<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 001-14163
National Equipment Services, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 36-4087016
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1603 Orrington Avenue, Suite 1600
Evanston, Illinois 60201
(Address of principal executive offices)
(Zip code)
(847) 733-1000
(Registrant's telephone number, including area code)
----------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
There were 24,123,387 shares of Common Stock ($.01 par value) outstanding as
of August 13, 1999.
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<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
QUARTERLY REPORT ON FORM 10-Q
For the Quarter ended
June 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<C> <S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1999 (Unaudited) and
December 31, 1998 .......................................... 3
Consolidated Statements of Operations for the three and six
months ended June 30, 1999 and 1998 (Unaudited)............. 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 and 1998 (Unaudited).................... 5
Notes to Consolidated Financial Statements (Unaudited)...... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 13
Item 2. Changes in Securities....................................... 13
Item 3. Defaults upon Senior Securities............................. 13
Item 4. Submission of Matters to a Vote of Security Holders......... 14
Item 5. Other Information........................................... 14
Item 6. Exhibits and Reports on Form 8-K............................ 14
SIGNATURE............................................................. 15
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Assets:
Cash and cash equivalents............................ $ 478 $ 344
Accounts receivable, net of allowance for doubtful
accounts of $2,722 and $2,590, respectively......... 73,864 53,323
Inventory, net....................................... 21,056 15,606
Rental equipment, net................................ 481,787 378,254
Property and equipment, net.......................... 41,853 29,016
Intangible assets, net............................... 252,711 218,959
Loan origination costs, net.......................... 10,203 10,197
Prepaid and other assets, net........................ 20,102 14,784
-------- --------
Total assets....................................... $902,054 $720,483
======== ========
Liabilities and Stockholders' Equity:
Cash overdraft....................................... $ -- $ 6,331
Accounts payable..................................... 24,217 25,665
Accrued interest..................................... 4,201 2,105
Accrued expenses and other liabilities............... 43,960 35,680
Debt................................................. 591,025 513,836
-------- --------
Total liabilities.................................. 663,403 583,617
-------- --------
Convertible preferred stock........................... 95,000 --
-------- --------
Stockholders' Equity:
Common stock, $0.01 par, 100,000 shares authorized;
24,123 shares issued................................. 241 241
Additional paid-in capital............................ 123,606 123,564
Retained earnings..................................... 19,906 13,163
Stock subscriptions receivable........................ (102) (102)
-------- --------
Total stockholders' equity......................... 143,651 136,866
-------- --------
Total liabilities and stockholders' equity......... $902,054 $720,483
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
----------------- -----------------
1999 1998 1999 1998
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenues:
Rental revenues......................... $ 78,927 $30,596 $138,829 $46,411
Rental equipment sales.................. 6,397 2,370 13,289 4,112
New equipment sales and other........... 24,519 11,164 45,257 15,758
-------- ------- -------- -------
Total revenues........................ 109,843 44,130 197,375 66,281
-------- ------- -------- -------
Cost of Revenues:
Rental equipment depreciation........... 14,729 5,104 27,660 7,831
Cost of rental equipment sales.......... 4,264 1,317 8,988 2,354
Cost of new equipment sales............. 8,094 6,294 15,707 8,481
Other operating expenses................ 34,892 13,964 61,918 21,513
-------- ------- -------- -------
Total cost of revenues................ 61,979 26,679 114,273 40,179
-------- ------- -------- -------
Gross profit............................. 47,864 17,451 83,102 26,102
Selling, general and administrative
expenses................................ 20,173 7,421 38,236 11,951
Non-rental depreciation and amortization. 4,272 1,262 7,573 2,069
-------- ------- -------- -------
Operating income......................... 23,419 8,768 37,293 12,082
Other income, net........................ 460 76 667 153
Interest expense, net.................... (13,612) (4,936) (26,334) (8,036)
-------- ------- -------- -------
Income before income taxes............... 10,267 3,908 11,626 4,199
Income tax expense....................... 4,312 1,583 4,883 1,734
-------- ------- -------- -------
Net income............................... $ 5,955 $ 2,325 $ 6,743 $ 2,465
======== ======= ======== =======
Basic earnings per common share.......... $ 0.25 $ 0.15 $ 0.29 $ 0.17
======== ======= ======== =======
Average number of common shares used in
basic calculation....................... 23,376 15,131 23,344 14,977
======== ======= ======== =======
Diluted earnings per common share........ $ 0.22 $ 0.14 $ 0.26 $ 0.15
======== ======= ======== =======
Average number of common shares used in
diluted calculation..................... 28,412 16,171 26,983 16,146
======== ======= ======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
For the Six
Months Ended
June 30,
------------------
1999 1998
-------- --------
<S> <C> <C>
Operating Activities:
Net income................................................ $ 6,743 $ 2,465
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization............................ 35,233 9,900
Gain on sale of rental equipment......................... (4,301) (1,758)
Gain on sale of property and equipment................... (52) (33)
Changes in operating assets and liabilities:
Accounts receivable..................................... (11,723) (4,614)
Inventory............................................... (3,169) 9
Prepaid and other assets................................ (5,360) (2,324)
Accounts payable........................................ (8,308) 3,778
Accrued expenses and other liabilities.................. 5,119 600
-------- --------
Net cash provided by operating activities................. 14,182 8,023
-------- --------
Investing Activities:
Net cash paid for acquisitions............................ (90,233) (110,086)
Purchases of rental equipment............................. (98,021) (44,629)
Proceeds from sale of rental equipment.................... 13,289 4,112
Purchases of property and equipment....................... (11,966) (3,540)
Proceeds from sale of property and equipment.............. 652 50
-------- --------
Net cash used in investing activities..................... (186,279) (154,093)
-------- --------
Financing Activities:
Proceeds from long-term debt.............................. 341,000 111,484
Payments on long-term debt................................ (168,811) --
Net proceeds from sale of common stock.................... 42 (89)
Payments of loan origination costs........................ -- --
-------- --------
Net cash provided by financing activities................. 172,231 111,395
-------- --------
Net increase (decrease) in cash and cash equivalents...... 134 (34,675)
Cash and cash equivalents at beginning of period.......... 344 35,682
-------- --------
Cash and cash equivalents at end of period................ $ 478 $ 1,007
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
1. Organization
National Equipment Services, Inc. (the "Company") 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. The
Company is primarily involved in the rental of equipment to construction and
industrial users and operates from locations in 29 states.
2. Basis of presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Accordingly, these unaudited financial statements and
related notes should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company annual report on Form 10-
K. In the opinion of management, all adjustments considered necessary for a
fair presentation, consisting only of normal recurring adjustments, have been
included. Results of operations for the interim periods are not necessarily
indicative of the results that may be expected for a full year.
