<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 24, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
NATIONSRENT, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7353 31-1570069
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
<TABLE>
<S> <C>
JAMES L. KIRK
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
450 EAST LAS OLAS BOULEVARD 450 EAST LAS OLAS BOULEVARD
FORT LAUDERDALE, FL 33301 FORT LAUDERDALE, FL 33301
(954) 760-6550 (954) 760-6550
(Address, Including Zip Code, and Telephone Number, (Name, Address, Including Zip Code, and Telephone
Including Area Code, of Registrant's Principal Number, Including Area Code, of Agent for Service)
Executive Offices)
</TABLE>
---------------------
COPIES TO:
STEPHEN K. RODDENBERRY, ESQ.
AKERMAN, SENTERFITT & EIDSON, P.A.
ONE S.E. THIRD AVENUE, 28TH FLOOR
MIAMI, FL 33131
(305) 374-5600
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================================
PROPOSED
AMOUNT MAXIMUM PROPOSED AMOUNT OF
TITLE OF EACH CLASS TO BE OFFERING PRICE MAXIMUM REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE FEE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 3/8% Senior Subordinated
Notes due 2008.............. $175,000,000 100% $175,000,000 $48,650
- ------------------------------------------------------------------------------------------------------------------------------
Guarantees(2)................. (3) (3) (3)
==============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
(2) The Company's wholly-owned domestic subsidiaries, listed in the table on the
following page (the "Guarantors"), have guaranteed on a senior unsecured
basis, jointly and severally, the payment of the principal of, premium, if
any, and interest on the 10 3/8% Senior Subordinated Notes due 2008 being
registered hereby (the "Guarantees"). The Guarantors are registering the
Guarantees. Pursuant to Rule 457(n) under the Securities Act of 1933, as
amended, no registration fee is required with respect to the Guarantees.
(3) Not applicable.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
TABLE OF CO-REGISTRANTS
<TABLE>
<CAPTION>
PRIMARY STANDARD
INDUSTRIAL I.R.S. EMPLOYER
STATE OF CLASSIFICATION IDENTIFICATION
NAME OF ADDITIONAL REGISTRANT INCORPORATION CODE CODE
----------------------------- ------------- ---------------- ---------------
<S> <C> <C> <C>
A-Action Rental, Inc........................ Pennsylvania 7353 25-1213243
Acme Rental, Inc............................ Michigan 7359 38-2196609
A to Z Rents It, Inc........................ Texas 7359 74-2375781
A to Z Rents It, Inc. #2.................... Texas 7359 74-2587622
Central Alabama Rental Center, Inc.......... Alabama 7353 63-0911089
Gabriel Trailer Manufacturing Company,
Inc....................................... Ohio 7353 31-0788963
Gold Coast Aerial Lift, Inc................. Florida 7353 59-2652858
High Reach Company, Inc..................... Florida 7353 59-1871216
NationsRent of Alabama, Inc................. Delaware 7353 65-0857655
NationsRent of California, Inc.............. Delaware 7353 pending
NationsRent of Florida, Inc................. Delaware 7353 65-0822618
NationsRent of Georgia, Inc................. Delaware 7353 65-0857652
NationsRent of Indiana, Inc................. Delaware 7353 31-1579278
NationsRent of Kentucky, Inc................ Delaware 7353 61-1316067
NationsRent of Louisiana, Inc............... Delaware 7353 65-0857650
NationsRent of Michigan, Inc................ Delaware 7353 65-0857648
NationsRent of New Hampshire, Inc........... Delaware 7353 65-0872984
NationsRent of Ohio, Inc.................... Delaware 7353 31-1578491
NationsRent of Tennessee, Inc............... Delaware 7353 65-0857647
NationsRent of Texas, Inc................... Delaware 7353 65-0843067
NationsRent of West Virginia, Inc........... Delaware 7353 31-1579293
NRI/LEC Merger Corp., Inc................... Delaware 7353 65-0872986
Raymond Equipment Company................... Kentucky 7353 61-0509732
Sam's Equipment Rental, Inc................. Ohio 7353 31-1373557
Southeast Rental & Leasing, Inc............. Florida 7353 59-3132678
Tennessee Tool & Supply, Inc................ Tennessee 5084 62-1263696
The Bode-Finn Company....................... Ohio 5084 31-0207079
The J. Kelly Co., Inc....................... Michigan 5084 38-2309159
Titan Rentals, Inc.......................... West Virginia 7353 55-0696220
</TABLE>
(ii)
<PAGE> 3
SUBJECT TO COMPLETION, DATED DECEMBER 24, 1998
OFFER TO EXCHANGE
10 3/8% SENIOR SUBORDINATED NOTES DUE 2008, WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT, FOR ANY AND ALL
OUTSTANDING 10 3/8% SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE NOT BEEN SO REGISTERED
OF
NATIONSRENT, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1999, UNLESS EXTENDED
---------------------
NationsRent, Inc., a Delaware corporation (the "Company"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to $175,000,000 aggregate principal amount of 10 3/8%
Senior Subordinated Notes due 2008 (the "New Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), for a like
principal amount at maturity of the issued and outstanding 10 3/8% Senior
Subordinated Notes due 2008 (the "Old Notes," and, together with the New Notes,
the "Notes") from the holders (the "Holders") thereof. The terms of the New
Notes are substantially identical in all material respects to the Old Notes,
except for certain transfer restrictions and registration rights relating to the
Old Notes. We issued $175,000,000 aggregate principal amount of Old Notes on
December 11, 1998, pursuant to exemptions from, or transactions not subject to,
the registration requirements of the Securities Act and applicable state
securities laws (the "Private Debt Offering"). The New Notes will be issued
pursuant to an indenture dated as of December 11, 1998 between the Company and
The Bank of New York (the "Trustee"). Set forth below is a summary of the terms
of the Notes offered by this Prospectus. For more detail see "Description of
Notes."
* INTEREST
The Notes have a fixed annual rate of 10 3/8% which will be paid every six
months on June 15 and December 15.
* MATURITY
The Notes will mature on December 15, 2008.
* GUARANTEES
If we cannot make payments on the Notes when they are due, our existing
subsidiaries have guaranteed the Notes and must make payments instead. Certain
of our future subsidiaries will also guarantee the Notes.
The Notes are unsecured obligations of our Company and the Guarantees are
unsecured obligations of the guarantor subsidiaries.
* MANDATORY OFFER TO REPURCHASE
If we sell certain assets or experience specific kinds of changes in control,
we must offer to repurchase the Notes.
* RANKING
The Notes and the Guarantees are subordinated to certain of our current debts
and certain of our future debts that we are permitted to incur under our
senior credit facilities and the indenture governing the Notes.
If we or any guarantor subsidiary goes into bankruptcy, payments on the Notes
will only be made after our senior debt or the senior debt of such guarantor
subsidiary has been paid in full.
* REDEMPTION
At any time on or after December 15, 2003, we may, at our option, redeem the
Notes at the prices set forth in this Prospectus.
At any time on or prior to December 15, 2001, we may redeem up to 35% of the
principal amount of the Notes and of any additional notes issued under the
indenture governing the Notes with the proceeds of certain equity offerings by
our Company.
---------------------
THIS INVESTMENT INVOLVES RISKS. SEE THE RISK FACTORS SECTION BEGINNING ON
PAGE 13.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES OR DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THIS PROSPECTUS IS DELIVERED IN FINAL FORM. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 4
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future senior debt of the
Company. The Notes rank equal to any future senior subordinated indebtedness of
the Company and rank senior in right of payment to all other subordinated
obligations of the Company. The Notes are unconditionally guaranteed (the
"Guarantees") on a senior subordinated basis by all of our existing and certain
future subsidiaries (the "Guarantors"). The Guarantees are general unsecured
obligations of the Guarantors and are subordinated in right of payment to all
existing and future senior debt of the Guarantors. The Guarantees rank equal to
any future senior subordinated indebtedness of the Guarantors and rank senior in
right of payment to all other subordinated obligations of the Guarantors. The
Indenture permits us to incur additional indebtedness, including senior debt
under our senior credit facilities. See "Description of the Notes."
For each Old Note accepted for exchange, the Holder thereof will receive a
New Note having a principal amount equal to that of the surrendered Old Note.
The New Notes will bear interest from the date of initial issuance of the New
Notes, plus an amount equal to the accrued interest on the Old Notes from the
most recent date to which interest has been paid to the date of exchange thereof
for New Notes. Old Notes accepted for exchange will cease to accrue interest
upon issuance of the New Notes. Holders of Old Notes accepted for exchange will
not receive any payment in respect of accrued interest on such Old Notes.
The New Notes are being offered hereunder in order to satisfy certain
obligations of ours contained in a Registration Rights Agreement between us and
the initial purchasers of the Old Notes. We are making the Exchange Offer
pursuant to the Registration Statement of which this Prospectus is a part in
reliance upon the position of the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters addressed
to other parties in other transactions. However, we have not sought our own
no-action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer. Based on
the interpretations by the staff of the Commission set forth in these no-action
letters, we believe that the New Notes issued pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by the Holders thereof
without further compliance with the registration and prospectus delivery
requirements of the Securities Act subject to certain conditions. Such
conditions include that the New Notes may not be offered for resale, resold or
otherwise transferred by the Holders thereof to (1) any such Holder that is an
"affiliate" of the Company or the Guarantors within the meaning of Rule 405
under the Securities Act; (2) an initial purchaser or Holder of Old Notes who
acquired the Old Notes directly from the Company solely in order to resell
pursuant to Rule 144A of the Securities Act or any other available exemption
under the Securities Act; or (3) a broker-dealer who acquired the Old Notes as a
result of market making or other trading activities. Furthermore, such New Notes
may only be acquired in the ordinary course of such Holder's business and such
Holder may not be participating in and has no arrangement or understanding with
any person to participate in a distribution (within the meaning of the
Securities Act) of such New Notes. Each broker-dealer that receives New Notes
for its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. We have agreed to make the Prospectus
available to any broker-dealer for use in connection with any such resale for up
to 120 days after the Expiration Date (as defined). See "Plan of Distribution."
We will not receive any proceeds from the Exchange Offer. We will pay
numerous expenses in connection with the Exchange Offer. Tenders of Old Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to
, 1999, (the "Expiration Date"). The Registration Statement of which
this Prospectus constitutes a part will remain in effect until the consummation
of the Exchange Offer, which will occur promptly after the Expiration Date. If
we terminate the Exchange Offer and do not accept for exchange any Old Notes, we
will promptly return the Old Notes to the Holders thereof. See "The Exchange
Offer."
There is no existing trading market for the New Notes and we cannot assure
you that a market for the New Notes will develop in the future. Bear, Stearns &
Co. Inc., NationsBanc Montgomery Securities LLC,
i
<PAGE> 5
BT Alex. Brown and BancBoston Robertson Stephens Inc. (collectively, the
"Initial Purchasers") have advised us that they currently intend to make a
market in the New Notes. The Initial Purchasers are not obligated to do so,
however, and any market-making with respect to the New Notes may be discontinued
at any time without notice. To the extent that a market for the New Notes does
develop, the market value of the New Notes will depend on market conditions
(such as yields on alternative investments), general economic conditions, our
financial condition and other conditions. Such conditions might cause the New
Notes, to the extent that they are actively traded, to trade at a significant
discount from face value. See "Risk Factors -- Trading Market for the Notes." We
do not intend to apply for listing or quotation of the New Notes on any
securities exchange or stock market or register or qualify the New Notes for
offer and sale in any jurisdiction (other than the registration of the New Notes
under the Securities Act).
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-4
that we filed with the Commission under the Securities Act. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits thereto, certain parts of which are omitted in accordance with the
rules and regulations of the Commission. For further information with respect to
our company and the New Notes offered by this Prospectus, please refer to the
Registration Statement. Any statements made in this Prospectus concerning the
provisions of certain documents are not necessarily complete and, in each
instance, we urge you to refer to the copy of such document filed as an exhibit
to the Registration Statement otherwise filed with the Commission. All of our
statements concerning such documents are qualified in their entirety by such
reference.
We comply with the informational requirements of the Exchange Act, and, in
accordance therewith, are required to file reports, proxy statements and other
information with the Commission. The Registration Statement, the exhibits
forming a part thereof and the reports and other information filed by us with
the Commission may be inspected without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549; and at the following regional offices of the
Commission: 7 World Trade Center, New York, New York 10048; and 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material can also be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, at prescribed rates. You may obtain
information on the Public Reference Section by calling the Commission at
1-800-SEC-0330. You may also inspect these materials at the offices of the NYSE,
20 Broad Street, New York, New York 10005 or on the Commission's site on the
World Wide Web at http://www.sec.gov.
We have agreed that, whether or not we are required to do so by the rules
and regulations of the Commission, for so long as any of the Notes remain
outstanding, we will furnish to the Holders and file with the Commission (unless
the Commission will not accept such a filing) (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K as if we were required to file such forms,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information only, a
report thereon by our certified independent accountants, and (ii) all reports
that would be required to be filed with the Commission on Form 8-K if we were
required to file such reports in each case within the time periods set forth in
the Commission's rules and regulations.
We have not authorized any dealer, salesperson or other individual to give
any information or to make any representations other than those contained in
this Prospectus. You may not rely on any such information or representations
other than those set forth in this Prospectus.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THE NEW NOTES AND IT IS NOT
SOLICITING AN OFFER TO BUY THE NEW NOTES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS PROHIBITED. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
UNDER THE TERMS DESCRIBED HEREIN SHALL IMPLY THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY DATE AFTER THE DATE HEREOF.
ii
<PAGE> 6
SUMMARY
The following summary contains basic information about this Offering. It
likely does not contain all the information that is important to you in making a
decision to invest in our Company. For a more complete understanding of this
Offering, we encourage you to read this entire document and other documents to
which we refer.
The term "Consolidated Financial Statements" means the consolidated
financial statements and accompanying notes contained in this Prospectus. The
term "Guarantees" means the agreements made by all of our existing and certain
of our future subsidiaries to make payments on the Notes when such payments are
due in the event that we cannot make such payments. The term "Guarantors" refers
to those subsidiaries providing the Guarantees. The term "Offering" means the
offering of the New Notes pursuant to this Prospectus. Unless the context
otherwise requires, all references to "NationsRent," the "Company," "we," "us"
or "our" include NationsRent, Inc. and its subsidiaries. Unless otherwise
indicated (1) the description of our business reflects all businesses which we
have acquired as of December 21, 1998 (collectively, the "Acquisitions") and (2)
all historical share information contained in this Prospectus has been adjusted
to reflect a 2,500 for 1 split of our common stock, par value $0.01 (the "Common
Stock"), which occurred on June 2, 1998 (the "Stock Split").
THE COMPANY
WHO WE ARE
NationsRent is one of the fastest growing equipment rental companies in the
United States. We have acquired a platform of equipment rental businesses
concentrated in selected markets and are building a network of nationally
branded locations. We have become a leading provider of rental equipment as a
result of our strategy to expand our fleet of rental equipment, acquire core
businesses and open or acquire additional locations concentrated around those
businesses. We believe that this "cluster" strategy enables us to increase
profitability in our acquired stores and achieve profitability in our newly
opened locations more quickly than our competitors. By implementing the cluster
strategy and expanding our fleet of rental equipment, we are able to provide a
full range of rental equipment to customers with a wide variety of equipment
rental needs.
WHAT WE DO
We offer a comprehensive line of equipment for rental primarily to a broad
range of construction and industrial customers, including heavy highway
contractors, general contractors, subcontractors, manufacturing plants and
distribution centers. We also sell used and new equipment, spare parts and
supplies, and provide maintenance and repair services. Our locations offer a
full range of high quality, well-maintained rental equipment, including the
following:
<TABLE>
<S> <C>
* backhoes * aerial lifts and work platforms
* bulldozers * compressors and generators
* skid steer loaders * specialized hand tools
</TABLE>
HOW WE HAVE DONE
Since our formation in August 1997, we have acquired 32 equipment rental
businesses operating in 20 states and we currently operate 135 locations. For
the twelve months ended September 30, 1998, on a pro forma basis assuming
completion of the Acquisitions, we had approximate revenue of $441.4 million,
EBITDA of $153.5 million and an EBITDA margin of 34.8%.
INDUSTRY OVERVIEW
We are capitalizing on the current dynamics in the equipment rental
industry. According to industry sources, the United States equipment rental
industry grew from an estimated $614.0 million in revenue in
1
<PAGE> 7
1982 to an estimated $20.0 billion in 1997, which represents a compound annual
growth rate of more than 26%. Construction and industrial companies primarily
have driven this growth by increasingly outsourcing their equipment needs to
reduce investment in non-core assets and convert costs from fixed to variable.
According to industry sources, the United States equipment rental industry is
expected to grow to an estimated $40.0 billion in annual revenue over the next
five years due to the overall growth in the economy and a continuing trend to
rent rather than buy equipment. In addition, the United States equipment rental
industry is highly fragmented, with more than 20,000 companies. According to
industry sources, in 1997 the 100 largest equipment rental companies in the
United States had a combined market share of less than 20%, no single equipment
rental company in the United States had a market share greater than 3% and more
than 90% of equipment rental companies had ten or fewer locations. We believe
that recent consolidation has increased the market share of the ten largest
equipment rental companies in the United States and that the largest equipment
rental company in the United States currently has a market share of
approximately 6%. We are taking advantage of the fragmentation in the equipment
rental industry and the absence of an equipment rental company with significant
market share by creating an integrated network of nationally branded locations
offering broad product selection and superior customer service.
COMPETITIVE STRENGTHS
We believe we have several competitive strengths that will enable us to
continue to increase growth and profitability, including the following:
Strong Market Position. We have achieved a leading market position in
selected markets and expect to continue to increase revenue as a result of
our cluster strategy. We believe this strategy enables us to more
effectively serve our customers, broaden our customer base, pool rental
equipment inventory, offer a broader selection and greater availability of
equipment and maintain a high rental equipment utilization rate. By
offering a full range of rental equipment from each location, we believe
that customers who currently use multiple rental equipment providers will
prefer to fill their rental needs through the NationsRent network of
locations. In addition, we believe that we have other advantages relative
to smaller operators, including greater purchasing power and a lower cost
of capital.
Full Range of Rental Equipment. By offering a full range of rental
equipment, we can serve a diverse customer base and respond to customer
demand across each geographic region in which we operate. We offer a
comprehensive selection of light, medium and heavy rental equipment serving
the short-, medium- and long-term requirements of contractors, commercial
customers and industrial customers. Since January 1, 1998, we have added
approximately $147.0 million of new equipment to our rental equipment
inventory. As a result, in part, of the capital expenditures made at the 25
locations we have owned since January 1, 1998, our rental revenue on a pro
forma basis from these locations has increased more than 40% for the nine
month period ended September 30, 1998 as compared to the same period for
1997.
National Brand. We have entered selected markets with the goal of
establishing a nationally recognized brand throughout the United States.
Since our formation in August 1997, we have expanded into 20 states in the
regions set forth below:
<TABLE>
<CAPTION>
NUMBER OF
REGION STATES WITH NATIONSRENT LOCATIONS LOCATIONS
- ------ --------------------------------- ---------
<S> <C> <C>
Midwest........................ Indiana, Kentucky, Michigan, Ohio, West 45
Virginia
Southeast...................... Alabama, Florida, Georgia, Tennessee 35
Central........................ Louisiana, Texas 33
Northeast...................... Maine, Massachusetts, New Hampshire, New York, 17
Pennsylvania, Rhode Island, Vermont
West........................... California, Nevada 5
-----
TOTAL 135
=====
</TABLE>
2
<PAGE> 8
The expansion into these regions provides us with a substantial base from
which to roll out our branding strategy. This strategy includes expanding
our fleet of rental equipment, implementing standard operating procedures
and best practices and creating a distinctive store format and marketing
program. We believe that we are able to increase revenue by offering an
extensive inventory of rental equipment in a customer-oriented atmosphere
and a brand name known for consistent quality. We believe this branding
strategy enables us to expand our customer base and attract a broader range
of customers, including large customers with operations in a variety of
geographic markets.
Distinctive Operating Format. We have designed and are implementing a
format for our locations which we believe differentiates us from our
competitors. Distinguishing characteristics of this format include
drive-through lanes, clearly marked equipment aisles and attractive, well
organized and clean store facilities. Our larger locations are typically on
a six to 12 acre site in a heavily trafficked area with a 20,000 to 40,000
square foot facility housing a repair and maintenance center and a broad
selection and extensive inventory of equipment and supplies. Our smaller
locations are typically on a two to six acre site in a high-visibility
commercial area with a 7,500 to 11,000 square foot facility, with
maintenance and delivery capabilities and inventory and supplies targeted
to the customer base in that area.
Focus on Customer Service. We are differentiating ourself from our
competitors with innovations designed to increase customer satisfaction. We
generally offer more convenient access, faster check-in and check-out
procedures and shorter required lead time for rentals than our competitors.
We also offer on-time equipment delivery and pick-up, on-site repair
service, 24-hour customer assistance and written instruction materials for
equipment usage and safety. In addition, as part of our plan to provide
one-stop shopping to customers, each location sells parts and supplies to
complement equipment rentals and sales.
Customized Management Information System. We are installing a
customized management information system (the "System") capable of
monitoring operations at several thousand locations. The System is designed
to track customer purchasing patterns and demographics for use in gaining
market share in new and existing markets, consolidating equipment
purchases, maximizing utilization rates and reducing overhead expenditures.
The System will provide our management with real time revenue, inventory,
financial and customer information, facilitating rapid and well informed
decision making. In addition, the System will be designed to permit our
customers to reserve and rent equipment and access their account
information from their own computer terminals via our Internet website. To
develop our System, we assembled a team of management information
specialists who have previously developed systems for several Fortune 500
companies. The System has been developed to ensure that it is Year 2000
compliant.
Experienced Management Team. We believe that we have one of the most
experienced and growth-oriented executive management teams among
publicly-traded companies in the equipment rental industry. James L. Kirk,
our Chairman and Chief Executive Officer, founded OHM Corporation ("OHM"),
a New York Stock Exchange ("NYSE") listed company, in 1969 and served in
various senior executive positions with OHM, growing it into a leading
environmental construction company with an inventory of heavy and light
equipment having an original cost of over $100 million. Recently, Don R.
O'Neal joined us as President and Chief Operating Officer. Prior to joining
us, Mr. O'Neal served as President of Ray L. O'Neal, Inc. ("RLOI") and
Arenco, LLC ("ALLC" and operating with RLOI as "A-1 Rentals") in Fort
Worth, Texas, one of the largest independent equipment rental businesses in
the United States, substantially all the assets of which were acquired by
us in October 1998. Mr. O'Neal was a second-generation owner of A-1 Rentals
and has been in the equipment rental business for over 30 years. In
addition, we benefit from the experience of H. Wayne Huizenga, one of our
directors and principal investors, who serves as Chairman and Co-Chief
Executive Officer of Republic Industries, Inc. ("Republic") and who
co-founded and served in various senior executive positions with Waste
Management, Inc. ("Waste Management") and Blockbuster Entertainment
Corporation ("Blockbuster"), each of which is a leading consolidator in its
respective industry. The other members of our senior management team have
previously worked closely with Mr. Kirk in senior management positions at
OHM, and other key employees and consultants have worked with Mr. Huizenga
in various positions at Republic, Waste Management or Blockbuster. The
NationsRent management team is supported by
3
<PAGE> 9
operating, marketing and business development managers with an average of
more than 15 years of experience in the equipment rental industry.
GROWTH STRATEGY
Our objectives are to increase revenue, profitability, market share and
cash flow by building a nationally branded network of locations that offer a
comprehensive selection of high quality rental equipment in convenient and
accessible locations to customers in the construction and industrial markets.
Key elements of our growth strategy are as follows:
Enhance Operations. We enhance the operations at our locations by:
* increasing the breadth and depth of rental inventory and sharing
rental equipment among locations;
* implementing the NationsRent customer service approach;
* linking locations to the NationsRent management information System;
and
* branding locations and rental inventory with the NationsRent logo,
colors and distinctive store appearance.
Expand National Presence. We expect to continue to acquire leading
companies to implement our cluster strategy and position NationsRent to
achieve significant market share. We target businesses that have one or
more of the following characteristics:
Sstrong positions in their geographic market;
* experienced local management teams that will continue to work with
us following the acquisition;
* high quality equipment rental inventory; and
* physical and operating characteristics that are suited to
conversion to the NationsRent format.
Once we have entered a particular market, we seek to acquire additional
rental businesses in that market or adjacent markets with locations and
equipment selection that complement our existing operations, thus enabling
us to further penetrate that market.
Open New Rental Locations. Once we have established a presence in a
particular market, we seek to open new locations in that geographic area or
adjacent areas to enable us to offer a greater selection and availability
of equipment, maximize our equipment inventory utilization rates and
achieve economies of scale. We believe that this strategy allows our new
locations to achieve profitability at a faster rate than our competitors
because these locations (1) generate revenue more quickly as a result of
the pre-existing market presence, name recognition and referrals from
existing locations and (2) have lower overhead costs due to the sharing of
service, maintenance, administrative functions and personnel with our
already-established locations. Since August 1997, we have opened six new
locations.
Further Penetrate Industrial Rental Market. We believe that the
equipment needs of industrial customers are underserved by the existing
equipment rental market in the United States and that there are significant
opportunities to further penetrate this market segment. We also believe
that by offering a comprehensive selection and available supply of rental
equipment throughout an integrated nationally branded network of locations,
industrial customers will become increasingly aware of the advantages of
equipment rental relative to ownership. Such advantages include reduced
capital investment, reduced storage and maintenance expense and greater
access to the most modern equipment.
4
<PAGE> 10
RECENT DEVELOPMENTS
In October 1998, we acquired substantially all of the assets of A-1
Rentals, which has 13 locations serving the Dallas/Fort Worth and Austin, Texas
markets. In December 1998, we acquired Logan Equipment Corp. and substantially
all of the assets of certain of its affiliated companies ("Logan"), which have
16 locations throughout the Northeast. We also acquired in December 1998
substantially all of the assets of River City Rentals, Inc. ("River City"),
which has five locations in California and Nevada.
NationsRent was incorporated in the State of Delaware in August 1997. Our
principal executive offices are located at 450 East Las Olas Boulevard, Fort
Lauderdale, Florida 33301 and our telephone number is (954) 760-6550.
5
<PAGE> 11
THE INITIAL OFFERING
Pursuant to a Purchase Agreement dated as of December 8, 1998 (the
"Purchase Agreement"), we sold the Old Notes in an aggregate principal amount of
$175.0 million to the Initial Purchasers on December 11, 1998. The Initial
Purchasers subsequently resold the Old Notes to qualified institutional buyers
pursuant to Rule 144A under the Securities Act. The net proceeds from the
Private Debt Offering, of approximately $168.8 million after deducting discounts
to the Initial Purchasers and estimated offering expenses, were used to repay
certain subordinated acquisition debt and outstanding indebtedness under our
senior credit facilities.
The Old Notes were sold pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. As a condition to their purchase of the Old Notes, the
Initial Purchasers requested that we agree to commence the Exchange Offer
following the Private Debt Offering.
THE EXCHANGE OFFER
NOTES OFFERED................... We are offering for exchange up to
$175,000,000 aggregate principal amount of
10 3/8% Senior Subordinated Notes due 2008,
which we have registered under the Securities
Act. The terms of the New Notes and the Old
Notes are substantially identical in all
material respects, except that:
* the New Notes have been registered
under the securities Act;
* the Old Notes have certain transfer
restrictions and registration rights;
and
* the New Notes will not contain certain
provisions relating to additional
interest to be paid to the Holders of
Old Notes under certain circumstances
relating to the timing of the Exchange
Offer.
EXCHANGE OFFER.................. We are offering to exchange the New Notes for
the Old Notes that are properly tendered and
accepted for exchange. We will issue the New
Notes promptly after the Expiration Date. If
you were not prohibited from participating in
the Exchange Offer and you did not tender
your Old Notes, you will have no further
exchange rights under the Registration Rights
Agreement with respect to such non-tendered
Old Notes once the Exchange Offer is
consummated. Accordingly, such Old Notes will
continue to be subject to the restrictions on
transfer contained in the legend thereon.
TENDERS, EXPIRATION DATE;
WITHDRAWAL; EXCHANGE DATE....... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1999, or
on a later extended date and time as we may
decide, provided that the Exchange Offer
shall not be extended beyond 30 calendar days
from the date of this Prospectus. You may
withdraw and retender any Old Notes tendered
pursuant to the Exchange Offer at any time
prior to the expiration date of the Exchange
Offer. We will return to you any of your
tendered Old Notes not accepted for exchange
for any reason without expense as promptly as
practicable after the expiration or
termination of the Exchange Offer. The date
of acceptance for exchange of all Old Notes
properly tendered and
6
<PAGE> 12
not withdrawn for New Notes (the "Exchange
Date") will be the first business day
following the expiration date of the Exchange
Offer or as soon as practicable thereafter.
SHELF REGISTRATION STATEMENT.... If you (other than by reason of being an
affiliate of the Company within the meaning
of Rule 405 under the Securities Act) are not
eligible under applicable securities laws to
participate in the Exchange Offer and you
have provided information regarding yourself
and the distribution of your Old Notes to us,
we have agreed to register the Old Notes with
a shelf registration statement and use our
best efforts to cause such registration
statement to be declared effective by the
Commission within certain time periods after
the consummation of the Exchange Offer. We
have agreed to maintain the effectiveness of
the shelf registration statement for, under
certain circumstances, a maximum of two years
to cover resales of the Old Notes held by
such holders.
ACCRUED INTEREST ON THE NEW
NOTES........................... Each New Note will bear interest from the
most recent date to which interest has been
paid on the Old Note or, if no such payment
has been made, from December 11, 1998.
Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance
of the New Notes.
PROCEDURES FOR TENDERING OLD
NOTES........................... If you want to accept the Exchange Offer, you
must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in
accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with either certificates
for the Old Notes or a book-entry
confirmation of such Old Notes into the
book-entry transfer facility, if such
procedure is available, and any other
required documentation, to The Bank of New
York, as Exchange Agent (the "Exchange
Agent"), at the address set forth herein and
in the Letter of Transmittal.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............... Any beneficial owner of Old Notes whose Old
Notes are registered in the name of a broker,
dealer, commercial bank, trust company or
other nominee and who wishes to tender such
Old Notes for exchange should contact the
registered Holder and instruct such
registered Holder to tender such Old Notes on
the beneficial owner's behalf. If such
beneficial owner wishes to tender its Old
Notes on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering its Old
Notes, either make appropriate arrangements
to register ownership of the Old Notes in
such owner's name or obtain a properly
completed bond power from the registered
Holder. The transfer of registered ownership
may take considerable time and may not be
able to be completed prior to the Expiration
Date.
GUARANTEED DELIVERY
PROCEDURES...................... If you want to tender your Old Notes for
exchange and your Old Notes are not
immediately available or you cannot deliver
the Old Notes or any other documents required
by the Letter of Transmittal to the Exchange
Agent, you must tender your Old
7
<PAGE> 13
Notes according to the delivery procedures
set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures"
section of this Prospectus.
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS................ The exchange pursuant to the Exchange Offer
will not result in the recognition of income,
gain or loss to you or our Company for
federal income tax purposes.
USE OF PROCEEDS................. We will not receive any proceeds from the
Exchange Offer.
EXCHANGE AGENT.................. The Bank of New York, the trustee under the
Indenture, is serving as Exchange Agent in
connection with the Exchange Offer.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
If you do not exchange your Old Notes for New Notes pursuant to the
Exchange Offer, you will continue to be subject to the restrictions on transfer
of such Old Notes as set forth in the legend on such notes as a consequence of
the issuance of the Old Notes pursuant to exemptions from, or in transactions
not subject to, the registration requirements of the Securities Act and
applicable state securities laws. In general, you may not offer or sell your Old
Notes unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. We do not currently anticipate that we will
register the Old Notes under the Securities Act.
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are substantially identical in
all material respects, except for certain transfer restrictions and registration
rights relating to the Old Notes and except for certain provisions relating to
additional interest to be paid to the Holders of Old Notes under certain
circumstances relating to the timing of the Exchange Offer. The New Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture. See "Description of the Notes."
NOTES OFFERED................... We are offering for exchange up to
$175,000,000 aggregate principal amount of
our Company's 10 3/8% Senior Subordinated
Notes due 2008, which we have registered
under the Securities Act.
MATURITY DATE................... The New Notes will mature on December 15,
2008.
INTEREST........................ We will pay interest on the New Notes at an
annual rate of 10 3/8%. We will pay the
interest due on the New Notes every six
months on June 15 and December 15. We will
make the first payment on June 15, 1999.
GUARANTEES...................... If we cannot make payments on the New Notes
when they are due, our existing subsidiaries
have guaranteed the New Notes and must make
payments instead. Certain of our future
subsidiaries will also guarantee the New
Notes.
RANKING......................... The New Notes are unsecured senior
subordinated debt of the Company:
* The New Notes will rank behind all of
our existing and future debts that do
not expressly provide that they rank
equally with, or are subordinated to,
the Notes.
8
<PAGE> 14
* The New Notes will rank ahead of all of
our existing and future debts that
expressly provide that they are
subordinated to the Notes.
The Guarantees are unsecured senior
subordinated debts of the Guarantors:
* The Guarantees will rank behind all of
each Guarantor's existing and future
debts that do not expressly provide
that they rank equally with, or are
subordinated to, the Guarantees.
* The Guarantees will rank ahead of all
of each Guarantor's existing and future
debts that expressly provide that they
are subordinated to the Guarantees.
As of September 30, 1998, on a pro forma
basis after giving effect to the
Acquisitions, certain borrowings under our
senior credit facilities, certain senior
subordinated supplier debt, the conversion to
equity of certain subordinated acquisition
debt, the Private Debt Offering and the
application of the proceeds from such
offering, there would be approximately:
- $272.2 million of outstanding debt
ranking ahead of the New Notes;
- $96.0 million of outstanding debt
ranking ahead of the Guarantees;
- $26.5 million of outstanding debt
ranking equally with the New Notes;
and
- $85.2 million of outstanding debt
ranking behind the New Notes.
OPTIONAL REDEMPTION............. At any time on or after December 15, 2003, we
may redeem some or all of the New Notes at
the redemption prices described under
"Description of Notes" plus any interest that
is due and unpaid on the date we redeem the
New Notes.
At any time on or prior to December 15, 2001,
we may redeem up to 35% of the principal
amount of the New Notes and of any additional
notes issued under the indenture governing
the New Notes with the proceeds from certain
equity offerings by our Company at a
redemption price equal to 110 3/8% of the
face amount of the New Notes, plus any
interest that is due and unpaid on the date
we redeem the New Notes.
MANDATORY REPURCHASE............ Following certain asset sales or changes of
control, we must offer to repurchase the New
Notes at the prices set forth under
"Description of Notes."
CERTAIN COVENANTS............... We will issue the New Notes under an
indenture with The Bank of New York as
trustee. The indenture will, among other
things, restrict our ability and the ability
of the Guarantors to:
* borrow money;
* pay dividends on stock or make certain
other restricted payments;
* use assets as security in other
transactions;
* make investments; and
* sell certain assets or merge with other
companies.
9
<PAGE> 15
EXCHANGE OFFER; REGISTRATION
RIGHTS.......................... Holders of New Notes (other than as set forth
below) are not entitled to any registration
rights with respect to the New Notes.
Pursuant to the Registration Rights Agreement
among the Company, the Guarantors and the
Initial Purchasers, the Company agreed to
file an exchange offer registration statement
with respect to an offer to exchange the Old
Notes for the New Notes. The Registration
Statement of which this Prospectus is a part
constitutes such exchange offer registration
statement. Under certain circumstances,
certain Holders of Old Notes (including
Holders of Old Notes who may not participate
in the Exchange Offer) may in certain
circumstances require us to file, and cause
to become effective, a shelf registration
statement under the Securities Act which
would cover resales of Old Notes by such
Holders.
USE OF PROCEEDS................. We will receive no proceeds from the Exchange
Offer.
RISK FACTORS
You should carefully consider all the information in this Prospectus. In
particular, you should evaluate the specific risk factors set forth under "Risk
Factors," beginning on page 13, for a discussion of certain risks involved in
making an investment in the New Notes.
10
<PAGE> 16
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
HISTORICAL(1) PRO FORMA AS ADJUSTED
------------- HISTORICAL(1) -----------------------------------
AUGUST 14 PRO FORMA ------------- NINE
(INCEPTION) AS ADJUSTED NINE MONTHS MONTHS TWELVE MONTHS
THROUGH YEAR ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1997(2) 1998 1998(2) 1998(2)(3)
------------- ------------ ------------- ------------- ------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue........................... $ 9,305 $400,974 $112,728 $336,767 $441,399
Gross profit(4)......................... 3,892 152,028 45,888 137,304 178,571
Operating income(4)..................... 2,527 71,502 20,670 68,697 87,050
Interest expense........................ 760 51,450 9,391 41,985 55,300
Income before provision for income
taxes................................. 1,767 21,222 11,817 27,342 32,127
Net income.............................. 1,001 12,309 6,854 15,859 18,634
OTHER DATA:
EBITDA(5)............................... $ 4,337 $135,564 $ 37,694 $119,718 $153,520
EBITDA Margin(6)........................ 46.6% 33.8% 33.4% 35.5% 34.8%
Ratio of EBITDA to interest expense..... 2.6x 2.8x
Rental equipment purchases(7)........... $ 2,461 $170,741 $ 76,816 $175,309 $220,211
Amortization of goodwill(4)............. 166 11,597 1,961 8,698 11,597
Depreciation and other amortization..... 1,644 51,295 14,525 41,693 54,496
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------ AS ADJUSTED
AS OF AS OF
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998(2)
------------------ ---------------------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
SELECTED BALANCE SHEET DATA:
Rental equipment, net....................................... $316,824 $ 420,591
Goodwill, net............................................... 244,935 462,386
Total assets................................................ 662,850 1,036,065
Total debt.................................................. 389,841 654,917
Stockholders' equity........................................ 188,759 275,689
</TABLE>
- ---------------
(1)The Acquisitions have been accounted for as purchases and, accordingly, the
operations of the acquired businesses are included in the statement of
operations data and other data from the date of acquisition.
(2)The pro forma as adjusted statement of operations data for the year ended
December 31, 1997 and the nine and twelve months ended September 30, 1998 and
the pro forma as adjusted selected balance sheet data as of September 30,
1998 give effect to the Acquisitions, an additional equity contribution of
$17.4 million from the Company's founders (the "Founders' Additional
Contribution"), a $27.6 million private placement of shares of Common Stock
(the "Common Stock Private Placement"), the Company's $104.0 million initial
public offering of Common Stock (the "Initial Public Offering"), the
conversion to equity of certain subordinated acquisition debt in the original
principal amount of $50.0 million (the "Debt Conversion"), certain borrowings
under the Company's senior credit facilities (the "Senior Borrowings") and
certain senior subordinated supplier debt in the original principal amount of
$25.0 million (the "Equipment Debt", and together with the Debt Conversion
and the Senior Borrowings, "Changes in Outstanding Indebtedness"), the
Private Debt Offering, and the application of the net proceeds of the Private
Debt Offering as described in the "Pro Forma Consolidated Financial
Statements" as if such transactions had occurred on the first day of the
period presented, and in the case of the pro forma as adjusted balance sheet
data, as of September 30, 1998. See "Use of Proceeds," "Risk
Factors -- Substantial Debt," "Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Certain
Relationships and Transactions" and the Company's pro forma and historical
financial statements and related notes.
(3)The unaudited pro forma as adjusted statement of operations data for the
twelve months ended September 30, 1998 includes the historical results of the
Company for the twelve months ended September 30, 1998 and the results of the
Acquisitions from the effective date of their acquisition by the Company, and
gives effect to the applicable 1997 Pro Forma Combined Acquisitions and the
applicable 1998 Pro Forma Combined Acquisitions described in "Unaudited Pro
Forma Consolidated Financial Statements," as if these transactions had
occurred on October 1, 1997. The results of the Acquisitions subsequent to
the dates of their acquisition are included in the historical results of the
Company.
In addition, the unaudited pro forma as adjusted consolidated statement of
operations data for the twelve months ended September 30, 1998 gives
additional effect to the following, as if such transactions had occurred on
October 1, 1997:
a. Adjustment to historical lease expense on rental equipment resulting from
the termination of certain leases which occurred in connection with the
Acquisitions (decrease of $2.9 million in cost of revenue).
b. Adjustment to the historical rental equipment depreciation recorded to
conform to the Company's accounting policies. Adjustment is based on the
estimated fair value of rental equipment acquired using estimated useful
lives ranging from two to ten years on the straight-line method with
salvage values ranging from zero to ten percent of cost (decrease of
$20.9 million in rental depreciation expense).
c. Adjustment to reduce historical compensation and benefits of certain
former owners and executives of the businesses acquired in the
Acquisitions to amounts consistent with employment agreements entered
into between the certain owners and executives and
11
<PAGE> 17
the Company, as well as the elimination of certain private company
business expenses that will not be incurred by the Company (decrease of
$11.8 million in selling, general and administration expenses).
d. Adjustment to historical facility lease expense to reflect the increase
in current lease payments in excess of historical amounts (increase of
$0.6 million in selling, general and administrative expenses).
e. Adjustment to historical property and equipment depreciation recorded to
conform to the Company's accounting policies. Adjustment is based on the
estimated fair value of property and equipment acquired using estimated
useful lives ranging from three to 39 years on the straight-line method
(decrease of $0.8 million in depreciation and amortization of non-rental
property and equipment).
f. Adjustment to recognize the amortization of goodwill and non-compete
agreements using an estimated useful life of 40 and five years,
respectively. Management believes that 40 years is a reasonable life for
goodwill in light of the characteristics of the equipment rental industry
such as the lack of dependence on technological change, the many years
that the industry has been in existence, the current trend towards the
outsourcing of equipment, the recent double digit annual growth rate and
the stable nature of the customer base. In addition, the Company has
focused on acquiring well-established businesses that have been in
existence for many years (increase of $9.3 million in non-rental property
and equipment, depreciation and amortization).
g. Adjustment to record interest on borrowings under the Company's senior
credit facilities (the "Credit Facilities") which consist of a revolving
line of credit and a term loan in an aggregate principal amount of up to
$435.0 million, with a minimum of $260.0 million under the revolving line
of credit, and notes issued to former owners of the acquired businesses,
net of interest related to debt not assumed or paid off at acquisition.
The interest rate on the Credit Facilities is determined using a base
rate plus a spread based on certain financial performance ratios. Based
on current market rates, an incremental borrowing rate of 8.1% was used
to determine interest expense. A change of one-eighth of a percent would
result in a $0.3 million reduction or increase in the pro forma
adjustment to annual interest expense (increase of $20.7 million in
interest expense).
h. To eliminate historical gains related to assets not acquired (increase of
$0.3 million in other (income)/expense).
i. To record a provision (benefit) for income taxes at an expected effective
rate of 42%.
j. To record interest expense and amortization of debt issuance cost related
to the Private Debt Offering (increase of $5.1 million in interest
expense).
These pro forma adjustments represent, in the opinion of management, all
adjustments necessary to present fairly the Company's pro forma results of
operations for the twelve months ended September 30, 1998, and are based
upon available information and certain assumptions considered reasonable
under the circumstances. The unaudited pro forma consolidated financial data
presented herein does not purport to present what the Company's results of
operations would actually have been had such events leading to the pro forma
adjustments in fact occurred at the beginning of the period indicated or to
project the Company's financial position or results of operations for any
future date or period.
(4) The amortization period for rental equipment depreciation ranges from two to
ten years. The amortization period for goodwill is 40 years.
(5) EBITDA represents earnings before interest expense, taxes, depreciation and
amortization. EBITDA is used by certain investors as an indicator of a
company's historical ability to service debt. However, EBITDA is not
intended to represent cash flows for the period, nor has it been presented
as an alternative to either (i) operating income (as determined by generally
accepted accounting principles ("GAAP")), as an indicator of operating
performance or (ii) cash flows from operating, investing and financing
activities (as determined by GAAP) and is thus susceptible to varying
calculations. EBITDA as presented may not be comparable to other similarly
titled measures of other companies.
(6) EBITDA margin represents EBITDA as a percentage of total revenue.
(7) Rental equipment purchases represent the purchase price of rental equipment
inventory acquired during the period.
12
<PAGE> 18
RISK FACTORS
An investment in the Notes involves a high degree of risk. You should
carefully consider the risk factors set forth below, as well as the other
information appearing elsewhere in this Prospectus, before making an investment
in the Notes.
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), including in particular the statements
about our plans, strategies and prospects under the headings "Summary,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." Although we believe that our plans, intentions and
expectations reflected in or suggested by such forward-looking statements are
reasonable, we cannot assure you that such plans, intentions or expectations
will be achieved. Important factors that could cause actual results to differ
materially from our forward-looking statements are set forth below and elsewhere
in this Prospectus. All forward-looking statements attributable to us or any
persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements set forth below.
HOLDERS RESPONSIBLE FOR COMPLIANCE WITH EXCHANGE OFFER PROCEDURES; CONSEQUENCES
OF FAILURE TO
EXCHANGE
We will issue the New Notes in exchange for the Old Notes pursuant to this
Exchange Offer only after we have received such Old Notes timely, along with a
properly completed and duly executed Letter of Transmittal and all other
required documents. Therefore, if you want to tender your Old Notes in exchange
for New Notes, you should allow sufficient time to ensure timely delivery.
Neither the Exchange Agent nor the Company is under any duty to give
notification of defects or irregularities with respect to the tender of Old
Notes for exchange. The Exchange Offer will expire at 5:00 p.m. New York City
time on 1999, or on a later extended date and time as we may
decide (the "Expiration Date"). Old Notes that are not tendered or are tendered
but not accepted for exchange will, following the Expiration Date and the
consummation of this Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof. In general, the Old Notes may not be offered
or sold, unless registered under the Securities Act or except pursuant to an
exemption from or in a transaction not subject to, the Securities Act. In
addition, if you are still holding an Old Note after the Expiration Date and the
Exchange Offer has been consummated, subject to certain exceptions, you will not
be entitled to any rights to have such Old Notes registered under the Securities
Act or to any similar rights under the Registration Rights Agreement (subject to
limited exceptions, if applicable). We do not currently anticipate that we will
register the Old Notes under the Securities Act.
The New Notes and any Old Notes which remain outstanding after consummation
of the Exchange Offer will vote together as a single class for purposes of
determining whether Holders of the requisite percentage thereof have taken
certain actions or exercised certain rights under the Indenture.
REQUIREMENTS FOR TRANSFER OF NEW NOTES
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, we believe that you may offer for
resale, resell and otherwise transfer the New Notes without compliance with the
registration and prospectus delivery provisions of the Securities Act, subject
to certain limitations. These limitations include that you are not an
"Affiliate" of ours within the meaning of Rule 405 under the Securities Act and,
provided that such New Notes are acquired in the ordinary course of your
business and that you have no arrangement with any person to participate in the
distribution of such New Notes. However, we have not submitted a no-action
letter to the Commission regarding this Exchange Offer and we cannot assure you
that the Commission would make a similar determination with respect to the
Exchange Offer as in such other circumstances. If you are an affiliate of the
Company, are engaged in or intend to engage in or have any arrangement or
understanding with respect to a distribution of the New Notes to be acquired
pursuant to the Exchange Offer, you (i) may not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus meeting the requirements under the Securities Act
in connection with any resale of such New Notes. The Letter of
13
<PAGE> 19
Transmittal states that by so acknowledging and delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes where the Old Notes exchanged for such New Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. We have agreed that, starting on the Expiration Date, and
ending on the close of business 120 days after the Expiration Date or, if
earlier, when all New Notes held by a participating broker-dealer have been
disposed of, it will make this Prospectus available to any participating
broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an
exemption from registration or qualification is available.
SUBSTANTIAL DEBT
We have, and will continue to have after this Offering, a significant
amount of debt. After giving pro forma effect to the Debt Conversion, the Senior
Borrowings and the Equipment Debt (collectively, the "Changes in Outstanding
Indebtedness"), the Acquisitions, the Private Debt Offering and the application
of proceeds of such offering, we would have had total debt, stockholders' equity
and a ratio of earnings to fixed charges at the dates and for the periods set
forth in the table below:
<TABLE>
<CAPTION>
FOR THE TWELVE MONTH
PERIOD ENDED
------------------------------
AT SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1998 1997 1998
---------------------- ------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total debt..................................... $654,917 -- --
Stockholders' equity........................... 275,689 -- --
Ratio of earnings to fixed charges............. -- 1.4x 1.5x
</TABLE>
We and our subsidiaries will be permitted to incur substantial additional
debt in the future. See "Capitalization," "Selected Historical and Pro Forma
Financial Information and Operations Data" and "Description of Notes."
Our debt could have important consequences to you, including:
* making it more difficult for us to satisfy our obligations with
respect to the Notes;
* increasing our vulnerability to adverse general economic and
industry conditions;
* limiting our ability to obtain additional financing to fund future
working capital, capital expenditures, acquisitions and other general
corporate requirements;
* requiring us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, thereby reducing the availability of
our cash flow to fund working capital, capital expenditures, acquisitions
or other general corporate purposes;
* limiting our flexibility in planning for, or reacting to, changes in
our business and the industry in which we operate; and
* placing us at a competitive disadvantage compared to our less
leveraged competitors.
In addition, the financial and other restrictive covenants in our debt may
limit our ability to, among other things, borrow additional funds, and any
failure by us to comply with those covenants could result in an event of default
which, if not cured or waived, could have a material adverse effect on us. See
"Description of Notes -- Change of Control" and "Description of Certain
Indebtedness -- Credit Facilities."
ACQUISITION AND INTEGRATION RISKS
Generally. Since our inception in August 1997, we have acquired 32
equipment rental businesses with 132 operating locations. We intend to continue
this growth by making additional acquisitions, opening new locations and
converting acquired locations to the NationsRent format. We cannot assure you
that we will be
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<PAGE> 20
able to identify suitable acquisition candidates or suitable new locations or
obtain financing for acquisitions or internal expansion on satisfactory terms,
or at all. If suitable acquisition candidates are not identifiable or if
acquisitions are prohibitively expensive, we may be forced to alter our growth
strategy. Our growth strategy presents certain risks inherent in (1) assessing
the value, strengths and weaknesses of acquisition candidates, (2) evaluating
the costs and uncertain returns of expanding our operations, and (3) integrating
acquisitions with existing operations. We expect our growth strategy may affect
short-term cash flow and net income as we increase our indebtedness and incur
expenses to open new locations, make acquisitions and expand rental inventory.
As a result, revenue and operating results may fluctuate. We cannot assure you
that we will successfully expand, that any acquired businesses will be
successfully integrated into our operations or that any expansion will result in
profitability. The failure to successfully implement our growth strategy may
have a material adverse effect on our business, financial condition, results of
operations or prospects.
Demands on NationsRent's Resources Due to Growth. Our anticipated growth
may place significant demands on our management and our operational, financial
and marketing resources. In connection with acquisitions and the opening of new
locations, we anticipate expanding the number of our employees, the scope of our
operating and financial systems and the geographic area of our operations. We
believe this growth will increase the complexity of our operations and the level
of responsibility exercised by both existing and new management personnel. To
manage this expected growth, we intend to invest further in our operating and
financial systems and to continue to expand, train and manage our employee base.
We cannot assure you that we will be able to attract and retain qualified
management and employees. We also cannot assure you that our current operating
and financial systems and controls will continue to be adequate as we grow or
that any steps taken to improve such systems and controls will be sufficient.
Our failure to successfully integrate and manage our growth may have a material
adverse effect on our business, financial condition, results of operations or
prospects.
Liabilities Associated with Acquisitions. There may be liabilities that we
fail or are unable to discover in the course of performing due diligence
investigations on each company or business we have acquired or seek to acquire
in the future. Such liabilities could include those arising from employee
benefits contribution obligations of a prior owner or non-compliance with
applicable federal, state or local environmental requirements by prior owners
for which we, as a successor owner, may be responsible. We try to minimize these
risks by conducting such due diligence, including employee benefit and
environmental reviews, as we deem appropriate under the circumstances. However,
we cannot assure you that we have identified, or in the case of future
acquisitions, will identify, all existing or potential risks. We also generally
require each seller of acquired businesses or properties to indemnify us against
undisclosed liabilities. In some cases this indemnification obligation may be
supported by deferring payment of a portion of the purchase price or other
appropriate security. However, we cannot assure you that the indemnification,
even if obtained, will be enforceable, collectible or sufficient in amount,
scope or duration to fully offset the possible liabilities associated with the
business or property acquired. Any such liabilities, individually or in the
aggregate, could have a material adverse effect on our business, financial
condition, results of operations or prospects.
DEPENDENCE ON ADDITIONAL CAPITAL FOR FUTURE GROWTH
Our ability to remain competitive, sustain our growth and expand our
operations through new locations and acquisitions largely depends on our access
to capital. In addition, we must make ongoing capital expenditures to update and
maintain the condition of our rental equipment inventory in order to provide our
customers with high-quality equipment. To date, we have financed capital
expenditures and acquisitions primarily through private equity, bank financing,
financing from equipment suppliers, the proceeds of our $104.0 million initial
public offering of Common Stock (the "Initial Public Offering") and the issuance
of promissory notes. As of the date of this Prospectus, our senior credit
facilities (the "Credit Facilities") consist of a revolving line of credit (the
"Revolving Line of Credit") and a term loan (the "Term Loan") in an aggregate
principal amount of up to $435.0 million, with a minimum of $260.0 million under
our Revolving Line of Credit. See "Description of Certain Indebtedness -- Credit
Facilities." To assist our growth strategy and meet our capital needs, we plan
to issue additional equity securities and incur additional indebtedness in the
future and in particular may request increases to our Credit Facilities from
time to time. We cannot assure you that any of these increases or any additional
capital, if and when required, will be available on terms
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<PAGE> 21
acceptable to us, or at all. If we fail to obtain sufficient additional capital
in the future, we could be forced to curtail our growth or delay capital
expenditures, which could have a material adverse effect on our business,
financial condition, results of operations or prospects.
Our ability to finance future acquisitions, new locations and internal
growth is also limited by the covenants contained in the Credit Facilities and
will be limited by the covenants contained in the Indenture. As a result of
these covenants, our ability to respond to changing business and economic
conditions and to secure additional financing may be significantly restricted,
and we may be prevented from engaging in transactions, including acquisitions,
that might be considered important to our growth strategy or otherwise
beneficial to us. Any breach of these covenants could cause a default under
other debt and the Notes. As a result, a substantial portion of our debt then
may become immediately due and payable. We are not certain whether we would
have, or would be able to obtain, sufficient funds to be able to make these
accelerated payments, including payments on the Notes. Such covenants may also
limit our ability to finance future operations and capital needs. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Business -- Growth Strategy"
and "Description of Certain Indebtedness."
COMPETITION
The equipment rental industry is highly competitive. Our competitors
include large national rental companies, equipment manufacturers, regional
corporations, smaller independent businesses and equipment vendors and dealers
who both sell and rent equipment to customers. Some of our competitors have
greater financial resources, are more geographically diverse and have greater
name recognition than we have. We may encounter increased competition from
existing competitors or new market entrants, such as equipment manufacturers,
that may be significantly larger and have greater financial and marketing
resources than we have. See "Business -- Competition."
LIMITED OPERATING HISTORY
We were formed in August 1997 and commenced operations in September 1997
with our acquisition of Sam's Equipment Rental, Inc. and Gabriel Trailer
Manufacturing Company, Inc. (collectively, "Sam's" or the "Predecessor
Company"). Accordingly, you can only evaluate us, our growth strategy and our
prospects based upon our limited operating history. You must evaluate the
Company's prospects in light of the risks, expenses and difficulties frequently
encountered by companies in the early stages of development. Although we have
recently experienced growth in revenue and net income, we cannot assure you that
this growth can or will be sustained or that our strategy of building a network
of nationally branded equipment rental locations will lead to continued growth
in revenue and net income.
