorter period
is acceptable to the Trustee) an Officers' Certificate setting forth (i) the
Section of this Indenture pursuant to which the redemption shall occur, (ii) the
redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the
redemption price.
If the Company is required to make an offer to purchase Notes pursuant to
Section 4.10 or 4.13 hereof, it shall furnish to the Trustee, at least 45 days
before the scheduled purchase date, an Officers' Certificate setting forth (i)
the section of this Indenture pursuant to which the offer to purchase shall
occur, (ii) the terms of the offer, (iii) the principal amount of Notes to be
purchased, (iv) the purchase price, (v) the purchase date and (vi) and further
setting forth a statement to the effect that (a) the Company or one its
Subsidiaries has affected an Asset Sale and there are Excess Proceeds
aggregating more than $7.0
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million or (b) a Change of Control has occurred, as applicable.
Section 3.02. Selection of Notes to be Redeemed.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
Section 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail or cause to be mailed by first class mail, a notice of
redemption to each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price for the Notes and accrued interest, and
Liquidated Damages, if any;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Notes to be redeemed and that, after the
redemption date, upon surrender of such Note, a new Note or Notes
in principal amount equal to the unredeemed portion shall be
issued upon surrender of the original Note;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption
payment, interest and Liquidated Damages, if any, on Notes called
for redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being
redeemed; and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on
the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name
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and at the Company's expense; provided, however, that the Company shall have
delivered to the Trustee, at least 45 days prior to the redemption date (or such
shorter period as shall be acceptable to the Trustee), an Officers' Certificate
requesting that the Trustee give such notice and setting forth the information
to be stated in the notice as provided in the preceding paragraph. The notice
mailed in the manner herein provided shall be conclusively presumed to have been
duly given whether or not the Holder receives such notice. In any case, failure
to give such notice by mail or any defect in the notice to the Holder of any
Note shall not affect the validity of the proceeding for the redemption of any
other Note.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price plus accrued and unpaid interest and Liquidated
Damages, if any, to such date. A notice of redemption may not be conditional.
Section 3.05. Deposit of Redemption or Purchase Price.
On or before 10:00 a.m. (New York City time) on each redemption date or the
date on which Notes must be accepted for purchase pursuant to Section 4.10 or
4.13, the Company shall deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption price of and accrued and unpaid interest and
Liquidated Damages, if any, on all Notes to be redeemed or purchased on that
date. The Trustee or the Paying Agent shall promptly return to the Company upon
its written request any money deposited with the Trustee or the Paying Agent by
the Company in excess of the amounts necessary to pay the redemption price of
(including any applicable premium), accrued interest and Liquidated Damages, if
any, on all Notes to be redeemed or purchased.
If Notes called for redemption or tendered in an Asset Sale Offer or Change
of Control Offer are paid or if the Company has deposited with the Trustee or
Paying Agent money sufficient to pay the redemption or purchase price of, unpaid
and accrued interest and Liquidated Damages, if any, on all Notes to be redeemed
or purchased, on and after the redemption or purchase date interest and
Liquidated Damages, if any, shall cease to accrue on the Notes or the portions
of Notes called for redemption or tendered and not withdrawn in an Asset Sale
Offer or Change of Control Offer (regardless of whether certificates for such
securities are actually surrendered). If a Note is redeemed or purchased on or
after an interest record date but on or prior to the related interest payment
date, then any accrued and unpaid interest and Liquidated Damages, if any, shall
be paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption shall not be so
paid upon surrender for redemption because of the failure of the Company to
comply with the preceding paragraph, interest shall be paid on the unpaid
principal and Liquidated Damages, if any, from the redemption or purchase date
until such principal and Liquidated Damages, if any, is paid, and to the extent
lawful on any interest not paid on such unpaid principal, in each case, at the
rate provided in the Notes and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
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(a) Except as described in the following paragraphs, the Notes will not be
redeemable at the Company's option prior to November 30, 2001. Thereafter, the
Notes will be subject to redemption at any time at the option of the Company, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on November 30 of the years indicated below:
YEAR PERCENTAGE
2001................................. 105.000%
2002................................. 102.500%
2003 and thereafter.................. 100.000%
(b) Notwithstanding the foregoing, at any time prior to November 20, 2000,
the Company may on any one or more occasions redeem up to 33% of the aggregate
principal amount of Notes originally issued under this Indenture at a redemption
price of 110% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the redemption date, with the net
cash proceeds of a public offering of common stock of the Company; provided that
at least 67% of the aggregate principal amount of Notes remain outstanding
immediately after the occurrence of such redemption (excluding Notes held by the
Company and its Subsidiaries); and provided, further, that such redemption shall
occur within 45 days of the date of the closing of such public offering.
(c) In addition, at any time on or prior to November 30, 2001, the Notes
may be redeemed as a whole but not in part at the option of the Company upon the
occurrence of or in connection with a Change of Control, upon not less than 30
nor more than 60 days' notice (but in no event may any such redemption occur
prior to or more than 90 days after the occurrence of such Change of Control),
at a redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date, subject to the right of Holders on the
relevant record date to receive interest due on the relevant interest payment
date.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption or sinking
fund payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall commence no earlier than 30 days and no later
than 60 days after an Asset Sale Offer shall be required to be made pursuant to
Section 4.10 and remain open for a period of 20 Business Days following its
commencement and no longer, except to the extent that a longer period is
required by applicable law (the "Offer Period"). No later than five Business
Days after the termination of the Offer Period (the "Purchase Date"), the
Company shall purchase the principal amount of Notes required to be purchased
pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer
Amount has been tendered, all Notes tendered in response to the Asset Sale
Offer. Payment for any Notes
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so purchased shall be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest and
Liquidated Damages, if any, shall be paid to the Person in whose name a Note is
registered at the close of business on such record date, and no additional
interest or Liquidated Damages, if any, shall be payable to Holders who tender
Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders. The notice
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be
made to all Holders. The notice, which shall govern the terms of the Asset Sale
Offer, shall describe in a summary fashion the transaction or transactions that
constitute the Asset Sale Offer, and shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest and Liquidated Damages, if any, after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer their interest in such Note by book-entry transfer,
to the Company, the Depositary, if appointed by the Company, or a Paying
Agent at the address specified in the notice not later than the close of
business on the last day of the Offer Period;
(f) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
(g) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(h) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On or before 10:00 a.m. (New York City time) on each Purchase Date, the
Company shall
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irrevocably deposit with the Trustee or Paying Agent in immediately available
funds the aggregate purchase price with respect to a principal amount of Notes
equal to the aggregate principal amount of Notes tendered in response to the
Asset Sale Offer or, if less, the Offer Amount, together with accrued and unpaid
interest and Liquidated Damages, if any, thereon, to be held for payment in
accordance with the terms of this Section 3.09. On the Purchase Date, the
Company shall, to the extent lawful, (i) accept for payment, on a pro rata basis
to the extent necessary, the Offer Amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer, or if less than the Offer Amount has been
tendered, all Notes tendered, (ii) deliver or cause the Paying Agent or
Depositary, as the case may be, to deliver to the Trustee Notes so accepted and
(iii) deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than three (3)
Business Days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, plus any accrued and unpaid interest and
Liquidated Damages, if any, thereon, and the Company shall promptly issue a new
Note, and the Trustee, shall authenticate and mail or deliver such new Note, to
such Holder, equal in principal amount to any unpurchased portion of such
Holder's Notes surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce in a newspaper of general circulation or in a press release provided to
a nationally recognized financial wire service the results of the Asset Sale
Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01, 3.02, 3.05 and 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. The Company shall pay all Liquidated Damages, if any, in the same
manner on the dates and in the amounts set forth in the Registration Rights
Agreement. Principal, premium and Liquidated Damages, if any, and interest,
shall be considered paid for all purposes hereunder on the date the Paying Agent
(if other than the Company or a Subsidiary thereof) holds, as of 10:00 a.m. (New
York City time) money deposited by the Company in immediately available funds
and designated for and sufficient to pay all such principal, premium and
Liquidated Damages, if any, and interest, then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee or Registrar) where Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company shall give
prompt
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written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee, or
its affiliate, as one such office or agency of the Company in accordance with
Section 2.03 hereof.
Section 4.03. Commission Reports.
Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Company shall furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" that describes
the financial condition and results of operations of the Company and its
consolidated Subsidiaries and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports, in each case within the
time periods specified in the Commission's rules and regulations. In addition,
following the consummation of the Exchange Offer, whether or not required by the
rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability within
the time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as is required for an offer or sale of the
Notes to qualify for an exemption under Rule 144A, it will furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act. The Company and each Subsidiary Guarantor shall at
all times comply with TIA (S) 314(a).
The financial information to be distributed to Holders of Notes shall be
filed with the Trustee and mailed to the Holders at their addresses appearing in
the register of Notes maintained by the Registrar, within 120 days after the end
of the Company's fiscal years and within 60 days after the end of each of the
first three quarters of each such fiscal year.
The Company shall provide the Trustee with a sufficient number of copies of
all reports and other documents and information and, if requested by the
Company, the Trustee will deliver such reports to the Holders under this Section
4.03.
Section 4.04. Compliance Certificate.
The Company shall deliver to the Trustee, within 90 days after the end of
each fiscal year of the Company, an Officers' Certificate stating (i)(A) that,
in the course of the performance by the signatories thereto of their duties as
Officers of the Company, they would normally have knowledge of any Default
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or Event of Default, (B) whether or not such signatories know of any Default or
Event of Default that occurred during such period and (C) if any Default or
Event of Default has occurred during such period, the nature of such Default or
Event of Default, its status and what action the Company is taking or proposes
to take in respect thereto and (ii) that to the best of his or her knowledge no
event has occurred and remains in existence by reason of which payments on
account of the principal of or interest, if any, on the Notes are prohibited or
if such event has occurred, a description of the event and what action the
Company is taking or proposes to take with respect thereto.
So long as not contrary to the then current recommendations of the American
Institute of Certified Public Accountants, the year-end financial statements
delivered pursuant to Section 4.03 hereof shall be accompanied by a written
statement of the Company's independent public accountants (who shall be a firm
of established national reputation) that in making the examination necessary for
certification of such financial statements, nothing has come to their attention
that would lead them to believe that the Company has violated any provisions of
Article 4 or Article 5 hereof or, if any such violation has occurred, specifying
the nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
The Company shall, so long as any of the Notes are outstanding, deliver to
the Trustee, forthwith upon any Officer becoming aware of any Default or Event
of Default, an Officers' Certificate specifying such Default or Event of Default
and what action the Company is taking or proposes to take with respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency all material taxes, assessments and governmental levies,
except such as are contested in good faith and by appropriate proceedings and
with respect to which appropriate reserves have been taken in accordance with
GAAP.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each Subsidiary Guarantor covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each Subsidiary Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or to the Company or a
Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation,
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in connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company; (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is pari passu with
or subordinated to the Notes, except a payment of interest or principal at
Stated Maturity; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after November 25, 1997 (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (vi) and (viii) of the next
succeeding paragraph), is less than the sum, without duplication, of (i)
50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the beginning of the first fiscal quarter
commencing after November 25, 1997 to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Company since
November 25, 1997 as a contribution to its common equity capital or from
the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus
(iii) to the extent that any Restricted Investment that was made after
November 25, 1997 is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) in the event the
Company or any Restricted Subsidiary makes any Investment in a Person that,
as a result of or in connection with such Investment, becomes a Restricted
Subsidiary, an amount equal to the Company's or any Restricted Subsidiary's
existing Restricted Investment in such Person that was previously treated
as a Restricted Payment.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of this
Indenture, (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c)(ii) of the preceding paragraph, (iii) the
defeasance, redemption, repurchase or other acquisition of pari passu or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness, (iv) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of any class of its common
Equity Interests on a pro rata basis, (v) the repurchase, redemption or other
acquisition or retirement for value of any Equity
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Interests of the Company or any Restricted Subsidiary of the Company held by any
member of the Company's (or any of its Restricted Subsidiaries') management
pursuant to any management equity subscription agreement or stock option
agreement; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $1.0 million in
any twelve-month period and no Default or Event of Default shall have occurred
and be continuing immediately after such transaction, (vi) the making and
consummation of an Asset Sale Offer to holders of Indebtedness pari passu with
or subordinate to the Notes in accordance with Section 4.10 hereof, (vii) the
making of loans to officers and directors of the Company or any Restricted
Subsidiary, the proceeds of which are contemporaneously used to purchase common
stock of the Company in an amount not to exceed $5.0 million at any one time
outstanding, (viii) the repurchase, redemption, defeasance, retirement,
refinancing or acquisition for value or payment of principal of subordinated or
pari passu Indebtedness at a purchase price not greater than 101% of the
principal amount of such subordinated or pari passu Indebtedness in the event of
a Change of Control pursuant to a provision similar to Section 4.13 hereof;
provided, however, that prior to the repurchase of any subordinated Indebtedness
and concurrently with the repurchase of any pari passu Indebtedness, the Company
has made an offer to purchase as provided in Section 4.13 hereof with respect to
the Notes and has repurchased all Notes validly tendered for payment in
connection with such offer to purchase and (ix) the making of additional
Restricted Payments in an amount not to exceed $5.0 million.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing
selected by the Board of Directors if such fair market value exceeds $5.0
million. Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed, together with a copy
of any fairness opinion or appraisal required by the Indenture.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this Section 4.07. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary.
Section 4.08. Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(i)(a) pay dividends or make any other distributions to the Company or
any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with
respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company or any of its
Restricted
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Subsidiaries;
(ii) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(iii) transfer any of its properties or assets to the Company or any
of its Restricted Subsidiaries.
However, the foregoing restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on November 25, 1997;
(b) the Credit Facility as in effect as of the date hereof, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are not materially more
restrictive, taken as a whole, with respect to such dividend and other
payment restrictions than those contained in the Credit Facility as in
effect on the date hereof;
(c) this Indenture and the Notes;
(d) applicable law;
(e) any instrument or contract of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such instrument or contract was entered
into in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired;
(f) customary non-assignment provisions in leases and other agreements
entered into in the ordinary course of business and consistent with past
practices;
(g) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired;
(h) any agreement for the sale of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale;
(i) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced (as
determined in good faith by the Board of Directors);
(j) secured Indebtedness otherwise permitted to be incurred pursuant
to the provisions of this Indenture that limit the right of the debtor to
dispose of the assets securing such Indebtedness;
(k) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business; and
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(l) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and the
Company will not issue any Disqualified Stock and will not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock and the Subsidiary Guarantors may incur
Indebtedness or issue preferred stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 2.0 to 1, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock or
preferred stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this Section 4.09 will not apply
to the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness under the Credit Facility; provided that the aggregate
principal amount of all Indebtedness (with letters of credit being deemed
to have a principal amount equal to the maximum potential liability of the
Company and the Subsidiary Guarantors thereunder) outstanding under the
Credit Facility after giving effect to such incurrence does not exceed the
greater of (a) $115.0 million or (b) the Borrowing Base;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness represented by the Notes and the Subsidiary Guarantees in an
aggregate principal amount of $125.0 million outstanding on the date
hereof;
(iv) the incurrence by the Company or any of the Subsidiary
Guarantors of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Subsidiary Guarantor, in an aggregate
principal amount not to exceed $10.0 million at any time outstanding;
(v) the incurrence by the Company or any of the Subsidiary
Guarantors of Indebtedness in connection with the acquisition of assets or
a new Subsidiary; provided that such Indebtedness was incurred by the prior
owner of such assets or such Subsidiary prior to such acquisition by the
Company or one of the Subsidiary Guarantors and was not incurred in
connection with, or in contemplation of, such acquisition by the Company or
one of the Subsidiary Guarantors; and provided further that the principal
amount (or accreted value, as applicable) of such Indebtedness, together
with any other outstanding Indebtedness incurred pursuant to this clause
(v) and any
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Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (v), does not exceed
$10.0 million at any time outstanding;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by this Indenture
to be incurred under the first paragraph hereof or clauses (i), (ii) or
(iii) of this paragraph or this clause (vi);
(vii) the incurrence by the Company or any of the Subsidiary
Guarantors of intercompany Indebtedness or preferred stock between or among
the Company and any of the Subsidiary Guarantors; provided, however, that
(A) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness or preferred stock being held by a Person other than
the Company or a Subsidiary Guarantor and (B) any sale or other transfer of
any such Indebtedness or preferred stock to a Person that is not either the
Company or a Subsidiary Guarantor shall be deemed, in each case, to
constitute an incurrence of such Indebtedness or an issuance of such
preferred stock by the Company or such Subsidiary Guarantor, as the case
may be, that was not permitted by this clause (vii);
(viii) the incurrence by the Company or any of the Subsidiary
Guarantors of Hedging Obligations;
(ix) the guarantee by the Company or any of the Subsidiary
Guarantors of Indebtedness of the Company or a Subsidiary Guarantor that
was permitted to be incurred by another provision of this Section 4.09;
(x) the incurrence by the Company or any of the Subsidiary
Guarantors of additional Indebtedness in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (x), not to exceed $10.0
million; and
(xi) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xi).
For purposes of determining compliance with this Section 4.09, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xi) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09. Accrual of interest, accretion
or amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this Section
4.09; provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
Section 4.10. Assets Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an
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Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may
be) receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; provided that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet), of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets and as to which
the Company or such Restricted Subsidiary is released from further liability and
(y) any securities, notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are contemporaneously
(subject to ordinary settlement periods) converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received), shall be
deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay Senior
Debt, or (b) to the acquisition of a majority of the assets of, or a majority of
the Voting Stock of, another Permitted Business, the making of a capital
expenditure or the acquisition of other long-term assets or properties
(including, without limitation, equipment) that are used or useful in a
Permitted Business. Pending the final application of any such Net Proceeds, the
Company may temporarily reduce revolving credit borrowings or otherwise invest
such Net Proceeds in any manner that is not prohibited by this Indenture. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $7.0 million,
the Company will be required to make an offer to all Holders of Notes and all
holders of pari passu Indebtedness containing provisions similar to those set
forth in Section 3.09 hereof to purchase the maximum principal amount of Notes
(including any Additional Notes) and such other Indebtedness that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in Section 3.09 hereof and such other
Indebtedness. To the extent that any Excess Proceeds remain after consummation
of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by this Indenture. If the aggregate principal amount
of Notes (including any Additional Notes) and such other Indebtedness tendered
into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness
to be purchased on a pro rata basis. Upon completion of such offer to purchase,
the amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions With Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related
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Affiliate Transactions involving aggregate consideration in excess of $10.0
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing selected by the Board of Directors.
Notwithstanding the foregoing, the following items shall not be deemed to be
Affiliate Transactions: (i) any employment agreement entered into by the Company
or any of its Restricted Subsidiaries in the ordinary course of business; (ii)
transactions between or among the Company and/or its Restricted Subsidiaries;
(iii) payment of reasonable directors fees to Persons who are not otherwise
Affiliates of the Company; (iv) Restricted Payments that are permitted by the
provisions of Section 4.07 hereof as well as transactions that do not constitute
Restricted Payments by virtue of exceptions set forth in the definitions of
"Investments" and "Permitted Investments" set forth in Section 1.01 hereof; (v)
reasonable indemnity provided on behalf of officers, directors, employees,
consultants or agents of the Company or any of its Restricted Subsidiaries as
determined in good faith by the Company's Board of Directors; and (vi) any
transactions undertaken pursuant to any contractual obligations or rights in
existence on November 25, 1997 (as in effect on such date) as described in the
Offering Memorandum under the caption "Certain Relationships and Related
Transactions."
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness or trade payables on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.
Section 4.13. Offer to Purchase Upon Change of Control.
Upon the occurrence of a Change of Control, unless the Company has
exercised its right to redeem the Notes pursuant to Section 3.07(c) hereof, each
Holder of Notes shall have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such Holder's
Notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase (the "Change of Control Payment"). Within 30 days following
any Change of Control, the Company will mail a notice to each Holder describing
the transaction or transactions that constitute the Change of Control and
offering to repurchase Notes on the date specified in such notice, which date
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by this Indenture and described in such notice. The Company
shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
issue a press release
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announcing the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above shall be applicable
whether or not any other provisions of this Indenture are applicable.
Notwithstanding anything to the contrary in this Section 4.13, the Company shall
not be required to make a Change of Control Offer upon a Change of Control if a
third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in this Section 4.13 and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, and the corporate, partnership or other existence of each of its
Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Restricted Subsidiary; provided that the Company shall not be required to
preserve the corporate, partnership or other existence of any of its Restricted
Subsidiaries, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not
adverse in any material respect to the Holders.
Section 4.15. Business Activities.
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Restricted Subsidiaries taken as a
whole.
Section 4.16. Additional Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries shall acquire or
create another Subsidiary after the date hereof (other than an Unrestricted
Subsidiary), then such newly acquired or created Subsidiary shall (a) execute a
Guarantee in substantially the form of Exhibit D hereto and (b) execute and
---------
deliver to the Trustee a supplemental indenture in the form of Exhibit E hereto
---------
pursuant to which such newly acquired or created Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Notes and
this Indenture on the terms set forth in such supplemental indenture.
Section 4.17. Payment for Consents.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions hereof or
the Notes unless such consideration is offered to be paid or is paid to all
Holders of the Notes that consent, waive or agree to amend in the time frame, on
the terms and subject to the conditions set forth in the solicitation documents
relating to such consent, waiver or agreement.
Section 4.18. Anti-Layering.
The Company shall not incur, create, issue, assume, guarantee or otherwise
become liable for any
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Indebtedness that is subordinate or junior in right of payment to any Senior
Debt and senior in any respect in right of payment to the Notes. No Subsidiary
Guarantor shall incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
the Senior Debt of such Subsidiary Guarantor and senior in any respect in right
of payment to the Subsidiary Guarantees.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation or Sale of Assets.
The Company may not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia,
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Registration Rights
Agreement, the Notes and this Indenture pursuant to a supplemental indenture in
a form reasonably satisfactory to the Trustee, (iii) immediately after such
transaction no Event of Default exists and (iv) except in the case of a merger
of the Company with or into a Subsidiary Guarantor, the Company or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in Section 4.09 hereof.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and shall exercise every
right and power of the Company under this Indenture with the same effect as if
such successor Person had been named as the Company herein; provided, that, (i)
solely for the purposes of computing Consolidated Net Income for purposes of
clause (b) of the first paragraph of Section 4.07 hereof, the Consolidated Net
Income of any Person other than the Company and its Subsidiaries shall be
included only for periods subsequent to the effective time of such merger,
consolidation, combination or transfer of assets; and (ii) in the case of any
sale, assignment, transfer, lease, conveyance, or other disposition of less than
all of the assets of the
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predecessor Company, the predecessor Company shall not be released or discharged
from the obligation to pay the principal of or interest and Liquidated Damages,
if any, on the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
Each of the following constitutes an Event of Default:
(a) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not
prohibited by the subordination provisions of this Indenture);
(b) default in payment when due of the principal of or premium, if any, on
the Notes (whether or not prohibited by the subordination provisions
of this Indenture);
(c) failure by the Company or any of its Subsidiaries to comply with
Sections 4.07, 4.09, 4.10 or 4.13 hereof, and such default continues
for ten days;
(d) failure by the Company or any of its Subsidiaries for 60 days after
notice to comply with any of its other agreements in this Indenture or
the Notes;
(e) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date hereof, which
default (a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default
(a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $10 million or more;
(f) failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $10 million, not covered by
insurance, which judgments are not paid, discharged or stayed for a
period of 60 days;
(g) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
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(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in
an involuntary case;
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property;
(iv) makes a general assignment for the benefit of its creditors;
or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days; or
(i) except as permitted by this Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any
Subsidiary Guarantor, or any Person acing on behalf of any Subsidiary
Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee (other than by reason of release pursuant to this
Indenture).
A Default under clause (d) is not an Event of Default until the Trustee
notifies the Company, or the Holders of at least 25% in principal amount of the
then outstanding Notes (including Additional Notes, if any) notify the Company
and the Trustee, of the Default and the Company does not cure the Default within
60 days after receipt of the notice. The notice must specify the Default,
demand that it be remedied and state that the notice is a "Notice of Default."
Section 6.02. Acceleration.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
this Indenture or the Notes except as provided herein. Subject to certain
limitations, Holders of a majority in
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principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, interest
and Liquidated Damages, if any, on the Notes or to enforce the performance of
any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences
hereunder except a continuing Default or Event of Default in the payment of
interest on, or the principal of, any Note held by a non-consenting Holder
(including in connection with an offer to purchase); provided that the Holders
of a majority in aggregate principal amount of the then outstanding Notes may
rescind an acceleration and its consequences, including any related payment
default that resulted from such acceleration. Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of other Holders (it being understood that (subject to
Section 7.01) the Trustee shall have no duty to ascertain whether or not such
actions or forbearances are unduly prejudicial to such Holders) or that may
involve the Trustee in personal liability. The Trustee may take any other
action which it deems proper which is not inconsistent with any such direction.
Notwithstanding any provision to the contrary in this Indenture, the Trustee
shall not be obligated to take any action with respect to the provisions of
Section 6.02 hereof unless directed to do so pursuant to this Section 6.05.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture, the
Subsidiary Guarantees or the Notes only if:
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(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default or the Trustee receives such notice from
the Company;
(b) the Holders of at least 25% in principal amount of the then outstanding
Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, interest, and
Liquidated Damages, if any, on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) hereof occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
securities or property payable or deliverable upon the conversion or exchange of
the Notes or on any such claims and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding,
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shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys, for amounts due
under Section 7.07 hereof, including payment of all reasonable compensation,
expenses and liabilities incurred, and all advances made, by the Trustee and the
costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium, if any, interest, and Liquidated Damages, if any,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium, if any, interest, and
Liquidated Damages, if any, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant
to Section 6.07 hereof, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of
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this Indenture or the TIA and the Trustee need perform only those duties
that are specifically set forth in this Indenture or the TIA and no others,
and no implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon Officers' Certificates or Opinions of
Counsel furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, its own bad faith, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 7.01 ;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b) and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, including, without limitation, the provisions of Section
6.05 hereof, unless such Holders shall have offered to the Trustee security and
indemnity reasonably satisfactory to it against any loss, liability or expense
that might be incurred by it in complying with such request.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may rely upon any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the
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misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture; provided that the Trustee's conduct
does not constitute willful misconduct or negligence.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company. A permissive right granted to the Trustee hereunder
shall not be deemed an obligation to act.
(f) The Trustee shall not be charged with knowledge of any Default or Event
of Default unless either (i) a Responsible Officer of the Trustee shall have
actual knowledge of such Default or Event of Default or (ii) written notice of
such Default or Event of Default shall have been given to the Trustee by the
Company or any Holder.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest (as defined in the
TIA) it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture, the Notes or any Subsidiary
Guarantee, shall not be accountable for the Company's use of the proceeds from
the Notes or any money paid to the Company or upon the Company's direction under
any provision of this Indenture, shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to all
Holders a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default in payment of principal of, premium, if
any, or interest on any Note, the Trustee may withhold the notice if and so long
as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders. The Trustee shall
not be deemed to have actual knowledge of a Default or an Event of Default
hereunder, except in the case of a Default or an Event of Default under Section
6.01(a) (other than with respect to the payment of Liquidated Damages) or
6.01(b) at such time as the Trustee is also the Paying Agent, until a
Responsible Officer of the Trustee receives written notice thereof from the
Company or any Holders that such a Default or an Event of Default has occurred.
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Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 1 beginning with the May 1 first following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders a brief report dated as of such reporting date
that complies with TIA (S) 313(a) (but if no event described in TIA (S) 313(a)
has occurred within the twelve months preceding the reporting date, no report
need be transmitted). The Trustee also shall comply with TIA (S) 313(b). The
Trustee shall also transmit by mail all reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders shall be
mailed to the Company and filed with the SEC and each stock exchange on which
the Notes are listed in accordance with TIA (S) 313(d). The Company shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time, and the Trustee
shall be entitled to reasonable compensation for its acceptance of this
Indenture and services hereunder as the Trustee and the Company may agree in
writing. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against, and hold it harmless from,
any and all losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture against
the Company (including this Section 7.07) and defending itself against or
investigating any claim (whether asserted by the Company or any Holder or any
other Person) or liability in connection with the exercise or performance of any
of its powers or duties hereunder, except to the extent any such loss, liability
or expense may be attributable to its negligence, willful misconduct or bad
faith. The Trustee shall notify the Company promptly of any claim for which it
may seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company shall defend the
claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel not to exceed one law firm. The Company need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
The obligations of the Company under this Section 7.07 shall survive the
resignation or removal of the Trustee and the satisfaction and discharge of this
Indenture.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the resignation or
removal of the Trustee and the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or 6.01(h) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
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Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to all
Holders. The retiring Trustee shall promptly transfer all property held by it
as Trustee to the successor Trustee, provided, that all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07. Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
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In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of the predecessor
trustee or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $50 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
Board Resolution, at any time, elect to have either Section 8.02 or 8.03 hereof
be applied to all outstanding Notes upon compliance with the conditions set
forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and its Subsidiaries shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
deemed to have been discharged from their respective obligations with respect to
all outstanding Notes on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that
the Company shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 hereof and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes and this Indenture (and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following provisions which
shall survive until otherwise terminated or discharged hereunder: (a) the
rights of Holders of outstanding Notes to receive solely from the trust fund
described in Section 8.04 hereof, and as more fully set forth in such Section,
payments in
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respect of the principal of, premium, if any, and interest and Liquidated
Damages on such Notes when such payments are due, (b) the Company's obligations
with respect to such outstanding Notes under Sections 2.06, 2.07, 2.10 and 4.02
hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith and (d) this
Article 8. Subject to compliance with this Article 8, the Company may exercise
its option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under Sections 4.03, 4.04, 4.05, 4.07, 4.08, 4.09 4.10, 4.11, 4.12,
4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 11.03 and Article 5 hereof with respect to
the outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company and
its Subsidiaries may omit to comply with and shall have no liability in respect
of any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(e) and 6.01(f) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in U.S. dollars, non-
callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest and Liquidated Damages on the outstanding Notes on the stated
maturity or on the applicable redemption date, as the case may be, and the
Company must specify whether the Notes are being defeased to maturity or to
a particular redemption date;
(b) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that (1) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (2) since the date hereof, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the
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same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(c) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound including, without limitation, the Credit Facility;
(f) the Company must have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(h) the Company must deliver to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
provided for relating to the Legal Defeasance or the Covenant Defeasance
have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
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Section 8.06. Repayment to Company.
(a) Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
(b) The Trustee shall promptly pay to the Company, after written request
therefor, any money held at such time in excess of the amounts required to pay
any of the Company's Obligations then owing with respect to the Notes.
(c) Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal, or premium, if any, or interest that remains unclaimed
for two years after such principal or premium, if any, or interest became due
and payable and any such money held by the Company in trust shall be discharged
from such trust, and, thereafter, Holders entitled to the money must look to the
Company for payment of such money as secured creditors and all liability of the
Trustee and the Paying Agent with respect to such money shall cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may, at the expense of the Company, cause to be published
once, in The New York Times and The Wall Street Journal (national edition),
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such notification
or publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided that, if the Company makes any payment of
principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the Subsidiary
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without notice to or the consent of any
Holder:
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(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's obligations to the
Holders in the case of a merger, consolidation or sale of all or
substantially all of the Company's assets;
(d) to make any change that would provide any additional rights or benefits
to the Holders or that does not adversely affect the legal rights
hereunder of any Holder;
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA;
(f) to provide for additional Subsidiary Guarantors in accordance with
Section 4.16 hereof; or
(g) to provide for the issuance of Additional Notes in accordance with the
limitations set forth in this Indenture as of the date hereof.
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental Indenture, and
upon receipt by the Trustee of the documents described in Section 9.06 hereof,
the Trustee shall join with the Company and the Subsidiary Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company, the Subsidiary
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees and the Notes with the consent of the Holders of at least
a majority in principal amount of the Notes (including Additional Notes, if any)
then outstanding (including consents obtained in connection with a purchase of,
or tender offer or exchange offer for, the Notes), and, subject to Sections 6.04
and 6.07 hereof, any existing Default or Event of Default (other than a Default
or Event of Default in the payment of the principal of, premium, if any, or
interest on the Notes, except a payment default resulting from an acceleration
that has been rescinded) or compliance with any provision of this Indenture, the
Subsidiary Guarantees or the Notes may be waived with the consent of the Holders
of a majority in principal amount of the Notes (including Additional Notes, if
any) then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, the
Notes).
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental Indenture, and
upon the filing with the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of the Holders as aforesaid, and upon receipt by the
Trustee of the documents described in Section 9.06 hereof, the Trustee shall
join with the Company and the Subsidiary Guarantors in the execution of such
amended or supplemental Indenture unless such amended or supplemental Indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
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It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed amendment or waiver, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amended or supplemental Indenture,
Note, Subsidiary Guarantee or waiver. Subject to Sections 6.04 and 6.07 hereof,
the Holders of a majority in aggregate principal amount of the Notes then
outstanding may waive any existing Default or compliance in a particular
instance by the Company or any Subsidiary with any provision of this Indenture,
the Subsidiary Guarantees or the Notes. However, without the consent of each
Holder affected, an amendment or waiver may not (with respect to any Notes held
by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other
than provisions relating to Sections 4.10 and 4.13 hereof);
(c) reduce the rate of or change the time for payment of interest on
any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes (including Additional Notes, if
any) and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders to receive payments of
principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Section 4.10 and/or 4.13 hereof); or
(h) make any change in Section 6.04 or 6.07 hereof or in this Section
9.02 or in Section 9.01 hereof.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture, the Notes or the
Subsidiary Guarantees shall be set forth in an amended or supplemental Indenture
that complies with the TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder is a continuing consent by the Holder and every subsequent Holder or
portion of a Note that evidences the same debt as the consenting Holder's Note,
even if notation of the consent is not made on any Note. However
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any such Holder or subsequent Holder may revoke the consent as to its Note if
the Trustee receives written notice of revocation before the date the waiver,
supplement or amendment becomes effective. An amendment, supplement or waiver
becomes effective in accordance with its terms and thereafter binds every
Holder.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to give their consent to any
amendment, supplement or waiver or take any other action described above or
required or permitted to be taken pursuant to this Indenture. If a record date
is fixed, then notwithstanding the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to give such consent to such
amendment, supplement or waiver or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 90
days after such record date.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for all Notes may
issue and the Trustee shall authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive (but is not required to receive) and (subject to
Section 7.01) shall be fully protected in relying upon, in addition to the
documents required by Section 13.04 hereof, an Officers' Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
Indenture is authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder of Notes by accepting a Note agrees,
that the Indebtedness evidenced by the Note (including the rights of Holders
under Section 4.13 hereof) is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment in full of
all Senior Debt of the Company, whether outstanding on the date hereof or
hereafter incurred, that the subordination is for the benefit of, and shall be
enforceable directly by, the holders of the Senior Debt and that each holder of
Senior Debt, whether now outstanding or hereafter created, incurred assumed or
guaranteed shall be deemed to have acquired Senior Debt in reliance upon the
covenants and provisions contained in this Indenture and the Notes. The Company
further agrees, and each Holder of Notes by accepting a Note agrees, the
Indebtedness evidenced by the Note shall rank pari passu in right of payment
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to the Existing Notes.
Section 10.02. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt of the Company will be
entitled to receive payment in full of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt) before the Holders will be
entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Debt are paid in full, any distribution to
which the Holders would be entitled shall be made to the holders of Senior Debt
(except that Holders may receive and retain Permitted Junior Securities and
payments made from the trust described under Article 8 hereof).
Section 10.03. Default on Designated Senior Debt.
The Company shall not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under Article
8 hereof) if (i) a default in the payment of the principal of, premium, if any,
or interest on Designated Senior Debt occurs and is continuing beyond any
applicable period of grace or (ii) any other default occurs and is continuing
with respect to Designated Senior Debt that permits holders of the Designated
Senior Debt as to which such default relates to accelerate its maturity and the
Trustee receives a notice of such default (a "Payment Blockage Notice") from the
Company or the holders of any Designated Senior Debt. Payments on the Notes may
and shall be resumed (a) in the case of a payment default, upon the date on
which such default is cured or waived and (b) in case of a nonpayment default,
the earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any Designated Senior Debt has been
accelerated. No new period of payment blockage may be commenced unless and until
(i) 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice and (ii) all scheduled payments of principal, premium,
if any, and interest on the Notes that have come due have been paid in full in
cash. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 90 consecutive days.
Section 10.04. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of Default, the
Company shall promptly notify holders of Senior Debt of the acceleration.
Section 10.05. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder of a Note receives any payment
of any Obligations with respect to the Notes at a time when such payment is
prohibited by Section 10.03 hereof, such payment shall be held by the Trustee or
such Holder, in trust for the benefit of, and shall be paid forthwith over and
delivered, upon written request, to, the holders of Senior Debt as their
interests may appear or their Representative under the indenture or other
agreement (if any) pursuant to which Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt of the Company remaining unpaid to the
extent necessary to pay such Obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to or
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for the holders of Senior Debt of the Company.
With respect to the holders of Senior Debt of the Company, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt of the Company.
Section 10.06. Notice by the Company.
The Company shall promptly notify the Trustee and the Paying Agent of any
facts known to the Company that would cause a payment of any Obligations with
respect to the Notes to violate this Article, which notice shall specifically
refer to this Article 10, but failure to give such notice shall not affect the
subordination of the Notes to the Senior Debt of the Company as provided in this
Article.
Section 10.07. Subrogation.
After all Senior Debt of the Company is paid in full and until the Notes
are paid in full, Holders of the Notes shall be subrogated (equally and ratably
with all other pari passu indebtedness) to the rights of holders of Senior Debt
of the Company to receive distributions applicable to Senior Debt of the Company
to the extent that distributions otherwise payable to the Holders of the Notes
have been applied to the payment of Senior Debt of the Company. A distribution
made under this Article to holders of Senior Debt of the Company that otherwise
would have been made to Holders of the Notes is not, as between the Company and
Holders of the Notes, a payment by the Company on the Notes.
Section 10.08. Relative Rights.
This Article defines the relative rights of Holders of the Notes and
holders of Senior Debt of the Company. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of the Notes, the
obligations of the Company, which are absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of the Notes and creditors
of the Company other than their rights in relation to holders of Senior
Debt; or
(3) prevent the Trustee or any Holder of the Notes from exercising
its available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt to receive distributions and
payments otherwise payable to Holders of the Notes.
If the Company fails because of this Article to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
Section 10.09. Subordination May Not Be Impaired by the Company.
No right of any holder of Senior Debt of the Company to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
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Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Debt of the Company, or any of them, may, at any time and from
time to time, without the consent of or notice to the Holders of the Notes,
without incurring any liabilities to any Holder of any Notes and without
impairing or releasing the subordination and other benefits provided in this
Indenture or the obligations of the Holders of the Notes to the holders of the
Senior Debt of the Company, even if any right of reimbursement or subrogation or
other right or remedy of any Holder of Notes is affected, impaired or
extinguished thereby, do any one or more of the following:
(1) change the manner, place or terms of payment or change or extend
the time of payment of, or renew, exchange, amend, increase or alter, the
terms of any Senior Debt, any security therefor or guaranty thereof or any
liability of any obligor thereon (including any guarantor) to such holder,
or any liability incurred directly or indirectly in respect thereof or
otherwise amend, renew, exchange, extend, modify, increase or supplement in
any manner any Senior Debt or any instrument evidencing or guaranteeing or
securing the same or any agreement under which Senior Debt is outstanding;
(2) sell, exchange, release, surrender, realize upon, enforce or
otherwise deal with in any manner and in any order any property pledged,
mortgaged or otherwise securing Senior Debt or any liability of any obligor
thereon to such holder, or any liability incurred directly or indirectly in
respect thereof;
(3) settle or compromise any Senior Debt or any other liability of
any obligor of the Senior Debt to such holder or any security therefor or
any liability incurred directly or indirectly in respect thereof and apply
any sums by whomsoever paid and however realized to any liability
(including, without limitation, Senior Debt) in any manner or order; and
(4) fail to take or to record or to otherwise perfect, for any reason
or for no reason, any lien or security interest securing Senior Debt by
whomsoever granted, exercise or delay in or refrain from exercising any
right or remedy against any obligor or any guarantor or any other person,
elect any remedy and otherwise deal freely with any obligor and any
security for the Senior Debt or any liability of any obligor to such holder
or any liability incurred directly or indirectly in respect thereof.
Section 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt of the Company, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders of the Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction so
long as such order or decree recognizes the provisions of this Article 10 or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of the Notes for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Debt and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
10.
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Section 10.11. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee, and the Trustee and the Paying Agent may continue to make payments
on the Notes, unless the Trustee shall have received at its Corporate Trust
Office at least three Business Days prior to the date of such payment written
notice of facts that would cause the payment of any Obligations with respect to
the Notes to violate this Article, which notice shall specifically refer to this
Article 10 (provided that, notwithstanding the foregoing, the making of any such
payments shall otherwise be subject to the provisions of Sections 10.02, 10.03
and 10.05 hereof). Only the Company or a Representative may give the notice.
Nothing in this Article 10 shall impair the claims of, or payments to, the
Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
Section 10.12. Authorization to Effect Subordination.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes, including without limitation the timely filing of a
claim for the unpaid balance of the Notes held by such Holder in the form
required in any Insolvency or Liquidation Proceeding and causing such claim to
be approved. If the Trustee does not file a proper proof of claim or proof of
debt in the form required in any proceeding referred to in Section 6.09 hereof
at least 30 days before the expiration of the time of such claim, the
Representatives of the Designated Senior Debt, including debt under the Credit
Facility, are hereby authorized to file an appropriate claim for and on behalf
of the Holders of the Notes.
Section 10.13. Amendments.
Any amendment to the provisions of this Article 10 shall require the
consent of the Holders of at least 75% in aggregate amount of Notes then
outstanding if such amendment would adversely affect the legal rights of
Holders.
ARTICLE 11
GUARANTEE OF NOTES
Section 11.01. Subsidiary Guarantee.