3. Earnings per share
The Company's earnings per share for the three and six months ended June 30,
1998 and 1999 is calculated as follows:
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended June 30, Months Ended June 30,
----------------------- -----------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income.................. $5,955 $2,325 $6,743 $2,465
Plus: interest on
convertible debt, net of
tax........................ 174 -- 348 --
------ ------ ------ ------
Income available to
stockholders............... $6,129 $2,325 $7,091 $2,465
====== ====== ====== ======
Weighted average shares
outstanding................ 24,123 16,171 24,123 16,146
Less: unvested stock...... 747 1,040 779 1,169
------ ------ ------ ------
Basic weighted average
shares outstanding......... 23,376 15,131 23,344 14,977
Plus:
Unvested stock............ 747 1,040 779 1,169
Convertible debt.......... 1,414 -- 1,414 --
Convertible preferred
stock.................... 2,875 -- 1,446 --
------ ------ ------ ------
Diluted weighted average
shares..................... 28,412 16,171 26,983 16,146
====== ====== ====== ======
Basic EPS................... $ 0.25 $ 0.15 $ 0.29 $ 0.17
====== ====== ====== ======
Diluted EPS................. $ 0.22 $ 0.14 $ 0.26 $ 0.15
====== ====== ====== ======
</TABLE>
4. Acquisitions
As more fully disclosed in the Company's Form 10-K for the year ended
December 31, 1998, the Company completed 12 acquisitions, accounted for as
purchases, at various times during 1998. In the first six months of 1999, the
Company purchased the following rental equipment companies:
<TABLE>
<CAPTION>
Acquisition
Date Company Location Purchase Price
----------- ------------------------ ---------------- --------------
<C> <S> <C> <C>
Barricade Light and
March 1, 1999 Rental Phoenix, AZ $ 9,000
March 17, 1999 Mayer-Hammant New Orleans, LA 26,000
March 19, 1999 Wellesley Crane Service Boston, MA 16,000
April 1, 1999 Advanced Warnings, Inc. Muskogee, OK 7,000
April 1, 1999 The Mike Madrid Company,
Inc.,
Latshaw Traffic Servic-
es, Inc., and Madrid
Leasing Corp. Lafayette, IN 5,750
May 13, 1999 The Illinois operations
of
S&R Equipment Co. Perrysburg, OH 16,300
June 1, 1999 Elite Rentals Mont Belvieu, TX 14,000
</TABLE>
6
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except per share data)
The following pro forma financial information represents the unaudited pro
forma results of operations as if the aforementioned 19 acquisitions had been
completed on January 1, 1998 and January 1, 1999, respectively, after giving
effect to certain adjustments including increased depreciation and
amortization of property and equipment and other assets, interest expense for
acquisition debt and amortization of related intangibles and goodwill. 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 the Company's future results of operations.
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
---------------- -----------------
1999 1998 1999 1998
-------- ------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues.............................. $112,575 $89,921 $213,250 $163,752
Operating income...................... $ 24,243 $17,019 $ 39,488 $ 26,245
Net income (loss)..................... $ 5,567 $ 1,194 $ 5,805 $ (2,204)
Basic earnings (loss) per share....... $ 0.22 $ 0.05 $ 0.23 $ (0.09)
Diluted earnings (loss) per share..... $ 0.17 $ 0.04 $ 0.18 $ (0.09)
</TABLE>
5. Inventory
Inventory consists of the following:
<TABLE>
<CAPTION>
June
30, December 31,
1999 1998
------- ------------
<S> <C> <C>
New equipment....................................... $ 9,170 $ 7,431
Parts............................................... 10,264 7,790
Other............................................... 3,557 1,546
------- -------
22,991 16,767
Less: reserve....................................... (1,935) (1,161)
------- -------
$21,056 $15,606
======= =======
</TABLE>
6. Debt
On November 20, 1997, the Company issued $100,000 of Senior Subordinated
Notes due 2004, Series A (the "Series A Notes"). In conjunction with its
initial public offering of Common Stock in July 1998, the Company entered into
a new credit facility which provides for a term facility of $100,000 and a
revolving credit facility of $300,000. On October 20, 1998, the Company
completed its exchange of $100,000 of Senior Subordinated Notes due 2004,
Series B (the "Series B Notes"), which have been registered for public
trading, for the Series A Notes.
On September 17, 1998, the Company issued a $15,000 junior subordinated
convertible note in connection with its acquisition of all of the issued and
outstanding capital stock of Shaughnessy Crane Service, Inc. ("Shaughnessy").
The note, issued to the former stockholders of Shaughnessy, accrues interest
at a rate of 8% per annum, and the Company may prepay all or any portion of
the outstanding principal amount at any time. In addition, the holders of the
note may elect to convert the principal amount of the note, plus accrued
interest, into the number of shares of the Company's Common Stock equal to
such amount divided by $13.00. If, on September 17, 1999, the note has not
been prepaid or converted, then the outstanding principal amount of the note,
plus accrued interest, will automatically convert into a number of shares of
Common Stock having a fair market value equal to such amount.
On December 11, 1998, the Company issued $125,000 of Senior Subordinated
Notes due 2004, Series C (the "Series C Notes"), and on January 8, 1999, the
Company issued $50,000 of additional Series C Notes.
7
<PAGE>
NATIONAL EQUIPMENT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands except per share data)
On March 16, 1999, the Company completed its exchange of $175,000 of Senior
Subordinated Notes due 2004, Series D (the "Series D Notes"), which have been
registered for public trading, for the Series C Notes.
The indentures for the Series B Notes and the Series D Notes and the credit
facility contain a number of covenants that, among other things, require the
Company 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. The
Company is currently in compliance with all covenants of the indentures
governing the Series B Notes, the Series D Notes and the credit facility.
The Company is a holding company with no independent operations, and the
Company's assets (excluding the common stock of its subsidiaries) are
insignificant. All of the Company's subsidiaries make full, unconditional,
joint and several guarantees of the Series B Notes and the Series D Notes, and
all of these subsidiaries are directly or indirectly wholly-owned by the
Company. The separate financial statements of each of these wholly-owned
subsidiaries are not presented as management believes that separate financial
statements and other disclosures concerning these subsidiaries are not
individually meaningful for presentation or material to investors.
7. Convertible Preferred Stock
On May 14, 1999 and June 18, 1999, the Company issued 60,000 and 40,000
shares, respectively, of Senior Redeemable Convertible Preferred Stock, Series
A (the "Preferred Shares") for net proceeds of approximately $95,000. Each
Preferred Share is convertible at the option of the holder into a number of
shares of the Company's Common Stock equal to $1 divided by the conversion
price (the "Conversion Price") then in effect. The Conversion Price is $13.00,
subject to adjustment based upon (i) certain issuances of Common Stock at a
price per share below the then current Conversion Price and (ii) standard
anti-dilution adjustments. Each Preferred Share is convertible at the option
of the Company into a number of shares of Common Stock equal to $1 divided by
the then current Conversion Price if at any time after one year from the issue
date of the Preferred Shares the average closing market price of the Common
Stock over a 60 consecutive trading day period equals or exceeds $20.00. The
Preferred Shares are voted with the Company's Common Stock on an as converted
basis.
Each holder of Preferred Shares will be entitled to receive dividends and
other distributions on a parity with each holder of Common Stock in an amount
equal to the dividends per share payable on the number of shares of Common
Stock into which such Preferred Shares would be convertible on the record
date. On April 30, 2009, the Company will redeem all of the shares of
Preferred Stock then outstanding, at a price per share equal to $1 plus an
amount per share equal to all declared and unpaid dividends thereon.
If a change of control occurs, the Company will within 5 business days
thereafter offer to purchase from each holder of Preferred Shares all
outstanding Preferred Shares then held by such holder at a purchase price
equal to the greater of: (A) the amount, if any, that each holder of Preferred
Shares would be entitled to receive per share of Common Stock in connection
with the change of control if such holder had converted its Preferred Shares
and (B) $20.00 in cash per share of Common Stock assuming such holder had
converted its Preferred Shares. If a liquidation or winding-up of the Company
(other than a change of control) occurs, no distribution will be made to the
holders of shares of any class of junior stock (including Common Stock)
unless, prior thereto, the holders of Preferred Shares have received an amount
per Preferred Share equal to the greater of: (A) $1, plus all declared and
unpaid dividends and (B) the proceeds in liquidation that the holders of
Preferred Shares would have received in respect of all shares of Common Stock
issuable to such holders upon conversion.
8
<PAGE>
8. Common Stock
On June 4, 1996, in connection with the Company's formation, the Company
authorized 25 shares of Class A Common Stock (24 of which were reserved for
issuance to the Company's majority stockholder), par value $0.01, and 150
shares of Class B Common Stock (75 of which were reserved for issuance to the
Company's majority stockholder), par value $0.01. On October 28, 1997, the
authorized shares of Class A Common Stock were increased to 50.