SUBORDINATION OF NOTES AND GUARANTEES
The Notes and the Guarantees will be subordinated in right of payment to
all of our and the Guarantors' existing and future debt which does not expressly
provide that it ranks equal with, or is subordinated in right of payment to, the
Notes and the Guarantees. As a result of the subordination provisions in the
indenture with The Bank of New York, as Trustee, governing the Notes (the
"Indenture"), upon certain liquidation, dissolution or bankruptcy events, debt
that ranks ahead of the Notes and the Guarantees will be entitled to be paid in
full in cash before any payment may be made with respect to the Notes or that
Guarantor's Guarantee. In addition, the subordination provisions of the
Indenture will provide that payments with respect to the Notes and the
Guarantees will be prohibited in the event of a payment default on debt that
ranks ahead of the Notes or the Guarantees. Further, in the event of certain
non-payment defaults on debt that ranks ahead of the Notes or the Guarantees,
payments with respect to the Notes and the Guarantees will be prohibited for up
to 179 days from the date written notice of the default is received. Only one
such prohibition period with respect to a non-payment default can be commenced
within any 360 consecutive days. In the event of a bankruptcy, liquidation or
reorganization of the Company or any Guarantor, holders of the Notes will
participate ratably with all holders of subordinated debt of the Company and
such Guarantor that is deemed to be of the same class as the Notes or the
Guarantees, and potentially with all other general creditors of the Company and
such Guarantor, based upon the respective amounts owed to each holder or
creditor, in the Company's or such Guarantor's remaining assets. In any of the
foregoing events, we cannot assure you that we would have
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<PAGE> 22
sufficient assets to pay amounts due on the Notes. As a result, holders of Notes
may receive less, ratably, than the holders of senior debt of the Company and
the Guarantors.
As of September 30, 1998, on a pro forma basis after giving effect to the
Acquisitions, Changes in Outstanding Indebtedness, the Private Debt Offering and
the application of the proceeds of such offering, the aggregate amount of debt
that ranks ahead of the Notes and Guarantees (including borrowings under our
Credit Facilities) would have been approximately $368.2 million, and
approximately $169.6 million would have been available for additional borrowing
under our Revolving Line of Credit. The Indenture and the Credit Facilities will
permit us and the Guarantors to incur substantial additional debt, including
debt that ranks ahead of the Notes.
POTENTIAL INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon a change of control, we will be required to offer to repurchase all
outstanding Notes at 101% of the principal amount thereof plus accrued and
unpaid interest to the date of repurchase. However, we cannot assure you that we
will have sufficient funds at the time of any change of control to make any
required repurchase of the Notes or that restrictions in our Credit Facilities
will allow us to make such required repurchases.
ASSET ENCUMBRANCES
The Notes will not be secured by any of our assets. Our obligations under
the Credit Facilities, however, are secured by a first priority security
interest in substantially all of our assets. If we become insolvent or are
liquidated, or if payment under the Credit Facilities is accelerated, the
lenders under the Credit Facilities would be entitled to exercise the remedies
available to a secured lender. Accordingly, these lenders will have a claim on
substantially all of our assets that will have priority over any claim for
payment under the Notes or the Guarantees. In any such event, because the Notes
will not be secured by any of our assets, it is possible that there would be no
assets remaining from which claims of the holders of the Notes could be
satisfied or, if any assets remained, they might be insufficient to satisfy such
claims fully. See "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources," "Description of Certain Indebtedness," "Description of Notes" and
the Consolidated Financial Statements and the Notes thereto included elsewhere
in this Prospectus.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture restricts, among other things, our ability to:
* borrow money;
* pay dividends on stock or make certain other restricted payments;
* use assets as security in other transactions;
* make investments;
* enter into certain transactions with our affiliates; and
* sell certain assets or merge with other companies.
If we fail to comply with these covenants, we would be in default under the
Indenture, and the principal and accrued interest on the Notes would become due
and payable. See "Description of Notes -- Certain Covenants."
In addition, the Credit Facilities contain many restrictive covenants
similar to the Indenture's covenants which, among other things, impose certain
limitations on us. The Credit Facilities contain restrictive covenants which are
generally more restrictive than those contained in the Indenture. The Credit
Facilities also require us to maintain specified consolidated financial ratios
and satisfy certain consolidated financial tests. Our ability to meet those
financial ratios and financial tests may be affected by events beyond our
control, and we cannot assure you that we will meet those tests. If we fail to
meet those tests or breach any of the covenants, the lenders under the Credit
Facilities could declare all amounts outstanding thereunder, together with
accrued interest, to be immediately due and payable. If we are unable to repay
those amounts, the lenders could proceed against the collateral granted to them
to secure that indebtedness. We cannot assure
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<PAGE> 23
you that our assets would be sufficient to repay in full such indebtedness or
any other indebtedness, including the Notes.
In addition, if we default under the Indenture, the Credit Facilities or
certain instruments governing our other indebtedness, that default could
constitute a cross-default under the Indenture, the Credit Facilities or the
instruments governing our other indebtedness, as applicable. See "Description of
Notes" and "Description of Certain Indebtedness."
FRAUDULENT CONVEYANCE
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, if, among other things, any Guarantor, at the time it
incurred the debt evidenced by its Guarantee of the Notes:
* (1) was insolvent or rendered insolvent by reason of such
incurrence, or (2) was engaged in a business or transaction for which that
Guarantor's remaining assets constituted unreasonably small capital, or (3)
intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature; and
* that Guarantor received less than reasonably equivalent value or
fair consideration for the incurrence of such debt;
then the Guarantee of that Guarantor could be voided, or claims by holders of
the Notes under that Guarantee could be subordinated to all other debts of that
Guarantor. In addition, any payment by that Guarantor pursuant to its Guarantee
could be required to be returned to that Guarantor, or to a fund for the benefit
of the creditors of that Guarantor.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, a Guarantor would be considered insolvent if:
* the sum of its debts, including contingent liabilities, was greater
than the saleable value of all of its assets at a fair valuation; or
* the present fair saleable value of its assets was less than the
amount that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
* it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that each Guarantor, after giving effect to the
debt incurred by that Guarantor in connection with the Private Debt Offering,
will not be insolvent, will not have unreasonably small capital for the business
in which it is engaged and will not have incurred debts beyond its ability to
pay such debts as they mature. However, we cannot assure you as to what standard
a court would apply in making such determinations or that a court would agree
with our conclusions in this regard.
HOLDING COMPANY STRUCTURE
The Company is a holding company with no significant assets other than its
investments in its subsidiaries. Accordingly, the Company must rely entirely
upon distributions from its subsidiaries to generate the funds necessary to meet
its obligations, including the payment of principal and interest on the Notes.
The ability of the subsidiaries of the Company to pay dividends or to make other
payments or advances to the Company will depend upon their operating results and
will be subject to applicable laws and contractual restrictions contained in the
instruments governing any indebtedness of such subsidiaries (including the
Credit Facilities). Although the Indenture limits the ability of such
subsidiaries to enter into consensual restrictions on their ability to pay
dividends and make other payments to the Company, such limitations are subject
to a number of significant qualifications. See "Description of Notes -- Certain
Covenants -- Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries."
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<PAGE> 24
SEASONALITY AND OTHER FLUCTUATIONS IN REVENUE AND OPERATING RESULTS
Our revenue and operating results have varied throughout the year and are
expected to continue to fluctuate in the future due to a number of factors,
including (1) adverse weather conditions, (2) general economic conditions in the
markets where we operate, including changes in national, regional or local
construction or industrial activity or increases in prevailing interest rates,
(3) timing of acquisitions and new location openings and related costs, (4) the
effectiveness of integrating acquired businesses and new locations, (5) rental
patterns of our customers and (6) price changes in response to competitive
factors. In addition, we incur various costs in integrating newly acquired or
opening locations, and the profitability of a new location is generally expected
to be lower in the initial months of operation.
LIABILITY AND INSURANCE
Our business exposes us to possible claims for personal injury or death
resulting from the use of the equipment we rent or sell and from injuries caused
in motor vehicle accidents in which our delivery and service personnel are
involved. We carry comprehensive insurance, subject to deductibles, at levels we
believe are sufficient to cover existing and future claims. Although we have not
experienced any material losses that were not covered by insurance, we cannot
assure you that existing or future claims will not exceed the level of our
insurance or that such insurance will continue to be available on economically
reasonable terms, or at all.
ENVIRONMENTAL AND SAFETY REGULATION
Our equipment, facilities and operations are subject to certain federal,
state and local laws and regulations relating to environmental protection and
occupational health and safety. These include, among other things, laws and
regulations governing wastewater discharges, the use, treatment, storage and
disposal of solid and hazardous wastes and materials, air quality and the
remediation of contamination associated with the release of hazardous
substances. Some of our existing and former locations use and have used,
substances, and currently generate or have generated or disposed of wastes,
which are or may be considered hazardous or otherwise are subject to applicable
environmental requirements.
In particular, we store and dispense, or have in the past stored and
dispensed, petroleum products from above-ground storage tanks and, in certain
cases, underground storage tanks at our locations. We also use hazardous
materials, including solvents, to clean and maintain equipment, and generate and
dispose of solid and hazardous wastes, including batteries, used motor oil,
radiator fluid and solvents. In connection with such activities, we have
incurred minimal capital expenditures and other compliance costs which are
expensed on a current basis and which, to date, have not been material to our
financial condition. Based on currently available information, we believe that
it is unlikely that we will have to incur material capital expenditures or other
material compliance or remediation costs for environmental and safety matters in
the foreseeable future. However, we cannot assure you that environmental and
safety requirements will not become more stringent or be interpreted and applied
more stringently in the future, or that we will not identify adverse
environmental conditions that are not currently known to us. Such future changes
or interpretations, or the identification of such adverse environmental
conditions, could result in additional environmental compliance or remediation
costs not currently anticipated by us, which could have a material adverse
effect on our business, financial condition, results of operations or prospects.
See "Business -- Environmental and Safety Regulation."
DEPENDENCE ON EXECUTIVE OFFICERS AND DIRECTORS
Our future success depends to a significant extent on retaining the
services of certain executive officers and directors. We do not maintain key man
insurance. The loss of the services of key employees or directors (whether such
loss is through resignation or other causes) or the inability to attract
additional qualified personnel could have a material adverse effect on our
business, financial condition, results of operations or prospects.
SIGNIFICANT STOCKHOLDERS
As of December 21, 1998, our executive officers and directors, including H.
Wayne Huizenga, beneficially owned approximately 36.5% of our Common Stock. In
addition, H. Family Investments, Inc., a Florida corporation controlled by H.
Wayne Huizenga, Jr., Mr. Huizenga's son, owned approximately 21.5%
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<PAGE> 25
of our outstanding Common Stock. As a result, our executive officers and
directors are, together with H. Family Investments, Inc., able to exercise
controlling influence over the outcome of matters submitted to our stockholders
for approval, including the election of directors.
EFFECTS OF YEAR 2000 ISSUE
Our management information System is being developed to ensure that it is
Year 2000 compliant. Although we do not anticipate any material adverse effects
from the Year 2000 issue, we cannot assure you that we, or any business we
acquire, or any of our customers or vendors will not experience interruptions of
operations because of Year 2000 problems. We expect to convert all of the
information systems of the businesses we acquire to our System as soon as
practicable after each acquisition is completed. However, we cannot assure you
that all such systems will be converted prior to December 31, 1999. Although we
do not expect to incur significant expense to address the Year 2000 issue beyond
our capital investment in the System, Year 2000 problems might require us to
incur unanticipated expenses and such expenses could have a material adverse
effect on our business, financial condition, results of operations or prospects.
TRADING MARKET FOR THE NOTES
Prior to this Offering, there has been no trading market for the Notes. We
have been advised by the Initial Purchasers that they currently intend to make a
market in the Notes; however, the Initial Purchasers are not obligated to do so.
Any market-making may be discontinued at any time, and we cannot assure you that
an active trading market for the Notes will develop or, if a trading market
develops, that it will continue. Further, the liquidity of, and trading market
for the Notes may be adversely affected by declines and volatility in the market
for high yield securities generally. The liquidity of and trading market for the
Notes also may be adversely affected by any changes in our financial performance
or prospects or in the prospects for the companies in our industry. We expect
that the Notes will be eligible for trading in the PORTAL market. We do not
intend to list the Notes or the Exchange Notes on any national securities
exchange or to seek the admission thereof to trading in the National Association
of Securities Dealers Automated Quotation System.
THE EXCHANGE OFFER
THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), we will accept for exchange Old Notes which are properly
tendered on or prior to the Expiration Date and not withdrawn as permitted
below. As used herein, the term "Expiration Date" means 5:00 p.m., New York City
time, on , 1999; provided, however, that if the Company, in its sole
discretion, has extended the period of time for which the Exchange Offer is
open, the term "Expiration Date" means the latest time and date to which the
Exchange Offer is extended.
As of the date of this Prospectus, $175.0 million aggregate principal
amount at maturity of the Old Notes is outstanding. This Prospectus, together
with the Letter of Transmittal, is first being sent on or about , 1999, to all
Holders of Old Notes known to the Company. Our obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain conditions set
forth under "-- Conditions of the Exchange Offer" below.
We expressly reserve the right, at any time or from time to time, to extend
the period of time during which the Exchange Offer is open, and thereby delay
acceptance for exchange of any Old Notes, by giving oral or written notice of
such extension to the Holders thereof as described below. During any such
extension, all Old Notes previously tendered will remain subject to the Exchange
Offer and may be accepted for exchange by the Company. Any Old Notes not
accepted for exchange for any reason will be returned without expense to the
tendering Holder as promptly as practicable after the expiration or termination
of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount at maturity of $1,000 and any integral multiple thereof.
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We expressly reserve the right to amend or terminate the Exchange Offer,
and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "-- Conditions of the Exchange Offer." The Company will
give written or oral notice of any extension, amendment, non-acceptance or
termination to the Holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued by means of a press release or
other public announcement no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
RESALE OF NEW NOTES
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, including "Shearman & Sterling"
(available July 2, 1993), "K-III Communications Corporation" (available May 14,
1993), "Morgan Stanley & Co. Incorporated" (available June 5, 1991), "Mary Kay
Cosmetics, Inc." (available June 5, 1991), "Warnaco, Inc." (available October
11, 1991) and "Exxon Capital Holdings Corporation" (available May 13, 1988), the
Company believes that, except as described below, the New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any Holder of such Notes (other than any
such Holder which is a broker-dealer or an "affiliate" of the Company or the
Guarantors within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that, (i) such New Notes are acquired in the ordinary
course of such Holder's business, (ii) such Holder has no arrangement or
understanding with any person to participate in the distribution of such New
Notes, and (iii) such Holder is not engaged in, and does not intend to engage
in, a distribution of such New Notes. The Company does not intend to request the
Commission to consider, and the Commission has not considered, the Exchange
Offer in the context of a no-action letter and there can be no assurance that
the staff of the Commission would make a similar determination with respect to
the Exchange Offer as it has in such other circumstances. By tendering Notes for
New Notes, each Holder will represent to the Company, that (i) the New Notes
acquired pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving such New Notes, whether or not such
person is the Holder, (ii) neither the Holder nor any such other person is
engaging in or intends to engage in a distribution of such New Notes and if such
Holder is not a broker-dealer, neither the Holder nor any such other person has
an arrangement or understanding with any person to participate in the
distribution of such New Notes within the meaning of the Securities Act and
(iii) neither the Holder nor any such person is an affiliate of the Company or
the Guarantors as defined in Rule 405 under the Securities Act. In the event
that any Holder of Old Notes cannot make the requisite representations to the
Company, such Holder cannot rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Unless an exemption from registration is otherwise available, any
such resale transaction should be covered by an effective registration statement
containing the selling security holders information required by Item 507 of
Regulation S-K under the Securities Act. This Prospectus may be used for an
offer to resell, resale or other transfer of New Notes only as specifically set
forth herein.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes, and that it has not entered into any arrangements or understanding with
the Company or any affiliate of the Company to distribute New Notes in
connection with any resale of such New Notes. See "Plan of Distribution." The
Letter of Transmittal states that by so acknowledging and delivering such a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at 10 3/8% per annum. Interest on the New
Notes will be payable semi-annually, in arrears, on June 15 and December 15 of
each year, commencing on June 15, 1999. Holders of New Notes will receive
interest on June 15, 1999 from the date of initial issuance of the New Notes,
plus an amount equal to the accrued interest on the Old Notes from the most
recent date to which interest has been
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paid to the date of exchange thereof for New Notes. Interest on the Old Notes
accepted for exchange will cease to accrue upon issuance of the New Notes.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a Holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal or (in the case of a book-entry transfer)
an Agent's Message (as defined) in lieu of such letter of Transmittal, to The
Bank of New York (the "Exchange Agent") at the address set forth below under
"Exchange Agent" on or prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at the Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date with the Letter of Transmittal or an Agent's Message in lieu of
such Letter of Transmittal, or (iii) the Holder must comply with the guaranteed
delivery procedures described below. "Agent's Message" means a message,
transmitted by the Book-Entry Transfer Facility to and received by the Exchange
Agent and forming a part of a Book-Entry Confirmation, which states that the
Book-Entry Transfer Facility has received an express from the tendering
participant, which acknowledgment states that such participant has received and
agrees to be bound by the Letter of Transmittal and that the Company may enforce
such Letter of Transmittal against such participant. THE METHOD OF DELIVERY OF
OLD NOTES, LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered Holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined). In the event that signatures on a Letter
of Transmittal or a notice of withdrawal as the case may be, are required to be
guaranteed, such guarantees must be by a firm which is a member of the National
Association of Securities Dealers, Inc., by a commercial bank or trust company
having an office or correspondent in the United States or by an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(collectively, "Eligible Institutions"). If Old Notes are registered in the name
of a person other than a signer of the Letter of Transmittal, the Old Notes
surrendered for exchange must be endorsed by, or accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Company in its sole discretion, duly executed by the
registered Holder with the signature thereon guaranteed by an Eligible
Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Note not properly tendered or not accept any particular
Old Note which acceptance might, in the judgment of the Company or its counsel,
be unlawful. The Company also reserves the absolute right to waive any defects
or irregularities or conditions of the Exchange Offer as to any particular Old
Note either before or after the Expiration Date (including the right to waive
the ineligibility of any Holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer as
to any particular Old Note either before or after the Expiration Date (including
the Letter of Transmittal and the instructions thereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or
22
<PAGE> 28
irregularities in connection with the tenders of Old Notes for exchange must be
cured within such reasonable period of time as the Company shall determine.
Neither the Company nor the Exchange Agent nor any other person shall be under
any duty to give notification of any defect or irregularity with respect to any
tender of Old Notes for exchange, nor shall any of them incur any liability for
failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered Holder or Holders of Old Notes, such Old Notes must be endorsed
or accompanied by powers of attorney, in either case signed by the registered
Holder or Holders exactly as the name or names of the registered Holder or
Holders appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted with the Letter of Transmittal.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "-- Conditions of the Exchange Offer" below. For purposes of the
Exchange Offer, the Company shall be deemed to have accepted properly tendered
Old Notes for exchange when, as and if the Company has given oral or written
notice thereof to the Exchange Agent, with written confirmation of any oral
notice to be given promptly thereafter.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of (i) certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility, (ii) a properly completed and duly executed
Letter of Transmittal or an Agent's Message in lieu thereof and (iii) all other
required documents. If any tendered Old Notes are not accepted for any reason
set forth in the terms and conditions of the Exchange Offer or if Old Notes are
submitted for a greater principal amount than the Holder wishes to exchange,
such unaccepted or non-exchange Old Notes will be returned without expense to
the tendering Holder thereof (or, in the case of Old Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry procedures described below, such
non-exchanged Old Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer promptly after the date of this Prospectus. Any financial
institution that is a participant in the Book-Entry Transfer Facility's systems
may make book-entry delivery of Old Notes by causing the Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for transfer. Such participant using the Book-Entry
Transfer Facility's procedures for transfer should transmit its acceptance to
the Book-Entry Transfer Facility on or prior to the Expiration Date or comply
with the guaranteed delivery procedures described below. The Book-Entry Transfer
Facility will verify such acceptance, execute a book-entry transfer of the
tendered Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility and then send to the Exchange Agent confirmation of such book-entry
transfer, including the Agent's Message confirming that the Book-Entry Transfer
Facility has received an express acknowledgment from such participant that such
participant has received and agrees to be bound by the Letter of Transmittal and
that the Company may enforce the Letter of Transmittal against such participant.
However, although delivery of Old Notes may be effected through book-entry
transfer at the
23
<PAGE> 29
Book-Entry Transfer facility, an Agent's Message and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address set forth below under "-- Exchange Agent" on or prior to
the Expiration Date or there must be compliance with the guaranteed delivery
procedures described below.
GUARANTEED DELIVERY PROCEDURES
If a Holder of Old Notes desires to tender such Old Notes and the Old Notes
are not immediately available, or time will not permit such Holder's Old Notes
or other required documents to reach the Exchange Agent before the Expiration
Date, or the procedure for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent received from
such Eligible Institution a Notice of Guaranteed Delivery, substantially in the
form provided by the Company (by telegram, telex, facsimile transmission, mail
or hand delivery), setting forth the name and address of the Holder of the Old
Notes and the amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that within three New York Stock Exchange ("NYSE")
trading days after the date of the execution of the Notice of Guaranteed
Delivery, the certificates for all physically tendered Old Notes, in proper form
for transfer, or a Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed appropriate Letter of Transmittal (or
facsimile thereof or Agent's Message in lieu thereof) with any required
signature guarantees and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be,
together with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof or Agent's Message in lieu thereof) with any required
signature guarantees and all other documents required by the Letter of
Transmittal, are received by the Exchange Agent within three NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address set forth below under "-- Exchange
Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having tendered the
Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount at
maturity of such Old Notes), (iii) contain a statement that such Holder is
withdrawing his election to have such Old Notes exchanged, (iv) be signed by the
Holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer to have the trustee with
respect to the Old Notes register the transfer of such Old Notes in the name of
the person withdrawing the tender and (v) specify the name in which such Old
Notes are registered, if different from that of the Depositor. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes that have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such Holder (or, in the case of Old Notes tendered by book-entry transfer into
the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Old Notes will be credited
to an account maintained with the Book-Entry Transfer Facility for the Old
Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may retendered
by following the
24
<PAGE> 30
procedures described under "-- Procedures for Tendering Old Notes" above at any
time on or prior to 5:00 p.m., New York City time, on the Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
The Exchange Offer is not conditioned upon any minimum principal amount at
maturity of the Old Notes being tendered for exchange. However, notwithstanding
any other provisions of the Exchange Offer, the Company will not be required to
accept for exchange, or exchange any New Notes for, any Old Notes, and may
terminate the Exchange Offer as provided herein before the acceptance of any Old
Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the Exchange Offer which, in
the Company's sole judgment, might materially impair the ability of the Company
to proceed with the Exchange Offer;
(b) any law, statute, rule or regulation is proposed, adopted or enacted,
or any existing law, statue, rule or regulation is interpreted by the staff of
the Commission, which, in the Company's sole judgment, might materially impair
the ability of the Company to proceed with the Exchange Offer; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its sole discretion, deem necessary for the consummation of
the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering Holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of Holders who tendered such Old
Notes to withdraw their tendered Old Notes, or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver or any such
right, and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at the address set forth below. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
25
<PAGE> 31
<TABLE>
<S> <C>
BY MAIL: OVERNIGHT COURIER:
The Bank of New York The Bank of New York
Corporate Trust Corporate Trust
101 Barclay Street -- 21 W 101 Barclay Street -- 21 W
New York, New York 10286 New York, New York 10286
Attention: Remo Reale Attention: Remo Reale
BY HAND IN NEW YORK
(AS DROP AGENT):
The Bank of New York
Corporate Trust
101 Barclay Street -- 21 W
New York, New York 10286
Attention: Remo Reale
FACSIMILE TRANSMISSION: CONFIRMED BY TELEPHONE:
212-815-5915 212-815-3703
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses of the Company to be incurred in connection with the
Company's performance and completion of the Exchange Offer will be paid by the
Company. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered Holder of the Old Notes
tendered hereby, or if tendered Old Notes are registered in the name of any
person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or on any other persons) will be
payable by the tendering Holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. Accordingly, such Old Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii)
pursuant to an effective registration statement under the Securities Act, (iii)
so long as the old Notes are eligible for resale pursuant to Rule 144A, to a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, or (iv)
pursuant to another available exemption from the registration requirements of
the Securities Act, in each case in accordance with any applicable securities
laws
26
<PAGE> 32
of any state of the United States. The Company does not currently anticipate
that it will register under the Securities Act the resale of any Old Notes that
remain outstanding after consummation of the Exchange Offer (subject to limited
exceptions, if applicable).
Holders of the Old and New Notes which remain outstanding after
consummation of the Exchange Offer will vote together as a single class for
purposes of determining whether Holders of the requisite percentage thereof have
taken certain actions or exercised certain rights under the Indenture.
Upon consummation of the Exchange Offer, Holders of Old Notes will not be
entitled to any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Exchange Offer; Registration
Rights."
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company.
27
<PAGE> 33
USE OF PROCEEDS
The net proceeds from the sale of the Old Notes in the Private Debt
Offering were approximately $168.8 million (after deducting discounts to the
Initial Purchasers and estimated Private Debt Offering expenses). The Company
will not receive any proceeds from the Exchange Offer. The net proceeds from the
sale of the Old Notes in the Private Debt Offering was used to repay certain
acquisition related subordinated debt and repay certain outstanding indebtedness
under the Credit Facilities. See "Description of Certain Indebtedness -- Credit
Facilities."
28
<PAGE> 34
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of September 30, 1998 (i) on a historical basis, (ii) pro forma for the
Acquisitions and Changes in Outstanding Indebtedness and (iii) pro forma for the
Acquisitions, Changes in Outstanding Indebtedness and as adjusted for the
Private Debt Offering and the application of the net proceeds of such offering.
This table should be read in conjunction with the Pro Forma Consolidated
Financial Statements and the Company's Consolidated Financial Statements
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Notes payable to financial institutions................... $262,500 $406,058 $265,408
Senior equipment obligations and other notes.............. 69,346 129,346 129,346
Subordinated promissory notes............................. 2,955 34,055 5,955
Subordinated convertible notes............................ 55,040 79,208 79,208
Notes offered hereby...................................... -- -- 175,000
-------- -------- --------
Total debt........................................ 389,841 648,667 654,917
-------- -------- --------
Stockholders' equity:
Preferred Stock, $0.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding........... -- -- --
Common Stock, $0.01 par value, 250,000,000 shares
authorized; 44,360,334 shares issued and outstanding,
55,628,239 shares issued and outstanding pro
forma(1)............................................... 444 556 556
Additional paid-in capital................................ 180,460 267,278 267,278
Retained earnings......................................... 7,855 7,855 7,855
-------- -------- --------
Total stockholders' equity........................ 188,759 275,689 275,689
-------- -------- --------
Total capitalization........................................ $578,600 $924,356 $930,606
======== ======== ========
</TABLE>
- ---------------
(1) Does not include (i) 1,045,380 shares issuable upon the exercise of
outstanding options with exercise prices ranging from $2.96 to $6.69 per
share and a weighted average exercise price of $5.27, (ii) 5,000,000 shares
reserved for issuance in connection with options that may be granted under
the 1998 Stock Option Plan, (iii) 9,099,480 shares issuable upon conversion
of certain convertible promissory notes, and (iv) 100,000 shares issuable
upon the exercise of outstanding warrants. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
"Management -- Stock Option Plan," "Certain Relationships and Transactions,"
and "Description of Certain Indebtedness -- Promissory Notes."
29
<PAGE> 35
SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA
FINANCIAL INFORMATION AND OPERATIONS DATA
The following selected consolidated financial information summarizes (i)
the statement of operations data and balance sheet data for the Predecessor
Company as of and for the fiscal years ended March 31, 1994 and 1995, and the
selected balance sheet data as of March 31, 1996, which have been derived from
the unaudited consolidated financial statements of the Predecessor Company not
included herein, (ii) the statement of operations data for the Predecessor
Company for the fiscal years ended March 31, 1996 and 1997 and the five months
ended August 31, 1997 and the selected balance sheet data as of March 31, 1997
and August 31, 1997, which have been derived from the audited consolidated
financial statements of the Predecessor Company included elsewhere in this
Prospectus, (iii) the statement of operations data of the Company for the period
from August 14, 1997 (inception) through December 31, 1997, and selected balance
sheet data as of December 31, 1997, which have been derived from the audited
consolidated financial statements of the Company appearing elsewhere in this
Prospectus, (iv) the consolidated statement of operations data of the Company
for the nine months ended September 30, 1998 and the selected balance sheet data
as of September 30, 1998, which have been derived from the unaudited
consolidated financial statements of the Company included elsewhere in this
Prospectus which, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the Company's results of operations and financial position at such date and for
such period, and (v) the pro forma consolidated statement of operations data for
the twelve months ended December 31, 1997 and the nine months ended September
30, 1998 and selected pro forma balance sheet data as of September 30, 1998,
which has been derived from the unaudited pro forma consolidated financial
statements included elsewhere in this Prospectus. The other data has been
derived from the consolidated financial statements referred to above for the
applicable periods. The selected consolidated historical and pro forma financial
information and operating data presented below should be read in conjunction
with the Company's Consolidated Financial Statements, the unaudited pro forma
consolidated financial statements and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this Prospectus.
30
<PAGE> 36
<TABLE>
<CAPTION>
PREDECESSOR COMPANY THE COMPANY(1)
------------------------------------------------ ---------------------------
AUGUST 14 PRO FORMA
APRIL 1 (INCEPTION) AS ADJUSTED
FISCAL YEAR ENDED MARCH 31, THROUGH THROUGH YEAR ENDED
----------------------------------- AUGUST 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996 1997 1997 1997 1997(2)
------ ------ ------- ------- ---------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Equipment rentals............. $5,376 $7,237 $11,871 $15,328 $ 8,515 $ 7,410 $242,759
Sales of equipment, parts and
supplies.................... 1,768 2,367 4,302 4,177 1,205 1,895 158,215
------ ------ ------- ------- ------- ------- --------
Total revenue........... 7,144 9,604 16,173 19,505 9,720 9,305 400,974
Cost of revenue:
Cost of equipment rentals,
excluding depreciation...... 2,549 3,442 4,380 6,029 2,193 2,196 89,055
Rental equipment
depreciation(4)............. 598 1,842 2,053 3,465 1,848 1,526 47,984
Cost of sales of equipment,
parts and supplies.......... 1,919 1,156 4,491 2,791 984 1,691 111,907
------ ------ ------- ------- ------- ------- --------
Total cost of revenue... 5,066 6,440 10,924 12,285 5,025 5,413 248,946
------ ------ ------- ------- ------- ------- --------
Gross profit................... 2,078 3,164 5,249 7,220 4,695 3,892 152,028
Selling, general and
administrative expenses....... 865 1,634 2,972 3,564 1,683 1,081 65,618
Non-rental equipment
depreciation and
amortization(4)............... 53 162 180 238 115 284 14,908
------ ------ ------- ------- ------- ------- --------
Operating income............... 1,160 1,368 2,097 3,418 2,897 2,527 71,502
------ ------ ------- ------- ------- ------- --------
Other (income)/expense:
Interest expense.............. 162 239 583 866 580 760 51,450
Other (income)/expense, net... (96) (353) (196) (203) 62 -- (1,170)
------ ------ ------- ------- ------- ------- --------
66 (114) 387 663 642 760 50,280
------ ------ ------- ------- ------- ------- --------
Income before provision for
income taxes.................. 1,094 1,482 1,710 2,755 2,255 1,767 21,222
Provision for income taxes.... 438 593 732 1,128 939 766 8,913
------ ------ ------- ------- ------- ------- --------
Net income..................... $ 656 $ 889 $ 978 $ 1,627 $ 1,316 $ 1,001 $ 12,309
====== ====== ======= ======= ======= ======= ========
Basic and diluted earnings per
share(5)...................... $ 0.04 $ 0.22
======= ========
OTHER DATA:
EBITDA(6)..................... $1,907 $3,725 $ 4,526 $ 7,324 $ 4,798 $ 4,337 $135,564
EBITDA Margin(7).............. 26.7% 38.8% 28.0% 37.5% 49.4% 46.6% 33.8%
Ratio of EBITDA to interest
expense..................... 2.6x
Ratio of earnings to fixed
charges(8).................. 6.5x 5.6x 3.0x 3.2x 4.1x 3.0x 1.4x
Rental equipment
purchases(9)................ $ -- $ -- $ 8,799 $ 8,101 $ 1,775 $ 2,461 $170,741
Amortization of goodwill(4)... -- -- -- -- -- 166 11,597
Depreciation and other
amortization................ 651 2,004 2,233 3,703 1,963 1,644 51,295
<CAPTION>
THE COMPANY(1)
-----------------------------------------------
PRO FORMA AS ADJUSTED
------------------------------
TWELVE
NINE MONTHS NINE MONTHS MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1998(2) 1998(2)(3)
------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Equipment rentals............. $ 73,644 $218,904 $282,634
Sales of equipment, parts and
supplies.................... 39,084 117,863 158,765
-------- -------- --------
Total revenue........... 112,728 336,767 441,399
Cost of revenue:
Cost of equipment rentals,
excluding depreciation...... 25,195 79,237 99,921
Rental equipment
depreciation(4)............. 13,555 38,905 50,825
Cost of sales of equipment,
parts and supplies.......... 28,090 81,321 112,082
-------- -------- --------
Total cost of revenue... 66,840 199,463 262,828
-------- -------- --------
Gross profit................... 45,888 137,304 178,571
Selling, general and
administrative expenses....... 22,287 57,121 76,250
Non-rental equipment
depreciation and
amortization(4)............... 2,931 11,486 15,271
-------- -------- --------
Operating income............... 20,670 68,697 87,050
-------- -------- --------
Other (income)/expense:
Interest expense.............. 9,391 41,985 55,300
Other (income)/expense, net... (538) (630) (377)
-------- -------- --------
8,853 41,355 54,923
-------- -------- --------
Income before provision for
income taxes.................. 11,817 27,342 32,127
Provision for income taxes.... 4,963 11,483 13,493
-------- -------- --------
Net income..................... $ 6,854 $ 15,859 $ 18,634
======== ======== ========
Basic and diluted earnings per
share(5)...................... $ 0.23 $ 0.28 $ 0.33
======== ======== ========
OTHER DATA:
EBITDA(6)..................... $ 37,694 $119,718 $153,520
EBITDA Margin(7).............. 33.4% 35.5% 34.8%
Ratio of EBITDA to interest
expense..................... 2.8x
Ratio of earnings to fixed
charges(8).................. 2.0x 1.6x 1.5x
Rental equipment
purchases(9)................ $ 76,816 $175,309 $220,211
Amortization of goodwill(4)... 1,961 8,698 11,597
Depreciation and other
amortization................ 14,525 41,693 54,496
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY THE COMPANY
------------------------------------------------- --------------------------------------------
PRO FORMA
AS ADJUSTED
AS OF MARCH 31, AS OF AS OF AS OF AS OF
------------------------------------ AUGUST 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1997 1997 1997 1998 1998(2)
------ ------- ------- ------- ---------- ------------ ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Rental equipment, net......... $3,244 $ 8,907 $14,722 $21,789 $21,886 $30,619 $316,824 $ 420,591
Goodwill, net................. -- -- -- -- -- 36,686 244,935 462,386
Total assets.................. 5,888 10,948 17,423 27,614 29,088 79,157 662,850 1,036,065
Total debt.................... 3,595 5,871 9,944 16,100 16,559 42,928 389,841 654,917
Stockholders' equity.......... 1,206 1,862 2,840 4,467 5,768 26,001 188,759 275,689
</TABLE>
- ---------------
(1)The Acquisitions have been accounted for as purchases and, accordingly, the
operations of the acquired businesses are included in the statement of
operations data and other data from the date of acquisition.
(2)The pro forma as adjusted statement of operations data for the year ended
December 31, 1997 and the nine and twelve months ended September 30, 1998 and
the pro forma as adjusted selected balance sheet data as of September 30,
1998 give effect to the Acquisitions, the Founders' Additional Contribution,
the Common Stock Private Placement, the Initial Public Offering, the Changes
in Outstanding Indebtedness, the Private Debt Offering, and the application
of the net proceeds of such offering as described in the "Pro Forma
Consolidated Financial Statements" as if such transactions had occurred on
the first day of the period presented, and in the case of the pro forma as
adjusted balance sheet data, as of September 30, 1998. See "Use of Proceeds,"
"Risk Factors -- Substantial Debt," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Certain Relationship and Transactions" and the Company's pro forma and
historical financial statements and related notes.
(3)The unaudited pro forma as adjusted statement of operations data for the
twelve months ended September 30, 1998 includes the historical results of the
Company for the twelve months ended September 30, 1998 and the results of the
Acquisitions from the effective date of their acquisition by the
31
<PAGE> 37
Company, and gives effect to the applicable 1997 Pro Forma Combined
Acquisitions and the applicable 1998 Pro Forma Combined Acquisitions
described in "Unaudited Pro Forma Consolidated Financial Statements," as if
these transactions had occurred on October 1, 1997. The results of the
Acquisitions subsequent to the dates of their acquisition are included in the
historical results of the Company.
In addition, the unaudited pro forma as adjusted consolidated statement of
operations data for the twelve months ended September 30, 1998 gives
additional effect to the following, as if such transactions had occurred on
October 1, 1997:
a. Adjustment to historical lease expense on rental equipment resulting from
the termination of certain leases which occurred in connection with the
Acquisitions (decrease of $2.9 million in cost of revenue).
b. Adjustment to the historical rental equipment depreciation recorded to
conform to the Company's accounting policies. Adjustment is based on the
estimated fair value of rental equipment acquired using estimated useful
lives ranging from two to ten years on the straight-line method with
salvage values ranging from zero to ten percent of cost (decrease of
$20.9 million in rental depreciation expense).
c. Adjustment to reduce historical compensation and benefits of certain
former owners and executives of the acquired businesses to amounts
consistent with employment agreements entered into between the certain
owners and executives and the Company, as well as the elimination of
certain private company business expenses that will not be incurred by
the Company (decrease of $11.8 million in selling, general and
administration expenses).
d. Adjustment to historical facility lease expense to reflect the increase
in current lease payments in excess of historical amounts (increase of
$0.6 million in selling, general and administrative expenses).
e. Adjustment to historical property and equipment depreciation recorded to
conform to the Company's accounting policies. Adjustment is based on the
estimated fair value of property and equipment acquired using estimated
useful lives ranging from three to 39 years on the straight-line method
(decrease of $0.8 million in depreciation and amortization of non-rental
property and equipment).
f. Adjustment to recognize the amortization of goodwill and non-compete
agreements using an estimated useful life of 40 and five years,
respectively. Management believes that 40 years is a reasonable life for
goodwill in light of the characteristics of the equipment rental industry
such as the lack of dependence on technological change, the many years
that the industry has been in existence, the current trend towards the
outsourcing of equipment, the recent double digit annual growth rate and
the stable nature of the customer base. In addition, the Company has
focused on acquiring well-established companies that have been in
existence for many years (increase of $9.3 million in non-rental property
and equipment, depreciation and amortization).
g. Adjustment to record interest on borrowings under the Credit Facilities
and notes issued to former owners of the acquired businesses, net of
interest related to debt not assumed or paid off at acquisition. The
interest rate on the Credit Facilities is determined using a base rate
plus a spread based on certain financial performance ratios. Based on
current market rates, an incremental borrowing rate of 8.1% was used to
determine interest expense. A change of one-eighth of a percent would
result in a $0.3 million reduction or increase in the pro forma
adjustment to annual interest expense (increase of $20.7 million in
interest expense).
h. To eliminate historical gains related to assets not acquired (increase of
$0.3 million in other (income)/expense).
i. To record a provision (benefit) for income taxes at an expected effective
rate of 42%.
j.To record interest expense and amortization of debt issuance cost related
to the Private Debt Offering (increase of $5.1 million in interest
expense).
These pro forma adjustments represent, in the opinion of management, all
adjustments necessary to present fairly the Company's pro forma results of
operations for the twelve months ended September 30, 1998, and are based
upon available information and certain assumptions considered reasonable
under the circumstances. The unaudited pro forma consolidated financial data
presented herein does not purport to present what the Company's results of
operations would actually have been had such events leading to the pro forma
adjustments in fact occurred at the beginning of the period indicated or to
project the Company's financial position or results of operations for any
future date or period.
(4) The amortization period for rental equipment depreciation ranges from two to
ten years. The amortization period for goodwill is 40 years.
(5) Earnings per share data is not included for the Predecessor Company on a
historical basis as such information would not be representative of the
capital structure of the Company after this Offering.
(6) EBITDA represents earnings before interest expense, taxes, depreciation and
amortization. EBITDA is used by certain investors as an indicator of a
company's historical ability to service debt. However, EBITDA is not
intended to represent cash flows for the period, nor has it been presented
as an alternative to either (i) operating income (as determined by GAAP), as
an indicator of operating performance or (ii) cash flows from operating,
investing and financing activities (as determined by GAAP) and is thus
susceptible to varying calculations. EBITDA as presented may not be
comparable to other similarly titled measures of other companies.
(7) EBITDA margin represents EBITDA as a percentage of total revenue.
(8) For purposes of determining the ratio of earnings to fixed charges, (i)
earnings consist of income before income taxes plus fixed charges and (ii)
fixed charges consists of interest expense, amortization of debt issuance
costs, and the estimated portion of rental expense.
(9) Rental equipment purchases represent the purchase price of rental equipment
inventory acquired during the period.
32
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's consolidated results
of operations and financial condition should be read in conjunction with the
Consolidated Financial Statements, and the unaudited Pro Forma Consolidated
Financial Information and the "Selected Consolidated Historical and Pro Forma
Consolidated Financial Information and Operating Data" included elsewhere in
this Prospectus.
GENERAL
NationsRent is one of the fastest growing equipment rental companies in the
United States. The Company is taking advantage of the fragmentation in the
equipment rental industry and the absence of an equipment rental company with
significant market share to achieve a leading market position by creating an
integrated network of nationally branded locations offering broad product
selection and superior customer service. NationsRent has become a leading
provider of rental equipment in selected markets as a result of its strategy to
acquire core businesses and open or acquire new locations concentrated around
those businesses. The Company believes that this "cluster" strategy enables it
to (i) increase profitability in its acquired stores and (ii) achieve
profitability in its newly opened locations more quickly than its competitors.
By implementing the cluster strategy and branding the equipment fleet offered at
the Company's locations, NationsRent is able to provide a full range of rental
equipment to customers with a wide variety of equipment rental needs.
NationsRent seeks to acquire businesses that have (i) strong positions in
their geographic market, (ii) experienced local management teams that will
continue to work with the Company following the acquisition, (iii) high quality
rental equipment inventory and (iv) physical and operating characteristics that
are suited to conversion to the NationsRent format. Since its formation in
August 1997, NationsRent consummated the acquisition of 32 equipment rental
businesses with 132 locations in Alabama, Florida, Georgia, Indiana, Kentucky,
Louisiana, Michigan, Ohio, Pennsylvania, Tennessee, Texas and West Virginia. The
aggregate consideration paid by the Company in these 32 acquisitions was
approximately $586.2 million and consisted of approximately (i) $365.9 million
in cash, (ii) $5.9 million of future non-contingent contractual cash payments
(iii) $38.6 million of subordinated promissory notes, (iv) $129.6 million of
convertible subordinated promissory notes, (v) 5,553,023 shares of Common Stock
and (vi) warrants to purchase 100,000 shares of Common Stock at the initial
public offering price. In addition, the Company repaid or assumed certain
outstanding indebtedness of the acquired businesses. The cash portion of the
consideration paid has been funded with equity contributions and borrowings
under the Credit Facilities.
After making an acquisition, the Company converts acquired locations to the
NationsRent format. The cost of converting an acquired location to the
NationsRent format varies depending on the physical properties of the acquired
location and the condition, breadth and depth of rental equipment inventory at
such location, which are factors considered in the selection and pricing of
acquisition candidates. Once NationsRent has established a presence in a
particular market, it may open new locations in that geographic area or adjacent
areas. Since August 1997, the Company has opened six new locations. The Company
does not plan to open any additional new locations in 1998. However, the Company
continues to evaluate the need for new locations as it acquires equipment rental
companies in new markets. The cost of opening the Company's six new locations
has varied depending on whether the Company has leased or purchased the
underlying real property, the size of the location and the breadth and depth of
inventory at each location. See "-- Liquidity and Capital Resources." The
average cost incurred by the Company through September 30, 1998 to open new
locations was approximately $2.6 million per location. The Company's new
locations have on average achieved profitability within approximately five
months of their opening.
The Company derives its revenue from (i) equipment rental (65% of total
revenue for the nine months ended September 30, 1998), (ii) sale of used
equipment (12%), (iii) sale of new equipment (12%) and (iv) sale of spare parts
and supplies, maintenance and repair services (11% in the aggregate, no single
item of which accounts for more than 10% of total revenue). The growth of rental
revenue is dependent on several factors including demand for rental equipment,
the amount and quality of equipment available for rent, rental rates and general
economic conditions. Revenue generated from the sale of used equipment is
affected by
33
<PAGE> 39
price, general economic conditions and the condition of the equipment. Revenue
from the sale of new equipment is affected by price and general economic
conditions. Revenue from the sale of spare parts and supplies, maintenance and
repair services is primarily affected by equipment rental and sales volume.
The principal components of the Company's cost of revenue include
depreciation of rental equipment, costs of new and used equipment sold,
personnel costs, occupancy costs, repair and maintenance costs and vehicle
operations. Rental equipment depreciation is calculated using the straight-line
method over the estimated useful life of such equipment. The range of useful
lives estimated by management for rental equipment is two to eight years and is
depreciated to a salvage value of zero to ten percent of original cost. Certain
lift equipment is depreciated over a ten-year period.
Selling, general and administrative expense includes management salaries,
advertising and marketing, travel, administrative and clerical salaries and data
processing.
Non-rental equipment depreciation and amortization includes the
depreciation of fixed assets that are not offered for rent, amortization of
leasehold improvements and amortization of intangible assets related to the
acquired businesses.
The acquisitions completed in 1997 have resulted in a significantly altered
cost structure of the Predecessor Company primarily due to changes to owners'
compensation, depreciation methodologies, interest expense and real estate
costs. The Company believes that the pre-acquisition historical results of the
acquired businesses are not indicative of future results. In addition, since the
Company was only in operation for approximately one month during 1997,
meaningful comparison to prior year can not be made. As such, the following
discussion of the historical and pro forma results of operations does not set
forth any prior year comparisons.
The following table sets forth, for the periods indicated, information
derived from the historical and pro forma consolidated statements of operations
of the Company expressed as a percentage of total revenue.
<TABLE>
<CAPTION>
HISTORICAL
AUGUST 14 PRO FORMA NINE MONTHS ENDED
(INCEPTION) YEAR SEPTEMBER 30, 1998
TO ENDED -------------------
DECEMBER 31, DECEMBER 31, PRO
1997 1997 HISTORICAL FORMA
------------ ------------ ---------- -----
<S> <C> <C> <C> <C>
Revenue:
Equipment rentals............................ 79.6% 60.5% 65.3% 65.0%
Sales of equipment, parts and supplies....... 20.4 39.5 34.7 35.0
------ ------ ------ -----
Total revenue........................ 100.0 100.0 100.0 100.0
Cost of revenue:
Cost of equipment rentals, excluding
depreciation.............................. 23.6 22.2 22.4 23.5
Rental equipment depreciation................ 16.4 12.0 12.0 11.6
Cost of sales of equipment, parts and
supplies.................................. 18.2 27.9 24.9 24.1
------ ------ ------ -----
Total cost of revenue................ 58.2 62.1 59.3 59.2
------ ------ ------ -----
Gross profit................................... 41.8 37.9 40.7 40.8
Selling, general and administrative expenses... 11.6 16.4 19.8 17.0
Non-rental equipment depreciation and
amortization................................. 3.0 3.7 2.6 3.4
------ ------ ------ -----
Operating income............................... 27.2% 17.8% 18.3% 20.4%
====== ====== ====== =====
</TABLE>
34
<PAGE> 40
HISTORICAL RESULTS OF OPERATIONS
Nine Months Ended September 30, 1998
Revenue. The following table sets forth the Company's revenue by type for
the nine months ended September 30, 1998 (in thousands, except percentages):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
-------------------
<S> <C> <C>
Equipment rentals........................................... $ 73,644 65%
Sales of equipment, parts, and supplies..................... 39,084 35
-------- ---
$112,728 100%
======== ===
</TABLE>
Equipment rental revenue as a percentage of total revenue was 65% for the
nine months ended September 30, 1998. The Company continues to expand its rental
equipment inventory at its current locations and has targeted equipment rental
revenue as a percentage of total revenue to be greater than 60%. Equipment
revenue as a percentage of total revenue exceeded 60% for the nine months ended
September 30, 1998, due to expansion of the rental fleet as well as the deferral
of used equipment sales scheduled for the end of the third quarter to the fourth
quarter of 1998.
Gross Profit. Gross profit for the nine months ended September 30, 1998
was $45.9 million or 40.7% of revenue.
Operating Expenses. Selling, general and administrative expenses for the
nine months ended September 30, 1998 were $22.3 million or 19.8% of revenue.
Non-rental equipment depreciation and amortization for the nine months ended
September 30, 1998 was $2.9 million or 2.6% of revenue.
Other Income and Expense. Interest expense for the nine months ended
September 30, 1998 was $9.4 million or 8.3% of revenue. Interest expense is
primarily attributable to the Company's Credit Facilities and subordinated notes
issued for acquisitions.
Income Taxes. The Company's effective income tax rate for the nine months
ended September 30, 1998 was 42%. The amount above statutory income tax rates is
attributable to non-deductible goodwill amortization for federal income tax
purposes.
PRO FORMA RESULTS OF OPERATIONS
Pro Forma Nine Months Ended September 30, 1998
Revenue. Total revenue for the nine months ended September 30, 1998 was
$336.8 million.
Gross Profit. Gross profit for the nine months ended September 30, 1998
was $137.3 million, or 40.8% of total revenue.
Total Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine months ended September 30, 1998 was $57.1
million, or a 17.0% of total revenue.
Operating Income. Operating income for the nine months ended September 30,
1998 was $68.7 million, or 20.4% of total revenue.
Pro Forma Year Ended December 31, 1997
Revenue. Total revenue for the year ended December 31, 1997 was $401.0
million.
Gross Profit. Gross profit for the year ended December 31, 1997 was $152.0
million, or 37.9% of total revenue.
Total Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 1997 were $65.6 million,
or 16.4% of total revenue.
35
<PAGE> 41
Operating Income. Operating income for the year ended December 31, 1997
was $71.5 million, or 17.8% of total revenue.
HISTORICAL RESULTS OF OPERATIONS -- PREDECESSOR COMPANY
Fiscal Year Ended March 31, 1997 ("Fiscal 1997") as Compared to
Fiscal Year Ended March 31, 1996 ("Fiscal 1996")
Revenue. Total revenue for Fiscal 1997 increased 20.6% to $19.5 million
from $16.2 million in Fiscal 1996. This increase was primarily attributable to a
29.1% increase in equipment rental revenue. Equipment rental revenue increased
as a result of the increased selection and availability of rental equipment and
from the opening of two new locations during Fiscal 1997.
Gross Profit. Gross profit for Fiscal 1997 increased 37.6% to $7.2 million
from $5.2 million in Fiscal 1996. Gross margin increased from 32.5% in Fiscal
1996 to 37.0% in Fiscal 1997. This improvement primarily resulted from increased
margins on the sale of used equipment.
Total Selling, General and Administrative Expenses. Selling, general and
administrative expenses for Fiscal 1997 increased 20.6% to $3.8 million from
$3.2 million in Fiscal 1996. As a percentage of total revenue, these costs were
19.5% in Fiscal 1996 compared with 19.5% in Fiscal 1997. The increase in
selling, general and administrative expenses was primarily attributable to
additional administrative staff hired and growth in business volume during
Fiscal 1997. In addition, the Company incurred additional non-rental
depreciation expense attributable to an increase in property, plant and
equipment as a result of the two locations opened during Fiscal 1997.
Operating Income. As a result of the foregoing, operating income increased
63.0% from $2.1 million for Fiscal 1996 to $3.4 million in Fiscal 1997.
Operating income margin increased from 13.0% in Fiscal 1996 to 17.5% in Fiscal
1997.
Other Expense. Other expense for Fiscal 1997 increased to $0.7 million
from $0.4 million in Fiscal 1996. This increase was primarily attributable to an
increase in debt and related interest expense which resulted from the Company's
increased financing of rental equipment asset purchases.
Income Tax Expense. Income tax expense was $1.1 million for Fiscal 1997,
compared to $0.7 million in Fiscal 1996. The Company's effective tax rate was
40.9% for Fiscal 1997, compared to 42.8% for the same period in Fiscal 1996.
Net Income. Net income for Fiscal 1997 increased 66.4% to $1.6 million
from $1.0 million for Fiscal 1996 for the aforementioned reasons. Net income as
a percentage of revenue was 8.3% for Fiscal 1997 compared with 6.1% for Fiscal
1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses of cash have been the funding of acquisitions
and capital expenditures. To date, the Company has funded its cash requirements
with (i) borrowings under the Credit Facilities, (ii) $48.4 million of equity
contributions from the founders of the Company, (iii) $27.6 million of proceeds
from a private placement of Common Stock, (iv) $95.7 million (after deducting
underwriting discounts and commissions and offering expenses) from its Initial
Public Offering of 13,000,000 shares of Common Stock at $8.00 per share, and (v)
the use of equipment leases.
The Company's net cash provided by operations was $39.3 million for the
nine months ended September 30, 1998. Net cash used in investing activities was
$278.0 million for the nine months ended September 30, 1998. Cash used in
investing activities in the first nine months of 1998 was primarily a result of
cash consideration of $208.0 million for the acquisition of businesses, net of
cash acquired and $76.8 million for purchases of rental equipment. Cash provided
by financing activities during this period was $246.4 million for the nine
months ended September 30, 1998. Cash provided by financing activities was
primarily a result of (i) $23.4 million of additional equity contributions from
the Company's founders, (ii) $27.6 million in proceeds from a private placement
of Common Stock, (iii) $95.7 million (after deducting underwriting
36
<PAGE> 42
discounts and commissions and offering expenses) from its Initial Public
Offering of 13,000,000 shares of Common Stock at $8.00 per share, and (iv)
borrowings under the Company's Credit Facilities.
In September 1998, the Company amended its Credit Facilities to increase
the facilities to include the $175.0 million Term Loan in addition to its
existing $260.0 million Revolving Line of Credit. Recently, the Credit
Facilities were amended further to allow the administrative agent to reallocate
the aggregate dollar amounts of the bank commitments between the Revolving Line
of Credit and the Term Loan, provided that the aggregate commitment may not be
more than $435.0 million and the aggregate commitment under the Revolving Line
of Credit may not be less than $260.0 million. The Revolving Line of Credit has
a three-year term scheduled to expire in June 2001 and the Term Loan has a
six-year term scheduled to expire in September 2004. The Credit Facilities can
be used to complete permitted acquisitions, make capital expenditures, enter
into standby letters of credit, or for working capital and other general
corporate purposes. Borrowings under the Revolving Line of Credit bear interest
at either the BankBoston, N.A. base rate plus a percentage ranging from 0.00% to
0.50% or, at the Company's option, the Eurodollar market rate plus a percentage
ranging from 2.00% to 2.75%. The Term Loan bears interest ranging from 3.00% to
3.25% over the Eurodollar market rate. The percentage over the BankBoston, N.A.
base rate or the Eurodollar market rate is based on the Company's financial
performance as measured by the total funded debt ratio. The Credit Facilities
are secured by a security interest in substantially all of the assets of the
Company. The Credit Facilities also impose, among other covenants, a tangible
assets to senior debt covenant, a restriction on all of the Company's retained
earnings including the declaration and payment of cash dividends, consent
requirements on certain acquisitions and a restriction on the ratio of total
funded debt to earnings before interest, income taxes, depreciation and
amortization. On September 30, 1998, $87.5 million and $175.0 million of cash
borrowings were outstanding under the Revolving Line of Credit and Term Loan,
respectively.
In December 1998, the Company completed its Private Debt Offering in which
it raised net proceeds of approximately $168.8 million (after the Initial
Purchasers' discounts and commissions and paying other estimated expenses)
through the sale of the Old Notes. The Company used the net proceeds from the
Private Debt Offering to repay certain subordinated acquisition debt and certain
outstanding indebtedness under its Credit Facilities.
The Company's short-term cash requirements for its existing operations
consist of (i) capital expenditures to maintain, modernize and expand its rental
equipment inventory, (ii) working capital requirements, and (iii) operating
activities such as repair and maintenance of rental equipment, purchase of
merchandise inventory and other operating activities. The Company estimates that
equipment expenditures for its existing locations, locations under agreements to
be acquired and for new store openings will be in the range of $150.0 million to
$200.0 million (approximately one-third of which is to replace existing rental
equipment), net of proceeds from used equipment sales, over the next 12 months.