Subject to Section 11.05 hereof, each of the Subsidiary Guarantors hereby,
on a full, unconditional, joint and several, unsecured basis guarantees (the
"Subsidiary Guarantees") to each Holder of a Note authenticated and delivered by
the Trustee and to the Trustee and its successors and assigns, irrespective of
the validity and enforceability of this Indenture, the Notes and the Obligations
of the Company hereunder and thereunder, that: (a) the principal of, premium, if
any, interest and Liquidated Damages, if any, on the Notes will be promptly paid
in full when due, subject to any applicable grace period, whether at maturity,
by acceleration, redemption or otherwise, and interest on the overdue principal,
premium, if any, (to the extent permitted by law) interest on any interest, if
any, and Liquidated Damages, if any, on the Notes, and all other payment
Obligations of the Company to the Holders or the Trustee hereunder or
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thereunder will be promptly paid in full and performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other Obligations, the same will
be promptly paid in full when due in accordance with the terms of the extension
or renewal, subject to any applicable grace period, whether at stated maturity,
by acceleration, redemption or otherwise. Failing payment when so due of any
amount so guaranteed for whatever reason the Subsidiary Guarantors will be
jointly and severally obligated to pay the same immediately. An Event of Default
under this Indenture or the Notes shall constitute an event of default under the
Subsidiary Guarantees, and shall entitle the Holders to accelerate the
Obligations of the Subsidiary Guarantors hereunder in the same manner and to the
same extent as the Obligations of the Company. The Subsidiary Guarantors hereby
agree that their Obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenants
that this Subsidiary Guarantee will not be discharged except by complete
performance of the Obligations contained in the Notes and this Indenture. If any
Holder or the Trustee is required by any court or otherwise to return to the
Company, the Subsidiary Guarantors, or any Custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Subsidiary Guarantors, any amount paid by either to the Trustee or such Holder,
this Subsidiary Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Subsidiary Guarantor agrees that it
shall not be entitled to, and hereby waives, any right of subrogation in
relation to the Holders in respect of any Obligations guaranteed hereby. Each
Subsidiary Guarantor further agrees that, as between the Subsidiary Guarantors,
on the one hand, and the Holders and the Trustee, on the other hand, (x) the
maturity of the Obligations guaranteed hereby may be accelerated as provided in
Article 6 for the purposes of the Subsidiary Guarantees, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article 6 hereof, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Subsidiary Guarantors for the purpose of the Subsidiary
Guarantees. The Subsidiary Guarantors shall have the right to seek contribution
from any non-paying Subsidiary Guarantor so long as the exercise of such right
does not impair the rights of the Holders under the Subsidiary Guarantees.
Section 11.02. Execution and Delivery of Subsidiary Guarantee.
To evidence its Subsidiary Guarantee set forth in Section 11.01, each
Subsidiary Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form of Exhibit D shall be endorsed by an Officer of such
---------
Subsidiary Guarantor on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Subsidiary Guarantor, by
manual or facsimile signature, by an Officer of such Subsidiary Guarantor.
Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee set
forth in Section 11.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the Subsidiary
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall
be valid nevertheless.
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The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth
in this Indenture on behalf of the Subsidiary Guarantors.
Section 11.03. Subsidiary Guarantors May Consolidate, etc., on Certain Terms
(a) Except as set forth in Articles 4 and 5, nothing contained in
this Indenture shall prohibit a merger between a Subsidiary Guarantor and
another Subsidiary Guarantor or a merger between a Subsidiary Guarantor and the
Company.
(b) Subject to Section 11.04 hereof, no Subsidiary Guarantor may
consolidate with or merge with or into (whether or not such Subsidiary Guarantor
is the surviving Person), another corporation, Person or entity whether or not
affiliated with such Subsidiary Guarantor unless (i) except in the case of a
merger of such Subsidiary Guarantor with or into the Company or another
Subsidiary Guarantor and subject to the provisions of the following paragraph,
the Person formed by or surviving any such consolidation or merger (if other
than such Subsidiary Guarantor) assumes all the obligations of such Subsidiary
Guarantor pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under the Notes, this Indenture and the
Registration Rights Agreement, (ii) immediately after giving effect to such
transaction, no Event of Default exists and (iii) except in the case of a merger
of such Subsidiary Guarantor with or into the Company or another Subsidiary
Guarantor, the Company would be permitted by virtue of the Company's pro forma
Fixed Charge Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof.
(c) In the case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor Person, by supplemental indenture,
executed and delivered to the Trustee and substantially in the form of Exhibit E
---------
hereto, of the Subsidiary Guarantee endorsed upon the Notes and the due and
punctual performance of all of the covenants and conditions of this Indenture to
be performed by the Subsidiary Guarantor, such successor Person shall succeed to
and be substituted for the Subsidiary Guarantor with the same effect as if it
had been named herein as a Subsidiary Guarantor. Such successor Person thereupon
may cause to be signed any or all of the Subsidiary Guarantees to be endorsed
upon all of the Notes issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee. All of the Subsidiary
Guarantees so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Subsidiary Guarantees theretofore and thereafter
issued in accordance with the terms of this Indenture as though all of such
guarantees had been issued at the date of the execution hereof.
Section 11.04. Releases Following Sale of Assets, Merger, Sale of Capital Stock
Etc..
In the event of a sale or other disposition of all of the assets of any
Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or
other disposition of all of the capital stock of any Subsidiary Guarantor, then
such Subsidiary Guarantor (in the event of a sale or other disposition, by way
of such a merger, consolidation or otherwise, of all of the capital stock of
such Subsidiary Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all of the assets of such Subsidiary
Guarantor) will be released and relieved of any obligations under its Subsidiary
Guarantee; provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the provisions of Section 4.10 and, if applicable,
Section 4.13 hereof.
Section 11.05. Limitation on Subsidiary Guarantor Liability.
For purposes hereof, the obligations of each Subsidiary Guarantor under its
Subsidiary Guarantee
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shall be limited to the lesser of (i) the aggregate amount of the Obligations of
the Company under the Notes and this Indenture and (ii) the amount, if any,
which would not have (A) rendered such Subsidiary Guarantor "insolvent" (as such
term is defined in the United States Bankruptcy Code and in the Debtor and
Creditor Law of the State of New York) or (B) left such Subsidiary Guarantor
with unreasonably small capital at the time its Subsidiary Guarantee of the
Notes was entered into; provided that it will be a presumption in any lawsuit or
other proceeding in which a Subsidiary Guarantor is a party that the amount
guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in
clause (i) above unless any creditor, or representative of creditors of such
Subsidiary Guarantor, or debtor in possession or trustee in bankruptcy of the
Subsidiary Guarantor, otherwise proves in such a lawsuit that the aggregate
liability of the Subsidiary Guarantor is the amount set forth in clause (ii)
above. In making any determination as to solvency or sufficiency of capital of a
Subsidiary Guarantor in accordance with the previous sentence, the right of such
Subsidiary Guarantor to contribution from other Subsidiary Guarantors, and any
other rights such Subsidiary Guarantor may have, shall be taken into account.
Section 11.06. "Trustee" to Include Paying Agent.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article 11 shall in each case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully and for all intents and purposes as if such Paying Agent were
named in this Article 11 in place of the Trustee.
ARTICLE 12
SUBORDINATION OF SUBSIDIARY GUARANTEE
Section 12.01. Agreement to Subordinate.
Each Subsidiary Guarantor agrees, and each Holder by accepting a Note
agrees, that all Obligations under the Subsidiary Guarantees shall be
subordinated in right of payment, to the extent and in the manner provided in
this Article 12, to the prior payment in full of all Senior Debt of such
Subsidiary Guarantor, whether outstanding on the date hereof or thereafter
incurred, that the subordination is for the benefit of, and shall be enforceable
directly by, the holders of the Senior Debt of such Subsidiary Guarantor and
that each holder of Senior Debt of such Subsidiary Guarantor, whether now
outstanding or hereafter created, incurred assumed or guaranteed shall be deemed
to have acquired Senior Debt in reliance upon the covenants and provisions
contained in this Indenture and the Subsidiary Guarantees. Each Subsidiary
Guarantor further agrees, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Subsidiary Guarantees shall rank pari passu in
right of payment to the Existing Subsidiary Guarantees.
Section 12.02. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of any Subsidiary Guarantor in a
liquidation or dissolution of such Subsidiary Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to such
Subsidiary Guarantor or its property, an assignment for the benefit of creditors
or any marshalling of such Subsidiary Guarantor's assets and liabilities, the
holders of Senior Debt of such Subsidiary Guarantor will be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt) before the Holders will be entitled to receive any
payment with respect to the
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respective Subsidiary Guarantees, and until all Obligations with respect to
Senior Debt are paid in full, any distribution to which the Holders would be
entitled shall be made to the holders of Senior Debt of such Subsidiary
Guarantor (except that Holders may receive and retain Permitted Junior
Securities and payments made from the trust described under Article 8 hereof).
Section 12.03. Default on Designated Senior Debt.
No Subsidiary Guarantor shall make any payment upon or in respect of the
Subsidiary Guarantees (except in Permitted Junior Securities or from the trust
described under Article 8 hereof) if (i) a default in the payment of the
principal of, premium, if any, or interest on Designated Senior Debt of such
Subsidiary Guarantor occurs and is continuing beyond any applicable period of
grace or (ii) any other default occurs and is continuing with respect to
Designated Senior Debt of such Subsidiary Guarantor that permits holders of the
Designated Senior Debt as to which such default relates to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment Blockage
Notice") from such Subsidiary Guarantor or the holders of any Designated Senior
Debt. Payments on the Subsidiary Guarantees may and shall be resumed (a) in the
case of a payment default, upon the date on which such default is cured or
waived and (b) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on which
the applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt of such Subsidiary Guarantor has been accelerated. No new
period of payment blockage may be commenced unless and until (i) 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage Notice
and (ii) all scheduled payments of principal, premium, if any, and interest on
the Notes that have come due have been paid in full in cash. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice unless such default shall have been cured or waived for
a period of not less than 90 consecutive days.
Section 12.04. Acceleration of Subsidiary Guarantees.
If payment of any Subsidiary Guarantee is accelerated because of an Event
of Default, the Subsidiary Guarantor shall promptly notify the Representatives
of Senior Debt of the acceleration.
Section 12.05. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder of a Subsidiary Guarantee
receives any payment of any Obligations with respect to a Subsidiary Guarantee
at a time when such payment is prohibited by Section 12.03 hereof, such payment
shall be held by the Trustee or such Holder, in trust for the benefit of, and
shall be paid forthwith over and delivered, upon written request, to, the
holders of Senior Debt of such Subsidiary Guarantor as their interests may
appear or their Representative under the indenture or other agreement (if any)
pursuant to which Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt of such Subsidiary Guarantor remaining unpaid to the
extent necessary to pay such Obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt of such Subsidiary Guarantor.
With respect to the holders of Senior Debt of any Subsidiary Guarantor, the
Trustee undertakes to perform only such obligations on the part of the Trustee
as are specifically set forth in this Article 12, and no implied covenants or
obligations with respect to the holders of Senior Debt of such Subsidiary
Guarantor shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Senior Debt of
any Subsidiary Guarantor.
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Section 12.06. Notice by Subsidiary Guarantor.
Each Subsidiary Guarantor shall promptly notify the Trustee and the Paying
Agent of any facts known to such Subsidiary Guarantor that would cause a payment
of any Obligations with respect to its Subsidiary Guarantee to violate this
Article, which notice shall specifically refer to this Article 12, but failure
to give such notice shall not affect the subordination of any Subsidiary
Guarantee to the Senior Debt of such Subsidiary Guarantor as provided in this
Article.
Section 12.07. Subrogation.
After all Senior Debt of the Subsidiary Guarantors is paid in full and
until the Notes are paid in full, Holders of the Subsidiary Guarantees shall be
subrogated (equally and ratably with all pari passu indebtedness) to the rights
of holders of Senior Debt of the Subsidiary Guarantors to receive distributions
applicable to Senior Debt of the Subsidiary Guarantors to the extent that
distributions otherwise payable to the Holders of the Subsidiary Guarantees have
been applied to the payment of Senior Debt of the Subsidiary Guarantors. A
distribution made under this Article to holders of Senior Debt of the Subsidiary
Guarantors that otherwise would have been made to Holders of the Subsidiary
Guarantees is not, as between the Subsidiary Guarantors and Holders of the
Subsidiary Guarantees, a payment by the Subsidiary Guarantors on the Subsidiary
Guarantees.
Section 12.08. Relative Rights.
This Article defines the relative rights of Holders of the Subsidiary
Guarantees and holders of Senior Debt of the Subsidiary Guarantors. Nothing in
this Indenture shall:
(1) impair, as between the Subsidiary Guarantors and Holders of the
Subsidiary Guarantees, the obligations of the Subsidiary Guarantors, which
are absolute and unconditional, to pay principal of and interest on the
Notes in accordance with the terms of the Subsidiary Guarantees;
(2) affect the relative rights of Holders of the Subsidiary
Guarantees and creditors of any Subsidiary Guarantor other than their
rights in relation to holders of Senior Debt; or
(3) prevent the Trustee or any Holder of the Subsidiary Guarantees
from exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Senior Debt to receive
distributions and payments otherwise payable to Holders of the Subsidiary
Guarantees.
If any Subsidiary Guarantor fails because of this Article to pay principal
of or interest on a Note on the due date in accordance with the terms of the
Subsidiary Guarantees, the failure is still a Default or Event of Default.
Section 12.09. Subordination May Not Be Impaired by Subsidiary Guarantor.
No right of any holder of Senior Debt of any Subsidiary Guarantor to
enforce the subordination of the Indebtedness evidenced by the Subsidiary
Guarantees shall be impaired by any act or failure to act by such Subsidiary
Guarantor or any Holder or by the failure of such Subsidiary Guarantor or any
Holder to comply with this Indenture.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Debt
69
<PAGE>
of any Subsidiary Guarantor, or any of them, may, at any time and from time to
time, without the consent of or notice to the Holders of the Subsidiary
Guarantees, without incurring any liabilities to any Holder of any Subsidiary
Guarantees and without impairing or releasing the subordination and other
benefits provided in this Indenture or the obligations of the Holders of the
Subsidiary Guarantees to the holders of the Senior Debt of such Subsidiary
Guarantor, even if any right of reimbursement or subrogation or other right or
remedy of any Holder of Subsidiary Guarantees is affected, impaired or
extinguished thereby, do any one or more of the following:
(1) change the manner, place or terms of payment or change or extend
the time of payment of, or renew, exchange, amend, increase or alter, the
terms of any Senior Debt, any security therefor or guaranty thereof or any
liability of any obligor thereon (including any guarantor) to such holder,
or any liability incurred directly or indirectly in respect thereof or
otherwise amend, renew, exchange, extend, modify, increase or supplement in
any manner any Senior Debt or any instrument evidencing or guaranteeing or
securing the same or any agreement under which Senior Debt is outstanding;
(2) sell, exchange, release, surrender, realize upon, enforce or
otherwise deal with in any manner and in any order any property pledged,
mortgaged or otherwise securing Senior Debt or any liability of any obligor
thereon, to such holder, or any liability incurred directly or indirectly
in respect thereof;
(3) settle or compromise any Senior Debt or any other liability of
any obligor of the Senior Debt to such holder or any security therefor or
any liability incurred directly or indirectly in respect thereof and apply
any sums by whomsoever paid and however realized to any liability
(including, without limitation, Senior Debt) in any manner or order; and
(4) fail to take or to record or to otherwise perfect, for any reason
or for no reason, any lien or security interest securing Senior Debt by
whomsoever granted, exercise or delay in or refrain from exercising any
right or remedy against any obligor or any guarantor or any other person,
elect any remedy and otherwise deal freely with any obligor and any
security for the Senior Debt or any liability of any obligor to such holder
or any liability incurred directly or indirectly in respect thereof.
Section 12.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt of any Subsidiary Guarantor, the distribution may be made and the
notice given to their Representative.
Upon any payment or distribution of assets of any Subsidiary Guarantor
referred to in this Article 12, the Trustee and the Holders of the Subsidiary
Guarantees shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction so long as such order or decree recognizes the
provisions of this Article 12 or upon any certificate of such Representative or
of the liquidating trustee or agent or other Person making any distribution to
the Trustee or to the Holders of the Subsidiary Guarantees for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Debt of any Subsidiary Guarantor and other Indebtedness of
the Company or any Subsidiary Guarantor, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 12.
70
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Section 12.11. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 12 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee, and the Trustee and the Paying Agent may continue to make payments
on the Notes or the Subsidiary Guarantees, unless the Trustee shall have
received at its Corporate Trust Office at least three Business Days prior to the
date of such payment written notice of facts that would cause the payment of any
Obligations with respect to the Notes or the Subsidiary Guarantees to violate
this Article, which notice shall specifically refer to this Article 12 (provided
that, notwithstanding the foregoing, the making of any such payments shall
otherwise be subject to the provisions of Sections 12.02, 12.03 and 12.05
hereof). Only the Company, the Subsidiary Guarantors or a Representative may
give the notice. Nothing in this Article 12 shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt of
any Subsidiary Guarantor with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights.
Section 12.12. Authorization to Effect Subordination.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 12, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes, including without limitation the timely filing of a
claim for the unpaid balance of the Notes held by such Holder in the form
required in any Insolvency or Liquidation Proceeding and causing such claim to
be approved. If the Trustee does not file a proper proof of claim or proof of
debt in the form required in any proceeding referred to in Section 6.09 hereof
at least 30 days before the expiration of the time of such claim, the
Representatives of the Designated Senior Debt, including debt under the Credit
Facility, are hereby authorized to file an appropriate claim for and on behalf
of the Holders of the Notes.
Section 12.13. Amendments.
Any amendment to the provisions of this Article 12 shall require the
consent of the Holders of at least 75% in aggregate amount of Notes then
outstanding if such amendment would adversely affect the rights of the Holders
of Subsidiary Guarantees.
ARTICLE 13
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S)318(c), the imposed duties shall control. If any
provision of this Indenture modifies or excludes any provision of the TIA that
may be so modified or excluded, such provision of the TIA shall be deemed to
apply to this Indenture as so modified or excluded, as the case may be.
Section 13.02. Notices.
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Any notice or communication by the Company, the Subsidiary Guarantors or
the Trustee to the others is duly given if in writing and delivered in person or
mailed by first class mail (registered or certified, return receipt requested),
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company or any Subsidiary Guarantor:
National Equipment Services, Inc.
1800 Sherman Avenue
Evanston, Illinois 60201
Telecopier No.: (847) 733-1078
Attention: Secretary
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telecopier No.: (312) 861-2200
Attention: H. Kurt von Moltke
If to the Trustee:
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Telecopier No.: (312) 461-3525
Attention: Indenture Trust Division
The Company, the Subsidiary Guarantors or the Trustee, by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier promising next Business Day delivery.
Any notice or communication to a Holder shall be mailed by first class mail
or by overnight air courier promising next Business Day delivery to its address
shown on the register kept by the Registrar. Any notice or communication shall
also be so mailed to any Person described in TIA (S) 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it;
provided that notice to the Trustee shall not be deemed to have been given until
receipt by the Trustee of such notice.
72
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If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
Section 13.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or the Subsidiary Guarantors
to the Trustee to take any action under this Indenture (other than the initial
issuance of the Senior Subordinated Notes), the Company or Subsidiary Guarantor
shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been satisfied; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officer's Certificate or certificates of public officials.
Section 13.05. Statements Required in Certificate.
Each certificate with respect to compliance with a condition or covenant
provided for in this Indenture (other than a certificate provided pursuant to
TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S) 314(e) and shall
include:
(a) a statement that the Person making such certificate has read such
covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements contained in such certificate
are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 13.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
73
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Section 13.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, this Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
Section 13.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF
LAW RULES THEREOF, SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE
NOTES AND THE SUBSIDIARY GUARANTEES.
Section 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 13.10. Successors.
All agreements of the Company and the Subsidiary Guarantors in this
Indenture, the Notes and the Subsidiary Guarantees shall bind their respective
successors and assigns. All agreements of the Trustee in this Indenture shall
bind its successors and assigns.
Section 13.11. Severability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 13.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 13.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
74
<PAGE>
SIGNATURES
Dated as of December 11, 1998 National Equipment Services, Inc.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Albany Ladder Company, Inc.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
BAT Acquisition Corp.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
NES Acquisition Corp.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
NES East Acquisition Corp.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
NES Michigan Acquisition Corp.
By: /s/ Paul R. Ingersoll
-----------------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
Falconite, Inc.
By: /s/ Paul R. Ingersoll
-----------------------------
Name: Paul R. Ingersoll
Title: Vice President
Carl's Mid South Rent-All Center
Incorporated
By: /s/ Paul R. Ingersoll
-----------------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite Aviation, Inc.
By: /s/ Paul R. Ingersoll
-----------------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite Equipment, Inc.
By: /s/ Paul R. Ingersoll
-----------------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite Rebuild Center, Inc.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
M&M Properties, Inc.
By: /s/ Paul R. Ingersoll
------------------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
McCurry & Falconite Equipment Co., Inc.
By: /s/ Paul R. Ingersoll
--------------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Rebel Studio Rentals, Inc.
By: /s/ Paul R. Ingersoll
--------------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Shaughnessy Crane Service, Inc.
By: /s/ Paul R. Ingersoll
--------------------------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
Harris Trust and Savings Bank,
as Trustee
By:/s/ C. Potter
-----------------------------
Name: C. Potter
Title: Assistant Vice President
<PAGE>
Exhibit A
---------
FOR PURPOSES OF SECTION 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT;
FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE PRICE IS $978.30.
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $21.70. THE ISSUE DATE IS DECEMBER 11,
1998 AND THE YIELD TO MATURITY IS 10.5% PER ANNUM.
(Face of Note)
10% Senior Subordinated Notes due 2004, Series ___
No. ___ $_______________
CUSIP NO.
NATIONAL EQUIPMENT SERVICES, INC.
promises to pay to _____________ or registered assigns, the principal sum of
___________ Dollars on November 30, 2004.
Interest Payment Dates: May 30 and November 30
Record Dates: May 15 and November 15
NATIONAL EQUIPMENT SERVICES, INC.
By:______________________________
Name:
Title:
This is one of the
Notes referred to in the
within-mentioned Indenture:
Dated: ___________
Harris Trust and Savings Bank,
as Trustee
By:__________________________________
Name:
Title:
A-1
<PAGE>
(Back of Note)
10% Senior Subordinated Notes due 2004, Series ___
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC") to the issuer or its agent for registration of transfer, exchange
or payment, and unless any certificate issued is registered in the name of Cede
& Co. or such other name as may be requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or such other entity as may be
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as
the registered owner hereof, Cede & Co., has an interest herein.]/1/
[THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE
THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF THE
SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (e) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.]/2/
_______________________
/1/ This paragraph should be included only if the Senior Subordinated Note
is issued in global form.
/2/ This paragraph should be removed upon the exchange of Senior
Subordinated Notes for New Senior Subordinated Notes in the Exchange Offer or
upon the registration of the Senior Subordinated Notes pursuant to the terms of
the Registration Rights Agreement.
A-2
<PAGE>
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. National Equipment Services, Inc., a Delaware corporation, or
its successor (the "Company"), promises to pay interest on the principal
amount of this Note at the rate of 10% per annum and shall pay the
Liquidated Damages, if any, payable pursuant to Section 5 of the
Registration Rights Agreement referred to below. The Company will pay
interest and Liquidated Damages, if any, in United States dollars (except
as otherwise provided herein) semi-annually in arrears on May 30 and
November 30, commencing on May 30, 1999, (each an "Interest Payment Date")
or if any such day is not a Business Day, on the next succeeding Business
Day. Interest on the Notes shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance; provided that if there is no existing Default or Event
of Default in the payment of interest, and if this Note is authenticated
between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date, except in the case of the original
issuance of Notes, in which case interest shall accrue from the date of
authentication. The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal
at the rate equal to 1% per annum in excess of the then applicable
interest rate on the Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy
Law) on overdue installments of interest and Liquidated Damages (without
regard to any applicable grace period) at the same rate to the extent
lawful. Interest shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
2. Method Of Payment. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages, if any, on the applicable
Interest Payment Date to the Persons who are registered Holders of Notes
at the close of business on May 15 or November 15 next preceding the
Interest Payment Date, even if such Notes are cancelled after such record
date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The
Notes shall be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for
such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages, if any,
may be made by check mailed to the Holders at their addresses set forth in
the register of Holders; provided that payment by wire transfer of
immediately available funds shall be required with respect to principal
of, premium and Liquidated Damages, if any, and interest on, the Global
Note and all other Notes the Holders of which shall have provided written
wire transfer instructions to the Company and the Paying Agent. Such
payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and
private debts.
3. Paying Agent And Registrar. Initially, Harris Trust and Savings Bank, the
Trustee under the Indenture, shall act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any
Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as of
December 11, 1998 ("Indenture") among the Company, the Subsidiary
Guarantors and the Trustee. The terms of the Notes include those stated in
the Indenture and those made a part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb)
(the "TIA"). The Notes are subject to all such terms, and Holders are
referred to the Indenture and such Act
A-3
<PAGE>
for a statement of such terms. The Notes are general unsecured Obligations
of the Company limited to $125,000,000 in aggregate principal amount.
5. Optional Redemption.
(a) Except as described in the following paragraphs, the Notes will
not be redeemable at the Company's option prior to November 30, 2001.
Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on November 30 of the
years indicated below:
YEAR PERCENTAGE
2001......................................... 105.000%
2002......................................... 102.500%
2003 and thereafter.......................... 100.000%
(b) Notwithstanding the foregoing, at any time prior to November 20,
2000, the Company may on any one or more occasions redeem up to 33% of the
aggregate principal amount of Notes originally issued under the Indenture
at a redemption price of 110% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of a public offering of common
stock of the Company; provided that at least 67% of the aggregate
principal amount of Notes remain outstanding immediately after the
occurrence of such redemption (excluding Notes held by the Company and its
Subsidiaries); and provided, further, that such redemption shall occur
within 45 days of the date of the closing of such public offering.
(c) In addition, at any time on or prior to November 30, 2001, the
Notes may be redeemed as a whole but not in part at the option of the
Company upon the occurrence of or in connection with a Change of Control,
upon not less than 30 nor more than 60 days' notice (but in no event may
any such redemption occur prior to or more than 90 days after the
occurrence of such Change of Control), at a redemption price equal to 100%
of the principal amount thereof plus the Applicable Premium as of, and
plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date, subject to the right of Holders on the relevant record
date to receive interest due on the relevant interest payment date.
6. Mandatory Redemption.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, unless the Company has
exercised its right to redeem the Notes pursuant to paragraph 5(c) of this
Note, each Holder of Notes shall have the
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<PAGE>
right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer
price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company will mail a notice to each
Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the date specified
in such notice, which date shall be no earlier than 30 days and no later
than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice. The Company shall comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
(b) When the aggregate amount of Excess Proceeds exceeds $7.0 million, the
Company will be required to make an offer to all Holders of Notes and all
holders of pari passu Indebtedness containing provisions similar to those
set forth in the Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets (an "Asset Sale Offer") to purchase
the maximum principal amount of Notes (including Additional Notes, if any)
and such other Indebtedness that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Indenture and such other Indebtedness. To the
extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by the Indenture. If the aggregate principal amount
of Notes (including Additional Notes, if any) and such other Indebtedness
tendered into such Asset Sale Offer surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes and such
other Indebtedness to be purchased on a pro rata basis. Upon completion of
such offer to purchase, the amount of Excess Proceeds shall be reset at
zero.
(c) Holders of the Notes that are the subject of an offer to purchase will
receive a Change of Control Offer or Asset Sale Offer from the Company
prior to any related purchase date and may elect to have such Notes
purchased by completing the form titled "Option of Holder to Elect
Purchase" appearing below.
8. Notice of Redemption. Notice of redemption shall be mailed by first class
mail at least 30 days but not more than 60 days before the redemption date
to each Holder whose Notes are to be redeemed at its registered address.
Notes in denominations larger than $1,000 may be redeemed in part but only
in whole multiples of $1,000, unless all of the Notes held by a Holder are
to be redeemed. On and after the redemption date, interest and Liquidated
Damages, if any, ceases to accrue on the Notes or portions thereof called
for redemption.
9. Subordination. The payment of principal, premium, if any, and interest
and Liquidated Damages on the Notes is subordinated in right of payment,
as set forth in the Indenture, to the prior payment in full of all Senior
Debt, which is (i) all Indebtedness under the Credit Facility and all
Hedging Obligations with respect thereto, whether outstanding on the date
of the Indenture or thereafter created, (ii) any other Indebtedness
permitted to be incurred by the Company or a Subsidiary Guarantor under
the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes or the Subsidiary Guarantees
and (iii) all
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<PAGE>
Obligations with respect to the foregoing. Notwithstanding anything to
the contrary in the foregoing, Senior Debt will not include (w) any
liability for federal, state, local or other taxes owed or owing by the
Company or a Subsidiary Guarantor, (x) any Indebtedness between or among
the Company, any of its Subsidiaries or any of its other Affiliates, (y)
any trade payables or (z) that portion of any Indebtedness that is
incurred in violation of the Indenture. To the extent provided in the
Indenture, Senior Debt must be paid before the Notes may be paid. The
Company agrees and each Holder of Notes by accepting a Note consents and
agrees to the subordination provided in the Indenture and authorizes the
Trustee to give it effect.
10. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in initial denominations of $1,000 and integral multiples
of $1,000. The transfer of the Notes may be registered and the Notes may
be exchanged as provided in the Indenture. The Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder
to pay any taxes and fees required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note or portion
of a Note selected for redemption, except for the unredeemed portion of
any Note being redeemed in part. Also, it need not exchange or register
the transfer of any Notes for a period of 15 days before a selection of
Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
11. Persons Deemed Owners. The registered Holder of a Note may be treated as
its owner for all purposes.
12. Amendment, Supplement and Waiver. Subject to the following paragraphs,
the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the Notes (including Additional Notes, if any) then
outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for,
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the Notes (including Additional Notes, if
any) then outstanding (including, without limitation, consents obtained
in connection with a purchase of, or tender offer or exchange offer for,
Notes).
Without the consent of each Holder affected, an amendment or waiver
may not (with respect to any Notes held by a non-consenting Holder): (i)
reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver; (ii) reduce the principal of or change
the fixed maturity of any Note or alter the provisions with respect to
the redemption of the Notes (other than provisions relating to the
covenants set forth in Sections 4.10 and 4.13 of the Indenture); (iii)
reduce the rate of or change the time for payment of interest on any
Note; (iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration); (v) make any Note
payable in money other than that stated in the Notes; (vi) make any
change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of Notes to receive payments of
principal of or premium, if any, or interest on the Notes; (vii) waive a
redemption payment with respect to any Note (other than a payment
required by one of the covenants set forth in Sections 4.10 or 4.13 of
the Indenture); or (viii) make any change in the foregoing amendment and
waiver provisions. In addition, any amendment to the provisions of
Article 10 or Article 12 of the Indenture (which relate to subordination)
will require the consent of the Holders of at least 75% in aggregate
principal
A-6
<PAGE>
amount of the Notes then outstanding if such amendment would adversely
affect the rights of Holders of Notes.
13. Defaults and Remedies. Events of Default include: (i) default for 30
days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (ii) default in payment when due of the
principal of or premium, if any, on the Notes (whether or not prohibited
by the subordination provisions of the Indenture); (iii) failure by the
Company or any of its Subsidiaries to comply with Sections 4.07, 4.09,
4.10 or 4.13 of the Indenture, and such default continues for ten days;
(iv) failure by the Company or any of its Subsidiaries for 60 days after
notice to comply with any of its other agreements in the Indenture or the
Notes; (v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture,
which default (a) is caused by a failure to pay principal of or premium,
if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $10 million or more; (vi) failure by the Company or any of its
Subsidiaries to pay final judgments aggregating in excess of $10 million,
not covered by insurance, which judgments are not paid, discharged or
stayed for a period of 60 days; (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant
Subsidiaries; and (viii) except as permitted by the Indenture, any
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full
force and effect or any Subsidiary Guarantor, or any Person acing on
behalf of any Subsidiary Guarantor, shall deny or disaffirm its
obligations under its Subsidiary Guarantee (other than by reason of
release pursuant to the Indenture).
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes
(including Additional Notes, if any) may declare all the Notes to be due
and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency,
with respect to the Company, any Significant Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject
to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of the Notes notice
of any continuing Default or Event of Default (except a Default or Event
of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
14. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform
services for the Company, the Subsidiary Guarantors or their respective
Affiliates, and may otherwise deal with the Company, the Subsidiary
Guarantors or their respective Affiliates, as if it were not the Trustee.
15. No Recourse Against Others. No director, officer, employee, incorporator
or stockholder of the Company or any Subsidiary Guarantor, as such, shall
have any liability for any obligations
A-7
<PAGE>
of the Company under the Notes, any Subsidiary Guarantee or the Indenture
or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes and the Subsidiary
Guarantees. Such waiver may not be effective to waive liabilities under
the federal securities laws and it is the view of the Commission that
such a waiver is against public policy.
16. Authentication. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
17. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
18. Additional Rights of Holders of Transfer Restricted Securities. In
addition to the rights provided to Holders of the Notes under the
Indenture, Holders of Transferred Restricted Securities (as defined in
the Registration Rights Agreement) shall have all the rights set forth in
the Registration Rights Agreement, dated as of the date hereof, among the
Company, the Subsidiary Guarantors and the Initial Purchasers, or in the
case of Additional Notes, Holders of Restricted Global Notes and
restricted Definitive Notes shall have the rights set forth in one or
more registration rights agreements, if any, between the Company and the
other parties thereto, relating to rights given by the Company to the
purchasers of any Additional Notes (collectively, the "Registration
Rights Agreement").
19. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee
on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to the Holders. No
representation is made as to the accuracy of such numbers either as
printed on the Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed
thereon.
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
National Equipment Services, Inc.
1800 Sherman Avenue
Evanston, Illinois 60201
Telecopier No.: (847) 733-1078
Attention: Secretary
A-8
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
____________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_______________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
____________________________________________________________________________
Date:_________________
Your Signature:_____________________
(Sign exactly as your name
appears on the face of this Note)
Signature Guarantee:________________
A-9
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10 or 4.13 of the Indenture, check the box below:
[_]Section 4.10 [_] Section 4.13
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state the
amount you elect to have purchased: $___________
Date:________________ Your Signature:______________________
(Sign exactly as your
name appears on the Note)
Tax Identification No.:______________
Signature Guarantee:_________________
A-10
<PAGE>
SCHEDULE OF EXCHANGES OF NOTES/3/
-
THE FOLLOWING EXCHANGES OF A PART OF THIS GLOBAL NOTE FOR OTHER NOTES HAVE BEEN
MADE:
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Principal Amount of Signature of authorized
Amount of decrease in Amount of increase in this Global Note officer of Trustee or
Principal Amount of this Principal Amount of this following such Note Custodian
Date of Exchange Global Note Global Note decrease (or increase)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
_____________________
/3/ This should be included only if the Senior Subordinated Note is issued
_
in global form.
A-11
<PAGE>
Exhibit B-1
-------
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF DEFINITIVE NOTES FOR OTHER DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN THE
GLOBAL NOTE
(Pursuant to Section 2.06(b) or (e) of the Indenture)
Harris Trust and Savings Bank
111 West Monroe, 6W
Chicago, Illinois 60603
Re: 10% Senior Subordinated Notes due 2004, Series ___ of National
Equipment Services, Inc.
Reference is hereby made to the Indenture, dated as of December 11, 1998
(the "Indenture"), among National Equipment Services, Inc., a Delaware
corporation (the "Company"), Albany Ladder Company, Inc., a New York corporation
("Albany"), BAT Acquisition Corp., a Delaware corporation ("BAT"), NES
Acquisition Corp., a Delaware corporation ("NES Acquisition"), NES East
Acquisition Corp., a Delaware corporation ("NES East"), NES Michigan Acquisition
Corp., a Delaware corporation ("NES Michigan"), Falconite, Inc., an Illinois
corporation ("Falconite"), Carl's Mid South Rent-All Center Incorporated, a
Tennessee corporation ("Carl's"), Falconite Aviation, Inc., a Delaware
corporation ("Falconite Aviation"), Falconite Equipment, Inc., an Illinois
corporation ("Falconite Equipment"), Falconite Rebuild Center, Inc., a Kentucky
corporation ("Falconite Rebuild"), M&M Properties, Inc., an Alabama corporation
("M&M"), McCurry & Falconite Equipment Co., Inc. ("M&F"), Rebel Studio Rentals,
Inc., a California corporation ("Rebel") and Shaughnessy Crane Service, Inc., a
Massachusetts corporation ("Shaughnessy") (each of Albany, BAT, NES Acquisition,
NES East, NES Michigan, Falconite, Carl's, Falconite Aviation, Falconite
Equipment, Falconite Rebuild, M&M, M&F, Rebel and Shaughnessy, a "Subsidiary
Guarantor" and together with any Subsidiary of the Company that executes a
Subsidiary Guarantee substantially in the form of Exhibit D attached hereto, the
---------
"Subsidiary Guarantors") and Harris Trust and Savings Bank, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
This relates to $ ___________ principal amount of Senior Subordinated
Notes which are evidenced by one or more Definitive Notes in the name of
__________________ (the "Transferor"). The Transferor has requested an
exchange or transfer of such Definitive Note(s) in the form of an equal
principal amount of Senior Subordinated Notes evidenced by (a) one or more
Definitive Notes, to be delivered to the Transferor or, in the case of a
transfer of such Senior Subordinated Notes, to such Person as the Transferor
instructs the Trustee or (b) a beneficial interest in the Global Note.
In connection with such request and in respect of the Senior Subordinated
Notes surrendered to the Trustee herewith for exchange (the "Surrendered Senior
Subordinated Notes"), the Holder of such Surrendered Senior Subordinated Notes
hereby certifies that:
[CHECK ONE]
[_] 1. the Surrendered Senior Subordinated Notes are being acquired for the
Transferor's own account, without transfer;
B-1-1
<PAGE>
or
[_] 2. the Surrendered Senior Subordinated Notes are being transferred to the
Company or any of its Subsidiaries;
or
[_] 3. the Surrendered Senior Subordinated Notes are being transferred
pursuant to and in accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the
Surrendered Senior Subordinated Notes are being transferred to a
Person that the Transferor reasonably believes is purchasing the
Surrendered Senior Subordinated Notes for its own account, or for one
or more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in
each case in a transaction meeting the requirements of Rule 144A;
or
[_] 4. the Surrendered Senior Subordinated Notes are being transferred in a
transaction permitted by Rule 144 under the Securities Act;
or
[_] 5. the Surrendered Senior Subordinated Notes are being transferred in a
transaction permitted by Rule 903 or Rule 904 under the Securities
Act;
or
[_] 6. the Surrendered Senior Subordinated Notes are being transferred to an
Institutional Accredited Investor pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A,
Rule 144 or Rule 904 and the Transferor further certifies that the
transfer complies with the transfer restrictions applicable to
beneficial interests in the Global Note and Definitive Notes bearing
the Private Placement Legend and the requirements of the exemption
claimed, which certification is supported by (x) if such transfer is
in respect of a principal amount of Senior Subordinated Notes at the
time of transfer of $100,000 or more, a certificate executed by the
transferee in the form of Exhibit C to the Indenture, or (y) if such
---------
transfer is in respect of a principal amount of Senior Subordinated
Notes at the time of transfer of less than $100,000, (1) a certificate
executed in the form of Exhibit C to the Indenture and
---------
(2) an Opinion of Counsel provided by the Transferor or the transferee
(a copy of which the Transferor has attached to this certification),
to the effect that such transfer is in compliance with the Securities
Act;
or
[_] 7. the Surrendered Senior Subordinated Notes are being transferred
pursuant to an effective registration statement under the Securities
Act;
B-1-2
<PAGE>
or
[_] 8. such transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act
other than Rule 144A, Rule 144, Rule 903, Rule 904 or transfer to an
Institutional Accredited Investor pursuant to paragraph 6 above, and
the Transferor hereby further certifies that the transfer complies
with the transfer restrictions applicable to beneficial interests in
the Global Note and Definitive Notes bearing the Private Placement
Legend and the requirements of the exemption claimed, which
certification is supported by an Opinion of Counsel, provided by the
Transferor or the transferee (a copy of which the Transferor has
attached to this certification), to the effect that such transfer is
in compliance with the Securities Act;
and the Surrendered Senior Subordinated Notes are being transferred in
compliance with any applicable blue sky securities laws of any state of the
United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company, the Subsidiary Guarantors and Salomon
Smith Barney Inc. and First Union Capital Markets, a division of Wheat First
Securities, Inc., the initial purchasers of such Senior Subordinated Notes being
transferred.
[Insert Name of Transferor]
By: __________________________
Name:
Title:
Dated:
cc: National Equipment Services, Inc.
Salomon Smith Barney Inc.
First Union Capital Markets
B-1-3
<PAGE>
Exhibit B-2
-----------
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM GLOBAL NOTE TO DEFINITIVE NOTE
(Pursuant to Section 2.06(c) of the Indenture)
Harris Trust and Savings Bank
111 West Monroe, 6W
Chicago, Illinois 60603
Re: 10% Senior Subordinated Notes due 2004, Series ___ of National
Equipment Services, Inc.
Reference is hereby made to the Indenture, dated as of December 11, 1998
(the "Indenture"), among National Equipment Services, Inc., a Delaware
corporation (the "Company"), Albany Ladder Company, Inc., a New York corporation
("Albany"), BAT Acquisition Corp., a Delaware corporation ("BAT"), NES
Acquisition Corp., a Delaware corporation ("NES Acquisition"), NES East
Acquisition Corp., a Delaware corporation ("NES East"), NES Michigan Acquisition
Corp., a Delaware corporation ("NES Michigan"), Falconite, Inc., an Illinois
corporation ("Falconite"), Carl's Mid South Rent-All Center Incorporated, a
Tennessee corporation ("Carl's"), Falconite Aviation, Inc., a Delaware
corporation ("Falconite Aviation"), Falconite Equipment, Inc., an Illinois
corporation ("Falconite Equipment"), Falconite Rebuild Center, Inc., a Kentucky
corporation ("Falconite Rebuild"), M&M Properties, Inc., an Alabama corporation
("M&M"), McCurry & Falconite Equipment Co., Inc. ("M&F"), Rebel Studio Rentals,
Inc., a California corporation ("Rebel") and Shaughnessy Crane Service, Inc., a
Massachusetts corporation ("Shaughnessy") (each of Albany, BAT, NES Acquisition,
NES East, NES Michigan, Falconite, Carl's, Falconite Aviation, Falconite
Equipment, Falconite Rebuild, M&M, M&F, Rebel and Shaughnessy, a "Subsidiary
Guarantor" and together with any Subsidiary of the Company that executes a
Subsidiary Guarantee substantially in the form of Exhibit D attached hereto, the
---------
"Subsidiary Guarantors") and Harris Trust and Savings Bank, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
This letter relates to $__________ principal amount of Senior Subordinated
Notes which are evidenced by a beneficial interest in the Global Note in the
name of ____________________ (the "Transferor"). The Transferor has requested
an exchange or transfer of such beneficial interest in the form of an equal
principal amount of Senior Subordinated Notes evidenced by one or more
Definitive Notes, to be delivered to the Transferor or, in the case of a
transfer of such Senior Subordinated Notes, to such Person as the Transferor
instructs the Trustee.