In connection with its initial public offering of 7,000 shares of Common
Stock on July 13, 1998, the Company exchanged all of its Class A and Class B
Common Stock for newly established Common Stock. The Class A and Class B
Common Stock was converted into an aggregate of 115 shares of newly
established Common Stock. Each share of newly established Common Stock was
then split into 0.139 shares of Common Stock. In conjunction with the July
1998 acquisitions of Falconite and R&R Rentals, the Company issued 278 and 296
shares of the Common Stock, respectively. On August 19, 1998, NES sold 375
additional shares of its Common Stock in connection with the underwriters'
exercise of their over-allotment option.
9. Subsequent events
In August 1999, the Company amended its credit facility to increase the
available borrowings from $400,000 to $700,000. All other terms, covenants and
conditions of the credit facility are expected to remain substantially
unchanged.
Also in July 1999, the Company completed its acquisition of the assets of
Gould & Associates, an Atlanta, Georgia based company engaged in the rental of
pumps and related accessories. In August 1999, the Company completed the
acquisition of the stock of the Plank Company ("Plank") and the stock of
Interstate Traffic Control, Inc. ("ITC"). Plank is a Houston, Texas based
trench shielding and shoring rental equipment company. ITC is a traffic safety
equipment rental company located in West Virginia. The aggregate purchase
price for these acquisitions approximated $100,000.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (in thousands)
The following table sets forth, for the periods indicated, information
derived from the combined and historical consolidated statements of operations
of the Company expressed as a percentage of total revenues.
<TABLE>
<CAPTION>
Six Months
Three Months Ended Ended
June 30, June 30,
-------------------- ------------
1999 1998 1999 1998
--------- --------- ----- -----
<S> <C> <C> <C> <C>
Rental revenues............................ 71.9% 69.3% 70.4% 70.0%
Rental equipment sales..................... 5.8 5.4 6.7 6.2
New equipment sales and other.............. 22.3 25.3 22.9 23.8
--------- --------- ----- -----
Total revenues............................. 100.0 100.0 100.0 100.0
Cost of revenues........................... 56.4 60.5 57.9 60.6
--------- --------- ----- -----
Gross profit............................... 43.6 39.5 42.1 39.4
Selling, general and administrative
expenses.................................. 18.4 16.8 19.4 18.0
Non-rental depreciation and amortization... 3.9 2.8 3.8 3.2
--------- --------- ----- -----
Operating income........................... 21.3 19.9 18.9 18.2
Other income, net.......................... 0.4 0.2 0.3 0.2
Interest expense, net...................... 12.4 11.2 13.3 12.1
--------- --------- ----- -----
Income before income taxes................. 9.3 8.9 5.9 6.3
Income tax expense......................... 3.9 3.6 2.5 2.6
--------- --------- ----- -----
Net income................................. 5.4% 5.3% 3.4% 3.7%
========= ========= ===== =====
</TABLE>
Historical Results of Operations
The following discusses the Company's operations for the three and six
months ended June 30, 1998 and 1999 and should be read in conjunction with the
unaudited consolidated financial statements and related notes thereto of the
Company included herein and the consolidated financial statements and related
notes thereto included in the Company's 1998 Annual Report on Form 10-K.
The Company completed twelve acquisitions during 1998, with seven completed
during the first six months of the year. Seven additional acquisitions were
completed during the first six months of 1999. The results of operations of
the businesses acquired in these acquisitions are included in the Company's
financial statements only from their respective dates of acquisition. Due to
the seasonality which impacts a significant portion of the Company's
locations, the second and third quarters of the year are typically the most
active quarters for the Company.
Results of Operations for the Three and Six Months Ended June 30, 1998 and
1999
Revenues. Total revenues increased from $44,130 to $109,843 from the second
quarter of 1998 to the second quarter of 1999. This represents a 149%
increase, 124% of which approximates the impact of the acquisition of
additional businesses after the second quarter of 1998. The remaining 25% is
attributable to increased volume at rental locations owned for more than one
year due to the increased outsourcing demands of customers. Similarly, total
revenues increased from $66,281 to $197,375 from the six months ended June 30,
1998 to the comparable period in 1999.
Gross Profit. Gross profit increased from $17,451 to $47,864 and from
$26,102 to $83,102 from the second quarter of 1998 to the second quarter of
1999 and from the first six months of 1998 to the first six months of 1999,
respectively. Gross profit as a percentage of total revenues increased from
39.5% to 43.6% and from 39.4% to 42.1% from the second quarter of 1998 to the
second quarter of 1999 and from the first six months of 1998 to the first six
months of 1999, respectively. This margin improvement was primarily the result
of increased rental revenues as a percentage of total revenues. Margins on
rental revenues typically exceed those earned on equipment sales.
10
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $7,421 to $20,173 from the second
quarter of 1998 to the second quarter of 1999 and from $11,951 to $38,236 from
the six months ended June 30, 1998 to the six months ended June 30, 1999. As a
percentage of total revenues, selling, general and administrative expenses
increased from 16.8% to 18.4% and from 18.0% to 19.4% during these respective
periods, due to additional expenses incurred in conjunction with the opening
of new branches during the end of 1998 and the beginning of 1999.
Non-rental depreciation and amortization. Non-rental depreciation and
amortization increased from $1,262 to $4,272 from the second quarter of 1998
to the second quarter of 1999 and from $2,069 to $7,573 from the six months
ended June 30, 1998 to six months ended June 30, 1999 due primarily to
increased amortization of goodwill attributable to the acquisitions completed
during the second half of 1998 and the first six months of 1999.
Operating income. As a result of the foregoing, operating income increased
from $8,768 to $23,419 and from $12,082 to $37,293 from the second quarter of
1998 to the second quarter of 1999 and from the first six months of 1998 to
the first six months of 1999, respectively. Operating income approximated
21.3% and 18.9% of total revenues for the three and six months ended June 30,
1999.
Interest expense. Interest expense increased from $4,936 to $13,612 from the
second quarter of 1998 to the second quarter of 1999 and from $8,036 to
$26,334 from the six months ended June 30, 1998 to the six months ended June
30, 1999. This increase was due to additional debt necessary to complete the
Company's strategy of acquiring additional businesses.
Income tax expense. Income tax expense increased from $1,583 to $4,312 from
the second quarter of 1998 to the second quarter of 1999 and from $1,734 to
$4,883 from the six months ended June 30, 1998 to the six months ended June
30, 1999 due to improved results of operations during the corresponding 1999
periods.
Liquidity and Capital Resources
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. Rental fleet purchases for the Company were $157,500 and $98,021 in
1998 and the first six months of 1999, respectively. The Company's purchases
for rental fleet are expected to be approximately $160,000 in 1999.
For the six months ended June 30, 1998 and 1999, the Company's net cash
provided by operations was $8,023 and $14,182, respectively. For the six
months ended June 30, 1998 and 1999, the Company's net cash used in investing
activities was $154,093 and $186,279, respectively. For the six months ended
June 30, 1998 and 1999, the Company's net cash provided by financing
activities was $111,395 and $172,231, respectively. Net cash provided by
financing activities consists primarily of borrowings under the Company's
credit facility, indebtedness under the indentures relating to the Series B
and Series D Notes and proceeds from the sale of the Company's Senior
Redeemable Convertible Preferred Stock, Series A.
In August 1999, the Company amended its credit facility, which currently
provides for a term facility to the Company of $100,000 and a revolving credit
facility to the Company for up to $600,000, 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 June 30, 1999, $300,411 was outstanding under the credit
facility.
11
<PAGE>
The Company believes that its 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 Software 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. In
accordance with its plan, the Company has substantially completed the
migration of several of the Company's operating units successfully to this new
system. The Company has invested approximately $1,495 to date relating to this
migration, and management estimates only minimal future investments to
complete the conversion to this common platform. Substantially all costs
associated with this migration have been and will be capitalized. As a result
of this conversion, all operating units, transactions processing and operating
systems are expected to be Year 2000 compliant.