In addition, the Company believes that it will be required to make equipment
expenditures in connection with new acquisitions. The Company believes that it
will be able to finance its short-term cash needs through borrowings under the
Credit Facilities, the use of equipment leases and cash generated from
operations. The Company estimates that such sources will be sufficient to fund
the cash required for the Company's existing operations for at least 12 months.
During the nine months ended September 30, 1998, the Company opened six new
locations within identified "clusters." The Company estimates that the aggregate
capital costs associated with each such new location will be in the range of
$2.0 million to $4.5 million. The Company believes that cash generated from
operations and borrowings under the Credit Facilities will be sufficient to fund
these costs without additional debt or equity financings.
The Company has customized a management information system that became
operational at certain locations in the fourth quarter of 1998. The Company
estimates the total cost of installation of the System at the Company's existing
locations will range between $5.0 million and $7.0 million and believes cash
generated from operations and borrowings under the Credit Facilities will be
sufficient to fund these costs. The Company expects that the incremental costs
of installation of the System at additional locations will not be significant on
a per location basis.
The Company plans to continue its acquisition strategy and expects to
finance future acquisitions using cash, capital stock, notes and/or assumption
of indebtedness. To fully implement its growth strategy and meet
37
<PAGE> 43
the resulting capital requirements, the Company will be required to increase
amounts available under the Credit Facilities, issue future debt instruments or
raise additional capital through equity financings. There can be no assurance
that any such increase to the Credit Facilities will be available or, if
available, will be on terms satisfactory to the Company, or that the Company
will be able to successfully complete any future debt or equity financings.
SEASONALITY AND FLUCTUATIONS IN OPERATING RESULTS
The Company's revenue and income are dependent upon activity in the
construction industry in the markets served by the Company. Construction
activity is dependent upon weather and other seasonal factors affecting
construction in the geographic areas where the Company has operations. Because
of this variability in demand, the Company's quarterly revenue may fluctuate,
and revenue for the first quarter of each year can be expected to be lower than
the remaining quarters. Although the Company believes that the historical trend
in quarterly revenue for the second, third and fourth quarters of each year is
generally higher than the first quarter, there can be no assurance that this
will occur in future periods. Accordingly, quarterly or other interim results
should not be considered indicative of results to be expected for any other
quarter or for a full year.
Operating results may fluctuate due to other factors including, but not
limited to (i) changes in general economic conditions including changes in
national, regional or local construction or industrial activities, (ii) the
timing of acquisitions and opening of new locations, (iii) the timing of
expenditures for new rental equipment and the disposition of used equipment,
(iv) competitive pricing pressures and (v) changes in interest rates.
The Company will incur significant expenses in opening new locations, such
as employee training, marketing and facility set-up costs. Initially, new
locations may generate lower operating margins than established locations and
may operate at a loss. In addition, when the Company purchases new rental
equipment, the depreciation related to such equipment may contribute to
near-term margin decline, because such equipment may not initially generate
revenue at a rate that is sufficient to match such increased depreciation
expense. As such, the opening of new rental locations and the purchase of new
equipment to expand the Company's current rental equipment inventory may reduce
the Company's operating margins during a start-up period.
INFLATION
The Company does not believe that inflation has been a significant factor
to the cost of its operations or the operations of the Predecessor Company.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company adopted SFAS No. 130 during the
quarter ended June 30, 1998. SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components in a full set
of financial statements. The objective of SFAS No. 130 is to report a measure
(comprehensive income) of all changes in equity of an enterprise that result
from transactions and other economic events in a period other than transactions
with owners. The adoption of SFAS 130 did not have a material impact on the
Company's consolidated financial statements, as comprehensive income was equal
to net income for all periods presented. The Company is currently evaluating the
reporting formats recommended under this Statement. SFAS No. 131 establishes a
new method by which companies will report operating segment information. This
method requires disclosure of information which is based on the manner in which
management organizes the segments within a company for making operating
decisions and assessing performance. The Company continues to evaluate the
provisions of SFAS No. 131 and, upon adoption, the Company may report operating
segments.
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 establishes criteria for determining which costs of
developing or obtaining internal-use computer software should be charged to
expense and which should be capitalized. SOP 98-1 is effective for all
transactions entered into in fiscal years beginning after December 15, 1998. The
Company does not believe that the adoption of SOP 98-1 will have a material
effect on the Company's financial position or results of operations.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5. SOP 98-5 requires that all
non-governmental entities expense costs of start-up activities, including
pre-operating, pre-opening and organization activities, as those costs are
incurred. In the opinion of
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<PAGE> 44
management, the adoption of this Statement will not have a material effect on
the Company's financial position or results of operations.
YEAR 2000
Since many computer systems and other equipment with embedded chips or
processors use only two digits to represent the year, these systems may be
unable to process accurately certain data before, during or after the year 2000.
As a result, business and governmental entities are at risk for possible
miscalculations or systems failures causing disruptions in their business
operations. This is commonly known as the "Year 2000" issue.
The Company began developing its own management information System during
the second quarter of 1998. The Company's System has been developed to ensure
that it is Year 2000 compliant. In October 1998, the Company began converting
its operations to the new System and has converted eight of its locations. The
Company expects to have all of its current operations converted to the new
System by the end of the second quarter of 1999.
Although the Company does not believe it will suffer any material effects
from the Year 2000 issue in its current operations, there can be no assurance
that the Company will be able to convert the systems of future acquisitions in a
timely manner to avoid any Year 2000 issues. The Company intends to convert all
of the systems of the businesses it acquires to the Company's System as soon as
practicable after each acquisition is completed. There can be no assurance,
however, that all such systems will be converted prior to December 31, 1999.
The Company relies on third-party suppliers for operating supplies,
merchandise for resale, utilities, transportation, equipment for rent and retail
sales and other key services. Interruption of any such third-party's operations
due to Year 2000 issues could have a material adverse effect on the Company's
operations. The Company has begun efforts to evaluate the progress of the
Company's critical third-party suppliers relative to their Year 2000 issues.
This evaluation process is scheduled for completion by the end of the second
quarter in 1999.
The Company is also dependent upon its customers for revenue and cash flow.
Year 2000 interruptions in the Company's customers' operations could result in
reduced revenue, decreased utilization of rental equipment, increased inventory
levels of merchandise, increased accounts receivable levels and cash flow
reductions. The Company has a very broad customer base which should minimize the
impact of isolated failures of its customers' systems. The Company has begun
efforts to evaluate the progress of its critical customers' relative to their
Year 2000 issues. This evaluation process is scheduled for completion by the end
of the second quarter in 1999.
Contingency plans for Year 2000-related interruptions are being developed
and will include, but not be limited to, the development of emergency backup and
recovery procedures for lost data, development of plans as a result the
Company's assessment of customer Year 2000 issues, identification of alternate
suppliers, acceleration of the time it takes to convert newly acquired locations
from their systems to the Company's System and increasing inventory levels of
critical supplies and rental equipment. All plans are expected to be completed
by the end of the second quarter in 1999. These activities are intended to
provide a means of managing risk, but cannot eliminate the potential for
disruption due to third-party failure.
Although the Company does not expect to incur significant expense to
address the Year 2000 issue beyond its capital investment in its System, Year
2000 problems might require the Company to incur unanticipated expenses which
could have a material adverse effect on the Company's business, financial
condition, results of operations or prospects.
The Company's Year 2000 efforts are ongoing and its overall plan, as well
as the consideration of contingency plans, will continue to evolve as new
information becomes available. While the Company anticipates no material
interruption of its business activities, the failure to correct a material Year
2000 problem could result in an interruption in, or a failure of, certain normal
business activities or operations. Such failures could materially and adversely
affect the Company's results of operations, liquidity and financial condition.
Due to the general uncertainty inherent in the Year 2000 problem, resulting in
part from the uncertainty of the Year 2000 readiness of third-party suppliers
and customers, the Company is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on the Company's
results of operations, liquidity or financial condition.
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<PAGE> 45
BUSINESS
GENERAL
NationsRent is one of the fastest growing equipment rental companies in the
United States. We have acquired a platform of equipment rental businesses
concentrated in selected markets and are building a network of nationally
branded locations. We have become a leading provider of rental equipment as a
result of our strategy to expand our rental fleet, acquire core businesses and
open or acquire additional locations concentrated around those businesses. We
believe that this "cluster" strategy enables us to increase profitability in our
acquired stores and achieve profitability in our newly opened locations more
quickly than our competitors. By implementing the cluster strategy and expanding
our fleet of rental equipment, we are able to provide a full range of rental
equipment to customers with a wide variety of equipment rental needs.
We offer a comprehensive line of equipment for rental primarily to a broad
range of construction and industrial customers, including heavy highway
contractors, general contractors, subcontractors, manufacturing plants and
distribution centers. We also sell used and new equipment, spare parts and
supplies, and provide maintenance and repair services. Our locations offer a
full range of high quality, well-maintained rental equipment, including the
following:
<TABLE>
<S> <C>
* backhoes * aerial lifts and work platforms
* bulldozers * compressors and generators
* skid steer loaders * specialized hand tools
</TABLE>
We currently serve over 140,000 active accounts primarily in the
construction and industrial segments of the equipment rental industry.
Construction customers include heavy highway contractors, general contractors,
speciality contractors, subcontractors, excavating contractors and trade
contractors (such as electricians and plumbers). Construction customers rent
equipment for all manner of construction activities, typically on a daily,
weekly or monthly basis, with relatively little lead time due to their need to
react quickly to changes in project scheduling. Industrial customers include
operators of manufacturing plants, petrochemical plants, distribution centers
and transportation facilities. Industrial customers typically rent equipment for
maintenance-oriented purposes on a weekly or monthly basis and are more likely
to place orders for rental equipment in advance of their regularly scheduled
maintenance requirements. In addition to construction and industrial customers,
we rent equipment to homeowners and other general rental customers.
Since our formation in August 1997, we have acquired 32 equipment rental
businesses operating in 20 states, and we currently operate 135 locations. For
the twelve months ended September 30, 1998 on a pro forma basis, assuming
completion of the Acquisitions, we had approximate revenue of $441.4 million,
EBITDA of $153.5 million and an EBITDA margin of 34.8%.
INDUSTRY OVERVIEW
According to industry sources, the United States equipment rental industry
grew from an estimated $614.0 million in revenue in 1982 to an estimated $20.0
billion in 1997, which represents a compound annual growth rate of more than
26%. Construction and industrial companies primarily have driven this growth by
increasingly outsourcing their equipment needs to reduce investment in non-core
assets and convert costs from fixed to variable. According to industry sources,
the United States equipment rental industry is expected to grow to an estimated
$40.0 billion in annual revenue over the next five years due to the overall
growth in the economy and a continuing trend to rent rather than buy equipment.
We believe that this trend toward rental will accelerate as a result of the many
advantages of equipment rental relative to ownership including reduced capital
investment, reduced storage and maintenance expense, increased flexibility to
accept projects due to wide selection of available equipment, greater access to
the most modern equipment without the need to make large capital expenditures,
and improved productivity by having access to equipment that suits a particular
job.
The United States equipment rental industry is highly fragmented, with more
than 20,000 companies. According to industry sources, in 1997 the 100 largest
equipment rental companies in the United States had a combined market share of
less than 20%, no single equipment rental company in the United States had a
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<PAGE> 46
market share greater than 3% and more than 90% of equipment rental companies had
ten or fewer locations. We believe that recent consolidation has increased the
market share of the ten largest equipment rental companies in the United States
and that the largest equipment rental company in the United States currently has
a market share of approximately 6%.
We believe the recent trend toward rapid consolidation in the equipment
rental industry should continue as a result of (i) increasing competitive
pressure on small, independent operators from the growing number of regional and
national companies with greater access to, and a lower cost of, capital and
other related operating efficiencies, (ii) increasing demand by customers for a
broader selection and greater availability of rental equipment and (iii) limited
alternative exit strategies for many of the owners and principals of smaller
independent companies. We believe that this consolidation trend, the fragmented
nature of the industry and the absence of an equipment rental company with a
significant market share present substantial opportunities for NationsRent to
achieve a leading market position by creating an integrated network of
nationally branded locations offering broad product selection and superior
customer service.
COMPETITIVE STRENGTHS
We believe we have several competitive strengths that will enable us to
continue to increase growth and profitability, including the following:
Strong Market Position. We have achieved a leading market position in
selected markets and expect to continue to increase revenue as a result of
our cluster strategy. We believe this strategy enables us to more
effectively serve our customers, broaden our customer base, pool rental
equipment inventory, offer a broader selection and greater availability of
equipment and maintain a high rental equipment utilization rate. By
offering a full range of rental equipment from each location, we believe
that customers who currently use multiple rental equipment providers will
prefer to fill their rental needs through the NationsRent network of
locations. In addition, we believe that we have other advantages relative
to smaller operators, including greater purchasing power and a lower cost
of capital.
Full Range of Rental Equipment. By offering a full range of rental
equipment, we can serve a diverse customer base and respond to customer
demand across each geographic region in which we operate. We offer a
comprehensive selection of light, medium and heavy rental equipment serving
the short-, medium- and long-term requirements of contractors, commercial
customers and industrial customers. Since January 1, 1998, we have added
approximately $147.0 million of new equipment to our rental equipment
inventory. As a result, in part, of the capital expenditures made at the 25
locations we have owned since January 1, 1998, our rental revenue from
these locations has increased more than 40% for the nine month period ended
September 30, 1998 on a pro forma basis as compared to the same period for
1997.
National Brand. We have entered selected markets with the goal of
establishing a nationally recognized brand throughout the United States.
Since our formation in August 1997, we have expanded into 20 states in the
regions set forth below:
<TABLE>
<CAPTION>
NUMBER OF
REGION STATES WITH NATIONSRENT LOCATIONS LOCATIONS
------ --------------------------------- ---------
<S> <C> <C>
Midwest........................ Indiana, Kentucky, Michigan, Ohio, West 45
Virginia
Southeast...................... Alabama, Florida, Georgia, Tennessee 35
Central........................ Louisiana, Texas 33
Northeast...................... Maine, Massachusetts, New Hampshire, New York, 17
Pennsylvania, Rhode Island, Vermont
West........................... California, Nevada 5
-----
TOTAL 135
=====
</TABLE>
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<PAGE> 47
The expansion into these regions provides us with a substantial base from
which to roll out our branding strategy. This strategy includes expanding
our fleet of rental equipment, implementing standard operating procedures
and best practices and creating a distinctive store format and marketing
program. We believe that we are able to increase revenue by offering an
extensive inventory of rental equipment in a customer-oriented atmosphere
and a brand name known for consistent quality. We believe this branding
strategy enables us to expand our customer base and attract a broader range
of customers, including large customers with operations in a variety of
geographic markets.
Distinctive Operating Format. We have designed and are implementing a
format for our locations which we believe differentiates us from our
competitors. Distinguishing characteristics of this format include
drive-through lanes, clearly marked equipment aisles and attractive,
well-organized and clean store facilities. Our larger locations are
typically on a six to 12 acre site in a heavily trafficked area with a
20,000 to 40,000 square foot facility housing a repair and maintenance
center and a broad selection and extensive inventory of equipment and
supplies. Our smaller locations are typically on a two to six acre site in
a high-visibility commercial area with a 7,500 to 11,000 square foot
facility, with maintenance and delivery capabilities and inventory and
supplies targeted to the customer base in that area.
Focus on Customer Service. We are differentiating ourself from our
competitors with innovations designed to increase customer satisfaction. We
generally offer more convenient access, faster check-in and check-out
procedures and shorter required lead time for rentals than our competitors.
We also offer on-time equipment delivery and pick-up, on-site repair
service, 24-hour customer assistance and written instruction materials for
equipment usage and safety. In addition, as part of our plan to provide
one-stop shopping to customers, each location sells parts and supplies to
complement equipment rentals and sales.
Customized Management Information System. We are installing our
customized management information System capable of monitoring operations
at several thousand locations. The System is designed to track customer
purchasing patterns and demographics for use in gaining market share in new
and existing markets, consolidating equipment purchases, maximizing
utilization rates and reducing overhead expenditures. The System will
provide our management with real time revenue, inventory, financial and
customer information, facilitating rapid and well-informed decision making.
In addition, the System will be designed to permit our customers to reserve
and rent equipment and access their account information from their own
computer terminals via our Internet website. To develop our System, we
assembled a team of management information specialists who have previously
developed systems for several Fortune 500 companies. The System has been
developed to ensure that it is Year 2000 compliant.
Experienced Management Team. We believe that we have one of the most
experienced and growth-oriented executive management teams among
publicly-traded companies in the equipment rental industry. James L. Kirk,
our Chairman and Chief Executive Officer, founded OHM, a NYSE-listed
Company, in 1969 and served in various senior executive positions with OHM,
growing it into a leading environmental construction company with an
inventory of heavy and light equipment having an original cost of over $100
million. Recently, Don R. O'Neal joined us as President and Chief Operating
Officer. Prior to joining us, Mr. O'Neal served as President of A-1 Rentals
in Fort Worth, Texas, one of the largest independent equipment rental
businesses in the United States, substantially all the assets of which were
acquired by us in October 1998. Mr. O'Neal was a second-generation owner of
A-1 Rentals and has been in the equipment rental business for over 30
years. In addition, we benefit from the experience of H. Wayne Huizenga,
one of our directors and principal investors, who serves as Chairman and
Co-Chief Executive Officer of Republic and who co-founded and served in
various senior executive positions with Waste Management and Blockbuster,
each of which is a leading consolidator in its respective industry. The
other members of our senior management team have previously worked closely
with Mr. Kirk in senior management positions at OHM, and other key
employees and consultants have worked with Mr. Huizenga in various
positions at Republic, Waste Management or Blockbuster. The NationsRent
management team is supported by operating, marketing and business
development managers with an average of more than 15 years of experience in
the equipment rental industry.
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<PAGE> 48
GROWTH STRATEGY
Our objectives are to increase revenue, profitability, market share and
cash flow by building a nationally branded network of locations that offer a
comprehensive selection of high quality rental equipment in convenient and
accessible locations to customers in the construction and industrial markets.
Key elements of our growth strategy are as follows:
Enhance Operations. We enhance the operations at our locations by:
* increasing the breadth and depth of rental inventory and sharing
rental equipment among locations;
* implementing the NationsRent customer service approach;
* linking locations to the NationsRent management information System;
and
* branding locations and rental inventory with the NationsRent logo,
colors and distinctive store appearance.
Expand National Presence. We expect to continue to acquire leading
companies to implement our cluster strategy and position NationsRent to
achieve significant market share. We target businesses that have one or
more of the following characteristics:
* strong positions in their geographic market;
* experienced local management teams that will continue to work with
us following the acquisition;
* high quality equipment rental inventory; and
* physical and operating characteristics that are suited to
conversion to the NationsRent format.
Once we have entered a particular market, we seek to acquire additional
rental businesses in that market or adjacent markets with locations and
equipment selection that complement our existing operations, thus enabling
us to further penetrate that market.
Open New Rental Locations. Once we have established a presence in a
particular market, we seek to open new locations in that geographic area or
adjacent areas to enable us to offer a greater selection and availability
of equipment, maximize our equipment inventory utilization rates and
achieve economies of scale. We believe that this strategy allows our new
locations to achieve profitability at a faster rate than our competitors
because these locations (1) generate revenue more quickly as a result of
the pre-existing market presence, name recognition and referrals from
existing locations and (2) have lower overhead costs due to the sharing of
service, maintenance, administrative functions and personnel with our
already-established locations. Since August 1997, we have opened six new
locations.
Further Penetrate Industrial Rental Market. We believe that the
equipment needs of industrial customers are underserved by the existing
equipment rental market in the United States and that there are significant
opportunities to further penetrate this market segment. We also believe
that by offering a comprehensive selection and available supply of rental
equipment throughout an integrated nationally branded network of locations,
industrial customers will become increasingly aware of the advantages of
equipment rental relative to ownership. Such advantages include reduced
capital investment, reduced storage and maintenance expense and greater
access to the most modern equipment.
ACQUISITIONS
In furtherance of our growth strategy, we have acquired 32 equipment rental
businesses with 132 locations. These locations are concentrated in the following
five geographic regions: Midwest Region, the Southeast Region, the Central
Region, the Northeast Region, and the West Region. We believe that each of the
equipment rental businesses which we have acquired or contracted to acquire
meets our acquisition criteria and promotes our cluster strategy. Furthermore,
each of these acquired businesses allows us to better meet the needs of the
broad range of construction and industrial customers to whom we primarily market
our products
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<PAGE> 49
and services. To this end, many of the businesses we have acquired have been
doing business in their respective markets for more than 35 years.
In October 1998, we acquired substantially all of the assets of A-1
Rentals. A-1 Rentals has 13 locations serving the Dallas/Fort Worth and Austin,
Texas markets and, as one of the largest independent equipment rental companies
in the United States, has operated in these markets for approximately 35 years.
Don R. O'Neal, President and Chief Operating Officer of the Company, previously
served as President of A-1 Rentals. See "Certain Relationships and
Transactions." In December 1998, we acquired Logan, which has 16 locations
throughout the Northeast. In December 1998, we also acquired substantially all
of the assets of River City, which has five locations in California and Nevada.
OPERATIONS
NationsRent is one of the fastest growing equipment rental companies in the
United States, currently operating 135 locations. Our operations primarily
consist of (1) renting a full range of equipment to construction and industrial
customers, (2) selling our used equipment inventory, (3) selling new equipment
as a distributor or dealer on behalf of several nationally known equipment
manufacturers and (4) selling parts, supplies and merchandise and providing
repair and maintenance services to complement our equipment rentals and sales.
Equipment Rentals. We rent on a daily, weekly and monthly basis a broad
variety of light, medium and heavy equipment serving the long-term requirements
of contractors, the short and medium-term requirements of commercial customers,
and short through long-term requirements of industrial customers. Our rental
inventory includes such equipment as aerial lifts and work platforms, air
compressors, backhoes, boom lifts, bulldozers, ditching equipment, forklifts,
generators, high reach equipment, pumps and scissor lifts. The mix of equipment
offered from each of our locations varies based on the needs of the local
market.
We are implementing a program to make ongoing capital investments in new
equipment, engage in periodic sales of used equipment and conduct preventive
maintenance. This program is designed to increase equipment utilization, enhance
resale values and extend the useful life of equipment. As of September 30, 1998,
on a pro forma basis for the Acquisitions, our equipment rental inventory had an
original cost of over $540.0 million and an average age of approximately 26
months.
We have developed operating initiatives that we are in the process of
introducing at all of our locations to offer our rental customers more
convenient access, faster check-in and check-out procedures, reduced equipment
downtime and shorter lead times for rentals than its competitors. For example,
all of our new locations are being designed with drive-through lanes to speed up
equipment loading and unloading. In addition, our rental equipment is being
outfitted with universal trailer hitches designed to accept a broad range of
towing mechanisms to ease customer transport of equipment. To reduce the
downtime associated with flat tires, we fill the tires of equipment used in
areas prone to flats with foam instead of air. Our rental locations also offer
equipment delivery and pick-up, on-site repair service within two hours of
customer request, 24-hour customer assistance, and a library of audio, video and
written instructional materials for equipment usage and safety.
Used Equipment Sales. We periodically sell used equipment to adjust the
size and composition of our rental equipment inventory in response to changing
market conditions and to maintain the quality and low average age of our rental
equipment. We attempt to balance the revenue obtainable from used equipment
sales with the revenue obtainable from continued equipment rentals. We are
generally able to achieve favorable resale prices for our used equipment due to
a preventive maintenance program and practice of selling used equipment before
it becomes obsolete or irreparable. We believe that the proactive management of
new equipment purchases and used equipment sales allows us to maximize
utilization rates and respond to changing economic conditions.
New Equipment Sales. We are a distributor of new equipment on behalf of
several nationally known equipment manufacturers. We have dealership
arrangements in certain geographic areas with various equipment manufacturers as
a result of the Acquisitions. Typically, dealership agreements do not have a
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<PAGE> 50
specific term and may be terminated by either party upon specific events and/or
written notice. In the future we may continue, amend or terminate dealership
arrangements, if any, of businesses we acquire or we may enter into new
dealership agreements or arrangements, depending on market conditions in the
area and other factors.
Parts, Supplies and Service. We sell a full complement of parts, supplies
and merchandise to our customers in conjunction with our equipment rental and
sales business. We provide repair service to rental customers and, as part of
our focus on customer service, we generally respond to rental equipment service
requests within two hours. We also offer maintenance service to customers who
own equipment and generate revenue from damage waiver charges, delivery charges
and warranty income. The Company believes that revenue from parts and service is
more stable than equipment sales revenue because of the recurring nature of the
parts and service business. We also believe that during economic downturns the
parts and service business may increase as customers postpone new equipment
purchases and instead attempt to maintain their existing equipment.
MANAGEMENT INFORMATION SYSTEM
We are installing a customized management information system capable of
monitoring operations at several thousand locations. Our System is designed to
track customer purchasing patterns and demographics for use in gaining market
share in new and existing markets, consolidating equipment purchases, maximizing
utilization rates and reducing overhead expenditures. The System will provide
our management with real time revenue, inventory, financial and customer
information, facilitating rapid and well-informed decision making. In addition,
the System will be designed to permit customers to reserve and rent equipment
and access their account information from their own computer terminals via our
Internet website. To develop our System, we assembled a team of management
information specialists who have previously developed systems for several
Fortune 500 companies. The System has been developed to ensure that it is Year
2000 compliant.
CUSTOMERS
We currently serve over 140,000 active accounts primarily in the
construction and industrial segments of the equipment rental industry. On a pro
forma basis after giving effect to the Acquisitions, our top ten customers
represented approximately 3% of our 1997 revenue and no single customer
accounted for more than 1% of the Company's 1997 revenue. Our customers vary in
size from large Fortune 500 companies to small construction contractors,
subcontractors, machine operators and homeowners.
We do not provide purchase financing to customers. We rent equipment, sell
parts and provide repair services on account to customers who are screened
through a credit application process. Customers can arrange financing of
purchases of large equipment through a variety of creditors including
manufacturers, banks, finance companies and other financial institutions.
SALES AND MARKETING
We maintain a strong marketing and sales orientation throughout our
organization in order to better understand and serve our customers and increase
our customer base. We undertake sales and marketing initiatives designed to
increase revenue and market share and build brand awareness. We prepare
marketing analyses which address key business issues such as market/industry
history, opportunities, company philosophy, sales trends, consumer behavior
trends, distribution channels, pricing issues, target markets, advertising and
media analysis, competitive situations and selling strategies. Based on the
results of our analyses, we develop marketing and sales strategies. To assist us
in implementing our marketing and sales strategies, we have retained a store
design and merchandising firm and a national advertising agency.
Our regional managers are responsible for training, supervising and
directing the selling activities of the NationsRent salesforce in their markets.
In addition, regional managers are also responsible for overseeing the mix of
equipment at their locations, keeping abreast of local construction and
industrial activity and monitoring competitors in their respective markets.
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We employ approximately 200 equipment rental salespeople who utilize
targeted local marketing strategies to address specific customer needs and
respond to competitive pressures. To remain informed of local market activity,
salespeople track construction projects and new equipment sales in their area
through Equipment Data Reports, F.W. Dodge Reports and PEC Reports (Planning,
Engineering and Construction), follow up on referrals and visit construction
sites and potential equipment users who are new to the area.
TRADEMARKS
The Company has applied to the United States Patent and Trademark Office to
register the service mark "NationsRent."
STORE LAYOUT AND DESIGN
Many of our locations are situated in high-visibility commercial areas and
are designed to offer easy and convenient access to customers. Our larger
locations are typically on a six to 12 acre site in a heavily-trafficked area
with a 20,000 to 40,000 square foot facility housing a repair and maintenance
center and a broad selection and extensive inventory of equipment and supplies.
Our smaller locations are typically on a two to six acre lot in a
high-visibility commercial area with a 7,500 to 11,000 square foot facility with
maintenance and delivery capabilities and inventory and supplies that are
targeted to the customer base in that area. Depending on the type of equipment
rented at a particular location and the needs of the local market, our locations
may include (1) sales and administrative offices, (2) a customer showroom
displaying equipment and parts, (3) an equipment service area and (4) outdoor
and indoor equipment storage facilities.
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<PAGE> 52
PURCHASING
We acquire equipment from vendors with reputations for product quality and
reliability. Our size and the quantity of equipment we acquire enable us to
purchase most equipment directly from manufacturers pursuant to national
purchasing agreements at lower prices and on more favorable terms than many
smaller competitors. We maintain close relationships with our vendors to ensure
the timely delivery of new equipment. We believe that we have sufficient
alternative sources of supply for the equipment we purchase in each of our
principal product categories. We acquire our rental equipment inventory through
a combination of purchase and lease arrangements.
We select the type and quantity of rental equipment to be purchased for
each of our locations based on the expected needs of the local market. We
determine rental rates for each type of equipment based on the cost and expected
utilization of the equipment, and adjust rental rates at each location for
demand, length of rental, volume of equipment rented and other competitive
considerations. The following table summarizes the primary suppliers of certain
of our rental equipment:
<TABLE>
<CAPTION>
PRODUCT CATEGORY PRIMARY SUPPLIERS
---------------- -----------------
<S> <C>
HEAVY
Articulated Trucks Volvo/Moxy/Caterpillar
Bulldozers Komatsu/John Deere/Caterpillar
Excavators Komatsu/John Deere/Caterpillar
Scrapers John Deere/Caterpillar
Track Loaders John Deere/Caterpillar
MEDIUM
Aerial Work Platforms JLG/Genie/Snorkel
Backhoes New Holland/Caterpillar/Case/John Deere
Compaction Equipment Ingersoll Rand/BOMAG
Forklifts JCB/Ingersoll Rand/Lull
Knuckle Boom Lifts JLG/Genie/Snorkel
Semi-Pneumatic Forklifts Komatsu/Mitsubishi
Wheel Loaders Volvo/Komatsu/Caterpillar
LIGHT
Air Compressors Ingersoll Rand/Multiquip
Concrete Buggies Miller/Whiteman
Concrete Mixers Whiteman/Essick
Concrete Saws Pardener/Stihl/Olympic
Electric Hammers Bosch/Harper
Light Towers Ingersoll Rand/Coleman/Specialty
Plate Compactors Multiquip/BOMAG
Power Generators MQ Power/Ingersoll Rand
Skid-Steer Loaders New Holland/Bobcat/Case
Submersible Pumps Surumi/Multiquip
Trenchers Vermeer/Ditch Witch
Welders Lincoln/Miller
</TABLE>
COMPETITION
The equipment rental industry is highly fragmented and competitive. We
compete with independent third parties in all of the markets in which we
operate. Most of our competitors in the rental business tend to operate in
specific, limited geographic areas, although some larger competitors compete on
a national basis. We also compete with equipment manufacturers which sell and
rent equipment directly to customers. Some of the Company's competitors have
greater financial resources and name recognition than the Company.
ENVIRONMENTAL AND SAFETY REGULATION
Our equipment, facilities and operations are subject to certain federal,
state and local laws and regulations relating to environmental protection and
occupational health and safety, including those governing wastewater discharges,
the use, treatment, storage and disposal of solid and hazardous wastes and
materials, air quality and the remediation of contamination associated with the
release of hazardous substances. For example, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, provides for,
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among other things, the remediation of sites from which there is a release or
threatened release of a hazardous substance into the environment and may impose
liability for the costs of cleanup and for damages to natural resources upon
past and current owners and operators of such sites. In addition, the Federal
Water Pollution Control Act of 1972 regulates the discharge of pollutants into
streams, rivers and other waters and may require the issuance of discharge
permits to us. The Occupational Safety and Health Act of 1970 authorizes the
promulgation of occupational safety and health standards which apply to the
Company's facilities and operations. In addition to federal environmental and
safety regulations, the states and certain localities in which we operate have
their own laws and regulations governing solid waste disposal, water pollution
and, in most cases, releases and cleanup of hazardous substances as well as
liability for such matters, which may be applicable to our facilities and
operations. Certain of our existing and former locations use and have used
substances, and currently generate or have generated or disposed of wastes,
which are or may be considered hazardous or otherwise are subject to applicable
environmental requirements.
In particular, we store and dispense, or in the past we have stored or
dispensed or the facilities at which we operated in the past stored or
dispensed, petroleum products from above-ground storage tanks and, in certain
cases, underground storage tanks. We also operate locations which in the past
used hazardous materials, including solvents, to clean and maintain equipment,
and generate and dispose of solid and hazardous wastes, including batteries,
used motor oil, radiator fluid and solvents. In connection with such activities,
we have incurred certain capital expenditures and other compliance costs which
are expensed on a current basis and which, to date, have not been material to
the Company's financial condition.
Additionally, in connection with acquisitions of equipment rental
businesses, we undertake environmental assessments of substantially all
locations that we will continue to operate following the acquisitions and expect
to continue to do so before acquiring any additional sites. We do not currently
maintain comprehensive insurance covering environmental liabilities at our
sites. However, the sellers of each of the equipment rental businesses which we
have acquired have indemnified us with respect to environmental liabilities
associated with such businesses. Based on currently available information, we
believe that it is unlikely that we will have to incur material capital
expenditures or other material compliance or remediation costs for environmental
and safety matters in the foreseeable future. We cannot assure you, however,
that federal, state or local environmental and safety requirements will not
become more stringent or be interpreted and applied more stringently in the
future, or that we will identify adverse environmental conditions that are not
currently known to us. Such future changes or interpretations, or the
identification of such adverse environmental conditions, could result in
additional environmental compliance or remediation costs which we do not
currently anticipate, which could be material to the Company's financial
condition or results of operations. See "Risk Factors -- Environmental and
Safety Regulation."
EMPLOYEES
As of September 30, 1998, NationsRent employed approximately 2,250 persons,
approximately 35 of which are covered by a collective bargaining agreement. We
believe our relations with our employees are good.
PROPERTIES
Our corporate headquarters are located in Ft. Lauderdale, Florida in leased
premises. Certain of our property and equipment are subject to liens securing
payment of portions of our indebtedness. We lease the real estate for all but
two of our locations and also lease certain of our equipment. We believe that
all of our facilities are sufficient for our current needs.
LEGAL PROCEEDINGS
We are party to pending legal proceedings arising in the ordinary course of
business. While the results of such proceedings cannot be predicted with
certainty, we do not believe that any of these matters are material to our
financial condition or results of operations.
48
<PAGE> 54
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The table below sets forth the names and ages of the executive officers and
directors of the Company as well as the positions and offices held by such
persons.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James L. Kirk............................. 49 Chairman of the Board and Chief Executive Officer
Don R. O'Neal............................. 51 President and Chief Operating Officer
Gene J. Ostrow............................ 44 Executive Vice President and Chief Financial
Officer
Philip V. Petrocelli...................... 39 Executive Vice President
Kris E. Hansel............................ 41 Vice President and Controller
Pamela K.M. Beall......................... 42 Vice President, Treasurer and Assistant Secretary
Joseph H. Izhakoff........................ 32 Vice President, General Counsel and Secretary
H. Wayne Huizenga......................... 60 Director
Harris W. Hudson.......................... 56 Director
Gary L. Gabriel........................... 55 Director
Thomas H. Bruinooge....................... 54 Director
</TABLE>
JAMES L. KIRK is a co-founder of the Company, together with H. Family
Investments, Inc. and Mr. Ostrow, and has served as the Chairman of the Board of
the Company since August 1997 and as Chief Executive Officer of the Company
since April 1998. Mr. Kirk also served as President of the Company from April
1998 though September 1998. From 1985 to February 1998, Mr. Kirk was Chairman of
the Board, President and Chief Executive Officer of OHM, a NYSE listed company.
DON R. O'NEAL joined the Company as President and Chief Operating Officer
in October 1998. From 1985 to October 1998, Mr. O'Neal served as President of
A-1 Rentals, which was acquired by the Company in October 1998. Mr. O'Neal has
served on the Board of Directors of the American Rental Association and has
served as President of the Texas Rental Association. Mr. O'Neal has been in the
equipment rental business for over 30 years.
GENE J. OSTROW is a co-founder of the Company, together with H. Family
Investments, Inc. and Mr. Kirk, and has served as its Executive Vice President
and Chief Financial Officer since August 1997. From August 1997 to April 1998,
Mr. Ostrow served as Secretary and Treasurer of the Company. From March 1997 to
October 1997, Mr. Ostrow was Vice President of Corporate Development of OHM.
From November 1994 to March 1997, Mr. Ostrow was a Senior Vice President,
Corporate Finance with Raymond James and Associates and from July 1996 to March
1997, Mr. Ostrow was co-head of that firm's mergers and acquisitions practice.
From October 1993 to November 1994, Mr. Ostrow was Vice President and Chief
Financial Officer of Ecoscience Corporation. Mr. Ostrow was employed by OHM and
its affiliates from February 1986 to October 1993 in various positions,
including Vice President and Chief Financial Officer of OHM from February 1986
through September 1991, and as Executive Vice President and Chief Financial
Officer of NSC Corporation (an affiliate of OHM) from July 1988 through October
1993. Mr. Ostrow is also a Certified Public Accountant.
PHILIP V. PETROCELLI joined the Company as Executive Vice President in
February 1998. From August 1993 to February 1998, Mr. Petrocelli was Vice
President -- Western Region of OHM. Before joining OHM, Mr. Petrocelli was a
Regional Director and acting Vice President-Analytical Labs with IT Corporation,
a provider of engineering services, since September 1988.
KRIS E. HANSEL joined the Company as Vice President and Controller in March
1998. Prior to joining the Company, Mr. Hansel served in various positions of
increasing responsibility at OHM since 1988, most recently as Vice President and
Controller. Prior to joining OHM, Mr. Hansel was General Accounting Manager of
WearEver-Proctor Silex, Inc.
49
<PAGE> 55
PAMELA K.M. BEALL joined the Company as Vice President and Treasurer in
April 1998. Ms. Beall also served as Secretary from April to October 1998 and
currently serves as Assistant Secretary. From June 1985 to April 1998, Ms. Beall
served as Treasurer of OHM and in various positions of increasing responsibility
at OHM, most recently as Vice President and Assistant Secretary. Before joining
OHM, Ms. Beall was General Manager, Treasury Services for USX Corporation, and
previous to that she was with Marathon Oil Company. From November 1996 to
February 1998, Ms. Beall served as a director of NSC Corporation, an affiliate
of OHM. Since May 1996, Ms. Beall has served as a director of System One
Services, Inc.
JOSEPH H. IZHAKOFF joined the Company as Vice President and General Counsel
in September 1998. Commencing October 1998, Mr. Izhakoff also began serving as
Secretary. Prior to joining the Company, Mr. Izhakoff was an attorney at
Akerman, Senterfitt & Eidson, P.A. since August 1995, most recently as a
shareholder, where his practice focused on corporate and securities matters and
mergers and acquisitions. From September 1990 to July 1993, Mr. Izhakoff was an
attorney at Paul, Weiss, Rifkind, Wharton & Garrison and from September 1993 to
July 1995, Mr. Izhakoff was an attorney at Thomson Muraro Razook & Hart, P.A.
H. WAYNE HUIZENGA joined the Company as a director in June 1998. Since July
1998, Mr. Huizenga has served as a director of theglobe.com, an on-line
interactive communication business. Since May 1998, Mr. Huizenga has served as
Chairman of the Board and Chief Executive Officer of Republic Services, Inc.
("Republic Services"), a leading provider of non-hazardous solid waste
collection and disposal services. Since August 1995, Mr. Huizenga has served as
Chairman of the Board of Republic, which owns the nation's largest chain of
franchised automotive dealerships, is building a chain of used vehicle
megastores and owns National Car Rental and Alamo Rent-A-Car. Since October
1996, Mr. Huizenga has served as Co-Chief Executive Officer of Republic and from
August 1995 until October 1996, Mr. Huizenga served as Chief Executive Officer
of Republic. Since September 1996, Mr. Huizenga has served as the Chairman of
the Board of Florida Panthers Holdings, Inc. ("Panthers Holdings"), a leisure,
recreation and entertainment company which owns and operates certain luxury
resort hotels and the Florida Panthers professional sports franchise. Since
January 1995, Mr. Huizenga also has served as the Chairman of the Board of
Extended Stay America, Inc. ("Extended Stay"), an operator of extended stay
lodging facilities. From September 1994 until October 1995, Mr. Huizenga served
as the Vice Chairman of Viacom Inc. ("Viacom"), a diversified entertainment and
communications company. During the same period, Mr. Huizenga also served as the
Chairman of the Board of Blockbuster Entertainment Group, a division of Viacom.
From April 1987 through September 1995, Mr. Huizenga served as the Chairman of
the Board and Chief Executive Officer of Blockbuster, during which time he
helped build Blockbuster from a 19-store chain into the world's largest video
rental company. In September 1994, Blockbuster merged into Viacom. In 1971, Mr.
Huizenga co-founded Waste Management, which he helped build into the world's
largest integrated solid waste services company, and he served in various
capacities, including President, Chief Operating Officer and a director from its
inception until 1984. Mr. Huizenga is the brother-in-law of Mr. Hudson.
HARRIS W. HUDSON joined the Company as a director in June 1998. Since May
1998, Mr. Hudson has served as Vice Chairman and a director of Republic
Services. Mr. Hudson has served as a director of Republic since August 1995 and
as Vice Chairman of Republic and Chairman of Republic's Solid Waste Group since
October 1996. From August 1995 until October 1996, Mr. Hudson served as
President of Republic. From May 1995 until August 1995, Mr. Hudson served as a
consultant to Republic. From 1983 until August 1995, Mr. Hudson founded and
served as Chairman of the Board, Chief Executive Officer and President of Hudson
Management Corporation, a solid waste collection company, which was acquired by
Republic in August 1995. From 1964 to 1982, Mr. Hudson served as Vice President
of Waste Management of Florida, Inc., a subsidiary of Waste Management and its
predecessor. Mr. Hudson also serves as a director of Panthers Holdings. Mr.
Hudson is the brother-in-law of Mr. Huizenga.
GARY L. GABRIEL joined the Company as a director in June 1998. Since
September 1997, Mr. Gabriel has provided consulting services to the Company on
operational and business development matters. From January 1978 to September
1997, Mr. Gabriel served as President of Sam's, which was acquired by the
Company in September 1997. In 1961, Mr. Gabriel co-founded a predecessor company
of Sam's.
50
<PAGE> 56
THOMAS H. BRUINOOGE joined the Company as a director in June 1998. Mr.
Bruinooge is an attorney who has been in private practice since 1968 and has
practiced with the firm of Bruinooge & Associates since 1987.
The executive officers of the Company are selected by and serve at the
discretion of the Board. The directors of the Company hold office until the next
annual meeting of stockholders and until their successors have been duly elected
and qualified.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has established an Executive Committee which has the same
powers and authority as the Board of Directors of the Company (the "Board"),
subject to the limitations of the Delaware General Corporation Law (the "DGCL")
and the Company's Certificate of Incorporation, as amended (the "Certificate"),
and Bylaws, as amended (the "Bylaws"). Messrs. Kirk and Huizenga are the members
of the Executive Committee.
The Company has established an Audit Committee and a Compensation
Committee, each composed of two independent directors. The Audit Committee,
comprised of Gary L. Gabriel and Thomas H. Bruinooge, recommends the annual
appointment of the Company's auditors, with whom the Audit Committee reviews the
scope of audit and non-audit assignments and related fees, accounting principles
used by the Company in financial reporting, internal auditing procedures and the
adequacy of the Company's internal control procedures. The Compensation
Committee, comprised of Harris W. Hudson and Thomas H. Bruinooge, administers
the 1998 Stock Option Plan and makes recommendations to the Board regarding
compensation for the Company's executive officers.
COMPENSATION OF DIRECTORS
The 1998 Stock Option Plan provides for an automatic grant of options to
purchase 50,000 shares of Common Stock to each member of the Board who joins the
Board as a non-employee director. In addition, the 1998 Stock Option Plan
provides for an additional automatic grant of options to purchase 10,000 shares
of Common Stock at the beginning of each fiscal year to each non-employee
director continuing to serve on the Board at such time. The 1998 Stock Option
Plan also provided for the automatic grant of options to purchase 50,000 shares
of Common Stock to each member of the Board who was a non-employee director at
the time of the Initial Public Offering. All options granted automatically to a
non-employee director will be fully vested and immediately exercisable. In
addition, each automatic grant of options to a non-employee director will remain
exercisable for a term of ten years from the date of grant so long as such
person remains a member of the Board. Each automatic grant of options to a
non-employee director serving on the Board at the time of the Initial Public
Offering has an exercise price per share equal to the Initial Public Offering
price of $8.00, and each automatic grant thereafter is exercisable at a price
per share equal to the closing price of a share of Common Stock on the NYSE, on
the date immediately prior to the automatic grant date. In addition to such
automatic option grant, the Company expects to reimburse directors for their
reasonable expenses incurred in connection with their attendance at Board and
Committee meetings.
In September 1997, in connection with the acquisition of Sam's, the Company
entered into an agreement with Gary L. Gabriel pursuant to which Mr. Gabriel
provides certain consulting services to the Company. See "Certain Relationships
and Transactions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year ended December 31, 1997, the Company had no Compensation
Committee or other committee of the Board performing similar functions.
Decisions concerning compensation of executive officers were made by certain
executive officers of the Company. Since the Initial Public Offering the Board
established a Compensation Committee consisting of non-employee directors. See
"-- Committees of the Board of Directors."
51
<PAGE> 57
EXECUTIVE COMPENSATION
The Company was formed in August 1997 and did not pay any compensation to
its Chief Executive Officer and did not pay salary and bonus in excess of
$100,000 to any of its executive officers for the period from August 14, 1997
(inception) to December 31, 1997. The following table sets forth the annual base
salaries that the Company expects to pay for the year ending December 31, 1998
to the named executive officers below (the "Named Officers") and certain options
to purchase Common Stock which the Company has granted to the Named Officers:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON STOCK
UNDERLYING
NAME ANNUAL BASE SALARY OPTIONS
- ---- ------------------ ------------
<S> <C> <C>
James L. Kirk................................ $ 250,000 250,000(1)
Don R. O'Neal................................ 250,000 100,000(2)
Gene J. Ostrow............................... 200,000 100,000(1)
Philip V. Petrocelli......................... 200,000 346,472(3)
Joseph H. Izhakoff........................... 185,000 150,000(4)
</TABLE>
- ---------------
(1) These options have an exercise price of $8.00 per share and vest over a
four-year period at the rate of 25% per year commencing August 6, 1999.
These options become immediately exercisable upon a change of control of the
Company (as defined in the 1998 Stock Option Plan).
(2) These options have an exercise price of $5.50 per share and vest over a
four-year period at a rate of 25% per year commencing October 23, 1999.
These options become immediately exercisable upon a change of control of the
Company (as defined in the 1998 Stock Option Plan).
(3) These options have an exercise price of $5.77 per share and vest over a
four-year period at the rate of 25% per year commencing on February 24,
1999. These options become immediately exercisable upon a change of control
of the Company (as defined in the option agreement related to such options).
(4) These options have an exercise price of $7.00 per share and vest over a
four-year period at a rate of 25% per year commencing September 1, 1999.
These options become immediately exercisable upon a change of control of the
Company (as defined in the 1998 Stock Option Plan).
The executive officers of the Company receive health benefits which do not
exceed 10% of their respective salaries. These benefits are also provided to
other employees of the Company. The Company may pay bonuses and issue additional
stock options to the Named Officers during 1998. See "-- Stock Option Plan." In
October 1998, in connection with the acquisition by the Company of A-1 Rentals,
Don R. O'Neal entered into an employment agreement to serve as President and
Chief Operating Officer of the Company. See "Certain Relationships and
Transactions."
STOCK OPTION PLAN
The Company's Board of Directors and stockholders adopted the 1998 Stock
Option Plan (the "Plan"), effective August 6, 1998. Pursuant to the Plan,
options to acquire a maximum of 5,000,000 shares of Common Stock may be granted
to employees, directors (including employee and non-employee directors) and
certain independent contractors and consultants of the Company or any Subsidiary
(as defined in the Plan). As of September 30, 1998, there were outstanding
options to purchase 2,188,795 shares at exercise prices ranging from $6.25 per
share to $8.00 per share granted under the Plan, 200,000 of which are
immediately exercisable.
The Compensation Committee administers the Plan. The Compensation Committee
determines which persons will receive options and the number of options to be
granted to such persons. The Plan also provides for annual mandatory grants of
options to non-employee directors. See " -- Compensation of Directors." The
Board of Directors or the Compensation Committee, as the case may be, will make
all determinations that it may deem necessary or advisable for the
administration of the Plan.
Pursuant to the Plan, the Company may grant Incentive Stock Options
("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and Non-Qualified Stock
52
<PAGE> 58
Options ("NQSOs"), not intended to qualify under Section 422 of the Code. The
price at which the Company's Common Stock may be purchased upon the exercise of
options granted under the Plan will be required to be not less than the per
share fair market value of the Common Stock on the date the particular options
are granted. Options granted under the Plan may have maximum terms of not more
than ten years and are not transferable, except by will or the laws of descent
and distribution. None of the ISOs under the Plan may be granted to an
individual owning more than 10% of the total combined voting power of all
classes of stock issued by the Company unless the purchase price of the Common
Stock under such option is at least 110% of the fair market value of the shares
issuable on exercise of the option determined as of the date the option is
granted, and such option is not exercisable more than five years after the grant
date.
Generally, options granted under the Plan terminate upon the date the
person to whom such options were granted is no longer employed or retained by
the Company or serving on the Company's Board of Directors other than by reason
of permanent and total disability as that term is defined in the Plan.
Pursuant to the Plan, except with respect to non-employee directors subject
to the termination of employment, death or disability provisions of the Plan and
unless otherwise determined by the Board of Directors, one-fourth of the options
granted to an optionee are exercisable on the first anniversary of such grant
and an additional one-fourth of such options are exercisable on each of the next
three succeeding anniversaries of the initial vesting date. However, options
granted under the Plan shall become immediately exercisable if the holder of
such options is terminated by the Company or is no longer a director of the
Company, as the case may be, subsequent to certain events which are deemed to be
a "change in control"' of the Company. A "change in control" of the Company
generally is deemed to occur when, subject to certain conditions, any person
becomes the beneficial owner of or acquires voting control with respect to more
than 50% of the Common Stock.
ISOs granted under the Plan are subject to the restriction that the
aggregate fair market value (determined as of the date of grant) of options
which first become exercisable in any calendar year cannot exceed $100,000.
The Plan provides for appropriate adjustments in the number and type of
shares covered by the Plan and options granted thereunder in the event of any
reorganization, dissolution, liquidation, recapitalization or certain other
transactions involving the Company.
401(k) PLAN
The Company has adopted a 401(k) Retirement Savings Plan (the "401(k)
Plan") to provide retirement and other benefits to employees of the Company and
to permit employees a means to save for their retirement. The 401(k) Plan is
intended to be a tax-qualified plan under Section 401(a) of the Internal Revenue
Code of 1986, as amended.
LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION
The DGCL authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of the directors' fiduciary duty of care. The Certificate
limits the liability of directors of the Company to the Company or its
stockholders to the fullest extent permitted by Delaware law. Specifically,
directors of the Company will not be personally liable for monetary damages for
breach of a director's fiduciary duty as a director, except for liability (1)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law, (3) under Section 174 of
the DGCL or (4) for any transaction from which the director derived an improper
personal benefit. The inclusion of this provision in the Certificate may have
the effect of reducing the likelihood of derivative litigation against
directors, and may discourage or deter stockholders or management from bringing
a lawsuit against directors for breach of their duty of care, even though such
an action, if successful, might otherwise have benefited the Company and its
stockholders. This provision has no effect on any non-monetary remedies that may
be available to the Company or its stockholders, nor does it relieve the Company
or its directors from compliance with federal or state securities laws.
53
<PAGE> 59
The Bylaws provide that the Company shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit (each, a "Proceeding") by reason of the fact that he is
or was a director or officer of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another entity,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with such Proceeding. In addition, the Company has
obtained director and officer liability insurance that insures the Company's
directors and officers against certain liabilities.
54
<PAGE> 60
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of December 21, 1998, information with
respect to the beneficial ownership of the Common Stock by (1) each person or
entity known to the Company to beneficially own more than 5% of the outstanding
shares of Common Stock, (2) each director of the Company and each Named Officer,
and (3) all directors and executive officers of the Company as a group. Unless
otherwise indicated, each such stockholder has sole voting and investment power
with respect to the shares beneficially owned by such stockholder. Percentages
of shares beneficially owned are based upon 55,618,024 shares of Common Stock
outstanding as of the date first set forth above in this paragraph, plus for
each person named below any shares of Common Stock that may be acquired by such
person within 60 days of such date upon exercise of outstanding options or other
rights.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT OF
NAME BENEFICIALLY OWNED COMMON STOCK
---- ------------------ ------------
<S> <C> <C>
H. Family Investments, Inc.(1).............................. 12,000,000 21.5%
450 East Las Olas Blvd.
Ft. Lauderdale, Florida 33301
James L. Kirk............................................... 12,000,100(2) 21.5
Don R. O'Neal............................................... 4,024,302(3) 7.2
Gene J. Ostrow.............................................. 1,000,000 1.8
Philip V. Petrocelli........................................ 123,776 *
Joseph H. Izhakoff.......................................... -- --
H. Wayne Huizenga........................................... 1,682,047(4)(5) 3.0
Harris W. Hudson............................................ 1,013,650(5)(6) 1.8
Gary L. Gabriel............................................. 461,250(5)(7) *
Thomas H. Bruinooge......................................... 87,092(5) *
All executive officers and directors as a group
(11 persons).............................................. 20,522,039(3)(7)(8) 36.8
</TABLE>
- ---------------
* Less than 1%
(1) H. Family Investments, Inc. is a Florida corporation controlled by H. Wayne
Huizenga, Jr., the son of Mr. Huizenga.
(2) These shares are held by Kirk Holdings Limited Partnership, a Nevada limited
partnership controlled by Mr. Kirk.
(3) Includes 621,392 shares of Common Stock owned by Mr. O'Neal's spouse, as to
which Mr. O'Neal disclaims beneficial ownership. Also includes 1,966,000
shares of Common Stock in the name of the 1997 Ray L. O'Neal and Ellen M.
O'Neal irrevocable trust for Don R. O'Neal of which Don R. O'Neal is a
trustee.
(4) These shares are held by Huizenga Investments Limited Partnership, a Nevada
limited partnership controlled by Mr. Huizenga ("HILP"). The number of
shares of Common Stock beneficially owned by Mr. Huizenga does not include
the 12,000,000 shares of Common Stock held by H. Family Investments, Inc.
because Mr. Huizenga does not share voting or dispositive control of such
shares and disclaims beneficial ownership of such shares.
(5) Includes 50,000 shares of Common Stock issuable upon exercise of options,
which are immediately exercisable at a price of $8.00 per share of Common
Stock.
(6) Includes 250,000 shares of Common Stock owned by Mr. Hudson's spouse, as to
which Mr. Hudson disclaims beneficial ownership.
(7) Includes 411,250 shares of Common Stock issuable upon conversion of
convertible promissory notes in an aggregate principal amount of $3.29
million, which are convertible at a price of $8.00 per share of Common
Stock. See "Description of Certain Indebtedness -- Promissory Notes."
(8) Includes an aggregate of 200,000 shares of Common Stock issuable upon
exercise of options held by Messrs. Huizenga, Hudson, Gabriel and Bruinooge,
which are immediately exercisable at a price of $8.00 per share of Common
Stock.
55
<PAGE> 61
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In August 1997, the Company was founded by H. Family Investments, Inc. and
Messrs. Kirk and Ostrow (collectively, the "Founders"). H. Family Investments,
Inc. is a Florida corporation controlled by H. Wayne Huizenga, Jr., the son of
Mr. Huizenga. The Founders committed an aggregate of $48.4 million in equity
capital to the Company which was funded at various times from September 1997
through June 2, 1998 as required to complete acquisitions. The Founders have
entered into certain lock-up agreements with the underwriters of the Initial
Public Offering (the "Founders' Lock-up Agreements") pursuant to which they have
agreed not to offer, sell or otherwise dispose of any shares of Common Stock or
any security, convertible into, exercisable for or exchangeable for shares of
Common Stock for a period of 180 days commencing August 7, 1998 without the
prior written consent of Bear, Stearns & Co. Inc., with the exception of certain
specified transfers. In August 1998, the Company registered with the SEC for
resale, subject to the Founders' Lock-up Agreements, under the Securities Act
and applicable state securities laws the shares of Common Stock held by the
Founders. The Company paid registration expenses incidental to such
registration, excluding underwriters' commissions and deductions.