In connection with such request and in respect of the Senior Subordinated
Notes surrendered to the Trustee herewith for exchange (the "Surrendered Senior
Subordinated Notes"), the Holder of such Surrendered Senior Subordinated Notes
hereby certifies that:
[CHECK ONE]
[_] 1. the Surrendered Senior Subordinated Notes are being transferred to the
beneficial owner of such Senior Subordinated Notes;
or
B-2-1
<PAGE>
[_] 2. the Surrendered Senior Subordinated Notes are being transferred
pursuant to and in accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the
Surrendered Senior Subordinated Notes are being transferred to a
Person that the Transferor reasonably believes is purchasing the
Surrendered Senior Subordinated Notes for its own account, or for one
or more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in
each case in a transaction meeting they requirements of Rule 144A;
or
[_] 3. the Surrendered Senior Subordinated Notes are being transferred in a
transaction permitted by Rule 144 under the Securities Act;
or
[_] 4. the Surrendered Senior Subordinated Notes are being transferred
pursuant to an effective registration statement under the Securities
Act;
or
[_] 5. the Surrendered Senior Subordinated Notes are being transferred in a
transaction permitted by Rule 903 or Rule 904 under the Securities
Act;
or
[_] 6. the Surrendered Senior Subordinated Notes are being transferred to an
Institutional Accredited Investor pursuant to an exemption under the
Securities Act other than Rule 144A, Rule 144 or Rule 904 and the
Transferor further certifies that the transfer complies with the
transfer restrictions applicable to beneficial interests in the Global
Note and Definitive Notes bearing the Private Placement Legend and the
requirements of the exemption claimed, which certification is
supported by (x) if such transfer is in respect of a principal amount
of Senior Subordinated Notes at the time of transfer of $100,000 or
more, a certificate executed by the transferee in the form of Exhibit
-------
C to the Indenture, or (y) if such transfer is in respect of a
-
principal amount of Senior Subordinated Notes at the time of transfer
of less than $100,000, (1) a certificate executed in the form of
Exhibit C to the Indenture and (2) an Opinion of Counsel provided by
---------
the Transferor or the transferee (a copy of which the Transferor has
attached to this certification), to the effect that such transfer is
in compliance with the Securities Act;
or
[_] 7. such transfer is being effected pursuant and in compliance with an
exemption from the registration requirements of the Securities Act
other than Rule 144A, Rule 144, Rule 903, Rule 904 or transfer to an
Institutional Accredited Investor pursuant to paragraph 6 above, and
the Transferor hereby further certifies that the transfer complies
with the transfer restrictions applicable to beneficial interests in
the Global Note and Definitive Notes bearing the Private Placement
Legend and the requirements of the exemption claimed, which
certification is supported by an Opinion of Counsel, provided by the
Transferor or
B-2-2
<PAGE>
the transferee (a copy of which the Transferor has attached to this
certification), to the effect that such transfer is in compliance with
the Securities Act;
and the Surrendered Senior Subordinated Notes are being transferred in
compliance with any applicable blue sky securities laws of any state of the
United States.
B-2-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company, the Subsidiary Guarantors and Salomon
Smith Barney Inc. and First Union Capital Markets, a division of Wheat First
Securities, Inc., the initial purchasers of such Senior Subordinated Notes being
transferred.
[Insert Name of Transferor]
By: _______________________
Name:
Title:
Dated:
cc: National Equipment Services, Inc.
Salomon Smith Barney Inc.
First Union Capital Markets
B-2-4
<PAGE>
Exhibit C
---------
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Harris Trust and Savings Bank
111 West Monroe, 6W
Chicago, Illinois 60603
Re: 10% Senior Subordinated Notes due 2004, Series ___ of National
Equipment Services, Inc.
Reference is hereby made to the Indenture, dated as of December 11, 1998
(the "Indenture"), among National Equipment Services, Inc., a Delaware
corporation (the "Company"), Albany Ladder Company, Inc., a New York corporation
("Albany"), BAT Acquisition Corp., a Delaware corporation ("BAT"), NES
Acquisition Corp., a Delaware corporation ("NES Acquisition"), NES East
Acquisition Corp., a Delaware corporation ("NES East"), NES Michigan Acquisition
Corp., a Delaware corporation ("NES Michigan"), Falconite, Inc., an Illinois
corporation ("Falconite"), Carl's Mid South Rent-All Center Incorporated, a
Tennessee corporation ("Carl's"), Falconite Aviation, Inc., a Delaware
corporation ("Falconite Aviation"), Falconite Equipment, Inc., an Illinois
corporation ("Falconite Equipment"), Falconite Rebuild Center, Inc., a Kentucky
corporation ("Falconite Rebuild"), M&M Properties, Inc., an Alabama corporation
("M&M"), McCurry & Falconite Equipment Co., Inc. ("M&F"), Rebel Studio Rentals,
Inc., a California corporation ("Rebel") and Shaughnessy Crane Service, Inc., a
Massachusetts corporation ("Shaughnessy") (each of Albany, BAT, NES Acquisition,
NES East, NES Michigan, Falconite, Carl's, Falconite Aviation, Falconite
Equipment, Falconite Rebuild, M&M, M&F, Rebel and Shaughnessy, a "Subsidiary
Guarantor" and together with any Subsidiary of the Company that executes a
Subsidiary Guarantee substantially in the form of Exhibit D attached hereto, the
---------
"Subsidiary Guarantors") and Harris Trust and Savings Bank, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
In connection with our proposed purchase of $__________ aggregate
principal amount of:
(a) [_] Beneficial interests, or
(b) [_] Definitive Notes,
we confirm that:
1. We understand that any subsequent transfer of the Senior
Subordinated Notes or any interest therein is subject to certain restrictions
and conditions set forth in the Indenture and the undersigned agrees to be bound
by, and not to resell, pledge or otherwise transfer the Senior Subordinated
Notes or any interest therein except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
--------------
2. We understand that the offer and sale of the Senior Subordinated
Notes have not been registered under the Securities Act, and that the Senior
Subordinated Notes and any interest therein may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on behalf
of any accounts for which we are acting as hereinafter stated, that if we should
sell the Senior
C-1
<PAGE>
Subordinated Notes or any interest therein, (A) we will do so only (1)(a) to a
person who we reasonably believe is a qualified institutional buyer (as defined
in Rule 144A under the Securities Act) in a transaction meeting the requirements
of 144A, (b) in a transaction meeting the requirements of Rule 144 under the
Securities Act, (c) outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 of the Securities Act, (d) to
an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D under the Securities Act who prior to the consummation of
such sale furnishes you with a signed certificate substantially in the form
hereof or (e) in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel), (2)
to the Company or any of its subsidiaries or (3) pursuant to an effective
registration statement and, in each case, in accordance with any applicable
securities laws of any State of the United States or any other applicable
jurisdiction and (B) we will, and each subsequent holder will be required to,
notify any purchaser from it of the security evidenced hereby of the resale
restrictions set forth in (A) above.
3. We understand that, on any proposed resale of the Senior
Subordinated Notes or beneficial interests, we will be required to furnish to
you and the Company such certifications, legal opinions and other information as
you and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the Senior
Subordinated Notes purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Senior Subordinated
Notes, and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Senior Subordinated Notes or beneficial
interests therein purchased by us for our own account or for one or more
accounts (each of which is an institutional "accredited investor") as to each of
which we exercise sole investment discretion.
6. We are not acquiring the Senior Subordinated Notes with a view to
any distribution thereof that would violate the Securities Act or the securities
laws of any State of the United States.
C-2
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
______________________________
[Insert Name of Accredited
Investor]
By:___________________________
Name:
Title:
Dated: ______________, ____
C-3
<PAGE>
Exhibit D
---------
SUBSIDIARY GUARANTEE
Subject to Section 11.05 of the Indenture, each Subsidiary Guarantor
hereby, jointly and severally, unconditionally guarantees to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of the
Indenture, the Notes and the Obligations of the Company under the Notes or under
the Indenture, that: (a) the principal of, premium, if any, interest and
Liquidated Damages, if any, on the Notes will be promptly paid in full when due,
subject to any applicable grace period, whether at maturity, by acceleration,
redemption or otherwise, and interest on overdue principal, premium, if any,
and, to the extent permitted by law, interest on any interest, if any, and
Liquidated Damages, if any, on the Notes and all other payment Obligations of
the Company to the Holders or the Trustee under the Indenture or under the Notes
will be promptly paid in full, all in accordance with the terms thereof; and (b)
in case of any extension of time of payment or renewal of any Notes or any of
such other payment Obligations, the same will be promptly paid in full when due
in accordance with the terms of the extension or renewal, subject to any
applicable grace period, whether at stated maturity, by acceleration, redemption
or otherwise. Failing payment when so due of any amount so guaranteed for
whatever reason, the Subsidiary Guarantors will be jointly and severally
obligated to pay the same immediately.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are (a)
expressly set forth in Article 11 of the Indenture and (b) subordinated to
Senior Debt as set forth in Article 12 of the Indenture, and reference is hereby
made to such Indenture for the precise terms of this Subsidiary Guarantee. The
terms of Article 11 of the Indenture are incorporated herein by reference. This
Subsidiary Guarantee is subject to release as and to the extent provided in
Section 11.04 of the Indenture.
This is a continuing Guarantee and shall remain in full force and effect
and shall be binding upon each Subsidiary Guarantor and its respective
successors and assigns to the extent set forth in the Indenture until full and
final payment of all of the Company's Obligations under the Notes and the
Indenture and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. This is a
Subsidiary Guarantee of payment and not a guarantee of collection.
This Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this Subsidiary
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
For purposes hereof, each Subsidiary Guarantor's liability shall be
limited to the lesser of (i) the aggregate amount of the Obligations of the
Company under the Notes and the Indenture and (ii) the amount, if any, which
would not have (A) rendered such Subsidiary Guarantor "insolvent" (as such term
is defined in the Bankruptcy Law and in the Debtor and Creditor Law of the State
of New York) or (B) left such Subsidiary Guarantor with unreasonably small
capital at the time its Subsidiary Guarantee of the Notes was entered into;
provided that, it will be a presumption in any lawsuit or other proceeding in
which a Subsidiary Guarantor is a party that the amount guaranteed pursuant to
the Subsidiary Guarantee is the amount set forth in clause (i) above unless any
creditor, or representative of creditors of such Subsidiary Guarantor, or debtor
in possession or trustee in bankruptcy of such Subsidiary Guarantor, otherwise
proves in such a lawsuit that the aggregate liability of the Subsidiary
Guarantor is limited to the amount set forth in clause (ii) above. The
Indenture provides that, in making any determination as to the solvency or
D-1
<PAGE>
sufficiency of capital of a Subsidiary Guarantor in accordance with the previous
sentence, the right of such Subsidiary Guarantors to contribution from other
Subsidiary Guarantors and any other rights such Subsidiary Guarantors may have,
contractual or otherwise, shall be taken into account.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Dated as of ___________________ [Name of Guarantor]
By:________________________________________________
Name:
Title:
D-2
<PAGE>
Exhibit E
---------
FORM OF SUPPLEMENTAL INDENTURE
Supplemental Indenture (this "Supplemental Indenture"), dated as of
___________, between Subsidiary Guarantor (the "New Subsidiary Guarantor"), a
subsidiary of National Equipment Services, Inc., a Delaware corporation (the
"Company"), and Harris Trust and Savings Bank, as trustee under the indenture
referred to below (the "Trustee"). Capitalized terms used herein and not
defined herein shall have the meaning ascribed to them in the Indenture (as
defined below).
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of December 11, 1998, providing for the
issuance of an aggregate principal amount of $125,000,000 of 10% Senior
Subordinated Notes due 2004, Series ___ (the "Senior Subordinated Notes");
WHEREAS, Sections 4.16 and 11.03 of the Indenture provide that under
certain circumstances the Company is required to cause certain of its
Subsidiaries to execute and deliver to the Trustee a supplemental indenture
pursuant to which such Subsidiaries shall unconditionally guarantee all of the
Company's Obligations under the Senior Subordinated Notes pursuant to a
Subsidiary Guarantee on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of the Senior Subordinated Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Subsidiary Guarantee. The New Subsidiary Guarantor
hereby agrees, jointly and severally with all other Subsidiary Guarantors, to
guarantee the Company's Obligations under the Senior Subordinated Notes and the
Indenture on the terms and subject to the conditions set forth in Article 11 of
the Indenture and to be bound by all other applicable provisions of the
Indenture.
E-1
<PAGE>
3. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, shareholder or agent of any Subsidiary
Guarantor, as such, shall have any liability for any obligations of the Company
or any Subsidiary Guarantor under the Senior Subordinated Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Senior Subordinated Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Senior Subordinated Notes.
4. New York Law to Govern. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
5. Counterparts The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
7. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Subsidiary
Guarantor.
E-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture
to be duly executed, all as of the date first above written.
Dated: ________________ [Name of New Subsidiary Guarantor]
By: __________________________________
Name:
Title:
Dated: ________________ Harris Trust and Savings Bank,
as Trustee
By: _________________________________
Name:
Title:
E-3
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1).................................................................... 7.10
(a)(2).................................................................... 7.10
(a)(3).................................................................... N.A.
(a)(4).................................................................... N.A.
(a)(5).................................................................... 7.10
(b)....................................................................... 7.03; 7.10
(c)....................................................................... N.A.
311 (a)....................................................................... 7.11
(b)....................................................................... 7.11
(c)....................................................................... N.A.
312 (a)....................................................................... 2.05
(b)....................................................................... 13.03
(c)....................................................................... 13.03
313 (a)....................................................................... 7.06
(b)(1).................................................................... 7.06
(b)(2).................................................................... 7.06; 7.07
(c)....................................................................... 7.06;13.02
(d)....................................................................... 7.06
314 (a)....................................................................... 4.03;13.05
(b)....................................................................... N.A.
(c)(1).................................................................... 13.04
(c)(2).................................................................... 13.04
(c)(3).................................................................... N.A.
(d)....................................................................... N.A.
(e)....................................................................... 13.05
(f)....................................................................... N.A.
315 (a)....................................................................... 7.01
(b)....................................................................... 7.05,13.02
(c)....................................................................... 7.01
(d)....................................................................... 7.01
(e)....................................................................... 6.11
316 (a)(last sentence)........................................................ 2.09
(a)(1)(A)................................................................. 6.05
(a)(1)(B)................................................................. 6.04
(a)(2).................................................................... N.A.
(b)....................................................................... 6.07
(c)....................................................................... 2.13
317 (a)(1).................................................................... 6.08
(a)(2).................................................................... 6.09
(b)....................................................................... 2.04
318 (a)....................................................................... 13.01
(b)....................................................................... N.A.
(c)....................................................................... 13.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions....................................................... 1
Section 1.02. Other Definitions................................................. 15
Section 1.03. Incorporation by Reference of Trust Indenture Act................. 16
Section 1.04. Rules of Construction............................................. 16
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating................................................... 17
Section 2.02. Execution and Authentication...................................... 18
Section 2.03. Registrar and Paying Agent........................................ 18
Section 2.04. Paying Agent to Hold Money in Trust............................... 19
Section 2.05. Holder Lists...................................................... 19
Section 2.06. Transfer and Exchange............................................. 19
Section 2.07. Replacement Notes................................................. 26
Section 2.08. Outstanding Notes................................................. 26
Section 2.09. Treasury Notes.................................................... 27
Section 2.10. Temporary Notes................................................... 27
Section 2.11. Cancellation...................................................... 27
Section 2.12. Defaulted Interest................................................ 28
Section 2.13. Record Date....................................................... 28
Section 2.14. Computation of Interest........................................... 28
Section 2.15. CUSIP Number...................................................... 28
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee................................................ 28
Section 3.02. Selection of Notes to be Redeemed................................. 29
Section 3.03. Notice of Redemption.............................................. 29
Section 3.04. Effect of Notice of Redemption.................................... 30
Section 3.05. Deposit of Redemption or Purchase Price........................... 30
Section 3.06. Notes Redeemed in Part............................................ 31
Section 3.07. Optional Redemption............................................... 31
Section 3.08. Mandatory Redemption.............................................. 31
Section 3.09. Offer to Purchase by Application of Excess Proceeds............... 31
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.................................................. 33
Section 4.02. Maintenance of Office or Agency................................... 34
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 4.03. Commission Reports................................................ 34
Section 4.04. Compliance Certificate............................................ 35
Section 4.05. Taxes............................................................. 35
Section 4.06. Stay, Extension and Usury Laws.................................... 35
Section 4.07. Restricted Payments............................................... 36
Section 4.08. Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries........................................... 38
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock........ 39
Section 4.10. Assets Sales...................................................... 41
Section 4.11. Transactions With Affiliates...................................... 41
Section 4.12. Liens............................................................. 42
Section 4.13. Offer to Purchase Upon Change of Control.......................... 42
Section 4.14. Corporate Existence............................................... 43
Section 4.15. Business Activities............................................... 43
Section 4.16. Additional Subsidiary Guarantees.................................. 43
Section 4.17. Payment for Consents.............................................. 44
Section 4.18. Anti-Layering..................................................... 44
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation or Sale of Assets........................... 44
Section 5.02. Successor Corporation Substituted................................. 44
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default................................................. 45
Section 6.02. Acceleration...................................................... 47
Section 6.03. Other Remedies.................................................... 47
Section 6.04. Waiver of Past Defaults........................................... 47
Section 6.05. Control by Majority............................................... 48
Section 6.06. Limitation on Suits............................................... 48
Section 6.07. Rights of Holders of Notes to Receive Payment..................... 48
Section 6.08. Collection Suit by Trustee........................................ 48
Section 6.09. Trustee May File Proofs of Claim.................................. 49
Section 6.10. Priorities........................................................ 49
Section 6.11. Undertaking for Costs............................................. 49
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee................................................. 50
Section 7.02. Rights of Trustee................................................. 51
Section 7.03. Individual Rights of Trustee...................................... 51
Section 7.04. Trustee's Disclaimer.............................................. 51
Section 7.05. Notice of Defaults................................................ 52
Section 7.06. Reports by Trustee to Holders of the Notes........................ 52
Section 7.07. Compensation and Indemnity........................................ 52
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 7.08. Replacement of Trustee............................................ 53
Section 7.09. Successor Trustee by Merger, etc.................................. 54
Section 7.10. Eligibility; Disqualification..................................... 54
Section 7.11. Preferential Collection of Claims Against Company................. 54
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.......... 54
Section 8.02. Legal Defeasance and Discharge.................................... 55
Section 8.03. Covenant Defeasance............................................... 55
Section 8.04. Conditions to Legal or Covenant Defeasance........................ 55
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions............................. 57
Section 8.06. Repayment to Company.............................................. 57
Section 8.07. Reinstatement..................................................... 57
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes............................... 58
Section 9.02. With Consent of Holders of Notes.................................. 58
Section 9.03. Compliance with Trust Indenture Act............................... 60
Section 9.04. Revocation and Effect of Consents................................. 60
Section 9.05. Notation on or Exchange of Notes.................................. 60
Section 9.06. Trustee to Sign Amendments, etc................................... 60
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate.......................................... 61
Section 10.02. Liquidation; Dissolution; Bankruptcy.............................. 61
Section 10.03. Default on Designated Senior Debt................................. 61
Section 10.04. Acceleration of Notes............................................. 62
Section 10.05. When Distribution Must Be Paid Over............................... 62
Section 10.06. Notice by the Company............................................. 62
Section 10.07. Subrogation....................................................... 62
Section 10.08. Relative Rights................................................... 62
Section 10.09. Subordination May Not Be Impaired by the Company.................. 63
Section 10.10. Distribution or Notice to Representative.......................... 64
Section 10.11. Rights of Trustee and Paying Agent................................ 64
Section 10.12. Authorization to Effect Subordination............................. 64
Section 10.13. Amendments........................................................ 64
ARTICLE 11
GUARANTEE OF NOTES
Section 11.01. Subsidiary Guarantee.............................................. 65
Section 11.02. Execution and Delivery of Subsidiary Guarantee.................... 66
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 11.03. Subsidiary Guarantors May Consolidate, etc., on Certain
Terms............................................................. 66
Section 11.04. Releases Following Sale of Assets, Merger, Sale of Capital
Stock Etc......................................................... 67
Section 11.05. Limitation on Subsidiary Guarantor Liability...................... 67
Section 11.06. "Trustee" to Include Paying Agent................................. 67
ARTICLE 12
SUBORDINATION OF SUBSIDIARY GUARANTEE
Section 12.01. Agreement to Subordinate.......................................... 67
Section 12.02. Liquidation; Dissolution; Bankruptcy.............................. 68
Section 12.03. Default on Designated Senior Debt................................. 68
Section 12.04. Acceleration of Subsidiary Guarantees............................. 68
Section 12.05. When Distribution Must Be Paid Over............................... 68
Section 12.06. Notice by Subsidiary Guarantor.................................... 69
Section 12.07. Subrogation....................................................... 69
Section 12.08. Relative Rights................................................... 69
Section 12.09. Subordination May Not Be Impaired by Subsidiary Guarantor......... 70
Section 12.10. Distribution or Notice to Representative.......................... 71
Section 12.11. Rights of Trustee and Paying Agent................................ 71
Section 12.12. Authorization to Effect Subordination............................. 71
Section 12.13. Amendments........................................................ 72
ARTICLE 13
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls...................................... 72
Section 13.02. Notices........................................................... 72
Section 13.03. Communication by Holders of Notes with Other Holders of
Notes............................................................. 73
Section 13.04. Certificate and Opinion as to Conditions Precedent................ 73
Section 13.05. Statements Required in Certificate................................ 73
Section 13.06. Rules by Trustee and Agents....................................... 74
Section 13.07. No Personal Liability of Directors, Officers, Employees and
Stockholders...................................................... 74
Section 13.08. Governing Law..................................................... 74
Section 13.09. No Adverse Interpretation of Other Agreements..................... 74
Section 13.10. Successors........................................................ 74
Section 13.11. Severability...................................................... 74
Section 13.12. Counterpart Originals............................................. 75
Section 13.13. Table of Contents, Headings, etc.................................. 75
</TABLE>
iv
<PAGE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFEROR
Exhibit C FORM OF CERTIFICATE FROM ACQUIRING
INSTITUTIONAL ACCREDITED INVESTOR
Exhibit D FORM OF SUBSIDIARY GUARANTEE
Exhibit E FORM OF SUPPLEMENTAL INDENTURE
v
<PAGE>
EXHIBIT 4.13
EXECUTION COPY
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of December 11, 1998
by and among
National Equipment Services, Inc.
Albany Ladder Company, Inc.
BAT Acquisition Corp.
NES Acquisition Corp.
NES East Acquisition Corp.
NES Michigan Acquisition Corp.
Falconite, Inc.
Carl's Mid South Rent-All Center Incorporated
Falconite Aviation, Inc.
Falconite Equipment, Inc.
Falconite Rebuild Center, Inc.
M&M Properties, Inc.
McCurry & Falconite Equipment Co., Inc.
Rebel Studio Rentals, Inc.
Shaughnessy Crane Service, Inc.
and
Salomon Smith Barney Inc.
First Union Capital Markets Corp.
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of December 11, 1998, by and among National Equipment Services, Inc., a
Delaware corporation (the "Company"), Albany Ladder Company, Inc., a New York
-------
corporation ("Albany"), BAT Acquisition Corp., a Delaware corporation ("BAT"),
------ ---
NES Acquisition Corp., a Delaware corporation ("NES Acquisition"), NES East
---------------
Acquisition Corp., a Delaware corporation ("NES East"), NES Michigan Acquisition
--------
Corp., a Delaware corporation ("NES Michigan"), Falconite, Inc., an Illinois
------------
corporation ("Falconite"), Carl's Mid South Rent-All Center Incorporated, a
---------
Tennessee corporation ("Carl's"), Falconite Aviation, Inc., a Delaware
------
corporation ("Falconite Aviation"), Falconite Equipment, Inc., an Illinois
------------------
corporation ("Falconite Equipment"), Falconite Rebuild Center, Inc., a Kentucky
-------------------
corporation ("Falconite Rebuild"), M&M Properties, Inc., an Alabama corporation
-----------------
("M&M"), McCurry & Falconite Equipment Co., Inc. ("M&F"), Rebel Studio Rentals,
--- ---
Inc., a California corporation ("Rebel"), Shaughnessy Crane Service, Inc., a
-----
Massachusetts corporation ("Shaughnessy" and, together with Albany, BAT, NES
-----------
Acquisition, NES East, NES Michigan, Falconite, Carl's, Falconite Aviation,
Falconite Equipment, Falconite Rebuild, M&M, M&F and Rebel, the "Subsidiary
----------
Guarantors") and Salomon Smith Barney Inc. ("Salomon Smith Barney") and First
- ---------- --------------------
Union Capital Markets Corp., a division of Wheat First Securities, Inc. ("First
-----
Union" and, together with Salomon Smith Barney, the "Initial Purchasers"), each
- ----- ------------------
of whom has agreed to purchase the Company's 10% Senior Subordinated Notes due
2004, Series C (the "Senior Subordinated Notes") pursuant to the Purchase
-------------------------
Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated December
8, 1998, (the "Purchase Agreement"), by and among the Company, the Subsidiary
------------------
Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers
to purchase the Senior Subordinated Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 2 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
---
Business Day: Any day except a Saturday, Sunday or other day in the City
------------
of New York, or in the city of the corporate trust office of the Trustee, on
which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Broker-Dealer Transfer Restricted Securities: New Senior Subordinated
--------------------------------------------
Notes that are acquired by a Broker-Dealer in the Exchange Offer in exchange for
Senior Subordinated Notes that such Broker-Dealer acquired for its own account
as a result of market making activities or other trading activities (other than
Senior Subordinated Notes acquired directly from the Company or any of its
affiliates).
Certificated Securities: As defined in the Indenture.
-----------------------
Closing Date: The date hereof.
------------
1
<PAGE>
Commission: The Securities and Exchange Commission.
----------
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
----------
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the New Senior
Subordinated Notes to be issued in the Exchange Offer, (b) the maintenance of
such Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the minimum period required
pursuant to Section 3(b) hereof and (c) the delivery by the Company to the
Registrar under the Indenture of New Senior Subordinated Notes in the same
aggregate principal amount as the aggregate principal amount of Senior
Subordinated Notes tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Senior Subordinated Notes, each
--------------------
Interest Payment Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Offer: The registration by the Company under the Act of the New
--------------
Senior Subordinated Notes pursuant to the Exchange Offer Registration Statement
pursuant to which the Company shall offer the Holders of all outstanding
Transfer Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities for New Senior Subordinated Notes in an aggregate
principal amount equal to the aggregate principal amount of the Transfer
Restricted Securities tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
-------------------------------------
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
--------------
to sell the Senior Subordinated Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act.
Global Noteholder: As defined in the Indenture.
-----------------
Holders: As defined in Section 2 hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
Indenture: The Indenture, dated the Closing Date, among the Company, the
---------
Subsidiary Guarantors and Harris Trust and Savings Bank, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture is
-------
amended or supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
---------------------
NASD: National Association of Securities Dealers, Inc.
----
New Senior Subordinated Notes: The Company's 10% Senior Subordinated
-----------------------------
Notes due 2004, Series D, to be issued pursuant to the Indenture (i) in the
Exchange Offer or (ii) upon the request of any
2
<PAGE>
Holder of Senior Subordinated Notes covered by a Shelf Registration Statement,
in exchange for such Senior Subordinated Notes.
Notes: The Senior Subordinated Notes and the New Senior Subordinated
-----
Notes.
Person: An individual, partnership, corporation, trust, unincorporated
------
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus prepared pursuant to this Agreement and
----------
included in a Registration Statement at the time such Registration Statement is
declared effective, as amended or supplemented by any prospectus supplement and
by all other amendments thereto, including post-effective amendments, and all
material incorporated by reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date, each Person who
-------------
is a Holder of Notes on the record date with respect to the Interest Payment
Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Company and the
----------------------
Subsidiary Guarantors relating to (a) an offering of New Senior Subordinated
Notes pursuant to an Exchange Offer or (b) the registration for resale of
Transfer Restricted Securities pursuant to the Shelf Registration Statement, in
each case, (i) which is filed pursuant to the provisions of this Agreement and
(ii) including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
------------------------
Transfer Restricted Securities.
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
---
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur of
------------------------------
(a) the date on which such Note is exchanged in the Exchange Offer and entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Note has
been disposed of in accordance with a Shelf Registration Statement, (c) the date
on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
------------------------- ---------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
3
<PAGE>
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
------
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company and the Subsidiary Guarantors shall (i) cause to be filed
with the Commission as soon as practicable after the Closing Date, but in no
event later than 90 days after the Closing Date, the Exchange Offer Registration
Statement, (ii) use its commercially reasonable best efforts to cause such
Exchange Offer Registration Statement to become effective at the earliest
possible time, but in no event later than 150 days after the Closing Date, (iii)
in connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be reasonably necessary in order to
cause such Exchange Offer Registration Statement to become effective, (B) file,
if applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act and (C) cause all filings which to
the knowledge of the Company are necessary, if any, in connection with the
registration and qualification of the New Senior Subordinated Notes to be made
under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer, and (iv) upon the effectiveness of such
Exchange Offer Registration Statement, commence and Consummate the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the New Senior Subordinated Notes to be offered in exchange for
the Senior Subordinated Notes that are Transfer Restricted Securities and to
permit sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company and the Subsidiary Guarantors shall use their respective
best efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 Business Days. The Company and the Subsidiary
Guarantors shall cause the Exchange Offer to comply with all applicable federal
securities laws and all state securities laws that, to the knowledge of the
Company, are applicable. No securities other than the Notes shall be included
in the Exchange Offer Registration Statement. The Company and the Subsidiary
Guarantors shall use their respective commercially reasonable best efforts to
cause the Exchange Offer to be Consummated on the earliest practicable date
after the Exchange Offer Registration Statement has become effective, but in no
event later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Senior Subordinated Notes
that are Transfer Restricted Securities and that were acquired for the account
of such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Senior Subordinated Notes (other than Transfer
Restricted Securities acquired directly from the Company or any affiliate of the
Company) pursuant to the Exchange Offer; however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Act and must, therefore,
deliver a prospectus meeting the requirements of the Act in connection with its
initial sale of each New Senior
4
<PAGE>
Subordinated Note received by such Broker-Dealer in the Exchange Offer, which
prospectus delivery requirement may be satisfied by the delivery by such Broker-
Dealer of the Prospectus contained in the Exchange Offer Registration Statement.
Such "Plan of Distribution" section shall also contain all other information
with respect to such sales of Broker-Dealer Transfer Restricted Securities by
Restricted Broker-Dealers that the Commission may require in order to permit
such sales pursuant thereto, but such "Plan of Distribution" shall not name any
such Broker-Dealer or disclose the amount of Notes held by any such Broker-
Dealer, except to the extent required by the Commission as a result of a change
in policy after the date of this Agreement.
The Company and the Subsidiary Guarantors shall use their respective
commercially reasonable best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented and amended as required by the
provisions of Section 6(c) below to the extent necessary to ensure that it is
available for sales of Broker-Dealer Transfer Restricted Securities by
Restricted Broker-Dealers, and to ensure that such Registration Statement
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of 180 days from the date on which the Exchange Offer is Consummated.
The Company and the Subsidiary Guarantors shall promptly provide
sufficient copies of the latest version of such Prospectus to such Restricted
Broker-Dealers promptly upon request, and in no event later than one day after
such request, at any time during such 180-day period in order to facilitate such
sales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
------------------
Exchange Offer Registration Statement with respect to the New Senior
Subordinated Notes because the Exchange Offer is not permitted by applicable law
(after the procedures set forth in Section 6(a)(i) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities shall notify the
Company within 20 Business Days following the Consummation of the Exchange Offer
that (A) such Holder was prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the New
Senior Subordinated Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the Prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales by
such Holder or (C) such Holder is a Broker-Dealer and holds Senior Subordinated
Notes acquired directly from the Company or one of its affiliates, then the
Company and the Subsidiary Guarantors shall (x) cause to be filed on or prior to
90 days after the date on which the Company determines that it is not required
to file the Exchange Offer Registration Statement pursuant to clause (i) above
or 90 days after the date on which the Company receives the notice specified in
clause (ii) above a shelf registration statement pursuant to Rule 415 under the
Act (which may be an amendment to the Exchange Offer Registration Statement (in
either event, the "Shelf Registration Statement")), relating to all Transfer
----------------------------
Restricted Securities the Holders of which shall have provided the information
required pursuant to Section 4(b) hereof, and shall (y) use their respective
commercially reasonable best efforts to cause such Shelf Registration Statement
to become effective on or prior to 150 days after the date on which the Company
becomes obligated to file such Shelf Registration Statement. If, after the
Company has filed an Exchange Offer Registration Statement which satisfies the
requirements of Section 3(a) above, the Company is required to file and make
effective a Shelf Registration Statement solely because the Exchange Offer shall
not be permitted under applicable federal law, then the filing of the Exchange
Offer Registration Statement shall be deemed to satisfy the requirements of
clause (x) above. Such an event shall have no
5
<PAGE>
effect on the requirements of clause (y) above. The Company and the Subsidiary
Guarantors shall use their respective best efforts to keep the Shelf
Registration Statement discussed in this Section 4(a) continuously effective,
supplemented and amended as required by and subject to the provisions of
Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least two years (as extended pursuant to Section 6(c)(i)) following the date on
which such Shelf Registration Statement first becomes effective under the Act.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 10 Business Days after receipt of a request
therefor, such information specified in Item 507 of Regulation S-K under the Act
for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have provided all such information. In the
event such information is provided by such Holder more than 10 Business Days
after receipt of a request therefor, such Holder shall not be entitled to
Liquidated Damages until 10 days after such information is provided. Each
Holder as to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the date specified for such filing in this
Agreement, (ii) any such Registration Statement has not been declared effective
by the Commission on or prior to the date specified for such effectiveness in
this Agreement, (iii) the Exchange Offer has not been Consummated within 30
Business Days after the Exchange Offer Registration Statement is first declared
effective by the Commission or (iv) any Registration Statement required by this
Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for its intended purpose without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself declared effective immediately (each such
event referred to in clauses (i) through (iv), a "Registration Default"), then
--------------------
the Company and the Subsidiary Guarantors hereby jointly and severally agree to
pay liquidated damages to each Holder of Transfer Restricted Securities with
respect to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 principal
amount of Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues. The amount of the
liquidated damages shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.50 per week per $1,000 principal
amount of Transfer Restricted Securities. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the
6
<PAGE>
case of (iii) above, or (4) upon the filing of a post-effective amendment to the
Registration Statement or an additional Registration Statement that causes the
Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement) to again be declared effective or made usable in the
case of (iv) above, the liquidated damages payable with respect to the Transfer
Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as
applicable, shall immediately cease.
All accrued liquidated damages shall be paid to the Global Note Holder by
wire transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by wire transfer to the accounts specified by
them or by mailing checks to their registered addresses, if no such accounts
have been specified, on each Damages Payment Date. All obligations of the
Company and the Subsidiary Guarantors set forth in the preceding paragraph that
are outstanding with respect to any Transfer Restricted Security at the time
such security ceases to be a Transfer Restricted Security shall survive until
such time as all such obligations with respect to such security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
-------------------------------------
Exchange Offer, the Company and the Subsidiary Guarantors shall comply with all
applicable provisions of Section 6(c) below, shall use their respective
commercially reasonable best efforts to effect such exchange and to permit the
sale of Broker-Dealer Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof, and shall comply
with all of the following provisions:
(i) If, following the date hereof there has been published a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, such that in the reasonable opinion of counsel to the Company there is
a substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Subsidiary Guarantors hereby
agree to seek a no-action letter or other favorable decision from the
Commission allowing the Company and the Subsidiary Guarantors to Consummate
an Exchange Offer for such Senior Subordinated Notes. The Company and the
Subsidiary Guarantors hereby agree to pursue the issuance of such a decision
to the Commission staff level. In connection with the foregoing, the Company
and the Subsidiary Guarantors hereby agree to take all such other actions as
are requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A) participating in
telephonic conferences with the Commission, (B) delivering to the Commission
staff an analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that such an Exchange
Offer should be permitted and (C) diligently pursuing a resolution (which
need not be favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
Consummation of the Exchange Offer, a written representation to the Company
and the Subsidiary Guarantors (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of the Company, (B) it is not engaged
in, and does not intend to engage in, and has no arrangement or understanding
with any person to participate in, a distribution of the New Senior
Subordinated Notes to be issued in the Exchange Offer and (C) it is acquiring
the New Senior Subordinated Notes in its ordinary course of business. Each
Holder hereby acknowledges and agrees that any Broker-Dealer and any
7
<PAGE>
such Holder using the Exchange Offer to participate in a distribution of the
securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc.
----------------------------
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
----------------------------------
May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i) above), and
(2) must comply with the registration and prospectus delivery requirements of
the Act in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective registration
statement containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K if the resales are of New Senior
Subordinated Notes obtained by such Holder in exchange for Senior
Subordinated Notes acquired by such Holder directly from the Company or an
affiliate thereof.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Subsidiary Guarantors shall, if requested by
the Commission, provide a supplemental letter to the Commission (A) stating
that the Company and the Subsidiary Guarantors are registering the Exchange
Offer in reliance on the position of the Commission enunciated in Exxon
-----
Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and
---------------------------- ------------------
Co., Inc. (available June 5, 1991) and, if applicable, any no-action letter
---------
obtained pursuant to clause (i) above, (B) including a representation that
neither the Company nor any Subsidiary Guarantor has entered into any
arrangement or understanding with any Person to distribute the New Senior
Subordinated Notes to be received in the Exchange Offer and that, to the best
of the Company's and each Subsidiary Guarantor's information and belief, each
Holder participating in the Exchange Offer is acquiring the New Senior
Subordinated Notes in its ordinary course of business and has no arrangement
or understanding with any Person to participate in the distribution of the
New Senior Subordinated Notes received in the Exchange Offer and (C) any
other undertaking or representation required by the Commission as set forth
in any no-action letter obtained pursuant to clause (i) above.
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company and the Subsidiary Guarantors shall comply
with all the provisions of Section 6(c) below and shall use their respective
commercially reasonable best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company and the Subsidiary Guarantors will prepare and file
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
------------------
any related Prospectus required by this Agreement to permit the sale or resale
of Transfer Restricted Securities (including, without limitation, any Exchange
Offer Registration Statement and the related Prospectus, to the extent that the
same are required to be available to permit sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers), the Company and the
Subsidiary Guarantors shall:
(i) use their respective commercially reasonable best efforts to keep
such Registration Statement continuously effective and provide all requisite
financial statements for the period specified
8
<PAGE>
in Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of
any event that would cause any such Registration Statement or the Prospectus
contained therein (A) to contain a material misstatement or omission or (B)
not to be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company and the Subsidiary
Guarantors shall file promptly an appropriate amendment to such Registration
Statement, (1) in the case of clause (A), correcting any such misstatement or
omission, and (2) in the case of clauses (A) and (B), use their respective
commercially reasonable best efforts to cause such amendment to be declared
effective and such Registration Statement and the related Prospectus to
become usable for their intended purpose(s) as soon as practicable
thereafter.
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period set forth
in Section 3 or 4 hereof, or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Registration Statement have
been sold; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Act, and to comply fully in all material respects with Rules 424, 430A and
462, as applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, selling Holders named in any
Registration Statement or Prospectus ("Named Holders") and any Restricted
Broker-Dealer (whether or not named in the Registration Statement) who has
requested copies of the Prospectus pursuant to the last paragraph of Section
3 hereof, or has otherwise identified itself as a Restricted Broker-Dealer to
the Company, promptly and, if requested by such Persons, confirm such advice
in writing, (A) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement under the Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any of the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made in
the Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration
Statement in order to make the statements therein not misleading, or that
requires the making of any additions to or changes in the Prospectus in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. If at any time the Commission shall issue
any stop order suspending the effectiveness of the Registration Statement, or
any state securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company and the Subsidiary Guarantors shall use their respective commercially
reasonable best efforts to obtain the withdrawal or lifting of such order at
the earliest possible time;
9
<PAGE>
(iv) furnish to the Initial Purchasers, each Named Holder and each
of the underwriter(s) in connection with such sale, if any, before filing
with the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration
Statement or Prospectus (including all documents incorporated by reference
after the initial filing of such Registration Statement), which documents
will be subject to the review and comment of such Named Holders and
underwriter(s) in connection with such sale, if any, for a period of at least
five Business Days, and the Company will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the Named Holders of the Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s) in connection with such sale, if any, shall reasonably object
within five Business Days after the receipt thereof. A Named Holder or
underwriter, if any, shall be deemed to have reasonably objected to such
filing if such Registration Statement, amendment, Prospectus or supplement,
as applicable, as proposed to be filed, contains a material misstatement or
omission or fails to comply with the applicable requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the Named Holders and to the
underwriter(s) in connection with such sale, if any, make the Company's and
the Subsidiary Guarantors' representatives available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such Named
Holders or underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the Named
Holders, any managing underwriter participating in any disposition pursuant
to such Registration Statement and any attorney or accountant retained by
such Named Holders or any of such underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and the
Subsidiary Guarantors subject to appropriate confidentiality agreements and
cause the Company's and the Subsidiary Guarantors' officers, directors and
employees to supply all information that is (a) reasonably requested by any
Named Holder, underwriter, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto subsequent to
the filing thereof and prior to its effectiveness and (b) customarily
furnished in transactions of the type contemplated by such Registration
Statement;
(vii) if requested by any Named Holders or the underwriter(s) in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective amendment
if necessary, such information as such Named Holders and underwriter(s), if
any, may reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, information with respect to the principal
amount of Transfer Restricted Securities being sold to such underwriter(s),
the purchase price being paid therefor and any other terms of the offering of
the Transfer Restricted Securities to be sold in such offering; and make all
required filings of such Prospectus supplement or post-effective amendment as
soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(viii) furnish to each Named Holder and each of the underwriter(s) in
connection with such sale, if any, without charge, at least one copy of the
Registration Statement, as first filed with the
10
<PAGE>
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(ix) deliver to each Named Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Subsidiary Guarantors
hereby consent to the use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each of the selling Holders and each of
the underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any amendment
or supplement thereto;
(x) enter into such agreements (including an underwriting agreement)
and make such representations and warranties and take all such other actions
in connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder
of Transfer Restricted Securities or underwriter in connection with any sale
or resale pursuant to any Registration Statement contemplated by this
Agreement, which agreements must be in customary form, and in such
connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an Underwritten Registration, the Company
and the Subsidiary Guarantors shall:
(A) furnish (or in the case of paragraphs (2) and (3), use its
commercially reasonable best efforts to furnish) to each Named Holder and
each underwriter, if any, upon the effectiveness of the Shelf Registration
Statement:
(1) a certificate, dated the date of effectiveness of the Shelf
Registration Statement, signed on behalf of the Company and each
Subsidiary Guarantor by (x) the President or any Vice President and (y)
a principal financial or accounting officer of the Company and such
Subsidiary Guarantor, confirming, as of the date thereof, the matters
set forth in paragraphs (f) and (g) of Section 7 of the Purchase
Agreement;
(2) an opinion, dated the date of effectiveness of the Shelf
Registration Statement, of counsel for the Company and the Subsidiary
Guarantors covering the matters set forth in paragraph (c) of Section 7
of the Purchase Agreement, and in any event including a statement to
the effect that such counsel has participated in the preparation of the
applicable Registration Statement, including review and discussion of
the contents thereof, and no facts came to such counsel's attention
that caused such counsel to believe that the Registration Statement, at
the time such Registration Statement or any post-effective amendment
thereto became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus contained in such Registration Statement as of its date
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state further that
such counsel assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial and statistical
data included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
11
<PAGE>
(3) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement, from the Company's
independent accountants, in the customary form and covering matters of
the type customarily covered in comfort letters to underwriters in
connection with primary underwritten offerings; and
(B) set forth in full or incorporate by reference in the underwriting
agreement, if any, in connection with any sale or resale pursuant to any
Shelf Registration Statement the indemnification provisions and procedures
of Section 8 hereof with respect to all parties to be indemnified pursuant
to said Section.