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.
Note: This document contains forward-looking statements as encouraged by the
Private Securities Litigation Reform Act of 1995. All statements contained in
this document, other than historical information, are forward-looking
statements. These statements represent management's current judgement on what
the future holds. A variety of factors could cause business conditions and the
Company's actual results to differ materially from those expected by the
Company or expressed in the Company's forward-looking statements. These
factors include, without limitation, the Company's ability to successfully
integrate acquired businesses; changes in market price or market demand; loss
of business from customers; unanticipated expenses; changes in financial
markets; and other factors discussed in the Company's filings with the
Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's credit facility, as amended, provides the Company with
available borrowings up to $700,000 provided that certain conditions and
financial tests are met, subject to a borrowing base. Borrowings under the
credit facility bear interest, at the Company's option, at either a specified
base rate plus the applicable borrowing margin or at LIBOR plus the applicable
borrowing margin. At August 13, 1999, the Company had total borrowings under
the credit facility and the term loan of $413,000. $263,000 of which were
subject to interest rate risk. Each 1.0% increase in interest rates on the
unhedged variable rate debt would impact pretax earnings by approximately
$2,630.
The Company uses interest rate swap contracts to hedge the impact of
interest rate fluctuations on certain variable rate debt. The Company does not
hold or issue derivative financial instruments for trading or speculative
purposes. The interest rate swap fixes the interest rate at 4.51% on $150,000
of variable rate debt through October 23, 2000. The interest differential is
paid or received on a monthly basis and recognized currently as a component of
interest expense. The counterparty to the swap is a major financial
institution and management believes that the risk of incurring credit losses
is remote.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Senior Redeemable Convertible Preferred Stock, Series A. Pursuant to a
Purchase Agreement, dated April 27, 1999, between the Company and each of The
1818 Fund III, L.P., Co-Investment Partners, L.P., Erie Indemnity Company, Erie
Insurance Exchange and Aquila Limited Partnership (collectively, the
"Purchasers"), the Company issued, and the Purchasers acquired, an aggregate of
100,000 shares of the Company's new Senior Redeemable Convertible Preferred
Stock, Series A (the "Preferred Shares") in exchange for an aggregate of $100.0
million in cash, less a 5% facility fee (the "Transaction"). The Transaction
occurred in two separate phases. In the first closing on May 14, 1999, the
Company issued 60,000 Preferred Shares to the Purchasers in exchange for $60.0
million in cash, less a 5% facility fee. In the second closing on June 18,
1999, the Company issued 40,000 Preferred Shares to the Purchasers in exchange
for $40.0 million in cash, less a 5% facility fee.
Each Preferred Share is convertible at the option of the holder into the
Company's Common Stock in accordance with a formula equal to $1,000 per share
divided by a conversion price of $13.00 per share, subject to adjustment. If,
at any time after one year from the issue date of the Preferred Shares, the
arithmetic average of the closing market price of the Company's Common Stock as
reported on the New York Stock Exchange over a 60 consecutive trading day
period equals or exceeds $20.00, subject to adjustment, the Company will have
the right, during the 60 day period after the end of such 60 day period, to
require all holders of Preferred Shares to convert all of their shares into
Common Stock according to the above formula. The Preferred Shares are voted
with the Company's Common Stock on an as converted basis. The holders of
Preferred Shares have the right to designate one member of the Board of
Directors. In connection with the first closing on May 14, 1999, the Board of
Directors appointed Lawrence C. Tucker, the designee of the holders of
Preferred Shares, to the Board.
Each holder of Preferred Shares will be entitled to receive dividends and
other distributions on a parity with each holder of Common Stock in an amount
equal to the dividends per share payable on the number of shares of Common
Stock into which such Preferred Shares would be convertible on the record date.
On April 30, 2009, the Company will redeem all of the shares of Preferred Stock
then outstanding, at a price per share equal to $1,000 plus an amount per share
equal to all declared and unpaid dividends thereon.
If a change of control occurs, the Company will within 5 business days
thereafter offer to purchase from each holder of Preferred Shares all
outstanding Preferred Shares then held by such holder at a purchase price equal
to the greater of: (A) the amount, if any, that each holder of Preferred Shares
would be entitled to receive per share of Common Stock in connection with the
change of control if such holder had converted its Preferred Shares and (B)
$20.00 in cash per share of Common Stock assuming such holder had converted its
Preferred Shares. If a liquidation or winding-up of the Company (other than a
change of control) occurs, no distribution will be made to the holders of
shares of any class of junior stock (including Common Stock) unless, prior
thereto, the holders of Preferred Shares have received an amount per Preferred
Share equal to the greater of: (A) $1,000, plus all declared and unpaid
dividends and (B) the proceeds in liquidation that the holders of Preferred
Shares would have received in respect of all shares of Common Stock issuable to
such holders upon conversion.
The Preferred Shares are unregistered, and each phase of the Transaction was
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to Section 4(2) of the Securities Act as a
transaction not involving any public offering. In addition to any resale
limitations imposed by the Securities Act, the Preferred Shares are subject to
certain restrictions on transfers. The Purchasers have certain rights to
require the Company to register their Preferred Shares under the Securities Act
in the future.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
13
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual shareholder meeting on June 17, 1999. See
Exhibit 22.1 for a report of the voting on the matters considered at the
meeting.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
See Index of Exhibits. The Company did not file any Current Reports on Form
8-K for the quarterly period ended June 30, 1999.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on August 16, 1999.
National Equipment Services, Inc.
/s/ Dennis O'Connor
By: _________________________________
Dennis O'Connor
Chief Financial Officer
Form 10-Q: For the quarter ended June 30, 1999.
15
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S> <C>
4.1 Supplemental Indenture [to November 1997 Indenture] dated as of
April 9, 1999 by and between Barricade Light & Rental, Inc.,
Mayer-Hammant Equipment, L.L.C., Wellesley Crane Sevice Co.,
Inc. and Harris Trust and Savings Bank, as Trustee.
4.2 Supplemental Indenture [to December 1998 Indenture] dated as of
April 9, 1999 by and between Barricade Light & Rental, Inc.,
Mayer-Hammant Equipment, L.L.C., Wellesley Crane Sevice Co.,
Inc. and Harris Trust and Savings Bank, as Trustee.
10.1 Amended and Restated Registration Agreement made as of June 4,
1996, and amended and restated as of May 14, 1999, by and among
National Equipment Services, Inc., Golder, Thoma, Cressey,
Rauner Fund V, L.P., The 1818 Fund III, L.P., Co-Investment
Partners, L.P., Erie Indemnity Company, Erie Insurance Exchange,
Aquila Limited Partnership, GTCR Associates V, Rodgers
Investment Partners, L.P., R&R Rentals, Falconite Investment
L.P., St. Louis Travel Corp., and certain Executives and other
persons named therein.
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.
21.1 Subsidiaries of the Company.(1)
22.1 Certificate and Report of Inspector of Election.
27.1 Financial Data Schedule.
</TABLE>
- --------
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 (File No. 001-14163).
16
<PAGE>
Exhibit 4.1
SUPPLEMENTAL INDENTURE
[to November 1997 Indenture]
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of April
9, 1999, by and among Barricade Light & Rental, Inc., Mayer-Hammant Equipment,
L.L.C., and Wellesley Crane Service Co., Inc. (collectively, the "New Subsidiary
Guarantors"), each a direct or indirect wholly-owned 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).