In September 1997, the Company acquired Sam's for $23.4 million from Gary
L. Gabriel, Troy L. Gabriel and certain trusts controlled by them. A portion of
the purchase price was paid by the Company to Gary L. Gabriel and certain trusts
controlled by him in the form of (1) unsecured promissory notes in the aggregate
principal amount of approximately $2.6 million which bear interest at the rate
of 8.5% per annum, (2) an unsecured convertible promissory note, as amended, in
the principal amount of approximately $0.7 million which bears interest at the
rate of 8.0% per annum, and (3) unsecured contingent convertible promissory
notes, as amended, in the aggregate principal amount of $3.0 million which bear
interest at the rate of 8.0% per annum. As of September 30, 1998, the aggregate
principal amount remaining outstanding under such notes was $3.29 million. For a
description of certain of the terms of these promissory notes, see "Description
of Certain Indebtedness -- Promissory Notes." As part of the Sam's acquisition,
the Company entered into certain leases, as amended, on four properties used in
its operations from TTG Properties, an Ohio general partnership ("TTG"), of
which Gary L. Gabriel and Troy L. Gabriel are general partners. Each of the four
leases to which the Company and TTG are a party commenced on October 1, 1997,
provides for an initial term of 10 years, with three automatic five-year
extensions. Under the leases, the Company has the option to purchase the leased
premises at any time within the last five years of the initial lease term at a
fixed price. The aggregate monthly rental payment to TTG under the leases on the
four properties is $57,000. Also, in connection with the Sam's acquisition,
Sam's entered into an agreement with Gary L. Gabriel pursuant to which Mr.
Gabriel provides certain consulting services to the Company. This agreement has
a three year term which automatically renews for an additional one year term.
This agreement provides for an annual salary of $100,000, and use of a leased
vehicle and up to $30,000 of rental equipment per year. The agreement provides
that if Mr. Gabriel's services are terminated at any time without cause, he will
be entitled to receive one year's annual salary as severance. In addition, the
Company has entered into ten year leases for certain facilities in Findlay and
Mansfield, Ohio, from TTG.
In May 1998, the Company received an unsecured subordinated loan in the
amount of $17.4 million from HILP. This loan represented bridge financing to
complete certain acquisitions until the Founders could fund the final portion of
their original capital commitments. The principal amount of the loan was repaid
on June 3, 1998 from an additional equity contribution of $17.4 million from the
Company's founders. Interest in the amount of approximately $124,000 accrued on
this loan and was paid by the Company on June 3, 1998.
On June 2, 1998, the Company sold an aggregate of 5,118,694 shares of
Common Stock in a private placement for aggregate proceeds of $27.6 million. The
table below sets forth the officers and directors of the
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<PAGE> 62
Company who participated in such private placement and the number of shares of
Common Stock acquired in such transaction:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
NAME COMMON STOCK
- ---- ------------
<S> <C>
H. Wayne Huizenga........................................... 1,632,047(1)
Harris W. Hudson............................................ 463,650
Philip V. Petrocelli........................................ 111,276
Pamela K.M. Beall........................................... 92,730
Kris E. Hansel.............................................. 37,092
Thomas H. Bruinooge......................................... 37,092
</TABLE>
--------------------
(1) These shares are held by HILP.
The holders of the shares of Common Stock issued in the June 1998 private
placement entered into certain lock-up agreements with underwriters of the
Initial Public Offering similar to the Founders' Lock-up Agreements, described
above. The Company registered with the SEC for resale, subject to the lock-up
agreements, under the Securities Act and applicable state securities laws the
shares of Common Stock issued in the June 1998 private placement. The Company
paid the registration expenses incidental to such registration, excluding
underwriters' commissions and discounts.
In October 1998, the Company acquired substantially all of the assets of
A-1 Rentals for approximately $178.8 million, $100.7 million of which was paid
in cash and $78.1 million which was paid in the form of unsecured subordinated
convertible and non-convertible promissory notes. In December 1998, the Company
converted the entire $50.0 million of the unsecured subordinated convertible
promissory notes held by Mr. O'Neal, certain trusts controlled by him, members
of Mr. O'Neal's family and certain trusts controlled by them into an aggregate
of 6,956,517 shares of Common Stock, at a price of $7 3/16 per share. Each of
these convertible promissory notes had a six-year term and bore interest at
6.00% per year. Approximately $28.1 million of the proceeds of the Private Debt
Offering was used to repay the entire outstanding principal amount of the
non-convertible promissory notes. Each of the non-convertible promissory notes
had a four-year term and bore interest at 8.00% per year. Upon the satisfaction
of certain earnings targets, the Company may pay to A-1 Rentals additional
consideration of $10.0 million in cash and $10.0 million in shares of Common
Stock.
In connection with the acquisition of A-1 Rentals, Mr. O'Neal entered into
a two-year employment agreement to serve as President and Chief Operating
Officer of the Company for a minimum annual salary of approximately $250,000.
Also, in connection with the acquisition of A-1 Rentals, the Company entered
into leases with entities affiliated with Mr. O'Neal for 15 properties used in
connection with the business of A-1 Rentals. The lease agreements, which have
initial terms ranging from one to five years, require aggregate monthly rental
payments of approximately $120,000.
The Company has entered into certain contracts for building construction
with Alvada Construction, Inc., an entity controlled by Mr. Kirk's brother. As
of September 30, 1998, the aggregate amount payable under these contracts was
approximately $1.2 million.
The Company currently leases the office space and parking for its corporate
headquarters from Panthers Holdings. The monthly lease amount payable by the
Company is approximately $44,000, which amount includes a share of the operating
expenses for this location based upon estimated usage. In addition, the Company
licenses from Panthers Holdings the use of an executive suite at the Broward
County Arena, which is operated by Panthers Holdings, for a fee of $95,000 per
annum for a term of seven years. The Company may also enter into a sponsorship
agreement with Panthers Holdings for certain sponsorship, marketing and
advertising services. Mr. Huizenga is Chairman of the Board of Panthers Holdings
and controls a majority of the voting interests of Panthers Holdings. Mr. Hudson
is also a director of Panthers Holdings.
In addition, the Company has entered into a license agreement with South
Florida Stadium Corporation at Pro Player Stadium, a professional sports stadium
in South Florida which is owned by Mr. Huizenga, for
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<PAGE> 63
the use of an executive suite at Pro Player Stadium for a fee of approximately
$166,000 per year for a term of seven years.
With respect to transactions discussed in this section, no independent
determination has been made as to the fairness or reasonableness of the terms
thereof. The Company believes, however, based on its prior experience, that the
terms of each transaction were as favorable to the Company as it could have
obtained from an unaffiliated party.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary description of the Credit Facilities, certain
promissory notes and related registration rights is qualified in its entirety by
reference to the Credit Facilities, the promissory notes and the registration
rights agreements, copies of which may be obtained from the Company upon written
request.
CREDIT FACILITIES
The Company has recently amended and restated its credit facilities with a
syndicate of lenders and BankBoston, N.A., as administrative agent. Under the
new Credit Facilities, the Company may borrow up to $260.0 million under the
Revolving Line of Credit and has borrowed $175.0 million under the Term Loan.
Recently, the Credit Facilities were amended further to allow the administrative
agent to reallocate the aggregate dollar amounts of the bank commitments between
the Revolving Line of Credit and the Term Loan, provided that the aggregate
commitment may not be more than $435.0 million and the aggregate commitment
under the Revolving Line of Credit may not be less than $260.0 million.
Borrowings under the Credit Facilities can be used to complete permitted
acquisitions, make capital expenditures, enter into stand-by letters of credit
and for working capital and other general corporate purposes. Borrowings under
the Credit Facilities may be in the form of base rate loans or at the option of
the Company, Eurodollar loans. Borrowings under the Credit Facilities bear
interest at either the BankBoston base rate plus a percentage ranging from 0.00%
to 0.50% or, at the Company's option, the Eurodollar market rate plus a
percentage ranging from 2.00% to 2.75%, with respect to the Revolving Line of
Credit, or 3.00% to 3.25%, with respect to the Term Loan. The percentage over
the BankBoston base rate or the Eurodollar market rate is based on the Company's
financial performance as measured by the total funded debt ratio (the "Pricing
Ratio"). Interest on the BankBoston base rate loans is payable quarterly in
arrears. Interest on the Eurodollar loans is payable on the last day of the
applicable interest period which may be a one, two, three or six month period at
the option of the Company, or quarterly in arrears, whichever is earlier. The
Credit Facilities are secured by a first priority security interest in
substantially all of assets of the Company. Borrowings under the Revolving Line
of Credit and the Term Loan mature and must be repaid, in full, in June 2001 and
September 2004, respectively.
PROMISSORY NOTES
In connection with certain of the Acquisitions, the Company has issued
unsecured subordinated promissory notes in an aggregate principal amount of
approximately $168.2 million. An aggregate principal amount of approximately
$129.6 million of such promissory notes are convertible (the "Convertible
Notes") into shares of Common Stock at conversion prices ranging from $7.76 to
$9.43 per share of Common Stock and bear interest at rates ranging between 6.00%
and 8.50%. Certain of these convertible promissory notes are pre-payable by the
Company based on the achievement of certain target trading prices of the Common
Stock over specified periods. Effective December 1998, the Company converted the
entire $50.0 million of the unsecured subordinated convertible promissory notes
into an aggregate of 6,956,517 shares of Common Stock, at a price of $7 3/16 per
share.
In connection with certain of the Convertible Notes issued prior to the
consummation of the Initial Public Offering, the Company granted certain
registration rights for the Common Stock into which the Convertible Notes are
convertible and registered such Common Stock with the SEC under the Securities
Act contemporaneously with the Initial Public Offering in August 1998 in
accordance with such registration rights. In connection with certain of the
Convertible Notes granted after the Initial Public Offering, the Company has
agreed to register the Common Stock into which the Convertible Notes are
convertible with the SEC under the Securities Act within 90 days of the issuance
of such Notes.
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<PAGE> 64
The holders of all Convertible Notes issued prior to the Initial Public
Offering have entered into lock-up agreements with the underwriters of such
offering pursuant to which stockholders have agreed not to offer, sell, agree to
sell, or otherwise dispose of, directly or indirectly, any shares of Common
Stock into which such notes are convertible for a period of 180 days following
August 7, 1998 without the prior written consent of the underwriters with the
exception of certain specified transfers. The holders of certain of the
Convertible Notes issued after the Initial Public Offering have entered into
certain lock-up agreements with the Company pursuant to which such noteholders
have agreed not to offer, sell or otherwise dispose of any shares of Common
Stock or any security convertible into, exercisable for or exchangeable for
shares of Common Stock for a period of generally 12 months following the date of
issuance without the Company's prior written consent, with the exception of
certain specified transfers.
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<PAGE> 65
DESCRIPTION OF NOTES
You can find the definitions of certain capitalized terms used in this
section under the subheading "Certain Definitions." For purposes of this
section, references to the "Company" include only the Company and not its
Subsidiaries. The Company will issue the New Notes and the Old Notes under an
Indenture among itself, the Guarantors and The Bank of New York, as Trustee (the
"Trustee").
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "TIA"). A copy of the Indenture may be obtained from the Company or
the Initial Purchasers. The terms of the New Notes are substantially identical
to the terms of the Old Notes in all material respects (including interest rate
and maturity), except that the New Notes will not be subject to (1) the
restrictions on transfer (other than with respect to holders that are
broker-dealers, persons who participated in the distribution of the Old Notes or
affiliates) and (2) the Registration Rights Agreement covenants regarding
exchange and the related Additional Interest.
The following description is a summary of the material provisions of the
Indenture. It does not restate the Indenture in its entirety. We urge you to
read the Indenture because it, and not this description, defines your rights as
a holder of the Notes ("Holder").
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
The Notes
The Notes are:
- general unsecured obligations of the Company;
- subordinated in right of payment to all existing and future Senior Debt;
- ranked equally with all existing and future senior subordinated debt of
the Company;
- senior in right of payment to all other existing and future subordinated
debt of the Company; and
- unconditionally guaranteed by the Guarantors.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Any Notes that remain
outstanding after the completion of the Exchange Offer, together with the New
Notes issued in connection with the Exchange Offer, will be treated as a single
class of securities for all purposes under the Indenture, including, without
limitation, waivers, amendments, redemptions, Change of Control Offers and Net
Proceeds Offers. All references in this section to "Notes" shall be deemed to
refer collectively to the Notes and any New Notes, unless the context otherwise
requires. Any reference to "Exchange Notes" shall be deemed to refer to New
Notes.
The Guarantees
The Notes are guaranteed by the Guarantors, which currently constitute all
of the Company's direct and indirect subsidiaries. The Guarantees of the Notes
are:
- general unsecured obligations of each Guarantor;
- subordinated in right of payment to all existing and future Guarantor
Senior Debt;
- ranked equally with any existing and future senior subordinated debt of
the Guarantor; and
- senior in right of payment to all other existing and future subordinated
obligations of such Guarantor.
After applying the proceeds from the Private Debt Offering as intended, as
of September 30, 1998, on a pro forma basis after giving effect to the
Acquisitions and the Changes in Outstanding Indebtedness, there would have been
$272.2 million of outstanding debt ranking ahead of the Notes, $96.0 million of
outstanding debt ranking ahead of the Guarantees, $26.5 million of outstanding
debt ranking equally with the Notes and $85.2 million of outstanding debt
ranking behind the Notes. As indicated above and as discussed in detail
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<PAGE> 66
below under the subheading "Subordination," payments on the Notes and under the
Guarantees are subordinated to the payment of Senior Debt. The Indenture permits
us and the Guarantors to incur additional Indebtedness, including Senior Debt.
As of the date of the Indenture, all of our Subsidiaries were "Wholly-Owned
Restricted Subsidiaries." However, under certain circumstances are permitted to
designate certain of our subsidiaries as "Unrestricted Subsidiaries."
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants in the Indenture. Unrestricted Subsidiaries will not guarantee the
Notes.
The Company may in the future conduct operations through one or more
Foreign Restricted Subsidiaries. Accordingly, the Company's ability to meet its
cash obligations may in part depend upon the ability of such Foreign Restricted
Subsidiaries to make cash distributions to the Company. Any right of the Company
to receive the assets of any such Foreign Restricted Subsidiary upon such
Foreign Restricted Subsidiary's liquidation or reorganization (and the
consequent right of the Holders to participate in the distribution of the
proceeds of those assets) effectively will be subordinated by operation of law
to the claims of such Foreign Subsidiary's creditors (including trade creditors)
and holders of its preferred stock and Senior Debt, except to the extent that
the Company is itself recognized as a creditor or preferred stockholder of such
Foreign Restricted Subsidiary, in which case the claims of the Company would
still be subordinate to any indebtedness or preferred stock of such Foreign
Restricted Subsidiary which is senior in right of payment to that held by the
Company. Although future Foreign Restricted Subsidiaries will not guarantee the
Notes, the Company will be required to pledge 65% of the outstanding Capital
Stock and any warrants, rights or options to purchase or acquire shares of any
class of such Capital Stock of each such Foreign Restricted Subsidiary to secure
the Company's obligations under the Notes. If the Company is prohibited from
pledging the Capital Stock of any of its foreign Subsidiaries by the Credit
Agreement or otherwise, then such foreign Subsidiaries shall not be permitted to
be a Foreign Restricted Subsidiary. Under the existing Credit Agreement, the
Company is required to pledge the stock of foreign Subsidiaries to secure its
Obligations thereunder.
PRINCIPAL, MATURITY AND INTEREST
The Notes (and Exchange Notes) are limited to a maximum aggregate principal
amount of $225.0 million, of which $175.0 million was outstanding as of the date
of this Prospectus and will mature on December 15, 2008. Additional amounts may
be issued in one or more series from time to time, subject to certain
limitations described under "Certain Covenants -- Limitation on Incurrence of
Additional Indebtedness" and restrictions contained in the Credit Agreement.
Interest on the Notes accrues at the rate of 10 3/8% per annum and is payable
semiannually in cash on each June 15 and December 15, commencing on June 15,
1999, to the persons who are registered Holders at the close of business on June
1 and December 1 immediately preceding the applicable interest payment date.
Interest on the Notes accrues from the most recent date to which interest
has been paid or, if no interest has been paid, from and including the Issue
Date. Interest is computed on the basis of a 360-day year comprised of twelve
30-day months. The Notes are not entitled to the benefit of any mandatory
sinking fund.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
The Company will make all principal, premium and interest payments on the
Notes at the office or agency of the Paying Agent and Registrar within the City
and State of New York unless the Company elects to make interest payments by
check mailed to the Holders at their addresses set forth in the register of
Holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee will initially act as Paying Agent and Registrar. Neither the
Company nor any of its Subsidiaries may act as Paying Agent or Registrar.
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<PAGE> 67
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder is treated as the owner of a Note for all purposes.
SUBSIDIARY GUARANTEES
Each Guarantor jointly and severally guarantees the Company's obligations
under the Notes. Each Guarantee is subordinated to the prior payment in full in
cash or Cash Equivalents of all Guarantor Senior Debt of that Guarantor (other
than under the Credit Agreement, which must be paid in full in cash) on the same
basis as the Notes are subordinated to Senior Debt. The Guarantors' obligations
under the Credit Agreement are secured by substantially all of the assets of the
Guarantors. The obligations of each Guarantor under its Guarantee are limited as
necessary to prevent such Guarantee from constituting a fraudulent conveyance or
fraudulent transfer under applicable law. See "Risk Factors -- Fraudulent
Conveyance." Each Guarantor that makes a payment or distribution under a
Guarantee shall be entitled to a pro rata contribution from each other Guarantor
based on the net assets of each other Guarantor.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor that is a Restricted Subsidiary of the Company, or
with other Persons upon the terms and conditions set forth in the Indenture. A
Guarantor may not sell or otherwise dispose of all or substantially all of its
assets, or consolidate with or merge with or into another Person (whether or not
such Guarantor is the surviving Person) unless certain conditions are met. See
"Certain Covenants -- Merger, Consolidation and Sale of Assets."
If a Guarantor is released from its obligations under the Credit Agreement,
the Guarantee of a Guarantor will be deemed automatically discharged and
released in accordance with the terms of the Indenture:
(1) in connection with any direct or indirect sale or other
disposition of all of the capital stock or all or substantially all of the
assets of that Guarantor (including by way of merger or consolidation or
foreclosure pursuant to the Credit Agreement), if such sale or disposition
is made in compliance with the applicable provisions of the Indenture (See
"-- Certain Covenants -- Limitation on Asset Sales"); or
(2) if a Guarantor is dissolved or liquidated in accordance with the
provisions of the Indenture; or
(3) if the Company designates any such Guarantor as an Unrestricted
Subsidiary.
Separate financial statements of all of the Guarantors are not included
herein because such Guarantors are jointly and severally liable with respect to
the Company's obligations pursuant to the Notes, and the aggregate net assets,
earnings and equity of the Guarantors are substantially equivalent to the net
assets, earnings and equity of the Company on a consolidated basis.
SUBORDINATION
The payment of all Obligations on the Notes are subordinated to the prior
payment in full in cash or Cash Equivalents of all Obligations in respect of
Senior Debt (other than under the Credit Agreement, which must be paid in full
in cash) whether outstanding on the Issue Date or thereafter incurred,
including, without limitation, the Company's obligations under the Credit
Agreement, before the Holders are entitled to receive any payment with respect
to the Notes in the event of any distribution to creditors of the Company:
(1) in a total or partial liquidation, dissolution or reorganization;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Company or its property;
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<PAGE> 68
(3) in an assignment for the benefit of creditors; or
(4) in any marshalling of the Company's assets and liabilities.
Neither the Company nor any other Person on its behalf shall (x) make any
payment of any kind or character with respect to any Obligations on the Notes or
(y) acquire any of the Notes for cash or property or otherwise if:
(1) any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of
any principal of, interest on, unpaid drawings for letters of credit issued
in respect of, or regularly accruing fees with respect to, any Senior Debt,
or
(2) any other event of default occurs and is continuing with respect
to any Designated Senior Debt permitting the holders of such Designated
Senior Debt then outstanding to accelerate its maturity and if the
Representative for the respective issue of Designated Senior Debt gives
written notice of the event of default to the Trustee (a "Default Notice").
Payment on the Notes may and shall be resumed:
(1) in the case of a payment default, on the date on which all events
of default have been cured or waived or cease to exist; or
(2) in the case of a non-payment default, the earlier of the date on
which such default is cured or waived or 179 days after the date on which
the applicable Default Notice is received (such 179-day period, the
"Blockage Period").
A Blockage Period may not extend beyond 179 days from the date the payment
on the Note was due. Only one Blockage Period may be commenced within any 360
consecutive days.
No non-payment default which existed or was continuing on the date of the
commencement of any Blockage Period with respect to the Designated Senior Debt
shall be, or be made, the basis for commencement of a second Blockage Period by
the Representative of such Designated Senior Debt whether or not within a period
of 360 consecutive days, unless such event of default shall have been cured or
waived for a period of not less than 90 consecutive days.
As a result of the subordination provisions described above, in the event
of a bankruptcy, insolvency or reorganization of the Company, the Holders of the
Notes may recover less, ratably, than holders of Senior Debt and funds which
would otherwise be payable to the Holders will be paid to the holders of Senior
Debt to the extent necessary to pay the Senior Debt in full. See "Risk
Factors -- Subordination."
Assuming we had completed the Offering and applied the proceeds as
intended, as of September 30, 1998, on a pro forma basis after giving effect to
the Acquisitions, the Changes in Outstanding Indebtedness, the Private Debt
Offering and the application of the proceeds from such offering, there would
have been $272.2 million of outstanding debt ranking ahead of the Notes, $96.0
million of outstanding debt ranking ahead of the Guarantees, $26.5 million of
outstanding debt ranking equally with the Notes and $85.2 million of outstanding
debt ranking behind the Notes. The Indenture permits us and the Guarantors to
incur additional Indebtedness.
OPTIONAL REDEMPTION
Optional Redemption Upon Equity Offerings. At any time on or prior to
December 15, 2001, the Company may, on any one or more occasions, redeem up to
35% of the sum of (i) the initial aggregate principal amount of the Notes issued
in the Offering and (ii) the respective initial aggregate principal amount of
the Notes issued under the Indenture after the Issue Date, at a redemption price
of 110 3/8% of the principal amount thereof plus accrued and unpaid interest and
Additional Interest, if any, to the date of redemption with the net cash
proceeds of one or more Public Equity Offerings or Private Equity Offerings;
provided that
(1) at least 65% of the sum of (i) the initial aggregate principal
amount of the Notes issued in the Offering and (ii) the respective initial
aggregate principal amount of Notes issued under the Indenture
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<PAGE> 69
after the Issue Date remains outstanding immediately after any such
redemption (excluding Notes held by the Company and its Subsidiaries); and
(2) the redemption shall be made not more than 90 days after the
closing of such Public Equity Offering or Private Equity Offering, as the
case may be.
Except pursuant to the preceding paragraph, the Notes are not redeemable
before December 15, 2003.
General Optional Redemption. At any time on or after December 15, 2003,
the Company may redeem all or part of the Notes upon not less than 30 nor more
than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount) if redeemed during the twelve-month period
commencing on December 15 of the year set forth below, plus accrued and unpaid
interest and Additional Interest, if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................ 105.188%
2004........................................................ 103.458%
2005........................................................ 101.729%
2006 and thereafter......................................... 100.000%
</TABLE>
SELECTION AND NOTICE OF REDEMPTION
If less than all of the Notes are to be redeemed at any time, the Trustee
will select Notes for redemption as follows:
(1) if the Notes are listed, in compliance with the requirements of
the principal national securities exchange on which such Notes are listed;
or
(2) if the Notes are not so listed, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate.
No Notes of $1,000 or less shall be redeemed in part. If a partial
redemption is made, selection of the Notes or portions thereof for redemption
shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata
basis as is practicable (subject to DTC procedures), unless such method is
otherwise prohibited. Notices of redemption shall be mailed by first-class mail
at least 30 but not more than 60 days before the redemption date to each Holder
of Notes to be redeemed at its registered address. Notices of redemption may not
be conditional.
If any Note is to be redeemed in part only, the notice of redemption that
relates to such Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in a principal amount equal to the unredeemed portion of
the original Note will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest will cease
to accrue on Notes or portions thereof called for redemption.
CHANGE OF CONTROL
If a Change of Control occurs, the Company will be required to make an
offer to purchase all or a portion of a Holder's Notes (in multiples of $1,000)
pursuant to the offer described below (the "Change of Control Offer"), at a
purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest and Additional Interest, if any (the "Change of Control Purchase
Price"), to the date of purchase (the "Change of Control Payment Date"). The
Company will not be required to make a Change of Control Offer if a third party
makes a Change of Control Offer that would be in compliance with the provisions
described in the Indenture if it were made by the Company, and such third party
purchases (for the consideration referred to in the immediate preceding
sentence) the Notes validly tendered and not withdrawn.
Prior to the mailing of the notice referred to below, but in any event
within 30 days following any Change of Control, the Company will either (i)
repay in full and terminate all commitments under Indebtedness under the Credit
Agreement and all other Senior Debt, the terms of which require repayment upon a
Change
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of Control, or offer to repay in full and terminate all commitments under all
Indebtedness under the Credit Agreement and all such other Senior Debt and repay
the Indebtedness owed to each lender which has accepted such offer or (ii)
obtain the requisite consents under the Credit Agreement and all such other
Senior Debt to permit the repurchase of the Notes as provided below. The
Company's failure to comply with the covenant described in the immediately
preceding sentence will constitute an Event of Default under the Indenture.
Within 30 days following any Change of Control, the Company must mail a
notice to each Holder, with a copy to the Trustee, describing the Change of
Control and the terms of the Change of Control Offer and stating, among other
things: the Change of Control Payment Date, which shall be fixed by the Company
on a business day no earlier than 30 days nor later than 60 days from the date
such notice is mailed, or such later date as is necessary to comply with
requirements under the Exchange Act; that any Note not tendered will continue to
accrue interest; that, unless the Company defaults in the payment of the Change
of Control Purchase Price, any Notes accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of Control
Payment Date; and certain other procedures that a Holder must follow to accept a
Change of Control Offer or to withdraw such acceptance. Holders electing to have
a Note purchased pursuant to a Change of Control Offer will be required to
surrender the Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third business day
prior to the Change of Control Payment Date.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered;
and
(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an officers' certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the
Company.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
This right, as well as restrictions in the Indenture described herein on the
ability of the Company and its Restricted Subsidiaries to incur additional
Indebtedness, to grant liens on its property, to make Restricted Payments and to
make Asset Sales, may make more difficult or discourage a takeover of the
Company, whether favored or opposed by the management of the Company.
Consummation of any such transaction in certain circumstances may require
redemption or repurchase of the Notes, and there can be no assurance that the
Company or the acquiring party will have sufficient financial resources to
effect such redemption or repurchase. Such restrictions and the restrictions on
transactions with Affiliates may, in certain circumstances, make more difficult
or discourage any leveraged buyout of the Company or any of its Subsidiaries.
While such restrictions cover a wide variety of arrangements which have
traditionally been used to effect highly leveraged transactions, the Indenture
may not afford the Holders of Notes protection in all circumstances from the
adverse aspects of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any
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securities laws or regulations conflict with the "Change of Control" provisions
of the Indenture, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
the "Change of Control" provisions of the Indenture by such compliance.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any Restricted Subsidiary
may incur Indebtedness (including, without limitation, Acquired Indebtedness),
if on the date of the incurrence of such Indebtedness, after giving effect to
the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the
Company is greater than 2.0 to 1.0. For purposes of determining any particular
amount of Indebtedness under this "Limitation on Incurrence of Additional
Indebtedness" covenant, guarantees, Liens or obligations with respect to letters
of credit supporting Indebtedness otherwise included in the determination of
such particular amount shall not be included.
Limitation on Restricted Payments. The Company will not, and will not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any distribution (other than
dividends or distributions payable in Qualified Capital Stock of the
Company) on or in respect of shares of the Company's Capital Stock to
holders of such Capital Stock;
(b) declare or pay any dividend or make any distribution on or in
respect of shares of any Restricted Subsidiary's Capital Stock other than
(i) to the Company or any of its Restricted Subsidiaries or (ii) to all
holders of any class, series or the same type of Capital Stock of such
Restricted Subsidiary on a pro rata basis; provided that in the case of
this clause (iii) such dividend or distribution shall not constitute
Indebtedness or Disqualified Stock;
(c) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any warrants, rights or options to purchase
or acquire shares of any class of such Capital Stock, other than
repurchases of equity interests of the Company deemed to occur upon the
exercise of options to acquire Capital Stock of the Company if such equity
interests represent a portion of the exercise price of such options;
(d) make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of the Company that is subordinate or junior in right of
payment to the Notes or the Guarantees other than (1) Indebtedness of the
Company to a Wholly Owned Restricted Subsidiary and (2) Seller Notes; or
(e) make any Investment (other than Permitted Investments) (each of
the actions set forth in clauses (a), (b), (c), (d) and (e) being referred
to as a "Restricted Payment"),
if at the time of such Restricted Payment or immediately after giving effect
thereto:
(i) a Default or an Event of Default shall have occurred and be
continuing, or
(ii) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant, or
(iii) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Issue Date (the
amount expended for such purposes, if other than
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in cash, being the fair market value of such property as determined
reasonably and in good faith by the Board of Directors of the Company)
shall exceed the sum of the following amounts (without duplication):
(1) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss) of the Company accrued on a cumulative basis during the
period beginning on the first day of the fiscal quarter immediately
following the Closing Date and ending on the last day of the last
fiscal quarter preceding the date the Restricted Payment occurs (the
"Reference Date") (treating such period as a single accounting
period); plus
(2) 100% of the aggregate net cash proceeds received by the
Company from any Person (other than a Subsidiary of the Company) from
the issuance and sale subsequent to the Issue Date and on or prior to
the Reference Date of Qualified Capital Stock of the Company or any
options, warrants or other rights to acquire Qualified Capital Stock
of the Company; plus
(3) 100% of the aggregate net cash proceeds received subsequent
to the Issue Date by the Company from any Person (other than a
Subsidiary of the Company) from the issuance or sale of debt
securities or shares of Disqualified Capital Stock that have been
converted into or exchanged for Qualified Capital Stock, together
with the aggregate cash received by the Company at the time of such
conversion or exchange; plus
(4) 100% of the aggregate net cash proceeds of any equity
contribution received by the Company subsequent to the Issue Date
from a holder of the Company's Capital Stock (other than from a
Subsidiary of the Company); plus
(5) the lesser of (a) an amount equal to the net reduction in
Investments made after the Issue Date pursuant to paragraphs (a) and
(b) of the "Limitation on Restricted Payments" covenant in any Person
resulting from payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in
each case to the Company or any Restricted Subsidiary (except to the
extent any such payment is included in the calculation of
Consolidated Net Income), or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries valued in each case as
provided in the definition of "Investments," and (b) the amount of
Investments previously made by the Company or any Restricted
Subsidiary in such Person.
The provisions set forth in the immediately preceding paragraph do not
prohibit:
(1) the payment of any dividend or the consummation of any irrevocable
redemption within 60 days after the date of declaration of such dividend or
the giving of notice of such irrevocable redemption if the dividend or
redemption would have been permitted on the date of declaration or the
giving of such irrevocable redemption notice;
(2) if no Default or Event of Default shall have occurred and be
continuing, the repurchase, redemption or other acquisition or retirement
of any shares of Capital Stock of the Company, either (i) solely in
exchange for shares of Qualified Capital Stock of the Company or any
options, warrants or other rights to acquire Qualified Capital Stock of the
Company or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of
shares of Qualified Capital Stock of the Company, or any options, warrants,
or other rights to acquire Qualified Capital Stock of the Company;
(3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition for value or payment of principal of any
Indebtedness of the Company that is subordinate or junior in right of
payment to the Notes either (i) solely in exchange for shares of Qualified
Capital Stock of the Company or any options, warrants or other rights to
acquire Qualified Capital Stock of the Company or (ii) through the
application of net proceeds of (A) a substantially concurrent sale for cash
(other than to a Subsidiary
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of the Company) of shares of Qualified Capital Stock of the Company or any
options, warrants or other rights to acquire Qualified Capital Stock of the
Company, or (B) Refinancing Indebtedness;
(4) if no Default or Event of Default shall have occurred and be
continuing, repurchases by the Company of Common Stock of the Company from
employees of the Company or any of its Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of
such employees, in an aggregate amount not to exceed $1.0 million in any
calendar year; and
(5) other Restricted Payments in an aggregate amount not to exceed
$15.0 million.
In determining the aggregate amount of Restricted Payments made subsequent
to the Issue Date in accordance with clause (iii) of the immediately
preceding paragraph, amounts expended pursuant to clauses (1), (2)(ii),
3(ii)(A), (4) and (5) shall be included in such calculation.
Not later than the date any Restricted Payment is made, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations
shall be based upon the Company's latest available public quarterly financial
statements.
Limitation on Asset Sales. The Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless:
(i) the Company or the applicable Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed of
(as determined in good faith by the Company's Board of Directors); and
(ii) at least 75% of the consideration received by the Company or the
Restricted Subsidiary, as the case may be, from such Asset Sale shall be in
the form of cash or Cash Equivalents and is received at the time of such
disposition.
Within 365 days of the consummation of an Asset Sale, the Company shall
apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale either:
(A) to prepay any Senior Debt or Guarantor Senior Debt and, in the
case of any Senior Debt or Guarantor Senior Debt under any revolving credit
facility, effect a permanent reduction in the availability under such
revolving credit facility,
(B) to make an investment in properties and assets or Persons that
replace the properties and assets that were the subject of such Asset Sale
or in properties and assets that will be used in the business of the
Company and its Restricted Subsidiaries as existing on the Issue Date or in
businesses reasonably related thereto ("Replacement Assets"), or
(C) a combination of prepayment and investment permitted by the
foregoing clauses (A) and (B).
Pending the final application of any such Net Cash Proceeds, the Company
may temporarily reduce Senior Debt or otherwise invest such Net Cash Proceeds in
any manner that is not prohibited by the Indenture. On the 366th day after an
Asset Sale or such earlier date, if any, as the Board of Directors of the
Company or of such Restricted Subsidiary determines not to apply the Net Cash
Proceeds relating to such Asset Sale as set forth in clauses (A), (B) and (C) of
the preceding paragraph (each, a "Net Proceeds Offer Trigger Date"), such
aggregate amount of Net Cash Proceeds which have not been applied on or before
such Net Proceeds Offer Trigger Date as permitted in clauses (A), (B) and (C) of
the preceding paragraph (each, a "Net Proceeds Offer Amount") shall be applied
by the Company or such Restricted Subsidiary to make an offer to purchase (the
"Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less
than 30 nor more than 45 days following the applicable Net Proceeds Offer
Trigger Date, from all Holders on a pro rata basis, that amount of Notes equal
to the Net Proceeds Offer Amount at a price equal to 100% of the principal
amount of the Notes to be purchased, plus accrued and unpaid interest and
Additional Interest, if any, thereon to the date of purchase.
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If at any time any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
the provisions described above. The Company may defer the Net Proceeds Offer
until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in
excess of $10.0 million resulting from one or more Asset Sales (at which time,
the entire unutilized Net Proceeds Offer Amount, and not just the amount in
excess of $10.0 million, shall be applied as required pursuant to this
covenant).
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 30 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders properly tender Notes, Notes of
tendering Holders will be purchased on a pro rata basis (based on amounts
tendered). To the extent that the aggregate principal amount of Notes tendered
under the Net Proceeds Offer is less than the Net Proceeds Offer Amount, the
Company may use such deficiency for any purpose not otherwise prohibited by the
Indenture. A Net Proceeds Offer shall remain open for a period of 20 business
days or such longer period as may be required by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue of such
compliance.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "-- Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold the
properties and assets of the Company and its Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value of such properties and assets of the Company
or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to:
(a) pay dividends or make any other distributions on or in respect of
its Capital Stock;
(b) make loans or advances or to pay any Indebtedness or other
obligation owed to the Company or any other Restricted Subsidiary of the
Company; or
(c) transfer any of its property or assets to the Company or any other
Restricted Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by reason of:
(1) applicable law;
(2) the Indenture and the Notes;
(3) customary non-assignment provisions of any contract or any
lease governing a leasehold interest of any Restricted Subsidiary of the
Company;
(4) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or the
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properties or assets of the Person so acquired, provided that such
Acquired Indebtedness was permitted by the terms of the Indenture;
(5) the Credit Agreement;
(6) agreements existing on the Issue Date to the extent and in the
manner such agreements are in effect on the Issue Date;
(7) restrictions on the transfer of assets subject to any Lien
permitted under the Indenture imposed by the holder of such Lien;
(8) restrictions imposed by any agreement with respect to an Asset
Sale permitted under the Indenture to any Person pending the closing of
such sale;
(9) any agreement or instrument governing Capital Stock of any
Person that is acquired;
(10) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature
described in clause (c) above; or
(11) any agreement governing Refinancing Indebtedness issued,
assumed or incurred pursuant to an agreement referred to in clause (2),
(4), (5) or (6) above; provided, however, that the provisions relating
to such encumbrance or restriction contained in any such Indebtedness
are no less favorable to the Company in any material respect as
determined by the Board of Directors of the Company in their reasonable
and good faith judgment than the provisions relating to such
encumbrance, or restriction contained in agreements referred to in such
clause (2), (4), (5) or (6), respectively.
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company.
Limitation on Liens. The Company will not, and will not cause or permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon any
property or assets of the Company or any of its Restricted Subsidiaries whether
owned on the Issue Date or acquired after the Issue Date, or any proceeds
therefrom, or assign or otherwise convey any right to receive income or profits
therefrom, except for:
(A) Liens equally and ratably securing (i) Indebtedness that ranks
pari passu with the Notes and the Guarantees, and (ii) the Notes and the
Guarantees;
(B) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date;
(C) Liens securing Senior Debt and Liens securing Guarantor Senior
Debt;
(D) Liens securing the Notes and the Guarantees;
(E) Liens of the Company or a Wholly Owned Restricted Subsidiary of
the Company on assets of any Subsidiary of the Company;
(F) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which has been secured by a Lien permitted under
the Indenture and which has been incurred in accordance with the provisions
of the Indenture; provided, however, that such Liens (1) are no less
favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (2) do not extend to or cover any property or assets of the
Company or any of its Restricted Subsidiaries not securing the Indebtedness
so Refinanced; and
(G) Permitted Liens.
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Prohibition on Incurrence of Senior Subordinated Debt. The Company will
not incur or permit to exist Indebtedness that is senior in right of payment to
the Notes and subordinate or junior in right of payment to any Senior Debt of
the Company. No Guarantor will incur or permit to exist Indebtedness that is
subordinate or junior in right of payment to Guarantor Senior Debt of such
Guarantor and senior in right of payment to such Guarantor's Guarantee.
Merger, Consolidation and Sale of Assets. The Company will not, in a
single transaction or series of related transactions, consolidate or merge with
or into any Person, or sell, assign, transfer, lease, convey or otherwise
dispose of (or cause or permit any Restricted Subsidiary of the Company to sell,
assign, transfer, lease, convey or otherwise dispose of) all or substantially
all of the Company's assets (determined on a consolidated basis for the Company
and the Company's Restricted Subsidiaries) whether as an entirety or
substantially as an entirety to any Person unless:
(i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and of the Company's
Restricted Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly existing under
the laws of the United States or any State thereof or the District of
Columbia and (y) shall expressly assume, by supplemental indenture (in form
and substance satisfactory to the Trustee), executed and delivered to the
Trustee, the due and punctual payment of the principal of, and premium, if
any, and interest and Additional Interest, if any, on all of the Notes and
the performance of every covenant of the Notes, the Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed;
(ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company
or such Surviving Entity, as the case may be, (1) shall have a Consolidated
Net Worth equal to or greater than the Consolidated Net Worth of the
Company immediately prior to such transaction and (2) shall be able to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the "Limitation on Incurrence of Additional
Indebtedness" covenant;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default or
Event of Default shall have occurred and be continuing; and
(iv) the Company or the Surviving Entity shall have delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture
comply with the applicable provisions of the Indenture and that all
conditions precedent in the Indenture relating to such transaction have
been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
Upon any consolidation, combination or merger or any transfer of all or
substantially all of the assets of the Company in accordance with the foregoing,
in which the Company is not the continuing corporation, the Surviving Entity
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under the Indenture and the Notes with the same effect as if
such Surviving Entity had been named as such.
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Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture) will not, and
the Company will not cause or permit any Guarantor to, consolidate with or merge
with or into any Person other than the Company or any other Guarantor unless:
(i) the entity formed by or surviving any such consolidation or merger
(if other than the Guarantor) is a corporation organized and existing under
the laws of the United States or any State thereof or the District of
Columbia;
(ii) such surviving entity (if other than the Guarantor) assumes by
supplemental indenture all of the obligations of the Guarantor on the
Guarantee;
(iii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; and
(iv) immediately after giving effect to such transaction and the use
of any net proceeds therefrom on a pro forma basis, the Company could
satisfy the provisions of clause (ii) of the first paragraph of this
covenant.
In connection with any merger or consolidation of a Guarantor with and into
the Company (with the Company being the surviving entity) or another Guarantor
that is a Wholly Owned Restricted Subsidiary of the Company, the Company need
only deliver to the Trustee an officers' certificate and an opinion of counsel,
each stating that such consolidation or merger and, if a supplemental indenture
is required in connection with such transaction, such supplemental indenture,
comply with the applicable provisions of the Indenture and that all conditions
precedent in the Indenture relating to such transaction have been satisfied.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
on terms that are no less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis from
a Person that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate Transactions
which is similar or part of a common plan) involving aggregate payments or other
property with a fair market value in excess of $5.0 million shall be approved by
the Board of Directors of the Company or such Restricted Subsidiary, as the case
may be, such approval to be evidenced by a Board Resolution stating that such
Board of Directors has determined that such transaction complies with the
foregoing provisions. If the Company or any Restricted Subsidiary of the Company
enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) that involves an aggregate fair market
value of more than $10.0 million, the Company or such Restricted Subsidiary, as
the case may be, shall, prior to the consummation thereof, obtain a favorable
opinion as to the fairness of such transaction or series of related transactions
to the Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the same
with the Trustee.
(b) The restrictions set forth in clause (a) above shall not apply to:
(i) reasonable fees and compensation paid to, loans or advances to,
and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Restricted Subsidiary of the Company as
determined in good faith by the Company's Board of Directors or senior
management;
(ii) transactions exclusively between or among the Company and any of
its Wholly Owned Restricted Subsidiaries or exclusively between or among
such Wholly Owned Restricted Subsidiaries, provided such transactions are
not otherwise prohibited by the Indenture;
(iii) any payments or transactions pursuant to agreements in effect as
of the Issue Date or any amendment thereto or any transaction contemplated
thereby (including pursuant to any amendment thereto) in any replacement
agreement thereto so long as any such amendment or replacement
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agreement is not more disadvantageous to the Holders in any material
respect than the original agreement as in effect on the Issue Date;
(iv) Restricted Payments permitted by the Indenture;
(v) any Investments by an Affiliate of the Company in the Capital
Stock (other than Disqualified Stock) of the Company or any Restricted
Subsidiary of the Company; and
(vi) any transaction, the terms of which are entered into on an
arm's-length basis with a Person that is not then an Affiliate, which
becomes an Affiliate Transaction upon the consummation thereof.
Additional Subsidiary Guarantees. If (i) the Company or any of its
Restricted Subsidiaries acquires or creates another Restricted Subsidiary or
(ii) an Unrestricted Subsidiary of the Company is redesignated as a Restricted
Subsidiary or otherwise ceases to be an Unrestricted Subsidiary and thereafter
is a Restricted Subsidiary, then such newly acquired, created or redesignated
Restricted Subsidiary (other than a Foreign Restricted Subsidiary) shall execute
a supplemental indenture becoming a Guarantor in accordance with the terms of
the Indenture.
Conduct of Business. The Company and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar or related to the
businesses in which the Company and its Restricted Subsidiaries are engaged on
the Issue Date.
Reports to Holders. The Company will deliver to the Trustee within 15 days
after the filing of the Indenture with the Commission, copies of the quarterly
and annual reports and of the information, documents and other reports, if any,
which the Company is required to file with the Commission pursuant to Section 13
or 15(d) of the Exchange Act. At all times from and after the Issue Date,
notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will file
with the Commission, to the extent permitted, and provide the Trustee and
Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act for so long as
any Notes are outstanding. The Company will also comply with the other
provisions of TIA sec. 314(a).
Payments for Consent. Neither the Company nor any of its Restricted
Subsidiaries will be permitted, directly or indirectly, to pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder for or as an inducement to obtain any consent, waiver or amendment of any
of the terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid or is paid to all Holders that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) default for 30 days in the payment of interest or Additional
Interest, if any, on any Notes, whether or not such payment is prohibited
by the subordination provisions of the Indenture;
(ii) default in payment when due of the principal on any Notes,
whether or not such payment is prohibited by the subordination provisions
of the Indenture;
(iii) default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Notes (except in the case of a default with respect to the "Merger,
Consolidation and Sale of Assets" covenant or the "Change of Control"
covenant, which will constitute an Event of Default with such notice
requirement but without such passage of time requirement);
(iv) the failure to pay at final maturity (after giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted
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Subsidiary of the Company (including, without limitation, Indebtedness
under the Credit Agreement) and such failure continues for a period of 20
days or more, or the acceleration of the final stated maturity of any such
Indebtedness (which acceleration is not rescinded, annulled or otherwise
cured within 20 days of receipt by the Company or such Restricted
Subsidiary of notice of any such acceleration) if the aggregate principal
amount of such Indebtedness, together with the principal amount of any
other such Indebtedness in default for failure to pay principal at final
maturity or which has been accelerated, in each case with respect to which
the 20-day period described above has passed, aggregates $10.0 million or
more at any time;
(v) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $3.0 million, which judgments
are not paid, discharged or stayed within a period of 60 days after such
judgment or judgments become final and non-appealable;
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries; or
(vii) any of the Guarantees of a Guarantor that is a Significant
Subsidiary ceases to be in full force and effect or any of such Guarantees
is declared to be null and void and unenforceable or any of such Guarantees
is found to be invalid or any of such Guarantors denies its liability under
its Guarantee (other than by reason of release of such Guarantor in
accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding Notes
may declare the principal of and accrued interest and Additional Interest, if
any, on all the Notes to be due and payable by notice in writing to the Company
and the Trustee specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice"), and the same (i) shall
become immediately due and payable or (ii) if there are any amounts outstanding
under the Credit Agreement, shall become immediately due and payable upon the
first to occur of an acceleration under the Credit Agreement (which acceleration
is not rescinded, annulled or otherwise cured within 20 days of receipt by the
Company or such Restricted Subsidiary of notice of any such acceleration) or
five business days after receipt by the Company and the Representative under the
Credit Agreement of such Acceleration Notice but only if such Event of Default
is then continuing. If an Event of Default specified in clause (vi) above with
respect to the Company occurs and is continuing, then all unpaid principal of,
and premium, if any, and accrued and unpaid interest and Additional Interest, if
any, on all of the outstanding Notes will become due and payable immediately
without further action or notice.
Any time after a declaration of acceleration with respect to the Notes as
described in the preceding paragraph, the Holders of a majority in principal
amount of the Notes may rescind and cancel such declaration and its
consequences:
(i) if the rescission would not conflict with any judgment or decree,
(ii) if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due solely
because of the acceleration,
(iii) to the extent the payment of such interest is lawful, interest
on overdue installments of interest and Additional Interest and overdue
principal, which, has become due otherwise than by such declaration of
acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation
and reimbursed the Trustee for its expenses, disbursements and advances,
and
(v) in the event of the cure or waiver of an Event of Default of the
type described in clause (vi) of the description above of Events of
Default, the Trustee shall have received an officers' certificate and an
opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
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The Holders of a majority in aggregate principal amount of the then
outstanding Notes may waive any existing Default or Event of Default under the
Indenture, and its consequences, except a default in the payment of the
principal of or interest or Additional Interest, if any, on any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all its
obligations discharged with respect to the outstanding Notes and all obligations
of the Guarantors discharged with respect to their Guarantees ("Legal
Defeasance") except for:
(i) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest and Additional
Interest, if any, on the Notes when such payments are due;
(ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payments;
(iii) the rights, powers, trusts, duties and immunities of the Trustee
and the Company's obligations in connection therewith; and
(iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company and the Guarantors released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(i) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders cash in U.S. dollars, non-callable U.S.
government obligations, or a combination thereof, in such amounts as will
be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest and Additional Interest, if any, on the Notes on the stated
date for payment thereof or on the applicable redemption date, as the case
may be, and the Company must specify whether the Notes are being defeased
to maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date
of the Indenture, there has been a change in the applicable United States
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders will not
recognize income, gain or loss for United States federal income tax
purposes as a result of such Legal Defeasance
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and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders will not
recognize income, gain or loss for United States federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
United States federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(iv) immediately after giving effect to such deposit on a pro forma
basis, no Default or Event of Default shall have occurred and be continuing
(A) either on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds, all or a portion of which
will be applied to such deposit), or (B) insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under the Indenture (other
than a Default or Event of Default resulting from the borrowing of funds,
all or a portion of which will be used to defease the Notes) or any other
material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound;
(vi) the Company must have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
(vii) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent relating to the Legal Defeasance or the Covenant Defeasance have
been complied with;
(viii) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Senior Debt, and (B) after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and
(ix) certain other customary conditions precedent are satisfied.
Notwithstanding the foregoing, the opinion of counsel required by clause
(ii) above need not be delivered if all Notes not theretofore delivered to the
Trustee for cancellation (x) have become due and payable, (y) will become due
and payable on the maturity date within one year or (z) are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when:
(i) either (a) all the Notes previously authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid
and Notes for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee
for cancellation or (b) all Notes not previously delivered to the Trustee
for cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in
an amount sufficient to pay and discharge the principal of, premium, if
any, and interest and Additional Interest, if any, on the Notes to the date
of deposit not previously delivered to the Trustee for cancellation,
together with irrevocable
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instructions from the Company directing the Trustee to apply such funds to
the payment thereof at maturity or redemption, as the case may be;
(ii) the Company has paid all other sums payable under the Indenture
by the Company; and
(iii) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions precedent
under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Guarantors and the Trustee, without the
consent of the Holders, may amend the Indenture for certain specified purposes,
including curing ambiguities, defects or inconsistencies, so long as such change
does not, in the opinion of the Trustee, adversely affect the rights of any of
the Holders in any material respect. In formulating its opinion on such matters,
the Trustee will be entitled to rely on such evidence as it deems appropriate,
including solely on an opinion of counsel.
Other modifications and amendments of the Indenture may be made with the
consent of the Holders of a majority in principal amount of the then outstanding
Notes issued under the Indenture, except that, without the consent of each
Holder affected thereby, no amendment may:
(i) reduce the amount of Notes whose Holders must consent to an
amendment;
(ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes;
(iii) reduce the principal of, or change or have the effect of
changing the fixed maturity of, any Notes, or change the date on which any
Notes may be subject to redemption or repurchase, or reduce the redemption
or repurchase price therefor;
(iv) make any Notes payable in money other than that stated in the
Notes;
(v) make any change in provisions of the Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Note on or after the due date thereof or to bring suit to enforce such
payment, or permitting Holders of a majority in principal amount of Notes
to waive Defaults or Events of Default;
(vi) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer in the event
of a Change of Control or make and consummate a Net Proceeds Offer with
respect to any Asset Sale that has been consummated or modify any of the
provisions or definitions with respect thereto;
(vii) modify or change any provision of the Indenture or the related
definitions affecting the subordination or ranking of the Notes or any
Guarantee in a manner which adversely affects the Holders; or
(viii) release any Guarantor from any of its obligations under its
Guarantee or the Indenture otherwise than in accordance with the terms of
the Indenture.
GOVERNING LAW
The Indenture, the Notes and the Guarantees are governed by, and construed
according to, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
THE TRUSTEE
Except during the continuance of an Event of Default, the Trustee will
perform only such duties as are specifically set forth in the Indenture. During
the existence of an Event of Default, the Trustee will exercise
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such rights and powers vested in it by the Indenture, and use the same degree of
care and skill in its exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
If the Trustee becomes a creditor of the Company, the Indenture limits its
right to obtain payments of claims in certain cases or to realize on certain
property received in respect of any such claim as security or otherwise. The
Trustee will be permitted to engage in other transactions, provided, however,
that if it acquires any conflicting interest, it must eliminate such conflict or
resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries that is existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time it merges or consolidates with the
Company or any of its Subsidiaries or that is assumed in connection with the
acquisition of assets from such Person and in each case not incurred by such
Person in connection with, or in anticipation or contemplation of, such Person
becoming a Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"Additional Interest" means all liquidated damages then owing pursuant to
the Registration Rights Agreement.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction or a
foreclosure pursuant to the Credit Agreement) to any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company of:
(a) any Capital Stock of any Restricted Subsidiary of the Company; or
(b) any other property or assets of the Company or any Restricted
Subsidiary of the Company other than in the ordinary course of business;
provided, however, that Asset Sales shall not include:
(i) a transaction or series of related transactions for which the
Company or its Restricted Subsidiaries receive aggregate consideration
in any year of less than $1.0 million,
(ii) the sale, lease, conveyance, disposition or other transfer of
all or substantially all of the assets of the Company as permitted under
"Merger, Consolidation and Sale of Assets,"
(iii) disposals or replacements of obsolete or outdated equipment
or inventory, and
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(iv) the sale or discount, in each case without recourse (other
than recourse for a breach of a representation or warranty), of accounts
receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof in the ordinary
course of business and not as part of a financing transaction.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Cash Equivalents" means:
(i) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's");
(iii) commercial paper maturing no more than 270 days from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250.0 million;
(v) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered
into with any bank meeting the qualifications specified in clause (iv)
above; and
(vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through
(v) above.
"Change of Control" means the occurrence of one or more of the following
events:
(i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets
of the Company to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of the
Indenture) (other than to one or more of the Permitted Holders);
(ii) the approval by the holders of Capital Stock of the Company of
any plan or proposal for the liquidation or dissolution of the Company
(whether or not otherwise in compliance with the provisions of the
Indenture);
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(iii) there is consummated any consolidation or merger of the Company
into another corporation in which the Company is not the surviving entity
(except that no Change of Control shall be deemed to have occurred if the
stockholders of the Company immediately prior to such transaction own 50%
or more of the aggregate voting power represented by the issued and
outstanding Capital Stock of such Person or Group immediately after such
transaction);
(iv) any Person or Group (other than one or more of the Permitted
Holders) shall become the owner, directly or indirectly, beneficially or of
record, of shares representing more than 50% of the aggregate voting power
represented by the issued and outstanding Capital Stock of the Company
(except that no Change of Control shall be deemed to have occurred if the
stockholders of the Company immediately prior to such transaction own 50%
or more of the aggregate voting power represented by the issued and
outstanding Capital Stock of such Person or Group immediately after such
transaction); or
(v) the replacement of a majority of the Board of Directors of the
Company over a two-year period from the directors who constituted the Board
of Directors of the Company at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a majority
of the Board of Directors of the Company then still in office who either
were members of such Board of Directors at the beginning of such period or
whose election as a member of such Board of Directors was previously so
approved.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (B) Consolidated Interest
Expense and (C) Consolidated Non-Cash Charges, less any noncash items increasing
Consolidated Net Income for such period, all as determined on a consolidated
basis for such Person and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or immediately prior to
the date of the transaction giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to
Consolidated Fixed Charges of such Person for the Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma (calculated on a basis consistent
with Regulation S-X under the Securities Act) basis for the period of such
calculation to (i) the incurrence or repayment of any Indebtedness of such
Person or any of its Restricted Subsidiaries (and the application of the
proceeds thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (provided that such
Consolidated EBITDA shall be included only to the extent includable pursuant to
the definition of "Consolidated Net Income") attributable to the assets which
are the subject of the Asset Acquisition or Asset Sale during the Four Quarter
Period) occurring during the Four Quarter Period or at any time subsequent to
the last day of the Four Quarter Period and on or prior to the Transaction Date,
as if such
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Asset Sale or Asset Acquisition (including the incurrence, assumption or
liability for any such Acquired Indebtedness) occurred on the first day of the
Four Quarter Period. If such Person or any of its Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed Indebtedness as
if such Person or any Restricted Subsidiary of such Person had directly incurred
or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local
income tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs, (b) the net costs under Interest Swap Obligations,
(c) all capitalized interest and (d) the interest portion of any deferred
payment obligation; and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom:
(a) for purposes of calculating the Consolidated Fixed Charge Coverage
Ratio only, after-tax gains, or losses (net of any related fees and
expenses) from Asset Sales or abandonments or reserves relating thereto,
(b) after-tax items classified as extraordinary or nonrecurring gains
or losses,
(c) the net income (or loss) of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Restricted
Subsidiary of the referent Person or is merged or consolidated with the
referent Person or any Restricted Subsidiary of the referent Person,
(d) the net income (but not loss) of any Restricted Subsidiary of the
referent Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by
a contract, operation of law or otherwise,
(e) the net income of any Person, other than a Restricted Subsidiary
of the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a Restricted Subsidiary of
the referent Person by such Person (provided that in the case of cash
dividends or distributions paid to any such Restricted Subsidiary that is
not a Wholly Owned Restricted Subsidiary, the portion of net income
included therein will be equal to the Company's interest in such Restricted
Subsidiary),
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(f) for purposes of calculating the Consolidated Fixed Charge Coverage
Ratio only, any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of Consolidated Net
Income accrued at any time following the Issue Date,
(g) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or
not such operations were classified as discontinued), and
(h) in the case of a successor to the referent Person by consolidation
or merger or as a transferee of the referent Person's assets, any earnings
of the successor corporation prior to such consolidation, merger or
transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person, provided that the Consolidated Net Worth of any Person
shall exclude the effect of any non-cash charges relating to the acceleration of
stock options or similar securities of such Person or another Person with which
such Person is merged or consolidated.