The above shall be done at each closing under such underwriting or similar
agreement, as and to the extent required thereunder, and if at any time the
representations and warranties of the Company and the Subsidiary Guarantors
contemplated in (A)(1) above cease to be true and correct, the Company and
the Subsidiary Guarantors shall so advise the underwriter(s), if any and the
Named Holders promptly and if requested by such Persons, shall confirm such
advice in writing;
(xi) prior to any public offering of Transfer Restricted Securities,
cooperate with the Named Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the Named Holders or underwriter(s), if any, may
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; provided,
however, that neither the Company nor any Subsidiary Guarantor shall be
required to register or qualify as a foreign corporation where it is not now
so qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is not
now so subject;
(xii) issue, upon the request of any Holder of Senior Subordinated
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, New Senior Subordinated Notes having an aggregate principal amount
equal to the aggregate principal amount of Senior Subordinated Notes
surrendered to the Company by such Holder in exchange therefor or being sold
by such Holder; such New Senior Subordinated Notes to be registered in the
name of such Holder or in the name of the purchaser(s) of such Notes, as the
case may be; in return, the Senior Subordinated Notes held by such Holder
shall be surrendered to the Company for cancellation;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Named Holders and each Restricted Broker-
Dealer and the underwriter(s), if any, to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as the
Named Holders, Restricted Broker-Dealers or the underwriter(s), if any, may
request at least two Business Days prior to such sale of Transfer Restricted
Securities;
(xiv) use their respective commercially reasonable best efforts to
cause the disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
domestic governmental agencies or authorities as may be necessary to enable
12
<PAGE>
the seller or sellers thereof or the underwriter(s), if any, to consummate
the disposition of such Transfer Restricted Securities, subject to the
proviso contained in clause (xi) above;
(xv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are in
a form eligible for deposit with the Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their respective commercially reasonable best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the disposition
of such Transfer Restricted Securities;
(xviii) otherwise use their respective commercially reasonable best
efforts to make generally available to its security holders with regard to
any applicable Registration Statement, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective date of
the Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xix) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by this
Agreement and, in connection therewith, cooperate with the Trustee and the
Holders of Notes to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute and use its commercially reasonable best efforts to cause
the Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
and
(xx) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
-----------------------
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof,
or until it is advised in writing by the Company that the use of the Prospectus
may
13
<PAGE>
be resumed, and has received copies of any additional or supplemental filings
that are incorporated by reference in the Prospectus (the "Advice"). If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of either such notice. In the
event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 6(c)(i)
or Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof
or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Subsidiary Guarantors'
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses (including
filings made by any Purchaser or Holder with the NASD and its counsel that may
be required by the rules and regulations of the NASD); (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
New Senior Subordinated Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company and the Subsidiary Guarantors; (v) all
application and filing fees in connection with listing the Notes on a national
securities exchange or automated quotation system pursuant to the requirements
hereof; and (vi) all fees and disbursements of independent certified public
accountants of the Company and the Subsidiary Guarantors (including the expenses
of any special audit and comfort letters required by or incident to such
performance).
The Company will, in any event, bear its and the Subsidiary Guarantors'
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Subsidiary Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Subsidiary
Guarantors will reimburse the Initial Purchasers and the Holders of Transfer
Restricted Securities being tendered in the Exchange Offer and/or resold
pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Subsidiary Guarantors, jointly and severally,
agree to indemnify and hold harmless (i) each Holder and (ii) each person, if
any, who controls (within the meaning of Section 15
14
<PAGE>
of the Act or Section 20 of the Exchange Act) any Holder (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person") and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an
"Indemnified Holder"), to the fullest extent lawful, from and against any and
------------------
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending any claim or action, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus prepared pursuant to this Agreement or Prospectus (or any
amendment or supplement thereto), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by an untrue statement or omission
or alleged untrue statement or omission that is made in reliance upon and in
conformity with information relating to any of the Holders furnished in writing
to the Company by any of the Holders expressly for use therein.
In case any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any of the
Indemnified Holders with respect to which in demnity may be sought against the
Company or the Subsidiary Guarantors, such Indemnified Holder (or the
Indemnified Holder controlled by such controlling person) shall promptly notify
the parties against whom indemnification is being sought (the "indemnifying
parties"), and such indemnifying parties shall assume the defense thereof,
including the employment of counsel and payment of all fees and expenses. Such
Indemnified Holder shall have the right to employ its own counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the Indemnified
Holder unless (i) the indemnifying parties have agreed in writing to pay such
fees and expenses, (ii) the indemnifying parties have failed to assume the
defense and employ counsel, or (iii) the named parties to any such action, suit
or proceeding (including any impleaded parties) include such Indemnified Holder
and the indemnifying parties and such Indemnified Holder shall have been advised
by its counsel that representation of such indemnified party and any
indemnifying party by the same counsel would be inappropriate under applicable
standards of professional conduct (whether or not such representation by the
same counsel has been proposed) due to actual or potential differing interests
between them (in which case the indemnifying party shall not have the right to
assume the defense of such action, suit or proceeding on behalf of such
Indemnified Holder). It is understood, however, that the indemnifying parties
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for the Indemnified
Holders not having actual or potential differing interests with the Indemnified
Holders or among themselves, which firm shall be designated in writing by the
Indemnified Holders, and that all such fees and expenses shall be reimbursed on
a monthly basis as provided in paragraph (a) hereof. The indemnifying parties
shall not be liable for any settlement of any such action, suit or proceeding
effected without their written consent, but if settled with such written
consent, or if there shall be a final judgment for the plaintiff in any such
action, suit or proceeding, the indemnifying parties agree to indemnify and hold
harmless such Indemnified Holder, to the extent provided in paragraph (a), and
any such controlling person from and against any loss, claim, damage, liability
or expense by reason of such settlement or judgment.
15
<PAGE>
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Subsidiary
Guarantors, and their respective directors, officers, and any person controlling
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or any Subsidiary Guarantor, to the same extent as the foregoing
indemnity from the Company and the Subsidiary Guarantors to each of the
Indemnified Holders, but only with respect to information relating to such
Holder furnished in writing by or on behalf of such Holder expressly for use in
any Registration Statement. In case any action, suit or proceeding shall be
brought against the Company, any Subsidiary Guarantor or its directors or
officers or any such controlling person in respect of which indemnity may be
sought against a Holder of Transfer Restricted Securities pursuant to this
paragraph (b), such Holder shall have the rights and duties given the Company
and the Subsidiary Guarantors (except that if the Company and the Subsidiary
Guarantors shall have assumed the defense thereof the Holders shall not be
required to do so, but may employ separate counsel therein and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
Holders' expense), and the Company, such Subsidiary Guarantor, such directors or
officers or such controlling person shall have the rights and duties given to
each Holder by the preceding paragraph. In no event shall any Holder be liable
or responsible for any amount in excess of the amount by which the total
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. The
foregoing indemnity agreement shall be in addition to any liability which the
Holders may otherwise have.
(c) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party under Section 8(a) or Section 8(b) hereof in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Subsidiary Guarantors, on the one hand, and the Holders, on the
other hand, from their sale of Transfer Restricted Securities or if such
allocation is not permitted by applicable law, the relative fault of the Company
and the Subsidiary Guarantors, on the one hand, and of the Indemnified Holder,
on the other hand, in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of the Company and the
Subsidiary Guarantors, on the one hand, and of the Indemnified Holder, on the
other hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or such Subsidiary Guarantor or by the Indemnified Holder and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the Subsidiary Guarantors and each Holder of Transfer
Restricted Securities agree that it would not be just and equitable if
contribution pursuant to this Section 8(c) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating any claim or defending any such action, suit or
16
<PAGE>
proceeding. Notwithstanding the provisions of this Section 8, no Holder or its
related Indemnified Holders shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to con tribute pursuant
to this Section 8(c) are several in proportion to the respective principal
amount of Senior Subordinated Notes held by each of the Holders hereunder and
not joint.
(d) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such action, suit or
proceeding.
SECTION 9. RULE 144A
The Company and each Subsidiary Guarantor hereby agrees with each Holder,
for so long as any Transfer Restricted Securities remain outstanding and during
any period in which the Company or such Subsidiary Guarantor is not subject to
Section 13 or 15(d) of the Securities Exchange Act, to make available, upon
request of any Holder of Transfer Restricted Securities, to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or investment bankers
and manager or managers for any Underwritten Offering that will administer such
offering will be selected by the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities included in such offering. Such
investment bankers and managers are referred to herein as the "underwriters."
17
<PAGE>
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
--------
rights provided herein, in the Indenture, the Purchase Agreement or granted by
law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Subsidiary Guarantors agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by them of the
provisions of this Agreement and hereby agree to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Subsidiary
--------------------------
Guarantor will, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Subsidiary Guarantors' securities under any agreement in effect on the date
hereof.
(c) Adjustments Affecting the Notes. Neither the Company nor any
-------------------------------
Subsidiary Guarantor will take any action, or voluntarily permit any change to
occur, with respect to the Notes that is designed to and would materially and
adversely affect the ability of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Subsidiary Guarantors:
National Equipment Services, Inc.
1800 Sherman Avenue
Evanston, Illinois 60201
Telecopier No.: (847) 733-1087
Attention: Dennis O'Connor
18
<PAGE>
With a copy, which shall not constitute notice, to:
Kirkland & Ellis
200 East Randolph Street
Chicago, Illinois 60601
Telecopier No.: (312) 861-2200
Attention: H. Kurt von Moltke
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities directly from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
National Equipment Services, Inc.
By:/s/ Paul R. Ingersoll
--------------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Albany Ladder Company, Inc.
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
BAT Acquisition Corp.
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
NES Acquisition Corp.
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
NES East Acquisition Corp.
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
NES Michigan Acquisition Corp.
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite, Inc.
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Carl's Mid South Rent-All Center
Incorporated
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite Aviation, Inc.
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
Falconite Equipment, Inc.
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite Rebuild Center, Inc.
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
M&M Properties, Inc.
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
McCurry & Falconite Equipment Co., Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Rebel Studio Rentals, Inc.
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Shaughnessy Crane Service, Inc.
By:/s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
Confirmed as of the date first
above mentioned.
Salomon Smith Barney Inc.
By:/s/ Steven J. Pearlman
------------------------
Name: Steven J. Pearlman
Title: Director
First Union Capital Markets Corp., a division of Wheat First Securities, Inc.
By:/s/ John J. Braden
------------------------
Name: John J. Braden
Title: Managing Director
<PAGE>
EXHIBIT 4.14
$125,000,000 EXECUTION COPY
NATIONAL EQUIPMENT SERVICES, INC.
10% SENIOR SUBORDINATED NOTES DUE 2004, SERIES C
PURCHASE AGREEMENT
------------------
December 8, 1998
Salomon Smith Barney Inc.
First Union Capital Markets Corp.
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
National Equipment Services, Inc., a Delaware corporation (the
"Company"), proposes, upon the terms and conditions set forth herein, to issue
-------
and sell to you, as the initial purchasers (the "Initial Purchasers"),
------------------
$125,000,000 in aggregate principal amount of its 10% Senior Subordinated Notes
due 2004, Series C (the "Senior Subordinated Notes"). The Senior Subordinated
-------------------------
Notes will (i) have the terms and provisions which are summarized in the
Offering Memorandum (as defined herein), (ii) be in the forms specified by the
Initial Purchasers pursuant to Section 3 hereof, and (iii) be issued pursuant to
the provisions of an Indenture, to be dated as of December 11, 1998 (the
"Indenture"), among the Company, each of the subsidiaries of the Company noted
---------
on Schedule I hereto (the "Subsidiary Guarantors") and Harris Trust and Savings
---------------------
Bank, as trustee (the "Trustee"). The Senior Subordinated Notes will be
-------
guaranteed on a senior subordinated basis by the Subsidiary Guarantors pursuant
to their guarantee (the "Subsidiary Guarantees").
---------------------
The Company and the Subsidiary Guarantors wish to confirm as follows
their agreement with the Initial Purchasers in connection with the purchase and
resale of the Senior Subordinated Notes.
1. Offering Memorandum. The Senior Subordinated Notes will be
offered and sold to the Initial Purchasers without registration under the
Securities Act of 1933, as amended (the "Act"), in reliance on an exemption
---
pursuant to Section 4(2) under the Act. The Company has prepared an offering
memorandum, dated December 8, 1998, (the "Offering Memorandum"), setting forth
-------------------
information regarding the Company, the Senior Subordinated Notes and the
Exchange Notes (as defined herein). Any references herein to the Offering
Memorandum shall be deemed to include all amendments and supplements thereto, if
any. The Company hereby confirms that it has authorized the use of the Offering
Memorandum in connection with the offering and resale of the Senior Subordinated
Notes by the Initial Purchasers.
The Company understands that the Initial Purchasers propose to make
offers and sales (the "Exempt Resales") of the Senior Subordinated Notes
--------------
purchased by the Initial Purchasers hereunder only on the terms and in the
manner set forth in the Offering Memorandum, and Section 2 hereof, as soon as
the Initial Purchasers deem advisable after this Agreement has been executed and
delivered, solely to
<PAGE>
persons whom the Initial Purchasers reasonably believe to be qualified
institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A
------------------------------
under the Act, as such rule may be amended from time to time ("Rule 144A"), in
---------
transactions under Rule 144A. Such Qualified Institutional Buyers are being
referred to herein as "Eligible Purchasers."
-------------------
It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act, the Senior Subordinated Notes (and all securities
issued in exchange therefor or in substitution thereof) shall bear the following
legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR")
IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
It is also understood and acknowledged that holders (including
subsequent transferees) of the Senior Subordinated Notes will have the
registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date (as defined
-----------------------------
herein), in substantially the form of Exhibit A hereto, for so long as such
Senior Subordinated Notes constitute "Transfer Restricted
2
<PAGE>
Securities" (as defined in the Registration Rights Agreement) and subject to the
other terms of the Registration Rights Agreement. Pursuant to the Registration
Rights Agreement, the Company will agree to file with the Securities and
Exchange Commission (the "Commission") under the circumstances set forth
----------
therein, (i) a registration statement on the appropriate form under the Act
relating to the Company's 10% Senior Subordinated Notes due 2004, Series D (the
"Exchange Notes") to be offered in exchange for the Senior Subordinated Notes
--------------
(the "Registered Exchange Offer") and (ii) under certain limited circumstances,
-------------------------
a shelf registration statement pursuant to Rule 415 under the Act relating to
the resale by certain holders of the Senior Subordinated Notes, and to use its
commercially reasonable best efforts to cause such registration statements to be
declared effective. As used herein, the Senior Subordinated Notes and the
Exchange Notes are hereinafter referred to collectively as the "Notes." This
-----
Agreement, the Indenture and the Registration Rights Agreement are hereinafter
referred to collectively as the "Operative Documents."
-------------------
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Indenture or the Offering Memorandum.
2. Agreements to Sell, Purchase and Resell. (a) The Company hereby
agrees, subject to all the terms and conditions set forth herein, to issue and
sell to the Initial Purchasers and, upon the basis of the representations,
warranties and agreements of the Company and the Subsidiary Guarantors herein
contained and subject to all the terms and conditions set forth herein, each
Initial Purchaser agrees, severally and not jointly, to purchase from the
Company, at a purchase price of 95.330% of the principal amount thereof, the
principal amount of Senior Subordinated Notes set forth opposite the name of
such Initial Purchaser in Schedule II hereto.
(b) The Initial Purchasers have advised the Company that they propose
to offer the Senior Subordinated Notes for sale upon the terms and conditions
set forth in this Agreement and in the Offering Memorandum. Each Initial
Purchaser hereby represents and warrants to, and agrees with, the Company that
such Initial Purchaser (i) is purchasing the Senior Subordinated Notes pursuant
to a private sale exempt from registration under the Act, (ii) will not solicit
offers for, or offer or sell, the Senior Subordinated Notes by means of any form
of general solicitation or general advertising or in any manner involving a
public offering within the meaning of Section 4(2) of the Act, and (iii) will
solicit offers for the Senior Subordinated Notes only from, and will offer, sell
or deliver the Senior Subordinated Notes as part of their initial offering, only
to persons whom the Initial Purchasers reasonably believe to be QIBs, or if any
such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
the Initial Purchasers that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, in each
case, in transactions under Rule 144A. The Initial Purchasers have advised the
Company that they will offer the Senior Subordinated Notes to Eligible
Purchasers at a price initially equal to 97.830% of the principal amount
thereof, plus accrued interest, if any, from the date of issuance of the Senior
Subordinated Notes. Such price may be changed by the Initial Purchasers at any
time thereafter without notice.
The Initial Purchasers understand that the Company and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Sections
7(c) and 7(d) hereof, counsel to the Company and counsel to the Initial
Purchasers, will rely upon the accuracy and truth of the foregoing
representations, warranties and agreements and the Initial Purchasers hereby
consent to such reliance.
3. Delivery of the Senior Subordinated Notes and Payment Therefor.
Delivery to the Initial Purchasers of and payment for the Senior Subordinated
Notes shall be made at the office of Latham & Watkins, 885 Third Avenue, Suite
1000, New York, New York 10022 at 10:00 A.M., New York City time, on December
11, 1998 (the "Closing Date"). The place of closing for the Senior Subordinated
------------
Notes
3
<PAGE>
and the Closing Date may be varied by agreement between the Initial Purchasers
and the Company.
The Senior Subordinated Notes will be delivered to the Initial
Purchasers against payment of the purchase price therefor in immediately
available funds. The Senior Subordinated Notes will be evidenced by one or more
global securities in definitive form (the "Global Note"), and will be registered
-----------
in the name of Cede & Co. as nominee of The Depository Trust Company ("DTC").
---
The Senior Subordinated Notes to be delivered to the Initial Purchasers shall be
made available to the Initial Purchasers in New York City for inspection and
packaging not later than 9:30 A.M., New York City time, on the business day next
preceding the Closing Date.
4. Agreements of the Company and the Subsidiary Guarantors. The
Company and the Subsidiary Guarantors, jointly and severally, agree with the
Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by
them, will confirm such advice in writing, within the period of time
referred to in paragraph (e) below, of any material change in the Company's
condition (financial or other), business, properties, net worth or results
of operations, or of the happening of any event which makes any statement
made in the Offering Memorandum (as then amended or supplemented) untrue in
any material respect or which requires the making of any additions to or
changes in the Offering Memorandum (as then amended or supplemented) in
order to make the statements therein not misleading, or of the necessity to
amend or supplement the Offering Memorandum (as then amended or
supplemented) to comply with any law.
(b) To furnish to the Initial Purchasers, without charge, as of the
date of the Offering Memorandum, such number of copies of the Offering
Memorandum as may then be amended or supplemented as they may reasonably
request.
(c) Not to make any amendment or supplement to the Offering
Memorandum of which the Initial Purchasers shall not previously have been
advised or to which they shall reasonably object after being so advised.
(d) The Company consents to the use of the Offering Memorandum (and
of any amendment or supplement thereto) in accordance with the securities
or Blue Sky laws of the jurisdictions in which the Senior Subordinated
Notes are offered by the Initial Purchasers and by all dealers to whom
Senior Subordinated Notes may be sold, in connection with the offering and
sale of the Senior Subordinated Notes.
(e) If, at any time prior to completion of the distribution of the
Senior Subordinated Notes by the Initial Purchasers to Eligible Purchasers,
any event shall occur that in the judgment of the Company or in the opinion
of counsel for the Initial Purchasers should be set forth in the Offering
Memorandum (as then amended or supplemented) in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary to supplement or amend the
Offering Memorandum in order to comply with any law, the Company will
forthwith prepare an appropriate supplement or amendment thereto or such
document, and will expeditiously furnish to the Initial Purchasers and
dealers a reasonable number of copies thereof.
(f) To cooperate with the Initial Purchasers and with their counsel
in connection with
4
<PAGE>
the qualification of the Senior Subordinated Notes for offering and sale by
the Initial Purchasers and by dealers under the securities or Blue Sky laws
of such jurisdictions as the Initial Purchasers may designate and will file
such consents to service of process or other documents necessary or
appropriate in order to effect such qualification; provided that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which
would subject it to service of process in suits, other than those arising
out of the offering or sale of the Senior Subordinated Notes, in any
jurisdiction where it is not now so subject.
(g) So long as any of the Senior Subordinated Notes are outstanding,
the Company will furnish to the Initial Purchasers (i) as soon as
available, a copy of each report of the Company mailed to stockholders or
filed with any stock exchange or regulatory body and (ii) from time to time
such other publicly available information concerning the Company as the
Initial Purchasers may reasonably request.
(h) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
the Initial Purchasers terminating this Agreement pursuant to Section 10
hereof) or if this Agreement shall be terminated by the Initial Purchasers
because of any failure or refusal on the part of the Company or the
Subsidiary Guarantors to comply with the terms or fulfill any of the
conditions of this Agreement, the Company and the Subsidiary Guarantors
agree to reimburse the Initial Purchasers for all out-of-pocket expenses
(including reasonable fees and expenses of their counsel) reasonably
incurred by them in connection herewith, but without any further obligation
on the part of the Company or the Subsidiary Guarantors for loss of profits
or otherwise.
(i) To apply the net proceeds from the sale of the Senior
Subordinated Notes to be sold by the Company hereunder substantially in
accordance with the description set forth in the Offering Memorandum.
(j) Without the prior consent of the Initial Purchasers, prior to the
expiration of 180 days after the date of the Offering Memorandum neither
the Company nor the Subsidiary Guarantors will offer, sell, contract to
sell or otherwise dispose of any fixed income obligation substantially
similar to the Senior Subordinated Notes and having a maturity of more than
one year (other than borrowings under the Credit Facility).
(k) Except as stated in this Agreement and in the Offering Memorandum
neither the Company nor the Subsidiary Guarantors have taken, nor will any
of them take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation
(within the meaning of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of the price of the Senior Subordinated Notes to
------------
facilitate the sale or resale of the Senior Subordinated Notes. Neither the
Company nor the Subsidiary Guarantors will distribute any offering material
in connection with the Exempt Resales in violation of the Act.
(l) To use their respective commercially reasonable best efforts to
cause the Senior Subordinated Notes to be designated Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") Market securities
------
in accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. relating to trading in the PORTAL
Market and to permit the Senior Subordinated Notes to be eligible for
clearance and settlement through DTC.
5
<PAGE>
(m) From and after the Closing Date, so long as any of the Senior
Subordinated Notes are outstanding and are "Restricted Securities" within
the meaning of the Rule 144(a)(3) under the Act or, if earlier, until two
years after the Closing Date, and during any period in which the Company is
not subject to Section 13 or 15(d) of the Exchange Act, the Company will
furnish to holders of the Senior Subordinated Notes and prospective
purchasers of Senior Subordinated Notes designated by such holders, upon
request of such holders or such prospective purchasers, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Act to
permit compliance with Rule 144A in connection with resale of the Senior
Subordinated Notes.
(n) The Company has complied and will comply with all provisions of
Florida Statutes Section 517.075 relating to issuers doing business with
Cuba.
(o) Not to sell, offer for sale or solicit offers to buy any security
(as defined in the Act) that would be integrated with the sale of the
Senior Subordinated Notes in a manner that would require the registration
under the Act of the sale to the Initial Purchasers or the Eligible
Purchasers of the Senior Subordinated Notes.
(p) To comply, in all material respects, to the extent applicable,
with all the terms and conditions of the Registration Rights Agreement and
all agreements set forth in the representation letter of the Company to DTC
relating to the approval of the Senior Subordinated Notes by DTC for "book
entry" transfer.
(q) Concurrently with any registration of the Senior Subordinated
Notes pursuant to the Registration Rights Agreement, or at such earlier
time as may be required, the Indenture shall be qualified under the Trust
Indenture Act of 1939 (the "1939 Act") and any necessary supplemental
--------
indentures will be entered into in connection therewith.
(r) Not to voluntarily claim, and will resist actively all attempts
to claim, the benefit of any usury laws against holders of the Senior
Subordinated Notes.
(s) To do and perform all things reasonably required or necessary to
be done and performed under this Agreement by them prior to the Closing
Date, and to satisfy all conditions precedent to the Initial Purchasers'
obligations hereunder to purchase the Senior Subordinated Notes.
5. Representations and Warranties of the Company and the Subsidiary
Guarantors. The Company and the Subsidiary Guarantors, jointly and severally,
represent and warrant to the Initial Purchasers that:
(a) The Offering Memorandum with respect to the Senior Subordinated Notes has
been prepared by the Company for use by the Initial Purchasers in connection
with the Exempt Resales. No order or decree preventing the use of the Offering
Memorandum or any amendment or supplement thereto, or any order asserting that
the transactions contemplated by this Agreement are subject to the registration
requirements of the Act has been issued and no proceeding for that purpose has
commenced or is pending or, to the knowledge of the Company or the Subsidiary
Guarantors, is overtly contemplated.
(b) The Offering Memorandum as of its date and as of the Closing
Date, did not or
6
<PAGE>
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except that this representation and
warranty does not apply to statements in or omissions from the Offering
Memorandum made in reliance upon and in conformity with information
relating to the Initial Purchasers furnished to the Company in writing by
or on behalf of the Initial Purchasers expressly for use therein.
(c) The Indenture has been duly and validly authorized by the Company
and the Subsidiary Guarantors and, upon its execution, delivery and
performance by the Company and the Subsidiary Guarantors and assuming due
authorization, execution, delivery and performance by the Trustee, will be
a valid and binding agreement of the Company and the Subsidiary Guarantors,
enforceable in accordance with its terms, except as enforcement thereof may
be limited by bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and subject to the applicability of general
principles of equity and conforms in all material respects to the
description thereof in the Offering Memorandum; no qualification of the
Indenture under the 1939 Act is required in connection with the offer and
sale of the Senior Subordinated Notes contemplated hereby or in connection
with the Exempt Resales.
(d) The Senior Subordinated Notes have been duly authorized by the
Company and, when executed by the Company and authenticated by the Trustee
in accordance with the Indenture and delivered to the Initial Purchasers
against payment therefor in accordance with the terms hereof, will have
been validly issued and delivered, and will constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture and
enforceable in accordance with their terms, except as enforcement thereof
may be limited by bankruptcy, insolvency or other similar laws affecting
the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity, and the description of the
Senior Subordinated Notes in the Offering Memorandum will conform in all
material respects to the Senior Subordinated Notes.
(e) The Subsidiary Guarantees to be endorsed on the Senior
Subordinated Notes have been duly authorized by the Subsidiary Guarantors
and, when executed by the Subsidiary Guarantors and when the Senior
Subordinated Notes are issued and authenticated in accordance with the
terms of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms hereof, such Subsidiary Guarantees
will have been validly issued and delivered and will constitute valid and
binding obligations of the Subsidiary Guarantors entitled to the benefits
of the Indenture and enforceable in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the applicability of general principles of equity, and the
description of such Subsidiary Guarantees in the Offering Memorandum will
conform in all material respects to such Subsidiary Guarantees.
(f) The Exchange Notes have been duly authorized by the Company and,
when executed by the Company and authenticated by the Trustee and delivered
in accordance with the Registered Exchange Offer and the Indenture, will
have been validly issued and delivered, and will constitute valid and
binding obligations of the Company entitled to the benefits of the
Indenture and enforceable in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the applicability of general principles of equity, and the
description of the Exchange Notes in the Offering Memorandum will conform
in all material respects to the Exchange Notes.
7
<PAGE>
(g) The Subsidiary Guarantees to be endorsed on the Exchange Notes
have been duly authorized by the Subsidiary Guarantors and, when executed
by the Subsidiary Guarantors and when the Exchange Notes are issued and
authenticated in accordance with the terms of the Registered Exchange Offer
and the Indenture, such Subsidiary Guarantees will have been validly issued
and delivered and will constitute valid and binding obligations of the
Subsidiary Guarantors entitled to the benefits of the Indenture and
enforceable in accordance with their terms, except as enforcement thereof
may be limited by bankruptcy, insolvency or other similar laws affecting
the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity, and the description of such
Subsidiary Guarantees in the Offering Memorandum will conform in all
material respects to such Subsidiary Guarantees.
(h) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and
nonassessable; the authorized capital stock of the Company conforms to the
description thereof in the Offering Memorandum.
(i) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware with full
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Offering Memorandum, and is
duly registered and qualified to conduct its business and is in good
standing in each jurisdiction or place where the nature of its properties
or the conduct of its business requires such registration or qualification,
except where the failure so to register or qualify does not have a material
adverse effect on the condition (financial or other), business, prospects,
properties, net worth or results of operations of the Company and the
Subsidiaries (as hereinafter defined) taken as a whole (a "Material Adverse
----------------
Effect").
-------
(j) All the Company's subsidiaries (as defined in the Act) are
referred to herein individually as a "Subsidiary" and collectively as the
----------
"Subsidiaries." Each Subsidiary is a corporation duly organized, validly
------------
existing and in good standing in the jurisdiction of its incorporation
(except Falconite Equipment, Inc. and Falconite, Inc. are not in good
standing in their respective jurisdictions of incorporation), with full
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Offering Memorandum, and is
duly registered and qualified to conduct its business and is in good
standing in each jurisdiction or place where the nature of its properties
or the conduct of its business requires such registration or qualification,
except where the failure so to register or qualify or be in good standing
does not have a Material Adverse Effect. All the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable, and are wholly owned by
the Company directly or indirectly through one of the other Subsidiaries,
free and clear of any lien, adverse claim, security interest, equity or
other encumbrance, except pursuant to and otherwise permitted by the Credit
Facility as described in the Offering Memorandum.
(k) Schedule III hereto lists the only jurisdictions or places where
the nature of the properties or the conduct of the businesses of the
Company and the Subsidiary Guarantors requires the Company and the
Subsidiary Guarantors to be duly registered, qualified and in good
standing, except where the failure to so register, qualify or be in good
standing would not have a Material Adverse Effect.
(l) There are no legal or governmental proceedings pending or, to the
knowledge of the Company or the Subsidiary Guarantors, overtly threatened,
against the Company or any of the Subsidiaries or to which the Company or
any of the Subsidiaries or to which any of their
8
<PAGE>
respective properties, is subject, that are not disclosed in the Offering
Memorandum and which are reasonably likely to cause a Material Adverse
Effect or to materially affect the issuance of the Senior Subordinated
Notes or the consummation of the transactions contemplated by this
Agreement. There are no material agreements, contracts, indentures or
leases that should be properly described or disclosed in a summary fashion
in the Offering Memorandum that are not so described or disclosed. Neither
the Company nor any Subsidiary is involved in any strike, job action or
labor dispute with any group of employees, and, to the Company's and the
Subsidiary Guarantors' knowledge, no such action or dispute is overtly
threatened.
(m) Neither the Company nor any of the Subsidiaries is (i) in
violation of its certificate or articles of incorporation or by-laws or
other organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body
having jurisdiction over the Company or any of the Subsidiaries except
where any such violation or violations in the aggregate would not have a
Material Adverse Effect or (ii) in default in any respect in the
performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
agreement, indenture, lease or other instrument to which the Company or any
of the Subsidiaries is a party or by which any of them or any of their
respective properties may be bound, except as may be disclosed in the
Offering Memorandum or where any such default or defaults in the aggregate
would not have a Material Adverse Effect.
(n) None of the issuance, offer, sale or delivery of the Senior
Subordinated Notes, the execution, delivery or performance of this
Agreement or the Indenture or the Registration Rights Agreement by the
Company or the Subsidiary Guarantors or the consummation by the Company and
the Subsidiary Guarantors of the transactions contemplated hereby or
thereby (i) requires any consent, approval, authorization or other order
of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official
(except such as may be required in connection with the registration under
the Act of the Senior Subordinated Notes in accordance with the
Registration Rights Agreement, qualification of the Indenture under the
1939 Act and compliance with the securities or Blue Sky laws of various
jurisdictions), or conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate or articles of
incorporation or bylaws, or other organizational documents, of the Company
or any of the Subsidiary Guarantors or (ii) conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, in any
material respect, any material agreement, indenture, lease or other
instrument to which the Company or any of the Subsidiary Guarantors is a
party or by which any of them or any of their respective properties may be
bound, or violates or will violate in any material respect any statute,
law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or any of the Subsidiary Guarantors or any of
their respective properties, or will result in the creation or imposition
of any material lien, charge or encumbrance upon any property or assets of
the Company or any of the Subsidiary Guarantors pursuant to the terms of
any agreement or instrument to which any of them is a party or by which any
of them may be bound or to which any of the property or assets of any of
them is subject.
9
<PAGE>
(o) The accountants, PricewaterhouseCoopers LLP, Price Waterhouse
LLP, Lawrence, Blackburn Meek Maxey & Co. P.C., Albin, Randall & Bennett,
Coopers & Lybrand L.L.P., KPMG Peat Marwick L.L.P and Wolf & Company, P.C.,
who have certified or shall certify the financial statements included as
part of the Offering Memorandum (or any amendment or supplement thereto),
are, to the Company's knowledge, independent public accountants under Rule
101 of the AICPA's Code of Professional Conduct, and its interpretation and
rulings.
(p) The financial statements (historical and pro forma), together
with related schedules and notes forming part of the Offering Memorandum
(and any amendment or supplement thereto), present fairly in all material
respects the consolidated financial position, results of operations and
changes in stockholders' equity and cash flows of the Company and the
Subsidiaries on the basis stated in the Offering Memorandum at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; the
assumptions used in preparing the pro forma financial information and
related notes and schedules included in the Offering Memorandum are
reasonable; and the other financial and statistical information and data
set forth in the Offering Memorandum (and any amendment or supplement
thereto) is accurately presented and, to the extent such information and
data is derived from the financial books and records of the Company, is
prepared on a basis consistent with such financial statements and the books
and records of the Company.
(q) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the
Registration Rights Agreement; the execution and delivery of, and the
performance by the Company of its obligations under, this Agreement and the
Registration Rights Agreement have been duly and validly authorized by the
Company, and this Agreement and the Registration Rights Agreement have been
duly executed and delivered by the Company and constitute the valid and
legally binding agreements of the Company, enforceable against the Company
in accordance with their terms, except as the enforcement hereof and
thereof may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity, and except as rights to
indemnity and contribution hereunder and thereunder may be limited by
Federal or state securities laws or principles of public policy.
(r) Each of the Subsidiary Guarantors has all requisite power and
authority to execute, deliver and perform its obligations under this
Agreement and the Registration Rights Agreement; the execution and delivery
of, and the performance by each Subsidiary Guarantor of its obligations
under, this Agreement and the Registration Rights Agreement have been duly
and validly authorized by each Subsidiary Guarantor, and this Agreement and
the Registration Rights Agreement have been duly executed and delivered by
each Subsidiary Guarantor and constitute the valid and legally binding
agreements of each Subsidiary Guarantor, enforceable against each
Subsidiary Guarantor in accordance with their terms, except as the
enforcement hereof and thereof may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally
and subject to the applicability of general principles of equity, and
except as rights to indemnity and contribution hereunder and thereunder may
be limited by Federal or state securities laws or principles of public
policy.
(s) Except as disclosed in the Offering Memorandum (or any amendment
or supplement thereto), subsequent to the date as of which such information
is given in the Offering Memorandum (or any amendment or supplement
thereto), neither the Company nor any of the
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Subsidiaries has incurred any liability or obligation, or entered into any
transaction, not in the ordinary course of business, that is material to
the Company and the Subsidiaries taken as a whole, and there has not been
any material change in the capital stock, or material increase in the
short-term or long-term debt, of the Company or any of the Subsidiaries or
any material adverse change, or any development involving or which could
reasonably be expected to involve a prospective material adverse change, in
the financial condition, business, properties, net worth or results of
operations of the Company and the Subsidiaries taken as a whole.
(t) Each of the Company and the Subsidiaries has good and marketable
title to all property (real and personal) described in the Offering
Memorandum as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances except pursuant to and otherwise
permitted by the Credit Facility as described in a summary fashion in the
Offering Memorandum; and all the property described in the Offering
Memorandum as being held under lease by each of the Company and the
Subsidiaries is held by it under valid, subsisting and enforceable leases,
with only such exceptions as in the aggregate are not materially burdensome
and do not interfere in any material respect with the conduct of the
business of the Company and the Subsidiaries taken as a whole.
(u) Neither the Company nor the Subsidiary Guarantors have
distributed and, prior to the later to occur of the Closing Date and
completion of the distribution of the Senior Subordinated Notes, will not
distribute any offering material in violation of the Act in connection with
the offering and sale of the Senior Subordinated Notes.
(v) Each of the Company and the Subsidiaries have such permits,
licenses, franchises, certificates of need and other approvals or
authorizations of governmental or regulatory authorities ("Permits") as are
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necessary under applicable law to own their respective properties and to
conduct their respective businesses in the manner described in the Offering
Memorandum, except to the extent that the failure to have such Permits
would not have a Material Adverse Effect; the Company and each of the
Subsidiaries have fulfilled and performed in all material respects, all
their respective material obligations with respect to the Permits, and no
event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, subject in each
case to such qualification as may be set forth in the Offering Memorandum
and except to the extent that any such revocation or termination would not
have a Material Adverse Effect; and, except as described in the Offering
Memorandum, none of the Permits contains any restriction that is materially
burdensome to the Company or any of the Subsidiaries.
(w) The Company and the Subsidiary Guarantors maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(x) Neither the Company nor any of the Subsidiaries nor, to the
Company's or the Subsidiary Guarantors' knowledge, any employee or agent of
the Company or any Subsidiary has made any payment of funds of the Company
or any Subsidiary or received or retained any funds
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in violation of any law, rule or regulation, which violation would have a
Material Adverse Effect.
(y) Except as disclosed in the Offering Memorandum, the Company and
each of the Subsidiaries have filed all tax returns required to be filed,
which returns are true and correct in all material respects, and neither
the Company nor any Subsidiary is in default in the payment of any taxes
which were payable pursuant to said returns or any assessments with respect
thereto, except where the failure to file such returns and make such
payments would not have a Material Adverse Effect and except for the
payment of any amounts that are being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP have been established.
(z) No holder of any security of the Company has any right to request
or demand registration of shares of Common Stock or any other security of
the Company because of the consummation of the transactions contemplated by
this Agreement or the Registration Rights Agreement, except as have been
waived.
(aa) The Company and each of the Subsidiaries own or possess all
patents, trademarks, trademark registration, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets
and rights described in the Offering Memorandum as being owned by any of
them or necessary for the conduct of their respective businesses, and
neither the Company nor the Subsidiary Guarantors are aware of any claim to
the contrary or any challenge by any other person to the rights of the
Company and the Subsidiaries with respect to the foregoing, except for such
claims or challenges that would not individually or in the aggregate be
reasonably expected to result in a Material Adverse Effect.
(bb) The Company is not and, upon sale of the Senior Subordinated
Notes to be issued and sold thereby in accordance herewith and the
application of the net proceeds to the Company of such sale as described in
the Offering Memorandum under the caption "Use of Proceeds," will not be an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(cc) When the Senior Subordinated Notes are issued and delivered
pursuant to this Agreement, such Senior Subordinated Notes will not be of
the same class (within the meaning of Rule 144A(d)(3) under the Act) as any
security of the Company that is listed on a national securities exchange
registered under Section 6 of the Exchange Act or that is quoted in a
United States automated interdealer quotation system.
(dd) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D ("Regulation D") under the Act) of the Company has
directly, or through any agent (provided that no representation is made as
to the Initial Purchasers or any person acting on their behalf), (i) sold,
offered for sale, solicited offers to buy, any security (as defined in the
Act) which is or properly would be integrated with the offering and sale of
the Senior Subordinated Notes in a manner that would require the
registration of the Senior Subordinated Notes under the Act or (ii) engaged
in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offering of the Senior
Subordinated Notes.
(ee) Assuming (i) that the representations and warranties in Section
2(b) hereof are true, (ii) the Initial Purchasers comply with the covenants
set forth in Section 2(b) hereof and (iii) that each person to whom the
Initial Purchasers offer, sell or deliver the Senior Subordinated Notes is
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<PAGE>
a QIB, the purchase and sale of the Senior Subordinated Notes pursuant
hereto (including the Initial Purchasers' proposed offering of the Senior
Subordinated Notes on the terms and in the manner set forth in the Offering
Memorandum and Section 2 hereof) is exempt from the registration
requirements of the Act.
(ff) The Company and each of its Subsidiaries have fulfilled their
obligations, if any, under the minimum funding standards of Section 302 of
the United States Employee Retirement Income Security Act of 1974 ("ERISA")
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and the regulations and published interpretations thereunder with respect
to each "plan" (as defined in ERISA and such regulations and published
interpretations) in which employees of the Company and its Subsidiaries are
eligible to participate and each such plan is in compliance in all material
respects with the presently applicable provisions of ERISA and such
regulations and published interpretations, and has not incurred any unpaid
liability to the Pension Benefit Guaranty Corporation (other than for the
payment of premiums in the ordinary course) or to any such plan under Title
IV of ERISA.
(gg) The execution and delivery of this Agreement, the other Operative
Documents and the sale of the Senior Subordinated Notes to the Initial
Purchasers or by the Initial Purchasers to Eligible Purchasers will not
involve any prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"). The representation made by the Company and the Subsidiary
----
Guarantors in the preceding sentence is made in reliance upon and subject
to the accuracy of, and compliance with, the representations and covenants
made or deemed made by the Eligible Purchasers as set forth in the Offering
Memorandum under the section entitled "Notice to Investors."
(hh) (i) The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are customary in the businesses in which they
are engaged; (ii) all policies of insurance insuring the Company or any of
its Subsidiaries or their respective businesses, assets, employees,
officers and directors are in full force and effect; (iii) the Company and
its Subsidiaries are in compliance with the terms of such policies and
instruments in all material respects; and (iv) there are no material claims
by the Company or any of its Subsidiaries under any such policy or
instrument as to which any insurance company is denying liability or
defending under a reservation of rights clause.
(ii) The Company and each of its Subsidiaries (i) are and at all times
have been, in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
------------------
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits, licenses
or approvals would not, singly or in the aggregate, have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries has been named as a
"potentially responsible party" under the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended, or any similar
state statute.
(jj) In connection with its acquisition of businesses, the Company
typically conducts a review of the effect of Environmental Laws on the
business, operations and properties of the acquired businesses, in the
course of which it identifies and evaluates associated costs and
liabilities
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(including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws, or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review, the Company has reasonably concluded
that such associated costs and liabilities would not, singly or in the
aggregate, have a Material Adverse Effect.