WITNESSETH
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (as supplemented, the "Indenture"), dated as of November 25, 1997,
providing for the issuance of an aggregate principal amount of $100,000,000 of
10% Senior Subordinated Notes due 2004 (the "Series A Notes");
WHEREAS, on October 20, 1998, the Company completed its offer to exchange
its 10% Senior Subordinated Notes due 2004, Series B (the "Series B Notes" and,
together with the Series A Notes, the "Senior Subordinated Notes"), which have
been registered under the Securities Act of 1933, as amended, and which were
issued under the Indenture, for all of its outstanding Series A 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 Guarantors 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 Guarantors
hereby agree, 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
<PAGE>
conditions set forth in Article 11 of the Indenture and to be bound by all
other applicable provisions of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, shareholder, equityholder 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
Guarantors.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first above written.
BARRICADE LIGHT & RENTAL, INC.
By: /s/ Paul R. Ingersoll
--------------------------
Name: Paul R. Ingersoll
Title: Vice President and Secretary
MAYER-HAMMANT EQUIPMENT, L.L.C.
By: /s/ Paul R. Ingersoll
---------------------------
Name: Paul R. Ingersoll
Title: Vice President and Secretary
WELLESLEY CRANE SERVICE CO., INC.
By: /s/ Paul R. Ingersoll
---------------------------
Name: Paul R. Ingersoll
Title: Vice President and Secretary
HARRIS TRUST AND SAVINGS BANK,
AS TRUSTEE
By: /s/ C. Potter
---------------------------
Name: C. Potter
Title: AVP.
<PAGE>
Exhibit 4.2
-----------
SUPPLEMENTAL INDENTURE
[to December 1998 Indenture]
Supplemental Indenture (the "Supplemental Indenture"), dated as of April 9,
1999, by and among Barricade Light & Rental, Inc., Mayer-Hammant Equipment,
L.L.C., and Wellesley Crane Service Co., Inc. (collectively, the "New Subsidiary
Guarantors"), each a direct or indirect wholly-owned 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 (as supplemented, the "Indenture"), dated as of December 11, 1998,
providing for the issuance of an aggregate principal amount of $175,000,000 of
10% Senior Subordinated Notes due 2004 (the "Series C Notes");
WHEREAS, on March 16, 1999, the Company completed its offer to exchange its
10% Senior Subordinated Notes due 2004, Series D (the "Series D Notes" and,
together with the Series C Notes, the "Senior Subordinated Notes"), which have
been registered under the Securities Act of 1933, as amended, and which were
issued under the Indenture, for all of its outstanding Series C 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 Guarantors 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 Guarantors
hereby agree, 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
<PAGE>
conditions set forth in Article 11 of the Indenture and to be bound by all other
applicable provisions of the Indenture.
3. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, shareholder, equityholder 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
Guarantors.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first above written.
BARRICADE LIGHT & RENTAL, INC.
By: /s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President and Secretary
MAYER-HAMMANT EQUIPMENT, L.L.C.
By: /s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President and Secretary
WELLESLEY CRANE SERVICE CO., INC.
By: /s/ Paul R. Ingersoll
-----------------------------------
Name: Paul R. Ingersoll
Title: Vice President and Secretary
HARRIS TRUST AND SAVINGS BANK, AS TRUSTEE
By: /s/ C. Potter
------------------------------
Name:
Title:
<PAGE>
Exhibit 10.1
------------
AMENDED AND RESTATED REGISTRATION AGREEMENT
THIS AGREEMENT is made as of June 4, 1996, and amended and restated as
of May 14, 1999, by and among National Equipment Services, Inc., a Delaware
corporation (the "Company") and the stockholders of the Company identified on
-------
the signature pages attached hereto. Unless otherwise provided in this
Agreement, capitalized terms used herein shall have the meanings set forth in
paragraph 8 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
--------------------
(a) Requests for Registration. At any time, (i) the holders of a
-------------------------
majority of the Original Registrable Securities or the holders of a majority of
the Series A Preferred Registrable Securities may request registration under the
Securities Act of all or any portion of their Registrable Securities on Form S-1
or any similar long-form registration ("Long-Form Registrations"), (ii) the
-----------------------
holders of a majority of the Original Registrable Securities or the holders of a
majority of the Series A Preferred Registrable Securities may request
registration under the Securities Act of all or any portion of their Registrable
Securities on Form S-2 or S-3 or any similar short-form registration ("Short-
-----
Form Registrations") if available, and (iii) any of Golder, Thoma, Cressey,
- ------------------
Rauner Fund V, L.P., The 1818 Fund III, L.P. or Co-Investment Partners, L.P.
(each, a "Qualified Holder") may request registration under the Securities Act
----------------
of all or any portion of its Registrable Securities. All registrations
requested pursuant to this paragraph 1(a) are referred to herein as "Demand
------
Registrations." Demand Registrations shall be made on a short form whenever the
- -------------
Company is permitted to do so. Notwithstanding anything herein to the contrary,
a Demand Registration may not be requested pursuant to this paragraph 1(a)
unless the Registrable Securities initially requested to be included in such
Demand Registration have an aggregate offering value of at least $20.0 million.
Each request for a Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered and the anticipated per share
price range for such offering. Within ten days after receipt of any such
request, the Company shall give written notice of such requested registration to
all other holders of Registrable Securities and shall include in such
registration all Registrable Securities with respect to which the Company has
received written re quests for inclusion therein within 15 days after the
receipt of the Company's notice.
(b) Permitted Long-Form Registrations. The holders of Original
---------------------------------
Registrable Securities, as a group (the "Original Group"), and the holders of
--------------
Series A Preferred Registrable Securities, as a group (the "Series A Preferred
------------------
Group"), shall each be entitled to request, pursuant to clause (i) of paragraph
- -----
1(a), (i) four Long-Form Registrations in which the Company shall pay all
Registration Expenses ("Company-paid Long-Form Registrations") and (ii) an
------------------------------------
unlimited number of Long-Form Registrations in which the Original Group and the
Series A Preferred Group shall pay their share of the Registration Expenses as
set forth in paragraph 5 hereof. The group initially requesting a Company-paid
Long Form Registration shall be referred to herein as the "Initiating Group." A
----------------
registration shall not count as one of the Initiating Group's permitted Long-
Form Registrations until it has become effective and no Company-paid Long-Form
Registration shall count
<PAGE>
as one of the Initiating Group's permitted Long-Form Registrations unless the
Initiating Group is able to register and sell at least 90% of the Registrable
Securities requested to be included by such Initiating Group in such
registration; provided that in any event the Company shall pay all Registration
--------
Expenses in connection with any registration initiated as a Company-paid Long-
Form Registration whether or not it has become effective and whether or not such
registration has counted as one of the permitted Company-paid Long-Form
Registrations.
(c) Permitted Short-Form Registrations. In addition to the Long-Form
----------------------------------
Registrations provided pursuant to paragraph 1(b), the Original Group and the
Series A Preferred Group shall each be entitled to request, pursuant to clause
(ii) of paragraph 1(a), an unlimited number of Short-Form Registrations in which
the Company shall pay all Registration Expenses. Demand Registrations shall be
Short-Form Registrations whenever the Company is permitted to use any applicable
short form. After the Company has become subject to the reporting requirements
of the Securities Exchange Act, the Company shall use its best efforts to make
Short-Form Registrations on Form S-3 available for the sale of Registrable
Securities.
(d) Permitted Independent Demand Registrations. In addition to the
------------------------------------------
Long Form Registrations provided pursuant to paragraph 1(b) and the Short Form
Registrations provided pursuant to paragraph 1(c), each Qualified Holder shall
be entitled to request, pursuant to clause (iii) of paragraph 1(a), one Demand
Registration in which the Company shall pay all Registration Expenses. A
registration shall not count as the initiating Qualified Holder's permitted
Demand Registration until it has become effective and unless the initiating
Qualified Holder is able to register and sell at least 50% of the Registrable
Securities requested to be included by such Initiating Qualified Holder in such
registration; provided that if The 1818 Fund III, L.P. is the Initiating
Qualified Holder, such 50% threshold shall not be deemed satisfied unless The
1818 Fund III, L.P., Erie Indemnity Company, Erie Insurance Exchange and Aquila
Limited Partnership are collectively able to register and sell at least 50% of
the Registrable Securities collectively requested to be included by them;
provided further that in any event the Company shall pay all Registration
- ----------------
Expenses in connection with any such registration whether or not it has become
effective and whether or not such registration has counted as the initiating
Qualified Holder's permitted Demand Registration.