"Consolidated Non-Cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).
"Consolidated Tangible Assets" means, all accounts receivable, inventory
(including rental inventory), property, plant and equipment (including titled
equipment) of the Company and the Guarantors, determined on a consolidated basis
in accordance with GAAP.
"Credit Agreement" means the Second Amended and Restated Revolving Credit
and Term Loan Agreement dated as of September 24, 1998, as amended, among the
Company, the Company's subsidiaries party thereto, the lenders party thereto in
their capacities as lenders thereunder, BankBoston, N.A., as administrative
agent, LaSalle National Bank, as documentation agent, and Fleet Bank, N.A. and
NationsBank, N.A., as co-agents for the lenders party thereto, together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder or adding Restricted
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (i) Indebtedness of the Company and its
Subsidiaries under or in respect of the Credit Agreement or (ii) any other
Indebtedness constituting Senior Debt which, at the time of determination, has
an aggregate principal amount of at least $25.0 million and is specifically
designated in the instrument evidencing such Senior Debt as "Designated Senior
Debt" by the Company.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof on or prior to the final
maturity date of the Notes.
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"Equipment Debt" means that certain senior subordinated supplier debt in an
original principal amount not to exceed $25.0 million in favor of one of the
Company's suppliers or its designee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith (which determination shall be conclusive) and shall be
evidenced by a Board Resolution of the Board of Directors of the Company
delivered to the Trustee.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary of the
Company that is incorporated in a jurisdiction other than the United States of
America, including its territories and possessions, or 80% of the sales,
earnings or assets of which are located in, generated from or derived from
operations located in, jurisdictions outside the United States of America.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date. All
ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP applied on a consistent basis.
"Guarantor" means (i) each of the Company's existing Restricted
Subsidiaries, and (ii) each of the Company's Restricted Subsidiaries that in the
future executes a supplemental indenture in which such Restricted Subsidiary
agrees to be bound by the terms of the Indenture as a Guarantor; provided that
any Person constituting a Guarantor as described above shall cease to constitute
a Guarantor when its respective Guarantee is released in accordance with the
terms of the Indenture.
"Guarantor Senior Debt" means with respect to any Guarantor, the principal
of, premium, if any, and interest (including any interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on any Indebtedness of a Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Guarantee of such Guarantor. Without limiting the generality of the foregoing,
"Guarantor Senior Debt" shall also include the principal of, premium, if any,
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable law)
on, and all other amounts owing in respect of:
(x) all monetary obligations (including guarantees thereof) of every
nature of such Guarantor under the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities,
(y) all Interest Swap Obligations (including guarantees thereof), and
(z) all obligations (including guarantees thereof) under Currency
Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred.
Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include:
(i) any Indebtedness of such Guarantor to a Restricted Subsidiary of
such Guarantor or any Affiliate of such Guarantor or any of such
Affiliate's Subsidiaries,
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(ii) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of such Guarantor or any Restricted
Subsidiary of such Guarantor (including, without limitation, amounts owed
for compensation),
(iii) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services (excluding Purchase
Money Indebtedness),
(iv) Indebtedness represented by Disqualified Capital Stock,
(v) any liability for federal, state, local or other taxes owed or
owing by such Guarantor,
(vi) that portion of any Indebtedness incurred in violation of the
Indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness,"
(vii) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company, and
(viii) any Indebtedness which is, by its express terms, subordinated
in right of payment to any other Indebtedness of such Guarantor.
"Indebtedness" means with respect to any Person, without duplication:
(i) all Obligations of such Person for borrowed money,
(ii) all Obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person,
(iv) all Obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
Obligations under any title retention agreement (but excluding trade
accounts payable, leases that are not Capitalized Lease Obligations and
other accrued liabilities arising in the ordinary course of business),
(v) all Obligations for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction,
(vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below,
(vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or
asset of such Person, the amount of such Obligation being deemed to be the
lesser of the fair market value of such property or asset or the amount of
the Obligation so secured,
(viii) all Obligations under Currency Agreements and all Interest Swap
Obligations of such Person, and
(ix) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued dividends, if
any.
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital
Stock. Indebtedness shall not include any liability for (i) federal, state,
local or other taxes, (ii) endorsements of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business or (iii)
any indebtedness that has been defeased or satisfied in accordance with the
terms of the documents governing such indebtedness.
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The amount of Indebtedness of any Person at any date shall be the
outstanding balance on such date of all unconditional Obligations as described
above, and the maximum liability upon the occurrence of the contingency giving
rise to the Obligation, on any contingent Obligations at such date; provided,
however, that the amount outstanding at any time of any Indebtedness incurred
with original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP.
The amount of any item of Indebtedness shall be an amount of such
Indebtedness properly classified as a liability on a balance sheet prepared in
accordance with GAAP.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of the "Limitation on
Restricted Payments" covenant, (i) "Investment" shall include and be valued at
the fair market value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary and
shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments by
the Company or any of its Restricted Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, writedowns or write-offs with
respect to such Investment, reduced by the payment of dividends or distributions
in connection with such Investment or any other amounts received in respect of
such Investment; provided that no such payment of dividends or distributions or
receipt of any such other amounts shall reduce the amount of any Investment if
such payment of dividends or distributions or receipt of any such amounts would
be included in Consolidated Net Income. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Common Stock of any
direct or indirect Restricted Subsidiary of the Company (other than all of the
Common Stock of such Restricted Subsidiary) such that, after giving effect to
any such sale or disposition, such Person is no longer a Restricted Subsidiary,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Common Stock of such
Person not sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Restricted Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket
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expenses and fees relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees and sales commissions), (b) taxes
paid or payable after taking into account any reduction in consolidated tax
liability due to available tax credits or deductions and any tax sharing
arrangements, (c) repayment of Indebtedness that either (A) is secured by a Lien
on the property or assets sold or (B) is required to be repaid in connection
with such Asset Sale (or in order to obtain a consent required in connection
therewith), (d) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, (e) any
consideration for an Asset Sale (which would otherwise constitute Net Cash
Proceeds) that is required to be held in escrow pending determination of whether
a purchase price adjustment will be made, but amounts under this clause (e)
shall become Net Cash Proceeds at such time and to the extent such amounts are
released to such Person and (f) a pro rata portion of the amount of cash or Cash
Equivalents received by any non-Guarantor Restricted Subsidiary that is not a
Wholly-Owned Restricted Subsidiary to the extent of the interests in such
non-Guarantor Restricted Subsidiary that are held by Persons other than the
Company or its Restricted Subsidiaries.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Holder(s)" means H. Family Investments, Inc., James L. Kirk, Don
R. O'Neal, Gene J. Ostrow, H. Wayne Huizenga and Harris W. Hudson and any of
their respective Affiliates, spouses, siblings, lineal descendants or lineal
ascendants or any trust for the benefit of such persons.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes, the Indenture and the Guarantees;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed the
greater of (A) $435.0 million and (B) the product of (x) Consolidated
Tangible Assets and (y) 1.0; reduced in the case of the preceding clause
(A) by any required permanent repayments from the application of the use of
proceeds from Asset Sales (which in the case of a revolving credit facility
are accompanied by a corresponding permanent commitment reduction)
thereunder;
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereof;
(iv) Interest Swap Obligations of the Company or any of its Restricted
Subsidiaries covering Indebtedness of the Company or such Restricted
Subsidiary; provided, however, that such Interest Swap Obligations are
entered into to protect the Company and its Restricted Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance with
the Indenture to the extent the notional principal amount of such Interest
Swap Obligation does not exceed the principal amount of the Indebtedness to
which such Interest Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary of the
Company to the Company or to a Restricted Subsidiary of the Company for so
long as such Indebtedness is held by the Company or a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Lien held
by a Person other than the Company, a Wholly Owned Restricted Subsidiary of
the Company or the lenders under the Credit Agreement; provided that if as
of any date any Person other than the Company, a Wholly
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Owned Restricted Subsidiary of the Company or the lenders under the Credit
Agreement owns or holds any such Indebtedness or holds a Lien in respect of
such Indebtedness, then the Company or such Restricted Subsidiary shall be
deemed to have incurred as of such date Indebtedness not constituting
Permitted Indebtedness pursuant to this clause (vi);
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Restricted Subsidiary of the Company or the lenders under the Credit
Agreement, in each case subject to no Lien (other than a lien in favor of
the lenders under the Credit Agreement); provided that (a) any Indebtedness
of the Company to any Wholly Owned Restricted Subsidiary of the Company
that is not a Guarantor is unsecured and subordinated, pursuant to a
written agreement, to the Company's obligations under the Indenture and the
Notes and (b) if as of any date any Person other than a Wholly Owned
Restricted Subsidiary of the Company or the lenders under the Credit
Agreement owns or holds any such Indebtedness or any Person holds a Lien in
respect of such Indebtedness, then Indebtedness not constituting Permitted
Indebtedness by the Company pursuant to this clause (vii) shall be deemed
to have been incurred on such date;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;
(x) Refinancing Indebtedness;
(xi) Capitalized Lease Obligations and Purchase Money Indebtedness of
the Company or any of its Restricted Subsidiaries not to exceed $10.0
million at any one time outstanding;
(xii) guarantees of Indebtedness otherwise permitted under the
Indenture;
(xiii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount (or, in the case of
Indebtedness issued at a discount, an accreted amount (determined in
accordance with GAAP)) not to exceed $20.0 million at any one time
outstanding (which may, but need not, be incurred in whole or in part under
the Credit Agreement); and
(xiv) Equipment Debt.
For purposes of determining compliance with the "Limitation on Incurrence
of Additional Indebtedness" covenant, in the event that an item of Indebtedness
meets the criteria of more than one of the types of Permitted Indebtedness
described in the above clauses, the Company, in its sole discretion shall
classify such item of Indebtedness and only be required to include the amount
and type of such Indebtedness in one of such clauses. Any Permitted Indebtedness
initially incurred pursuant to any of the clauses in the preceding paragraph may
at any time at the sole discretion of the Company be treated as having been
incurred pursuant to any other clause as long as the outstanding amount of such
Permitted Indebtedness at the time of any reclassification could be made
pursuant to such other clause.
"Permitted Investments" means:
(i) Investments by the Company or any Restricted Subsidiary of the
Company in any Person that is or will become immediately after such
Investment, a Wholly Owned Restricted Subsidiary of the Company or that
will merge or consolidate into the Company or a Wholly Owned Restricted
Subsidiary of the Company,
(ii) Investments in the Company by any Restricted Subsidiary of the
Company; provided that any Indebtedness evidencing such Investment is
unsecured and, to the extent made by a Restricted
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Subsidiary that is not a Guarantor, subordinated, pursuant to a written
agreement, to the Company's obligations under the Notes and the Indenture;
(iii) investments in cash and Cash Equivalents;
(iv) loans and advances to employees and officers of the Company and
its Restricted Subsidiaries in the ordinary course of business for bona
fide business purposes not in excess of $2.0 million at any one time
outstanding;
(v) Currency Agreements and Interest Swap Obligations entered into in
the ordinary course of the Company's or its Restricted Subsidiaries'
businesses and otherwise in compliance with the Indenture;
(vi) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of such trade creditors or customers or in
good faith settlement of delinquent obligations of such trade creditors or
customers;
(vii) Investments made by the Company or its Restricted Subsidiaries
as a result of non-cash consideration received in connection with an Asset
Sale made in compliance with the "Limitation on Asset Sales" covenant;
(viii) Investments existing on the Issue Date;
(ix) guarantees of Indebtedness otherwise permitted under the
Indenture,
(x) obligations of one or more officers or other employees of the
Company or any of its Restricted Subsidiaries in connection with such
officers' or employees' acquisition of shares of Common Stock of the
Company so long as no cash is paid by the Company or any of its Restricted
Subsidiaries to such officers or employees in connection with the
acquisition of any such obligations; and
(xi) additional Investments in an aggregate amount that, together with
all other Investments made pursuant to this clause (xi), does not exceed
$5.0 million.
For purposes of determining compliance with the "Limitation on Restricted
Payments" covenant, in the event that an Investment meets the criteria of more
than one of the types of Permitted Investments described in the clauses in the
preceding paragraph, the Company, in its sole discretion, shall classify such
Permitted Investment and only be required to include the amount and type of such
Permitted Investment in one of such clauses. Any Permitted Investment initially
made pursuant to any of the clauses in the preceding paragraph may at any time
at the sole discretion of the Company be treated as having been made pursuant to
any other clause as long as the outstanding amount of such Permitted Investment
at the time of any reclassification could be made pursuant to such other clause.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
that are either (a) not yet due or are delinquent for less than ninety days
or (b) being contested in good faith by appropriate proceedings and as to
which the Company or its Restricted Subsidiaries shall have set aside on
its books such reserves, if any, as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security;
(iv) Liens securing (a) letters of credit issued in the ordinary
course of business consistent with past practice in connection therewith,
or to secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money) and any bank's
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unexercised right of set off with respect to deposits made in the ordinary
course and (b) indemnity obligations in respect of the disposition of any
business or assets of the Company or any Restricted Subsidiary (provided
that the property subject to such Lien does not have a fair market value in
excess of the cash or Cash Equivalent proceeds received by the Company and
its Restricted Subsidiaries in connection with such disposition);
(v) judgment Liens not giving rise to an Event of Default;
(vi) easements, rights-of-way, municipal ordinances, zoning
restrictions and other similar charges, encumbrances, title defects or
irregularities not interfering in any material respect with the ordinary
conduct of the business of the Company or any of its Restricted
Subsidiaries;
(vii) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(viii) purchase money Liens to finance property or assets of the
Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; provided, however, that (A) the related
Purchase Money Indebtedness shall not exceed the cost of such property or
assets (including the cost of design, development, improvement, production,
acquisition, construction, installation and integration) and shall not be
secured by any property or assets of the Company or any Restricted
Subsidiary of the Company other than the property and assets so acquired or
constructed (and any accounts, contract rights, chattel paper, documents
and instruments arising from the sale, lease or rental of such property or
assets and all attachments, parts, accessions, accessories and replacements
thereof, and all proceeds therefrom) and (B) the Lien securing such
Indebtedness shall be created within six months of such acquisition,
construction or improvement;
(ix) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(x) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(xi) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(xii) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xiii) Liens securing Indebtedness under Currency Agreements;
(xiv) any lease or sublease to a third party not interfering in any
material respect with the business of the Company and its Restricted
Subsidiaries; and
(xv) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the
Company or of any of its Restricted Subsidiaries other than the property or
assets and the proceeds thereof that secured the Acquired Indebtedness
prior to the time such Indebtedness became Acquired Indebtedness of the
Company or a Restricted Subsidiary of the Company and are no more favorable
to the lienholders than those securing the Acquired Indebtedness prior to
the incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company.
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"Person" means an individual, partnership, corporation, unincorporated
organization, association, limited liability company, joint stock company, trust
or joint venture, or a governmental agency or political subdivision thereof or
any other entity.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Private Equity Offering" means an issuance of Qualified Capital Stock of
the Company for cash in a private placement.
"Public Equity Offering" means an underwritten public offering of Qualified
Capital Stock of the Company for cash pursuant to a registration statement filed
with the Commission in accordance with the Securities Act, the net proceeds of
which are at least $40.0 million.
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant, in each case
(except in the case of Indebtedness incurred pursuant to clause (ii), (iv), (v),
(vi), (vii), (viii) or (ix) of the definition of Permitted Indebtedness) that
does not (1) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed Refinancing (plus
the amount of any interest or premium required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of reasonable fees
and expenses incurred by the Company in connection with such Refinancing) or (2)
create Indebtedness with (A) a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness being Refinanced
or (B) a final maturity earlier than the final maturity of the Indebtedness
being Refinanced; provided that (x) if such Indebtedness being Refinanced is
Indebtedness solely of the Company, then such Refinancing Indebtedness shall be
Indebtedness solely of the Company and (y) if such Indebtedness being Refinanced
is subordinate or junior to the Notes, then such Refinancing Indebtedness shall
be subordinate to the Notes at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of the date of the Indenture, among the Company, the
Guarantors and the Initial Purchasers.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
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"Seller Notes" means any Indebtedness incurred by the Company or any of the
Restricted Subsidiaries in favor of any Person or Persons from whom the Company
or such Restricted Subsidiary acquires a business or the assets or properties of
a business directly in connection with such acquisition.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of:
(x) all monetary obligations (including guarantees thereof) of every
nature of the Company under the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities,
(y) all Interest Swap Obligations (including guarantees thereof) and
(z) all obligations (including guarantees thereof) under Currency
Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include:
(i) any Indebtedness of the Company to a Subsidiary of the Company or
any Affiliate of the Company or any of such Affiliate's Subsidiaries,
(ii) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of the Company or any Subsidiary of the
Company (including, without limitation, amounts owed for compensation),
(iii) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services (excluding Purchase
Money Indebtedness),
(iv) Indebtedness represented by Disqualified Capital Stock,
(v) any liability for federal, state, local or other taxes owed or
owing by the Company,
(vi) that portion of any Indebtedness incurred in violation of the
Indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness,"
(vii) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company, and
(viii) any Indebtedness which is, by its express terms, subordinated
in right of payment to any other Indebtedness of the Company.
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(w)
of Regulation S-X under the Securities Act.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by, and
published in, the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
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date fixed for redemption of the Notes following a Change of Control (or, if
such Statistical Release is no longer published, any publicly available source
of similar market data)) most nearly equal to the then remaining Average Life to
Stated Maturity of the Notes; provided, however, that if the Average Life to
Stated Maturity of the Notes is not equal to the constant maturity of a United
States Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the Average Life to
Stated Maturity of the Notes is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary
owns any Capital Stock of, or owns or holds any Lien on any property of, the
Company or any other Restricted Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided that (x) the Company
certifies to the Trustee that such designation complies with the "Limitation on
Restricted Payments" covenant and (y) each Subsidiary to be so designated and
each of its Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable with respect to any Indebtedness pursuant to which the
lender has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if (x) immediately after giving effect to
such designation, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an officers' certificate certifying that such designation
complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than in the case of a foreign Restricted Subsidiary, directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law) are owned by such Person or any Wholly Owned
Restricted Subsidiary of such Person.
REGISTRATION RIGHTS
The Company, the Guarantors and the Initial Purchasers entered into a
registration rights agreement (the "Registration Rights Agreement") pursuant to
which the Company and the Guarantors agreed that they will, at their cost, for
the benefit of the Holders, (i) within 90 days after the Issue Date (the "Filing
Date"), file a registration statement on an appropriate registration form (this
Exchange Offer Registration Statement) with respect to a registered offer (the
Exchange Offer) to exchange the Old Notes for the New Notes of the Company,
guaranteed by the Guarantors, which New Notes will have terms substantially
identical in all material respects to the Old Notes (except that the New Notes
will not contain terms with respect to transfer restrictions) and (ii) to use
their best efforts to cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act within 150 days after the Issue
Date. Upon the Exchange Offer Registration Statement being declared effective,
the Company and the Guarantors will offer the New Notes in
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exchange for surrender of the Old Notes. The Company and the Guarantors will
keep the Exchange Offer open for not less than 20 business days (or longer if
required by applicable law) after the date notice of the Exchange Offer is
mailed to the Holders. For each of the Old Notes surrendered to the Company
pursuant to the Exchange Offer, the Holder who surrendered such Old Notes will
receive a New Note having a principal amount equal to that of the surrendered
Old Notes. Interest on each New Note will accrue (A) from the later of (i) the
last interest payment date on which interest was paid on the Old Note
surrendered in exchange therefor, and (ii) if the Old Note is surrendered for
exchange on a date in a period which includes the record date for an interest
payment date to occur on or after the date of such exchange and as to which
interest will be paid, the date of such interest payment date or (B) if no
interest has been paid on the Old Notes, from the Issue Date.
If (1) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company and the Guarantors
are not permitted to effect an Exchange Offer, (2) the Exchange Offer is not
consummated within 180 days of the Issue Date, (3) any holder of Notes notifies
the Company within a certain time period that (a) it is prohibited by law or SEC
policy from participating in the Exchange Offer, (b) it may not resell the New
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales, (c) it is a
broker-dealer and owns Old Notes acquired directly from the Company or any
Guarantor or an affiliate of the Company or any Guarantor, or (d) in the case of
any Holder that participates in the Exchange Offer, such Holder does not receive
New Notes on the date of the exchange that may be sold without restriction under
state and federal securities laws (other than due solely to the status of such
Holder as an affiliate of the Company or any Guarantor within the meaning of the
Securities Act), then in each case, the Company and the Guarantors will (x)
promptly deliver to the Holders and the Trustee written notice thereof and (y)
at their sole expense, (a) as promptly as practicable, file a shelf registration
statement covering resales of the Notes (the "Shelf Registration Statement"),
(b) use their best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act and (c) use their best efforts to
keep effective the Shelf Registration Statement until the earlier of two years
after the Issue Date or such time as all of the applicable Old Notes have been
sold thereunder. The Company will, in the event that a Shelf Registration
Statement is filed, provide to each Holder copies of the prospectus that is a
part of the Shelf Registration Statement, notify each such Holder when the Shelf
Registration Statement for the Notes has become effective and take certain other
actions as are required to permit unrestricted resales of the Notes. A Holder
that sells Old Notes pursuant to the Shelf Registration Statement will be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement that are
applicable to such a Holder (including certain indemnification rights and
obligations).
If the Company or the Guarantors fail to comply with the above provisions
or if the Exchange Offer Registration Statement or the Shelf Registration
Statement fails to become effective, then, as liquidated damages, additional
interest (the "Additional Interest") shall become payable in respect of the
Notes as follows (each, a "Registration Default"):
(i) if (A) the Exchange Offer Registration Statement is not filed with
the Commission on or prior to the Filing Date or (B) notwithstanding that
the Company and the Guarantors filed the Exchange Offer Registration
Statement on or prior to the Filing Date, the Company and the Guarantors
are required to file a Shelf Registration Statement and such Shelf
Registration Statement is not filed on or prior to the date required by the
Registration Rights Agreement (the "Shelf Filing Date"), then commencing on
the day after either such required filing date, Additional Interest shall
accrue on the principal amount of the Notes at a rate of 0.25% per annum,
for the first 90 days immediately following each such filing date, such
Additional Interest rate increasing by an additional 0.25% per annum at the
beginning of each subsequent 90-day period; or
(ii) if (A) the Exchange Offer Registration Statement is not declared
effective by the Commission on or prior to 150 days after the Issue Date
(the "Effectiveness Date") or (B) notwithstanding that the Notes Exchange
Offer Registration Statement was declared effective on or prior to the
Effectiveness
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Date, the Company and the Guarantors are required to file a Shelf
Registration Statement and such Shelf Registration Statement is not
declared effective by the Commission on or prior to the 60th day following
the date such Shelf Registration Statement was filed (the "Shelf
Effectiveness Date"), then, commencing on the date after the 60th day
following the applicable effectiveness date, Additional Interest shall
accrue on the principal amount of the Notes at a rate of 0.25% per annum
for the first 90 days immediately following such date, such Additional
Interest rate increasing by an additional 0.25% per annum at the beginning
of each subsequent 90-day period; or
(iii) If (A) the Company and the Guarantors have not exchanged
Exchange Notes for all Notes validly tendered in accordance with the terms
of the Exchange Offer on or prior to the 30th day after the date on which
the Exchange Offer Registration Statement was declared effective or (B) if
applicable, the Shelf Registration Statement has been declared effective
and such Shelf Registration Statement ceases to be effective at any time
prior to the second anniversary of the Issue Date (other than after such
time as all Notes have been disposed of thereunder), then Additional
Interest shall accrue on the principal amount of the Notes at a rate of
0.25% per annum for the first 90 days commencing on (x) the 31st day after
such effective date, in the case of (A) above, or (y) the day such Shelf
Registration Statement ceases to be effective in the case of (B) above,
such Additional Interest rate increasing by an additional 0.25% per annum
at the beginning of each subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may not exceed
in the aggregate 2.0% per annum; provided, further, that the Company and the
Guarantors shall in no event be required to pay Additional Interest for more
than one Registration Default at any given time; and provided, further, that (1)
upon the filing of the Exchange Offer Registration Statement or a Shelf
Registration Statement, as applicable (in the case of clause (i) above), (2)
upon the effectiveness of the Exchange Offer Registration Statement or a Shelf
Registration Statement, as applicable (in the case of clause (ii) above), or (3)
upon the exchange of Exchange Notes for all Notes tendered (in the phrase of
clause (iii)(A) above), or upon the effectiveness of the Shelf Registration
Statement which had ceased to remain effective (in the case of clause (iii)(B)
above), as applicable, Additional Interest on the Notes as a result of such
clause (or the relevant subclause thereof), as the case may be, shall cease to
accrue.
Any amounts of Additional Interest due pursuant to clauses (i), (ii) or
(iii) above will be payable in the manner provided for the payment of interest
in the Indenture, on the same original interest payment date as set forth in the
Indenture and the Notes. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Notes multiplied by a fraction, the numerator of which is the number of days
such Additional Interest rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which will be available upon request to the Company.
BOOK-ENTRY, DELIVERY AND FORM
Except as described in the next paragraph, the New Notes initially will be
represented by one or more permanent global certificates in definitive, fully
registered form (the "Global Notes"). The Global Notes will be deposited on the
Issue Date with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC") and registered in the name of a nominee of DTC. The Global Notes
will be subject to certain restrictions on transfer set forth therein and will
bear the legend regarding such restrictions set forth under the heading
"Transfer Restrictions" herein.
Notes (i) transferred to "foreign purchasers" (as defined in "Transfer
Restrictions") or (ii) held by QIBs or institutional Accredited Investors who
are not QIBs who elect to take physical delivery of their certificates instead
of holding their interests through a Global Note (and which are thus ineligible
to trade through DTC) (collectively referred to herein as the "Non-Global
Purchasers") will be issued in registered
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form (the "Certificated Security"). Upon the transfer to a QIB of any
Certificated Security initially issued to a Non-Global Purchaser, such
Certificated Security will, unless the transferee requests otherwise or the
Global Notes have previously been exchanged in whole for Certificated
Securities, be exchanged for an interest in a Global Note. For a description of
the restrictions on the transfer of Certificated Securities and any interest in
the Global Notes, see "Transfer Restrictions."
THE GLOBAL NOTES
The Company expects that pursuant to procedures established by DTC (i) upon
the issuance of the Global Notes, DTC or its custodian will credit, on its
internal system, the principal amount of Notes of the individual beneficial
interests represented by such Global Notes to the respective accounts of persons
who have accounts with such depositary and (ii) ownership of beneficial
interests in the Global Notes will be shown on, and the transfer of such
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the Initial
Purchasers and ownership of beneficial interests in the Global Notes will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. QIBs and institutional Accredited Investors
who are not QIBs may hold their interests in the Global Notes directly through
DTC if they are participants in such system, or indirectly through organizations
which are participants in such systems.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all purposes
under the Indenture. No beneficial owner of an interest in the Global Notes will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the Indenture with respect to the Notes.
Payments of the principal of, premium (if any) interest (including
Additional Interest) on the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest (including Additional Interest) on the
Global Notes, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Notes as shown on the records of DTC or its nominee. The Company
also expects that payments by participants to owners of beneficial interests in
the Global Notes held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's sameday funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Notes to persons in
states which require physical delivery of the Notes or to pledge such
securities, such holder must transfer its interest in a Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and
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trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performances by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Note and a successor depositary is not appointed by the Company
within 90 days of receipt of a written notice from DTC, Certificated Securities
will be issued in exchange for the Global Notes, which certificates will bear
the legends referred to under the heading "Transfer Restrictions."
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of the New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes acquired
as a result of market-making activities or other trading activities. The Company
has agreed that it will make this Prospectus available to any broker-dealer for
use in connection with any such resale for a period of 120 days after the
Expiration Date or until all participating broker-dealers have so resold. Any
such broker-dealer who intends to use this Prospectus in connection with the
resale of New Notes received in exchange for Old Notes pursuant to the Exchange
Offer must notify the Company, or cause the Company to be notified, on or prior
to the Expiration Date, that it is such a broker-dealer.
The Company will not receive any proceeds from the issuance of the New
Notes offered hereby or from any sale of New Notes by broker-dealers. New Notes
received by broker-dealers for their own account pursuant to the Exchange Offer
may be sold from time to time in one or more transactions in the over-the-
counter market, in negotiated transactions, through the writing of options on
the New Notes or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concession from any such broker-dealer and/or the purchasers of
any New Notes. Any broker-dealer that resells New Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker-dealer that
participates in a distribution of New Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act, and any profit on any resale of New
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer, and to
the best of the Company's information and belief, each person participating in
the Exchange Offer is acquiring the New Notes in its ordinary course of business
and has no arrangement or understanding with any person to participate in the
distribution of the New Notes to be received in the Exchange Offer.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations relating to the purchase, ownership and disposition of the Notes,
but does not purport to be a complete analysis of all the potential tax
considerations relating thereto (possibly with retroactive effect). This summary
is based on the
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Internal Revenue Code of 1986, as amended (the "Code"), existing, temporary, and
proposed Treasury Regulations, and laws, rulings and decisions now in effect,
all of which are subject to change. This summary deals only with holders that
will hold Notes as "capital assets" (within the meaning of Section 1221 of the
Code). This summary does not address holders subject to special rules, such as
tax-exempt organizations, insurance companies, dealers in securities or
currencies, or persons that will hold Notes as a position in a hedging
transaction, "straddle" or "conversion transaction" for tax purposes.
For the purposes of this discussion, a "U.S. holder" means any holder of a
Note that is (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any state thereof (except, in the case of a partnership, to the
extent future Treasury Regulations provide otherwise), (iii) an estate the
income of which is subject to United States federal income taxation regardless
of its source, (iv) a trust other than a "foreign trust," as such term is
defined in Section 7701(a)(31) of the Code or (v) otherwise subject to United
States federal income tax on a net income basis in respect of its worldwide
taxable income. A "Non-U.S. holder" means any holder of a Note that is not a
U.S. holder.
THE FOLLOWING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, INVESTORS
CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISERS WITH
RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME AND ESTATE TAX
LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY
APPLICABLE TAX TREATY.
UNITED STATES FEDERAL INCOME TAXATION OF U.S. HOLDERS
Payment of Interest
Interest on a Note generally will be includable in the income of the U.S.
holder of such Note as ordinary income at the time such interest is received or
accrued, in accordance with such holder's method of accounting for United States
federal income tax purposes. It is expected that the Notes will be issued
without original issue discount and the following discussion so assumes.
Market Discount
If a U.S. holder purchases a Note for an amount that is less than its
principal amount, the amount of the difference will be treated as "market
discount" for United States federal income tax purposes, unless such difference
is less than a specified de minimis amount. Under the market discount rules, a
U.S. holder will be required to treat any partial principal payment on, or any
gain on the sale, exchange, retirement or other disposition of, a Note as
ordinary income to the extent of the market discount which has not previously
been included in income and is treated as having accrued on such Note at the
time of such payment or disposition. In addition, the U.S. holder may be
required to defer, until the maturity of the Note or its earlier disposition in
a taxable transaction, the deduction of all or a portion of the interest expense
on any indebtedness incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the U.S.
holder elects to accrue on a constant interest method. A U.S. holder may elect
to include market discount in income currently as it accrues (on either a
ratable or constant interest method), in which case the rule described above
regarding deferral of interest deductions will not apply. This election to
include market discount in income currently, once made, applies to all market
discount obligations acquired on or after the first taxable year to which the
election applies and may not be revoked without the consent of the Internal
Revenue Service (the "IRS").
97
<PAGE> 103
Amortizable Bond Premium
A U.S. holder that purchases a Note for an amount in excess of the
principal amount will be considered to have purchased the Note at a "premium." A
U.S. holder generally may elect to amortize the premium over the remaining term
of the Note on a constant yield method. However, if the Note is purchased at a
time when the Note may be optionally redeemed for an amount that is in excess of
its principal amount, special rules would apply that could result in a deferral
of the amortization of bond premium until later in the term of the Note. The
amount amortized in any year will be treated as a reduction of the U.S. holder's
interest income from the Note. Bond premium on a Note held by a U.S. holder that
does not make such an election will decrease the gain or increase the loss
otherwise recognized on disposition of the Note. The election to amortize
premium on a constant yield method, once made, applies to all debt obligations
held or subsequently acquired by the electing U.S. holder on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or redemption of a Note, a U.S. holder generally
will recognize capital gain or loss equal to the difference between (i) the
amount of cash proceeds and the fair market value of any property received on
the sale, exchange or redemption (except to the extent such amount is
attributable to either Additional Interest discussed below, or accrued interest
income not previously included in income which is taxable as ordinary income)
and (ii) such holder's adjusted tax basis in the Note. A holder's adjusted tax
basis in a Note generally will equal the cost of the Note to such holder. Such
capital gain or loss will be long-term capital gain or loss if the Note was held
by the U.S. holder for more than 12 months. Under recently enacted legislation,
the net capital gain of an individual derived in respect of the Notes generally
will be taxed at a maximum rate of 20% if it is long-term capital gain.
Exchange of Notes for Exchange Notes
The exchange of Notes for Exchange Notes pursuant to the Exchange Offer
should not be considered a taxable exchange for U.S. federal income tax purposes
because the Exchange Notes should not constitute a material modification of the
terms of the Notes. Accordingly, such exchange should have no U.S. federal
income tax consequences to U.S. holders of Notes, and the basis and holding
period of such a holder in an Exchange Note will be the same as such holder's
adjusted tax basis and holding period in the Note exchanged therefor.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note and payments of the proceeds
of the sale of a Note to certain noncorporate holders, and a 31% backup
withholding tax may apply to such payments if the U.S. holder (i) fails to
furnish or certify his correct taxpayer identification number to the payer in
the manner required, (ii) is notified by the Internal Revenue Service that he
has failed to report payments of interest and dividends properly, or (iii) under
certain circumstances, fails to certify that he has not been notified by the
Internal Revenue Service that he is subject to backup withholding for failure to
report interest and dividend payments. Any amounts withheld under the backup
withholding rules from a payment to a U.S. holder will be allowed as a credit
against such holder's United States federal income tax and may entitle the
holder to a refund, provided that the required minimum information is furnished
to the Internal Revenue Service.
Additional Interest
The Company believes that Additional Interest, if any, described above
under "Exchange Offer -- Registration Rights" will be taxable to the U.S. holder
as ordinary income in accordance with the holder's method of accounting for
federal income tax purposes. The Internal Revenue Service may take a different
position, however, which could affect the timing of a holder's income with
respect to Additional Interest, if any.
98
<PAGE> 104
UNITED STATES FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a person other than a U.S. holder generally
will not be subject to U.S. federal income tax provided (i) such gain is not
effectively connected with the conduct by such holder of a trade or business in
the United States, and (ii) in the case of gains derived by an individual, such
individual is not present in the United States for 183 days or more in the
taxable year of the disposition.
Payments of interest to a Non-U.S. holder with respect to a Note generally
will not be subject to U.S. federal income tax and a withholding tax if (a)
either (i) the beneficial owner of the Note certifies to the Company or its
agent, under penalties of perjury, that it is not a U.S. person and provides its
name and address on an Internal Revenue Service Form W-8 (or a suitable
substitute form) or (ii) a securities clearing organization, bank or other
financial organization that holds customers' securities in the ordinary course
of business (a "financial institution") and holds the Note certifies under
penalties of perjury that such a Form W-8 (or suitable substitute form) has been
received from the beneficial owner by it or by a financial institution between
it and the beneficial owner and furnishes the payor with a copy thereof, and (b)
the holder does not actually or constructively own 10% or more of the voting
power of all voting stock of the Company and is not a controlled foreign
corporation for U.S. tax purposes that is related to the Company through stock
ownership. A Non-U.S. holder that does not meet the requirements above would
generally be subject to U.S. federal withholding at a flat rate of 30% (or a
lower applicable treaty rate) on payments of interest with respect to the Notes.
If a Non-U.S. holder of a Note is engaged in a trade or business in the
United States and interest on the Note is effectively connected with the conduct
of such trade or business, such Non-U.S. holder, although exempt from U.S.
federal withholding tax (provided the Non-U.S. holder files the appropriate
certification with the Company or its U.S. agent) will be subject to U.S.
federal income tax on such interest in the same manner as if it were a U.S.
holder. In addition, if such Non-U.S. holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits (subject to adjustment) for that taxable year unless it
qualifies for a lower rate under an applicable income tax treaty.
Recently finalized Treasury obligations, which are generally effective with
respect to payments made after December 31, 1999, subject to certain transition
rules, provide alternative certification requirements and means by which a
holder of a Note could claim the exemption from U.S. federal income and
withholding tax.
If interest on the Notes is exempt from United States federal income and
withholding tax under the rules described above, the Notes will not be included
in the estate of a deceased Non-U.S. holder for United States federal estate tax
purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company will, where required, report to the holders of Notes and the
Internal Revenue Service the amount of any interest paid on the Notes in each
calendar year and the amounts of tax withheld, if any, with respect to such
payments. Copies of these information returns may also be made available under
the provisions of a specific treaty agreement to the tax authorities of the
country in which the Non-U.S. holder resides.
In the case of payments of interest to Non-U.S. holders, Temporary Treasury
regulations provide that the 31% backup withholding tax and certain information
reporting will not apply to such payments with respect to which either the
requisite certification, as described above, has been received or an exemption
has otherwise been established; provided that neither the Company nor its
payment agent has actual knowledge that the holder is a United States person or
that the conditions of any other exemption are not in fact satisfied. Under
temporary Treasury regulations, these information reporting and backup
withholding requirements will apply, however, to the gross proceeds paid to a
Non-U.S. holder on the disposition of the Notes by or through a United States
office of a United States or foreign broker, unless the holder certifies to the
broker under penalties of perjury as to its name, address, and status as a
foreign person, and such broker has no actual knowledge to the contrary, or the
holder otherwise establishes an exemption. Information reporting requirements,
but not backup withholding, will also apply to a payment of the proceeds of a
disposition of the Notes
99
<PAGE> 105
by or through a foreign office of a United States broker or a foreign broker
that is a controlled foreign corporation for United States federal income tax
purposes or a foreign person that derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United States,
unless such broker has documentary evidence in its file that the holder of the
Notes is not a United States person, and such broker has no actual knowledge to
the contrary, or the holder establishes an exception. Neither information
reporting nor backup withholding generally will apply to a payment of the
proceeds of a disposition of the Notes by or through a foreign office of a
foreign broker not subject to the preceding sentence.
In October 1997, Treasury regulations were issued which alter the foregoing
rules in certain respects and which generally will apply to any payments in
respect of a Note or proceeds from the sale of a Note that are made after
December 31, 1999. Among other things, such regulations expand the number of
foreign intermediaries that are potentially subject to information reporting and
address certain documentary evidence requirements relating to exemption from the
general backup withholding requirements. Holders of the Notes should consult
their tax advisers concerning the possible application of such regulations to
any payments made on or with respect to the Notes.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-U.S.
holder's United States federal income tax liability, provided that the required
information is furnished to the Internal Revenue Service.
EXCHANGE OFFER
For federal income tax purposes, the exchange of Old Notes for New Notes
pursuant to the Exchange Offer will not result in recognition of gain or loss by
U.S. Holders of Notes, the holding period of the New Notes will include the
holding period of the Old Notes and the basis of the New Notes will be the same
as the basis of the Old Notes immediately before the exchange. In the case of a
holder of the Old Notes who is a cash basis taxpayer and whose taxable year ends
prior to the date on which the first interest payment under the Notes is paid,
the exchange of the Old Notes for the New Notes could result in the acceleration
of interest income accrued during the holding period of the Old Notes through
the date of the exchange.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Akerman, Senterfitt & Eidson, P.A., Miami, Florida. Certain attorneys
at Akerman, Senterfitt & Eidson, P.A. currently own shares of Common Stock of
the Company.
EXPERTS
The financial statements of the Company, Gabriel Trailer Manufacturing
Company, Inc., R. and R. Rental, Inc., C & E Rental and Service, Inc., Titan
Rentals, Inc., The Bode-Finn Company, RFL Enterprises, Inc., Naples Rent-All &
Sales Company, Inc., Raymond Equipment Company, Inc., The Florida Panhandle and
Southeast Texas Divisions of General Rental, Inc., Associated Rental Equipment
Management Company, Inc., Revco Equipment Rentals, Inc., High Reach Company,
Inc. and High Reach Leasing Company, Reliable Rental & Supply Co., Inc., Ray L.
O'Neal, Inc. and Arenco, LLC, and Action Equipment Company, Inc. and Action
Supply Co., Inc., included in this Prospectus and Registration Statement and the
Schedule of the Company included elsewhere in the Prospectus have been audited
by Arthur Andersen LLP, independent certified public accountants, as indicated
in their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
The financial statements of Logan Equipment Corporation as of December 31,
1997 and for the year then ended, appearing in this Prospectus and Registration
Statement, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
100
<PAGE> 106
NATIONSRENT, INC.
INDEX TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
NATIONSRENT, INC.
Introduction to Pro Forma Consolidated Financial
Statements............................................. PF-2
Pro Forma Consolidated Balance Sheet at September 30,
1998................................................... PF-3
Pro Forma Consolidated Statements of Operations for the
year ended December 31, 1997........................... PF-4
Predecessor Pro Forma Consolidated Statements of
Operations for the year ended December 31, 1997........ PF-5
Acquisitions Consolidated Statements of Operations for the
year ended December 31, 1997........................... PF-6
Pro Forma Consolidated Statements of Operations for the
nine months ended September 30, 1998................... PF-7
Notes to Unaudited Pro Forma Consolidated Financial
Statements............................................. PF-8
</TABLE>
PF-1
<PAGE> 107
NATIONSRENT, INC.
INTRODUCTION TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following pro forma consolidated financial statements of the Company
present the pro forma consolidated balance sheet at September 30, 1998 and the
pro forma consolidated statements of operations for the year ended December 31,
1997 and the nine months ended September 30, 1998. The pro forma consolidated
financial statements give effect to the Acquisitions, the Founders' Additional
Contribution, the Private Placement, certain borrowings under the Credit
Facilities, conversion to equity of certain subordinated acquisition debt,
incurrance of certain senior subordinated supplier debt and the Private Debt
Offering. The pro forma consolidated balance sheet at September 30, 1998 gives
effect to the transactions and events described above as if they occurred on
September 30, 1998. The pro forma consolidated statements of operations for the
year ended December 31, 1997 reflect the Acquisitions as if they occurred on
January 1, 1997. The pro forma consolidated statements of operations for the
nine months ended September 30, 1998 are comprised of the historical results of
the Company, which include the results of operations of all businesses acquired
during 1997 and the first nine months of 1998 (consisting of Sam's Equipment
Rental, Inc. ("Sam's"), Ashland Rental and Sales, Inc. ("Ashland"), R. and R.
Rental, Inc. ("R&R"), C&E Rental and Service, Inc. ("C&E"), Titan Rentals, Inc.
("Titan"), Central Rent-All, Inc. ("Central"), Revco Equipment Rentals, Inc.
("Revco"), RFL Enterprises, Inc. ("RFL"), Naples Rent-All and Sales Company,
Inc. ("Naples"), The Bode-Finn Company ("Bode-Finn"), U-Rent-It Company, Inc.
("U-Rent-It"), A-Action Rental, Inc. ("A-Action"), Raymond Equipment Company,
Inc, ("Jobs"), The J. Kelly Co., Inc. ("J. Kelly"), General Rental, Inc.
("General"), Associated Rental Equipment Management Company, Inc.
("Associated"), A to Z Rents It, Inc. ("A to Z"), Big "R" Rents Corporation
("Big R"), High Reach Company, Inc. and High Reach Leasing Company ("High
Reach"), Agstar, Inc. and Lightnin' Truck Rental, Inc. ("Lightnin"'), Reliable
Rental & Supply Co., Inc. ("Reliable"), Witt Equipment Company ("Witt"),
Louisiana Rentals of Houma, Inc. ("Louisiana"), Sheffield Equipment Co., Inc.
("Sheffield"), Gold Coast Aerial Lift, Inc. ("Gold Coast"), Central Alabama
Rental Center, Inc. ("Central Alabama"), Tennessee Tool and Supply, Inc.
("Tennessee")), and reflect the results of operations of all businesses acquired
in the Acquisitions subsequent to September 30, 1998 as if they occurred on
January 1, 1998.
The pro forma consolidated financial statements are based upon available
information and certain assumptions considered reasonable by management. The pro
forma consolidated financial statements do not reflect the potential cost
savings the Company may have achieved had the Company owned the acquired
businesses for the full period. Accordingly, these statements are not
necessarily indicative of the actual results of operations that might have
occurred, nor are they necessarily indicative of expected results in the future.
The pro forma consolidated financial statements should be read in
conjunction with the Company's Consolidated Financial Statements and
management's discussion thereof contained elsewhere in this Prospectus.
PF-2
<PAGE> 108
NATIONSRENT, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
UNAUDITED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL OTHER PRO FORMA
COMPANY A-1 LOGAN ACTION ACQUISITIONS ADJUSTMENTS PRO FORMA
---------- --------- ------- ------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........ $ 9,231 $ 252 $ 1,760 $ 266 $ 100 $ -- $ 11,609
Accounts receivable, net......... 48,115 7,010 8,169 2,833 3,979 -- 70,106
Inventories...................... 12,406 2,231 5,871 1,558 650 (1,031)(a) 21,685
Due from related party........... -- -- -- 461 -- (461)(b) --
Prepaid expenses and other
assets......................... 11,424 1,920 785 404 1,327 -- 15,860
Rental equipment, net............ 316,824 38,278 35,343 8,650 12,736 8,760(b) 420,591
Property and equipment, net...... 19,416 2,971 2,396 857 1,439 -- 27,079
Intangible assets related to
acquired business, net......... 245,434 -- 1,831 -- -- 215,620(c) 462,885
-------- ------- ------- ------- ------- -------- ----------
Total assets............... $662,850 $52,662 $56,155 $15,029 $20,231 $222,888 $1,029,815
======== ======= ======= ======= ======= ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable................. $ 44,117 $ 920 $ 8,882 $ 4,163 $ 1,606 $ -- $ 59,688
Accrued expenses and other
liabilities.................... 32,053 3,019 -- 511 662 -- 36,245
Debt............................. 389,841 14,683 42,359 10,906 16,502 174,376(d) 648,667
Income taxes payable............. 638 -- -- -- (5) -- 633
Deferred taxes................... 7,442 -- -- -- -- 1,451(e) 8,893
-------- ------- ------- ------- ------- -------- ----------
Total liabilities.......... 474,091 18,622 51,241 15,580 18,765 175,827 754,126
Put Warrants..................... -- -- -- 1,875 -- (1,875) --
Stockholders' equity
Treasury stock................... -- (95) -- -- (792) 887(f) --
Common stock..................... 444 62 5 10 135 (100)(g) 556
Additional paid-in capital....... 180,460 200 507 1,624 473 84,014(h) 267,278
Retained earnings................ 7,855 33,873 4,402 (4,060) 1,650 (35,865)(f) 7,855
-------- ------- ------- ------- ------- -------- ----------
Total stockholders'
equity................... 188,759 34,040 4,914 (2,426) 1,466 48,936 275,689
-------- ------- ------- ------- ------- -------- ----------
Total liabilities and
stockholders' equity..... $662,850 $52,662 $56,155 $15,029 $20,231 $222,888 $1,029,815
======== ======= ======= ======= ======= ======== ==========
<CAPTION>
OFFERING PRO FORMA
ADJUSTMENTS AS ADJUSTED
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents........ $ -- $ 11,609
Accounts receivable, net......... -- 70,106
Inventories...................... -- 21,685
Due from related party........... -- --
Prepaid expenses and other
assets......................... 6,250(i) 22,110
Rental equipment, net............ -- 420,591
Property and equipment, net...... -- 27,079
Intangible assets related to
acquired business, net......... -- 462,885
-------- ----------
Total assets............... $ 6,250 $1,036,065
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUIT
Accounts payable................. $ -- $ 59,688
Accrued expenses and other
liabilities.................... -- 36,245
Debt............................. 6,250(j) 654,917
Income taxes payable............. -- 633
Deferred taxes................... -- 8,893
-------- ----------
Total liabilities.......... 6,250 760,376
Put Warrants..................... -- --
Stockholders' equity
Treasury stock................... -- --
Common stock..................... -- 556
Additional paid-in capital....... -- 267,278
Retained earnings................ -- 7,855
-------- ----------
Total stockholders'
equity................... -- 275,689
-------- ----------
Total liabilities and
stockholders' equity..... $ 6,250 $1,036,065
======== ==========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
PF-3
<PAGE> 109
NATIONSRENT, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ACQUISITION PRO FORMA OFFERING PRO FORMA
COMPANY ACQUISITIONS ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
---------- ------------ ----------- --------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Equipment rentals........................ $18,367 $225,324 $ (932)(1) $242,759 $ -- $242,759
Sales of equipment, merchandise, parts
and supplies........................... 4,622 153,593 -- 158,215 -- 158,215
------- -------- ------- -------- -------- --------
Total revenue...................... 22,989 378,917 (932) 400,974 -- 400,974
Cost of revenue:
Cost of equipment rentals, excluding
depreciation........................... 5,669 86,432 (2,617)(a) 89,055 -- 89,055
(429)(1)
Rental equipment depreciation............ 3,705 64,014 (19,558)(b) 47,984 -- 47,984
(177)(1)
Sales of equipment, merchandise, parts
and supplies........................... 3,538 108,351 18(c) 111,907 -- 111,907
------- -------- ------- -------- -------- --------
Total cost of revenue.............. 12,912 258,797 (22,763) 248,946 -- 248,946
------- -------- ------- -------- -------- --------
Gross profit............................... 10,077 120,120 21,831 152,028 -- 152,028
Operating expenses:
Selling, general and administrative
expenses............................... 3,391 74,921 (12,880)(d) 65,618 -- 65,618
(520)(l)
706(e)
Depreciation and amortization of
non-rental property and equipment...... 675 4,222 (863)(f) 14,908 -- 14,908
10,874(g)
------- -------- ------- -------- -------- --------
Total operating expenses........... 4,066 79,143 (2,683) 80,526 -- 80,526
------- -------- ------- -------- -------- --------
Operating income........................... 6,011 40,977 24,514 71,502 -- 71,502
Other (income)/expense
Interest expense......................... 2,469 18,145 25,774(h) 46,310 5,140(k) 51,450
(78)(l)
Other (income)/expense, net.............. 12 (1,482) 300(i) (1,170) -- (1,170)
------- -------- ------- -------- -------- --------
Total other (income)/expense....... 2,481 16,663 25,996 45,140 5,140 50,280
------- -------- ------- -------- -------- --------
Income before provision for income taxes... 3,530 24,314 (1,482) 26,362 (5,140) 21,222
Provision for income taxes............... 1,482 10,471 (881)(j) 11,072 (2,159)(j) 8,913
------- -------- ------- -------- -------- --------
Net income......................... $ 2,048 $ 13,843 $ (601) $ 15,290 $ (2,981) $ 12,309
======= ======== ======= ======== ======== ========
Basic and diluted net income per
share............................ $ 0.08 $ 0.27 $ 0.22
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
PF-4
<PAGE> 110
NATIONSRENT, INC.
PREDECESSOR PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
PREDECESSOR COMPANY ADJUSTMENTS PRO FORMA
JANUARY 1, 1997 TO INCEPTION TO TO PREDECESSOR HISTORICAL
AUGUST 31, 1997 DECEMBER 31, 1997 AND COMPANY COMPANY
------------------ ----------------- -------------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue:
Equipment rentals................................... $10,957 $7,410 $ -- $18,367
Sales of equipment, merchandise, parts and
supplies.......................................... 2,727 1,895 -- 4,622
------- ------ ----- -------
Total revenue................................. 13,684 9,305 -- 22,989
Cost of revenue:
Cost of equipment rentals, excluding depreciation... 3,473 2,196 -- 5,669
Rental equipment depreciation....................... 2,642 1,526 (463)(b) 3,705
Sales of equipment, merchandise, parts and supplies
sold.............................................. 1,847 1,691 -- 3,538
------- ------ ----- -------
Total cost of revenue......................... 7,962 5,413 (463) 12,912
------- ------ ----- -------
Gross profit.......................................... 5,722 3,892 463 10,077
Operating expenses:
Selling, general and administrative expenses........ 2,653 1,081 (343)(d) 3,391
Depreciation and amortization of non-rental property
and equipment..................................... 140 284 (62)(f) 675
313(g)
------- ------ ----- -------
Total operating expenses...................... 2,793 1,365 (92) 4,066
------- ------ ----- -------
Operating income...................................... 2,929 2,527 555 6,011
Other (income)/expense
Interest expense.................................... 809 760 900(h) 2,469
Other (income)/expense, net......................... 12 -- -- 12
------- ------ ----- -------
Total other (income)/expense.................. 821 760 900 2,481
------- ------ ----- -------
Income before provision for income taxes.............. 2,108 1,767 (345) 3,530
Provision for income taxes.......................... 880 766 (164)(j) 1,482
------- ------ ----- -------
Net income (loss)............................. $ 1,228 $1,001 $(181) $ 2,048
======= ====== ===== =======
Basic and diluted net income per share........ $ 0.04 $ 0.08
====== =======
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
PF-5
<PAGE> 111
NATIONSRENT, INC.