6. Indemnification and Contribution. (a) The Company and the
Subsidiary Guarantors agree jointly and severally to indemnify and hold harmless
each Initial Purchaser and each person, if any, who controls any Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Offering Memorandum or in any amendment or supplement thereto,
or arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which has been
made therein or omitted therefrom in reliance upon and in conformity with the
information relating to such Initial Purchaser furnished in writing to the
Company by or on behalf of such Initial Purchaser expressly for use in
connection therewith. The foregoing indemnity agreement shall be in addition to
any liability which the Company or the Subsidiary Guarantors may otherwise have.
(b) If any action, suit or proceeding shall be brought against an
Initial Purchaser or any person controlling such Initial Purchaser in respect of
which indemnity may be sought against the Company or the Subsidiary Guarantors,
the Initial Purchaser or such controlling person shall promptly notify the
parties against whom indemnification is being sought (the "indemnifying
parties"), and such indemnifying parties shall assume the defense thereof,
including the employment of counsel and payment of all fees and expenses. The
Initial Purchaser or any such controlling person shall have the right to employ
separate counsel in any such action, suit or proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Initial Purchaser or such controlling person unless (i) the
indemnifying parties have agreed in writing to pay such fees and expenses, (ii)
the indemnifying parties have failed to assume the defense and employ counsel,
or (iii) the named parties to any such action, suit or proceeding (including any
impleaded parties) include both the Initial Purchaser or such controlling person
and the indemnifying parties and the Initial Purchaser or such controlling
person shall have been advised by its counsel that representation of such
indemnified party and any indemnifying party by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or not
such representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the indemnifying party
shall not have the right to assume the defense of such action, suit or
proceeding on behalf of the Initial Purchaser or such controlling person). It is
understood, however, that the indemnifying parties shall, in connection with any
one such action, suit or proceeding or separate but substantially similar or
related actions, suits or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of attorneys (in addition to one separate
firm of attorneys per jurisdiction acting as local counsel) at any time for the
Initial Purchasers and controlling persons not having actual or potential
differing interests with the Initial Purchasers or among themselves, which firm
shall be designated in writing by Salomon Smith Barney Inc., and that all such
fees and expenses shall be reimbursed on a monthly basis as provided in
paragraph (a) hereof. The indemnifying parties shall not be liable for any
settlement of any such action, suit or proceeding effected without their written
consent, but if settled with such written consent, or if there shall be a final
judgment for the plaintiff in any such action,
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<PAGE>
suit or proceeding, the indemnifying parties agree to indemnify and hold
harmless the Initial Purchasers, to the extent provided in paragraph (a), and
any such controlling person from and against any loss, claim, damage, liability
or expense by reason of such settlement or judgment.
(c) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company and the Subsidiary Guarantors, and their
respective directors and officers, and any person who controls the Company or
any Subsidiary Guarantor within the meaning of Section 15 of the Act or Section
20 of the Exchange Act to the same extent as the indemnity from the Company and
the Subsidiary Guarantors to the Initial Purchasers set forth in paragraph (a)
hereof, but only with respect to information relating to such Initial Purchaser
furnished in writing by or on behalf of such Initial Purchaser expressly for use
in the Offering Memorandum or any amendment or supplement thereto. If any
action, suit or proceeding shall be brought against the Company or the
Subsidiary Guarantors, any of their respective directors or officers, or any
such controlling person based on the Offering Memorandum, or any amendment or
supplement thereto, and in respect of which indemnity may be sought against the
Initial Purchasers pursuant to this paragraph (c), the Initial Purchasers shall
have the rights and duties given to the Company by paragraph (b) above (except
that if the Company shall have assumed the defense thereof the Initial
Purchasers shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the Initial Purchasers' expense), and the Company and
the Subsidiary Guarantors, their respective directors and officers, and any such
controlling person shall have the rights and duties given to the Initial
Purchasers by paragraph (b) above. The foregoing indemnity agreement shall be in
addition to any liability which the Initial Purchasers may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraph (a) or (c) hereof in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then an indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Subsidiary Guarantors on the one hand and the Initial Purchasers
on the other hand from the offering of the Senior Subordinated Notes, or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Subsidiary Guarantors on the one hand and the Initial Purchasers on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Subsidiary Guarantors on the one hand and the Initial Purchasers on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
discounts and commissions received by the Initial Purchasers. The relative fault
of the Company and the Subsidiary Guarantors on the one hand and the Initial
Purchasers on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Subsidiary Guarantors on the one hand or by the
Initial Purchasers on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company, the Subsidiary Guarantors and the Initial Purchasers
agree that it would not be just and equitable if contribution pursuant to this
Section 6 were determined by a pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to in paragraph (d) above. The amount paid or payable by an indemnified party as
a result of the
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losses, claims, damages, liabilities and expenses referred to in paragraph (d)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 6, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price of the Senior Subordinated Notes underwritten by it and
distributed to the public exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 6 shall be paid on a monthly basis, by the indemnifying party to the
indemnified party as such losses, claims, damages, liabilities or expenses are
incurred. The indemnity and contribution agreements contained in this Section 6
and the representations and warranties of the Company and the Subsidiary
Guarantors set forth in this Agreement shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf of the
Initial Purchasers or any person controlling the Initial Purchasers, the
Company, any Subsidiary Guarantor, their respective directors or officers or any
person controlling the Company or any Subsidiary Guarantor, (ii) acceptance of
any Senior Subordinated Notes and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to an Initial Purchaser or any person
controlling such Initial Purchaser, or to the Company, any Subsidiary Guarantor,
their respective directors or officers or any person controlling the Company or
any Subsidiary Guarantor, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 6.
(g) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is a party
and indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such action, suit or
proceeding.
7. Conditions of the Initial Purchasers' Obligation. The obligations
of the Initial Purchasers to purchase the Senior Subordinated Notes hereunder
are subject to the following conditions:
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements of
the Act shall have been issued and no proceedings for that purpose shall have
been commenced or shall be pending or, to the knowledge of the Company or the
Subsidiary Guarantors, be overtly contemplated. No stop order suspending the
sale of the Senior Subordinated Notes in any jurisdiction designated by the
Initial Purchasers shall have been issued and no proceedings for that purpose
shall have been commenced or shall be pending or, to the knowledge of the
Company or the Subsidiary Guarantors, shall be contemplated.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the financial condition, business, properties, net
worth, or results of operations of the Company or the Subsidiaries not
contemplated by the Offering Memorandum, which in the opinion of the Initial
Purchasers, would
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materially adversely affect the market for the Senior Subordinated Notes, or
(ii) any event or development relating to or involving the Company or any
officer or director of the Company which makes any statement made in the
Offering Memorandum untrue in any material respect or which, in the opinion of
the Company and its counsel or the Initial Purchasers and their counsel,
requires the making of any addition to or change in the Offering Memorandum in
order to state a material fact required by any law to be stated therein or
necessary in order to make the statements therein not misleading, if amending or
supplementing the Offering Memorandum to reflect such event or development
would, in the opinion of the Initial Purchasers, materially adversely affect the
market for the Senior Subordinated Notes.
(c) The Initial Purchasers shall have received on the Closing Date
an opinion of Kirkland & Ellis, counsel for the Company, dated the Closing Date
and addressed to the Initial Purchasers, in substantially the form of Exhibit B
hereto.
(d) The Initial Purchasers shall have received on the Closing Date
an opinion of Latham & Watkins, counsel for the Initial Purchasers, dated the
Closing Date, and addressed to the Initial Purchasers, with respect to the
Offering Memorandum and such other related matters as the Initial Purchasers may
reasonably request, and such counsel shall have received such certificates,
documents and information as they may reasonably request to enable them to pass
upon such matters.
(e) The Initial Purchasers shall have received letters addressed to
the Initial Purchasers, and dated the date hereof and the Closing Date, from
PricewaterhouseCoopers LLP, independent certified public accountants,
substantially in the forms heretofore approved by the Initial Purchasers.
(f)(i) There shall not have been any change in the capital stock of
the Company and the Subsidiary Guarantors nor any material increase in the
short-term or long-term debt of the Company and the Subsidiary Guarantors (other
than in the ordinary course of business) from that set forth or contemplated in
the Offering Memorandum (or any amendment or supplement thereto); (ii) there
shall not have been, since the respective dates as of which information is given
in the Offering Memorandum (or any amendment or supplement thereto), except as
may otherwise be stated in the Offering Memorandum (or any amendment or
supplement thereto), any material adverse change in the condition (financial or
other), business, prospects, properties, net worth or results of operations of
the Company and the Subsidiaries taken as a whole; (iii) the Company and the
Subsidiaries shall not have any liabilities or obligations, direct or contingent
(whether or not in the ordinary course of business), that are material to the
Company and the Subsidiaries, taken as a whole, other than those reflected in
the Offering Memorandum (or any amendment or supplement thereto); and (iv) all
the representations and warranties of the Company and the Subsidiary Guarantors
contained in this Agreement shall be true and correct in all material respects
on and as of the date hereof and on and as of the Closing Date as if made on and
as of the Closing Date, and the Initial Purchasers shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief accounting officer of the Company and the Subsidiary Guarantors
(or such other officers as are acceptable to the Initial Purchasers), to the
effect set forth in this Section 7(f) and in Section 7(g) and 7(l) hereof.
(g) The Company and the Subsidiary Guarantors shall not have failed
at or prior to the Closing Date to have performed or complied with any of their
agreements herein contained and required to be performed or complied with by
them hereunder at or prior to the Closing Date.
(h) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
436(g) under the Act, that (i) it is downgrading its rating assigned to any
class of securities of the Company, or (ii) it is reviewing its ratings
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assigned to any class of securities of the Company with a view to possible
downgrading, or with negative implications, or direction not determined.
(i) The Senior Subordinated Notes shall have been approved for
trading on PORTAL.
(k) The Company shall have furnished or caused to be furnished to the
Initial Purchasers such further certificates and documents as the Initial
Purchasers shall have requested.
(l) Falconite Inc. shall be in good standing in its jurisdiction of
incorporation. Falconite Equipment, Inc. shall be in good standing in its
jurisdiction of incorporation, or the Company shall represent to the Initial
Purchasers that Falconite Equipment, Inc. is not a material subsidiary of the
Company.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers and counsel for the
Initial Purchasers.
8. Expenses. The Company and the Subsidiary Guarantors agree to pay
the following costs and expenses and all other costs and expenses incurred by
them incident to the performance by them of any of their obligations hereunder:
(i) the preparation, printing and reproduction of the Offering Memorandum
(including, without limitation, financial statements thereto), and each
amendment or supplement thereto; (ii) the printing (or reproduction) and
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of the Offering Memorandum and all amendments or
supplements thereto as may be reasonably requested for use in connection with
the offering and sale of the Senior Subordinated Notes; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the Senior
Subordinated Notes, including any stamp taxes in connection with the original
issuance and sale of the Senior Subordinated Notes; (iv) the printing (or
reproduction) and delivery of this Agreement and the Blue Sky Memorandum; (v)
the application for quotation of the Senior Subordinated Notes on the PORTAL
Market; (vi) the qualification of the Senior Subordinated Notes for offer and
sale under the securities or Blue Sky laws of the several states as provided in
Section 4(f) hereof (including the reasonable fees, expenses and disbursements
of counsel for the Initial Purchasers relating to the preparation, printing or
reproduction, and delivery of the Blue Sky Memorandum and such qualification),
provided that the fees referred to in this clause (vi) shall not exceed $10,000;
(vii) the performance by the Company and the Subsidiary Guarantors of their
obligations under the Registration Rights Agreement; (viii) fees and expenses of
the Trustee and its counsel; (ix) the transportation and other expenses, if any,
incurred by or on behalf of the Company representatives in connection with
presentations to prospective purchasers of the Senior Subordinated Notes; and
(x) the fees and expenses of the Company's accountants and the fees and expenses
of counsel (including local and special counsel, if any) for the Company. The
Company and the Subsidiary Guarantors hereby agree that they will pay in full on
the Closing Date the fees and expenses referred to in clause (vi) of this
Section 8 by delivering to counsel for the Initial Purchasers on such date a
check payable to such counsel in the requisite amount.
9. Effective Date of Agreement. This Agreement shall become
effective upon the execution and delivery hereof by all the parties hereto.
10. Termination of Agreement. (a) This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchasers, without
liability on the part of the Initial Purchasers to the Company or the Subsidiary
Guarantors, by notice to the Company, if prior to the Closing Date, (i) trading
in securities generally on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq
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National Market shall have been suspended or materially limited, (ii) a general
moratorium on commercial banking activities in New York shall have been
declared, or (iii) there shall have occurred any outbreak or escalation of
hostilities involving the United States or other domestic, foreign or
international calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States is
such as to make it, in the reasonable judgment of the Initial Purchasers,
impracticable or inadvisable to commence or continue the offering of the Senior
Subordinated Notes on the terms set forth on the cover page of the Offering
Memorandum or to enforce contracts for the resale of the Senior Subordinated
Notes by the Initial Purchasers. Notice of such termination may be given to the
Company by telegram, telecopy or telephone and shall be subsequently confirmed
by letter.
(b) If on the Closing Date any one or more of the Initial Purchasers
shall fail or refuse to purchase the Senior Subordinated Notes which it or they
have agreed to purchase hereunder on such date and the amount of Senior
Subordinated Notes which such defaulting Initial Purchaser or Initial
Purchasers, as the case may be, agreed but failed or refused to purchase is not
more than one-tenth of the total amount of Senior Subordinated Notes to be
purchased on such date by all Initial Purchasers, each non-defaulting Initial
Purchaser shall be obligated severally, in the proportion which the aggregate
principal amount of such securities set forth opposite its name in Schedule II
bears to the total amount of such Senior Subordinated Notes which all the non-
defaulting Initial Purchasers, as the case may be, have agreed to purchase, or
in such other proportion as the Initial Purchasers may specify, to purchase the
securities which such defaulting Initial Purchaser or Initial Purchasers, as the
case may be, agreed but failed or refused to purchase on such date; provided
that in no event shall the aggregate principal amount of such securities which
any Initial Purchaser has agreed to purchase pursuant to Section 2 hereof be
increased pursuant to this Section 10 by an amount in excess of one-ninth of
such aggregate amount of such Senior Subordinated Notes without the written
consent of such Initial Purchaser. If on the Closing Date any Initial Purchaser
or Initial Purchasers shall fail or refuse to purchase such Senior Subordinated
Notes and the aggregate amount of Senior Subordinated Notes with respect to
which such default occurs is more than one-tenth of the total amount of Senior
Subordinated Notes to be purchased by all Initial Purchasers and arrangements
satisfactory to the Initial Purchasers and the Company for the purchase of such
securities are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Initial Purchaser
and the Company. In any such case which does not result in termination of this
Agreement, either the Initial Purchasers or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Offering Memorandum or any other
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve any defaulting Initial Purchaser from liability in respect of
any default of any such Initial Purchaser under this Agreement.
11. Information Furnished by the Initial Purchasers. The statements
set forth in the fifth and last paragraph of the cover page of the Offering
Memorandum and the last paragraph on the inside cover page of the Offering
Memorandum and the second sentence of the fourth paragraph under the caption
"Plan of Distribution" in the Offering Memorandum, constitute the only
information furnished by or on behalf of the Initial Purchasers as such
information is referred to in Sections 5(b) and 6 hereof.
12. Miscellaneous. Except as otherwise provided in Sections 4 and 10
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 1800 Sherman Avenue, Evanston, Illinois 60201, Attention: Chief
Financial Officer with a copy, which shall not constitute notice, to Kirkland &
Ellis, 200 East Randolph Street, Chicago, Illinois 60601, Attention: H. Kurt von
Moltke, or (ii) if to the Initial Purchasers, addressed to Salomon Smith Barney
Inc., 388 Greenwich Street, New York, NY 10013, Attention: Manager, Investment
Banking Division, with a copy to Latham & Watkins, 885 Third Avenue, New York,
19
<PAGE>
NY 10022, Attention: Beth Neckman.
This Agreement has been and is made solely for the benefit of the
Initial Purchasers, the Company, the Subsidiary Guarantors and their respective
directors, officers and controlling persons referred to in Section 6 hereof and
their respective successors and assigns, to the extent provided herein, and no
other person shall acquire or have any right under or by virtue of this
Agreement. Neither the term "successor" nor the term "successors and assigns" as
used in this Agreement shall include a purchaser from the Initial Purchasers of
any of the Senior Subordinated Notes in his status as such purchaser.
13. Applicable Law; Counterparts This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York and without
regard to the conflicts of law principles thereof.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
[signature page follows]
20
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Subsidiary Guarantors and the Initial Purchasers.
Very truly yours,
National Equipment Services, Inc.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Albany Ladder Company, Inc.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
BAT Acquisition Corp.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
NES Acquisition Corp.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
NES East Acquisition Corp.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
NES Michigan Acquisition Corp.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite, Inc.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Carl's Mid South Rent-All Center
Incorporated
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite Aviation, Inc.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite Equipment, Inc.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
Falconite Rebuild Center, Inc.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
M&M Properties, Inc.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
McCurry & Falconite Equipment Co., Inc.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Rebel Studio Rentals, Inc.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
Shaughnessy Crane Service, Inc.
By:/s/ Paul R. Ingersoll
--------------------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
Confirmed as of the date first
above mentioned.
Salomon Smith Barney Inc.
By:/s/ Steven J. Pearlman
-----------------------------
Name: Steven J. Pearlman
Title: Director
First Union Capital Markets Corp., a division of Wheat First Securities, Inc.
By:/s/ John J. Braden
-----------------------------
Name: John J. Braden
Title: Managing Director
<PAGE>
SCHEDULE I
SUBSIDIARY GUARANTORS
---------------------
Albany Ladder Company, Inc.
BAT Acquisition Corp.
NES Acquisition Corp.
NES East Acquisition Corp.
NES Michigan Acquisition Corp.
Falconite, Inc.
Carl's Mid South Rent-All Center Incorporated
Falconite Aviation, Inc.
Falconite Equipment, Inc.
Falconite Rebuild Center, Inc.
M&M Properties, Inc.
McCurry & Falconite Equipment Co., Inc.
Rebel Studio Rentals, Inc.
Shaughnessy Crane Service, Inc.
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
SENIOR SUBORDINATED NOTES
INITIAL PURCHASERS TO BE PURCHASED
- ------------------ -------------------------
<S> <C>
Salomon Smith Barney Inc....................... $ 87,500,000
First Union Capital Markets Corp.,
a division of Wheat First Securities, Inc..... $ 37,500,000
------------
Total.................................... $125,000,000
============
</TABLE>
<PAGE>
SCHEDULE III
Jurisdictions Where Qualified to Do Business
<TABLE>
<CAPTION>
NAME OF ENTITY STATE OF INCORPORATION STATES OF FOREIGN QUALIFICATION
- -------------- ---------------------- --------------------------------
<S> <C> <C>
National Equipment Services, Inc. Delaware Illinois
Albany Ladder Company, Inc. New York Connecticut, Massachusetts, New
Hampshire, Pennsylvania and
Vermont
BAT Acquisition Corp. Delaware Nevada
NES Acquisition Corp. Delaware Alabama, Louisiana and Texas
NES East Acquisition Corp. Delaware Connecticut, Georgia, Louisiana,
Maine, Massachusetts, New York,
New Hampshire, Pennsylvania,
Vermont and Virginia
NES Michigan Acquisition Corp. Delaware Michigan
Falconite, Inc. Illinois Kentucky
Carl's Mid South Rent-All Center Tennessee none
Incorporated
Falconite Aviation, Inc. Delaware none
Falconite Equipment, Inc. Illinois Indiana, Kentucky, Michigan,
Missouri, Ohio and Tennessee
Falconite Rebuild Center, Inc. Kentucky none
M&M Properties, Inc. Alabama Florida, Georgia, Louisiana and
Mississippi
McCurry & Falconite Equipment Alabama none
Co., Inc.
Rebel Studio Rentals, Inc. California none
Shaughnessy Crane Service, Inc. Massachusetts New Hampshire, New Jersey and
Rhode Island
</TABLE>
<PAGE>
Exhibit A
---------
Form of Registration Rights Agreement
<PAGE>
Exhibit B
---------
Form of Opinion of Kirkland & Ellis
<PAGE>
EXHIBIT 4.15
EXECUTION COPY
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of January 8, 1999
by and among
National Equipment Services, Inc.
Albany Ladder Company, Inc.
BAT Acquisition Corp.
NES Acquisition Corp.
NES East Acquisition Corp.
NES Michigan Acquisition Corp.
Falconite, Inc.
Carl's Mid South Rent-All Center Incorporated
Falconite Aviation, Inc.
Falconite Equipment, Inc.
Falconite Rebuild Center, Inc.
M&M Properties, Inc.
McCurry & Falconite Equipment Co., Inc.
Rebel Studio Rentals, Inc.
Shaughnessy Crane Service, Inc.
and
Salomon Smith Barney Inc.
First Union Capital Markets Corp.
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of January 8, 1999, by and among National Equipment Services, Inc., a
Delaware corporation (the "Company"), Albany Ladder Company, Inc., a New York
-------
corporation ("Albany"), BAT Acquisition Corp., a Delaware corporation ("BAT"),
------ ---
NES Acquisition Corp., a Delaware corporation ("NES Acquisition"), NES East
---------------
Acquisition Corp., a Delaware corporation ("NES East"), NES Michigan Acquisition
--------
Corp., a Delaware corporation ("NES Michigan"), Falconite, Inc., an Illinois
------------
corporation ("Falconite"), Carl's Mid South Rent-All Center Incorporated, a
---------
Tennessee corporation ("Carl's"), Falconite Aviation, Inc., a Delaware
------
corporation ("Falconite Aviation"), Falconite Equipment, Inc., an Illinois
------------------
corporation ("Falconite Equipment"), Falconite Rebuild Center, Inc., a Kentucky
-------------------
corporation ("Falconite Rebuild"), M&M Properties, Inc., an Alabama corporation
-----------------
("M&M"), McCurry & Falconite Equipment Co., Inc. ("M&F"), Rebel Studio Rentals,
--- ---
Inc., a California corporation ("Rebel"), Shaughnessy Crane Service, Inc., a
-----
Massachusetts corporation ("Shaughnessy" and, together with Albany, BAT, NES
-----------
Acquisition, NES East, NES Michigan, Falconite, Carl's, Falconite Aviation,
Falconite Equipment, Falconite Rebuild, M&M, M&F and Rebel, the "Subsidiary
----------
Guarantors") and Salomon Smith Barney Inc. ("Salomon Smith Barney") and First
- ---------- --------------------
Union Capital Markets Corp., a division of Wheat First Securities, Inc. ("First
-----
Union" and, together with Salomon Smith Barney, the "Initial Purchasers"), each
- ----- ------------------
of whom has agreed to purchase the Company's 10% Senior Subordinated Notes due
2004, Series C (the "Senior Subordinated Notes") pursuant to the Purchase
-------------------------
Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated January
5, 1999, (the "Purchase Agreement"), by and among the Company, the Subsidiary
------------------
Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers
to purchase the Senior Subordinated Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 2 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
---
Business Day: Any day except a Saturday, Sunday or other day in the City
------------
of New York, or in the city of the corporate trust office of the Trustee, on
which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Broker-Dealer Transfer Restricted Securities: New Senior Subordinated
--------------------------------------------
Notes that are acquired by a Broker-Dealer in the Exchange Offer in exchange for
Senior Subordinated Notes that such Broker-Dealer acquired for its own account
as a result of market making activities or other trading activities (other than
Senior Subordinated Notes acquired directly from the Company or any of its
affiliates).
Certificated Securities: As defined in the Indenture.
-----------------------
Closing Date: The date hereof.
------------
1
<PAGE>
Commission: The Securities and Exchange Commission.
----------
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
----------
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the New Senior
Subordinated Notes to be issued in the Exchange Offer, (b) the maintenance of
such Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the minimum period required
pursuant to Section 3(b) hereof and (c) the delivery by the Company to the
Registrar under the Indenture of New Senior Subordinated Notes in the same
aggregate principal amount as the aggregate principal amount of Senior
Subordinated Notes tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Senior Subordinated Notes, each
--------------------
Interest Payment Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Offer: The registration by the Company under the Act of the New
--------------
Senior Subordinated Notes pursuant to the Exchange Offer Registration Statement
pursuant to which the Company shall offer the Holders of all outstanding
Transfer Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities for New Senior Subordinated Notes in an aggregate
principal amount equal to the aggregate principal amount of the Transfer
Restricted Securities tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
-------------------------------------
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
--------------
to sell the Senior Subordinated Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act.
Global Noteholder: As defined in the Indenture.
-----------------
Holders: As defined in Section 2 hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
Indenture: The Indenture, dated December 11, 1998, among the Company, the
---------
Subsidiary Guarantors and Harris Trust and Savings Bank, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture is
-------
amended or supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
---------------------
NASD: National Association of Securities Dealers, Inc.
----
New Senior Subordinated Notes: The Company's 10% Senior Subordinated
-----------------------------
Notes due 2004, Series D, to be issued pursuant to the Indenture (i) in the
Exchange Offer or (ii) upon the request of any
2
<PAGE>
Holder of Senior Subordinated Notes covered by a Shelf Registration Statement,
in exchange for such Senior Subordinated Notes.
Notes: The Senior Subordinated Notes and the New Senior Subordinated
-----
Notes.
Person: An individual, partnership, corporation, trust, unincorporated
------
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus prepared pursuant to this Agreement and
----------
included in a Registration Statement at the time such Registration Statement is
declared effective, as amended or supplemented by any prospectus supplement and
by all other amendments thereto, including post-effective amendments, and all
material incorporated by reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date, each Person who
-------------
is a Holder of Notes on the record date with respect to the Interest Payment
Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Company and the
----------------------
Subsidiary Guarantors relating to (a) an offering of New Senior Subordinated
Notes pursuant to an Exchange Offer or (b) the registration for resale of
Transfer Restricted Securities pursuant to the Shelf Registration Statement, in
each case, (i) which is filed pursuant to the provisions of this Agreement and
(ii) including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
------------------------
Transfer Restricted Securities.
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
---
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur of
------------------------------
(a) the date on which such Note is exchanged in the Exchange Offer and entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Note has
been disposed of in accordance with a Shelf Registration Statement, (c) the date
on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
------------------------- ---------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
3
<PAGE>
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
------
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company and the Subsidiary Guarantors shall (i) cause to be filed
with the Commission as soon as practicable after the Closing Date, but in no
event later than 90 days after December 11, 1998, the Exchange Offer
Registration Statement, (ii) use its commercially reasonable best efforts to
cause such Exchange Offer Registration Statement to become effective at the
earliest possible time, but in no event later than 150 days after December 11,
1998, (iii) in connection with the foregoing, (A) file all pre-effective
amendments to such Exchange Offer Registration Statement as may be reasonably
necessary in order to cause such Exchange Offer Registration Statement to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all filings which to the knowledge of the Company are necessary, if any, in
connection with the registration and qualification of the New Senior
Subordinated Notes to be made under the Blue Sky laws of such jurisdictions as
are necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting registration of the New Senior Subordinated Notes to be offered
in exchange for the Senior Subordinated Notes that are Transfer Restricted
Securities and to permit sales of Broker-Dealer Transfer Restricted Securities
by Restricted Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company and the Subsidiary Guarantors shall use their respective
best efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 Business Days. The Company and the Subsidiary
Guarantors shall cause the Exchange Offer to comply with all applicable federal
securities laws and all state securities laws that, to the knowledge of the
Company, are applicable. No securities other than the Notes (including the $125
million aggregate principal amount of Senior Subordinated Notes issued on
December 11, 1998 and the $50 million aggregate principal amount of Senior
Subordinated Notes issued on the Closing Date) shall be included in the Exchange
Offer Registration Statement. The Company and the Subsidiary Guarantors shall
use their respective commercially reasonable best efforts to cause the Exchange
Offer to be Consummated on the earliest practicable date after the Exchange
Offer Registration Statement has become effective, but in no event later than 30
Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Senior Subordinated Notes
that are Transfer Restricted Securities and that were acquired for the account
of such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Senior Subordinated Notes (other than Transfer
Restricted Securities acquired directly from the Company or any affiliate of the
Company) pursuant to the Exchange Offer; however, such Broker-
4
<PAGE>
Dealer may be deemed to be an "underwriter" within the meaning of the Act and
must, therefore, deliver a prospectus meeting the requirements of the Act in
connection with its initial sale of each New Senior Subordinated Note received
by such Broker-Dealer in the Exchange Offer, which prospectus delivery
requirement may be satisfied by the delivery by such Broker-Dealer of the
Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-
Dealers that the Commission may require in order to permit such sales pursuant
thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer
or disclose the amount of Notes held by any such Broker-Dealer, except to the
extent required by the Commission as a result of a change in policy after the
date of this Agreement.
The Company and the Subsidiary Guarantors shall use their respective
commercially reasonable best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented and amended as required by the
provisions of Section 6(c) below to the extent necessary to ensure that it is
available for sales of Broker-Dealer Transfer Restricted Securities by
Restricted Broker-Dealers, and to ensure that such Registration Statement
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of 180 days from the date on which the Exchange Offer is Consummated.
The Company and the Subsidiary Guarantors shall promptly provide
sufficient copies of the latest version of such Prospectus to such Restricted
Broker-Dealers promptly upon request, and in no event later than one day after
such request, at any time during such 180-day period in order to facilitate such
sales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
------------------
Exchange Offer Registration Statement with respect to the New Senior
Subordinated Notes because the Exchange Offer is not permitted by applicable law
(after the procedures set forth in Section 6(a)(i) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities shall notify the
Company within 20 Business Days following the Consummation of the Exchange Offer
that (A) such Holder was prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the New
Senior Subordinated Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the Prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales by
such Holder or (C) such Holder is a Broker-Dealer and holds Senior Subordinated
Notes acquired directly from the Company or one of its affiliates, then the
Company and the Subsidiary Guarantors shall (x) cause to be filed on or prior to
90 days after the date on which the Company determines that it is not required
to file the Exchange Offer Registration Statement pursuant to clause (i) above
or 90 days after the date on which the Company receives the notice specified in
clause (ii) above a shelf registration statement pursuant to Rule 415 under the
Act (which may be an amendment to the Exchange Offer Registration Statement (in
either event, the "Shelf Registration Statement")), relating to all Transfer
----------------------------
Restricted Securities the Holders of which shall have provided the information
required pursuant to Section 4(b) hereof, and shall (y) use their respective
commercially reasonable best efforts to cause such Shelf Registration Statement
to become effective on or prior to 150 days after the date on which the Company
becomes obligated to file such Shelf Registration Statement. If, after the
Company has filed an Exchange Offer Registration Statement which satisfies the
requirements of Section 3(a) above, the Company is required to file and make
effective a Shelf Registration Statement solely because the Exchange
5
<PAGE>
Offer shall not be permitted under applicable federal law, then the filing of
the Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above. Such an event shall have no effect on the
requirements of clause (y) above. The Company and the Subsidiary Guarantors
shall use their respective best efforts to keep the Shelf Registration Statement
discussed in this Section 4(a) continuously effective, supplemented and amended
as required by and subject to the provisions of Sections 6(b) and (c) hereof to
the extent necessary to ensure that it is available for sales of Transfer
Restricted Securities by the Holders thereof entitled to the benefit of this
Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years (as extended
pursuant to Section 6(c)(i)) following the date on which such Shelf Registration
Statement first becomes effective under the Act.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 10 Business Days after receipt of a request
therefor, such information specified in Item 507 of Regulation S-K under the Act
for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have provided all such information. In the
event such information is provided by such Holder more than 10 Business Days
after receipt of a request therefor, such Holder shall not be entitled to
Liquidated Damages until 10 days after such information is provided. Each
Holder as to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the date specified for such filing in this
Agreement, (ii) any such Registration Statement has not been declared effective
by the Commission on or prior to the date specified for such effectiveness in
this Agreement, (iii) the Exchange Offer has not been Consummated within 30
Business Days after the Exchange Offer Registration Statement is first declared
effective by the Commission or (iv) any Registration Statement required by this
Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for its intended purpose without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself declared effective immediately (each such
event referred to in clauses (i) through (iv), a "Registration Default"), then
--------------------
the Company and the Subsidiary Guarantors hereby jointly and severally agree to
pay liquidated damages to each Holder of Transfer Restricted Securities with
respect to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 principal
amount of Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues. The amount of the
liquidated damages shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.50 per week per $1,000 principal
amount of Transfer Restricted Securities. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above,
6
<PAGE>
(2) upon the effectiveness of the Exchange Offer Registration Statement (and/or,
if applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the liquidated
damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall immediately cease.
All accrued liquidated damages shall be paid to the Global Note Holder by
wire transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by wire transfer to the accounts specified by
them or by mailing checks to their registered addresses, if no such accounts
have been specified, on each Damages Payment Date. All obligations of the
Company and the Subsidiary Guarantors set forth in the preceding paragraph that
are outstanding with respect to any Transfer Restricted Security at the time
such security ceases to be a Transfer Restricted Security shall survive until
such time as all such obligations with respect to such security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
-------------------------------------
Exchange Offer, the Company and the Subsidiary Guarantors shall comply with all
applicable provisions of Section 6(c) below, shall use their respective
commercially reasonable best efforts to effect such exchange and to permit the
sale of Broker-Dealer Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof, and shall comply
with all of the following provisions:
(i) If, following the date hereof there has been published a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, such that in the reasonable opinion of counsel to the Company there is
a substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Subsidiary Guarantors hereby
agree to seek a no-action letter or other favorable decision from the
Commission allowing the Company and the Subsidiary Guarantors to Consummate
an Exchange Offer for such Senior Subordinated Notes. The Company and the
Subsidiary Guarantors hereby agree to pursue the issuance of such a decision
to the Commission staff level. In connection with the foregoing, the Company
and the Subsidiary Guarantors hereby agree to take all such other actions as
are requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A) participating in
telephonic conferences with the Commission, (B) delivering to the Commission
staff an analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that such an Exchange
Offer should be permitted and (C) diligently pursuing a resolution (which
need not be favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
Consummation of the Exchange Offer, a written representation to the Company
and the Subsidiary Guarantors (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of the Company, (B) it is not engaged
in, and does not intend to engage in, and has no arrangement or understanding
with any person to participate in, a distribution of the New Senior
Subordinated Notes to be issued
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<PAGE>
in the Exchange Offer and (C) it is acquiring the New Senior Subordinated
Notes in its ordinary course of business. Each Holder hereby acknowledges and
agrees that any Broker-Dealer and any such Holder using the Exchange Offer to
participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the date
of this Agreement rely on the position of the Commission enunciated in Morgan
------
Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
--------------------- ----------------------
Corporation (available May 13, 1988), as interpreted in the Commission's
-----------
letter to Shearman & Sterling dated July 2, 1993, and similar no-action
letters (including, if applicable, any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered by
an effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K if
the resales are of New Senior Subordinated Notes obtained by such Holder in
exchange for Senior Subordinated Notes acquired by such Holder directly from
the Company or an affiliate thereof.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Subsidiary Guarantors shall, if requested by
the Commission, provide a supplemental letter to the Commission (A) stating
that the Company and the Subsidiary Guarantors are registering the Exchange
Offer in reliance on the position of the Commission enunciated in Exxon
-----
Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and
---------------------------- ------------------
Co., Inc. (available June 5, 1991) and, if applicable, any no-action letter
---------
obtained pursuant to clause (i) above, (B) including a representation that
neither the Company nor any Subsidiary Guarantor has entered into any
arrangement or understanding with any Person to distribute the New Senior
Subordinated Notes to be received in the Exchange Offer and that, to the best
of the Company's and each Subsidiary Guarantor's information and belief, each
Holder participating in the Exchange Offer is acquiring the New Senior
Subordinated Notes in its ordinary course of business and has no arrangement
or understanding with any Person to participate in the distribution of the
New Senior Subordinated Notes received in the Exchange Offer and (C) any
other undertaking or representation required by the Commission as set forth
in any no-action letter obtained pursuant to clause (i) above.
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company and the Subsidiary Guarantors shall comply
with all the provisions of Section 6(c) below and shall use their respective
commercially reasonable best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company and the Subsidiary Guarantors will prepare and file
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
------------------
any related Prospectus required by this Agreement to permit the sale or resale
of Transfer Restricted Securities (including, without limitation, any Exchange
Offer Registration Statement and the related Prospectus, to the extent that the
same are required to be available to permit sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers), the Company and the
Subsidiary Guarantors shall:
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<PAGE>
(i) use their respective commercially reasonable best efforts to
keep such Registration Statement continuously effective and provide all
requisite financial statements for the period specified in Section 3 or 4 of
this Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein (A)
to contain a material misstatement or omission or (B) not to be effective and
usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Company and the Subsidiary Guarantors shall
file promptly an appropriate amendment to such Registration Statement, (1) in
the case of clause (A), correcting any such misstatement or omission, and (2)
in the case of clauses (A) and (B), use their respective commercially
reasonable best efforts to cause such amendment to be declared effective and
such Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter.
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period set forth
in Section 3 or 4 hereof, or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Registration Statement have
been sold; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Act, and to comply fully in all material respects with Rules 424, 430A and
462, as applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, selling Holders named in any
Registration Statement or Prospectus ("Named Holders") and any Restricted
Broker-Dealer (whether or not named in the Registration Statement) who has
requested copies of the Prospectus pursuant to the last paragraph of Section
3 hereof, or has otherwise identified itself as a Restricted Broker-Dealer to
the Company, promptly and, if requested by such Persons, confirm such advice
in writing, (A) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement under the Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any of the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made in
the Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration
Statement in order to make the statements therein not misleading, or that
requires the making of any additions to or changes in the Prospectus in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. If at any time the Commission shall issue
any stop order suspending the effectiveness of the Registration Statement, or
any state securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company and the Subsidiary Guarantors shall use their respective commercially
reasonable best efforts to obtain the withdrawal or lifting of such order at
the earliest possible time;
9
<PAGE>
(iv) furnish to the Initial Purchasers, each Named Holder and each
of the underwriter(s) in connection with such sale, if any, before filing
with the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration
Statement or Prospectus (including all documents incorporated by reference
after the initial filing of such Registration Statement), which documents
will be subject to the review and comment of such Named Holders and
underwriter(s) in connection with such sale, if any, for a period of at least
five Business Days, and the Company will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the Named Holders of the Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s) in connection with such sale, if any, shall reasonably object
within five Business Days after the receipt thereof. A Named Holder or
underwriter, if any, shall be deemed to have reasonably objected to such
filing if such Registration Statement, amendment, Prospectus or supplement,
as applicable, as proposed to be filed, contains a material misstatement or
omission or fails to comply with the applicable requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the Named Holders and to the
underwriter(s) in connection with such sale, if any, make the Company's and
the Subsidiary Guarantors' representatives available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such Named
Holders or underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the Named
Holders, any managing underwriter participating in any disposition pursuant
to such Registration Statement and any attorney or accountant retained by
such Named Holders or any of such underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and the
Subsidiary Guarantors subject to appropriate confidentiality agreements and
cause the Company's and the Subsidiary Guarantors' officers, directors and
employees to supply all information that is (a) reasonably requested by any
Named Holder, underwriter, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto subsequent to
the filing thereof and prior to its effectiveness and (b) customarily
furnished in transactions of the type contemplated by such Registration
Statement;
(vii) if requested by any Named Holders or the underwriter(s) in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective amendment
if necessary, such information as such Named Holders and underwriter(s), if
any, may reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, information with respect to the principal
amount of Transfer Restricted Securities being sold to such underwriter(s),
the purchase price being paid therefor and any other terms of the offering of
the Transfer Restricted Securities to be sold in such offering; and make all
required filings of such Prospectus supplement or post-effective amendment as
soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(viii) furnish to each Named Holder and each of the underwriter(s) in
connection with such sale, if any, without charge, at least one copy of the
Registration Statement, as first filed with the
10
<PAGE>
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(ix) deliver to each Named Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Subsidiary Guarantors
hereby consent to the use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each of the selling Holders and each of
the underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any amendment
or supplement thereto;
(x) enter into such agreements (including an underwriting agreement)
and make such representations and warranties and take all such other actions
in connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder
of Transfer Restricted Securities or underwriter in connection with any sale
or resale pursuant to any Registration Statement contemplated by this
Agreement, which agreements must be in customary form, and in such
connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an Underwritten Registration, the Company
and the Subsidiary Guarantors shall:
(A) furnish (or in the case of paragraphs (2) and (3), use its
commercially reasonable best efforts to furnish) to each Named Holder and
each underwriter, if any, upon the effectiveness of the Shelf Registration
Statement:
(1) a certificate, dated the date of effectiveness of the Shelf
Registration Statement, signed on behalf of the Company and each
Subsidiary Guarantor by (x) the President or any Vice President and (y)
a principal financial or accounting officer of the Company and such
Subsidiary Guarantor, confirming, as of the date thereof, the matters
set forth in paragraphs (f) and (g) of Section 7 of the Purchase
Agreement;
(2) an opinion, dated the date of effectiveness of the Shelf
Registration Statement, of counsel for the Company and the Subsidiary
Guarantors covering the matters set forth in paragraph (c) of Section 7
of the Purchase Agreement, and in any event including a statement to
the effect that such counsel has participated in the preparation of the
applicable Registration Statement, including review and discussion of
the contents thereof, and no facts came to such counsel's attention
that caused such counsel to believe that the Registration Statement, at
the time such Registration Statement or any post-effective amendment
thereto became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus contained in such Registration Statement as of its date
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state further that
such counsel assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial and statistical
data included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
11
<PAGE>
(3) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement, from the Company's
independent accountants, in the customary form and covering matters of
the type customarily covered in comfort letters to underwriters in
connection with primary underwritten offerings; and
(B) set forth in full or incorporate by reference in the underwriting
agreement, if any, in connection with any sale or resale pursuant to any
Shelf Registration Statement the indemnification provisions and procedures
of Section 8 hereof with respect to all parties to be indemnified pursuant
to said Section.