(e) Priority on Demand Registrations. The Company shall not include
--------------------------------
in any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the holders of a majority of the
Registrable Securities included in such registration. If a Demand Registration
is an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities to be
included in such registration without adversely affecting the marketability of
the offering, the Company shall include in such registration prior to the
inclusion of any securities which are not Registrable Securities the number of
Registrable Securities requested to be included which in the opinion of such
underwriters can be sold in an orderly manner within the price range of such
offering, pro rata among
2
<PAGE>
the respective holders thereof on the basis of the amount of Registrable
Securities requested by each such holder to be included in such offering.
Notwithstanding anything herein to the contrary, without the consent of the
Company and the holders of a majority of the Registrable Securities included in
such registration, any Persons other than holders of Registrable Securities who
participate in Demand Registrations must pay their share of the Registration
Expenses as provided in paragraph 5 hereof.
(f) Restrictions on Certain Demand Registrations. The Company shall
--------------------------------------------
not be obligated to effect any Demand Registration within 180 days after the
effective date of a previous registration. The Company may postpone for up to
180 days the filing or the effectiveness of a registration statement for a
Demand Registration if the board of directors of the Company determines in good
faith that such Demand Registration would reasonably be expected to have a
material adverse effect on any proposal or plan by the Company or any of its
Subsidiaries to engage in any acquisition of stock or assets or any merger,
consolidation, tender offer, reorganization or similar transaction; provided
that in such event, the holders of Registrable Securities initially requesting
such Demand Registration shall be entitled to withdraw such request and, if such
request is withdrawn, such Demand Registration shall not count as one of the
permitted Demand Registrations hereunder and the Company shall pay all
Registration Expenses in connection with such registration. The Company may
delay a Demand Registration hereunder only once in any twelve-month period.
(g) Selection of Underwriters. The holders of a majority of the
-------------------------
Registrable Securities included in any underwritten Demand Registration shall
have the right to select the investment banker(s) and manager(s) to administer
the offering.
(h) Other Registration Rights. Except as provided in this Agreement,
-------------------------
(i) the Company shall not grant to any Person the right to request the Company
to register any equity securities of the Company, or any securities convertible
or exchangeable into or exercisable for such securities, without the prior
written consent of the holders of a majority of the Registrable Securities, and
(ii) the Company shall not grant to any Person the right to request the Company
to register any equity securities of the Company, or any securities convertible
or exchangeable into or exercisable for such securities, on terms which are more
favorable (e.g., rights which are other than pari passu) to such Person than
those granted to the holders of Series A Preferred Registrable Securities
hereunder without the prior written consent of the holders of a majority of the
Series A Registrable Securities. Furthermore, if the Company hereafter grants
to any Person the right to request the Company to register any equity securities
of the Company, or any securities convertible or exchangeable into or
exercisable for such securities, by means of a shelf registration pursuant to
Rule 415 under the Securities Act, then the Company shall simultaneously grant
such rights to the holders of Series A Preferred Registrable Securities.
2. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever the Company proposes to register any
------------------
of its securities under the Securities Act (other than pursuant to a Demand
Registration (which is addressed under paragraph 1 above rather than under this
paragraph 2)) and the registration form to
3
<PAGE>
be used may be used for the registration of Registrable Securities (a "Piggyback
---------
Registration"), the Company shall give prompt written notice (in any event
- ------------
within three business days after its receipt of notice of any exercise of demand
registration rights other than under this Agreement) to all holders of
Registrable Securities of its intention to effect such a registration and shall
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within 20 days
after the receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
------------------
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
---------------------------------
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the Company, the Company shall include in such registration (i)
first, the securities the Company proposes to sell, (ii) second, the Registrable
Securities requested to be included in such registration, pro rata among the
holders of such Registrable Securities on the basis of the number of shares
requested by each such holder to be included in such offering, and (iii) third,
other securities requested to be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration
-----------------------------------
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the holders of a majority of the
Registrable Securities to be included in such registration, the Company shall
include in such registration (i) first, the securities requested to be included
therein by the holders requesting such registration, (ii) second, the
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Registrable Securities on the basis of the number of
shares requested by each such holder to be included in such offering, and (iii)
third, other securities requested to be included in such registration.
(e) Selection of Underwriters. If any Piggyback Registration is an
-------------------------
underwritten offering, the selection of investment banker(s) and manager(s) for
the offering must be approved by the holders of a majority of the Registrable
Securities included in such Piggyback Registration. Such approval shall not be
unreasonably withheld.
(f) Other Registrations. If the Company has previously filed a
-------------------
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convert ible or exchangeable into or exercisable for its equity securities
under the Securities Act (except on Form S-8 or any successor form), whether on
its own behalf or at the request of any holder or holders
4
<PAGE>
of such securities, until a period of at least 180 days has elapsed from the
effective date of such previous registration.
3. Holdback Agreements.
-------------------
(a) Each holder of Registrable Securities shall not effect any public
sale or distribution (including sales pursuant to Rule 144) of equity securities
of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 180-day
period beginning on the effective date of any underwritten registration (except
as part of such underwritten registration), unless the underwriters managing the
registered public offering otherwise agree.
(b) The Company (i) shall not effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
180-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise agree, and (ii) shall use best efforts to cause each holder of at
least 5% (on a fully-diluted basis) of its Common Stock, or any securities
convertible into or exchangeable or exercisable for Common Stock, purchased from
the Company at any time after the date of this Agreement (other than in a
registered public offering) to agree not to effect any public sale or
distribution (including sales pursuant to Rule 144) of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
-----------------------
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to the counsel selected by the
holders of a majority of the Registrable Securities covered by such registration
statement copies of all such documents proposed to be filed, which documents
shall be subject to the review and comment of such counsel);
(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 180 days and comply with the provisions of the Securities Act with respect
5
<PAGE>
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities covered by such
registra tion statement as a NASDAQ "national market system security" within
the meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or,
failing that, to secure NASDAQ authorization for such Registrable Securities
and, without limiting the generality of the foregoing, to arrange for at least
two market makers to register as such with respect to such Registrable
Securities with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions (including,
without limitation, causing representatives of the Company to participate in any
"road show" or "road shows") as the holders of
6
<PAGE>
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including effecting a stock split or a combination of
shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
(m) use its best efforts to cause such Registrable Securities covered
by such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Registrable Securities; and
(n) obtain a cold comfort letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by cold comfort letters as the holders of a majority of the Registrable
Securities being sold reasonably request (provided that such Registrable
Securities constitute at least 10% of the securities covered by such
registration statement).
7
<PAGE>
5. Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, listing expenses, printing expenses, messenger and delivery expenses, fees
and disbursements of custodians, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"), shall be borne
---------------------
as provided in this Agreement, except that the Company shall, in any event, pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit or quarterly review, the expense of any liability
insurance and the expenses and fees for listing the securities to be registered
on each securities exchange on which similar securities issued by the Company
are then listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, in addition to the provisions of paragraph 5(a) above, the Company
shall reimburse the holders of Registrable Securities included in such
registration for the reasonable fees and dis bursements of one counsel chosen
by the holders of a majority of the Registrable Securities included in such
registration and for the reasonable fees and disbursements of each additional
counsel retained by any holder of Registrable Securities for the purpose of
rendering a legal opinion on behalf of such holder in connection with any
underwritten Demand Registration or Piggyback Registration.