ACQUISITIONS CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
R & R C & E TITAN RFL BODE-FINN NAPLES JOBS REVCO
------ ------ ------ ------ --------- ------ ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Equipment rentals................................... $2,409 $4,506 $1,927 $ 966 $20,212 $2,262 $12,651 $2,129
Sales of equipment, merchandise, parts and
supplies.......................................... 2,107 2,768 3,042 2,077 41,038 3,805 8,307 495
------ ------ ------ ------ ------- ------ ------- ------
Total revenue.................................. 4,516 7,274 4,969 3,043 61,250 6,067 20,958 2,624
Cost of revenue:
Cost of equipment rentals, excluding depreciation... 1,398 1,846 1,303 463 4,978 1,707 2,423 1,004
Rental equipment depreciation....................... 631 766 302 261 7,266 440 4,520 613
Sales of equipment, merchandise, parts and supplies
sold.............................................. 1,808 1,791 2,043 1,472 28,584 2,967 6,150 223
------ ------ ------ ------ ------- ------ ------- ------
Total cost of revenue.......................... 3,837 4,403 3,648 2,196 40,828 5,114 13,093 1,840
------ ------ ------ ------ ------- ------ ------- ------
Gross profit......................................... 679 2,871 1,321 847 20,422 953 7,865 784
Operating expenses:
Selling, general and administrative expenses........ 715 1,417 824 209 16,597 518 2,373 312
Depreciation and amortization of non-rental property
and equipment..................................... 76 157 16 23 257 45 212 25
------ ------ ------ ------ ------- ------ ------- ------
Total operating expenses....................... 791 1,574 840 232 16,854 563 2,585 337
------ ------ ------ ------ ------- ------ ------- ------
Operating income..................................... (112) 1,297 481 615 3,568 390 5,280 447
Other (income)/expense
Interest expense.................................... 80 101 34 92 1,602 23 1,846 122
Other (income)/expense, net......................... (30) (61) 7 (15) (348) (52) -- (3)
------ ------ ------ ------ ------- ------ ------- ------
Total other (income)/expense................... 50 40 41 77 1,254 (29) 1,846 119
------ ------ ------ ------ ------- ------ ------- ------
Income before provision for income taxes............. (162) 1,257 440 538 2,314 419 3,434 328
Provision for income taxes.......................... -- 503 168 215 929 167 1,374 131
------ ------ ------ ------ ------- ------ ------- ------
Net income (loss).............................. $(162) $ 754 $ 272 $ 323 $ 1,385 $ 252 $ 2,060 $ 197
====== ====== ====== ====== ======= ====== ======= ======
<CAPTION>
GENERAL ASSOCIATED HIGH REACH RELIABLE A-1 LOGAN ACTION
------- ---------- ---------- -------- ------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Equipment rentals................................... $7,238 $24,261 $15,138 $8,315 $40,691 $ 5,882 $6,114
Sales of equipment, merchandise, parts and
supplies.......................................... 1,876 16,527 3,085 1,151 7,549 9,632 7,732
------ ------- ------- ------ ------- ------- ------
Total revenue.................................. 9,114 40,788 18,223 9,466 48,240 15,514 13,846
Cost of revenue:
Cost of equipment rentals, excluding depreciation... 4,018 4,973 6,007 4,183 14,514 1,197 3,187
Rental equipment depreciation....................... 942 8,626 3,153 1,291 14,741 1,297 661
Sales of equipment, merchandise, parts and supplies
sold.............................................. 1,204 13,464 1,703 626 3,608 7,218 6,315
------ ------- ------- ------ ------- ------- ------
Total cost of revenue.......................... 6,164 27,063 10,863 6,100 32,863 9,712 10,163
------ ------- ------- ------ ------- ------- ------
Gross profit......................................... 2,950 13,725 7,360 3,366 15,377 5,802 3,683
Operating expenses:
Selling, general and administrative expenses........ 1,495 6,143 2,739 2,041 11,241 3,466 3,432
Depreciation and amortization of non-rental property
and equipment..................................... 407 466 344 297 372 74 190
------ ------- ------- ------ ------- ------- ------
Total operating expenses....................... 1,902 6,609 3,083 2,338 11,613 3,540 3,622
------ ------- ------- ------ ------- ------- ------
Operating income..................................... 1,048 7,116 4,277 1,028 3,764 2,262 61
Other (income)/expense
Interest expense.................................... 704 3,748 2,185 419 698 922 780
Other (income)/expense, net......................... -- (358) (13) (15) (328) -- (28)
------ ------- ------- ------ ------- ------- ------
Total other (income)/expense................... 704 3,390 2,172 404 370 922 752
------ ------- ------- ------ ------- ------- ------
Income before provision for income taxes............. 344 3,726 2,105 624 3,394 1,340 (691)
Provision for income taxes.......................... 138 1,490 942 250 1,358 -- --
------ ------- ------- ------ ------- ------- ------
Net income (loss).............................. $ 206 $ 2,236 $ 1,163 $ 374 $ 2,036 $ 1,340 $(691)
====== ======= ======= ====== ======= ======= ======
<CAPTION>
OTHER TOTAL
------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revenue:
Equipment rentals................................... $70,623 $225,324
Sales of equipment, merchandise, parts and
supplies.......................................... 42,402 153,593
------- --------
Total revenue.................................. 113,025 378,917
Cost of revenue:
Cost of equipment rentals, excluding depreciation... 33,231 86,432
Rental equipment depreciation....................... 18,504 64,014
Sales of equipment, merchandise, parts and supplies
sold.............................................. 29,175 108,351
------- --------
Total cost of revenue.......................... 80,910 258,797
------- --------
Gross profit......................................... 32,115 120,120
Operating expenses:
Selling, general and administrative expenses........ 21,399 74,921
Depreciation and amortization of non-rental property
and equipment..................................... 1,261 4,222
------- --------
Total operating expenses....................... 22,660 79,143
------- --------
Operating income..................................... 9,455 40,977
Other (income)/expense
Interest expense.................................... 4,789 18,145
Other (income)/expense, net......................... (238) (1,482)
------- --------
Total other (income)/expense................... 4,551 16,663
------- --------
Income before provision for income taxes............. 4,904 24,314
Provision for income taxes.......................... 2,806 10,471
------- --------
Net income (loss).............................. 2,098 $ 13,843
======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
PF-6
<PAGE> 112
NATIONSRENT, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL BODE HIGH
COMPANY RFL FINN NAPLES JOBS REVCO GENERAL ASSOCIATED REACH
---------- ---- --------- ------ ------ ------ ------- ---------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Equipment rentals................ $73,644 $228 $ 6,336 $ 513 $4,086 $ 493 $4,494 $15,172 $13,434
Sales of equipment, merchandise,
parts and supplies............. 39,084 481 16,971 892 4,258 40 657 7,502 1,982
------- ---- ------- ------ ------ ------ ------ ------- -------
Total revenue............... 112,728 709 23,307 1,405 8,344 533 5,151 22,674 15,416
Cost of revenue:
Cost of equipment rentals,
excluding depreciation......... 25,195 129 1,088 395 1,073 189 2,519 4,999 5,396
Rental equipment
depreciation................... 13,555 73 2,493 94 2,022 140 589 5,876 2,825
Sales of equipment,
merchandise, parts and supplies
sold........................... 28,090 328 11,940 687 3,342 27 204 5,483 1,473
------- ---- ------- ------ ------ ------ ------ ------- -------
Total cost of revenue....... 66,840 530 15,521 1,176 6,437 356 3,312 16,358 9,694
------- ---- ------- ------ ------ ------ ------ ------- -------
Gross profit...................... 45,888 179 7,786 229 1,907 177 1,839 6,316 5,722
Operating expenses:
Selling, general and
administrative expenses........ 22,287 26 6,315 120 1,473 79 640 2,609 2,253
Depreciation and
amortization of
non-rental property and
equipment...................... 2,931 6 82 9 94 1 197 240 263
------- ---- ------- ------ ------ ------ ------ ------- -------
Total operating expenses.... 25,218 32 6,397 129 1,567 80 837 2,849 2,516
------- ---- ------- ------ ------ ------ ------ ------- -------
Operating income.................. 20,670 147 1,389 100 340 97 1,002 3,467 3,206
Other (income)/expense
Interest expense................. 9,391 18 506 4 738 31 381 2,600 2,089
Other
(income)/expense,
net............................ (538) -- (121) (13) -- -- -- (78) 205
------- ---- ------- ------ ------ ------ ------ ------- -------
Total other (income)/
expense.................... 8,853 18 385 (9) 738 31 381 2,522 2,294
------- ---- ------- ------ ------ ------ ------ ------- -------
Income before provision for income
taxes............................ 11,817 129 1,004 109 (398) 66 621 945 912
Provision for income taxes....... 4,963 54 421 46 (167) 28 261 397 383
------- ---- ------- ------ ------ ------ ------ ------- -------
Net income (loss)................. $ 6,854 $75 $ 583 $ 63 $ (231) $ 38 $ 360 $ 548 $ 529
======= ==== ======= ====== ====== ====== ====== ======= =======
Basic and diluted net income per
share............................ $ 0.23
=======
<CAPTION>
OTHER ACQUISITION PRO FORMA OFFERING
RELIABLE A-1 ACTION LOGAN ACQUISITIONS ADJUSTMENTS COMBINED ADJUSTMENTS
-------- ------- ------- ------- ------------ ----------- --------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Equipment rentals................ 6,423 $37,440 $ 5,626 $12,881 $39,095 $ (961)(1) $218,904 $ --
Sales of equipment, merchandise,
parts and supplies............. 1,200 7,306 5,464 18,048 13,978 -- 117,863
------ ------- ------- ------- ------- ------- -------- -------
Total revenue............... 7,623 44,746 11,090 30,929 53,073 (961) 336,767 --
Cost of revenue:
Cost of equipment rentals,
excluding depreciation......... 2,970 12,713 2,657 2,107 20,124 (1,980)(a) 79,237 --
Rental equipment (337)(l)
depreciation................... 993 13,762 598 3,253 8,686 (15,986)(b) 38,905 --
Sales of equipment, (68)(l)
merchandise, parts and supplies
sold........................... 421 1,958 4,690 13,488 9,195 (5)(1) 81,321 --
------ ------- ------- ------- ------- ------- -------- -------
Total cost of revenue....... 4,384 28,433 7,945 18,848 38,005 (18,376) 199,463 --
------ ------- ------- ------- ------- ------- -------- -------
Gross profit...................... 3,239 16,313 3,145 12,081 15,068 17,415 137,304 --
Operating expenses:
Selling, general and
administrative expenses........ 1,736 3,745 2,451 7,518 9,227 (3,406)(d) 57,121 --
Depreciation and (468)(l)
amortization of 516(e)
non-rental property and
equipment...................... 231 238 153 176 579 6,286 (f)(g 11,486 --
------ ------- ------- ------- ------- ------- -------- -------
Total operating expenses.... 1,967 3,983 2,604 7,694 9,806 2,928 68,607 --
------ ------- ------- ------- ------- ------- -------- -------
Operating income.................. 1,272 12,330 541 4,387 5,262 14,487 68,697 --
Other (income)/expense
Interest expense................. 288 789 2,394 1,912 2,716 14,312(h) 38,130 3,855(k)
Other (39)(l)
(income)/expense,
net............................ (17) (297) (5) -- 161 73(i) (630) --
------ ------- ------- ------- ------- ------- -------- -------
Total other (income)/
expense.................... 271 492 2,389 1,912 2,877 14,346 37,500 3,855
------ ------- ------- ------- ------- ------- -------- -------
Income before provision for income
taxes............................ 1,001 11,838 (1,848) 2,475 2,385 141 31,197 (3,855)
Provision for income taxes....... 420 4,735 -- 44 1,001 516(j) 13,102 (1,619)(j)
------ ------- ------- ------- ------- ------- -------- -------
Net income (loss)................. $ 581 $ 7,103 $(1,848) $ 2,431 $ 1,384 $ (375) $ 18,095 $(2,236)
====== ======= ======= ======= ======= ======= ======== =======
Basic and diluted net income per
share............................
<CAPTION>
PRO FORMA
AS ADJUSTED
-----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C>
Revenue:
Equipment rentals................ $218,904
Sales of equipment, merchandise,
parts and supplies............. 117,863
--------
Total revenue............... 336,767
Cost of revenue:
Cost of equipment rentals,
excluding depreciation......... 79,237
Rental equipment
depreciation................... 38,905
Sales of equipment,
merchandise, parts and supplies
sold........................... 81,321
--------
Total cost of revenue....... 199,463
--------
Gross profit...................... 137,304
Operating expenses:
Selling, general and
administrative expenses........ 57,121
Depreciation and
amortization of
non-rental property and
equipment...................... 11,486
--------
Total operating expenses.... 68,607
--------
Operating income.................. 68,697
Other (income)/expense
Interest expense................. 41,985
Other
(income)/expense,
net............................ (630)
--------
Total other (income)/
expense.................... 41,355
--------
Income before provision for income
taxes............................ 27,342
Provision for income taxes....... 11,483
--------
Net income (loss)................. $ 15,859
========
Basic and diluted net income per
share............................ $ 0.28
========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
PF-7
<PAGE> 113
NATIONSRENT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. HISTORICAL FINANCIAL STATEMENTS
The historical financial data presented in these pro forma consolidated
financial statements represents the financial position of the Company and the
acquired businesses at September 30, 1998 and their results of operations for
the year ended December 31, 1997 and nine months ended September 30, 1998
(except that the financial data for Jobs included in the pro forma consolidated
statements of operations for the year ended December 31, 1997 consists of the
combined six months ended June 30, 1997 and December 31, 1997, the financial
data for J. Kelly included in the pro forma consolidated statements of
operations for the year ended December 31, 1997 is for the year ended March 31,
1998 and includes $1,546 in revenue also included in the pro forma consolidated
statements of operations for the nine months ended September 30, 1998, the
financial data for High Reach included in the pro forma consolidated statements
of operations for the year ended December 31, 1997 is for the year ended
September 30, 1997, the financial data for Acme Rental, Inc. included in the pro
forma consolidated statements of operations for the year ended December 31, 1997
consists of the combined three months ended March 31, 1997 and nine months ended
December 31, 1997, and the financial data for Central Alabama included in the
pro forma consolidated statements of operations for the year ended December 31,
1997 consists of the combined nine months ended September 30, 1997 and the three
months ended December 31, 1997).
2. ACQUISITIONS
During the year ended December 31, 1997 the Company completed five
acquisitions. Following year-end but prior to September 30, 1998, the Company
completed twenty-two acquisitions and subsequent to September 30, 1998, the
Company completed five acquisitions. Each of these was accounted for in the
unaudited pro forma consolidated financial statements using the purchase method
of accounting. Preliminary purchase accounting values for the acquired
businesses prior to September 30, 1998 have been recorded based on estimated
fair values of the assets and liabilities acquired. Final adjustments will be
recorded when final information as to fair values of the net assets acquired is
available. The purchase accounting adjustments for the acquisitions subsequent
to September 30, 1998 were based on the respective companies' September 30, 1998
balance sheets using estimates as to the fair values of assets and liabilities
acquired. As a result, final allocation could be different.
The following table presents the allocation of purchase price for the
acquisitions subsequent to September 30, 1998:
<TABLE>
<S> <C>
Purchase price.............................................. $265,827
Net assets acquired......................................... 46,108
Acquisition adjustments
Rental Equipment.......................................... 4,750
Inventories............................................... (1,031)
Deferred income taxes..................................... (1,451)
--------
Intangible assets recorded.................................. $217,451
========
</TABLE>
PF-8
<PAGE> 114
NATIONSRENT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
3. PRO FORMA ADJUSTMENTS
<TABLE>
<S> <C>
BALANCE SHEET:
a. Represents the preliminary estimate of the adjustment to
fair market value.
b. To eliminate the assets not acquired in the Acquisitions.
c. Represents the excess purchase price over the estimated fair
value of the net assets acquired of $217,451, net of
historical goodwill and other intangibles of $1,831.
d. Represents borrowings for the Acquisitions of $123,630,
$31,100 and $74,168 funded by the Credit Facilities, through
the issuance of subordinated convertible notes and
subordinated notes to the sellers, respectively. Also
reflected are reductions for pre-acquisition debt not
assumed in the Acquisitions of $4,522 and the conversion to
equity of convertible notes issued in connection with the
A-1 acquisition (the "A-1 Convertible Notes") for $50,000.
e. Represents the estimated deferred income tax liability
related to the purchase accounting adjustments recorded for
the Acquisitions.
f. To eliminate the equity accounts reflected in the historical
financial statements of the Acquisitions.
g. Represents the elimination of the equity accounts of the
Acquisitions of $212, the issuance of Common Stock of $43
and $70 for acquisitions and the conversion of the A-1
Convertible Notes respectively.
h. Represents the elimination of the equity accounts of the
Acquisitions of $2,803 and additional paid-in capital
related to the issuance of Common Stock of $36,886 and
$49,931 for acquisitions and the conversion to equity of the
A-1 Convertible Notes.
i. Represents debt issuance costs related to the Private Debt
Offering.
j. Represents the Private Debt Offering of $175,000 and
reductions to the Credit Facilities and subordinated notes
using the estimated net proceeds of $168,750.
STATEMENTS OF OPERATIONS:
a. Adjustment to eliminate historical lease expense on rental
equipment resulting from the termination of certain leases
which occurred in connection with purchases of the
Acquisitions.
b. Adjustment to the historical rental equipment depreciation
recorded to conform to the Company's accounting policies.
Adjustment is based on the estimated fair value of rental
equipment acquired using estimated useful lives ranging from
2 to 10 years on the straight-line method with salvage
values ranging from zero to ten percent of cost.
c. Adjustment to conform the historical accounting for
inventory of the Acquisitions from the LIFO method to FIFO
method, where applicable.
d. Adjustment to reduce historical compensation and benefits of
certain former owners and executives of the Acquisitions to
amounts consistent with employment arrangements entered into
between the certain owners and executives and the Company,
as well as the elimination of certain private company
business expenses that will not be incurred by the Company.
e. Adjustment to historical facility lease expense to reflect
the increase in current lease payments in excess of
historical amounts.
f. Adjustment to historical property and equipment depreciation
recorded to conform to the Company's accounting policies.
Adjustment is based on the estimated fair value of property
and equipment acquired using estimated useful lives ranging
from 3 to 39 years on the straight-line method.
</TABLE>
PF-9
<PAGE> 115
NATIONSRENT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
g. Adjustment to recognize the amortization of goodwill and
non-compete agreements using an estimated useful life of 40
and five years, respectively. Management believes that 40
years is a reasonable life for goodwill in light of the
characteristics of the equipment rental industry such as the
lack of dependence on technological change, the many years
that the industry has been in existence, the current trend
towards the outsourcing of equipment, the recent double
digit annual growth rate and the stable nature of the
customer base. In addition, the Company has focused on
acquiring well established companies that have been in
existence for many years.
h. Adjustment to record interest on borrowings under the Credit
Facilities and notes issued to former owners of the
Acquisitions, net of interest related to debt not assumed or
paid off at acquisition. The interest rate on the Credit
Facilities is determined using a base rate plus a spread
based on certain financial performance ratios. Based on
current market rates, an incremental borrowing rate of 8.1%
was used to determine interest expense. A change of
one-eighth of a percent would result in a $312 reduction or
increase in the pro forma adjustment to annual interest
expense.
i. To eliminate historical gains related to assets not
acquired.
j. To record a provision (benefit) for income taxes at an
expected effective rate of 42%.
k. To record interest expense and amortization of debt issuance
costs related to the Private Debt Offering.
l. Adjustment to eliminate operations of a division of one of
the acquired business not purchased.
</TABLE>
4. PRO FORMA EARNINGS PER SHARE
Pro forma diluted earnings per share is calculated based on the shares
outstanding at December 31, 1997 and September 30, 1998, as well as giving
effect to the Private Placement, the Initial Public Offering, the Acquisitions,
and the conversion to equity of the A-1 Convertible Notes as if these shares
were outstanding at the beginning of the respective periods. The shares used to
calculate pro forma earnings per share ("EPS") are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
Shares outstanding................................... 25,000 44,360
Shares issued in Private Placement................... 5,119 --
Shares issued in Initial Public Offering............. 13,000 --
A-1 Convertible Notes................................ 6,957 6,957
Acquisitions......................................... 5,553 4,312
------ ------
Shares used in basic EPS computation 55,629 55,629
Common Stock equivalents --(a) 177
Convertible Notes --(a) 9,099
------ ------
Shares used in diluted EPS computation............... 55,629 64,905
====== ======
Add back to net income for interest expense, net of
income taxes, for assumed conversion of convertible
notes.............................................. $ --(a) $2,375
====== ======
</TABLE>
- ---------------
(a) Excluded from computation as antidilutive.
PF-10
<PAGE> 116
NATIONSRENT, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE REGISTRANT
NATIONSRENT, INC.
Report of Independent Certified Public Accountants........ F-5
Consolidated Balance Sheet as of December 31, 1997........ F-6
Consolidated Statement of Income for the period from
inception (August 14, 1997) to December 31, 1997....... F-7
Consolidated Statement of Stockholders' Equity for the
period from inception (August 14, 1997) to December 31,
1997................................................... F-8
Consolidated Statement of Cash Flows for the period from
inception (August 14, 1997) to December 31, 1997....... F-9
Notes to Consolidated Financial Statements................ F-10
NATIONSRENT, INC. -- UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
Unaudited Consolidated Balance Sheet as of September 30,
1998................................................... F-19
Unaudited Consolidated Statements of Income for the period
from inception (August 14, 1997) to September 30, 1997
and for the nine months ended September 30, 1998....... F-20
Unaudited Consolidated Statements of Cash Flows for the
period from inception (August 14, 1997) to September
30, 1997 and for the nine months ended September 30,
1998................................................... F-21
Notes to Unaudited Consolidated Financial Statements...... F-22
THE PREDECESSOR COMPANY
GABRIEL TRAILER MANUFACTURING COMPANY, INC. ("SAM'S")
Report of Independent Certified Public Accountants........ F-26
Consolidated Balance Sheets as of March 31, 1997 and
August 31, 1997........................................ F-27
Consolidated Statements of Income for the years ended
March 31, 1996 and 1997 and the period from April 1,
1997 to August 31, 1997................................ F-28
Consolidated Statements of Stockholders' Equity for the
years ended March 31, 1996 and 1997 and the period from
April 1, 1997 to August 31, 1997....................... F-29
Consolidated Statements of Cash Flows for the years ended
March 31, 1996 and 1997 and the period from April 1,
1997 to August 31, 1997................................ F-30
Notes to Consolidated Financial Statements................ F-31
COMPLETED ACQUISITIONS
R. AND R. RENTAL, INC.
Report of Independent Certified Public Accountants........ F-36
Balance Sheet as of December 10, 1997..................... F-37
Statement of Operations for the period from January 1,
1997 to December 10, 1997.............................. F-38
Statement of Stockholder's Equity for the period from
January 1, 1997 to December 10, 1997................... F-39
Statement of Cash Flows for the period from January 1,
1997 to December 10, 1997.............................. F-40
Notes to Financial Statements............................. F-41
C&E RENTAL AND SERVICE, INC.
Report of Independent Certified Public Accountants........ F-44
Balance Sheets as of December 31, 1996 and December 22,
1997................................................... F-45
</TABLE>
F-1
<PAGE> 117
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Statements of Income for the year ended December 31, 1996
and the period from January 1, 1997 to December 22,
1997................................................... F-46
Statements of Stockholder's Equity for the year ended
December 31, 1996 and the period from January 1, 1997
to December 22, 1997................................... F-47
Statements of Cash Flows for the year ended December 31,
1996 and the period from January 1, 1997 to December
22, 1997............................................... F-48
Notes to Financial Statements............................. F-49
TITAN RENTALS, INC.
Report of Independent Certified Public Accountants........ F-53
Balance Sheet as of December 30, 1997..................... F-54
Statement of Income for the period from January 1, 1997 to
December 30, 1997...................................... F-55
Statement of Stockholders' Equity for the period from
January 1, 1997 to December 30, 1997................... F-56
Statement of Cash Flows for the period from January 1,
1997 to December 30, 1997.............................. F-57
Notes to Financial Statements............................. F-58
THE BODE-FINN COMPANY
Report of Independent Certified Public Accountants........ F-62
Balance Sheets as of December 31, 1996 and 1997 and March
31, 1998 (unaudited)................................... F-63
Statements of Income for the years ended December 31,
1995, 1996 and 1997 and for the three month periods
ended March 31, 1997 and 1998 (unaudited).............. F-64
Statements of Stockholders' Equity for the years ended
December 31, 1995, 1996 and 1997 and for the three
month period ended March 31, 1998 (unaudited).......... F-65
Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997 and for the three month periods
ended March 31, 1997 and 1998 (unaudited).............. F-66
Notes to Financial Statements............................. F-67
RFL ENTERPRISES, INC.
Report of Independent Certified Public Accountants........ F-74
Balance Sheets as of December 31, 1997 and March 31, 1998
(unaudited)............................................ F-75
Statements of Income for the year ended December 31, 1997
and for the three month periods ended March 31, 1997
and 1998 (unaudited)................................... F-76
Statements of Stockholder's Equity for the year ended
December 31, 1997 and for the three month period ended
March 31, 1998 (unaudited)............................. F-77
Statements of Cash Flows for the year ended December 31,
1997 and for the three month periods ended March 31,
1997 and 1998 (unaudited).............................. F-78
Notes to Financial Statements............................. F-79
NAPLES RENT-ALL & SALES COMPANY, INC.
Report of Independent Certified Public Accountants........ F-83
Balance Sheets as of December 31, 1997 and March 31, 1998
(unaudited)............................................ F-84
Statements of Income for the year ended December 31, 1997
and for the three month periods ended March 31, 1997
and 1998 (unaudited)................................... F-85
Statements of Stockholder's Equity for the year ended
December 31, 1997 and for the three month period ended
March 31, 1998 (unaudited)............................. F-86
Statements of Cash Flows for the year ended December 31,
1997 and for the three month periods ended March 31,
1997 and 1998 (unaudited).............................. F-87
Notes to Financial Statements............................. F-88
</TABLE>
F-2
<PAGE> 118
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
RAYMOND EQUIPMENT COMPANY, INC. ("JOBS")
Report of Independent Certified Public Accountants........ F-93
Balance Sheets as of June 30, 1996 and 1997 and March 31,
1998 (unaudited)....................................... F-94
Statements of Income for the years ended June 30, 1996 and
1997 and for the nine month periods ended March 31,
1997 and 1998 (unaudited).............................. F-95
Statements of Stockholders' Equity for the years ended
June 30, 1996 and 1997 and for the nine month period
ended March 31, 1998 (unaudited)....................... F-96
Statements of Cash Flows for the years ended June 30, 1996
and 1997 and for the nine month periods ended March 31,
1997 and 1998 (unaudited).............................. F-97
Notes to Financial Statements............................. F-98
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS OF
GENERAL RENTAL, INC.
Report of Independent Certified Public Accountants........ F-102
Division Balance Sheets as of December 31, 1997 and June
30, 1998 (unaudited)................................... F-103
Statements of Division Operations for the year ended
December 31, 1997 and for the six month periods ended
June 30, 1997 and 1998 (unaudited)..................... F-104
Statements of Division Equity for the year ended December
31, 1997 and for the six month period ended June 30,
1998 (unaudited)....................................... F-105
Statements of Division Cash Flows for the year ended
December 31, 1997 and for the six month periods ended
June 30, 1997 and 1998 (unaudited)..................... F-106
Notes to Division Financial Statements.................... F-107
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
Report of Independent Certified Public Accountants........ F-113
Balance Sheets as of December 31, 1996 and 1997 and June
30, 1998 (unaudited)................................... F-114
Statements of Income for the years ended December 31,
1995, 1996 and 1997 and for the six month periods ended
June 30, 1997 and 1998 (unaudited)..................... F-115
Statements of Stockholder's Equity for the years ended
December 31, 1995, 1996 and 1997 and for the six month
period ended June 30, 1998 (unaudited)................. F-116
Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997 and for the six month periods ended
June 30, 1997 and 1998 (unaudited)..................... F-117
Notes to Financial Statements............................. F-118
REVCO EQUIPMENT RENTALS, INC.
Report of Independent Certified Public Accountants........ F-126
Balance Sheets as of December 31, 1997 and March 31, 1998
(unaudited)............................................ F-127
Statements of Income for the year ended December 31, 1997
and for the three month periods ended March 31, 1997
and 1998 (unaudited)................................... F-128
Statements of Stockholders' Equity for the year ended
December 31, 1997 and for the three month period ended
March 31, 1998 (unaudited)............................. F-129
Statements of Cash Flows for the year ended December 31,
1997 and for the three month periods ended March 31,
1997 and 1998 (unaudited).............................. F-130
Notes to Financial Statements............................. F-131
HIGH REACH COMPANY, INC. AND HIGH REACH LEASING COMPANY
Report of Independent Certified Public Accountants........ F-134
Combined Balance Sheets as of September 30, 1997 and June
30, 1998 (unaudited)................................... F-135
Combined Statements of Income for the year ended September
30, 1997 and for the nine months ended June 30, 1997
and 1998 (unaudited)................................... F-136
Combined Statements of Stockholder's Equity and Owner's
Capital for the year ended September 30, 1997 and for
the nine months ended June 30, 1998 (unaudited)........ F-137
</TABLE>
F-3
<PAGE> 119
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Combined Statements of Cash Flows for the year ended
September 30, 1997 and for the nine month period ended
June 30, 1997 and 1998 (unaudited)..................... F-138
Notes to Combined Financial Statements.................... F-139
RELIABLE RENTAL & SUPPLY CO, INC.
Report of Independent Certified Public Accountants........ F-147
Balance Sheets as of December 31, 1997 and June 30, 1998
(unaudited)............................................ F-148
Statements of Income for the year ended December 31, 1997
and for the six month period ended June 30, 1997 and
1998 (unaudited)....................................... F-149
Statements of Stockholders' Equity for the year ended
December 31, 1997 and for the six months ended June 30,
1998 (unaudited)....................................... F-150
Statements of Cash Flows for the year ended December 31,
1997 and for the six month period ended June 30, 1997
and 1998 (unaudited)................................... F-151
Notes to Financial Statements............................. F-152
RAY L. O'NEAL, INC. AND ARENCO, LLC
Report of Independent Certified Public Accountants........ F-157
Combined Balance Sheets as of December 31, 1996 and 1997
and September 30, 1998 (unaudited)..................... F-158
Combined Statements of Income for the years ended December
31, 1995, 1996 and 1997 and for the nine month periods
ended September 30, 1997 and 1998 (unaudited).......... F-159
Combined Statements of Stockholders' Equity for the years
ended December 31, 1995, 1996 and 1997 and for the nine
month period ended September 30, 1998 (unaudited)...... F-160
Combined Statements of Cash Flows for the years ended
December 31, 1995, 1996, and 1997 and for the nine
month periods ended September 30, 1997 and 1998
(unaudited)............................................ F-161
Notes to Combined Financial Statements.................... F-163
ACTION EQUIPMENT COMPANY, INC. AND ACTION SUPPLY CO., INC.
Report of Independent Public Accountants.................. F-168
Combined Balance Sheets as of December 31, 1997 and
September 30, 1998 (unaudited)......................... F-169
Combined Statements of Operations for the year ended
December 31, 1997 and for the nine months ended
September 30, 1997 and 1998 (unaudited)................ F-170
Combined Statements of Stockholders' Deficit for the year
ended December 31, 1997 and for the nine months ended
September 30, 1998 (unaudited)......................... F-171
Combined Statements of Cash Flows for the year ended
December 31, 1997 and for the nine months ended
September 30, 1997 and 1998 (unaudited)................ F-172
Notes to Combined Financial Statements.................... F-173
LOGAN EQUIPMENT CORPORATION
Report of Independent Auditors............................ F-180
Balance Sheets as of December 31, 1997 and September 30,
1998 (unaudited)....................................... F-181
Statements of Income for the year ended December 31, 1997
and for the nine months ended September 30, 1997 and
1998 (unaudited)....................................... F-182
Statements of Changes in Stockholders' Equity for the year
ended December 31, 1997 and for the nine months ended
September 30, 1998 (unaudited)......................... F-183
Statements of Cash Flows for the year ended December 31,
1997 and for the nine month period ended September 30,
1997 and 1998 (unaudited).............................. F-184
Notes to Consolidated Financial Statements................ F-185
</TABLE>
F-4
<PAGE> 120
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To NationsRent, Inc.:
We have audited the accompanying consolidated balance sheet of NationsRent,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for the period from August 14, 1997 (inception) to December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of NationsRent,
Inc. and subsidiaries as of December 31, 1997, and the results of their
operations and their cash flows for the period from August 14, 1997 (inception)
to December 31, 1997 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
June 3, 1998 (except with respect to
the matters referred to in the
third and fifth paragraphs of Note 10,
as to which the date is July 15, 1998).
F-5
<PAGE> 121
NATIONSRENT, INC.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 1,493
Accounts receivable, net of allowance for doubtful accounts
of $587................................................... 5,008
Inventories................................................. 1,840
Prepaid expenses and other assets........................... 755
Rental equipment, net....................................... 30,619
Property and equipment, net................................. 2,334
Intangible assets related to acquired businesses, net....... 37,108
-------
Total Assets...................................... $79,157
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable.......................................... $ 2,303
Accrued repair and maintenance expenses................... 950
Accrued compensation and related taxes.................... 328
Accrued expenses and other liabilities.................... 2,579
Debt...................................................... 42,928
Income taxes payable...................................... 1,523
Deferred income taxes..................................... 2,545
-------
Total liabilities................................. 53,156
-------
Commitments and Contingencies (Notes 9 and 10)
Stockholders' Equity:
Preferred stock -- $0.01 par value, 5,000,000 shares
authorized, no shares issued and outstanding........... --
Common stock -- $0.01 par value, 100,000,000 shares
authorized, 25,000,000 shares issued and outstanding... 250
Additional paid-in capital................................ 24,750
Retained earnings......................................... 1,001
-------
Total stockholders' equity........................ 26,001
-------
Total Liabilities and Stockholders' Equity........ $79,157
=======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
F-6
<PAGE> 122
NATIONSRENT, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD FROM INCEPTION (AUGUST 14, 1997) THROUGH DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<S> <C>
Revenue:
Equipment rentals......................................... $ 7,410
Sales of equipment, parts and supplies.................... 1,895
-------
Total revenue..................................... 9,305
-------
Cost of revenue:
Cost of equipment rentals, excluding depreciation......... 2,196
Rental equipment depreciation............................. 1,526
Cost of sales of equipment, parts and supplies............ 1,691
-------
Total cost of revenue............................. 5,413
-------
Gross profit................................................ 3,892
Operating expenses:
Selling, general and administrative expenses.............. 1,081
Non-rental equipment depreciation and amortization........ 284
-------
Operating income............................................ 2,527
-------
Other (income)/expense:
Interest expense.......................................... 760
Interest income........................................... (29)
Other, net................................................ 29
-------
760
-------
Income before provision for income taxes.................... 1,767
Provision for income taxes................................ 766
-------
Net income.................................................. $ 1,001
=======
Net income per share -- basic and diluted................... $ 0.04
=======
Weighted average common shares outstanding:
Basic..................................................... 25,000
=======
Diluted................................................... 25,007
=======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
F-7
<PAGE> 123
NATIONSRENT, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM AUGUST 14, 1997 (INCEPTION) TO DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL
NUMBER OF PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------- ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C>
BALANCE, August 14, 1997 (Inception)............ -- $ -- $ -- $ -- $ --
Issuance of common stock (after giving effect
to the stock split discussed in Note 1).... 25,000,000 250 24,750 -- 25,000
Net income.................................... -- -- -- 1,001 1,001
---------- ---- ------- ------ -------
BALANCE, December 31, 1997...................... 25,000,000 $250 $24,750 $1,001 $26,001
========== ==== ======= ====== =======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
F-8
<PAGE> 124
NATIONSRENT, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM AUGUST 14, 1997 (INCEPTION) TO DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 1,001
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.......................... 1,810
Gain on sale of rental equipment....................... (59)
Deferred income tax provision.......................... 357
Changes in operating assets and liabilities:
Accounts receivable............................... 334
Inventories....................................... 83
Prepaid expenses and other assets................. (296)
Accounts payable.................................. 776
Accrued expenses and other liabilities............ (428)
Income taxes payable.............................. 117
--------
Net cash provided by operating activities......... 3,695
--------
CASH FLOWS FROM INVESTING ACTIVITIES, NET OF ACQUISITIONS:
Acquisitions of businesses, net of cash acquired....... (34,137)
Purchases of rental equipment.......................... (2,461)
Purchases of property and equipment.................... (963)
Proceeds from sale of rental equipment................. 1,159
Decrease in notes receivable affiliates................ 1,358
--------
Net cash used in investing activities............. (35,044)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock................. 25,000
Proceeds from debt..................................... 21,917
Repayments of debt..................................... (14,075)
--------
Net cash provided by financing activities......... 32,842
--------
Net increase in cash and cash equivalents................... 1,493
Cash and cash equivalents, beginning of period.............. --
--------
Cash and cash equivalents, end of period.................... $ 1,493
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest................................. $ 621
========
Cash paid for income taxes............................. $ 390
========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
The Company acquired the net assets and assumed
certain liabilities of certain businesses as
follows:
Total assets, net of cash acquired................ $ 78,629
Total liabilities assumed......................... (27,311)
Amounts paid through the issuance of debt......... (17,181)
--------
Net cash paid..................................... $ 34,137
========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
F-9
<PAGE> 125
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ACCOUNTING POLICIES
Basis of presentation
NationsRent, Inc. (the "Company") was incorporated in the state of Delaware
on August 14, 1997 for the purpose of creating a nationally branded network of
equipment rental locations offering a broad selection of equipment primarily to
the construction and industrial segments of the equipment rental industry in the
United States. The Company also sells used and new equipment, spare parts,
merchandise and supplies, and provides maintenance and repair services.
The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying consolidated balance sheets
are presented on an unclassified basis.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. The Company had no
cash equivalents at December 31, 1997.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Inventories
Inventories, which consist of equipment, tools, parts and related
merchandise supply items, are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method. Provision is made to
reduce excess or obsolete inventories to their estimated net realizable value.
Rental equipment
Rental equipment purchased new by the Company is recorded at cost and
depreciated over the estimated useful life of the equipment using the
straight-line method. Rental equipment that is obtained through the acquisition
of a business is valued at its estimated fair market value at the time of
acquisition. The range of useful lives estimated by management for rental
equipment is two to ten years. Rental equipment is depreciated to a salvage
value of zero to ten percent of cost. Rental equipment having a cost of $500 or
less is charged to expense at the time of purchase. Accumulated depreciation on
rental equipment was $1,526,000 at December 31, 1997. Ordinary maintenance and
repair costs are charged to operations as incurred.
F-10
<PAGE> 126
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and equipment
Property and equipment purchased new by the Company is recorded at cost.
Property and equipment obtained through the acquisition of a business is
recorded at the estimated fair market value at the time of acquisition.
Depreciation and amortization are recorded on a straight-line basis over the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements........................ 10-39 years, not to exceed lease term
Furniture, fixtures and office equipment.......... 3-7 years
Vehicles, delivery and shop equipment............. 5-10 years
</TABLE>
Ordinary maintenance and repair costs are charged to expense as incurred.
Intangible assets
Intangible assets are recorded at cost and are amortized using the
straight-line method over their estimated useful lives of five years for
covenants not to compete and 40 years for goodwill. The accumulated amortization
of intangible assets, including goodwill, relating to acquired businesses, was
approximately $180,000 at December 31, 1997.
Long-lived assets
The carrying value of long-lived assets, including goodwill, is reviewed if
the facts and circumstances suggest that it may be impaired. If this review
indicates that long-lived assets will not be recoverable, as determined based on
the undiscounted cash flows of the entity acquired over the remaining
amortization period, the Company's carrying value of the long-lived assets will
be reduced by the amount by which carrying value exceeds fair value.
Fair value of financial instruments
The carrying amounts reported in the accompanying consolidated balance
sheets for accounts receivable, accounts payable and accrued expenses and other
liabilities approximate fair value due to the short-term nature of these
accounts. The fair value of debt is determined using current interest rates for
similar instruments at December 31, 1997 and approximates the carrying value of
these notes due to the fact that the underlying instruments include provisions
to adjust note balances and interest rates to approximate fair market value.
Revenue recognition
Rental revenue is recognized as earned during the rental agreement period.
Equipment rentals in the consolidated statements of operations includes revenue
earned on equipment rentals, rental equipment delivery and pick-up fees and fuel
sales. Revenue from the sale of used equipment, parts and supplies and retail
merchandise is recognized at the time of delivery to, or pick-up by, the
customer. When rental equipment is sold, the related cost and accumulated
depreciation are removed from the respective accounts. Proceeds from the sale
and the related book value of the equipment sold are reported as revenue from
rental equipment sales and cost of rental equipment sales, respectively, in the
statements of operations.
Advertising
Advertising costs are charged to expense as incurred. For the period from
August 14, 1997 (inception) to December 31, 1997, the Company incurred $171,000
of advertising costs.
F-11
<PAGE> 127
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes
The Company accounts for income taxes under the liability method pursuant
to Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes. Under the liability method, deferred tax assets and liabilities
are determined based on differences between the financial reporting and tax
bases of assets and liabilities using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. The Company and its
wholly owned subsidiaries file a consolidated federal income tax return.
Computation of earnings per share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, Earnings Per Share. SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Under SFAS No. 128, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Earnings per share
amounts for all periods have been presented to conform with SFAS No. 128 and
Staff Accounting Bulletin No. 98 (issued by the Securities and Exchange
Commission in February 1998), which amends the determination of and accounting
for "cheap stock" in periods prior to an initial public offering. The effect of
dilutive securities is computed using the treasury stock method.
Stock split
During June 1998, the Company effected a 2,500-for-one split of its common
stock. The accompanying consolidated financial statements reflect the stock
split on a retroactive basis from the beginning of the periods presented.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10%
of total accounts receivable. The Company controls credit risk through credit
approvals, credit limits, and monitoring procedures.
Stock based compensation
The Company accounts for stock compensation arrangements in accordance with
APB Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB No. 25")
and accordingly, recognizes no compensation expense for the stock compensation
arrangements since the stock options are granted at exercise prices at or
greater than the fair value of the shares at the date of grant.
Seasonality
The Company's initial acquisitions have been in the Midwest region of the
United States. The Company's revenue and income are dependent upon the activity
in the construction industry in the markets served by the Company. Construction
activity is dependent upon weather and the traditional seasons for construction
work. Because of this variability in demand, the Company's quarterly revenue may
fluctuate, and revenue for the first quarter of each year can be expected to be
lower than the remaining quarters. Although the Company believes that the
historical trend in quarterly revenue for the second, third and fourth quarters
of each year is generally higher than the first quarter, there can be no
assurance that this will occur in future periods.
F-12
<PAGE> 128
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accordingly, quarterly or other interim results should not be considered
indicative of results to be expected for any quarter or for the full year.
Impact of recently issued accounting standards
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." The Company is required to adopt the provisions of these
Statements in fiscal year 1998. SFAS No. 130 establishes standards for reporting
and display of comprehensive income and its components in a primary financial
statement. The Company is currently evaluating the reporting formats recommended
under this Statement. SFAS No. 131 establishes a new method by which companies
will report operating segment information. This method requires disclosure of
information which is based on the manner in which management organizes the
segments within a company for making operating decisions and assessing
performance. The Company continues to evaluate the provisions of SFAS No. 131
and, upon adoption, the Company may report operating segments. In April 1998,
the American Institute of Certified Public Accountants issued Statement of
Position No. 98-5 ("SOP 98-5"). SOP 98-5 requires that all non-governmental
entities expense costs of start-up activities, including pre-operating,
pre-opening and organization activities, as those costs are incurred. In the
opinion of management, the adoption of this statement will have no impact on its
statement of operations.
2. ACQUISITIONS
The Company is building a nationally branded network of equipment rental
locations. Pursuant to this strategy, the Company has made five acquisitions
during 1997. Consideration for these acquisitions has consisted of cash and debt
payable to former owners. The acquisitions have been accounted for using the
purchase method and, accordingly, the acquired assets and assumed liabilities,
including goodwill, have been recorded at their estimated fair values as of the
date of acquisition. Purchase accounting values for all acquisitions have been
assigned on a preliminary basis, and are subject to adjustment when final
information as to the fair values of the nets assets acquired is available. The
operations of the acquired businesses have been included in the Company's
consolidated statement of income since the date of each respective acquisition.
The following table sets forth businesses acquired during 1997 and the
consideration paid:
<TABLE>
<CAPTION>
TOTAL
NAME OF BUSINESS DATE OF ACQUISITION CONSIDERATION
- ---------------- ------------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Sam's Equipment Rental, Inc......................... August 31, 1997 $23,431
Ashland Rental and Sales, Inc. ..................... November 18, 1997 2,221
R. and R. Rental, Inc. ............................. December 10, 1997 8,000
C & E Rental and Service, Inc. ..................... December 23, 1997 12,250
Titan Rentals, Inc. ................................ December 31, 1997 5,900
-------
Total..................................... $51,802
=======
</TABLE>
The following table sets forth the estimated fair value of the assets
acquired and liabilities assumed for the above acquisitions (in thousands):
<TABLE>
<S> <C>
Assets, including cash...................................... $41,828
Goodwill.................................................... 36,686
Other intangibles........................................... 599
Liabilities................................................. 27,311
</TABLE>
F-13
<PAGE> 129
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the unaudited pro forma consolidated results
of operations for the year ended December 31, 1997 giving effect to the above
acquisitions as if such acquisitions had occurred on January 1, 1997 (in
thousands, except per share data):
<TABLE>
<S> <C>
Revenue..................................................... $42,085
Net income.................................................. 2,816
Basic and diluted earnings per share........................ $ 0.11
</TABLE>
The above unaudited pro forma consolidated results are based upon certain
assumptions and estimates which the Company believes are reasonable. The
unaudited pro forma consolidated results of operations may not be indicative of
the operating results that actually would have been reported had the Company
been in existence and had the acquisitions been consummated on January 1, 1997,
nor are they necessarily indicative of results which will be reported in the
future.
3. PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
--------------
(IN THOUSANDS)
<S> <C>
Buildings and improvements.................................. $ 96
Furniture, fixtures and office equipment.................... 514
Vehicles, delivery and shop equipment....................... 906
Construction in process..................................... 923
------
2,439
Less -- accumulated depreciation and amortization........... (105)
------
Property and equipment, net............................... $2,334
======
</TABLE>
4. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
--------------
(IN THOUSANDS)
<S> <C>
Subordinated promissory notes, bearing interest at 8.5%,
interest payable quarterly and maturities through December
2000...................................................... $ 6,091
Subordinated convertible notes, bearing interest at 6.5%,
interest payable quarterly and maturities through December
2002...................................................... 11,090
Mortgage payable, bearing interest at 9.5%, payable in
monthly installments through July 2007.................... 112
Note payable, with interest at 8.25%, payable in monthly
installments through August 1998.......................... 33
Equipment notes, bearing interest at 6.0% to 9.25%, payable
in various monthly installments through June 2000, secured
by equipment.............................................. 5,144
Notes payable to financial institutions..................... 20,458
-------
Total debt........................................ $42,928
=======
</TABLE>
The subordinated promissory notes and the subordinated convertible notes
were issued in connection with the acquisitions of certain businesses. The
convertible notes have features that allow the holder to convert the principal,
or portion thereof, of the note into common stock in the event the Company
completes an initial
F-14
<PAGE> 130
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
public offering ("IPO") of its common stock. Such principal would be converted
into common stock at the IPO price. Certain convertible notes have provisions
that prospectively increase the interest rates to 8.5% if the Company does not
complete an IPO of its common stock before March 1999.
Notes payable to financial institutions at December 31, 1997 consist of
amounts due under: (i) a $12,500,000 interest bearing term loan, with interest
equal to the prime rate less 0.25%, payable in equal monthly installments of
$20,833 and a final payment of $12,000,000 on September 22, 1999, (ii) a
$6,000,000 interest bearing term loan, with interest equal to the prime rate
less 0.25%, payable in equal monthly installments of $83,333 and a final payment
of $5,500,000 on June 18, 1998 and (iii) a $2,000,000 revolving credit
agreement, bearing interest equal to the prime rate less 0.25%, with the
principal due on September 22, 1999. Each of the above notes imposes, among
other covenants, an earnings to fixed charges covenant, a minimum net worth
covenant and a liabilities to worth covenant, as defined. The notes also provide
the financial institution with a security interest in all of the assets of the
Company.
In March 1998, the Company entered into a $165,000,000 credit facility, as
amended, with a syndicate of lenders to provide for cash borrowings and letters
of credit. The credit facility has a three year term scheduled to expire on May
15, 2001. The credit facility can be used to complete permitted acquisitions,
make capital expenditures, enter into standby letters of credit, or for working
capital and other general corporate purposes. Cash borrowings bear interest at
either the BankBoston base rate plus a percentage ranging from 0.00% to 0.50%
or, at the Company's option, the Eurodollar market rate plus a percentage
ranging from 1.50% to 2.75%. The percentage over the BankBoston base rate or the
Eurodollar market rate is based on the Company's financial performance as
measured by a total funded debt ratio (as defined in the credit facility). The
credit facility provides the banks with a security interest in substantially all
of the assets of the Company. The credit facility also imposes, among other
covenants, a tangible assets to senior debt covenant, a restriction on all of
the Company's retained earnings including the declaration and payment of cash
dividends, consent requirements on certain acquisitions and a restriction on the
ratio of total funded debt to earnings before interest, income taxes,
deprecation and amortization. The proceeds from the credit facility were used to
repay substantially all of the notes payable to financial institutions that were
outstanding at December 31, 1997.
The aggregate maturity of debt at December 31, 1997 for the five years
ending December 31 is: 1998, $13,892,000; 1999, $17,039,000; 2000, $9,521,000;
2001, $184,000; 2002, $2,197,000; 2003 and thereafter, $95,000.
5. STOCKHOLDERS' EQUITY
Preferred stock
The Company has authorized 5,000,000 shares of $0.01 par value preferred
stock. No shares of preferred stock have been issued at December 31, 1997. The
rights and preferences of the preferred stock will be fixed by the Board of
Directors at the time such shares are issued. The preferred stock, when issued,
will have dividend and liquidation preferences over those of the common
stockholders.
Stock options
During 1997, the Company granted to certain employees options to purchase
an aggregate of 282,527 shares of common stock, at exercise prices ranging from
$2.96 to $4.40 per share. At December 31, 1997 all options granted during the
year were outstanding and had a weighted average remaining contractual life of
9.93 years. The weighted average exercise price per share for these stock
options was $3.54. The exercise price per share was based on the estimated fair
value of the Company's common stock at the time of the grant. As such, no
compensation cost will be recognized for these stock options. The above options
become exercisable in equal 25% increments commencing on the first anniversary
of date of the grant, and expire 10 years from the date of grant. Accordingly,
no options were exercisable at December 31, 1997.
F-15
<PAGE> 131
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, which also requires that the information be determined
as if the Company had accounted for its employee stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model. The following assumptions were used in the
valuation: average expected life 7 years, expected volatility 0.75, risk free
interest rate 6% and no dividends. The weighted average fair value of options
granted during the year was $2.86.
For purposes of pro forma disclosures of net income and earnings per share,
the estimated fair value of the options is amortized to expense over the
options' vesting period, resulting in pro forma compensation expense of
approximately $23,000 for the period from August 14, 1997 (inception) to
December 31, 1997. The Company's pro forma net income for the period from August
14, 1997 (inception) to December 31, 1997 was $978,000 with pro forma diluted
and basic net income per share of $0.04.
6. INCOME TAXES
The components of the provision for federal and state income taxes for the
period from August 14, 1997 (inception) to December 31, 1997 are as follows (in
thousands):
<TABLE>
<S> <C>
Current..................................................... $409
Deferred.................................................... 357
----
$766
====
Federal..................................................... $602
State....................................................... 164
----
$766
====
</TABLE>
A reconciliation of the difference between the expected provision for
income taxes using the statutory federal income tax rate of 34% and the
Company's actual provision for the period from August 14, 1997 (inception) to
December 31, 1997 is as follows:
<TABLE>
<S> <C>
Federal statutory income tax rate........................... 34.0%
Add:
Non-deductible goodwill amortization...................... 3.0
State income taxes, net of federal tax benefit............ 6.1
Other, net................................................ 0.3
----
43.4%
====
</TABLE>
The components of deferred income tax liabilities (assets) at December 31,
1997 are as follows (in thousands):
<TABLE>
<S> <C>
Depreciation and amortization differences................... $2,766
Accrued liabilities not deductible until paid............... (761)
Bad debt provision not currently deductible................. (233)
Change from cash to accrual basis for income tax reporting
purposes.................................................. 773
------
Net deferred income tax liabilities....................... $2,545
======
</TABLE>
F-16
<PAGE> 132
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14, 1997
(INCEPTION) TO
DECEMBER 31,
1997
---------------
<S> <C>
Numerator:
Net income................................................ $ 1,001
=======
Denominator:
Denominator for basic earnings per
share -- weighted-average shares....................... 25,000
Effect of dilutive securities:
Employee stock options................................. 7
-------
Denominator for diluted earnings per share -- adjusted
weighted-average shares................................ 25,007
=======
Basic earnings per share.................................... $ 0.04
=======
Diluted earnings per share.................................. $ 0.04
=======
</TABLE>
Options to purchase 113,752 shares of common stock at $4.40 per share were
outstanding at December 31, 1997 but were not included in the computation of
diluted earnings per share because the options' exercise price was greater than
the average fair value of the common shares and, therefore, the effect would be
antidilutive.
See Note 10 for a description of certain transactions occurring in 1998
that would have significantly changed the number of common shares outstanding at
December 31, 1997 if these transactions had occurred before December 31, 1997.
8. RELATED PARTY TRANSACTIONS
The Company rents certain buildings from a related party. Such rental
expense totaled $160,000 for the period from August 14, 1997 (inception) to
December 31, 1997. One of the principal owners of the related party is an
officer and director of the Company.
9. COMMITMENTS AND CONTINGENCIES
Operating leases
The Company leases rental equipment, real estate and certain office
equipment under operating leases. Certain real estate leases require the Company
to pay maintenance, insurance, taxes and certain other expenses in addition to
the stated rentals. Future minimum lease payments under noncancelable operating
leases, including the related party lease discussed above, at December 31, 1997
total $1,108,000, $867,000, $555,000, $518,000 and $398,000 for the years ending
December 31, 1998, 1999, 2000, 2001 and 2002, respectively. There are no
payments under noncancelable operating leases subsequent to the year ending
December 31, 2002. Rent expense under noncancelable operating leases for the
period from August 14, 1997 (inception) to December 31, 1997 was $410,000,
including the related party lease discussed above.
Legal matters
The Company is subject to claims and lawsuits in the ordinary course of its
business. In the opinion of management, the Company has either adequate legal
defense, indemnification for such matters from previous
F-17
<PAGE> 133
NATIONSRENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
owners or is adequately covered by insurance. If not insured, such matters will
not, in the aggregate, have a material adverse impact upon the Company's
consolidated financial position, results of future operations or cash flows.
Environmental matters
The Company and its operations are subject to various laws and related
regulations governing environmental matters. Under such laws, an owner or lessee
of real estate may be liable for the costs of removal or remediation of certain
hazardous or toxic substances located on or in, or emanating from, such
property, as well as investigation of property damage. As part of the Company's
acquisition due diligence, the Company performs extensive environmental
analysis. The remediation has typically been the responsibility of the prior
owner and is addressed prior to closing. The Company does not believe there are
currently any environmental liabilities which should be recorded or disclosed in
its financial statements. The Company believes the possibility is remote that
its compliance with various laws and regulations relating to the protection of
the environment will have a material effect on its capital expenditures, future
earnings or financial position.
10. SUBSEQUENT EVENTS
In June 1998, the founding stockholders of the Company made an additional
capital contribution of $17,400,000. Also, in June 1998, the Company sold an
aggregate of 5,118,694 shares of common stock in a private placement for
aggregate proceeds of $27,600,000. Investors in the private placement include
Company employees and associates of the founding stockholders of the Company.
In May 1998, the Company received an unsecured subordinated loan in the
amount of $17,400,000 (the "Huizenga Note") from Huizenga Investments Limited
Partnership, an entity controlled by a current director and stockholder of the
Company. The loan accrued interest at the prevailing prime rate which was
payable quarterly. The loan had a maturity date of January 19, 2001. The loan
was repaid, without any prepayment penalty, in its entirety on June 3, 1998
using the proceeds from the aforementioned additional capital contribution.
Through July 15, 1998, the Company has completed eleven acquisitions of
rental equipment businesses since December 31, 1997 for aggregate consideration
of $170,875,000. Such consideration consisted of $131,566,000 of cash,
$39,309,000 of subordinated convertible debt and warrants to purchase
approximately $800,000 of the Company's common stock at the IPO price. The cash
portion of the consideration was funded through borrowings under the credit
facility and the Huizenga Note. Each of the acquisitions has been accounted for
using the purchase method.
Subsequent to December 31, 1997, through April 20, 1998, the Company
granted to certain employees options to purchase an aggregate of 805,044 shares
of common stock, at exercise prices ranging from $4.40 to $6.69 per share. The
weighted average exercise price per share for these stock options was $5.95. The
exercise prices per share were based on the estimated fair value of the
Company's common stock at the time of the grants. As such, no compensation cost
will be recognized for these stock options.
In July 1998, the Company amended its credit facility to increase the limit
for cash borrowings and letters of credit from $165,000,000 to $265,000,000.
F-18
<PAGE> 134
NATIONSRENT, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 9,231 $ 1,493
Accounts receivable, net of allowance for doubtful accounts
of $2,742 and $587 at September 30, 1998 and December 31,
1997, respectively........................................ 48,115 5,008
Inventories................................................. 12,406 1,840
Prepaid expenses and other assets........................... 11,424 755
Rental equipment, net....................................... 316,824 30,619
Property and equipment, net................................. 19,416 2,334
Intangible assets related to acquired businesses, net....... 245,434 37,108
-------- -------
Total Assets...................................... $662,850 $79,157
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable.......................................... $ 44,117 $ 2,303
Accrued repair and maintenance expenses................... 4,681 950
Accrued compensation and related taxes.................... 3,520 328
Accrued expenses and other liabilities.................... 23,852 2,579
Debt...................................................... 389,841 42,928
Income taxes payable...................................... 638 1,523
Deferred income taxes..................................... 7,442 2,545
-------- -------
Total liabilities................................. 474,091 53,156
-------- -------
Commitments and Contingencies (Note 7)
Stockholders' Equity:
Preferred stock -- $0.01 par value, 5,000,000 shares
authorized, no shares issued and outstanding........... -- --
Common stock -- $0.01 par value, 250,000,000 shares
authorized, 44,360,334 shares and 25,000,000 shares
issued and outstanding at September 30, 1998 and
December 31, 1997, respectively........................ 444 250
Additional paid-in capital................................ 180,460 24,750
Retained earnings......................................... 7,855 1,001
-------- -------
Total stockholders' equity........................ 188,759 26,001
-------- -------
Total Liabilities and Stockholders' Equity........ $662,850 $79,157
======== =======
</TABLE>
The accompanying notes to unaudited consolidated financial statements are an
integral part of these consolidated financial statements.