The above shall be done at each closing under such underwriting or similar
agreement, as and to the extent required thereunder, and if at any time the
representations and warranties of the Company and the Subsidiary Guarantors
contemplated in (A)(1) above cease to be true and correct, the Company and
the Subsidiary Guarantors shall so advise the underwriter(s), if any and the
Named Holders promptly and if requested by such Persons, shall confirm such
advice in writing;
(xi) prior to any public offering of Transfer Restricted Securities,
cooperate with the Named Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the Named Holders or underwriter(s), if any, may
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; provided,
however, that neither the Company nor any Subsidiary Guarantor shall be
required to register or qualify as a foreign corporation where it is not now
so qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is not
now so subject;
(xii) issue, upon the request of any Holder of Senior Subordinated
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, New Senior Subordinated Notes having an aggregate principal amount
equal to the aggregate principal amount of Senior Subordinated Notes
surrendered to the Company by such Holder in exchange therefor or being sold
by such Holder; such New Senior Subordinated Notes to be registered in the
name of such Holder or in the name of the purchaser(s) of such Notes, as the
case may be; in return, the Senior Subordinated Notes held by such Holder
shall be surrendered to the Company for cancellation;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Named Holders and each Restricted Broker-
Dealer and the underwriter(s), if any, to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as the
Named Holders, Restricted Broker-Dealers or the underwriter(s), if any, may
request at least two Business Days prior to such sale of Transfer Restricted
Securities;
(xiv) use their respective commercially reasonable best efforts to
cause the disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
domestic governmental agencies or authorities as may be necessary to enable
12
<PAGE>
the seller or sellers thereof or the underwriter(s), if any, to consummate
the disposition of such Transfer Restricted Securities, subject to the
proviso contained in clause (xi) above;
(xv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are in
a form eligible for deposit with the Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their respective commercially reasonable best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the disposition
of such Transfer Restricted Securities;
(xviii) otherwise use their respective commercially reasonable best
efforts to make generally available to its security holders with regard to
any applicable Registration Statement, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective date of
the Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xix) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by this
Agreement and, in connection therewith, cooperate with the Trustee and the
Holders of Notes to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute and use its commercially reasonable best efforts to cause
the Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
and
(xx) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
-----------------------
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof,
or until it is advised in writing by the Company that the use of the Prospectus
may
13
<PAGE>
be resumed, and has received copies of any additional or supplemental filings
that are incorporated by reference in the Prospectus (the "Advice"). If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of either such notice. In the
event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 6(c)(i)
or Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof
or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Subsidiary Guarantors'
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses (including
filings made by any Purchaser or Holder with the NASD and its counsel that may
be required by the rules and regulations of the NASD); (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
New Senior Subordinated Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company and the Subsidiary Guarantors; (v) all
application and filing fees in connection with listing the Notes on a national
securities exchange or automated quotation system pursuant to the requirements
hereof; and (vi) all fees and disbursements of independent certified public
accountants of the Company and the Subsidiary Guarantors (including the expenses
of any special audit and comfort letters required by or incident to such
performance).
The Company will, in any event, bear its and the Subsidiary
Guarantors' internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company or the Subsidiary Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Subsidiary
Guarantors will reimburse the Initial Purchasers and the Holders of Transfer
Restricted Securities being tendered in the Exchange Offer and/or resold
pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Subsidiary Guarantors, jointly and severally,
agree to indemnify and hold harmless (i) each Holder and (ii) each person, if
any, who controls (within the meaning of Section 15
14
<PAGE>
of the Act or Section 20 of the Exchange Act) any Holder (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person") and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an
"Indemnified Holder"), to the fullest extent lawful, from and against any and
------------------
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending any claim or action, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus prepared pursuant to this Agreement or Prospectus (or any
amendment or supplement thereto), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by an untrue statement or omission
or alleged untrue statement or omission that is made in reliance upon and in
conformity with information relating to any of the Holders furnished in writing
to the Company by any of the Holders expressly for use therein.
In case any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any of the
Indemnified Holders with respect to which in demnity may be sought against the
Company or the Subsidiary Guarantors, such Indemnified Holder (or the
Indemnified Holder controlled by such controlling person) shall promptly notify
the parties against whom indemnification is being sought (the "indemnifying
parties"), and such indemnifying parties shall assume the defense thereof,
including the employment of counsel and payment of all fees and expenses. Such
Indemnified Holder shall have the right to employ its own counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the Indemnified
Holder unless (i) the indemnifying parties have agreed in writing to pay such
fees and expenses, (ii) the indemnifying parties have failed to assume the
defense and employ counsel, or (iii) the named parties to any such action, suit
or proceeding (including any impleaded parties) include such Indemnified Holder
and the indemnifying parties and such Indemnified Holder shall have been advised
by its counsel that representation of such indemnified party and any
indemnifying party by the same counsel would be inappropriate under applicable
standards of professional conduct (whether or not such representation by the
same counsel has been proposed) due to actual or potential differing interests
between them (in which case the indemnifying party shall not have the right to
assume the defense of such action, suit or proceeding on behalf of such
Indemnified Holder). It is understood, however, that the indemnifying parties
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for the Indemnified
Holders not having actual or potential differing interests with the Indemnified
Holders or among themselves, which firm shall be designated in writing by the
Indemnified Holders, and that all such fees and expenses shall be reimbursed on
a monthly basis as provided in paragraph (a) hereof. The indemnifying parties
shall not be liable for any settlement of any such action, suit or proceeding
effected without their written consent, but if settled with such written
consent, or if there shall be a final judgment for the plaintiff in any such
action, suit or proceeding, the indemnifying parties agree to indemnify and hold
harmless such Indemnified Holder, to the extent provided in paragraph (a), and
any such controlling person from and against any loss, claim, damage, liability
or expense by reason of such settlement or judgment.
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<PAGE>
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Subsidiary
Guarantors, and their respective directors, officers, and any person controlling
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or any Subsidiary Guarantor, to the same extent as the foregoing
indemnity from the Company and the Subsidiary Guarantors to each of the
Indemnified Holders, but only with respect to information relating to such
Holder furnished in writing by or on behalf of such Holder expressly for use in
any Registration Statement. In case any action, suit or proceeding shall be
brought against the Company, any Subsidiary Guarantor or its directors or
officers or any such controlling person in respect of which indemnity may be
sought against a Holder of Transfer Restricted Securities pursuant to this
paragraph (b), such Holder shall have the rights and duties given the Company
and the Subsidiary Guarantors (except that if the Company and the Subsidiary
Guarantors shall have assumed the defense thereof the Holders shall not be
required to do so, but may employ separate counsel therein and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
Holders' expense), and the Company, such Subsidiary Guarantor, such directors or
officers or such controlling person shall have the rights and duties given to
each Holder by the preceding paragraph. In no event shall any Holder be liable
or responsible for any amount in excess of the amount by which the total
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. The
foregoing indemnity agreement shall be in addition to any liability which the
Holders may otherwise have.
(c) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party under Section 8(a) or Section 8(b) hereof in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Subsidiary Guarantors, on the one hand, and the Holders, on the
other hand, from their sale of Transfer Restricted Securities or if such
allocation is not permitted by applicable law, the relative fault of the Company
and the Subsidiary Guarantors, on the one hand, and of the Indemnified Holder,
on the other hand, in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of the Company and the
Subsidiary Guarantors, on the one hand, and of the Indemnified Holder, on the
other hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or such Subsidiary Guarantor or by the Indemnified Holder and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the Subsidiary Guarantors and each Holder of Transfer
Restricted Securities agree that it would not be just and equitable if
contribution pursuant to this Section 8(c) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating any claim or defending any such action, suit or
16
<PAGE>
proceeding. Notwithstanding the provisions of this Section 8, no Holder or its
related Indemnified Holders shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to con tribute pursuant
to this Section 8(c) are several in proportion to the respective principal
amount of Senior Subordinated Notes held by each of the Holders hereunder and
not joint.
(d) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such action, suit or
proceeding.
SECTION 9. RULE 144A
The Company and each Subsidiary Guarantor hereby agrees with each Holder,
for so long as any Transfer Restricted Securities remain outstanding and during
any period in which the Company or such Subsidiary Guarantor is not subject to
Section 13 or 15(d) of the Securities Exchange Act, to make available, upon
request of any Holder of Transfer Restricted Securities, to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or investment bankers
and manager or managers for any Underwritten Offering that will administer such
offering will be selected by the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities included in such offering. Such
investment bankers and managers are referred to herein as the "underwriters."
17
<PAGE>
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
--------
rights provided herein, in the Indenture, the Purchase Agreement or granted by
law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Subsidiary Guarantors agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by them of the
provisions of this Agreement and hereby agree to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Subsidiary
--------------------------
Guarantor will, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Subsidiary Guarantors' securities under any agreement in effect on the date
hereof.
(c) Adjustments Affecting the Notes. Neither the Company nor any
-------------------------------
Subsidiary Guarantor will take any action, or voluntarily permit any change to
occur, with respect to the Notes that is designed to and would materially and
adversely affect the ability of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Subsidiary Guarantors:
National Equipment Services, Inc.
1800 Sherman Avenue
Evanston, Illinois 60201
Telecopier No.: (847) 733-1087
Attention: Dennis O'Connor
18
<PAGE>
With a copy, which shall not constitute notice, to:
Kirkland & Ellis
200 East Randolph Street
Chicago, Illinois 60601
Telecopier No.: (312) 861-2200
Attention: H. Kurt von Moltke
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities directly from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
National Equipment Services, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Albany Ladder Company, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title:Vice President
BAT Acquisition Corp.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title:Vice President
NES Acquisition Corp.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title:Vice President
NES East Acquisition Corp.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title:Vice President
<PAGE>
NES Michigan Acquisition Corp.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Carl's Mid South Rent-All Center
Incorporated
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite Aviation, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite Equipment, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
Falconite Rebuild Center, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
M&M Properties, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
McCurry & Falconite Equipment Co., Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Rebel Studio Rentals, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Shaughnessy Crane Service, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
Confirmed as of the date first
above mentioned.
Salomon Smith Barney Inc.
By:/s/ Steven J. Pearlman
----------------------
Name: Steven J. Pearlman
Title: Managing Director
First Union Capital Markets Corp., a division of Wheat First Securities, Inc.
By:/s/ Douglas J. Fink
-------------------
Name: Douglas J. Fink
Title: Managing Director
<PAGE>
EXHIBIT 4.16
$50,000,000 EXECUTION COPY
NATIONAL EQUIPMENT SERVICES, INC.
10% SENIOR SUBORDINATED NOTES DUE 2004, SERIES C
PURCHASE AGREEMENT
------------------
January 5, 1999
Salomon Smith Barney Inc.
First Union Capital Markets Corp.
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
National Equipment Services, Inc., a Delaware corporation (the
"Company"), proposes, upon the terms and conditions set forth herein, to issue
- --------
and sell to you, as the initial purchasers (the "Initial Purchasers"),
------------------
$50,000,000 in aggregate principal amount of its 10% Senior Subordinated Notes
due 2004, Series C (the "Senior Subordinated Notes"). The Senior Subordinated
-------------------------
Notes will (i) have the terms and provisions which are summarized in the
Offering Memorandum (as defined herein), (ii) be in the forms specified by the
Initial Purchasers pursuant to Section 3 hereof, and (iii) be issued pursuant to
the provisions of an Indenture, dated as of December 11, 1998 (the "Indenture"),
---------
among the Company, each of the subsidiaries of the Company noted on Schedule I
hereto (the "Subsidiary Guarantors") and Harris Trust and Savings Bank, as
---------------------
trustee (the "Trustee"). The Senior Subordinated Notes will be guaranteed on a
-------
senior subordinated basis by the Subsidiary Guarantors pursuant to their
guarantee (the "Subsidiary Guarantees").
---------------------
The Company and the Subsidiary Guarantors wish to confirm as follows
their agreement with the Initial Purchasers in connection with the purchase and
resale of the Senior Subordinated Notes.
1. Offering Memorandum. The Senior Subordinated Notes will be
offered and sold to the Initial Purchasers without registration under the
Securities Act of 1933, as amended (the "Act"), in reliance on an exemption
---
pursuant to Section 4(2) under the Act. The Company has prepared an offering
memorandum, dated January 5, 1999, (the "Offering Memorandum"), setting forth
-------------------
information regarding the Company, the Senior Subordinated Notes and the
Exchange Notes (as defined herein). Any references herein to the Offering
Memorandum shall be deemed to include all amendments and supplements thereto, if
any. The Company hereby confirms that it has authorized the use of the Offering
Memorandum in connection with the offering and resale of the Senior Subordinated
Notes by the Initial Purchasers.
The Company understands that the Initial Purchasers propose to make
offers and sales (the "Exempt Resales") of the Senior Subordinated Notes
--------------
purchased by the Initial Purchasers hereunder only on the terms and in the
manner set forth in the Offering Memorandum, and Section 2 hereof, as soon as
the Initial Purchasers deem advisable after this Agreement has been executed and
delivered, solely to
<PAGE>
persons whom the Initial Purchasers reasonably believe to be qualified
institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A
------------------------------
under the Act, as such rule may be amended from time to time ("Rule 144A"), in
---- ----
transactions under Rule 144A. Such Qualified Institutional Buyers are being
referred to herein as "Eligible Purchasers."
-------------------
It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act, the Senior Subordinated Notes (and all securities
issued in exchange therefor or in substitution thereof) shall bear the following
legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES
TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) OF THE SECURITIES ACT
(AN "INSTITUTIONAL ACCREDITED INVESTOR") IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
It is also understood and acknowledged that holders (including
subsequent transferees) of the Senior Subordinated Notes will have the
registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date (as defined
- ------------------------------
herein), in substantially the form of Exhibit A hereto, for so long as such
Senior Subordinated Notes constitute "Transfer Restricted
2
<PAGE>
Securities" (as defined in the Registration Rights Agreement) and subject to the
other terms of the Registration Rights Agreement. Pursuant to the Registration
Rights Agreement, the Company will agree to file with the Securities and
Exchange Commission (the "Commission") under the circumstances set forth
----------
therein, (i) a registration statement on the appropriate form under the Act
relating to the Company's 10% Senior Subordinated Notes due 2004, Series D (the
"Exchange Notes") to be offered in exchange for the Senior Subordinated Notes
--------------
(the "Registered Exchange Offer") and (ii) under certain limited circumstances,
-------------------------
a shelf registration statement pursuant to Rule 415 under the Act relating to
the resale by certain holders of the Senior Subordinated Notes, and to use its
commercially reasonable best efforts to cause such registration statements to be
declared effective. As used herein, the Senior Subordinated Notes and the
Exchange Notes are hereinafter referred to collectively as the "Notes." This
-----
Agreement, the Indenture and the Registration Rights Agreement are hereinafter
referred to collectively as the "Operative Documents."
-------------------
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Indenture or the Offering Memorandum.
2. Agreements to Sell, Purchase and Resell. (a) The Company hereby
agrees, subject to all the terms and conditions set forth herein, to issue and
sell to the Initial Purchasers and, upon the basis of the representations,
warranties and agreements of the Company and the Subsidiary Guarantors herein
contained and subject to all the terms and conditions set forth herein, each
Initial Purchaser agrees, severally and not jointly, to purchase from the
Company, at a purchase price of 95.500% of the principal amount thereof, plus
accrued interest from December 11, 1998, the principal amount of Senior
Subordinated Notes set forth opposite the name of such Initial Purchaser in
Schedule II hereto.
(b) The Initial Purchasers have advised the Company that they propose
to offer the Senior Subordinated Notes for sale upon the terms and conditions
set forth in this Agreement and in the Offering Memorandum. Each Initial
Purchaser hereby represents and warrants to, and agrees with, the Company that
such Initial Purchaser (i) is purchasing the Senior Subordinated Notes pursuant
to a private sale exempt from registration under the Act, (ii) will not solicit
offers for, or offer or sell, the Senior Subordinated Notes by means of any form
of general solicitation or general advertising or in any manner involving a
public offering within the meaning of Section 4(2) of the Act, and (iii) will
solicit offers for the Senior Subordinated Notes only from, and will offer, sell
or deliver the Senior Subordinated Notes as part of their initial offering, only
to persons whom the Initial Purchasers reasonably believe to be QIBs, or if any
such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
the Initial Purchasers that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, in each
case, in transactions under Rule 144A. The Initial Purchasers have advised the
Company that they will offer the Senior Subordinated Notes to Eligible
Purchasers at a price initially equal to 98.000% of the principal amount
thereof, plus accrued interest from December 11, 1998. Such price may be
changed by the Initial Purchasers at any time thereafter without notice.
The Initial Purchasers understand that the Company and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Sections
7(c) and 7(d) hereof, counsel to the Company and counsel to the Initial
Purchasers, will rely upon the accuracy and truth of the foregoing
representations, warranties and agreements and the Initial Purchasers hereby
consent to such reliance.
3. Delivery of the Senior Subordinated Notes and Payment Therefor.
Delivery to the Initial Purchasers of and payment for the Senior Subordinated
Notes shall be made at the office of Latham & Watkins, 885 Third Avenue, Suite
1000, New York, New York 10022 at 10:00 A.M., New York City time, on January 8,
1999 (the "Closing Date"). The place of closing for the Senior Subordinated
------------
Notes
3
<PAGE>
and the Closing Date may be varied by agreement between the Initial Purchasers
and the Company.
The Senior Subordinated Notes will be delivered to the Initial
Purchasers against payment of the purchase price therefor in immediately
available funds. The Senior Subordinated Notes will be evidenced by one or more
global securities in definitive form (the "Global Note"), and will be registered
-----------
in the name of Cede & Co. as nominee of The Depository Trust Company ("DTC").
---
The Senior Subordinated Notes to be delivered to the Initial Purchasers shall be
made available to the Initial Purchasers in New York City for inspection and
packaging not later than 9:30 A.M., New York City time, on the business day next
preceding the Closing Date.
4. Agreements of the Company and the Subsidiary Guarantors. The
Company and the Subsidiary Guarantors, jointly and severally, agree with the
Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by
them, will confirm such advice in writing, within the period of time
referred to in paragraph (e) below, of any material change in the Company's
condition (financial or other), business, properties, net worth or results
of operations, or of the happening of any event which makes any statement
made in the Offering Memorandum (as then amended or supplemented) untrue in
any material respect or which requires the making of any additions to or
changes in the Offering Memorandum (as then amended or supplemented) in
order to make the statements therein not misleading, or of the necessity to
amend or supplement the Offering Memorandum (as then amended or
supplemented) to comply with any law.
(b) To furnish to the Initial Purchasers, without charge, as of the
date of the Offering Memorandum, such number of copies of the Offering
Memorandum as may then be amended or supplemented as they may reasonably
request.
(c) Not to make any amendment or supplement to the Offering
Memorandum of which the Initial Purchasers shall not previously have been
advised or to which they shall reasonably object after being so advised.
(d) The Company consents to the use of the Offering Memorandum (and
of any amendment or supplement thereto) in accordance with the securities
or Blue Sky laws of the jurisdictions in which the Senior Subordinated
Notes are offered by the Initial Purchasers and by all dealers to whom
Senior Subordinated Notes may be sold, in connection with the offering and
sale of the Senior Subordinated Notes.
(e) If, at any time prior to completion of the distribution of the
Senior Subordinated Notes by the Initial Purchasers to Eligible Purchasers,
any event shall occur that in the judgment of the Company or in the opinion
of counsel for the Initial Purchasers should be set forth in the Offering
Memorandum (as then amended or supplemented) in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary to supplement or amend the
Offering Memorandum in order to comply with any law, the Company will
forthwith prepare an appropriate supplement or amendment thereto or such
document, and will expeditiously furnish to the Initial Purchasers and
dealers a reasonable number of copies thereof.
(f) To cooperate with the Initial Purchasers and with their counsel
in connection with
4
<PAGE>
the qualification of the Senior Subordinated Notes for offering and sale by
the Initial Purchasers and by dealers under the securities or Blue Sky laws
of such jurisdictions as the Initial Purchasers may designate and will file
such consents to service of process or other documents necessary or
appropriate in order to effect such qualification; provided that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which
would subject it to service of process in suits, other than those arising
out of the offering or sale of the Senior Subordinated Notes, in any
jurisdiction where it is not now so subject.
(g) So long as any of the Senior Subordinated Notes are outstanding,
the Company will furnish to the Initial Purchasers (i) as soon as
available, a copy of each report of the Company mailed to stockholders or
filed with any stock exchange or regulatory body and (ii) from time to time
such other publicly available information concerning the Company as the
Initial Purchasers may reasonably request.
(h) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
the Initial Purchasers terminating this Agreement pursuant to Section 10
hereof) or if this Agreement shall be terminated by the Initial Purchasers
because of any failure or refusal on the part of the Company or the
Subsidiary Guarantors to comply with the terms or fulfill any of the
conditions of this Agreement, the Company and the Subsidiary Guarantors
agree to reimburse the Initial Purchasers for all out-of-pocket expenses
(including reasonable fees and expenses of their counsel) reasonably
incurred by them in connection herewith, but without any further obligation
on the part of the Company or the Subsidiary Guarantors for loss of profits
or otherwise.
(i) To apply the net proceeds from the sale of the Senior
Subordinated Notes to be sold by the Company hereunder substantially in
accordance with the description set forth in the Offering Memorandum.
(j) Without the prior consent of the Initial Purchasers, prior to the
expiration of 180 days after the date of the Offering Memorandum neither
the Company nor the Subsidiary Guarantors will offer, sell, contract to
sell or otherwise dispose of any fixed income obligation substantially
similar to the Senior Subordinated Notes and having a maturity of more than
one year (other than borrowings under the Credit Facility).
(k) Except as stated in this Agreement and in the Offering Memorandum
neither the Company nor the Subsidiary Guarantors have taken, nor will any
of them take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation
(within the meaning of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of the price of the Senior Subordinated Notes to
------------
facilitate the sale or resale of the Senior Subordinated Notes. Neither
the Company nor the Subsidiary Guarantors will distribute any offering
material in connection with the Exempt Resales in violation of the Act.
(l) To use their respective commercially reasonable best efforts to
cause the Senior Subordinated Notes to be designated Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") Market securities
------
in accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. relating to trading in the PORTAL
Market and to permit the Senior Subordinated Notes to be eligible for
clearance and settlement through DTC.
5
<PAGE>
(m) From and after the Closing Date, so long as any of the Senior
Subordinated Notes are outstanding and are "Restricted Securities" within
the meaning of the Rule 144(a)(3) under the Act or, if earlier, until two
years after the Closing Date, and during any period in which the Company is
not subject to Section 13 or 15(d) of the Exchange Act, the Company will
furnish to holders of the Senior Subordinated Notes and prospective
purchasers of Senior Subordinated Notes designated by such holders, upon
request of such holders or such prospective purchasers, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Act to
permit compliance with Rule 144A in connection with resale of the Senior
Subordinated Notes.
(n) The Company has complied and will comply with all provisions of
Florida Statutes Section 517.075 relating to issuers doing business with
Cuba.
(o) Not to sell, offer for sale or solicit offers to buy any security
(as defined in the Act) that would be integrated with the sale of the
Senior Subordinated Notes in a manner that would require the registration
under the Act of the sale to the Initial Purchasers or the Eligible
Purchasers of the Senior Subordinated Notes.
(p) To comply, in all material respects, to the extent applicable,
with all the terms and conditions of the Registration Rights Agreement and
all agreements set forth in the representation letter of the Company to DTC
relating to the approval of the Senior Subordinated Notes by DTC for "book
entry" transfer.
(q) Concurrently with any registration of the Senior Subordinated
Notes pursuant to the Registration Rights Agreement, or at such earlier
time as may be required, the Indenture shall be qualified under the Trust
Indenture Act of 1939 (the "1939 Act") and any necessary supplemental
--------
indentures will be entered into in connection therewith.
(r) Not to voluntarily claim, and will resist actively all attempts
to claim, the benefit of any usury laws against holders of the Senior
Subordinated Notes.
(s) To do and perform all things reasonably required or necessary to
be done and performed under this Agreement by them prior to the Closing
Date, and to satisfy all conditions precedent to the Initial Purchasers'
obligations hereunder to purchase the Senior Subordinated Notes.
5. Representations and Warranties of the Company and the Subsidiary
Guarantors. The Company and the Subsidiary Guarantors, jointly and severally,
represent and warrant to the Initial Purchasers that:
(a) The Offering Memorandum with respect to the Senior Subordinated Notes has
been prepared by the Company for use by the Initial Purchasers in connection
with the Exempt Resales. No order or decree preventing the use of the Offering
Memorandum or any amendment or supplement thereto, or any order asserting that
the transactions contemplated by this Agreement are subject to the registration
requirements of the Act has been issued and no proceeding for that purpose has
commenced or is pending or, to the knowledge of the Company or the Subsidiary
Guarantors, is overtly contemplated.
(b) The Offering Memorandum as of its date and as of the Closing Date,
did not or
6
<PAGE>
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except that this representation and
warranty does not apply to statements in or omissions from the Offering
Memorandum made in reliance upon and in conformity with information
relating to the Initial Purchasers furnished to the Company in writing by
or on behalf of the Initial Purchasers expressly for use therein.
(c) The Indenture has been duly and validly authorized by the Company
and the Subsidiary Guarantors and, upon its execution, delivery and
performance by the Company and the Subsidiary Guarantors and assuming due
authorization, execution, delivery and performance by the Trustee, will be
a valid and binding agreement of the Company and the Subsidiary Guarantors,
enforceable in accordance with its terms, except as enforcement thereof may
be limited by bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and subject to the applicability of general
principles of equity and conforms in all material respects to the
description thereof in the Offering Memorandum; no qualification of the
Indenture under the 1939 Act is required in connection with the offer and
sale of the Senior Subordinated Notes contemplated hereby or in connection
with the Exempt Resales.
(d) The Senior Subordinated Notes have been duly authorized by the
Company and, when executed by the Company and authenticated by the Trustee
in accordance with the Indenture and delivered to the Initial Purchasers
against payment therefor in accordance with the terms hereof, will have
been validly issued and delivered, and will constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture and
enforceable in accordance with their terms, except as enforcement thereof
may be limited by bankruptcy, insolvency or other similar laws affecting
the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity, and the description of the
Senior Subordinated Notes in the Offering Memorandum will conform in all
material respects to the Senior Subordinated Notes.
(e) The Subsidiary Guarantees to be endorsed on the Senior
Subordinated Notes have been duly authorized by the Subsidiary Guarantors
and, when executed by the Subsidiary Guarantors and when the Senior
Subordinated Notes are issued and authenticated in accordance with the
terms of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms hereof, such Subsidiary Guarantees
will have been validly issued and delivered and will constitute valid and
binding obligations of the Subsidiary Guarantors entitled to the benefits
of the Indenture and enforceable in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the applicability of general principles of equity, and the
description of such Subsidiary Guarantees in the Offering Memorandum will
conform in all material respects to such Subsidiary Guarantees.
(f) The Exchange Notes have been duly authorized by the Company and,
when executed by the Company and authenticated by the Trustee and delivered
in accordance with the Registered Exchange Offer and the Indenture, will
have been validly issued and delivered, and will constitute valid and
binding obligations of the Company entitled to the benefits of the
Indenture and enforceable in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the applicability of general principles of equity, and the
description of the Exchange Notes in the Offering Memorandum will conform
in all material respects to the Exchange Notes.
7
<PAGE>
(g) The Subsidiary Guarantees to be endorsed on the Exchange Notes
have been duly authorized by the Subsidiary Guarantors and, when executed
by the Subsidiary Guarantors and when the Exchange Notes are issued and
authenticated in accordance with the terms of the Registered Exchange Offer
and the Indenture, such Subsidiary Guarantees will have been validly issued
and delivered and will constitute valid and binding obligations of the
Subsidiary Guarantors entitled to the benefits of the Indenture and
enforceable in accordance with their terms, except as enforcement thereof
may be limited by bankruptcy, insolvency or other similar laws affecting
the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity, and the description of such
Subsidiary Guarantees in the Offering Memorandum will conform in all
material respects to such Subsidiary Guarantees.
(h) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and
nonassessable; the authorized capital stock of the Company conforms to the
description thereof in the Offering Memorandum.
(i) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware with full
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Offering Memorandum, and is
duly registered and qualified to conduct its business and is in good
standing in each jurisdiction or place where the nature of its properties
or the conduct of its business requires such registration or qualification,
except where the failure so to register or qualify does not have a material
adverse effect on the condition (financial or other), business, prospects,
properties, net worth or results of operations of the Company and the
Subsidiaries (as hereinafter defined) taken as a whole (a "Material Adverse
----------------
Effect").
------
(j) All the Company's subsidiaries (as defined in the Act) are
referred to herein individually as a "Subsidiary" and collectively as the
----------
"Subsidiaries." Each Subsidiary is a corporation duly organized, validly
-------------
existing and in good standing in the jurisdiction of its incorporation
(except Carl's Mid South Rent-All Center Incorporated is not in good
standing in its jurisdiction of incorporation), with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum, and is duly registered
and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify or be in good standing does not have a
Material Adverse Effect. All the outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, and are wholly owned by the Company directly
or indirectly through one of the other Subsidiaries, free and clear of any
lien, adverse claim, security interest, equity or other encumbrance, except
pursuant to and otherwise permitted by the Credit Facility as described in
the Offering Memorandum.
(k) Schedule III hereto lists the only jurisdictions or places where
the nature of the properties or the conduct of the businesses of the
Company and the Subsidiary Guarantors requires the Company and the
Subsidiary Guarantors to be duly registered, qualified and in good
standing, except where the failure to so register, qualify or be in good
standing would not have a Material Adverse Effect.
(l) There are no legal or governmental proceedings pending or, to the
knowledge of the Company or the Subsidiary Guarantors, overtly threatened,
against the Company or any of the Subsidiaries or to which the Company or
any of the Subsidiaries or to which any of their
8
<PAGE>
respective properties, is subject, that are not disclosed in the Offering
Memorandum and which are reasonably likely to cause a Material Adverse
Effect or to materially affect the issuance of the Senior Subordinated
Notes or the consummation of the transactions contemplated by this
Agreement. There are no material agreements, contracts, indentures or
leases that should be properly described or disclosed in a summary fashion
in the Offering Memorandum that are not so described or disclosed. Neither
the Company nor any Subsidiary is involved in any strike, job action or
labor dispute with any group of employees, and, to the Company's and the
Subsidiary Guarantors' knowledge, no such action or dispute is overtly
threatened.
(m) Neither the Company nor any of the Subsidiaries is (i) in
violation of its certificate or articles of incorporation or by-laws or
other organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body
having jurisdiction over the Company or any of the Subsidiaries except
where any such violation or violations in the aggregate would not have a
Material Adverse Effect or (ii) in default in any respect in the
perfor mance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
agreement, indenture, lease or other instrument to which the Company or any
of the Subsidiaries is a party or by which any of them or any of their
respective properties may be bound, except as may be disclosed in the
Offering Memorandum or where any such default or defaults in the aggregate
would not have a Material Adverse Effect.
(n) None of the issuance, offer, sale or delivery of the Senior
Subordinated Notes, the execution, delivery or performance of this
Agreement or the Indenture or the Registration Rights Agreement by the
Company or the Subsidiary Guarantors or the consummation by the Company and
the Subsidiary Guarantors of the transactions contemplated hereby or
thereby (i) requires any consent, approval, authorization or other order
of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official
(except such as may be required in connection with the registration under
the Act of the Senior Subordinated Notes in accordance with the
Registration Rights Agreement, qualification of the Indenture under the
1939 Act and compliance with the securities or Blue Sky laws of various
jurisdictions), or conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate or articles of
incorporation or bylaws, or other organizational documents, of the Company
or any of the Subsidiary Guarantors or (ii) conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, in any
material respect, any material agreement, indenture, lease or other
instrument to which the Company or any of the Subsidiary Guarantors is a
party or by which any of them or any of their respective properties may be
bound, or violates or will violate in any material respect any statute,
law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or any of the Subsidiary Guarantors or any of
their respective properties, or will result in the creation or imposition
of any material lien, charge or encumbrance upon any property or assets of
the Company or any of the Subsidiary Guarantors pursuant to the terms of
any agreement or instrument to which any of them is a party or by which any
of them may be bound or to which any of the property or assets of any of
them is subject.
9
<PAGE>
(o) The accountants, PricewaterhouseCoopers LLP, Price Waterhouse
LLP, Lawrence, Blackburn Meek Maxey & Co. P.C., Albin, Randall & Bennett,
Coopers & Lybrand L.L.P., KPMG Peat Marwick L.L.P and Wolf & Company, P.C.,
who have certified or shall certify the financial statements included as
part of the Offering Memorandum (or any amendment or supplement thereto),
are, to the Company's knowledge, independent public accountants under Rule
101 of the AICPA's Code of Professional Conduct, and its interpretation and
rulings.
(p) The financial statements (historical and pro forma), together
with related schedules and notes forming part of the Offering Memorandum
(and any amendment or supplement thereto), present fairly in all material
respects the consolidated financial position, results of operations and
changes in stockholders' equity and cash flows of the Company and the
Subsidiaries on the basis stated in the Offering Memorandum at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; the
assumptions used in preparing the pro forma financial information and
related notes and schedules included in the Offering Memorandum are
reasonable; and the other financial and statistical information and data
set forth in the Offering Memorandum (and any amendment or supplement
thereto) is accurately presented and, to the extent such information and
data is derived from the financial books and records of the Company, is
prepared on a basis consistent with such financial statements and the books
and records of the Company.
(q) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the
Registration Rights Agreement; the execution and delivery of, and the
performance by the Company of its obligations under, this Agreement and the
Registration Rights Agreement have been duly and validly authorized by the
Company, and this Agreement and the Registration Rights Agreement have been
duly executed and delivered by the Company and constitute the valid and
legally binding agreements of the Company, enforceable against the Company
in accordance with their terms, except as the enforcement hereof and
thereof may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity, and except as rights to
indemnity and contribution hereunder and thereunder may be limited by
Federal or state securities laws or principles of public policy.
(r) Each of the Subsidiary Guarantors has all requisite power and
authority to execute, deliver and perform its obligations under this
Agreement and the Registration Rights Agreement; the execution and delivery
of, and the performance by each Subsidiary Guarantor of its obligations
under, this Agreement and the Registration Rights Agreement have been duly
and validly authorized by each Subsidiary Guarantor, and this Agreement and
the Registration Rights Agreement have been duly executed and delivered by
each Subsidiary Guarantor and constitute the valid and legally binding
agreements of each Subsidiary Guarantor, enforceable against each
Subsidiary Guarantor in accordance with their terms, except as the
enforcement hereof and thereof may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally
and subject to the applicability of general principles of equity, and
except as rights to indemnity and contribution hereunder and thereunder may
be limited by Federal or state securities laws or principles of public
policy.
(s) Except as disclosed in the Offering Memorandum (or any amendment
or supplement thereto), subsequent to the date as of which such information
is given in the Offering Memorandum (or any amendment or supplement
thereto), neither the Company nor any of the
10
<PAGE>
Subsidiaries has incurred any liability or obligation, or entered into any
transaction, not in the ordinary course of business, that is material to
the Company and the Subsidiaries taken as a whole, and there has not been
any material change in the capital stock, or material increase in the
short-term or long-term debt, of the Company or any of the Subsidiaries or
any material adverse change, or any development involving or which could
reasonably be expected to involve a prospective material adverse change, in
the financial condition, business, properties, net worth or results of
operations of the Company and the Subsidiaries taken as a whole.
(t) Each of the Company and the Subsidiaries has good and marketable
title to all property (real and personal) described in the Offering
Memorandum as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances except pursuant to and otherwise
permitted by the Credit Facility as described in a summary fashion in the
Offering Memorandum; and all the property described in the Offering
Memorandum as being held under lease by each of the Company and the
Subsidiaries is held by it under valid, subsisting and enforceable leases,
with only such exceptions as in the aggregate are not materially burdensome
and do not interfere in any material respect with the conduct of the
business of the Company and the Subsidiaries taken as a whole.
(u) Neither the Company nor the Subsidiary Guarantors have
distributed and, prior to the later to occur of the Closing Date and
completion of the distribution of the Senior Subordinated Notes, will not
distribute any offering material in violation of the Act in connection with
the offering and sale of the Senior Subordinated Notes.
(v) Each of the Company and the Subsidiaries have such permits,
licenses, franchises, certificates of need and other approvals or
authorizations of governmental or regulatory authorities ("Permits") as are
-------
necessary under applicable law to own their respective properties and to
conduct their respective businesses in the manner described in the Offering
Memorandum, except to the extent that the failure to have such Permits
would not have a Material Adverse Effect; the Company and each of the
Subsidiaries have fulfilled and performed in all material respects, all
their respective material obligations with respect to the Permits, and no
event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, subject in each
case to such qualification as may be set forth in the Offering Memorandum
and except to the extent that any such revocation or termination would not
have a Material Adverse Effect; and, except as described in the Offering
Memorandum, none of the Permits contains any restriction that is materially
burdensome to the Company or any of the Subsidiaries.
(w) The Company and the Subsidiary Guarantors maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(x) Neither the Company nor any of the Subsidiaries nor, to the
Company's or the Subsidiary Guarantors' knowledge, any employee or agent of
the Company or any Subsidiary has made any payment of funds of the Company
or any Subsidiary or received or retained any funds
11
<PAGE>
in violation of any law, rule or regulation, which violation would have a
Material Adverse Effect.
(y) Except as disclosed in the Offering Memorandum, the Company and
each of the Subsidiaries have filed all tax returns required to be filed,
which returns are true and correct in all material respects, and neither
the Company nor any Subsidiary is in default in the payment of any taxes
which were payable pursuant to said returns or any assessments with respect
thereto, except where the failure to file such returns and make such
payments would not have a Material Adverse Effect and except for the
payment of any amounts that are being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP have been established.
(z) No holder of any security of the Company has any right to
request or demand registration of shares of Common Stock or any other
security of the Company because of the consummation of the transactions
contemplated by this Agreement or the Registration Rights Agreement, except
as have been waived.
(aa) The Company and each of the Subsidiaries own or possess all
patents, trademarks, trademark registration, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets
and rights described in the Offering Memorandum as being owned by any of
them or necessary for the conduct of their respective businesses, and
neither the Company nor the Subsidiary Guarantors are aware of any claim to
the contrary or any challenge by any other person to the rights of the
Company and the Subsidiaries with respect to the foregoing, except for such
claims or challenges that would not individually or in the aggregate be
reasonably expected to result in a Material Adverse Effect.
(bb) The Company is not and, upon sale of the Senior Subordinated
Notes to be issued and sold thereby in accordance herewith and the
application of the net proceeds to the Company of such sale as described in
the Offering Memorandum under the caption "Use of Proceeds," will not be an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(cc) When the Senior Subordinated Notes are issued and delivered
pursuant to this Agreement, such Senior Subordinated Notes will not be of
the same class (within the meaning of Rule 144A(d)(3) under the Act) as any
security of the Company that is listed on a national securities exchange
registered under Section 6 of the Exchange Act or that is quoted in a
United States automated interdealer quotation system.
(dd) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D ("Regulation D") under the Act) of the Company has
directly, or through any agent (provided that no representation is made as
to the Initial Purchasers or any person acting on their behalf), (i) sold,
offered for sale, solicited offers to buy, any security (as defined in the
Act) which is or properly would be integrated with the offering and sale of
the Senior Subordinated Notes in a manner that would require the
registration of the Senior Subordinated Notes under the Act or (ii) engaged
in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offering of the Senior
Subordinated Notes.
(ee) Assuming (i) that the representations and warranties in Section
2(b) hereof are true, (ii) the Initial Purchasers comply with the covenants
set forth in Section 2(b) hereof and (iii) that each person to whom the
Initial Purchasers offer, sell or deliver the Senior Subordinated Notes is
12
<PAGE>
a QIB, the purchase and sale of the Senior Subordinated Notes pursuant
hereto (including the Initial Purchasers' proposed offering of the Senior
Subordinated Notes on the terms and in the manner set forth in the Offering
Memorandum and Section 2 hereof) is exempt from the registration
requirements of the Act.
(ff) The Company and each of its Subsidiaries have fulfilled their
obligations, if any, under the minimum funding standards of Section 302 of
the United States Employee Retirement Income Security Act of 1974 ("ERISA")
-----
and the regulations and published interpretations thereunder with respect
to each "plan" (as defined in ERISA and such regulations and published
interpretations) in which employees of the Company and its Subsidiaries are
eligible to participate and each such plan is in compliance in all material
respects with the presently applicable provisions of ERISA and such
regulations and published interpretations, and has not incurred any unpaid
liability to the Pension Benefit Guaranty Corporation (other than for the
payment of premiums in the ordinary course) or to any such plan under Title
IV of ERISA.
(gg) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Senior Subordinated Notes to the
Initial Purchasers or by the Initial Purchasers to Eligible Purchasers will
not involve any prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"). The representation made by the Company and the Subsidiary
----
Guarantors in the preceding sentence is made in reliance upon and subject
to the accuracy of, and compliance with, the representations and covenants
made or deemed made by the Eligible Purchasers as set forth in the Offering
Memorandum under the section entitled "Notice to Investors."
(hh) (i) The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are customary in the businesses in which they
are engaged; (ii) all policies of insurance insuring the Company or any of
its Subsidiaries or their respective businesses, assets, employees,
officers and directors are in full force and effect; (iii) the Company and
its Subsidiaries are in compliance with the terms of such policies and
instruments in all material respects; and (iv) there are no material claims
by the Company or any of its Subsidiaries under any such policy or
instrument as to which any insurance company is denying liability or
defending under a reservation of rights clause.
(ii) The Company and each of its Subsidiaries (i) are and at all
times have been, in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances
or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
------------------
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits, licenses
or approvals would not, singly or in the aggregate, have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries has been named as
a "potentially responsible party" under the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended, or any similar
state statute.
(jj) In connection with its acquisition of businesses, the Company
typically conducts a review of the effect of Environmental Laws on the
business, operations and properties of the acquired businesses, in the
course of which it identifies and evaluates associated costs and
liabilities
13
<PAGE>
(including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws, or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review, the Company has reasonably concluded
that such associated costs and liabilities would not, singly or in the
aggregate, have a Material Adverse Effect.
6. Indemnification and Contribution. (a) The Company and the
Subsidiary Guarantors agree jointly and severally to indemnify and hold harmless
each Initial Purchaser and each person, if any, who controls any Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Offering Memorandum or in any amendment or supplement thereto,
or arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which has been
made therein or omitted therefrom in reliance upon and in conformity with the
information relating to such Initial Purchaser furnished in writing to the
Company by or on behalf of such Initial Purchaser expressly for use in
connection therewith. The foregoing indemnity agreement shall be in addition to
any liability which the Company or the Subsidiary Guarantors may otherwise have.
(b) If any action, suit or proceeding shall be brought against an
Initial Purchaser or any person controlling such Initial Purchaser in respect of
which indemnity may be sought against the Company or the Subsidiary Guarantors,
the Initial Purchaser or such controlling person shall promptly notify the
parties against whom indemnification is being sought (the "indemnifying
parties"), and such indemnifying parties shall assume the defense thereof,
including the employment of counsel and payment of all fees and expenses. The
Initial Purchaser or any such controlling person shall have the right to employ
separate counsel in any such action, suit or proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Initial Purchaser or such controlling person unless (i) the
indemnifying parties have agreed in writing to pay such fees and expenses, (ii)
the indemnifying parties have failed to assume the defense and employ counsel,
or (iii) the named parties to any such action, suit or proceeding (including any
impleaded parties) include both the Initial Purchaser or such controlling person
and the indemnifying parties and the Initial Purchaser or such controlling
person shall have been advised by its counsel that representation of such
indemnified party and any indemnifying party by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or not
such representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the indemnifying party
shall not have the right to assume the defense of such action, suit or
proceeding on behalf of the Initial Purchaser or such controlling person). It
is understood, however, that the indemnifying parties shall, in connection with
any one such action, suit or proceeding or separate but substantially similar or
related actions, suits or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of attorneys (in addition to one separate
firm of attorneys per jurisdiction acting as local counsel) at any time for the
Initial Purchasers and controlling persons not having actual or potential
differing interests with the Initial Purchasers or among themselves, which firm
shall be designated in writing by Salomon Smith Barney Inc., and that all such
fees and expenses shall be reimbursed on a monthly basis as provided in
paragraph (a) hereof. The indemnifying parties shall not be liable for any
settlement of any such action, suit or proceeding effected without their written
consent, but if settled with such written consent, or if there shall be a final
judgment for the plaintiff in any such action,
14
<PAGE>
suit or proceeding, the indemnifying parties agree to indemnify and hold
harmless the Initial Purchasers, to the extent provided in paragraph (a), and
any such controlling person from and against any loss, claim, damage, liability
or expense by reason of such settlement or judgment.