(c) To the extent Registration Expenses are not required to be paid
by the Company, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
shall be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
6. Indemnification.
---------------
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers, directors, partners,
members, affiliates and each Person who controls such holder (within the meaning
of the Securities Act) against all losses, claims, damages, liabilities and
expenses caused by any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same. In connection with an underwritten offering, the Company shall
indemnify such underwriters, their officers and directors and each Person who
8
<PAGE>
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the holders
of Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder specifically stating that it is for use in
the preparation of such registration statement, prospectus or preliminary
prospectus, amendment or supplement; provided that the obligation to indemnify
shall be individual, not joint and several, for each holder and shall be limited
to the net amount of proceeds received by such holder from the sale of
Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided, however, that any
indemnified party may, at its own expense, retain separate counsel to
participate in such defense. If such defense is assumed, the indemnifying party
shall not be subject to any liability for any settlement made by the indemnified
party without its consent (but such consent shall not be unreasonably withheld).
No indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation or which requires action other than the payment of money by
the indemnifying party. An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director, partner, member, affiliate or
controlling Person of such indemnified party and shall survive the transfer of
securities. The Company also agrees to make such provisions, as are
9
<PAGE>
reasonably requested by any indemnified party, for contribution to such party in
the event the Company's indemnification is unavailable for any reason.
7. Participation in Underwritten Registrations. No Person may
-------------------------------------------
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification obligations to the Company or the underwriters with respect
thereto, except as otherwise provided in paragraph 6 hereof.
8. Definitions.
-----------
(a) "Executive Registrable Securities" means (i) any shares of Common
--------------------------------
Stock issued upon conversion or exchange of the Class A Common Stock, par value
$.01 per share, and the Class B Common Stock, par value $.01 per share,
originally issued to any Executives, (ii) any other Common Stock issued with
respect to the securities referred to in clause (i) by way of a stock dividend
or stock split or in connection with an exchange or combination of shares,
recapitalization, merger, consolidation or other reorganization, and (iii) any
other shares of Common Stock held by Persons holding securities described in
clauses (i) and (ii) of this paragraph 8(a). As to any particular Executive
Registrable Securities, such securities shall cease to be Executive Registrable
Securities when they have been distributed to the public pursuant to a offering
registered under the Securities Act or sold to the public through a broker,
dealer or market maker in compliance with Rule 144 under the Securities Act (or
any similar rule then in force). For purposes of this Agreement, a Person shall
be deemed to be a holder of Executive Registrable Securities whenever such
Person has the right to acquire such Executive Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has actually been effected.
(b) "Executives" means, collectively, current and former executive
----------
employees and board members of, and consultants to, the Company and its
Subsidiaries who are or become parties to this Agreement, including without
limitation Kevin Rodgers, Dennis O'Connor, Paul Ingersoll, James Kowalik,
Michael Wolverton, Carter Wilson, James Horsley, Joseph Swinbank, Donald Poarch,
James O'Neil, Sammy Sorsby, J.D. Cox, Marc Trubitz, Suellen Trubitz, Randall
Brevard, Linda Sue Hughes, Donald Stewart, Ronald St. Clair, William Lear and
Joseph Cormier.
(c) "Golder Thoma Registrable Securities" means (i) any shares of
-----------------------------------
Common Stock issued upon conversion or exchange of the Class A Common Stock, par
value $.01 per share, and the Class B Common Stock, par value $.01 per share,
issued pursuant to that certain Stock Purchase Agreement, dated as of June 4,
1996, by and between the Company and Golder, Thoma,
10
<PAGE>
Cressey, Rauner Fund V, L.P. (as assignee of the original party, Golder, Thoma,
Cressey, Rauner Fund IV, L.P.), (ii) any other Common Stock issued with respect
to the securities referred to in clause (i) by way of a stock dividend or stock
split or in connection with an exchange or combination of shares,
recapitalization, merger, consolidation or other reorganization, and (iii) any
other shares of Common Stock held by Persons holding securities described in
clauses (i) and (ii) of this paragraph 8(c). As to any particular Golder Thoma
Registrable Securities, such securities shall cease to be Golder Thoma
Registrable Securities when they have been distributed to the public pursuant to
a offering registered under the Securities Act or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force). For purposes of this Agreement, a
Person shall be deemed to be a holder of Golder Thoma Registrable Securities
whenever such Person has the right to acquire such Golder Thoma Registrable
Securities (upon conversion or exercise in connection with a transfer of
securities or otherwise, but disregarding any restrictions or limitations upon
the exercise of such right), whether or not such acquisition has actually been
effected.
(d) "Original Registrable Securities" means, collectively, the Golder
-------------------------------
Thoma Registrable Securities and the Executive Registrable Securities.
(e) "Registrable Securities" means collectively, the Original
----------------------
Registrable Securities and Series A Preferred Registrable Securities.
(f) "Series A Preferred Registrable Securities" means (i) any shares
-----------------------------------------
of Common Stock issued upon conversion or exchange of the Senior Redeemable
Convertible Preferred Stock, Series A, par value $.01 per share, issued pursuant
to that certain Stock Purchase Agreement, dated as of April 27, 1999, by and
among the Company, The 1818 Fund III, L.P., Co-Investment Partners, L.P., Erie
Indemnity Company, Erie Insurance Exchange and Aquila Limited Partnership, (ii)
any other Common Stock issued with respect to the securities referred to in
clause (i) by way of a stock dividend or stock split or in connection with an
exchange or combination of shares, recapitalization, merger, consolidation or
other reorganization, and (iii) any other shares of Common Stock held by Persons
holding securities described in clauses (i) and (ii) of this paragraph 8(f). As
to any particular Series A Preferred Registrable Securities, such securities
shall cease to be Series A Preferred Registrable Securities when they have been
distributed to the public pursuant to a offering registered under the Securities
Act or sold to the public through a broker, dealer or market maker in compliance
with Rule 144 under the Securities Act (or any similar rule then in force). For
purposes of this Agreement, a Person shall be deemed to be a holder of Series A
Preferred Registrable Securities whenever such Person has the right to acquire
such Series A Preferred Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.
11
<PAGE>
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company shall not hereafter
--------------------------
enter into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to the holders of Registrable Securities in
this Agreement.
(b) Adjustments Affecting Registrable Securities. The Company shall
--------------------------------------------
not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. Any Person having rights under any provision of this
--------
Agreement shall be entitled to enforce such rights specifically and to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of a majority of the Registrable
Securities; provided that (i) no such amendment or action which adversely
affects any one holder or group of holders of Registrable Securities, as such,
vis-a-vis the other holders of Registrable Securities, as such, shall be
effective against such holder or group of holders without the prior written
consent of such holder or group of holders and (ii) no such amendment or action
which adversely affects the unique rights of the holders of Series A Registrable
Securities hereunder or a Qualified Holder hereunder (e.g., a reduction in the
number of their Demand Registrations) shall be effective against such holder or
group of holders without the prior written consent of the holders of a majority
of the Series A Registrable Securities or such Qualified Holder, as the case may
be.
(e) Successors and Assigns. All covenants and agreements in this
----------------------
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(f) Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be
12
<PAGE>
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
(g) Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) Governing Law. The corporate law of the State of Delaware shall
-------------
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of Illinois, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the State of Illinois or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Illinois.
(j) Notices. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each holder of Registrable Securities at the
addresses indicated on the Company's books and records and to the Company at the
address of its corporate headquarters or to such other address or to the
attention of such other person as the recipient party has specified by prior
written notice to the sending party.
* * * * *
13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Registration Agreement as of the date first written above.
NATIONAL EQUIPMENT SERVICES,
INC.
By: /s/ Kevin P. Rodgers
---------------------------
Name: Kevin P. Rodgers
-------------------------
Title: President and CEO
------------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND V, L.P.
By: GTCR V, L.P.