F-19
<PAGE> 135
NATIONSRENT, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
FROM
AUGUST 14, 1997
NINE MONTHS (INCEPTION)
ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- ---------------
<S> <C> <C>
Revenue:
Equipment rentals......................................... $73,644 $ 2,643
Sales of equipment, parts and supplies.................... 39,084 198
------- -------
Total revenue..................................... 112,728 2,841
------- -------
Cost of revenue:
Cost of equipment rentals, excluding depreciation......... 25,195 577
Rental equipment depreciation............................. 13,555 326
Cost of sales of equipment, parts and supplies............ 28,090 78
------- -------
Total cost of revenue............................. 66,840 981
------- -------
Gross profit................................................ 45,888 1,860
Operating expenses:
Selling, general and administrative expenses.............. 22,287 286
Non-rental equipment depreciation and amortization........ 2,931 64
------- -------
Operating income............................................ 20,670 1,510
------- -------
Other (income)/expense:
Interest expense.......................................... 9,391 104
Interest income........................................... (143) (12)
Other, net................................................ (395) (2)
------- -------
8,853 90
------- -------
Income before provision for income taxes.................... 11,817 1,420
Provision for income taxes................................ 4,963 614
------- -------
Net income.................................................. $ 6,854 $ 806
======= =======
Net income per share:
Basic..................................................... $ 0.23 $ 0.03
======= =======
Diluted................................................... $ 0.23 $ 0.03
======= =======
Weighted average common shares outstanding:
Basic..................................................... 29,894 25,000
======= =======
Diluted................................................... 33,501 25,000
======= =======
</TABLE>
The accompanying notes to unaudited consolidated financial statements are an
integral part of these consolidated financial statements.
F-20
<PAGE> 136
NATIONSRENT, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
FROM
NINE MONTHS AUGUST 14, 1997
ENDED (INCEPTION)
SEPTEMBER 30, THROUGH
1998 SEPTEMBER 30, 1997
------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 6,854 $ 806
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 16,742 390
Gain on sale of rental equipment.......................... (2,910) (14)
Deferred income tax provision............................. 3,580 382
Changes in operating assets and liabilities:
Accounts receivable..................................... (14,175) (662)
Inventories............................................. 917 (40)
Prepaid expenses and other assets....................... (3,666) 53
Accounts payable........................................ 32,588 496
Accrued expenses and other liabilities.................. 270 (63)
Income taxes payable.................................... (903) 231
--------- --------
Net cash provided by operating activities............. 39,297 1,579
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash acquired.......... (207,967) (11,900)
Purchases of rental equipment............................. (76,816) (250)
Purchases of property and equipment....................... (6,004) (2)
Decreases in notes receivable affiliates.................. -- 1,358
Proceeds from sale of rental equipment.................... 12,808 71
--------- --------
Net cash used in investing activities................. (277,979) (10,723)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.................... 123,277 15,000
Capital contribution...................................... 23,400 --
Proceeds from debt........................................ 560,173 1,547
Repayments of debt........................................ (456,885) (994)
Debt issuance costs....................................... (3,545) --
--------- --------
Net cash provided by financing activities............. 246,420 15,553
--------- --------
Net increase in cash and cash equivalents................... 7,738 6,409
Cash and cash equivalents, beginning of period.............. 1,493 --
--------- --------
Cash and cash equivalents, end of period.................... $ 9,231 $ 6,409
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 7,416 $ 155
========= ========
Cash paid for income taxes................................ $ 1,791 $ 98
========= ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
The Company acquired the net assets and assumed certain
liabilities of certain businesses as follows:
Total assets, net of cash acquired...................... $ 497,008 $ 47,804
Total liabilities assumed............................... (229,760) (24,123)
Amount paid with common stock and warrants.............. (9,227) --
Amount paid through the issuance of debt and future
payments.............................................. (50,054) (11,781)
--------- --------
Net cash paid......................................... $ 207,967 $ 11,900
========= ========
</TABLE>
The accompanying notes to unaudited consolidated financial statements are an
integral part of these consolidated financial statements.
F-21
<PAGE> 137
NATIONSRENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have
been prepared by NationsRent, Inc. (the "Company") and reflect all adjustments
of a normal recurring nature which are, in the opinion of management, necessary
for a fair presentation of financial results for the three and nine months ended
September 30, 1998 and for the period from August 14, 1997 (Inception) through
September 30, 1997, in accordance with generally accepted accounting principles
for interim financial reporting and pursuant to Article 10 of Regulation S-X.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. These unaudited interim
consolidated financial statements should be read in conjunction with the
consolidated financial statements for the period ended December 31, 1997
appearing in the Company's Registration Statement on Form S-1, as amended
(Commission File No. 333-56233), filed with the Securities and Exchange
Commission. The results of operations for the three and nine months ended
September 30, 1998 are not necessarily indicative of the results which may be
reported for the year ending December 31, 1998.
The unaudited interim consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All material
intercompany transactions and balances have been eliminated in consolidation.
Impact of recently issued accounting standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company adopted SFAS No. 130 during the
quarter ended June 30, 1998. SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components in a full set
of financial statements. The objective of SFAS No. 130 is to report a measure
(comprehensive income) of all changes in equity of an enterprise that result
from transactions and other economic events in a period other than transactions
with owners. The adoption of SFAS 130 did not have a material impact on the
Company's consolidated financial statements, as comprehensive income was equal
to net income for all periods presented. The Company is currently evaluating the
reporting formats recommended under this Statement. SFAS No. 131 establishes a
new method by which companies will report operating segment information. This
method requires disclosure of information which is based on the manner in which
management organizes the segments within a company for making operating
decisions and assessing performance. The Company continues to evaluate the
provisions of SFAS No. 131 and, upon adoption, the Company may report operating
segments.
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 establishes criteria for determining which costs of
developing or obtaining internal-use computer software should be charged to
expense and which should be capitalized. SOP 98-1 is effective for all
transactions entered into in fiscal years beginning after December 15, 1998. The
Company does not believe that the adoption of SOP 98-1 will have a material
effect on the Company's financial position or results of operations.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5. SOP 98-5 requires that all
non-governmental entities expense costs of start-up activities, including
pre-operating, pre-opening and organization activities, as those costs are
incurred. In the opinion of
F-22
<PAGE> 138
NATIONSRENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SEPTEMBER 30, 1998
management, the adoption of this Statement will not have a material effect on
the Company's financial position or results of operations.
NOTE 2 -- ACQUISITIONS
The Company is building a nationally branded network of equipment rental
locations. Pursuant to this strategy, the Company made 22 acquisitions of
equipment rental businesses during the nine months ended September 30, 1998. The
aggregate consideration for these acquisitions was $272,099,000 and consisted
of, (i) $212,818,000 of cash, (ii) $44,350,000 of subordinated convertible debt,
(iii) $1,409,000 of subordinated debt, (iv) $4,295,000 of future contractual
cash payments, (v) 1,241,640 shares of the Company's common stock, $0.01 par
value per share ("Common Stock"), and (vi) warrants to purchase 100,000 shares
of Common Stock. In addition, in connection with seven of the acquisitions, the
Company has agreed to make up to an aggregate $4,113,000 of future payments to
the former owners based on the achievement of certain future operating results.
Such payments will be made at various times through July 2001. The cash portion
of the consideration was funded through borrowings under the Company's revolving
credit facility (the "Credit Facility"), capital contributions by the founders
of the Company and a private placement of Common Stock. In addition, the Company
repaid or assumed outstanding indebtedness of the acquired companies in the
aggregate amount of $196,386,000. The acquisitions have been accounted for using
the purchase method and, accordingly, the acquired assets and assumed
liabilities, including goodwill, have been recorded at their estimated fair
values as of the date of acquisition. Purchase accounting values for all
acquisitions have been assigned on a preliminary basis, and are subject to
adjustment when final information as to the fair values of the net assets
acquired is available. The operations of the acquired businesses have been
included in the Company's consolidated statements of income since the date of
each respective acquisition.
The following table sets forth the estimated fair value of the assets
acquired and liabilities assumed for the aforementioned acquisitions (in
thousands):
<TABLE>
<S> <C>
Assets, including cash...................................... $292,488
Goodwill.................................................... 208,982
Other intangibles........................................... 389
Liabilities................................................. 229,760
</TABLE>
The following table sets forth the unaudited pro forma consolidated results
of operations for the nine months ended September 30, 1998 giving effect to the
aforementioned acquisitions as if such acquisitions had occurred on January 1,
1998 (in thousands, except per share data):
<TABLE>
<S> <C>
Revenue..................................................... $231,044
Net income.................................................. 11,763
Earnings per share:
Basic.................................................. $ 0.27
Diluted................................................ $ 0.26
</TABLE>
NOTE 3 -- COMMON STOCK
During the first nine months of 1998, the founding stockholders of the
Company made an additional capital contribution of $23,400,000. In June 1998,
the Company sold an aggregate of 5,118,694 shares of Common Stock in a private
placement for aggregate proceeds of $27,600,000. Investors in the private
placement included Company employees and associates of the founding stockholders
of the Company.
In August 1998, the Company consummated its initial public offering of
13,000,000 shares of Common Stock at $8.00 per share. The Company received net
proceeds of approximately $95,677,000 after deducting
F-23
<PAGE> 139
NATIONSRENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SEPTEMBER 30, 1998
underwriting discounts and commissions and offering expenses. The Company used
all of the net proceeds to repay a portion of the outstanding borrowings of the
Company under its Credit Facility.
NOTE 4 -- SEASONALITY
The Company's initial acquisitions have been primarily in the Midwest
region of the United States. The Company's revenue and income are dependent upon
the activity in the construction industry in the markets served by the Company.
Construction activity is dependent upon weather and the traditional seasons for
construction work. Because of this variability in demand, the Company's
quarterly revenue may fluctuate, and revenue for the first quarter of each year
can be expected to be lower than the remaining quarters. Although the Company
believes that the historical trend in quarterly revenue for the second, third
and fourth quarters of each year is generally higher than the first quarter,
there can be no assurance that this will occur in future periods. Accordingly,
quarterly or other interim results should not be considered indicative of
results to be expected for any quarter or for the full year.
NOTE 5 -- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
FROM
AUGUST 14, 1997
THREE MONTHS NINE MONTHS (INCEPTION)
ENDED ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1997
------------- ------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Numerator:
Net income -- basic earnings
per share................... $ 5,561 $ 6,854 $ 806
Interest expense on convertible
subordinated debt, net of
income taxes................ 488 821 --
------- ------- -------
Numerator -- diluted earnings
per share................... $ 6,049 $ 7,675 $ 806
======= ======= =======
Denominator:
Denominator for basic earnings
per share --
weighted-average shares..... 37,909 29,894 25,000
Effect of dilutive securities:
Convertible subordinated
debt...................... 6,083 3,430 --
Employee stock options...... 279 177 --
------- ------- -------
Denominator for diluted
earnings per share --
adjusted weighted-average
shares...................... 44,271 33,501 25,000
======= ======= =======
Basic earnings per share......... $ 0.15 $ 0.23 $ 0.03
======= ======= =======
Diluted earnings per share....... $ 0.14 $ 0.23 $ 0.03
======= ======= =======
</TABLE>
F-24
<PAGE> 140
NATIONSRENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SEPTEMBER 30, 1998
NOTE 6 -- DEBT
In September 1998, the Company amended its Credit Facility to increase the
facility to include a term loan of $175,000,000 (the "Term Loan") in addition to
its existing revolving credit facility of up to $260,000,000 (the "Revolver").
Recently, the Credit Facility was amended further to allow the administrative
agent to reallocate the aggregate dollar amounts of the bank commitments between
the Revolver and the Term Loan, provided that the aggregate commitment may not
be less than $435,000,000 and the aggregate commitment under the Revolver may
not be less than $260,000,000. The Revolver has a three-year term scheduled to
expire in September 2001 and the Term Loan has a six-year term scheduled to
expire in September 2004. The Credit Facility can be used to complete permitted
acquisitions, make capital expenditures, enter into standby letters of credit,
or for working capital and other general corporate purposes. Borrowings under
the Revolver bear interest at either the BankBoston base rate plus a percentage
ranging from 0.0% to 0.50% or, at the Company's option, the Eurodollar market
rate plus a percentage ranging from 2.00% to 2.75%. The Term Loan bears interest
ranging from 3.00% to 3.25% over the Eurodollar market rate. The percentage over
the BankBoston base rate or the Eurodollar market rate is based on the Company's
financial performance as measured by the total funded debt ratio. The Credit
Facility is secured by a security interest in substantially all of the assets of
the Company. The Credit Facility also imposes, among other covenants, a tangible
assets to senior debt covenant, a restriction on all of the Company's retained
earnings including the declaration and payment of cash dividends, consent
requirements on certain acquisitions and a restriction on the ratio of total
funded debt to earnings before interest, income taxes, depreciation and
amortization.
NOTE 7 -- SUBSEQUENT EVENTS
The Company has completed three acquisitions of rental equipment businesses
since September 30, 1998 for aggregate consideration of $187,946,000. Such
consideration consisted of, (i) $108,076,000 of cash, (ii) $51,770,000 of
subordinated convertible debt, and (iii) $28,100,000 of subordinated debt. Also,
upon the satisfaction of certain post-closing earnings targets, the Company
shall pay additional consideration of $10,000,000 in cash and $10,000,000 in
shares of the Company's Common Stock. The cash portion of the consideration was
funded through borrowings under the Credit Facility. Each of the acquisitions
has been accounted for using the purchase method.
F-25
<PAGE> 141
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Gabriel Trailer Manufacturing Company, Inc.:
We have audited the accompanying consolidated balance sheets of Gabriel Trailer
Manufacturing Company, Inc. and subsidiary (an Ohio corporation) as of March 31,
1997 and August 31, 1997, and the related consolidated statements of income,
stockholders' equity and cash flows for the years ended March 31, 1996 and 1997
and for the period from April 1, 1997 through August 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gabriel Trailer Manufacturing
Company, Inc. and subsidiary as of March 31, 1997 and August 31, 1997, and the
results of their operations and their cash flows for the years ended March 31,
1996 and 1997 and for the period from April 1, 1997 through August 31, 1997 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 8, 1998.
F-26
<PAGE> 142
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, AUGUST 31,
1997 1997
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 17,186 $ 149,742
Accounts receivable, net of allowances for doubtful accounts
of $265,000 and $330,000 as of March 31, and August 31,
1997, respectively........................................ 2,044,590 3,335,663
Inventories................................................. 947,322 991,902
Due from affiliates......................................... 1,421,199 1,357,990
Rental equipment, net....................................... 21,788,980 21,885,967
Property, plant and equipment, net.......................... 1,208,147 1,145,612
Other assets................................................ 186,704 221,186
----------- -----------
Total assets...................................... $27,614,128 $29,088,062
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable.......................................... $ 1,739,231 $ 422,591
Accrued expenses and other liabilities.................... 1,667,030 1,759,464
Debt...................................................... 16,100,269 16,558,863
Income taxes payable...................................... 1,491,129 1,423,026
Deferred income taxes..................................... 2,149,565 3,156,458
----------- -----------
Total liabilities................................. 23,147,224 23,320,402
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 7, 8 and 10)
STOCKHOLDERS' EQUITY:
Common stock -- no par value, 10,000 shares authorized,
issued and outstanding................................. 500 500
Retained earnings......................................... 4,466,404 5,767,160
----------- -----------
Total stockholders' equity........................ 4,466,904 5,767,660
----------- -----------
Total liabilities and stockholders' equity........ $27,614,128 $29,088,062
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-27
<PAGE> 143
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEAR ENDED MARCH 31, APRIL 1, 1997
---------------------------- TO
1996 1997 AUGUST 31, 1997
------------ ------------ ---------------
<S> <C> <C> <C>
REVENUE:
Equipment rentals................................ $11,871,114 $15,327,802 $8,514,810
Sales of equipment, parts and supplies........... 4,301,865 4,177,194 1,204,708
----------- ----------- ----------
16,172,979 19,504,996 9,719,518
COST OF REVENUE:
Cost of equipment rentals, excluding
depreciation.................................. 4,379,534 6,029,585 2,192,790
Rental equipment depreciation.................... 2,052,534 3,465,293 1,847,567
Cost of sales of equipment, parts and supplies... 4,490,975 2,790,666 984,147
----------- ----------- ----------
10,923,043 12,285,544 5,024,504
----------- ----------- ----------
Gross profit............................. 5,249,936 7,219,452 4,695,014
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES....... 2,972,337 3,563,930 1,683,311
NONRENTAL DEPRECIATION............................. 180,101 237,905 114,993
----------- ----------- ----------
Operating income......................... 2,097,498 3,417,617 2,896,710
----------- ----------- ----------
OTHER INCOME (EXPENSE):
Interest expense................................. (582,807) (866,284) (580,107)
Interest income.................................. 71,103 15,941 15,710
Other, net....................................... 125,468 187,044 (77,597)
----------- ----------- ----------
Total other income (expense), net........ (386,236) (663,299) (641,994)
----------- ----------- ----------
Income before provision for income
taxes.................................. 1,711,262 2,754,318 2,254,716
PROVISION FOR INCOME TAXES......................... 732,793 1,127,416 938,790
----------- ----------- ----------
NET INCOME......................................... $ 978,469 $ 1,626,902 $1,315,926
=========== =========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-28
<PAGE> 144
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------
NUMBER OF TREASURY RETAINED
SHARES AMOUNT STOCK EARNINGS TOTAL
--------- ------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, April 1, 1995.................... 10,000 $500 $(190,000) $2,051,033 $1,861,533
Retirement of treasury stock............ -- -- 190,000 (190,000) --
Net income.............................. -- -- -- 978,469 978,469
------ ---- --------- ---------- ----------
BALANCE, March 31, 1996................... 10,000 500 -- 2,839,502 2,840,002
Net income.............................. -- -- -- 1,626,902 1,626,902
------ ---- --------- ---------- ----------
BALANCE, March 31, 1997................... 10,000 500 -- 4,466,404 4,466,904
Distribution............................ -- -- -- (15,170) (15,170)
Net income.............................. -- -- -- 1,315,926 1,315,926
------ ---- --------- ---------- ----------
BALANCE, August 31, 1997.................. 10,000 $500 $ -- $5,767,160 $5,767,660
====== ==== ========= ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated statements.
F-29
<PAGE> 145
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEAR ENDED MARCH 31, APRIL 1, 1997
---------------------------- TO AUGUST 31,
1996 1997 1997
------------ ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................ $ 978,469 $ 1,626,902 $ 1,315,926
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation................................... 2,232,635 3,703,200 1,962,560
(Gain) loss on sale of assets.................. 16,202 (68,548) 84,020
Deferred income taxes.......................... 486,450 809,283 1,006,893
Changes in operating assets and liabilities:
Accounts receivable.......................... (309,761) (688,006) (1,291,073)
Inventories.................................. (122,582) (187,075) (44,580)
Other assets................................. (41,962) 8,601 (93,296)
Accounts payable............................. 244,241 777,122 (1,316,640)
Accrued expenses and other liabilities....... 446,252 503,630 92,434
Income taxes payable......................... 246,343 318,133 (68,103)
----------- ----------- -----------
Net cash provided by operating
activities.............................. 4,176,287 6,803,242 1,648,141
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............... (494,684) (516,029) (63,792)
Proceeds from sale of property and equipment...... 314,097 17,560 8,733
Purchases of rental equipment..................... (8,799,248) (8,101,137) (1,775,155)
Proceeds from sale of rental equipment............ 916,403 1,326,510 136,685
----------- ----------- -----------
Net cash used in investing activities..... (8,063,432) (7,273,096) (1,693,529)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt................................ 12,823,899 17,922,405 4,843,858
Repayments of debt................................ (8,658,333) (14,417,413) (3,651,766)
Payments of equipment financings.................. -- (1,928,097) (1,045,871)
(Advances to) repayments from affiliates, net..... (316,721) (1,094,105) 31,723
----------- ----------- -----------
Net cash provided by financing
activities.............................. 3,848,845 482,790 177,944
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... (38,300) 12,936 132,556
CASH AND CASH EQUIVALENTS, beginning of period...... 42,550 4,250 17,186
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period............ $ 4,250 $ 17,186 $ 149,742
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................ $ 553,206 $ 821,349 $ 546,085
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Equipment financing............................... $ -- $ 4,637,084 $ 387,503
=========== =========== ===========
Property dividends................................ $ -- $ -- $ 15,170
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated statements.
F-30
<PAGE> 146
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND AUGUST 31, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION:
Gabriel Trailer Manufacturing Company, Inc. ("Gabriel") (together with its
subsidiary, the "Company") was incorporated in March 1970 to manufacture, buy,
sell and deal in trailer equipment, other related equipment and parts and
accessories. Gabriel's wholly-owned subsidiary, Sam's Equipment Rental, Inc. was
formed for the purpose of renting and leasing construction related equipment.
The Company currently rents a broad array of equipment to a diverse customer
base including construction industry participants, industrial companies,
homeowners and others. The Company also engages in related activities such as
selling used equipment, acting as a distributor for certain new and used
equipment, and selling related merchandise and parts. The nature of the
Company's business is such that short-term obligations are typically met by cash
flow generated from long-term assets. Consequently, consistent with industry
practice, the accompanying balance sheets are presented on an unclassified
basis.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary. All significant intercompany
accounts and transactions have been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash equivalents
The Company considers all highly liquid instruments with an original
maturity of three months or less when purchased to be cash equivalents. At March
31, 1997 and August 31, 1997, the Company had no cash equivalents.
Inventories
Inventories consist of equipment, tools, parts, fuel and related rental
equipment supplies and accessories. Inventories are stated at the lower of cost
or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The range of
useful lives estimated by management for rental equipment is five to seven
years. Ordinary maintenance and repair costs are charged to operations as
incurred.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to the rental of equipment is recognized
over the contract term.
Property, plant and equipment
Property, plant and equipment is recorded at cost and depreciated over the
estimated useful life using the straight-line method. The range of useful lives
estimated by management for property, plant and equipment is three to forty
years. Ordinary maintenance and repair costs are charged to operations as
incurred.
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
F-31
<PAGE> 147
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fair value of financial instruments
The carrying amounts reported in the accompanying consolidated balance
sheets for cash and cash equivalents, accounts receivable, accounts payable,
accrued expenses and other liabilities approximate fair value as of March 31,
1997 and August 31, 1997.
Income taxes
The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," which requires, among other things, recognition
of future tax effects measured at enacted rates attributable to deductible
temporary differences between financial statement and income tax bases of assets
and liabilities to the extent that realization of said effects is more likely
than not.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10%
of total accounts receivable. The Company controls credit risk through credit
approvals, credit limits and monitoring procedures.
3. RENTAL EQUIPMENT:
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
MARCH 31, AUGUST 31,
1997 1997
----------- -----------
<S> <C> <C>
Rental equipment.......................................... $28,790,435 $30,641,146
Less -- accumulated depreciation.......................... 7,001,455 8,755,179
----------- -----------
Rental equipment, net................................ $21,788,980 $21,885,967
=========== ===========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
MARCH 31, AUGUST 31,
1997 1997
----------- -----------
<S> <C> <C>
Land...................................................... $ 49,863 $ 49,863
Building.................................................. 757,816 757,816
Furniture and fixtures.................................... 355,131 339,593
Vehicles.................................................. 1,134,204 1,113,193
----------- -----------
2,297,014 2,260,465
Less -- accumulated depreciation.......................... (1,088,867) (1,114,853)
----------- -----------
Property, plant and equipment, net.............. $ 1,208,147 $ 1,145,612
=========== ===========
</TABLE>
F-32
<PAGE> 148
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. ACCRUED EXPENSES AND OTHER LIABILITIES:
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
MARCH 31, AUGUST 31,
1997 1997
---------- ----------
<S> <C> <C>
Personal property taxes..................................... $1,044,423 $1,172,905
Payroll-related............................................. 231,274 188,246
Tax penalties and interest.................................. 248,000 248,000
Other....................................................... 143,333 150,313
---------- ----------
Accrued expenses and other liabilities............ $1,667,030 $1,759,464
========== ==========
</TABLE>
6. DEBT:
Debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31, AUGUST 31,
1997 1997
----------- -----------
<S> <C> <C>
Lines of credit, with borrowings up to $6.3 million,
secured by substantially all of the Company's assets,
interest ranging from 8.25% to 8.50%, payable in
monthly installments through September 1997.......... $ 4,091,315 $ 5,497,095
Revolving term loans, secured by substantially all of
the Company's assets, interest ranging from 8.25% to
8.90%, payable in monthly installments through
January 2000......................................... 6,444,444 6,233,334
Equipment notes, secured by rental equipment, interest
ranging from 6.90% to 9.00%, payable in monthly
installments through June 2000....................... 5,312,900 4,656,172
Mortgages payable, secured by real estate, interest
ranging from 6.75% to 9.50%, payable in monthly
installments through August 2005..................... 161,798 113,936
Note payable to related party, secured by life insurance
policy on officer, interest at 8.25%, payable in
monthly installments through August 1998............. 89,812 58,326
----------- -----------
Total debt...................................... $16,100,269 $16,558,863
=========== ===========
</TABLE>
Maturities of the Company's debt at August 31, 1997, for the years ended
August 31, are as follows:
<TABLE>
<S> <C>
1998........................................................ $14,155,433
1999........................................................ 1,677,753
2000........................................................ 636,277
2001........................................................ 9,853
2002........................................................ 10,831
Thereafter.................................................. 68,716
-----------
$16,558,863
===========
</TABLE>
F-33
<PAGE> 149
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES:
The provision for Federal and state income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED PERIOD FROM
MARCH 31, APRIL 1, 1997
---------------------- TO AUGUST 31,
1996 1997 1997
-------- ---------- -------------
<S> <C> <C> <C>
Current......................................... $246,343 $ 318,133 $ (68,103)
Deferred........................................ 486,450 809,283 1,006,893
-------- ---------- ----------
$732,793 $1,127,416 $ 938,790
======== ========== ==========
Federal......................................... $575,542 $ 885,481 $ 737,333
State........................................... 157,251 241,935 201,457
-------- ---------- ----------
$732,793 $1,127,416 $ 938,790
======== ========== ==========
</TABLE>
A reconciliation of the difference between the expected provision for
income taxes using the statutory Federal income tax rate of 34% and the
Company's actual provision is as follows:
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED PERIOD FROM
MARCH 31, APRIL 1, 1997
---------------------- TO AUGUST 31,
1996 1997 1997
-------- ---------- -------------
<S> <C> <C> <C>
Provision at the statutory tax rate............. $581,829 $ 936,468 $766,603
State income taxes.............................. 103,786 159,677 132,962
Nondeductible expenses.......................... 47,178 31,271 39,225
-------- ---------- --------
$732,793 $1,127,416 $938,790
======== ========== ========
</TABLE>
Deferred income taxes arise primarily due to temporary differences in
recognizing certain revenues and expenses for tax purposes and the use of
accelerated depreciation for tax purposes. The components of the deferred income
tax liabilities are as follows:
<TABLE>
<CAPTION>
MARCH 31, AUGUST 31,
1997 1997
---------- ----------
<S> <C> <C>
Depreciation of property and equipment and rental
equipment................................................. $2,211,443 $2,708,783
Accrued liabilities......................................... (871,739) (349,825)
Accounts receivable......................................... 809,861 (118,830)
Section 481 cash to accrual election change................. -- 916,330
---------- ----------
Deferred income tax liability............................. $2,149,565 $3,156,458
========== ==========
</TABLE>
The Company's income tax returns and related payments for the years ended
March 31, 1995, 1996 and 1997 were not filed on a timely basis. It is not
possible to predict the ultimate outcome of the Company's penalties for failure
to file, and pay on a timely basis and underpayment. The Company has estimated
an approximate liability of $175,000, which is included in accrued expenses and
other liabilities.
8. COMMITMENTS AND CONTINGENCIES:
Operating Leases
The Company leases rental equipment, real estate and certain office
equipment under operating leases. Certain real estate leases require the Company
to pay maintenance, insurance, taxes and certain other expenses in addition to
the stated rentals. The leases cover several operating locations and expire at
various dates through September 2002. Future minimum lease payments to related
and unrelated third parties, by
F-34
<PAGE> 150
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
year and in the aggregate, at August 31, 1997 for noncancelable operating leases
with initial or remaining terms of one year or more are as follows:
<TABLE>
<CAPTION>
RELATED PARTY OTHER TOTAL
------------- -------- ----------
<S> <C> <C> <C>
1998............................................ $ 480,000 $328,322 $ 808,322
1999............................................ 368,000 228,866 596,866
2000............................................ 256,000 67,821 323,821
2001............................................ 192,000 -- 192,000
2002............................................ 8,000 -- 8,000
---------- -------- ----------
Total $1,304,000 $625,009 $1,929,009
========== ======== ==========
</TABLE>
Rent expense under noncancelable operating leases for the years ended March
31, 1996 and 1997 and the period from April 1, 1997 through August 31, 1997 is
$784,354, $1,098,234 and $423,798, respectively. Included in total rent expense
is rent to a related party of approximately $280,000, $357,000 and $200,000 for
the years ended March 31, 1996 and 1997 and the period from April 1, 1997
through August 31, 1997, respectively.
Litigation, Claims and Assessments
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
9. EMPLOYEE BENEFIT PLAN:
The Company has a 401(k) defined contribution profit-sharing plan under
which employees having worked a minimum of twelve months are eligible to
participate. Employer contributions, which are discretionary and depend on the
Company's profitability, were approximately $54,600, $70,100 and $47,700 for the
years ended March 31, 1996 and 1997 and for the period from April 1, 1997
through August 31, 1997, respectively.
10. SUBSEQUENT EVENT:
Effective September 1, 1997, all of the outstanding stock of the Company
was purchased by NationsRent, Inc., an unrelated third party, in exchange for
cash and debt.
F-35
<PAGE> 151
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To R. and R. Rental, Inc.:
We have audited the accompanying balance sheet of R. and R. Rental, Inc. (an
Ohio S corporation) at December 10, 1997, and the related statements of
operations, stockholder's equity and cash flows for the period from January 1,
1997 through December 10, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of R. and R. Rental, Inc. at
December 10, 1997, and the results of its operations and its cash flows for the
period from January 1, 1997 through December 10, 1997 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 8, 1998.
F-36
<PAGE> 152
R. AND R. RENTAL, INC.
BALANCE SHEET
AS OF DECEMBER 10, 1997
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 193,714
Accounts receivable, net of allowance for doubtful accounts
of $150,000............................................... 649,193
Inventories................................................. 928,962
Rental equipment, net....................................... 4,002,825
Property and equipment, net................................. 267,903
Other assets................................................ 3,400
----------
Total assets...................................... $6,045,997
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable.......................................... $ 15,354
Accrued expenses and other liabilities.................... 108,996
Note payable.............................................. 1,523,139
----------
Total liabilities................................. 1,647,489
----------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 9)
STOCKHOLDER'S EQUITY:
Common stock -- no par value, 250 shares authorized,
issued and outstanding................................. 500
Additional paid-in capital................................ 5,327,477
Accumulated deficit....................................... (929,469)
----------
Total stockholder's equity........................ 4,398,508
----------
Total liabilities and stockholder's equity........ $6,045,997
==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
balance sheet.
F-37
<PAGE> 153
R. AND R. RENTAL, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 10, 1997
<TABLE>
<S> <C>
REVENUE:
Equipment rentals......................................... $2,409,518
Sales of equipment, parts and supplies.................... 2,106,695
----------
4,516,213
COST OF REVENUE:
Cost of equipment rentals, excluding depreciation......... 1,398,174
Rental equipment depreciation............................. 630,548
Cost of sales of equipment, parts and supplies............ 1,808,076
----------
3,836,798
----------
Gross profit...................................... 679,415
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 715,140
NONRENTAL DEPRECIATION...................................... 76,630
----------
Operating loss.................................... (112,355)
----------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (79,579)
Other income.............................................. 29,829
----------
Total other income (expense), net................. (49,750)
----------
NET LOSS.......................................... $ (162,105)
==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-38
<PAGE> 154
R. AND R. RENTAL, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 10, 1997
<TABLE>
<CAPTION>
COMMON STOCK
------------------ ADDITIONAL
NUMBER PAID-IN ACCUMULATED
OF SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997.................. 250 $500 $3,761,380 $(767,364) $2,994,516
Capital contributions................... -- -- 1,566,097 -- 1,566,097
Net loss................................ -- -- -- (162,105) (162,105)
--- ---- ---------- --------- ----------
BALANCE, December 10, 1997................ 250 $500 $5,327,477 $(929,469) $4,398,508
=== ==== ========== ========= ==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-39
<PAGE> 155
R. AND R. RENTAL, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 10, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (162,105)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 707,178
Loss on sale of rental equipment....................... 65,326
Changes in operating assets and liabilities:
Accounts receivable.................................. (40,271)
Inventories.......................................... (298,639)
Other assets......................................... 4,523
Accounts payable..................................... (382,070)
Accrued expenses and other liabilities............... 28,016
-----------
Net cash used in operating activities............. (78,042)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment............................. (2,208,233)
Purchases of property and equipment....................... (96,568)
Proceeds from sale of rental equipment.................... 307,793
-----------
Net cash used in investing activities............. (1,997,008)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable................................ 1,523,139
Repayments of note payable................................ (935,609)
Capital contributions..................................... 1,566,097
-----------
Net cash provided by financing activities......... 2,153,627
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 78,577
CASH AND CASH EQUIVALENTS, beginning of period.............. 115,137
-----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 193,714
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 79,579
===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-40
<PAGE> 156
R. AND R. RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 10, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
R. and R. Rentals, Inc. (the "Company") was incorporated in July 1988 in
the State of Ohio. The Company rents a broad array of equipment to a diverse
customer base that includes construction industry participants, industrial
companies, homeowners and others. The Company also engages in related activities
such as selling used equipment, acting as a distributor for certain new
equipment and selling related merchandise and parts. The nature of the Company's
business is such that short-term obligations are typically met by cash flow
generated from long-term assets. Consequently, consistent with industry
practice, the accompanying balance sheet is presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. At December 10,
1997, the Company had no cash equivalents.
Inventories
Inventories consist of equipment, tools, parts, fuel and related equipment
supplies and accessories inventories are stated at the lower of weighted average
cost or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The useful life
estimated by management for rental equipment is seven years. Ordinary
maintenance and repair costs are charged to operations as incurred.
Revenue recognition
Revenue related to the sale of equipment is recognized at the point of
sale. Revenue related to equipment rental is recognized over the contract term.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using the straight-line method. The range of useful lives
estimated by management for property and equipment is three to fifteen years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
Fair value of financial instruments
The carrying amounts reported in the balance sheet for cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses and other
liabilities and note payable approximate fair value as of December 10, 1997.
F-41
<PAGE> 157
R. AND R. RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes
The Company is an S corporation for income tax purposes. Accordingly,
income, losses and related temporary differences which arise in the recording of
income and expense items for financial reporting and tax reporting purposes are
included in the individual tax return of the stockholder. Therefore, no
provision or liability for Federal and state income taxes has been included in
the accompanying financial statements.
On a pro forma basis, the Company would have had a tax benefit, however it
would have been fully offset by a valuation allowance as the benefit would not
have achieved the realization requirements of Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes."
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10%
of total accounts receivable. The Company controls credit risk through credit
approvals, credit limits, and monitoring procedures.
3. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation as of December 10,
1997, consist of the following:
<TABLE>
<S> <C>
Rental equipment............................................ $ 5,349,321
Less -- accumulated depreciation............................ (1,346,496)
-----------
Rental equipment, net............................. $ 4,002,825
===========
</TABLE>
4. PROPERTY AND EQUIPMENT
A summary of property and equipment as of December 10, 1997, is as follows:
<TABLE>
<S> <C>
Trucks and autos............................................ $ 255,842
Furniture and fixtures...................................... 147,333
Computer equipment.......................................... 81,986
Leasehold improvements...................................... 38,466
---------
523,627
Less -- accumulated depreciation............................ (255,724)
---------
Property and equipment, net....................... $ 267,903
=========
</TABLE>
F-42
<PAGE> 158
R. AND R. RENTAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities as of December 10, 1997, consists of
the following:
<TABLE>
<S> <C>
Accrued property taxes...................................... $100,000
Payroll-related............................................. 8,996
--------
Accrued expenses and other liabilities............ $108,996
========
</TABLE>
6. DEBT
The Company entered into a demand promissory note bearing interest at prime
(8.5% at December 10, 1997), with interest payable quarterly. This note is
secured by substantially all of the Company's rental equipment. The note had an
outstanding balance of $1,523,139 at December 10, 1997.
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases various automobiles under operating leases. Future
minimum lease payments, by year and in the aggregate, for noncancelable
operating leases with initial or remaining terms of one year or more are as
follows at December 10, 1997 for the following years ended December 10:
<TABLE>
<S> <C>
1998........................................................ $30,044
1999........................................................ 17,875
2000........................................................ 6,186
-------
Total............................................. $54,105
=======
</TABLE>
Expense under these operating leases for the period ended December 10, 1997
was $44,493 and is included under selling, general and administrative expenses
in the accompanying statement of operations.
Litigation, Claims and Assessments
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
8. RELATED PARTY TRANSACTIONS
The Company leases two buildings from the stockholder under monthly
operating leases. For the period ended December 10, 1997, rent expense totaled
approximately $56,500 and is included under selling, general and administrative
expenses in the accompanying statement of operations.
9. SUBSEQUENT EVENT
Effective December 11, 1997, substantially all of the Company's operating
assets and liabilities were purchased by NationsRent, Inc., an unrelated third
party, in exchange for cash and debt.
The demand promissory note of $1,523,139 at December 10, 1997 was paid off
by the stockholder of the Company with proceeds from the purchase of the
Company's assets and liabilities.
F-43
<PAGE> 159
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To C & E Rental and Service, Inc.:
We have audited the accompanying balance sheets of C & E Rental and Service,
Inc. (an Indiana S corporation) as of December 31, 1996 and December 22, 1997,
and the related statements of income, stockholder's equity and cash flows for
the year ended December 31, 1996 and the period from January 1, 1997 through
December 22, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of C & E Rental and Service, Inc.
as of December 31, 1996 and December 22, 1997, and the results of its operations
and its cash flows for the year ended December 31, 1996 and the period from
January 1, 1997 through December 22, 1997 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 8, 1998.
F-44
<PAGE> 160
C & E RENTAL AND SERVICE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 43,390 $ 184,318
Accounts receivable, net of allowances for doubtful accounts
of $81,011 and $109,973 as of December 31, 1996, and
December 22, 1997, respectively........................... 705,695 701,156
Inventories................................................. 134,491 213,934
Due from affiliate.......................................... 372,115 --
Rental equipment, net....................................... 2,202,833 3,022,154
Property and equipment, net................................. 394,665 621,734
Other assets................................................ 30,357 32,543
---------- ----------
Total assets...................................... $3,883,546 $4,775,839
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable.......................................... $ 194,278 $ 205,403
Accrued expenses and other liabilities.................... 198,443 185,087
Debt...................................................... 1,284,908 922,856
---------- ----------
Total liabilities................................. 1,677,629 1,313,346
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 8 and 10)
STOCKHOLDER'S EQUITY:
Common stock -- no par value, 1,000 shares authorized,
issued and outstanding................................. 200,000 200,000
Retained earnings......................................... 2,588,781 3,845,357
Less: Treasury stock -- 500 shares at cost................ (582,864) (582,864)
---------- ----------
Total stockholder's equity........................ 2,205,917 3,462,493
---------- ----------
Total liabilities and stockholder's equity........ $3,883,546 $4,775,839
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-45
<PAGE> 161
C & E RENTAL AND SERVICE, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FROM JANUARY 1,
ENDED 1997 TO
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ---------------
<S> <C> <C>
REVENUE:
Equipment rentals......................................... $4,395,313 $4,506,274
Sales of equipment, parts and supplies.................... 1,961,510 2,638,935
Other..................................................... 115,115 128,586
---------- ----------
6,471,938 7,273,795
COST OF REVENUE:
Cost of equipment rentals, excluding depreciation......... 1,752,011 1,846,084
Rental equipment depreciation............................. 637,210 765,518
Cost of sales of equipment, parts and supplies............ 1,352,831 1,791,275
---------- ----------
3,742,052 4,402,877
---------- ----------
Gross profit...................................... 2,729,886 2,870,918
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 1,760,595 1,417,097
NONRENTAL DEPRECIATION AND AMORTIZATION..................... 136,897 157,252
---------- ----------
Operating income.................................. 832,394 1,296,569
---------- ----------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (115,243) (101,218)
Other, net................................................ 51,580 61,225
---------- ----------
Total other income (expense), net................. (63,663) (39,993)
---------- ----------
Net income........................................ 768,731 1,256,576
PRO FORMA PROVISION FOR INCOME TAX.......................... 307,492 502,630
---------- ----------
PRO FORMA NET INCOME........................................ $ 461,239 $ 753,946
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-46
<PAGE> 162
C & E RENTAL AND SERVICE, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE PERIOD FROM JANUARY 1, 1997 TO DECEMBER 22, 1997
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
NUMBER RETAINED TREASURY
OF SHARES AMOUNT EARNINGS STOCK TOTAL
--------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996................. 1,000 $200,000 $1,820,050 $(582,864) $1,437,186
Net income............................. -- -- 768,731 -- 768,731
----- -------- ---------- --------- ----------
BALANCE, December 31, 1996............... 1,000 200,000 2,588,781 (582,864) 2,205,917
Net income............................. -- -- 1,256,576 -- 1,256,576
----- -------- ---------- --------- ----------
BALANCE, December 22, 1997............... 1,000 $200,000 $3,845,357 $(582,864) $3,462,493
===== ======== ========== ========= ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-47
<PAGE> 163
C & E RENTAL AND SERVICE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEAR JANUARY 1, 1997
ENDED TO
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 768,731 $ 1,256,576
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 774,107 922,770
Gain on sale of assets................................. (473,908) (705,063)
Changes in operating assets and liabilities:
Accounts receivable, net............................. (199,095) 4,539
Inventories.......................................... 15,644 (79,443)
Other assets......................................... 7,146 (2,186)
Accounts payable..................................... 65,384 11,125
Accrued expenses and other liabilities............... (21,052) (13,356)
----------- -----------
Net cash provided by operating activities......... 936,957 1,394,962
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment............................. (1,609,651) (2,848,230)
Proceeds from sale of rental equipment.................... 1,271,362 1,968,454
Purchases of property and equipment....................... (102,209) (384,321)
----------- -----------
Net cash used in investing activities............. (440,498) (1,264,097)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt........................................ 612,000 1,488,000
Repayments of debt........................................ (734,711) (1,850,052)
Payments from (advances to) affiliate..................... (372,115) 372,115
----------- -----------
Net cash provided by (used in) financing
activities...................................... (494,826) 10,063
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 1,633 140,928
CASH AND CASH EQUIVALENTS, beginning of period.............. 41,757 43,390
----------- -----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 43,390 $ 184,318
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 115,243 $ 101,218
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-48
<PAGE> 164
C & E RENTAL AND SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND DECEMBER 22, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
C & E Rental and Service, Inc. ("C & E Rental" or the "Company", formerly
Bob's Rental & Supply, Inc.), was incorporated in the State of Indiana in August
1959 and is engaged in the rental of a broad array of equipment to a diverse
customer base that includes construction industry participants, industrial
companies, homeowners and others. The Company also engages in related activities
such as selling new and used equipment, related merchandise and parts. The
nature of the Company's business is such that short-term obligations are
typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying balance sheets are presented
on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. At December 31, 1996
and December 22, 1997, the Company had no cash equivalents.
Inventories
Inventories consist of equipment, tools, parts, fuel and related supply
items. Inventories are stated at the lower of cost (first-in, first-out) or
market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using an accelerated method. The useful life
estimated by management for rental equipment is seven years. Ordinary
maintenance and repair costs are charged to operations as incurred.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using straight-line and accelerated methods. Ordinary
maintenance and repair costs are charged to operations as incurred. The range of
useful lives estimated by management for property and equipment is as follows:
<TABLE>
<CAPTION>
YEARS
-------------
<S> <C>
Machinery and equipment..................................... 5
Furniture and fixtures...................................... 5
Autos and trucks............................................ 5
Buildings................................................... 20 - 30
Leasehold improvements...................................... Life of lease
</TABLE>
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
F-49
<PAGE> 165
C & E RENTAL AND SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair value of financial instruments
The carrying amounts reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable and accrued expenses
and other liabilities approximate fair value as of December 31, 1996 and
December 22, 1997 and approximates the carrying value of such debt.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Income taxes
The Company is an S corporation for income tax purposes. Accordingly,
income, losses and related temporary differences which arise in the recording of
income and expense items for financial reporting and tax reporting purposes are
included in the individual tax return of the stockholder. Therefore, no
provision or liability for Federal and state income taxes has been included in
the accompanying financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for informational purposes only. The pro forma provision
for income tax has been provided at the estimated effective rate of 40%.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10%
of total accounts receivable. The Company controls credit risk through credit
approvals, credit limits and monitoring procedures.
3. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ------------
<S> <C> <C>
Rental equipment............................................ $ 4,245,254 $ 5,275,468
Less -- accumulated depreciation............................ (2,042,421) (2,253,314)
----------- -----------
Rental equipment, net............................. $ 2,202,833 $ 3,022,154
=========== ===========
</TABLE>
F-50
<PAGE> 166
C & E RENTAL AND SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
A summary of property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ------------
<S> <C> <C>
Machinery and equipment..................................... $ 26,190 $ 47,614
Furniture and fixtures...................................... 153,241 245,779
Autos and trucks............................................ 406,528 479,348
Buildings................................................... 349,743 349,743
Leasehold improvements...................................... -- 195,351
Land........................................................ 88,566 89,430
---------- ----------
1,024,268 1,407,265
Less -- accumulated depreciation............................ (629,603) (785,531)
---------- ----------
Property and equipment, net....................... $ 394,665 $ 621,734
========== ==========
</TABLE>
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ------------
<S> <C> <C>
Payroll-related............................................. $100,640 $ 70,069
Sales, property and other taxes............................. 97,803 115,018
-------- --------
Accrued expenses and other liabilities............ $198,443 $185,087
======== ========
</TABLE>
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 22,
1996 1997
------------ ------------
<S> <C> <C>
Line of credit, with borrowings up to $950,000, secured by
substantially all of the Company's business assets,
interest at 9.00% and 8.75%, as of 1996 and 1997,
respectively, payable in monthly installments through
November 1998............................................. $ 227,000 $150,000
Promissory note, secured by substantially all of the
Company's business assets, interest at 8.00%, payable in
monthly installments of $15,775 through July 2001......... 712,908 587,539
Note payable to officer, unsecured, interest at 9.50% and
9.00%, as of 1996 and 1997, respectively, payable in
December 1997............................................. 345,000 65,000
Note payable to bank, secured by certain real property,
interest at 8.75%, payable in monthly installments of
$1,583 through May 2000................................... -- 120,317
---------- --------
Total debt........................................ $1,284,908 $922,856
========== ========
</TABLE>
F-51
<PAGE> 167
C & E RENTAL AND SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of the Company's debt at December 22, 1997, for the years ended
December 22, are as follows:
<TABLE>
<S> <C>
1998........................................................ $371,459
1999........................................................ 169,516
2000........................................................ 275,014
2001........................................................ 106,867
--------
Total............................................. $922,856
========
</TABLE>
7. RELATED-PARTY TRANSACTIONS
In addition to the note payable to officer, described in Note 6, the
Company made a $372,115 advance to an affiliated company during 1996 which is
reflected as due from affiliate in the accompanying balance sheet as of December
31, 1996. The advance was repaid in 1997. During 1997, the Company entered into
a monthly operating lease with the same affiliated company for one of its
buildings. For the period ended December 22, 1997, such rental expense totaled
approximately $40,000.
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases real estate under operating leases. Certain leases
require the Company to pay maintenance, insurance, taxes and certain other
expenses in addition to the stated rentals. Future minimum lease payments, by
year and in the aggregate, for noncancelable operating leases with initial or
remaining terms of one year or more are as follows at December 22, 1997:
<TABLE>
<S> <C>
1998........................................................ $54,600
1999........................................................ 28,935
-------
Total............................................. $83,535
=======
</TABLE>
Rent expense under operating leases for the year ended December 31, 1996
and the period ended December 22, 1997 were approximately $46,800 and $94,600,
respectively.
Litigation, Claims and Assessments
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
9. EMPLOYEE BENEFIT PLAN
The Company has a contributory 401(k) profit-sharing plan under which
substantially all full-time employees are eligible to participate. Employer
contributions were approximately $51,000 and $61,000 for 1996 and 1997,
respectively.
10. SUBSEQUENT EVENT
Effective December 23, 1997, substantially all of the Company's operating
assets and liabilities were purchased by NationsRent, Inc., an unaffiliated
third party, in exchange for cash and debt.
F-52
<PAGE> 168
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Titan Rentals, Inc.:
We have audited the accompanying balance sheet of Titan Rentals, Inc. (a West
Virginia corporation) as of December 30, 1997, and the related statements of
income, stockholders' equity and cash flows for the period from January 1, 1997
through December 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Titan Rentals, Inc. as of
December 30, 1997, and the results of its operations and its cash flows for the
period from January 1, 1997 through December 30, 1997 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 6, 1998.
F-53
<PAGE> 169
TITAN RENTALS, INC.
BALANCE SHEET
AS OF DECEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 249,470
Accounts receivable, net of allowance for doubtful accounts
of $37,360................................................ 637,253
Inventories................................................. 93,120
Prepaid expenses and other assets........................... 117,205
Rental equipment, net....................................... 1,132,746
Property and equipment, net................................. 73,305
Income taxes receivable..................................... 70,352
----------
Total assets...................................... $2,373,451
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable.......................................... $ 105,384
Accrued expenses and other liabilities.................... 97,354
Debt...................................................... 501,612
Deferred income taxes..................................... 194,307
----------
Total liabilities................................. 898,657
----------
COMMITMENTS AND CONTINGENCIES (Notes 9 and 11)
STOCKHOLDERS' EQUITY:
Common stock -- $1,000 par value, 1,000 shares authorized,
155 shares issued and outstanding...................... 155,000
Retained earnings......................................... 1,319,794
----------
Total stockholders' equity........................ 1,474,794
----------
Total liabilities and stockholders' equity........ $2,373,451
==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
balance sheet.
F-54
<PAGE> 170
TITAN RENTALS, INC.
STATEMENT OF INCOME
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 30, 1997
<TABLE>
<S> <C>
REVENUE:
Equipment rentals......................................... $1,926,760
Sales of equipment, parts and supplies.................... 2,991,843
Other..................................................... 50,611
----------
4,969,214
COST OF REVENUE:
Cost of equipment rentals, excluding depreciation......... 1,302,454
Rental equipment depreciation............................. 302,271
Cost of sales of equipment, parts and supplies............ 2,043,201
----------
3,647,926
----------
Gross profit...................................... 1,321,288
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 823,906
NONRENTAL DEPRECIATION AND AMORTIZATION..................... 16,048
----------
Operating income.................................. 481,334
----------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (33,579)
Other expense............................................. (7,438)
----------
Total other income (expense), net................. (41,017)
----------
Income before provision for income tax............ 440,317
PROVISION FOR INCOME TAX.................................... 168,085
----------
NET INCOME.................................................. $ 272,232
==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-55
<PAGE> 171
TITAN RENTALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 30, 1997
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
NUMBER RETAINED
OF SHARES AMOUNT EARNINGS TOTAL
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1997........................... 155 $155,000 $1,047,562 $1,202,562
Net income....................................... -- -- 272,232 272,232
--- -------- ---------- ----------
BALANCE, December 30, 1997......................... 155 $155,000 $1,319,794 $1,474,794
=== ======== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-56
<PAGE> 172
TITAN RENTALS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 30, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 272,232
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 318,319
Gain on sale of rental equipment....................... (666,617)
Deferred income taxes.................................. 56,199
Changes in operating assets and liabilities:
Accounts receivable.................................. (72,740)
Inventories.......................................... (5,430)
Prepaid expenses and other assets.................... 49,703
Income taxes receivable.............................. (41,127)
Accounts payable..................................... (184,448)
Accrued expenses and other liabilities............... 49,522
-----------
Net cash used in operating activities............. (224,387)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment............................. (1,063,670)
Purchases of property and equipment....................... (61,822)
Proceeds from sale of rental equipment.................... 1,510,660
-----------
Net cash provided by investing activities......... 385,168
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt........................................ 417,271
Repayments of debt........................................ (578,759)
-----------
Net cash used in financing activities............. (161,488)
-----------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (707)
CASH AND CASH EQUIVALENTS, beginning of period.............. 250,177
-----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 249,470
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 33,579
===========
Cash paid for income taxes................................ $ 154,467
===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-57
<PAGE> 173
TITAN RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Titan Rentals, Inc. (the "Company") was incorporated in the state of West
Virginia in January 1990 for the purpose of creating an equipment rental
company. The Company rents a broad array of equipment to a diverse customer base
that includes construction industry participants, industrial companies,
homeowners and others. The Company also engages in related activities such as
selling used equipment, acting as a distributor for certain new equipment and
selling related merchandise and parts. The nature of the Company's business is
such that short-term obligations are typically met by cash flow generated from
long-term assets. Consequently, consistent with industry practice, the
accompanying balance sheet is presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. At December 30,
1997, the Company had no cash equivalents.
Inventories
Inventories consist of equipment, tools, parts, fuel and related supply
items. Inventories are stated at the lower of average cost or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using accelerated and straight-line methods. The
range of useful lives estimated by management for rental equipment is three to
seven years. Rental equipment having a cost of $500 or less is expensed at the
time of purchase. Ordinary maintenance and repair costs are charged to
operations as incurred.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using accelerated and straight-line methods. The range of
useful lives estimated by management for property and equipment is five to seven
years. Ordinary maintenance and repair costs are charged to operations as
incurred.
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
F-58
<PAGE> 174
TITAN RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair value of financial instruments
The carrying amounts reported in the accompanying balance sheet for cash
and cash equivalents, accounts receivable, income taxes receivable, accounts
payable, accrued expenses and other liabilities and debt approximate fair value
as of December 30, 1997 and approximates the carrying value of such debt.
Income taxes
The Company follows Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which requires, among other things,
recognition of future tax effects measured at enacted rates attributable to
deductible temporary differences between financial statement and income tax
bases of assets and liabilities to the extent that realization of said effects
is more likely than not.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10%
of total accounts receivable. The Company controls credit risk through credit
approvals, credit limits and monitoring procedures.
3. RENTAL EQUIPMENT
As of December 30, 1997, rental equipment and related accumulated
depreciation consist of the following:
<TABLE>
<S> <C>
Rental equipment............................................ $1,491,084
Less -- accumulated depreciation............................ (358,338)
----------
Rental equipment, net............................. $1,132,746
==========
</TABLE>
4. PROPERTY AND EQUIPMENT
A summary of property and equipment as of December 30, 1997, is as follows:
<TABLE>
<S> <C>
Furniture, fixtures and office equipment.................... $121,175
Less -- accumulated depreciation............................ (47,870)
--------
Property and equipment, net....................... $ 73,305
========
</TABLE>
F-59
<PAGE> 175
TITAN RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities as of December 30, 1997, consists of
the following:
<TABLE>
<S> <C>
Payroll-related............................................. $12,746
Property and sales tax...................................... 30,469
Other....................................................... 54,139
-------
Accrued expenses and other liabilities............ $97,354
=======
</TABLE>
6. DEBT
As of December 30, 1997, debt consists of the following:
<TABLE>
<S> <C>
Line of credit, secured by accounts receivable and
inventory, interest at prime plus .50% (9.5% at December
30, 1997), payable in monthly installments through
December 2002............................................. $ 33,303
Equipment notes, secured by equipment, interest from 7.90%
to 9.25%, payable in various monthly installments through
January 2000.............................................. 468,309
--------
Total debt........................................ $501,612
========
</TABLE>
Maturities of the Company's debt at December 30, 1997, for the years ended
December 30, are as follows:
<TABLE>
<S> <C>
1998........................................................ $247,731
1999........................................................ 158,804
2000........................................................ 95,077
--------
Total............................................. $501,612
========
</TABLE>
7. INCOME TAXES
The provision for Federal and state income taxes for the period from
January 1, 1997 through December 30, 1997, is as follows:
<TABLE>
<S> <C>
Current..................................................... $111,886
Deferred.................................................... 56,199
--------
$168,085
========
Federal..................................................... $112,552
State....................................................... 55,533
--------
$168,085
========
</TABLE>
A reconciliation of the difference between the expected provision for
income taxes for the period from January 1, 1997 through December 30, 1997,
using the statutory federal income tax rate of 34% and the Company's effective
tax rate is as follows:
<TABLE>
<S> <C>
Provision at statutory tax rate............................. $149,700
State income taxes, net of federal benefit.................. 36,652
Other....................................................... (18,267)
--------
$168,085
========
</TABLE>
F-60
<PAGE> 176
TITAN RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The components of deferred income tax assets and (liabilities) as of
December 30, 1997, are as follows:
<TABLE>
<S> <C>
Accrued liabilities......................................... $ 22,000
Accounts receivable......................................... (36,504)
Prepaid expenses............................................ (13,429)
Property and equipment...................................... (166,374)
---------
Deferred tax liability............................ $(194,307)
=========
</TABLE>
8. RELATED-PARTY TRANSACTIONS
Effective January 1, 1994, the Company entered into a lease with a related
party to lease its office and operating facilities. The minimum annual rental
payments amount to $84,000 per year and are paid on a month-to-month basis.