(c) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company and the Subsidiary Guarantors, and their
respective directors and officers, and any person who controls the Company or
any Subsidiary Guarantor within the meaning of Section 15 of the Act or Section
20 of the Exchange Act to the same extent as the indemnity from the Company and
the Subsidiary Guarantors to the Initial Purchasers set forth in paragraph (a)
hereof, but only with respect to information relating to such Initial Purchaser
furnished in writing by or on behalf of such Initial Purchaser expressly for use
in the Offering Memorandum or any amendment or supplement thereto. If any
action, suit or proceeding shall be brought against the Company or the
Subsidiary Guarantors, any of their respective directors or officers, or any
such controlling person based on the Offering Memorandum, or any amendment or
supplement thereto, and in respect of which indemnity may be sought against the
Initial Purchasers pursuant to this paragraph (c), the Initial Purchasers shall
have the rights and duties given to the Company by paragraph (b) above (except
that if the Company shall have assumed the defense thereof the Initial
Purchasers shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the Initial Purchasers' expense), and the Company and
the Subsidiary Guarantors, their respective directors and officers, and any such
controlling person shall have the rights and duties given to the Initial
Purchasers by paragraph (b) above. The foregoing indemnity agreement shall be in
addition to any liability which the Initial Purchasers may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraph (a) or (c) hereof in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then an indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Subsidiary Guarantors on the one hand and the Initial Purchasers
on the other hand from the offering of the Senior Subordinated Notes, or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Subsidiary Guarantors on the one hand and the Initial Purchasers on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Subsidiary Guarantors on the one hand and the Initial Purchasers on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
discounts and commissions received by the Initial Purchasers. The relative
fault of the Company and the Subsidiary Guarantors on the one hand and the
Initial Purchasers on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Subsidiary Guarantors on the one
hand or by the Initial Purchasers on the other hand and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) The Company, the Subsidiary Guarantors and the Initial Purchasers
agree that it would not be just and equitable if contribution pursuant to this
Section 6 were determined by a pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to in paragraph (d) above. The amount paid or payable by an indemnified party
as a result of the
15
<PAGE>
losses, claims, damages, liabilities and expenses referred to in paragraph (d)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 6, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price of the Senior Subordinated Notes underwritten by it and
distributed to the public exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 6 shall be paid on a monthly basis, by the indemnifying party to the
indemnified party as such losses, claims, damages, liabilities or expenses are
incurred. The indemnity and contribution agreements contained in this Section 6
and the representations and warranties of the Company and the Subsidiary
Guarantors set forth in this Agreement shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf of the
Initial Purchasers or any person controlling the Initial Purchasers, the
Company, any Subsidiary Guarantor, their respective directors or officers or any
person controlling the Company or any Subsidiary Guarantor, (ii) acceptance of
any Senior Subordinated Notes and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to an Initial Purchaser or any
person controlling such Initial Purchaser, or to the Company, any Subsidiary
Guarantor, their respective directors or officers or any person controlling the
Company or any Subsidiary Guarantor, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
6.
(g) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is a party
and indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such action, suit or
proceeding.
7. Conditions of the Initial Purchasers' Obligation. The
obligations of the Initial Purchasers to purchase the Senior Subordinated Notes
hereunder are subject to the following conditions:
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements of
the Act shall have been issued and no proceedings for that purpose shall have
been commenced or shall be pending or, to the knowledge of the Company or the
Subsidiary Guarantors, be overtly contemplated. No stop order suspending the
sale of the Senior Subordinated Notes in any jurisdiction designated by the
Initial Purchasers shall have been issued and no proceedings for that purpose
shall have been commenced or shall be pending or, to the knowledge of the
Company or the Subsidiary Guarantors, shall be contemplated.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the financial condition, business, properties, net
worth, or results of operations of the Company or the Subsidiaries not
contemplated by the Offering Memorandum, which in the opinion of the Initial
Purchasers, would
16
<PAGE>
materially adversely affect the market for the Senior Subordinated Notes, or
(ii) any event or development relating to or involving the Company or any
officer or director of the Company which makes any statement made in the
Offering Memorandum untrue in any material respect or which, in the opinion of
the Company and its counsel or the Initial Purchasers and their counsel,
requires the making of any addition to or change in the Offering Memorandum in
order to state a material fact required by any law to be stated therein or
necessary in order to make the statements therein not misleading, if amending or
supplementing the Offering Memorandum to reflect such event or development
would, in the opinion of the Initial Purchasers, materially adversely affect the
market for the Senior Subordinated Notes.
(c) The Initial Purchasers shall have received on the Closing Date an
opinion of Kirkland & Ellis, counsel for the Company, dated the Closing Date and
addressed to the Initial Purchasers, in substantially the form of Exhibit B
hereto.
(d) The Initial Purchasers shall have received on the Closing Date an
opinion of Latham & Watkins, counsel for the Initial Purchasers, dated the
Closing Date, and addressed to the Initial Purchasers, with respect to the
Offering Memorandum and such other related matters as the Initial Purchasers may
reasonably request, and such counsel shall have received such certificates,
documents and information as they may reasonably request to enable them to pass
upon such matters.
(e) The Initial Purchasers shall have received letters addressed to
the Initial Purchasers, and dated the date hereof and the Closing Date, from
PricewaterhouseCoopers LLP, independent certified public accountants,
substantially in the forms heretofore approved by the Initial Purchasers.
(f)(i) There shall not have been any change in the capital stock of
the Company and the Subsidiary Guarantors nor any material increase in the
short-term or long-term debt of the Company and the Subsidiary Guarantors (other
than in the ordinary course of business) from that set forth or contemplated in
the Offering Memorandum (or any amendment or supplement thereto); (ii) there
shall not have been, since the respective dates as of which information is given
in the Offering Memorandum (or any amendment or supplement thereto), except as
may otherwise be stated in the Offering Memorandum (or any amendment or
supplement thereto), any material adverse change in the condition (financial or
other), business, prospects, properties, net worth or results of operations of
the Company and the Subsidiaries taken as a whole; (iii) the Company and the
Subsidiaries shall not have any liabilities or obligations, direct or contingent
(whether or not in the ordinary course of business), that are material to the
Company and the Subsidiaries, taken as a whole, other than those reflected in
the Offering Memorandum (or any amendment or supplement thereto); and (iv) all
the representations and warranties of the Company and the Subsidiary Guarantors
contained in this Agreement shall be true and correct in all material respects
on and as of the date hereof and on and as of the Closing Date as if made on and
as of the Closing Date, and the Initial Purchasers shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief accounting officer of the Company and the Subsidiary Guarantors
(or such other officers as are acceptable to the Initial Purchasers), to the
effect set forth in this Section 7(f) and in Section 7(g) and 7(l) hereof.
(g) The Company and the Subsidiary Guarantors shall not have failed at
or prior to the Closing Date to have performed or complied with any of their
agreements herein contained and required to be performed or complied with by
them hereunder at or prior to the Closing Date.
(h) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
436(g) under the Act, that (i) it is downgrad ing its rating assigned to any
class of securities of the Company, or (ii) it is reviewing its ratings
17
<PAGE>
assigned to any class of securities of the Company with a view to possible
downgrading, or with negative implications, or direction not determined.
(i) The Senior Subordinated Notes shall have been approved for trading
on PORTAL.
(k) The Company shall have furnished or caused to be furnished to the
Initial Purchasers such further certificates and documents as the Initial
Purchasers shall have requested.
(l) Carl's Mid South Rent-All Center Incorporated shall be in good
standing in its jurisdiction of incorporation, or the Company shall represent to
the Initial Purchasers that Carl's Mid South Rent-All Center Incorporated is not
a material subsidiary of the Company.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers and counsel for the
Initial Purchasers.
8. Expenses. The Company and the Subsidiary Guarantors agree to pay
the following costs and expenses and all other costs and expenses incurred by
them incident to the performance by them of any of their obligations hereunder:
(i) the preparation, printing and reproduction of the Offering Memorandum
(including, without limitation, financial statements thereto), and each
amendment or supplement thereto; (ii) the printing (or reproduction) and
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of the Offering Memorandum and all amendments or
supplements thereto as may be reasonably requested for use in connection with
the offering and sale of the Senior Subordinated Notes; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the Senior
Subordinated Notes, including any stamp taxes in connection with the original
issuance and sale of the Senior Subordinated Notes; (iv) the printing (or
reproduction) and delivery of this Agreement and the Blue Sky Memorandum; (v)
the application for quotation of the Senior Subordinated Notes on the PORTAL
Market; (vi) the qualification of the Senior Subordinated Notes for offer and
sale under the securities or Blue Sky laws of the several states as provided in
Section 4(f) hereof (including the reasonable fees, expenses and disbursements
of counsel for the Initial Purchasers relating to the preparation, printing or
reproduction, and delivery of the Blue Sky Memorandum and such qualification),
provided that the fees referred to in this clause (vi) shall not exceed $10,000;
(vii) the performance by the Company and the Subsidiary Guarantors of their
obligations under the Registration Rights Agreement; (viii) fees and expenses of
the Trustee and its counsel; (ix) the transportation and other expenses, if any,
incurred by or on behalf of the Company representatives in connection with
presentations to prospective purchasers of the Senior Subordinated Notes; and
(x) the fees and expenses of the Company's accountants and the fees and expenses
of counsel (including local and special counsel, if any) for the Company. The
Company and the Subsidiary Guarantors hereby agree that they will pay in full on
the Closing Date the fees and expenses referred to in clause (vi) of this
Section 8 by delivering to counsel for the Initial Purchasers on such date a
check payable to such counsel in the requisite amount.
9. Effective Date of Agreement. This Agreement shall become
effective upon the execution and delivery hereof by all the parties hereto.
10. Termination of Agreement. (a) This Agreement shall be subject
to termination in the absolute discretion of the Initial Purchasers, without
liability on the part of the Initial Purchasers to the Company or the Subsidiary
Guarantors, by notice to the Company, if prior to the Closing Date, (i) trading
in securities generally on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market shall have been suspended or materially
limited, (ii) a general moratorium on commercial
18
<PAGE>
banking activities in New York shall have been declared, or (iii) there shall
have occurred any outbreak or escalation of hostilities involving the United
States or other domestic, foreign or international calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in the reasonable
judgment of the Initial Purchasers, impracticable or inadvisable to commence or
continue the offering of the Senior Subordinated Notes on the terms set forth on
the cover page of the Offering Memorandum or to enforce contracts for the resale
of the Senior Subordinated Notes by the Initial Purchasers. Notice of such
termination may be given to the Company by telegram, telecopy or telephone and
shall be subsequently confirmed by letter.
(b) If on the Closing Date any one or more of the Initial Purchasers
shall fail or refuse to purchase the Senior Subordinated Notes which it or they
have agreed to purchase hereunder on such date and the amount of Senior
Subordinated Notes which such defaulting Initial Purchaser or Initial
Purchasers, as the case may be, agreed but failed or refused to purchase is not
more than one-tenth of the total amount of Senior Subordinated Notes to be
purchased on such date by all Initial Purchasers, each non-defaulting Initial
Purchaser shall be obligated severally, in the proportion which the aggregate
principal amount of such securities set forth opposite its name in Schedule II
bears to the total amount of such Senior Subordinated Notes which all the non-
defaulting Initial Purchasers, as the case may be, have agreed to purchase, or
in such other proportion as the Initial Purchasers may specify, to purchase the
securities which such defaulting Initial Purchaser or Initial Purchasers, as the
case may be, agreed but failed or refused to purchase on such date; provided
that in no event shall the aggregate principal amount of such securities which
any Initial Purchaser has agreed to purchase pursuant to Section 2 hereof be
increased pursuant to this Section 10 by an amount in excess of one-ninth of
such aggregate amount of such Senior Subordinated Notes without the written
consent of such Initial Purchaser. If on the Closing Date any Initial Purchaser
or Initial Purchasers shall fail or refuse to purchase such Senior Subordinated
Notes and the aggregate amount of Senior Subordinated Notes with respect to
which such default occurs is more than one-tenth of the total amount of Senior
Subordinated Notes to be purchased by all Initial Purchasers and arrangements
satisfactory to the Initial Purchasers and the Company for the purchase of such
securities are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Initial Purchaser
and the Company. In any such case which does not result in termination of this
Agreement, either the Initial Purchasers or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Offering Memorandum or any other
documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Initial Purchaser from liability in
respect of any default of any such Initial Purchaser under this Agreement.
11. Information Furnished by the Initial Purchasers. The statements
set forth in the fifth and last paragraph of the cover page of the Offering
Memorandum and the last paragraph on the inside cover page of the Offering
Memorandum and the second sentence of the fourth paragraph under the caption
"Plan of Distribution" in the Offering Memorandum, constitute the only
information furnished by or on behalf of the Initial Purchasers as such
information is referred to in Sections 5(b) and 6 hereof.
12. Miscellaneous. Except as otherwise provided in Sections 4 and 10
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 1800 Sherman Avenue, Evanston, Illinois 60201, Attention: Chief
Financial Officer with a copy, which shall not constitute notice, to Kirkland &
Ellis, 200 East Randolph Street, Chicago, Illinois 60601, Attention: H. Kurt von
Moltke, or (ii) if to the Initial Purchasers, addressed to Salomon Smith Barney
Inc., 388 Greenwich Street, New York, NY 10013, Attention: Manager, Investment
Banking Division, with a copy to Latham & Watkins, 885 Third Avenue, New York,
NY 10022, Attention: Beth Neckman.
19
<PAGE>
This Agreement has been and is made solely for the benefit of the
Initial Purchasers, the Company, the Subsidiary Guarantors and their respective
directors, officers and controlling persons referred to in Section 6 hereof and
their respective successors and assigns, to the extent provided herein, and no
other person shall acquire or have any right under or by virtue of this
Agreement. Neither the term "successor" nor the term "successors and assigns"
as used in this Agreement shall include a purchaser from the Initial Purchasers
of any of the Senior Subordinated Notes in his status as such purchaser.
13. Applicable Law; Counterparts This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York and without
regard to the conflicts of law principles thereof.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
[signature page follows]
20
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Subsidiary Guarantors and the Initial Purchasers.
Very truly yours,
National Equipment Services, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Albany Ladder Company, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
BAT Acquisition Corp.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
NES Acquisition Corp.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
NES East Acquisition Corp.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
NES Michigan Acquisition Corp.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Carl's Mid South Rent-All Center
Incorporated
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite Aviation, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Falconite Equipment, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
Falconite Rebuild Center, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
M&M Properties, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
McCurry & Falconite Equipment Co., Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Rebel Studio Rentals, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
Shaughnessy Crane Service, Inc.
By:/s/ Paul R. Ingersoll
---------------------
Name: Paul R. Ingersoll
Title: Vice President
<PAGE>
Confirmed as of the date first
above mentioned.
Salomon Smith Barney Inc.
By:/s/ Steven J. Pearlman
----------------------
Name: Steven J. Pearlman
Title: Managing Director
First Union Capital Markets Corp., a division of Wheat First Securities, Inc.
By:/s/ John J. Braden
----------------------
Name: John J. Braden
Title: Managing Director
<PAGE>
SCHEDULE I
SUBSIDIARY GUARANTORS
---------------------
Albany Ladder Company, Inc.
BAT Acquisition Corp.
NES Acquisition Corp.
NES East Acquisition Corp.
NES Michigan Acquisition Corp.
Falconite, Inc.
Carl's Mid South Rent-All Center Incorporated
Falconite Aviation, Inc.
Falconite Equipment, Inc.
Falconite Rebuild Center, Inc.
M&M Properties, Inc.
McCurry & Falconite Equipment Co., Inc.
Rebel Studio Rentals, Inc.
Shaughnessy Crane Service, Inc.
<PAGE>
SCHEDULE II
PRINCIPAL AMOUNT OF
SENIOR SUBORDINATED NOTES
INITIAL PURCHASERS TO BE PURCHASED
- ------------------ -------------------------
Salomon Smith Barney Inc...................... $35,000,000
First Union Capital Markets Corp., $15,000,000
a division of Wheat First Securities, Inc..... -----------
Total................................... $50,000,000
===========
<PAGE>
SCHEDULE III
Jurisdictions Where Qualified to Do Business
<TABLE>
<CAPTION>
NAME OF ENTITY STATE OF INCORPORATION STATES OF FOREIGN QUALIFICATION
- ----------------------------------- ---------------------- ---------------------------------
<S> <C> <C>
National Equipment Services, Inc. Delaware Illinois
Albany Ladder Company, Inc. New York Connecticut, Massachusetts, New
Hampshire, Pennsylvania and
Vermont
BAT Acquisition Corp. Delaware Nevada
NES Acquisition Corp. Delaware Alabama, Louisiana and Texas
NES East Acquisition Corp. Delaware Alabama, Connecticut, Georgia,
Louisiana, Maine, Massachusetts,
New York, New Hampshire,
Pennsylvania, Vermont and
Virginia
NES Michigan Acquisition Corp. Delaware Michigan
Falconite, Inc. Illinois Kentucky
Carl's Mid South Rent-All Center Tennessee none
Incorporated
Falconite Aviation, Inc. Delaware none
Falconite Equipment, Inc. Illinois Indiana, Kentucky, Michigan,
Missouri, Ohio and Tennessee
Falconite Rebuild Center, Inc. Kentucky none
M&M Properties, Inc. Alabama Florida, Georgia, Louisiana and
Mississippi
McCurry & Falconite Equipment Alabama none
Co., Inc.
Rebel Studio Rentals, Inc. California none
Shaughnessy Crane Service, Inc. Massachusetts New Hampshire, New Jersey and
Rhode Island
</TABLE>
<PAGE>
Exhibit A
---------
Form of Registration Rights Agreement
<PAGE>
Exhibit B
---------
Form of Opinion of Kirkland & Ellis
<PAGE>
KIRKLAND & ELLIS
Partnerships Including Professional Corporations
200 East Randolph Drive
Chicago, Illinois 60601
312 861-2000
Exhibit 5.1
To Call Writer Direct: Facsimile:
312 861-2000 312 861-2200
February 1, 1999
National Equipment Services, Inc.
1800 Sherman Avenue
Evanston, Illinois 60201
Re: 10% Senior Subordinated Notes due 2004, Series D
------------------------------------------------
Ladies and Gentlemen:
We are acting as special counsel to National Equipment Services, Inc.,
a Delaware corporation (the "Company"), in connection with the proposed
registration by the Company of up to $175,000,000 in aggregate principal amount
of the Company's 10% Senior Subordinated Notes due 2004, Series D (the "Exchange
Notes"), pursuant to a Registration Statement on Form S-4 to be filed with the
Securities and Exchange Commission (the "Commission") on or about the date
hereof under the Securities Act of 1933, as amended (the "Securities Act") (such
Registration Statement, as amended or supplemented, is hereinafter referred to
as the "Registration Statement"), for the purpose of effecting an exchange offer
(the "Exchange Offer") for the Company's 10% Senior Subordinated Notes due 2004,
Series C (the "Outstanding Notes"). We are also acting as special counsel to
Albany Ladder Company, Inc. ("Albany"), BAT Acquisition Corp. ("BAT"), Carl's
Mid South Rent-All Center Incorporated ("CMSRACI"), Falconite Aviation, Inc.
("FAI"), Falconite Equipment, Inc. ("FEI"), Falconite, Inc. ("Falconite"),
Falconite Rebuild Center, Inc. ("FRCI"), McCurry & Falconite Equipment Co., Inc.
("M&FECI"), M&M Properties, Inc. ("M&MPI"), NES Acquisition Corp. ("NES
Acquisition"), NES East Acquisition Corp. ("NES East"), NES Michigan Acquisition
Corp. ("NES Michigan"), Rebel Studio Rentals, Inc. ("RSR") and Shaughnessy Crane
Service, Inc. ("SCS" and, together with Albany, BAT, CMSRACI, FAI, FEI,
Falconite, FRCI, M&FECI, M&MPI, NES Acquisition, NES East, NES Michigan and RSR,
the "Subsidiary Guarantors") as issuers of guarantees (collectively, the
"Guarantees") of the obligations of the Company under the Exchange Notes. The
Exchange Notes and the Guarantees are to be issued pursuant to the Indenture
(the "Indenture"), dated as of December 11, 1998, among the Company, the
Subsidiary Guarantors and Harris Trust and Savings Bank, as Trustee, in exchange
for and in replacement of the Company's current Outstanding Notes, of which
$175,000,000 in aggregate principal amount is outstanding.
<PAGE>
National Equipment Services, Inc.
February 1, 1999
Page 2
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the corporate and organizational documents of the Company
and each Subsidiary Guarantor, (ii) minutes and records of the corporate
proceedings of the Company and each Subsidiary Guarantor with respect to the
issuance of the Exchange Notes and the Guarantees, respectively, (iii) the
Registration Statement and exhibits thereto, (iv) the Registration Rights
Agreement, dated as of December 11, 1998, among the Company, the Subsidiary
Guarantors, Salomon Smith Barney Inc. and First Union Capital Markets Corp. and
(v) the Registration Rights Agreement, dated as of January 8, 1999, among the
Company, the Subsidiary Guarantors, Salomon Smith Barney Inc. and First Union
Capital Markets Corp.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of
the signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than the Company and the Subsidiary Guarantors, and the
due authorization, execution and delivery of all documents by the parties
thereto other than the Company and the Subsidiary Guarantors. As to any facts
material to the opinions expressed herein which we have not independently
established or verified, we have relied upon statements and representations of
officers and other representatives of the Company and others.
Based upon and subject to the foregoing qualifications, assumptions
and limitations and the further limitations set forth below, we are of the
opinion that:
(1) Each of the Company, BAT, FAI, NES Acquisition, NES East and NES
Michigan is a corporation existing and in good standing under the General
Corporation Law of the State of Delaware. Albany is a corporation existing and
in good standing under the New York Business Corporation Law. CMSRACI is a
corporation existing and in good standing under the Tennessee Business
Corporation Act. Each of Falconite and FEI is a corporation existing and in
good standing under the Illinois Business Corporation Act of 1983. FRCI is a
corporation existing and in good standing under the Kentucky 1988 Business
Corporation Act. Each of M&FECI and M&MPI is a corporation existing and in good
standing under the Alabama Business Corporation Act. RSR is a
<PAGE>
National Equipment Services, Inc.
February 1, 1999
Page 3
corporation existing and in good standing under the California General
Corporation Law. SCS is a corporation existing and in good standing under the
Massachusetts Business Corporation Law.
(2) The sale and issuance of the Exchange Notes has been validly
authorized by the Company.
(3) The Guarantees have been validly authorized by each of the
Subsidiary Guarantors.
(4) When, as and if (i) the Registration Statement shall have become
effective pursuant to the provisions of the Securities Act, (ii) the Indenture
shall have been qualified pursuant to the provisions of the Trust Indenture Act
of 1939, as amended, (iii) the Outstanding Notes shall have been validly
tendered to the Company, (iv) the Exchange Notes shall have been issued in the
form and containing the terms described in the Registration Statement, the
Indenture, the resolutions of the Company's and each Subsidiary Guarantor's
Board of Directors (or authorized committee thereof) authorizing the foregoing
and any legally required consents, approvals, authorizations and other order of
the Commission and any other regulatory authorities to be obtained and (v) the
Exchange Notes have been authenticated by the Trustee, the Exchange Notes when
issued pursuant to the Exchange Offer will be legally issued, fully paid and
nonassessable and will constitute valid and binding obligations of the Company
and each Guarantee will constitute the valid and binding obligation of the
respective Subsidiary Guarantor.
Our opinions expressed above are subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies and (iv) any laws except the laws of the State of New York, the
laws of the State of Illinois, the General Corporation Law of the State of
Delaware (in the case of the Company, BAT, FAI, NES Acquisition, NES East and
NES Michigan), the Alabama Business Corporation Act (in the case of M&FECI and
M&MPI), the California General Corporation Law (in the case of RSR), the
Kentucky 1988 Business Corporation Act (in the case of FRCI), the Massachusetts
Business Corporation Law (in the case of SCS) and the Tennessee Business
Corporation Act (in the case of CMSRACI). We advise you that issues addressed
by this letter may be governed in whole or in part by other laws, but we express
no opinion as to whether any relevant difference exists between the laws upon
which our opinions are based and any other laws which may actually govern. With
respect to any opinion or other advice
<PAGE>
National Equipment Services, Inc.
February 1, 1999
Page 4
based on the Alabama Business Corporation Act, the California General
Corporation Law, the Kentucky 1988 Business Corporation Act, the Massachusetts
Business Corporation Law and the Tennessee Business Corporation Act, we note
that we do not practice in Alabama, California, Kentucky, Massachusetts or
Tennessee, and our opinions and advice based on the Alabama Business Corporation
Act, the California General Corporation Law, the Kentucky 1988 Business
Corporation Act, the Massachusetts Business Corporation Law and the Tennessee
Business Corporation Act are limited to the statutory provisions set forth in
Michie's Alabama Code (1975), West's Annotated California Codes (1990), Kentucky
Revised Statutes (1989 Replacement), Massachusetts General Laws Annotated (1992)
and Tennessee Code Annotated (1995 Replacement), respectively, without regard to
regulations promulgated thereunder or any judicial interpretations thereof.
For purposes of the opinions in numbered paragraph 1, we have relied
exclusively upon (a) in the case of the Company, BAT, FAI, NES Acquisition, NES
East and NES Michigan, recent certificates issued by the Delaware Secretary of
State, (b) in the case of Albany, a recent certificate issued by the New York
Secretary of State, (c) in the case of CMSRACI, a recent certificate issued by
the Tennessee Secretary of State, (d) in the case of Falconite and FEI, recent
certificates issued by the Illinois Secretary of State, (e) in the case of FRCI,
a recent certificate issued by the Kentucky Secretary of State, (f) in the case
of M&FECI and M&MPI, recent certificates issued by the Alabama Secretary of
State, (g) in the case of RSR, a recent certificate issued by the California
Secretary of State and (h) in the case of SCS, a recent certificate issued by
the Secretary of the Commonwealth of Massachusetts, and such opinions are not
intended to provide any conclusion or assurance beyond that conveyed by such
certificates. We have assumed without investigation that there has been no
relevant change or development between the respective dates of such certificates
and the date of this letter.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. We also consent to the reference to our firm under the
heading "Legal Matters" in the Registration Statement. In giving this consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Commission.
We do not find it necessary for the purposes of this opinion, and
accordingly we do not purport to cover herein, the application of the securities
or "Blue Sky" laws of the various states to the issuance of the Exchange Notes.
<PAGE>
National Equipment Services, Inc.
February 1, 1999
Page 5
This opinion is limited to the specific issues addressed herein, and
no opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the State of New York, the laws of the State of Illinois, the Alabama
General Corporation Act, the California General Corporation Law, the General
Corporation Law of the State of Delaware, the Kentucky 1988 Business Corporation
Act, the Massachusetts Business Corporation Law and the Tennessee Business
Corporation Act be changed by legislative action, judicial decision or
otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purposes.
Yours very truly,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
<PAGE>
EXHIBIT 12.1
NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands of dollars, except ratios)
<TABLE>
<CAPTION>
For the Period
From Inception Pro Forma
(June 4, 1996) For the Year For the Year
Through Ended Ended
December 31, 1996 December 31, 1997 December 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Pre-tax income (loss) $(332) $1,923 $ 4,168
Fixed charges:
Interest expense on all indebtedness 0 4,336 44,516
Rental expense representative of an interest factor 0 220 1,727
----- ------ -------
Total fixed charges 0 4,556 46,243
----- ------ -------
Earnings before income taxes and fixed charges $(332) $6,479 $50,411
===== ====== =======
Ratio of earnings to fixed charges (A) 1.42 1.09
===== ====== =======
</TABLE>
<TABLE>
<CAPTION>
For the Pro Forma
Nine Months For the Nine Months
Ended Ended
September 30, 1998 September 30, 1998
------------------ --------------------
<S> <C> <C>
Pre-tax income $14,684 $12,806
Fixed charges:
Interest expense on all indebtedness 16,001 33,387
Rental expense representative of an interest factor 663 1,295
------- -------
Total fixed charges 16,664 34,682
------- -------
Earnings before income taxes and fixed charges $31,348 $47,488
======= =======
Ratio of earnings to fixed charges 2.13 1.37
======= =======
</TABLE>
(A) The company's operations during the period from inception (June 4, 1996)
through December 31, 1996 were limited to organizational and start-up
activities while no revenues were generated; accordingly, presentation of
this rate is not considered meaningful.
<PAGE>
EXHIBIT 21.1
------------
SUBSIDIARIES
<TABLE>
<CAPTION>
State or Other
Jurisdiction of Each
Subsidiary's
Incorporation or
Registrant Subsidiary Organization
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
National Equipment Albany Ladder Company, Inc. (1) New York
Services, Inc. BAT Acquisition Corp. (2) Delaware
Carl's Mid South Rent-All Center Incorporated Tennessee
Falconite Aviation, Inc. Delaware
Falconite Equipment, Inc. (3) Illinois
Falconite, Inc. Illinois
Falconite Rebuild Center, Inc. Kentucky
McCurry & Falconite Equipment Co., Inc. Alabama
M&M Properties, Inc. (4) Alabama
NES Acquisition Corp. (5) Delaware
NES East Acquisition Corp. (6) Delaware
NES Michigan Acquisition Corp. (7) Delaware
Rebel Studio Rentals, Inc. (8) California
Shaughnessy Crane Service, Inc. (9) Massachusetts
</TABLE>
- -------------------
Notes:
(1) Albany Ladder Company, Inc. also does business under the names Albany
Ladder Company and Albany Ladder Co.
(2) BAT Acquisition Corp. also does business under the names BAT Rentals,
Eagle, Eagle Scaffolding Equipment and Eagle Scaffolding.
(3) Falconite Equipment, Inc. also does business under the names
Falconite and Falconite, Inc.
(4) M&M Properties, Inc. also does business under the names M&M
Equipment, Inc. and Falconite Equipment.
(5) NES Acquisition Corp. also does business under the names Lone Star
Rentals, Industrial Hoist Services, Sprintank, Sprint Industrial
Services and Dragon Rentals.
(6) NES East Acquisition Corp. also does business under the names
Equipco Sales & Rentals, Equipco Rentals & Sales, Aerial
Platforms, Inc., Aerial Platforms, CEC, Cormier Equipment
Corporation and NES East Acquisition Corp. of Delaware.
(7) NES Michigan Acquisition Corp. also does business under the names
Worksafe and Grand Hi-Reach.
(8) Rebel Studio Rentals, Inc. also does business under the name NES
Studio Equipment.
(9) Shaughnessy Crane Service, Inc. also does business under the names
Shaughnessy Crane, Shaughnessy Crane Service, Shaughnessy Aerialifts
and Shaughnessy Millwrights.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of our reports relating to the following
financial statements which appear in such Prospectus.
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS REPORT DATE
-------------------- -----------
<S> <C>
National Equipment Services, Inc. and Subsidiaries.... April 1, 1998,
except for the
information in
Note 13 as to
which the date is
January 5, 1999
Aerial Platforms, Inc.................................. November 4, 1997
Lone Star Rentals, Inc................................. November 4, 1997
BAT Rentals, Inc....................................... November 4, 1997
Sprintank and Sprintank Mobile Storage
(division of Sprint Industrial Services, Inc.)........ November 4, 1997
MST Enterprises, Inc. d/b/a Equipco Rental and Sales.. November 4, 1997
Work Safe Supply Company, Inc. and Subsidiaries........ March 4, 1998
Genpower Pump & Equipment, Inc......................... March 3, 1998
Albany Ladder Company, Inc............................. September 3, 1998
R & R Rentals, Inc..................................... September 3, 1998
</TABLE>
We also consent to the application of the National Equipment Services, Inc.
and Subsidiaries report to the Financial Statement Schedules for the period from
inception (June 4, 1996) through December 31, 1996 and the year ended December
31, 1997 listed under Item 21(b) of this Registration Statement when such
schedules are read in conjunction with the financial statements referred to in
our report. The audits referred to in such report also included these
schedules. We also consent to the reference to us under the heading "Experts" in
such Prospectus.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 2, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of National Equipment Services, Inc. of our
report dated February 3, 1998, except for Note 8 as to which the date is March
4, 1998, related to the financial statements of Cormier Equipment Corporation,
which appears in such Prospectus. We also consent to the references to us under
the heading "Experts" in such Prospectus.
/s/ Albin, Randall & Bennett, CPA's
February 1, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement of National Equipment Services, Inc. on Form S-4 of our
report dated February 6, 1998, except for the information in Note 6 as to which
the date is March 23, 1998 and except for the information in Note 12 as to which
the date is April 1, 1998, relating to the financial statements of Falconite,
Inc., which appear in such Prospectus. We also consent to the reference to us
under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
Louisville, Kentucky
February 1, 1999
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Falconite, Inc.
We consent to the use of our report dated February 20, 1997 with respect to
the consolidated balance sheet of Falconite, Inc. and subsidiaries as of
December 31, 1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for the years ended December 31, 1995 and
1996 included herein, and to the reference to our firm under the heading
"Experts".
/s/ KPMG LLP
St. Louis, Missouri
February 1, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report dated March 3, 1998, relating to
the financial statements of Dragon Rentals (A Wholly Owned Division of The
Modern Group, Inc.--A Texas Corporation), in the Prospectus constituting part of
the Registration Statement on Form S-4 of National Equipment Services, Inc. We
also consent to the references to us under the heading "Experts" in such
Prospectus.
/s/ Lawrence, Blackburn, Meek, Maxey & Co. P.C.
February 2, 1999
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 and
Prospectus of National Equipment Services, Inc., of our report dated July 17,
1998 on the balance sheets of Shaughnessy Crane Service, Inc. as of December 31,
1997 and 1996, and the related statements of income, changes in stockholders'
equity and cash flows for each of the years in the three year period ended
December 31, 1997 and to the use of our name and the statements with respect to
us, as appearing under the heading "Experts" in the Prospectus.
/s/ Wolf & Company, P.C.
Boston, Massachusetts
February 1, 1999
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
-----------------
NATIONAL EQUIPMENT SERVICES, INC.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to National Equipment Services, Inc., to sign the Registration Statement
on Form S-4 of (i) National Equipment Services, Inc. and (ii) Albany Ladder
Company, Inc., BAT Acquisition Corp., Carl's Mid South Rent-All Center
Incorporated, Falconite Aviation, Inc., Falconite Equipment, Inc., Falconite,
Inc., Falconite Rebuild Center, Inc., McCurry & Falconite Equipment Co., Inc.,
M&M Properties, Inc., NES Acquisition Corp., NES East Acquisition Corp., NES
Michigan Acquisition Corp., Rebel Studio Rentals, Inc. and Shaughnessy Crane
Service, Inc. (collectively, the "Subsidiary Guarantors") relating to the
registration of $175,000,000 aggregate principal amount of 10% Senior
Subordinated Notes due 2004, Series D (the "Exchange Notes") to be issued by
National Equipment Services, Inc. and the related guarantees of the Subsidiary
Guarantors, and any or all amendments to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his substitutes, may lawfully do or
cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
/S/ Ronald St. Clair /S/ John L. Grove
- -------------------------------------- --------------------------------------
Ronald St. Clair, John L. Grove,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
ALBANY LADDER COMPANY, INC.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to Albany Ladder Company, Inc., to sign the Registration Statement on
Form S-4 of (i) National Equipment Services, Inc. and (ii) Albany Ladder
Company, Inc., BAT Acquisition Corp., Carl's Mid South Rent-All Center
Incorporated, Falconite Aviation, Inc., Falconite Equipment, Inc., Falconite,
Inc., Falconite Rebuild Center, Inc., McCurry & Falconite Equipment Co., Inc.,
M&M Properties, Inc., NES Acquisition Corp., NES East Acquisition Corp., NES
Michigan Acquisition Corp., Rebel Studio Rentals, Inc. and Shaughnessy Crane
Service, Inc. (collectively, the "Subsidiary Guarantors") relating to the
registration of $175,000,000 aggregate principal amount of 10% Senior
Subordinated Notes due 2004, Series D (the "Exchange Notes") to be issued by
National Equipment Services, Inc. and the related guarantees of the Subsidiary
Guarantors, and any or all amendments to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his substitutes, may lawfully do or
cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
BAT ACQUISITION CORP.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to BAT Acquisition Corp., to sign the Registration Statement on Form S-4
of (i) National Equipment Services, Inc. and (ii) Albany Ladder Company, Inc.,
BAT Acquisition Corp., Carl's Mid South Rent-All Center Incorporated, Falconite
Aviation, Inc., Falconite Equipment, Inc., Falconite, Inc., Falconite Rebuild
Center, Inc., McCurry & Falconite Equipment Co., Inc., M&M Properties, Inc., NES
Acquisition Corp., NES East Acquisition Corp., NES Michigan Acquisition Corp.,
Rebel Studio Rentals, Inc. and Shaughnessy Crane Service, Inc. (collectively,
the "Subsidiary Guarantors") relating to the registration of $175,000,000
aggregate principal amount of 10% Senior Subordinated Notes due 2004, Series D
(the "Exchange Notes") to be issued by National Equipment Services, Inc. and the
related guarantees of the Subsidiary Guarantors, and any or all amendments to
such registration statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
CARL'S MID SOUTH RENT-ALL CENTER INCORPORATED
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to Carl's Mid South Rent-All Center Incorporated, to sign the
Registration Statement on Form S-4 of (i) National Equipment Services, Inc. and
(ii) Albany Ladder Company, Inc., BAT Acquisition Corp., Carl's Mid South Rent-
All Center Incorporated, Falconite Aviation, Inc., Falconite Equipment, Inc.,
Falconite, Inc., Falconite Rebuild Center, Inc., McCurry & Falconite Equipment
Co., Inc., M&M Properties, Inc., NES Acquisition Corp., NES East Acquisition
Corp., NES Michigan Acquisition Corp., Rebel Studio Rentals, Inc. and
Shaughnessy Crane Service, Inc. (collectively, the "Subsidiary Guarantors")
relating to the registration of $175,000,000 aggregate principal amount of 10%
Senior Subordinated Notes due 2004, Series D (the "Exchange Notes") to be issued
by National Equipment Services, Inc. and the related guarantees of the
Subsidiary Guarantors, and any or all amendments to such registration statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his substitutes, may lawfully do or
cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
FALCONITE AVIATION, INC.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to Falconite Aviation, Inc., to sign the Registration Statement on Form
S-4 of (i) National Equipment Services, Inc. and (ii) Albany Ladder Company,
Inc., BAT Acquisition Corp., Carl's Mid South Rent-All Center Incorporated,
Falconite Aviation, Inc., Falconite Equipment, Inc., Falconite, Inc., Falconite
Rebuild Center, Inc., McCurry & Falconite Equipment Co., Inc., M&M Properties,
Inc., NES Acquisition Corp., NES East Acquisition Corp., NES Michigan
Acquisition Corp., Rebel Studio Rentals, Inc. and Shaughnessy Crane Service,
Inc. (collectively, the "Subsidiary Guarantors") relating to the registration of
$175,000,000 aggregate principal amount of 10% Senior Subordinated Notes due
2004, Series D (the "Exchange Notes") to be issued by National Equipment
Services, Inc. and the related guarantees of the Subsidiary Guarantors, and any
or all amendments to such registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
FALCONITE EQUIPMENT, INC.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to Falconite Equipment, Inc., to sign the Registration Statement on Form
S-4 of (i) National Equipment Services, Inc. and (ii) Albany Ladder Company,
Inc., BAT Acquisition Corp., Carl's Mid South Rent-All Center Incorporated,
Falconite Aviation, Inc., Falconite Equipment, Inc., Falconite, Inc., Falconite
Rebuild Center, Inc., McCurry & Falconite Equipment Co., Inc., M&M Properties,
Inc., NES Acquisition Corp., NES East Acquisition Corp., NES Michigan
Acquisition Corp., Rebel Studio Rentals, Inc. and Shaughnessy Crane Service,
Inc. (collectively, the "Subsidiary Guarantors") relating to the registration of
$175,000,000 aggregate principal amount of 10% Senior Subordinated Notes due
2004, Series D (the "Exchange Notes") to be issued by National Equipment
Services, Inc. and the related guarantees of the Subsidiary Guarantors, and any
or all amendments to such registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
FALCONITE, INC.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to Falconite, Inc., to sign the Registration Statement on Form S-4 of
(i) National Equipment Services, Inc. and (ii) Albany Ladder Company, Inc., BAT
Acquisition Corp., Carl's Mid South Rent-All Center Incorporated, Falconite
Aviation, Inc., Falconite Equipment, Inc., Falconite, Inc., Falconite Rebuild
Center, Inc., McCurry & Falconite Equipment Co., Inc., M&M Properties, Inc., NES
Acquisition Corp., NES East Acquisition Corp., NES Michigan Acquisition Corp.,
Rebel Studio Rentals, Inc. and Shaughnessy Crane Service, Inc. (collectively,
the "Subsidiary Guarantors") relating to the registration of $175,000,000
aggregate principal amount of 10% Senior Subordinated Notes due 2004, Series D
(the "Exchange Notes") to be issued by National Equipment Services, Inc. and the
related guarantees of the Subsidiary Guarantors, and any or all amendments to
such registration statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
FALCONITE REBUILD CENTER, INC.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to Falconite Rebuild Center, Inc., to sign the Registration Statement on
Form S-4 of (i) National Equipment Services, Inc. and (ii) Albany Ladder
Company, Inc., BAT Acquisition Corp., Carl's Mid South Rent-All Center
Incorporated, Falconite Aviation, Inc., Falconite Equipment, Inc., Falconite,
Inc., Falconite Rebuild Center, Inc., McCurry & Falconite Equipment Co., Inc.,
M&M Properties, Inc., NES Acquisition Corp., NES East Acquisition Corp., NES
Michigan Acquisition Corp., Rebel Studio Rentals, Inc. and Shaughnessy Crane
Service, Inc. (collectively, the "Subsidiary Guarantors") relating to the
registration of $175,000,000 aggregate principal amount of 10% Senior
Subordinated Notes due 2004, Series D (the "Exchange Notes") to be issued by
National Equipment Services, Inc. and the related guarantees of the Subsidiary
Guarantors, and any or all amendments to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his substitutes, may lawfully do or
cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
MCCURRY & FALCONITE EQUIPMENT CO., INC.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to McCurry & Falconite Equipment Co., Inc., to sign the Registration
Statement on Form S-4 of (i) National Equipment Services, Inc. and (ii) Albany
Ladder Company, Inc., BAT Acquisition Corp., Carl's Mid South Rent-All Center
Incorporated, Falconite Aviation, Inc., Falconite Equipment, Inc., Falconite,
Inc., Falconite Rebuild Center, Inc., McCurry & Falconite Equipment Co., Inc.,
M&M Properties, Inc., NES Acquisition Corp., NES East Acquisition Corp., NES
Michigan Acquisition Corp., Rebel Studio Rentals, Inc. and Shaughnessy Crane
Service, Inc. (collectively, the "Subsidiary Guarantors") relating to the
registration of $175,000,000 aggregate principal amount of 10% Senior
Subordinated Notes due 2004, Series D (the "Exchange Notes") to be issued by
National Equipment Services, Inc. and the related guarantees of the Subsidiary
Guarantors, and any or all amendments to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his substitutes, may lawfully do or
cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
M&M PROPERTIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to M&M Properties, Inc., to sign the Registration Statement on Form S-4
of (i) National Equipment Services, Inc. and (ii) Albany Ladder Company, Inc.,
BAT Acquisition Corp., Carl's Mid South Rent-All Center Incorporated, Falconite
Aviation, Inc., Falconite Equipment, Inc., Falconite, Inc., Falconite Rebuild
Center, Inc., McCurry & Falconite Equipment Co., Inc., M&M Properties, Inc., NES
Acquisition Corp., NES East Acquisition Corp., NES Michigan Acquisition Corp.,
Rebel Studio Rentals, Inc. and Shaughnessy Crane Service, Inc. (collectively,
the "Subsidiary Guarantors") relating to the registration of $175,000,000
aggregate principal amount of 10% Senior Subordinated Notes due 2004, Series D
(the "Exchange Notes") to be issued by National Equipment Services, Inc. and the
related guarantees of the Subsidiary Guarantors, and any or all amendments to
such registration statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
NES ACQUISITION CORP.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to NES Acquisition Corp., to sign the Registration Statement on Form S-4
of (i) National Equipment Services, Inc. and (ii) Albany Ladder Company, Inc.,
BAT Acquisition Corp., Carl's Mid South Rent-All Center Incorporated, Falconite
Aviation, Inc., Falconite Equipment, Inc., Falconite, Inc., Falconite Rebuild
Center, Inc., McCurry & Falconite Equipment Co., Inc., M&M Properties, Inc., NES
Acquisition Corp., NES East Acquisition Corp., NES Michigan Acquisition Corp.,
Rebel Studio Rentals, Inc. and Shaughnessy Crane Service, Inc. (collectively,
the "Subsidiary Guarantors") relating to the registration of $175,000,000
aggregate principal amount of 10% Senior Subordinated Notes due 2004, Series D
(the "Exchange Notes") to be issued by National Equipment Services, Inc. and the
related guarantees of the Subsidiary Guarantors, and any or all amendments to
such registration statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
NES EAST ACQUISITION CORP.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to NES East Acquisition Corp., to sign the Registration Statement on
Form S-4 of (i) National Equipment Services, Inc. and (ii) Albany Ladder
Company, Inc., BAT Acquisition Corp., Carl's Mid South Rent-All Center
Incorporated, Falconite Aviation, Inc., Falconite Equipment, Inc., Falconite,
Inc., Falconite Rebuild Center, Inc., McCurry & Falconite Equipment Co., Inc.,
M&M Properties, Inc., NES Acquisition Corp., NES East Acquisition Corp., NES
Michigan Acquisition Corp., Rebel Studio Rentals, Inc. and Shaughnessy Crane
Service, Inc. (collectively, the "Subsidiary Guarantors") relating to the
registration of $175,000,000 aggregate principal amount of 10% Senior
Subordinated Notes due 2004, Series D (the "Exchange Notes") to be issued by
National Equipment Services, Inc. and the related guarantees of the Subsidiary
Guarantors, and any or all amendments to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his substitutes, may lawfully do or
cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
NES MICHIGAN ACQUISITION CORP.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to NES Michigan Acquisition Corp., to sign the Registration Statement on
Form S-4 of (i) National Equipment Services, Inc. and (ii) Albany Ladder
Company, Inc., BAT Acquisition Corp., Carl's Mid South Rent-All Center
Incorporated, Falconite Aviation, Inc., Falconite Equipment, Inc., Falconite,
Inc., Falconite Rebuild Center, Inc., McCurry & Falconite Equipment Co., Inc.,
M&M Properties, Inc., NES Acquisition Corp., NES East Acquisition Corp., NES
Michigan Acquisition Corp., Rebel Studio Rentals, Inc. and Shaughnessy Crane
Service, Inc. (collectively, the "Subsidiary Guarantors") relating to the
registration of $175,000,000 aggregate principal amount of 10% Senior
Subordinated Notes due 2004, Series D (the "Exchange Notes") to be issued by
National Equipment Services, Inc. and the related guarantees of the Subsidiary
Guarantors, and any or all amendments to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his substitutes, may lawfully do or
cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
REBEL STUDIO RENTALS, INC.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to Rebel Studio Rentals, Inc., to sign the Registration Statement on
Form S-4 of (i) National Equipment Services, Inc. and (ii) Albany Ladder
Company, Inc., BAT Acquisition Corp., Carl's Mid South Rent-All Center
Incorporated, Falconite Aviation, Inc., Falconite Equipment, Inc., Falconite,
Inc., Falconite Rebuild Center, Inc., McCurry & Falconite Equipment Co., Inc.,
M&M Properties, Inc., NES Acquisition Corp., NES East Acquisition Corp., NES
Michigan Acquisition Corp., Rebel Studio Rentals, Inc. and Shaughnessy Crane
Service, Inc. (collectively, the "Subsidiary Guarantors") relating to the
registration of $175,000,000 aggregate principal amount of 10% Senior
Subordinated Notes due 2004, Series D (the "Exchange Notes") to be issued by
National Equipment Services, Inc. and the related guarantees of the Subsidiary
Guarantors, and any or all amendments to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his substitutes, may lawfully do or
cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
POWER OF ATTORNEY
-----------------
SHAUGHNESSY CRANE SERVICE, INC.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Kevin P. Rodgers, Dennis J. O'Connor and Paul R.