Its: General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: General Partner
By: /s/ Wiliam C. Kessinger
---------------------------
Its: Principal
/s/ Kevin P. Rodgers
-------------------------------
Kevin Rodgers
/s/ Paul R. Ingersoll
-------------------------------
Paul Ingersoll
THE 1818 FUND III, L.P.
By: Brown Brothers Harriman & Co.,
Its: General Partner
By: /s/ T. Michael Long
---------------------------
Name: T. Michael Long
Title: Partner
14
<PAGE>
CO-INVESTMENT PARTNERS, L.P.
By: CIP Partners, LLC,
Its: General Partner
By: /s/ Walter M. Cain
-----------------------------
Name: Walter M. Cain
----------------------------
Title: Individual Managing Member
ERIE INDEMNITY COMPANY
By: /s/ Douglas F. Ziegler
-----------------------------
Name: Douglas F. Ziegler
Title: Senior Vice President, Treasurer
& Chief Investment Officer
ERIE INSURANCE EXCHANGE
By: Erie Indemnity Company,
Its: attorney-in-fact
By: /s/ Douglas F. Ziegler
-----------------------------
Name: Douglas F. Ziegler
Title: Senior Vice President, Treasurer
& Chief Investment Officer
AQUILA LIMITED PARTNERSHIP
By: Northway Management Company, LLC,
By: /s/ Patrick J. Costello
-----------------------------
Name: Patrick J. Costello
Title: Chief Financial Officer
CONTINUATION OF
SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION AGREEMENT
15
<PAGE>
GTCR ASSOCIATES V
By: /s/ William C. Kessinger
---------------------------
Golder, Thoma, Cressey, Rauner, Inc.
Its: Managing General Partner
By: /s/ William C. Kessinger
---------------------------
Its: Principal
RODGERS INVESTMENT PARTNERS, L.P.
By: /s/ Kevin P. Rodgers
--------------------------
/s/ Dennis O'Connor
-------------------------------
Dennis O'Connor
/s/ James G. Kowalik
-------------------------------
James G. Kowalik
_______________________________
Jerry M. Wolverton
_______________________________
Carter Wilson
_______________________________
James Horsley
_______________________________
Joseph Swinbank
CONTINUATION OF
SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION AGREEMENT
16
<PAGE>
_______________________________
Donald Poarch
/s/ James O'Neil
--------------------------------
James O'Neil
_______________________________
Sammy Sorsby
_______________________________
J.D. Cox
_______________________________
Marc S. Trubitz
_______________________________
Suellen Trubitz
/s/ Douglas Randall Brevard
-------------------------------
Douglas Randall Brevard
/s/ Linda Sue Hughes
-------------------------------
Linda Sue Hughes
/s/ Donald Stewart
-------------------------------
Donald Stewart
/s/ Ronald St. Clair
-------------------------------
Ronald St. Clair
CONTINUATION OF
SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION AGREEMENT
17
<PAGE>
/s/ William S. Lear
-------------------------------
William S. Lear
_______________________________
Joseph Y. Cormier
/s/ Joseph Falconite
-------------------------------
Joseph Falconite
_______________________________
Ralph McCurry
_______________________________
Michael A. Falconite
_______________________________
Emilie Falconite
_______________________________
Angela S. Grimm
/s/ David Melber
-------------------------------
David Melber
_______________________________
Richard Mann
R&R RENTALS
By: __________________________
Its: __________________________
CONTINUATION OF
SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION AGREEMENT
18
<PAGE>
FALCONITE INVESTMENT L.P.
By: __________________________
Its: __________________________
ST. LOUIS CORP. TRAVEL
By: __________________________
Its: __________________________
Ralph McCurry (Trust)
By: __________________________
Its: __________________________
CONTINUATION OF
SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION AGREEMENT
19
<PAGE>
Exhibit 22.1
NATIONAL EQUIPMENT SERVICES, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
CERTIFICATE AND REPORT OF INSPECTOR OF ELECTION
-----------------------------------------------
The undersigned, the duly appointed Inspector of Election at the
Annual Meeting of Stockholders (the "Annual Meeting") of National Equipment
Services, Inc., a Delaware corporation (the "Company"), held on June 17, 1999,
pursuant to Section 231 of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY that the following is an accurate report of the
votes of the stockholders of the Company at the Annual Meeting;
(1) The number of shares of Common Stock of the Company issued and
outstanding and entitled to vote on matters submitted at the Annual Meeting to
the holders of Common Stock was 24,123,387.
(2) There were present at the Annual Meeting, in person or by proxy,
holders of 22,832,486 shares of Common Stock, which is 94.6% of the total
number of shares of Common Stock outstanding and entitled to vote at the
Annual Meeting and which constituted a quorum for purposes of voting on each
of the matters submitted to the stockholders for their vote.
(3) I tabulated the votes with respect to the election of
directors, and Ronald St. Clair received 22,816,266 votes and Lawrence C.
Tucker received 22,816,266 votes.
(4) Each of Ronald St, Clair and Lawrence C. Tucker received a
plurality of the votes cast by the holders of the Common Stock and I hereby
declare and certify to the Secretary of the Company that each of Ronald St.
Clair and Lawrence C. Tucker has been duly elected as a director of the
Company.
<PAGE>
(5) I tabulated the votes with respect to the resolution regarding
approval of the issuance of up to 100,000 shares of Senior Redeemable
Convertible Preferred Stock, Series A and the issuance of sharess of Common
Stock upon conversion thereof and such proposal received the number of votes
set forth below:
Number of Votes
----------------
For 20,995,808
Against 137,306
Abstain 1,699,372
Since a majority of the votes cast by the holders of the Common Stock present
and voting at the meeting were votes for approval, I hereby declare and
certify to the Secretary of the Company that such resolution has been
approved by the stockholders of the Company.
(6) 1 tabulated the votes with respect to the resolution regarding
ratification of the appointment of PricewaterhouseCoopers LLP as independent
public accountants for the fiscal year ending December 31, 1999 and such
proposal received the number of votes so forth below:
Number of Votes
---------------
For 22,800,085
Against 27,951
Abstain 4,450
Since a majority of the votes cast by the holders of the Common Stock present
and voting at the meeting were votes for approval, I hereby declare and
certify to the Secretary of the Company that such resolution has been
approved by the stockholders of the Company.
* * * * *
<PAGE>
IN WITNESS WHEREOF, I have executed this Certificate the 17th day of
June, 1999.
By: /s/Thomas Blatchford
----------------------------------
Print: Thomas Blatchford
-------------------------------
on behalf of Harris Trust and
Savings Bank
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF NATIONAL EQUIPMENT SERVICES, 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>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 478 1,007
<SECURITIES> 0 0
<RECEIVABLES> 73,864 27,972
<ALLOWANCES> 2,722 1,387
<INVENTORY> 21,056 6,736
<CURRENT-ASSETS> 0 0
<PP&E> 590,440 155,980
<DEPRECIATION> 66,800 13,773
<TOTAL-ASSETS> 902,054 272,579
<CURRENT-LIABILITIES> 0 0
<BONDS> 591,025 224,240
95,000 0
0 0
<COMMON> 241 234
<OTHER-SE> 143,410 28,615
<TOTAL-LIABILITY-AND-EQUITY> 902,054 272,579
<SALES> 58,546 19,870
<TOTAL-REVENUES> 197,375 66,281
<CGS> 24,695 10,835
<TOTAL-COSTS> 114,273 40,179
<OTHER-EXPENSES> 45,809 14,020
<LOSS-PROVISION> 1,358 1,133
<INTEREST-EXPENSE> 26,334 8,036
<INCOME-PRETAX> 11,626 4,199
<INCOME-TAX> 4,883 1,734
<INCOME-CONTINUING> 6,743 2,465
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,743 2,465
<EPS-BASIC> 0.29 0.17
<EPS-DILUTED> 0.26 0.15
</TABLE>