Ingersoll and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to Shaughnessy Crane Service, Inc., to sign the Registration Statement
on Form S-4 of (i) National Equipment Services, Inc. and (ii) Albany Ladder
Company, Inc., BAT Acquisition Corp., Carl's Mid South Rent-All Center
Incorporated, Falconite Aviation, Inc., Falconite Equipment, Inc., Falconite,
Inc., Falconite Rebuild Center, Inc., McCurry & Falconite Equipment Co., Inc.,
M&M Properties, Inc., NES Acquisition Corp., NES East Acquisition Corp., NES
Michigan Acquisition Corp., Rebel Studio Rentals, Inc. and Shaughnessy Crane
Service, Inc. (collectively, the "Subsidiary Guarantors") relating to the
registration of $175,000,000 aggregate principal amount of 10% Senior
Subordinated Notes due 2004, Series D (the "Exchange Notes") to be issued by
National Equipment Services, Inc. and the related guarantees of the Subsidiary
Guarantors, and any or all amendments to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his substitutes, may lawfully do or
cause to be done by virtue hereof.
This power of attorney has been signed as of the 22nd day of January,
1999, by the following persons:
/S/ Kevin P. Rodgers /S/ Dennis J. O'Connor
- -------------------------------------- --------------------------------------
Kevin P. Rodgers, Dennis J. O'Connor,
President, Chief Executive Officer and Chief Financial Officer
Director
/S/ Carl D. Thoma /S/ William C. Kessinger
- -------------------------------------- --------------------------------------
Carl D. Thoma, William C. Kessinger,
Director Director
<PAGE>
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939 of a Corporation Designated to Act as
Trustee
Check if an Application to Determine Eligibility of a Trustee Pursuant to
Section 305(b)(2) ______
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
Illinois 36-1194448
(State of Incorporation) (I.R.S. Employer Identification No.)
111 West Monroe Street, Chicago, Illinois 60603
(Address of principal executive offices)
Carolyn Potter Harris Trust and Savings Bank,
311 West Monroe Street, Chicago, Illinois, 60606
312-461-2531 phone 312-461-3525 facsimile
(Name, address and telephone number for agent for service)
NATIONAL EQUIPMENT SERVICES, INC.
ALBANY LADDER COMPANY, INC.
BAT ACQUISITION CORP.
CARL'S MID SOUTH RENT-ALL CENTER INCORPORATED
FALCONITE AVIATION, INC.
FALCONITE EQUIPMENT, INC.
FALCONITE, INC.
FALCONITE REBUILD CENTER, INC
McCURRY & FALCONITE EQUIPMENT CO., INC.
M&M PROPERTIES, INC.
NES ACQUISITION CORP.
NES EAST ACQUISITION CORP.
NES MICHIGAN ACQUISITION CORP.
REBEL STUDIO RENTALS, INC.
SHAUGHNESSY CRANE SERVICE, INC.
(Obligors)
Delaware 36-4087016
New York 14-1295523
Delaware 86-0857699
Tennessee 62-1230136
Delaware 61-1312696
Illinois 37-0987459
Illinois 31-1490949
Kentucky 31-1501864
Alabama 63-1140920
Alabama 63-0895405
Delaware 76-0522698
Delaware 36-4209300
Delaware 38-3388768
California 93-1172556
Massachusetts 04-2842710
(State of Incorporation) (I.R.S. Employer Identification No.)
1800 Sherman Avenue
Evanston Illinois 60201
(Address of principal executive offices)
Debt Securities
(Title of indenture securities)
<PAGE>
1. GENERAL INFORMATION. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164 West
Jackson Boulevard, Chicago, Illinois; Federal Deposit Insurance
Corporation, Washington, D.C.; The Board of Governors of the Federal
Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise corporate
trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee,
describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. through 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee as now in effect
which includes the authority of the trustee to commence business and to
exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between Harris
Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc. which
constitutes the articles of association of the Trustee as now in effect
and includes the authority of the Trustee to commence business and to
exercise corporate trust powers was filed in connection with the
Registration Statement of Louisville Gas and Electric Company, File No.
2-44295, and is incorporated herein by reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in connection
with the Registration Statement of Commercial Federal Corporation, File
No. 333-20711, and is incorporated herein by reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
(included as Exhibit B on page 3 of this statement)
1
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 21st day of January, 1999.
HARRIS TRUST AND SAVINGS BANK
By: /S/ J. Bartolini
--------------------------------
J. Bartolini
Vice President
EXHIBIT A
The consents of the trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
HARRIS TRUST AND SAVINGS BANK
By: /S/ J. Bartolini
--------------------------------
J. Bartolini
Vice President
2
<PAGE>
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of September 30, 1998, as published in accordance with
a call made by the State Banking Authority and by the Federal Reserve Bank of
the Seventh Reserve District.
HARRIS BANK
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on September 30, 1998, a state banking institution organized and
operating under the banking laws of this State and a member of the Federal
Reserve System. Published in accordance with a call made by the Commissioner of
Banks and Trust Companies of the State of Illinois and by the Federal Reserve
Bank of this District.
Bank's Transit Number 71000288
<TABLE>
<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
<S> <C> <C>
Cash and balances due from depository institutions:
Non-interest bearing balances and currency and coin............... $ 1,097,714
Interest bearing balances......................................... $ 213,712
Securities:..............................................................
a. Held-to-maturity securities $ 0
b. Available-for-sale securities $ 5,036,734
Federal funds sold and securities purchased under agreements to resell $ 48,950
Loans and lease financing receivables:
Loans and leases, net of unearned income.......................... $9,111,098
LESS: Allowance for loan and lease losses........................ $ 104,900
----------
Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus 4.b).............................................. $ 9,006,198
Assets held in trading accounts.......................................... $ 202,008
Premises and fixed assets (including capitalized leases)................. $ 245,290
Other real estate owned.................................................. $ 365
Investments in unconsolidated subsidiaries and associated companies...... $ 41
Customer's liability to this bank on acceptances outstanding............. $ 34,997
Intangible assets........................................................ $ 260,477
Other assets............................................................. $ 1,148,163
-----------
TOTAL ASSETS $17,294,649
===========
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Deposits:
In domestic offices........................................................................... $ 9,467,895
Non-interest bearing..................................................................... $2,787,471
Interest bearing......................................................................... $6,680,424
In foreign offices, Edge and Agreement subsidiaries, and IBF's................................ $ 1,268,759
Non-interest bearing..................................................................... $ 23,329
Interest bearing......................................................................... $1,245,430
Federal funds purchased and securities sold under agreements to repurchase in domestic offices
of the bank and of its Edge and Agreement subsidiaries, and in IBF's:
Federal funds purchased & securities sold under agreements to repurchase........................ $ 3,118,548
Trading Liabilities 110,858
Other borrowed money:...........................................................................
a. With remaining maturity of one year or less $ 1,202,050
b. With remaining maturity of more than one year $ 0
Bank's liability on acceptances executed and outstanding $ 34,997
Subordinated notes and debentures............................................................... $ 225,000
Other liabilities............................................................................... $ 530,224
--------------------------
TOTAL LIABILITIES $15,958,331
==========================
EQUITY CAPITAL
Common stock.................................................................................... $ 100,000
Surplus......................................................................................... $ 604,834
a. Undivided profits and capital reserves...................................................... $ 580,271
b. Net unrealized holding gains (losses) on available-for-sale securities $ 51,213
--------------------------
TOTAL EQUITY CAPITAL $ 1,336,318
==========================
Total liabilities, limited-life preferred stock, and equity capital............................. $17,294,649
==========================
</TABLE>
I, Pamela Piarowski, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
PAMELA PIAROWSKI
10/29/98
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
EDWARD W. LYMAN,
ALAN G. McNALLY,
CHARLES SHAW
Directors.
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED FINANCIAL STATEMENTS OF NATIONAL SERVICES EQUIPMENT, INC. AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001051381
<NAME> NATIONAL EQUIPMENT SERVICES, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS OTHER 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1997 JUN-04-1996 JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1997 DEC-31-1996 SEP-30-1998 SEP-30-1997
<CASH> 35,682 12 662 1,574
<SECURITIES> 0 0 0 0
<RECEIVABLES> 8,610 0 51,962 7,812
<ALLOWANCES> 254 0 1,771 138
<INVENTORY> 2,239 0 13,888 3,001
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 55,198 20 383,312 53,125
<DEPRECIATION> 5,385 3 24,146 5,526
<TOTAL-ASSETS> 131,137 216 640,001 90,975
<CURRENT-LIABILITIES> 0 0 0 0
<BONDS> 98,782 0 98,913 0
0 0 0 0
0 0 0 0
<COMMON> 2 1 241 2
<OTHER-SE> 26,471 105 131,588 26,507
<TOTAL-LIABILITY-AND-EQUITY> 131,137 216 640,001 90,975
<SALES> 14,890 0 37,183 9,407
<TOTAL-REVENUES> 41,288 0 137,434 25,575
<CGS> 7,807 0 20,481 5,532
<TOTAL-COSTS> 25,715 0 76,828 15,990
<OTHER-EXPENSES> 9,386 336 30,176 5,797
<LOSS-PROVISION> 479 0 16,296 2,261
<INTEREST-EXPENSE> 4,545 (4) 1,517 138
<INCOME-PRETAX> 1,923 (332) 14,684 1,330
<INCOME-TAX> 818 (137) 5,981 519
<INCOME-CONTINUING> 1,105 (195) 8,703 811
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 1,424 0
<CHANGES> 0 0 0 0
<NET-INCOME> 1,105 (195) 7,279 811
<EPS-PRIMARY> 0.09 (0.05) 0.42 0.07
<EPS-DILUTED> 0.08 (0.05) 0.40 0.06
</TABLE>
<PAGE>
Exhibit 99.1
------------
LETTER OF TRANSMITTAL
To Tender for Exchange
10% Senior Subordinated Notes due 2004, Series C
of
NATIONAL EQUIPMENT SERVICES, INC.
Pursuant to the Prospectus dated , 1999
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1999 UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed, and submitted to the Exchange Agent:
HARRIS TRUST AND SAVINGS BANK
(the "Exchange Agent")
c/o HARRIS TRUST COMPANY OF NEW YORK
By Mail: By Facsimile By Overnight Courier or
Wall Street Station Transmission: Hand:
P.O. Box 1010 (for Eligible Wall Street Plaza
New York, NY 10268-1010 Institutions Only) 88 Pine Street, 19th
Attn: Reorganization (212) 701-7636 Floor
Dept. (212) 701-7637 New York, NY 10005
Attn: Reorganization
Dept.
For Information Telephone (call collect):
(212) 701-7624
Delivery of this Letter of Transmittal to an address, or transmission via
facsimile to a number, other than as set forth above will not constitute a
valid delivery.
For any questions regarding this Letter of Transmittal or for any additional
information, you may contact the Exchange Agent.
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1999 (as it may be supplemented and amended from time to time,
the "Prospectus") of National Equipment Services, Inc., a Delaware corporation
("Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
that together constitute the Company's offer (the "Exchange Offer") to
exchange $1,000 in principal amount of its 10% Senior Subordinated Notes due
2004, Series D (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement, for each $1,000 in principal amount of its outstanding
10% Senior Subordinated Notes due 2004, Series C (the "Notes"), of which
$175,000,000 aggregate principal amount is outstanding. Capitalized terms used
but not defined herein have the meanings ascribed to them in the Prospectus.
The undersigned hereby tenders the Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each
<PAGE>
beneficial owner of the Tendered Notes ("Beneficial Owners") a duly completed
and executed form of "Instruction to Registered Holder and/or Book-Entry
Transfer Facility Participant from Beneficial Owner" accompanying this Letter
of Transmittal, instructing the undersigned to take the action described in
this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns and transfers to, or upon the
order of, the Company all right, title, and interest in, to and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (see Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as
appropriate) to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned
with respect to the Tendered Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver the Tendered Notes to the Company or cause ownership
of the Tendered Notes to be transferred to, or upon the order of, the Company,
on the books of the registrar for the Notes and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company
upon receipt by the Exchange Agent, as the undersigned's agent, of the
Exchange Notes to which the undersigned is entitled upon acceptance by the
Company of the Tendered Notes pursuant to the Exchange Offer, and (ii) receive
all benefits and otherwise exercise all rights of beneficial ownership of the
Tendered Notes, all in accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Notes pursuant to the procedures
described under the caption "The Exchange Offer" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of
the Exchange Offer, subject only to withdrawal of such tenders on the terms
set forth in the Prospectus under the caption "The Exchange Offer--Withdrawal
Rights." All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and any Beneficial
Owner(s), and every obligation of the undersigned or any Beneficial Owner(s)
hereunder shall be binding upon the heirs, representatives, successors, and
assigns of the undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges, encumbrances, and adverse
claims when the Tendered Notes are acquired by the Company as contemplated
herein. The undersigned and each Beneficial Owner will, upon request, execute
and deliver any additional documents reasonably requested by the Company or
the Exchange Agent as necessary or desirable to complete and give effect to
the transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired
by the undersigned and any Beneficial Owner(s) in the ordinary course of
business of the undersigned and any Beneficial Owner(s), (ii) the undersigned
and each Beneficial Owner are not participating, do not intend to participate,
and have no arrangement or understanding with any person to participate, in
the distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company,
and (iv) the undersigned and each Beneficial Owner acknowledge and agree that
any person participating in the Exchange Offer with the intention or for the
purpose of distributing the Exchange Notes must
2
<PAGE>
comply with the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), in connection with a secondary
resale of the Exchange Notes acquired by such person and cannot rely on the
position of the Staff of the Securities and Exchange Commission (the
"Commission") set forth in the no-action letters that are discussed in the
section of the Prospectus entitled "The Exchange Offer." In addition, by
accepting the Exchange Offer, the undersigned hereby (i) represents and
warrants that, if the undersigned or any Beneficial Owner of the Notes is a
Participating Broker-Dealer, such Participating Broker-Dealer acquired the
Notes for its own account as a result of market-making activities or other
trading activities and has not entered into any arrangement or understanding
with the Company or any "affiliate" of the Company (within the meaning of Rule
405 under the Securities Act) to distribute the Exchange Notes to be received
in the Exchange Offer and (ii) acknowledges that, by receiving Exchange Notes
for its own account in exchange for Notes, where such Notes were acquired as a
result of market-making activities or other trading activities, such
Participating Broker-Dealer will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such Exchange Notes.
Holders of Notes that are tendering by book-entry transfer to the Exchange
Agent's account at DTC can execute the tender through the DTC Automated Tender
Offer Program ("ATOP"), for which the transaction will be eligible. DTC
participants that are accepting the Exchange Offer must transmit their
acceptance to DTC, which will verify the acceptance and execute a book-entry
delivery to the Exchange Agent's DTC account. DTC will then send an Agent's
Message to the Exchange Agent for its acceptance. DTC participants may also
accept the Exchange Offer prior to the Expiration Date by submitting a Notice
of Guaranteed Delivery or Agent's Message relating thereto as described herein
under Instruction 2, "Guaranteed Delivery Procedures."
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE "Use of Guaranteed Delivery" BELOW (Box 4).
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE "Use of Book-Entry Transfer" BELOW (Box 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
DESCRIPTION OF NOTES TENDERED
(Attach additional signed pages, if necessary)
<TABLE>
- -----------------------------------------------------------------------------------
<CAPTION>
Name(s) and Address(es)
of Registered Note Holder(s),
exactly as Aggregate Principal
name(s) appear(s) on Certificate Amount Aggregate
Note Certificate(s) Number(s) of Represented by Principal Amount
(Please fill in, if blank) Notes* Certificates(s) Tendered**
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Total
- -----------------------------------------------------------------------------------
</TABLE>
*Need not be completed by persons tendering by book-entry transfer.
**The minimum permitted tender is $1,000 in principal amount of Notes. All
other tenders must be in integral multiples of $1,000 of principal amount.
Unless otherwise indicated in this column, the principal amount of all
Note Certificates identified in this Box 1 or delivered to the Exchange
Agent herewith shall be deemed tendered. See Instruction 4.
3
<PAGE>
BOX 2
BENEFICIAL OWNER(S)
- --------------------------------------------------------------------------------
State of Principal Residence of Each Principal Amount of Tendered Notes
Beneficial Owner of Tendered Notes Held for Account of Beneficial Owner
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5, 6 and 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED
NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Notes to:
Name(s):
-----------------------------------------------------------------------------
(please print)
Address:
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(include Zip Code)
Tax Identification or
Social Security No.: ________________________________________________________
4
<PAGE>
BOX 4
USE OF GUARANTEED DELIVERY
(See Instruction 2)
TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s): ____________________________________________
Window Ticket No. (if any): _________________________________________________
Date of Execution of Notice of Guaranteed Delivery: _________________________
Name of Institution that Guaranteed Delivery: _______________________________
If Delivered by Book-Entry Transfer: ________________________________________
Account Number with DTC: _________________________________________________
Transaction Code Number: _________________________________________________
BOX 5
USE OF BOOK-ENTRY TRANSFER
(See Instruction 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-
ENTRY TRANSFER.
Name of Tendering Institution: ______________________________________________
Account Number: _____________________________________________________________
Transaction Code Number: ____________________________________________________
5
<PAGE>
BOX 6
TENDERING HOLDER SIGNATURE
(See Instructions 1 and 5)
In Addition, Complete Substitute Form W-9
- --------------------------------------------------------------------------------
X _________________________________ Signature Guarantee
(If required by Instruction 5)
X _________________________________
(Signature of Registered Holder(s) Authorized Signature
or Authorized Signatory) X _________________________________
Name: _____________________________
Note: The above lines must be (please print)
signed by the registered holder(s)
of Notes as their name(s)
appear(s) on the Notes or by
persons(s) authorized to become
registered holder(s) (evidence of
such authorization must be
transmitted with this Letter of
Transmittal). If signature is by a
trustee, executor, administrator,
guardian, attorney-in-fact,
officer, or other person acting in
a fiduciary or representative
capacity, such person must set
forth his or her full title below.
See Instruction 5.
Title: ____________________________
Name of Firm: _____________________
(Must be an Eligible Institution
as
defined in Instruction 2)
Address:
-----------------------------------
-----------------------------------
-----------------------------------
(Zip Code)
Name(s): __________________________
Area Code and Telephone Number:
Capacity: _________________________
-----------------------------------
Street Address: ___________________
Dated: ____________________________
------------------------
(Zip Code)
BOX 7
Area Code and Telephone Number:
BROKER-DEALER STATUS
-----------------------------------
- --------------------------------------------------------------------------------
[_]Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes
for its own account as a result of market-making activities or other
trading activities. If this box is checked, regardless of whether you
are tendering by book-entry transfer through ATOP, an executed copy of
this Letter of Transmittal must be received within three NYSE trading
days after the Expiration Date by National Equipment Services, Inc.,
Attention Paul R. Ingersoll, facsimile (847) 733-1078.
Tax Identification or Social
Security Number:
-----------------------------------
6
<PAGE>
PAYOR'S NAME: HARRIS TRUST AND SAVINGS BANK
- -------------------------------------------------------------------------------
SUBSTITUTE Name (if joint names, list first and circle the name of
Form W-9 the person or entity whose number you enter in Part 1
below. See instructions if your name has changed.)
Department of the City, State and ZIP Code
-------------------------------------------------------------
Address
-------------------------------------------------------------
Treasury List account number(s) here
(optional)
-------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TAXPAYER Social
IDENTIFICATION NUMBER ("TIN") IN THE BOX Security
AT RIGHT AND CERTIFY BY SIGNING AND Number
DATING BELOW
Internal Revenue -------------------------------------------------------------
Service
or TIN
-------------------------------------------------------------
PART 2--Check the box if you are NOT subject to backup
withholding under the provisions of section 3406(a)(1)(C)
of the Internal Revenue Code because (1) you have not
been notified that you are subject to backup withholding
as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has
notified you that you are no longer subject to backup
withholding. [_]
-------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF PART 3--
PERJURY, I CERTIFY THAT THE INFORMATION Awaiting
PROVIDED ON THIS FORM IS TRUE, CORRECT TIN [_]
AND COMPLETE.
SIGNATURE _____________ DATE _____________
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
7
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Notes. This Letter of
Transmittal is to be completed by registered Holders of Notes if certificates
representing such Notes are to be forwarded herewith pursuant to the
procedures set forth in the Prospectus under the caption "The Exchange Offer--
Procedures for Tendering Outstanding Notes--Valid Tender," unless delivery of
such certificates is to be made by book-entry transfer to the Exchange Agent's
account maintained by DTC through ATOP. For a holder to properly tender Notes
pursuant to the Exchange Offer, a properly completed and duly executed copy of
this Letter of Transmittal, including Substitute Form W-9, and any other
documents required by this Letter of Transmittal must be received by the
Exchange Agent at its address set forth herein, and either (i) certificates
for Tendered Notes must be received by the Exchange Agent at its address set
forth herein, or (ii) such Tendered Notes must be transferred pursuant to the
procedures for book-entry transfer described in the Prospectus under the
caption "The Exchange Offer--Procedures for Tendering Outstanding Notes--Valid
Tender" (and a confirmation of such transfer received by the Exchange Agent),
in each case prior to 5:00 p.m., New York City time, on the Expiration Date.
The method of delivery of certificates for Tendered Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the tendering holder and the delivery will be deemed made
only when actually received by the Exchange Agent. If delivery is by mail,
registered mail with return receipt requested, properly insured, is
recommended. Instead of delivery by mail, it is recommended that the Holder
use an overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure timely delivery. No Letter of Transmittal or
Tendered Notes should be sent to the Company. Neither the Company nor the
Exchange Agent is under any obligation to notify any tendering holder of the
Company's acceptance of tendered Notes prior to the closing of the Exchange
Offer.
2. Guaranteed Delivery Procedures. If a registered Holder desires to tender
Notes pursuant to the Exchange Offer and (a) certificates representing such
tendered Notes are not immediately available, (b) time will not permit such
Holder's Letter of Transmittal, certificates representing such tendered Notes
and all other required documents to reach the Exchange Agent on or prior to
the Expiration Date, or (c) the procedures for book-entry transfer cannot be
completed on or prior to the Expiration Date, such Holder may nevertheless
tender such tendered Notes with the effect that such tender will be deemed to
have been received on or prior to the Expiration Date if the procedures set
forth below and in the Statement under "The Exchange Offer--Procedures for
Tendering Outstanding Notes--Guaranteed Delivery" (including the completion of
Box 4 above) are followed. Pursuant to such procedures, (i) the tender must be
made by or through an Eligible Institution (as defined), (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in
the form provided by the Company herewith, or an Agent's Message with respect
to a guaranteed delivery that is accepted by the Company, must be received by
the Exchange Agent on or prior to the Expiration Date, and (iii) the
certificates for the tendered Notes, in proper form for transfer (or a Book-
Entry Confirmation of the transfer of such tendered Notes to the Exchange
Agent's account at DTC as described in the Prospectus), together with a Letter
of Transmittal (or manually signed facsimile thereof) properly completed and
duly executed, with any required signature guarantees and any other documents
required by the Letter of Transmittal or a properly transmitted Agent's
Message, must be received by the Exchange Agent within three New York Stock
Exchange trading days after the date of execution of the Notice of Guaranteed
Delivery. Any holder who wishes to tender Notes pursuant to the guaranteed
delivery procedures described above must ensure that the Exchange Agent
receives the Notice of Guaranteed Delivery relating to such tendered Notes
prior to 5:00 p.m., New York City time, on the Expiration Date. Failure to
complete the guaranteed delivery procedures outlined above will not, of
itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by an Eligible Holder who
attempted to use the guaranteed delivery process.
3. Beneficial Owner Instructions to Registered Holders. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may
execute and deliver this Letter of Transmittal. Any Beneficial Owner of
Tendered Notes who is not
8
<PAGE>
the registered holder must arrange promptly with the registered holder to
execute and deliver this Letter of Transmittal on his or her behalf through
the execution and delivery to the registered holder of the "Instructions to
Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" form accompanying this Letter of Transmittal.
4. Partial Tenders. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes held by the holder is tendered, the tendering holder should
fill in the principal amount tendered in the column labeled "Aggregate
Principal Amount Tendered" of the box entitled "Description of Notes Tendered"
(see Box 1) above. The entire principal amount of Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated. If the entire principal amount of all Notes held by the holder is
not tendered, then Notes for the principal amount of Notes not tendered and
Exchange Notes issued in exchange for any Notes tendered and accepted will be
sent to the Holder at his or her registered address, unless a different
address is provided in the appropriate box on this Letter of Transmittal, as
soon as practicable following the Expiration Date.
5. Signatures on the Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signatures. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be
issued (and any untendered principal amount of Notes is to be reissued) in the
name of the registered holder(s), then such registered holder(s) need not and
should not endorse any Tendered Notes, nor provide a separate bond power. In
any other case, such registered holder(s) must either properly endorse the
Tendered Notes or transmit a properly completed separate bond power with this
Letter of Transmittal, with the signature(s) on the endorsement or bond power
guaranteed by a Medallion Signature Guarantor (as defined below).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be
endorsed or accompanied by appropriate bond powers, in each case, signed as
the name(s) of the registered holder(s) appear(s) on the Tendered Notes, with
the signature(s) on the endorsement or bond power guaranteed by a Medallion
Signature Guarantor.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
the Company, evidence satisfactory to the Company of their authority to so act
must be submitted with this Letter of Transmittal.
Signatures on this Letter of Transmittal must be guaranteed by a recognized
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchange Medallion
Program (each a "Medallion Signature Guarantor"), unless the Tendered Notes
are tendered (i) by a registered Holder of Tendered Notes (or by a participant
in DTC whose name appears on a security position listing as the owner of such
Tendered Notes) who has not completed Box 3 ("Special Delivery Instructions")
on this Letter of Transmittal, or (ii) for the account of a member firm of a
registered national securities exchange, a member of the National Association
of Securities Dealers, Inc. ("NASD") or a commercial bank or trust company
having an office or correspondent in the United States (each of the foregoing
being referred to as an "Eligible Institution"). If the Tendered Notes are
registered in the name of a person
9
<PAGE>
other than the signor of the Letter of Transmittal or if Notes not tendered
are to be returned to a person other than the registered Holder, then the
signature on this Letter of Transmittal accompanying the Tendered Notes must
be guaranteed by a Medallion Signature Guarantor as described above.
Beneficial owners whose Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if they desire to
tender such Notes.
6. Special Delivery Instructions. Tendering holders should indicate in Box 3
the name and address to which the Exchange Notes and/or substitute Notes for
principal amounts not tendered or not accepted for exchange are to be sent, if
different from the name and address of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the taxpayer
identification or social security number of the person named must also be
indicated.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer.
If, however, a transfer tax is imposed for any reason other than the transfer
and exchange of Tendered Notes pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
this Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter
of Transmittal.
8. Tax Identification Number. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide
the Exchange Agent (as payor) with its correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Exchange Agent is not provided with the correct
TIN, the Holder may be subject to backup withholding and a $50 penalty imposed
by the Internal Revenue Service. (If withholding results in an over-payment of
taxes, a refund may be obtained.) Certain holders (including, among others,
all corporations and certain foreign individuals) are not subject to these
backup withholding and reporting requirements. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9"
for additional instructions.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result
of failure to report all interest or dividends or (ii) if previously so
notified, the Internal Revenue Service has notified the holder that such
holder is no longer subject to backup withholding. If the Tendered Notes are
registered in more than one name or are not in the name of the actual owner,
consult the "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of Tendered Notes will
be determined by the Company in its sole discretion, which determination will
be final and binding. The Company reserves the right to reject any and all
Notes not validly tendered or any Notes the Company's acceptance of which
would, in the opinion of the Company or its counsel, be unlawful. The Company
also reserves the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of Notes as to any ineligibility of any
holder who seeks to tender Notes in the Exchange Offer. The interpretation of
the terms and conditions of the Exchange Offer (including this Letter of
Transmittal and the instructions hereto) by the Company shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Notes must be cured within such time as the Company
shall
10
<PAGE>
determine. Neither the Company, the Exchange Agent nor any other person shall
be under any duty to give notification of defects or irregularities with
respect to tenders of Notes, nor shall any of them incur any liability for
failure to give such notification. Tenders of Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
10. Waiver of Conditions. The Company reserves the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Notes.
11. No Conditional Tender. No alternative, conditional, irregular, or
contingent tender of Notes or transmittal of this Letter of Transmittal will
be accepted.
12. Mutilated, Lost, Stolen or Destroyed Notes. Any tendering Holder whose
Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated herein for further instructions.
13. Requests For Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address indicated
herein. Holders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Exchange Offer.
14. Acceptance of Tendered Notes and Issuance of Exchange Notes; Return of
Notes. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Notes as soon as practicable
after the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted Tendered Notes when, as and if the Company has
given written or oral notice (immediately followed in writing) thereof to the
Exchange Agent. If any Tendered Notes are not exchanged pursuant to the
Exchange Offer for any reason, such unexchanged Notes will be returned,
without expense, to the undersigned at the address shown in Box 1 or at a
different address as may be indicated herein under "Special Delivery
Instructions" (Box 3).
15. Withdrawal. Tenders may be withdrawn only pursuant to the procedures set
forth in the Prospectus under the caption "The Exchange Offer--Withdrawal
Rights."
11
<PAGE>
Exhibit 99.2
------------
NOTICE OF GUARANTEED DELIVERY
in Respect of
10% Senior Subordinated Notes due 2004, Series C
of
NATIONAL EQUIPMENT SERVICES, INC.
Pursuant to the Prospectus dated , 1999
The Exchange Agent for the Exchange Offer is:
HARRIS TRUST AND SAVINGS BANK
(the "Exchange Agent")
c/o HARRIS TRUST COMPANY OF NEW YORK
By Mail: By Facsimile By Overnight Courier or
Wall Street Station Transmission: Hand:
P.O. Box 1010 (for Eligible Wall Street Plaza
New York, NY 10268-1010 Institutions Only) 88 Pine Street, 19th
Attn: Reorganization (212) 701-7636(212) 701- Floor
Dept. 7637 New York, NY 10005
Attn: Reorganization
Dept.
For Information Telephone (call collect):
(212) 701-7624
Delivery of this Notice of Guaranteed Delivery to an address, or
transmission via facsimile to a number, other than as set forth above will not
constitute valid delivery.
As set forth in the Prospectus dated , 1999 (as it may be
supplemented and amended from time to time, the "Prospectus") of National
Equipment Services, Inc. (the "Company") under the caption "The Exchange
Offer--Procedures for Tendering Outstanding Notes--Guaranteed Delivery," and
in the Instructions to the related Letter of Transmittal (the "Letter of
Transmittal"), this form, or one substantially equivalent hereto, or an
Agent's Message relating to the guaranteed delivery procedures, must be used
to accept the Company's offer (the "Exchange Offer") to exchange any and all
of its outstanding 10% Senior Subordinated Notes due 2004, Series C (the
"Notes"), for new 10% Senior Subordinated Notes due 2004, Series D (the
"Exchange Notes"), if time will not permit the Letter of Transmittal,
certificates representing such Notes and other required documents to reach the
Exchange Agent, or the procedures for book-entry transfer cannot be completed,
on or prior to the Expiration Date (as defined).
This form must be delivered by an Eligible Institution (as defined) by mail
or hand delivery or transmitted via facsimile to the Exchange Agent as set
forth above. If a signature on the Letter of Transmittal is required to be
guaranteed by a Medallion Signature Guarantor under the instructions thereto,
such signature guarantee must appear in the applicable space provided in the
Letter of Transmittal. This form is not to be used to guarantee signatures.
Questions and requests for assistance and requests for additional copies of
the Prospectus may be directed to the Exchange Agent at the address above.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , 1999, UNLESS EXTENDED ("THE EXPIRATION
DATE").
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal (receipt of which is hereby acknowledged), the principal amount of
the Notes specified below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under "The Exchange Offer--Procedures for Tendering
Outstanding Notes--Guaranteed Delivery" and in Instruction 2 to the Letter of
Transmittal. The undersigned hereby authorizes the Exchange Agent to deliver
this Notice of Guaranteed Delivery to the Company with respect to the Notes
tendered pursuant to the Exchange Offer.
The undersigned understands that Notes will be exchanged only after timely
receipt by the Exchange Agent of (i) such Notes, or a Book-Entry Confirmation,
and (ii) a Letter of Transmittal (or a manually signed facsimile thereof),
including by means of an Agent's Message, of the transfer of such Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility, with respect
to such Notes, properly completed and duly executed, with any signature
guarantees and any other documents required by the Letter of Transmittal
within three New York Stock Exchange, Inc. trading days after the execution
hereof. The undersigned also understands that the method of delivery of this
Notice of Guaranteed Delivery and any other required documents to the Exchange
Agent is at the election and sole risk of the holder, and the delivery will be
deemed made only when actually received by the Exchange Agent.
The undersigned understands that tenders of Notes will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof. The
undersigned also understands that tenders of Notes may be withdrawn at any
time prior to the Expiration Date.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
All capitalized terms used herein but not defined herein shall have the
meanings ascribed to them in the Prospectus.
2
<PAGE>
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Holder(s)
or
Authorized Signatory: _______________ Date: _______________________________
------------------------------------- Address: ____________________________
------------------------------------- -------------------------------------
Name(s) of Registered Holder(s): ____ Area Code and Telephone No. _________
------------------------------------- If Notes will be delivered by book-
entry transfer, check book-entry
transfer facility below:
-------------------------------------
Principal Amount of Notes Tendered: _ [_] The Depository Trust Company
------------------------------------- Depository
Account No. _________________________
Certificate No.(s) of Notes
(if available) ______________________
This Notice of Guaranteed Delivery must be signed by the holder(s) exactly
as their name(s) appear(s) on certificate(s) for Notes or on a security
position listing as the owner of Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery without alteration, enlargement or any change
whatsoever. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s): ____________________________________________________________________
-----------------------------------------------------------------------------
Capacity: ___________________________________________________________________
Address(es): ________________________________________________________________
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
DO NOT SEND NOTES WITH THIS FORM. NOTES SHOULD BE SENT TO THE EXCHANGE AGENT
TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of the Securities Transfer Agents Medallion
Program, the Stock Exchange Medallion Program or the New York Stock
Exchange, Inc. Medallion Signature Program (each, an "Eligible
Institution"), hereby (i) represents that the above-named persons are deemed
to own the Notes tendered hereby within the meaning of Rule 14e-4
promulgated under the Securities Exchange Act of 1934, as amended ("Rule
14e-4"), (ii) represents that such tender of Notes complies with Rule 14e-4
and (iii) guarantees that the Notes tendered hereby are in proper form for
transfer (pursuant to the procedures set forth in the Prospectus under "The
Exchange Offer--Procedures for Tendering Outstanding Notes--Guaranteed
Delivery"), and that the Exchange Agent will receive (a) such Notes, or a
Book-Entry Confirmation of the transfer of such Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility and (b) a properly
completed and duly executed Letter of Transmittal or facsimile thereof (or
Agent's message) with any required signature guarantees and any other
documents required by the Letter of Transmittal within three New York Stock
Exchange, Inc. trading days after the date of execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Exchange Agent and must deliver the Letter of Transmittal
and Notes to the Exchange Agent within the time period shown herein. Failure
to do so could result in a financial loss to such Eligible Institution.
Name of Firm: _______________________________________________________________
Authorized Signature: _______________________________________________________
Title: ______________________________________________________________________
Address: ____________________________________________________________________
-----------------------------------------------------------------------------
(Zip Code)
Area Code and Telephone Number: _____________________________________________
Dated: _______________________________
4
<PAGE>
Exhibit 99.3
INSTRUCTIONS
TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
NATIONAL EQUIPMENT SERVICES, INC.
10% SENIOR SUBORDINATED NOTES DUE 2004, Series C
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1999 (as the same may be amended or supplemented from time to
time, the "Prospectus") of National Equipment Services, Inc., a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 10% Senior Subordinated Notes due 2004, Series C
(the "Notes") held by you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (fill in amount):
$ of the 10% Senior Subordinated Notes due 2004, Series C.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_]TO TENDER the following Notes held by you for the account of the
undersigned (insert principal amount of Notes to be tendered, if any): $
[_]NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instruct you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representation and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations that
(i) the undersigned's principal residence is in the state of (fill in state)
, (ii) the undersigned is acquiring the Exchange Notes in the
ordinary course of business of the undersigned, (iii) the undersigned is not
participating, does not participate, and has no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes, (iv)
the undersigned acknowledges that any person participating in the Exchange
Offer for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the "Act"), in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the Staff of the Securities and Exchange Commission set forth
in no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer--Resales of Exchange Notes," and (v) the
undersigned is not an "affiliate," as defined in Rule 405 under the Act, of
the Company or any Subsidiary Guarantor; (b) to agree, on behalf of the
undersigned, as set forth in the Letter of Transmittal; and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of such Notes.
Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. If this box is checked, a copy of these Instructions must be
received within three New York Stock Exchange trading days after the
Expiration Date by National Equipment Services, Inc., attention Paul R.
Ingersoll, facsimile (847) 733-1078.
[_]
<PAGE>
SIGN HERE
Name of beneficial owner(s): ______________________________________________
Signature(s): _____________________________________________________________
Name (please print): ______________________________________________________
Address:___________________________________________________________________
--------------------------------------------------------------------
--------------------------------------------------------------------
Telephone number: _________________________________________________________
Taxpayer Identification or Social Security Number: ________________________
Date: _____________________________________________________________________
2