The accompanying financial statements include revenue of $173,499 for the
period from January 1, 1997 through December 30, 1997 and outstanding accounts
receivable as of December 30, 1997 of $24,117 related to sales to a related
party.
9. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases rental equipment under operating leases. Future minimum
lease payments, by year and in the aggregate, for noncancelable operating leases
with initial or remaining terms of one year or more are as follows at December
30, 1997:
<TABLE>
<S> <C>
1998........................................................ $74,292
1999........................................................ 39,893
</TABLE>
Rental equipment expense under noncancelable operating leases was $74,292
for the period from January 1, 1997 through December 30, 1997.
Litigation, Claims and Assessments
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
10. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution profit-sharing plan under which
employees having worked a minimum of twelve months are eligible to participate.
Employer contributions, which are discretionary and depend on the Company's
profitability, were approximately $49,000 for 1997.
11. SUBSEQUENT EVENT
Effective December 31, 1997, all of the outstanding stock of the Company
was purchased by NationsRent, Inc., an unrelated third party, in exchange for
cash and debt.
F-61
<PAGE> 177
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Bode-Finn Company:
We have audited the accompanying balance sheets of The Bode-Finn Company (an
Ohio corporation) as of December 31, 1996 and 1997, and the related statements
of income, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Bode-Finn Company as of
December 31, 1996 and 1997, and the results of its operations and cash flows for
each of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 12, 1998.
F-62
<PAGE> 178
THE BODE-FINN COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents........................... $ 244,625 $ 398,042 $ 887,170
Accounts receivable, net of allowance for doubtful
accounts of $770,000, $760,000 and $798,180
(unaudited) for 1996, 1997 and 1998,
respectively...................................... 8,013,745 7,840,930 7,250,208
Inventories, net.................................... 4,635,371 3,823,388 4,855,835
Rental equipment, net............................... 20,438,368 21,560,523 21,920,589
Property and equipment, net......................... 1,041,681 956,768 989,588
Other assets........................................ 879,378 886,487 849,219
----------- ----------- -----------
Total assets.............................. $35,253,168 $35,466,138 $36,752,609
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable.................................. $ 3,951,392 $ 2,350,332 $ 3,921,807
Accrued expenses and other liabilities............ 4,623,823 5,374,820 5,094,374
Debt.............................................. 16,407,989 16,086,500 15,839,363
----------- ----------- -----------
Total liabilities......................... 24,983,204 23,811,652 24,855,544
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 9 and 12)
STOCKHOLDERS' EQUITY:
Common stock, no par value, 2,500 shares
authorized, 1,250 shares issued and
outstanding.................................... 125,000 125,000 125,000
Retained earnings................................. 10,144,964 11,529,486 11,772,065
----------- ----------- -----------
Total stockholders' equity................ 10,269,964 11,654,486 11,897,065
----------- ----------- -----------
Total liabilities and stockholders'
equity.................................. $35,253,168 $35,466,138 $36,752,609
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-63
<PAGE> 179
THE BODE-FINN COMPANY
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTH
PERIOD ENDED
FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
Equipment rentals.............. $18,231,447 $19,772,670 $20,211,679 $ 4,742,679 $ 4,687,176
Sales of equipment, parts and
supplies.................... 26,599,122 32,722,336 33,821,681 7,324,630 8,254,837
Service and other.............. 5,468,525 6,251,936 7,216,815 1,753,068 1,768,973
----------- ----------- ----------- ----------- -----------
50,299,094 58,746,942 61,250,175 13,820,377 14,710,986
COST OF REVENUE:
Cost of equipment rentals,
excluding depreciation...... 4,771,698 5,229,390 4,978,411 1,323,300 1,399,440
Rental equipment
depreciation................ 5,436,903 6,515,970 7,265,763 1,745,328 1,832,972
Cost of sales of equipment,
parts and supplies.......... 20,161,831 25,937,735 26,425,012 5,752,417 6,177,680
Other.......................... 2,052,764 1,895,993 2,159,402 589,033 576,602
----------- ----------- ----------- ----------- -----------
32,423,196 39,579,088 40,828,588 9,410,078 9,986,694
----------- ----------- ----------- ----------- -----------
Gross profit........... 17,875,898 19,167,854 20,421,587 4,410,299 4,724,292
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES........ 14,093,787 15,443,249 16,596,595 3,755,319 3,964,404
NONRENTAL DEPRECIATION AND
AMORTIZATION................... 205,564 260,652 256,808 72,853 61,814
----------- ----------- ----------- ----------- -----------
Operating income....... 3,576,547 3,463,953 3,568,184 582,127 698,074
----------- ----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense............... (1,329,494) (1,494,310) (1,601,831) (349,526) (379,571)
Other income................... 227,106 212,218 347,947 39,326 85,795
----------- ----------- ----------- ----------- -----------
Other income (expense),
net.................. (1,102,388) (1,282,092) (1,253,884) (310,200) (293,776)
----------- ----------- ----------- ----------- -----------
Income before provision
for income taxes..... 2,474,159 2,181,861 2,314,300 271,927 404,298
PROVISION FOR INCOME TAXES....... 1,036,771 936,241 929,778 137,461 161,719
----------- ----------- ----------- ----------- -----------
NET INCOME....................... $ 1,437,388 $ 1,245,620 $ 1,384,522 $ 134,466 $ 242,579
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-64
<PAGE> 180
THE BODE-FINN COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 1997
AND THE THREE MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------
NUMBER TOTAL
OF RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
--------- -------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1995.................... 1,250 $125,000 $ 7,461,956 $ 7,586,956
Net income................................ -- -- 1,437,388 1,437,388
----- -------- ----------- -----------
BALANCE, December 31, 1995.................. 1,250 125,000 8,899,344 9,024,344
Net income................................ -- -- 1,245,620 1,245,620
----- -------- ----------- -----------
BALANCE, December 31, 1996.................. 1,250 125,000 10,144,964 10,269,964
Net income................................ -- -- 1,384,522 1,384,522
----- -------- ----------- -----------
BALANCE, December 31, 1997.................. 1,250 125,000 11,529,486 11,654,486
Net income (unaudited).................... -- -- 242,579 242,579
----- -------- ----------- -----------
BALANCE, March 31, 1998 (unaudited)......... 1,250 $125,000 $11,772,065 $11,897,065
===== ======== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-65
<PAGE> 181
THE BODE-FINN COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTH
FOR THE YEAR ENDED DECEMBER 31, PERIOD ENDED MARCH 31,
------------------------------------------ --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................... $ 1,437,388 $ 1,245,620 $ 1,384,522 $ 134,466 $ 242,579
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization..... 5,642,467 6,776,622 7,522,571 1,818,181 1,899,786
Provision for bad debts........... 291,256 413,151 244,184 54,550 57,169
Provision for inventory
obsolescence.................... -- -- 50,000 -- --
Gain on sale of rental
equipment....................... (618,322) (712,961) (800,940) (121,132) (131,185)
(Gain) loss on sale of property
and equipment................... 740 (22,522) (230,537) 1,231 (29,649)
Changes in operating assets and
liabilities:
Accounts receivable............. (220,880) (810,847) (71,369) 390,384 533,553
Inventories..................... (1,359,110) 1,198,655 1,614,587 553,534 (795,309)
Other assets.................... 275,012 140,938 (7,109) (16,922) 37,268
Accounts payable................ 604,748 1,179,194 (1,601,060) (1,008,860) 1,571,475
Accrued expenses and other
liabilities.................. 383,309 (274,895) 750,997 141,046 (280,446)
------------ ------------ ------------ ------------ -----------
Total adjustments............ 4,999,220 7,887,335 7,471,324 1,812,012 2,862,662
------------ ------------ ------------ ------------ -----------
Net cash provided by
operating activities....... 6,436,608 9,132,955 8,855,846 1,946,478 3,105,241
------------ ------------ ------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment... (10,733,785) (10,254,290) (10,364,431) (2,720,488) (2,588,134)
Purchases of property and
equipment.................... (419,435) (702,564) (211,398) (43,803) (101,984)
Proceeds from sale of rental
equipment.................... 1,690,437 1,850,831 1,736,844 283,554 289,142
Proceeds from sale of property
and equipment................ 16,422 42,378 458,045 1,200 32,000
------------ ------------ ------------ ------------ -----------
Net cash used in investing
activities................. (9,446,361) (9,063,645) (8,380,940) (2,479,537) (2,368,976)
------------ ------------ ------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt................ 8,236,990 10,797,136 17,437,380 18,054,160 758,150
Repayments of debt................ (5,331,819) (10,831,673) (17,758,869) (17,066,355) (1,005,287)
------------ ------------ ------------ ------------ -----------
Net cash provided by (used in)
financing activities............ 2,905,171 (34,537) (321,489) 987,805 (247,137)
------------ ------------ ------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................... (104,582) 34,773 153,417 454,746 489,128
CASH AND CASH EQUIVALENTS, beginning
of period........................... 314,434 209,852 244,625 244,625 398,042
------------ ------------ ------------ ------------ -----------
CASH AND CASH EQUIVALENTS, end of
period.............................. $ 209,852 $ 244,625 $ 398,042 $ 699,371 $ 887,170
============ ============ ============ ============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.............. $ 1,441,462 $ $1,476,730 $ 1,582,877 $ 349,380 $ 373,420
============ ============ ============ ============ ===========
Cash paid for income taxes.......... $ 832,954 $ 915,026 $ 812,481 $ 98,200 $ 88,000
============ ============ ============ ============ ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-66
<PAGE> 182
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION:
The Bode-Finn Company (the "Company") was incorporated in Ohio in January
1938. The Company rents a broad array of equipment to a diverse customer base
that includes construction industry participants, industrial companies and
others in the states of Ohio, Kentucky, West Virginia and Indiana. The Company
also engages in related activities such as selling used equipment, acting as a
distributor for certain new equipment and selling related merchandise and parts.
The nature of the Company's business is such that short-term obligations are
typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying audited and unaudited
balance sheets are presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents.
Inventories
Inventories consist of equipment, parts and related supply items. New and
used equipment inventories are stated at the lower of cost (determined using a
first-in, first-out "FIFO" basis) or market. Parts inventories are determined
using a combination of the last-in, first-out "LIFO" and FIFO methods and are
stated at replacement cost which approximates market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using an accelerated method. The range of useful
lives estimated by management for rental equipment is five to seven years.
Rental equipment is depreciated to a salvage value of ten to twenty percent of
cost. Rental equipment having a cost of $2,000 or less is expensed at the time
of purchase. Ordinary maintenance and repair costs are charged to operations as
incurred.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using an accelerated method. The range of useful lives
estimated by management for property and equipment is two to thirty-nine years.
Property and equipment is depreciated to a salvage value of zero to twenty
percent of cost. Ordinary maintenance and repair costs are charged to operations
as incurred.
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
F-67
<PAGE> 183
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair value of financial instruments
The carrying amounts for accounts receivable, accounts payable and accrued
expenses and other liabilities approximate fair value due to the short-term
nature of these accounts. The fair value of debt is determined using current
interest rates for similar instruments as of December 31, 1996 and 1997 and
approximates the carrying value of these notes due to the fact that the
underlying instruments include provisions to adjust note balances and interest
rates to approximate fair market value.
Income taxes
The Company follows Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which requires, among other things,
recognition of future tax benefits measured at enacted rates attributable to
deductible temporary differences between financial statement and income tax
bases of assets and liabilities and to tax net operating loss carryforwards to
the extent that realization of said benefits is more likely than not.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of geographically diverse
customers make up the Company's customer base. No single customer represents
greater than 10% of total accounts receivable. The Company controls credit risk
through credit approvals, credit limits, and monitoring procedures.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Interim financial information
In the opinion of management, the unaudited interim financial information
as of March 31, 1998 and for the three month periods ended March 31, 1997 and
1998 furnished herein reflects all adjustments consisting of normal recurring
accruals that, in the opinion of management, are necessary for a fair
presentation of the results for the interim period. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for the entire year.
3. INVENTORIES:
Inventories are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
New and used equipment, FIFO............. $ 2,581,561 $ 1,590,860 $ 2,319,053
Parts, LIFO.............................. 645,076 801,055 747,327
Parts, FIFO.............................. 900,780 901,854 921,799
Work in progress, at cost................ 682,954 754,619 1,092,656
Allowance for obsolete inventory......... (175,000) (225,000) (225,000)
------------ ------------ ------------
Total inventories, net......... $ 4,635,371 $ 3,823,388 $ 4,855,835
============ ============ ============
</TABLE>
F-68
<PAGE> 184
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The current costs, determined by using the FIFO basis, of LIFO inventories
was $1,122,383, $1,301,380 and $1,247,652 (unaudited) at December 31, 1996 and
1997 and March 31, 1998.
4. RENTAL EQUIPMENT:
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Rental equipment......................... $ 46,719,676 $ 50,299,100 $ 51,198,041
Less -- accumulated depreciation......... (26,281,308) (28,738,577) (29,277,452)
------------ ------------ ------------
Rental equipment, net.......... $ 20,438,368 $ 21,560,523 $ 21,920,589
============ ============ ============
</TABLE>
5. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture, fixtures and office
equipment.............................. $ 3,728,682 $ 3,588,314 $ 3,621,218
Less -- accumulated depreciation......... (2,687,001) (2,631,546) (2,631,630)
------------ ------------ ------------
Property and equipment, net.... $ 1,041,681 $ 956,768 $ 989,588
============ ============ ============
</TABLE>
6. ACCRUED EXPENSES AND OTHER LIABILITIES:
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Compensation and payroll-related............... $2,083,332 $2,422,240 $1,723,623
Deferred income-rental and maintenance......... 777,237 955,808 999,391
Taxes.......................................... 532,373 698,314 737,698
Medical insurance reserve...................... 232,256 302,381 302,381
Other.......................................... 998,625 996,077 1,331,281
---------- ---------- ----------
Accrued expenses and other liabilities......... $4,623,823 $5,374,820 $5,094,374
========== ========== ==========
</TABLE>
F-69
<PAGE> 185
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. DEBT:
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable, unsecured, interest at 6%,
payable on demand......................... $ 28,095 $ 35,525 $ 43,675
Revolving $7,000,000 credit agreement,
secured by rental equipment and inventory,
interest at prime, 8.5% at December 31,
1997 and March 31, 1998 (unaudited), due
1999...................................... -- 2,950,000 3,350,000
Revolving $15,000,000 credit agreement,
secured by rental equipment and inventory,
interest at 9.25%, payable in monthly
installments through February 2003........ -- 12,916,670 12,291,674
Revolving $8,000,000 credit agreement,
secured by rental equipment and inventory,
interest at prime 8.5% at December 31,
1997 and March 31, 1998 (unaudited),
repaid during 1997........................ 6,650,000 -- --
Notes payable, secured by rental equipment
and inventory, interest at prime plus
1/2% (9.0% at December 31, 1997 and March
31, 1998 (unaudited)), payable in monthly
installments, repaid during 1997.......... 9,123,939 -- --
Note payable, secured by property and
equipment, interest at 9.1%, payable in
monthly installments, repaid during
1997...................................... 317,337 -- --
Rental equipment notes, secured by rental
equipment and inventory, interest from
8.5% to 10.5%, payable in various monthly
installments through 2001................. 288,618 184,305 154,014
----------- ----------- -----------
Total debt........................ $16,407,989 $16,086,500 $15,839,363
=========== =========== ===========
</TABLE>
Maturities of the Company's debt at December 31, 1997 for the years ended
December 31, are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 2,610,563
1999........................................................ 5,497,943
2000........................................................ 2,536,997
2001........................................................ 2,524,034
2002........................................................ 2,500,297
2003 and thereafter......................................... 416,666
-----------
$16,086,500
===========
</TABLE>
F-70
<PAGE> 186
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES:
The provision (benefit) for Federal and state income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTH
PERIOD ENDED
FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- -------------------
1995 1996 1997 1997 1998
---------- ---------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current................................... $ 800,518 $1,157,016 $828,793 $128,263 $150,404
Deferred.................................. 236,253 (220,775) 100,985 9,198 11,315
---------- ---------- -------- -------- --------
$1,036,771 $ 936,241 $929,778 $137,461 $161,719
========== ========== ======== ======== ========
Federal................................... $ 888,321 $ 805,329 $789,496 $116,774 $137,462
State and local........................... 148,450 130,912 140,282 20,687 24,257
---------- ---------- -------- -------- --------
$1,036,771 $ 936,241 $929,778 $137,461 $161,719
========== ========== ======== ======== ========
</TABLE>
The deferred income tax results from temporary differences in the
recognition of certain items for tax and financial statement purposes,
principally from differences in depreciation methods, allowance for doubtful
accounts and other expenses not currently deductible for tax purposes. For
financial statement purposes, the credit has been recognized in 1997 as a
deferred tax asset.
A reconciliation of the difference between the expected provision for
income taxes using the statutory federal income tax rate of 34% and the
Company's actual provision is as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTH
PERIOD ENDED
FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- -------------------
1995 1996 1997 1997 1998
---------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Provision at statutory tax rate............. $ 841,214 $741,832 $786,862 $117,225 $137,462
State and local income taxes, net of federal
benefit................................... 97,977 86,402 92,586 13,653 16,010
Other....................................... 97,580 108,007 50,330 6,583 8,247
---------- -------- -------- -------- --------
$1,036,771 $936,241 $929,778 $137,461 $161,719
========== ======== ======== ======== ========
</TABLE>
The components of deferred income tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Reserves and accruals not deductible until paid..... $ 945,915 $ 1,103,736 $ 1,116,255
Depreciation........................................ (1,274,973) (1,394,170) (1,320,000)
Alternative minimum tax credit carryforward......... 392,356 252,747 252,747
----------- ----------- -----------
Net deferred tax asset (liability)........ $ 63,298 $ (37,687) $ 49,002
=========== =========== ===========
</TABLE>
Net deferred tax assets and net deferred tax liability are reported in the
accompanying balance sheets as components of other assets and accrued expenses
and other liabilities, respectively.
F-71
<PAGE> 187
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES:
Operating Leases
The Company leases rental equipment, real estate and certain office
equipment under noncancelable operating leases. These leases expire at various
dates through September 30, 2010. Certain real estate leases require the Company
to pay maintenance, insurance, taxes and certain other expenses in addition to
the stated rentals. Future minimum lease payments for noncancelable operating
leases with initial or remaining terms of one year or more are as follows at
December 31, 1997:
<TABLE>
<S> <C>
1998..................................................... $1,644,419
1999..................................................... 1,055,192
2000..................................................... 568,309
2001..................................................... 356,649
2002..................................................... 166,289
Thereafter............................................... 1,196,538
----------
$4,987,396
==========
</TABLE>
Rent expense under noncancelable operating leases for the years ended
December 31, 1995, 1996 and 1997 were $1,537,082, $1,598,979 and $1,824,938,
respectively.
Litigation
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying consolidated financial statements.
10. RELATED PARTY TRANSACTIONS:
The Company leases land and buildings used in its operations from its
stockholders and officers. The leases cover several operating locations and
expire at various dates through September 30, 2010. The leases require minimum
monthly payments plus override amounts when certain conditions are met or
exceeded. The total rent expense related to these leases for the years ended
December 31, 1995, 1996 and 1997 was $661,481, $739,781 and $768,716,
respectively.
11. EMPLOYEE BENEFIT PLANS:
401(k) Plan
The Company participates in a 401(k) plan (the "Plan") which covers certain
full-time employees over 21 years old who have worked a minimum of one year for
the Company. The Plan is funded by employee deferrals of income and
discretionary contributions by the Company. The Company's matching contributions
totaled $207,982, $262,267 and $302,769 for the years ended December 31, 1995,
1996 and 1997. No amount was due to the Plan as of December 31, 1997.
Profit Sharing Plan
All full-time employees over 21 years old who have worked a minimum of one
year for the Company may participate in the Company's Profit Sharing Retirement
Plan (the "Profit Sharing Plan"). The Profit Sharing Plan is funded by
contributions made by the Company. The Company's Board of Directors determines
the annual amount of contributions. The Company's Profit Sharing retirement
contributions totaled $550,000, $400,000 and $508,000 for the years ended
December 31, 1995, 1996 and 1997, respectively.
F-72
<PAGE> 188
THE BODE-FINN COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred Compensation Plan
The Company has deferred compensation agreements with various employees.
Under the terms of the agreements, the Company will pay these employees a
defined amount for ten years subsequent to their retirement from the Company, if
retirement from the Company is after the agreed retirement date. A deferred
compensation accrual of approximately $534,226, $539,585 and $539,585
(unaudited) is included in the accompanying balance sheets in accrued expenses
and other liabilities at December 31, 1996 and 1997 and March 31, 1998.
12. SUBSEQUENT EVENT:
Effective May 5, 1998, substantially all of the outstanding stock of the
Company was purchased by NationsRent, Inc., an unrelated third party, in
exchange for cash and stock.
F-73
<PAGE> 189
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To RFL Enterprises, Inc.:
We have audited the accompanying balance sheet of RFL Enterprises, Inc. (an
Indiana S corporation) as of December 31, 1997, and the related statements of
income, stockholder's equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RFL Enterprises, Inc. as of
December 31, 1997, and the results of its operations and cash flows for the year
then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 8, 1998.
F-74
<PAGE> 190
RFL ENTERPRISES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 50,158 $ 390,055
Accounts receivable, net of allowances for doubtful accounts
of $10,000 and $10,000 (unaudited) as of December 31, 1997
and March 31, 1998, respectively.......................... 215,240 170,300
Inventories................................................. 185,366 180,962
Rental equipment, net....................................... 1,622,404 1,333,136
Property, plant and equipment, net.......................... 199,192 197,592
---------- ----------
Total assets...................................... $2,272,360 $2,272,045
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable.......................................... $ 1,791 $ 1,362
Accrued expenses and other liabilities.................... 58,041 54,940
Debt...................................................... 844,871 742,877
---------- ----------
Total liabilities................................. 904,703 799,179
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)
STOCKHOLDER'S EQUITY:
Common stock -- no par value, 1,000 shares authorized, 100
issued and outstanding................................. 10,000 10,000
Retained earnings......................................... 1,357,657 1,462,866
---------- ----------
Total stockholder's equity........................ 1,367,657 1,472,866
---------- ----------
Total liabilities and stockholder's equity........ $2,272,360 $2,272,045
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-75
<PAGE> 191
RFL ENTERPRISES, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTH
YEAR ENDED PERIOD ENDED MARCH 31,
DECEMBER 31, -------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Equipment rentals........................................ $ 966,277 $241,591 $201,806
Sales of equipment, parts and supplies................... 1,950,382 522,518 473,635
Other.................................................... 126,511 27,454 33,913
---------- -------- --------
3,043,170 791,563 709,354
COST OF REVENUE:
Cost of equipment rentals................................ 463,165 105,353 102,899
Rental equipment depreciation............................ 261,405 58,259 77,144
Cost of sales of equipment, parts and supplies........... 1,471,807 334,783 326,984
---------- -------- --------
2,196,377 498,395 507,027
---------- -------- --------
Gross profit..................................... 846,793 293,168 202,327
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............... 208,694 47,470 46,365
NONRENTAL DEPRECIATION..................................... 23,307 1,600 1,600
---------- -------- --------
Operating income................................. 614,792 244,098 154,362
---------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense......................................... (92,293) (20,654) (16,891)
Interest income.......................................... 14,925 2,356 348
---------- -------- --------
Total other income (expense), net................ (77,368) (18,298) (16,543)
---------- -------- --------
Net income....................................... 537,424 225,800 137,819
PRO FORMA PROVISION FOR INCOME TAXES....................... 214,970 90,320 55,128
---------- -------- --------
PRO FORMA NET INCOME....................................... $ 322,454 $135,480 $ 82,691
========== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-76
<PAGE> 192
RFL ENTERPRISES, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE
THREE MONTH PERIOD ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK
NO PAR VALUE
-------------------
NUMBER RETAINED
OF SHARES AMOUNT EARNINGS TOTAL
--------- ------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1997............................ 100 $10,000 $ 940,484 $ 950,484
Distribution...................................... -- -- (120,251) (120,251)
Net income........................................ -- -- 537,424 537,424
--- ------- ---------- ----------
BALANCE, December 31, 1997.......................... 100 10,000 1,357,657 1,367,657
Distribution (unaudited).......................... -- -- (32,610) (32,610)
Net income (unaudited)............................ -- -- 137,819 137,819
--- ------- ---------- ----------
BALANCE, March 31, 1998 (unaudited)................. 100 $10,000 $1,462,866 $1,472,866
=== ======= ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-77
<PAGE> 193
RFL ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTH
YEAR ENDED PERIOD ENDED MARCH 31,
DECEMBER 31, -------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 537,424 $ 225,800 $ 137,819
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation......................................... 284,712 59,859 78,744
Gain on sale of rental equipment..................... (471,986) (177,803) (150,519)
Changes in operating assets and liabilities:
Accounts receivable, net........................... 56,067 97,997 44,940
Inventories........................................ (29,941) (3,529) 4,404
Accounts payable................................... 968 174,349 (429)
Accrued expenses and other liabilities............. 31,674 (11,446) (3,101)
----------- --------- ---------
Net cash provided by operating activities....... 408,918 365,227 111,858
----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment........................... (2,077,859) (616,880) (110,992)
Proceeds from sale of rental equipment.................. 1,914,038 522,518 473,635
----------- --------- ---------
Net cash provided by (used in) investing
activities.................................... (163,821) (94,362) 362,643
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of distributions................................ (120,251) (120,000) (32,610)
Repayments of debt...................................... (133,202) (101,752) (101,994)
----------- --------- ---------
Net cash used in financing activities........... (253,453) (221,752) (134,604)
----------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... (8,356) 49,113 339,897
CASH AND CASH EQUIVALENTS, beginning of period............ 58,514 58,514 50,158
----------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period.................. $ 50,158 $ 107,627 $ 390,055
=========== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................. $ 87,293 $ 20,654 $ 16,891
=========== ========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-78
<PAGE> 194
RFL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
RFL Enterprises, Inc. (the "Company") was incorporated in 1983 as an
Indiana S corporation. The Company rents a broad array of equipment to a
customer base that includes principally construction industry participants and
industrial companies. The Company also engages in related activities such as
selling used equipment, acting as a distributor for certain new equipment and
selling related merchandise and parts. The nature of the Company's business is
such that short-term obligations are typically met by cash flow generated from
long-term assets. Consequently, consistent with industry practice, the
accompanying audited and unaudited balance sheets are presented on an
unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. The Company had no
cash equivalents at December 31, 1997 and March 31, 1998 (unaudited).
Inventories
Inventories consist of equipment, tools, parts, fuel and related supply
items and are stated at the lower of average weighted cost or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The range of
useful lives estimated by management for rental equipment is five to ten years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Property, plant and equipment
Property, plant and equipment are recorded at cost and depreciated over
their estimated useful lives using the straight-line method. The range of useful
lives estimated by management for property and equipment is five to thirty-nine
years. Ordinary maintenance and repair costs are charged to operations as
incurred.
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
Fair value of financial instruments
The carrying amounts reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable and accrued expenses
and other liabilities approximate fair value as of December 31, 1997 and March
31, 1998 (unaudited).
F-79
<PAGE> 195
RFL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes
The Company is an S corporation for income tax purposes. Accordingly,
income, losses and related temporary differences which arise in the recording of
income and expense items for financial reporting and tax reporting purposes are
included in the individual tax return of the shareholder. Therefore, no
provision or liability for Federal and state income taxes has been included in
the accompanying financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for information purposes only. The pro forma provision
for income tax has been provided at the estimated rate of 40%.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Three customers each represent greater than 10%
of total accounts receivable. As of December 31, 1997, these accounts
represented 40% of total accounts receivable. The Company controls credit risk
through credit approvals, credit limits, and monitoring procedures.
Interim financial information
In the opinion of management, the unaudited interim financial information
as of March 31, 1998 and for the three month periods ended March 31, 1997 and
1998 furnished herein reflects all adjustments consisting of normal recurring
accruals that, in the opinion of management, are necessary for a fair
presentation of the results for the interim period. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for the entire year primarily due to seasonal variations.
3. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Rental equipment............................................ $2,161,788 $1,880,998
Less -- accumulated depreciation............................ (539,384) (547,862)
---------- ----------
Rental equipment, net............................. $1,622,404 $1,333,136
========== ==========
</TABLE>
F-80
<PAGE> 196
RFL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture, fixtures and office equipment.................... $ 20,603 $ 20,603
Building.................................................... 140,820 140,820
Land........................................................ 80,000 80,000
-------- --------
241,423 241,423
Less -- accumulated depreciation............................ (42,231) (43,831)
-------- --------
Property and equipment, net....................... $199,192 $197,592
======== ========
</TABLE>
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Deferred revenues........................................... $36,000 $36,000
Sales and property tax...................................... 12,197 13,183
Other....................................................... 9,844 5,757
------- -------
Accrued expenses and other liabilities............ $58,041 $54,940
======= =======
</TABLE>
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Line of credit, interest at 8.75%, payable on demand........ $550,000 $ 64,000
Term loan, secured by accounts receivable, inventories and
equipment, interest at 9.9%, payable in semi annual
installments through December 1999........................ 114,000 500,000
Mortgage, secured by building and land, interest at 9.18%,
payable in monthly installments through June 2009......... 157,871 155,877
Unsecured note payable to stockholder, interest at 10%,
payable on demand......................................... 23,000 23,000
-------- --------
Total debt........................................ $844,871 $742,877
======== ========
</TABLE>
F-81
<PAGE> 197
RFL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Subsequent to December 31, 1997, the Company retired the line of credit,
term loan and note payable to stockholder in connection with its purchase by
NationsRent, Inc., an unrelated third party. Maturities of the mortgage at
December 31, 1997, for the years ended December 31, are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 12,000
1999........................................................ 12,000
2000........................................................ 12,000
2001........................................................ 12,000
2002........................................................ 12,000
Thereafter.................................................. 97,871
--------
Total............................................. $157,871
========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
8. SUBSEQUENT EVENT
Effective April 15, 1998, substantially all of the Company's operating
assets and liabilities were purchased by NationsRent, Inc. in exchange for cash
and debt.
F-82
<PAGE> 198
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Naples Rent-All & Sales Company, Inc.:
We have audited the accompanying balance sheet of Naples Rent-All & Sales
Company, Inc. (a Florida S corporation) as of December 31, 1997, and the related
statements of income, stockholder's equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Naples Rent-All & Sales
Company, Inc. as of December 31, 1997, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 1, 1998.
F-83
<PAGE> 199
NAPLES RENT-ALL & SALES COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 98,660 $ 87,208
Accounts receivable, net of allowances for doubtful accounts
of $34,035 and $24,072 (unaudited) as of December 31, 1997
and March 31, 1998, respectively.......................... 408,579 447,831
Inventories................................................. 816,397 957,373
Rental equipment, net....................................... 913,137 866,056
Property and equipment, net................................. 119,647 144,475
Other assets................................................ 27,259 55,240
---------- ----------
Total assets...................................... $2,383,679 $2,558,183
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable.......................................... $ 428,714 $ 564,619
Accrued expenses and other liabilities.................... 148,452 172,948
Debt...................................................... 176,128 171,420
---------- ----------
Total liabilities................................. 753,294 908,987
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 9)
STOCKHOLDER'S EQUITY:
Common stock -- $10 par value, 5,500 shares authorized,
5,129 shares issued.................................... 51,290 51,290
Additional paid-in capital................................ 6,826 6,826
Retained earnings......................................... 1,901,639 1,920,450
Treasury stock -- 1,709 shares at cost.................... (329,370) (329,370)
---------- ----------
Total stockholder's equity........................ 1,630,385 1,649,196
---------- ----------
Total liabilities and stockholder's equity........ $2,383,679 $2,558,183
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-84
<PAGE> 200
NAPLES RENT-ALL & SALES COMPANY, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTH
YEAR ENDED PERIOD ENDED MARCH 31,
DECEMBER 31, -------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Equipment rentals....................................... $2,262,014 $ 509,684 $ 512,784
Sales of equipment, parts and supplies.................. 3,747,704 807,151 867,976
Other................................................... 57,121 19,900 24,782
---------- ---------- ----------
6,066,839 1,336,735 1,405,542
COST OF REVENUE:
Cost of equipment rentals, excluding depreciation....... 1,706,311 360,942 394,948
Rental equipment depreciation........................... 440,152 93,437 94,377
Cost of sales of equipment, parts and supplies.......... 2,967,261 627,675 686,811
---------- ---------- ----------
5,113,724 1,082,054 1,176,136
---------- ---------- ----------
Gross profit.................................... 953,115 254,681 229,406
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.............. 517,662 109,503 119,820
NONRENTAL DEPRECIATION AND AMORTIZATION................... 44,970 6,981 9,333
---------- ---------- ----------
Operating income................................ 390,483 138,197 100,253
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense........................................ (23,535) (4,976) (3,976)
Other income, net....................................... 52,433 14,907 13,054
---------- ---------- ----------
Total other income (expense), net............... 28,898 9,931 9,078
---------- ---------- ----------
Net income...................................... 419,381 148,128 109,331
PRO FORMA PROVISION FOR INCOME TAX........................ 167,752 59,251 43,732
---------- ---------- ----------
PRO FORMA NET INCOME...................................... $ 251,629 $ 88,877 $ 65,599
========== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-85
<PAGE> 201
NAPLES RENT-ALL & SALES COMPANY, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL
NUMBER PAID-IN RETAINED TREASURY
OF SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
--------- ------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997......... 5,129 $51,290 $6,826 $1,810,258 $(329,370) $1,539,004
Stockholder distributions...... -- -- -- (328,000) -- (328,000)
Net income..................... -- -- -- 419,381 -- 419,381
----- ------- ------ ---------- --------- ----------
BALANCE, December 31, 1997....... 5,129 51,290 6,826 1,901,639 (329,370) 1,630,385
Stockholder distributions
(unaudited)................. -- -- -- (90,520) -- (90,520)
Net income (unaudited)......... -- -- -- 109,331 -- 109,331
----- ------- ------ ---------- --------- ----------
BALANCE, March 31, 1998
(unaudited).................... 5,129 $51,290 $6,826 $1,920,450 $(329,370) $1,649,196
===== ======= ====== ========== ========= ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-86
<PAGE> 202
NAPLES RENT-ALL & SALES COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTH
YEAR ENDED PERIOD ENDED MARCH 31,
DECEMBER 31, -------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 419,381 $148,128 $109,331
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 485,122 100,418 103,710
Gain on sale of rental equipment...................... (212,328) (35,288) (69,563)
Gain on sale of property and equipment................ (4,637) -- --
Changes in operating assets and liabilities:
Accounts receivable, net............................ (64,496) (13,733) (39,252)
Inventories......................................... 64,926 (17,837) (140,976)
Other assets........................................ 1,533 (53,435) (27,981)
Accounts payable.................................... (18,273) 29,397 135,905
Accrued expenses and other liabilities.............. 31,964 (12,133) 24,496
--------- -------- --------
Net cash provided by operating activities........ 703,192 145,517 95,670
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment............................ (560,004) (112,088) (85,472)
Purchases of property and equipment...................... (71,997) (2,869) (34,161)
Proceeds from sale of rental equipment................... 393,040 65,646 107,739
Proceeds from sale of property and equipment............. 16,320 -- --
--------- -------- --------
Net cash used in investing activities............ (222,641) (49,311) (11,894)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stockholder distributions................................ (328,000) (72,132) (90,520)
Proceeds from debt....................................... 65,000 10,632 --
Repayments of debt....................................... (188,261) (35,000) (4,708)
--------- -------- --------
Net cash used in financing activities............ (451,261) (96,500) (95,228)
--------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....... 29,290 (294) (11,452)
CASH AND CASH EQUIVALENTS, beginning of period............. 69,370 69,370 98,660
--------- -------- --------
CASH AND CASH EQUIVALENTS, end of period................... $ 98,660 $ 69,076 $ 87,208
========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest................................... $ 23,535 $ 4,976 $ 3,976
========= ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-87
<PAGE> 203
NAPLES RENT-ALL & SALES COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Naples Rent-All & Sales Company, Inc. (the "Company") was incorporated in
January 1968 to serve as a rental center for homeowners and contractors
equipment, lawn and garden equipment, and golf course and turf maintenance
equipment. The Company also engages in related activities such as selling used
equipment, acting as a distributor for certain new equipment and selling related
merchandise and parts. The nature of the Company's business is such that
short-term obligations are typically met by cash flow generated from long-term
assets. Consequently, consistent with industry practice, the accompanying
audited and unaudited balance sheets are presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. As of December 31,
1997 and March 31, 1998 (unaudited), the Company had no cash equivalents.
Inventories
Inventories consist of equipment, tools, parts, fuel and related supply
items. Inventories are stated at the lower of weighted average cost or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over a five-year life
using accelerated methods. Rental equipment is depreciated to a salvage value of
five percent of cost. Rental equipment having a cost of $500 or less is expensed
at the time of purchase. Ordinary maintenance and repair costs are charged to
operations as incurred.
Property and equipment
Property and equipment are recorded at cost and depreciated over an
estimated useful life of five years using the straight-line method. Ordinary
maintenance and repair costs are charged to operations as incurred. The range of
useful lives estimated by management for property and equipment is as follows:
<TABLE>
<CAPTION>
YEARS
-------------
<S> <C>
Furniture and fixtures...................................... 5
Equipment................................................... 5
Leasehold improvements...................................... Life of lease
</TABLE>
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
F-88
<PAGE> 204
NAPLES RENT-ALL & SALES COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair value of financial instruments
The carrying amounts reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable, accrued expenses
and other liabilities and debt approximate fair value as of December 31, 1997
and March 31, 1998 (unaudited).
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Income taxes
The Company is an S corporation for tax purposes. Accordingly, income,
losses and related temporary differences which arise in the recording of income
and expense items for financial reporting and tax reporting purposes are
included in the individual tax return of the stockholder. Therefore, no
provision or liability for Federal and state income taxes has been included in
the accompanying financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for informational purposes only. The pro forma provision
for income tax has been provided at the estimated effective tax rate of 40%.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of customers make up the
Company's customer base. No single customer represents greater than 10% of total
accounts receivable. The Company controls credit risk through credit approvals,
credit limits, and monitoring procedures.
Interim financial information
In the opinion of management, the unaudited interim financial information
as of March 31, 1998 and for the three month periods ended March 31, 1997 and
1998 furnished herein reflects all adjustments consisting of normal recurring
accruals that, in the opinion of management, are necessary for a fair
presentation of the results for the interim period. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for the entire year primarily due to seasonal variations.
F-89
<PAGE> 205
NAPLES RENT-ALL & SALES COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Rental equipment............................................ $ 2,033,651 $ 2,051,524
Less -- accumulated depreciation............................ (1,120,514) (1,185,468)
----------- -----------
Rental equipment, net............................. $ 913,137 $ 866,056
=========== ===========
</TABLE>
4. PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture and fixtures...................................... $ 32,697 $ 32,032
Equipment................................................... 278,072 291,313
Leasehold improvements...................................... 36,847 38,362
--------- ---------
347,616 361,707
Less -- accumulated depreciation............................ (227,969) (217,232)
--------- ---------
Property and equipment, net....................... $ 119,647 $ 144,475
========= =========
</TABLE>
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Payroll-related............................................. $ 55,247 $ 56,988
Accrued dividends payable................................... 45,000 50,429
Accrued property taxes...................................... 15,187 4,978
Other....................................................... 33,018 60,553
-------- --------
Accrued expenses and other liabilities............ $148,452 $172,948
======== ========
</TABLE>
F-90
<PAGE> 206
NAPLES RENT-ALL & SALES COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Revolving line of credit, with borrowings up to $350,000,
secured by substantially all of the Company's receivables,
interest at prime plus .25% (8.75% at December 31, 1997
and March 31, 1998), payable in monthly installments
through November 1998..................................... $ 50,000 $ 50,000
Equipment notes, secured by equipment, interest at rates
averaging approximately 7%, payable in monthly
installments through December 2000........................ 126,128 121,420
-------- --------
Total debt........................................ $176,128 $171,420
======== ========
</TABLE>
Maturities of the Company's debt at December 31, 1997 for the years ended
December 31, are as follows:
<TABLE>
<S> <C>
1998........................................................ $122,090
1999........................................................ 36,168
2000........................................................ 17,870
--------
Total............................................. $176,128
========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases real estate under operating leases. Certain real estate
leases require the Company to pay maintenance, insurance, taxes and certain
other expenses in addition to the stated rentals. Future minimum lease payments,
by year and in the aggregate, for noncancelable operating leases with initial or
remaining terms of one year or more are as follows at December 31, 1997:
<TABLE>
<S> <C>
1998........................................................ $221,710
1999........................................................ 203,234
--------
Total............................................. $424,944
========
</TABLE>
Rent expense under operating leases for the year ended December 31, 1997
and three month periods ended March 31, 1997 and 1998 was approximately
$222,000, $58,000 (unaudited) and $55,000 (unaudited), respectively.
Consulting Agreement
The Company has a consulting agreement with a former stockholder in which
the Company is required to pay the former stockholder $30,000 per year through
November 1, 1999. Consulting fees for the year ended December 31, 1997 under the
terms of this agreement were $30,000. Subsequent to year-end, all future amounts
owed under this agreement were settled in exchange for approximately $40,000.
Litigation, Claims and Assessments
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
F-91
<PAGE> 207
NAPLES RENT-ALL & SALES COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. EMPLOYEE BENEFIT PLAN
The Company has a contributory 401(k) profit-sharing plan under which
substantially all full-time employees are eligible to participate. The plan
allows for discretionary employer contributions as determined by the Company.
Employees vest in contributions made by the employer over a seven-year period.
Employer contributions for the year ended December 31, 1997 and three month
periods ended March 31, 1997 and 1998 were approximately $17,000, $0 (unaudited)
and $3,000 (unaudited), respectively.
9. SUBSEQUENT EVENT
Effective April 30, 1998, substantially all of the Company's operating
assets and liabilities were purchased by NationsRent, Inc., an unrelated third
party, in exchange for cash and debt.
F-92
<PAGE> 208
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Raymond Equipment Company, Inc.:
We have audited the accompanying balance sheets of Raymond Equipment Company,
Inc. (a Kentucky S corporation) as of June 30, 1996 and 1997, and the related
statements of income, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Raymond Equipment Company, Inc.
as of June 30, 1996 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 13, 1998.
F-93
<PAGE> 209
RAYMOND EQUIPMENT COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................... $ 749,276 $ 224,684 $ 427,366
Marketable securities at market value................... 1,227,355 777,860 914,335
Accounts receivable..................................... 3,390,079 3,608,443 2,198,061
Inventories............................................. 644,061 586,321 752,124
Rental equipment, net................................... 28,865,568 32,685,787 33,704,468
Property and equipment, net............................. 2,709,715 2,719,656 2,868,278
Other assets............................................ 195,664 399,687 397,243
----------- ----------- -----------
Total assets.................................. $37,781,718 $41,002,438 $41,261,875
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable...................................... $ 974,322 $ 793,087 $ 883,350
Accrued expenses and other liabilities................ 1,059,130 539,020 328,848
Debt.................................................. 24,498,329 25,883,180 23,468,571
----------- ----------- -----------
Total liabilities............................. 26,531,781 27,215,287 24,680,769
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)
STOCKHOLDERS' EQUITY:
Common stock, no par value, 500,000 shares authorized,
207,650, 209,651 and 210,975 (unaudited) shares
issued and outstanding at June 30, 1996, 1997 and
March 31, 1998, respectively....................... 439,116 544,168 629,513
Retained earnings..................................... 10,461,809 12,969,978 15,442,113
Net unrealized gain on marketable
securities.................................. 349,012 273,005 509,480
----------- ----------- -----------
Total stockholders' equity.................... 11,249,937 13,787,151 16,581,106
----------- ----------- -----------
Total liabilities and stockholders' equity.... $37,781,718 $41,002,438 $41,261,875
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-94
<PAGE> 210
RAYMOND EQUIPMENT COMPANY, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIOD
FOR THE YEAR ENDED JUNE 30, ENDED MARCH 31,
--------------------------- -------------------------
1996 1997 1997 1998
------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE:
Equipment rentals......................... $10,427,708 $11,997,902 $ 8,082,542 $ 9,113,745
Sales of equipment, parts and supplies.... 8,700,165 9,323,810 7,318,745 6,923,388
----------- ----------- ----------- -----------
19,127,873 21,321,712 15,401,287 16,037,133
COST OF REVENUE:
Cost of equipment rentals, excluding
depreciation........................... 3,172,008 3,329,502 2,506,446 2,291,828
Rental equipment depreciation............. 3,652,589 4,198,076 3,049,772 3,565,429
Cost of sales of equipment, parts and
supplies............................... 5,287,538 5,991,061 4,178,088 4,123,883
----------- ----------- ----------- -----------
12,112,135 13,518,639 9,734,306 9,981,140
----------- ----------- ----------- -----------
Gross profit...................... 7,015,738 7,803,073 5,666,981 6,055,993
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.................................. 2,361,132 2,837,207 1,865,711 1,952,962
NONRENTAL DEPRECIATION AND AMORTIZATION..... 147,637 182,783 150,571 167,226
----------- ----------- ----------- -----------
Operating income.................. 4,506,969 4,783,083 3,650,699 3,935,805
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense.......................... (1,670,707) (1,801,706) (1,303,290) (1,429,917)
Interest income........................... 28,544 23,812 11,619 20,190
Other, net................................ 93,829 121,010 112,418 258,086
----------- ----------- ----------- -----------
Total other expense, net.......... (1,548,334) (1,656,884) (1,179,253) (1,151,641)
----------- ----------- ----------- -----------
Net income........................ 2,958,635 3,126,199 2,471,446 2,784,164
PRO FORMA PROVISION FOR INCOME TAXES........ 1,239,454 1,306,480 1,044,578 1,169,665
----------- ----------- ----------- -----------
PRO FORMA NET INCOME........................ $ 1,719,181 $ 1,819,719 $ 1,426,868 $ 1,614,499
=========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-95
<PAGE> 211
RAYMOND EQUIPMENT COMPANY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
COMMON STOCK UNREALIZED
-------------------- GAIN ON TOTAL
NUMBER OF RETAINED MARKETABLE STOCKHOLDERS'
SHARES AMOUNT EARNINGS SECURITIES EQUITY
--------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, July 1, 1995................. 202,880 $256,651 $ 8,595,607 $174,455 $ 9,026,713
Issuance of common stock............ 4,770 182,465 -- -- 182,465
Distributions to stockholders....... -- -- (1,092,433) -- (1,092,433)
Net income.......................... -- -- 2,958,635 -- 2,958,635
Net increase in unrealized gain on
marketable securities............ -- -- -- 174,557 174,557
------- -------- ----------- -------- -----------
BALANCE, June 30, 1996................ 207,650 439,116 10,461,809 349,012 11,249,937
Issuance of common stock............ 2,001 105,052 -- -- 105,052
Distributions to stockholders....... -- -- (618,030) -- (618,030)
Net income.......................... -- -- 3,126,199 -- 3,126,199
Net decrease in unrealized gain on
marketable securities............ -- -- -- (76,007) (76,007)
------- -------- ----------- -------- -----------
BALANCE, June 30, 1997................ 209,651 544,168 12,969,978 273,005 13,787,151
Issuance of common stock
(unaudited)...................... 1,324 85,345 -- -- 85,345
Distributions to stockholders
(unaudited)...................... -- -- (312,029) -- (312,029)
Net income (unaudited).............. -- -- 2,784,164 -- 2,784,164
Net increase in unrealized gain on
marketable securities
(unaudited)...................... -- -- -- 236,475 236,475
------- -------- ----------- -------- -----------
BALANCE, March 31, 1998 (unaudited)... 210,975 $629,513 $15,442,113 $509,480 $16,581,106
======= ======== =========== ======== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-96
<PAGE> 212
RAYMOND EQUIPMENT COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIOD
FOR THE YEAR ENDED JUNE 30, ENDED MARCH 31,
--------------------------- --------------------------
1996 1997 1997 1998
------------ ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 2,958,635 $ 3,126,199 $ 2,471,446 $ 2,784,164
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 3,800,226 4,380,859 3,200,343 3,732,655
Gain on sale of rental equipment............... (1,540,076) (1,385,381) (1,195,800) (867,733)
Realized gain on sale of marketable
securities................................... (27,458) (73,615) (73,615) (50,000)
Charitable contribution marketable
securities................................... -- 297,103 -- --
Changes in operating assets and liabilities:
Accounts receivable.......................... (83,880) (218,364) 1,900,804 1,410,382
Inventories.................................. (239,521) 57,740 103,038 (165,803)
Other assets................................. (3,724) (204,023) 29,620 2,444
Accounts payable............................. 497,168 (181,235) 1,210,542 90,263
Accrued expenses and other liabilities....... 48,138 (520,110) (784,978) (210,172)
------------ ------------ ----------- ------------
Net cash provided by operating
activities.............................. 5,409,508 5,279,173 6,861,400 6,726,200
------------ ------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities............... (490,000) -- -- --
Proceeds from the sale of marketable
securities..................................... 99,997 150,000 150,000 150,000
Purchases of rental equipment.................... (10,790,192) (11,300,675) (7,291,951) (7,650,313)
Purchases of property and equipment.............. (1,223,457) (217,559) (138,068) (363,494)
Proceeds from sale of rental equipment........... 4,258,338 4,678,959 4,295,084 3,947,732
Proceeds from sale of property and equipment..... 173,075 13,637 13,637 33,850
------------ ------------ ----------- ------------
Net cash used in investing activities..... (7,972,239) (6,675,638) (2,971,298) (3,882,225)
------------ ------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of
issuance costs................................. 182,465 105,052 105,052 85,345
Proceeds from debt............................... 15,404,343 15,329,825 4,907,186 9,839,377
Principal payments on debt....................... (11,416,600) (13,944,974) (9,183,049) (12,253,986)
Distributions to stockholders.................... (1,092,433) (618,030) (246,761) (312,029)
------------ ------------ ----------- ------------
Net cash provided by (used in) financing
activities.............................. 3,077,775 871,873 (4,417,572) (2,641,293)
------------ ------------ ----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 515,044 (524,592) (527,470) 202,682
CASH AND CASH EQUIVALENTS, beginning of period..... 234,232 749,276 749,276 224,684
------------ ------------ ----------- ------------
CASH AND CASH EQUIVALENTS, end of period........... $ 749,276 $ 224,684 $ 221,806 $ 427,366
============ ============ =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest........................... $ 1,653,083 $ 1,832,804 $ 1,364,318 $ 1,407,413
============ ============ =========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-97
<PAGE> 213
RAYMOND EQUIPMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND JUNE 30, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Raymond Equipment Company, Inc. (the "Company") was incorporated in the
state of Kentucky in 1955. The Company rents a broad array of equipment to a
diverse customer base that includes construction industry participants,
industrial companies, homeowners and others. The Company also engages in related
activities such as selling used equipment, acting as a distributor for certain
new equipment and selling related merchandise parts and supplies. The nature of
the Company's business is such that short-term obligations are typically met by
cash flow generated from long-term assets. Consequently, consistent with
industry practice, the accompanying audited and unaudited balance sheets are
presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. At June 30, 1996 and
1997 and March 31, 1998 (unaudited), the Company had no cash equivalents.
Marketable securities
In accordance with the provisions of Statement of Financial Accounting
Standards No. 115, unrealized gains and losses on investments available-for-sale
(which are stated at quoted fair value) are included as a separate component of
stockholders' equity. All of the Company's marketable securities are held as
available-for-sale.
Inventories
Inventories consist of equipment, tools, parts, fuel and related supply
items. Inventories are stated at the lower of weighted average cost or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The range of
useful lives estimated by management for rental equipment is two to ten years.
Rental equipment is depreciated to a salvage value of zero to ten percent of
cost. All rental equipment is capitalized at the time of purchase. Ordinary
maintenance and repair costs are charged to operations as incurred.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using the straight-line method. The range of useful lives
estimated by management are as follows:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Buildings and improvements.................................. 20 - 25
Automobiles and trucks...................................... 3 - 7
Office furniture and fixtures............................... 5 - 10
</TABLE>
Ordinary maintenance and repair costs are charged to operations as
incurred.
F-98
<PAGE> 214
RAYMOND EQUIPMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
Fair value of financial instruments
The carrying amount reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable, accrued expenses
and other liabilities and debt approximates fair value as of June 30, 1996 and
1997 and March 31, 1998 (unaudited).
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Income taxes
The Company is an S corporation for income tax purposes. Accordingly,
income, losses and related temporary differences which arise in the recording of
income and expense items for financial reporting and tax reporting purposes are
proportionally included in the individual tax returns of the stockholders.
Therefore, no provision or liability for Federal and state income taxes has been
included in the accompanying financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for informational purposes only. The pro forma provision
for income tax has been provided at the estimated effective rate of 40% of
taxable net income.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments,
marketable securities and accounts receivable. The Company maintains cash and
cash equivalents with high quality financial institutions. Concentrations of
credit risk with respect to accounts receivable are limited because a large
number of diverse customers make up the Company's customer base. No single
customer represents greater than 10% of total accounts receivable. The Company
controls credit risk through credit approvals, credit limits and monitoring
procedures.
Interim financial information
In the opinion of management, the unaudited financial information as of
March 31, 1998 and for the nine month periods ended March 31, 1997 and 1998
furnished herein reflects all adjustments consisting of normal recurring
accruals that are necessary for a fair presentation of the results for the
interim periods. The results of operations for the nine months ended March 31,
1998 are not necessarily indicative of the results to be expected for the entire
year.
F-99
<PAGE> 215
RAYMOND EQUIPMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. MARKETABLE SECURITIES
The cost and estimated market value of marketable securities are as
follows:
<TABLE>
<CAPTION>
JUNE 30,
--------------------- MARCH 31,
1996 1997 1998
---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cost................................................ $ 878,343 $504,855 $404,855
Unrealized gains.................................... 349,012 273,005 509,480
---------- -------- --------
Estimated market value.............................. $1,227,355 $777,860 $914,335
========== ======== ========
</TABLE>
4. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Rental equipment............................... $35,794,948 $41,753,287 $ 44,188,277
Less -- accumulated depreciation............... (6,929,380) (9,067,500) (10,483,809)
----------- ----------- ------------
Rental equipment, net................ $28,865,568 $32,685,787 $ 33,704,468
=========== =========== ============
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
JUNE 30,
------------------------ MARCH 31,
1996 1997 1998
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture, fixtures and office equipment......... $3,615,247 $ 3,740,810 $ 3,994,517
Less -- accumulated depreciation................. (905,532) (1,021,154) (1,126,239)
---------- ----------- -----------
Property and equipment, net............ $2,709,715 $ 2,719,656 $ 2,868,278
========== =========== ===========
</TABLE>
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
--------------------- MARCH 31,
1996 1997 1998
---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Payroll-related..................................... $ 769,254 $279,162 $ 39,308
Accrued interest.................................... 129,231 64,308 86,812
Accrued property taxes.............................. 123,830 161,723 200,066
Other............................................... 36,815 33,827 2,662
---------- -------- --------
Accrued expenses and other liabilities.............. $1,059,130 $539,020 $328,848
========== ======== ========
</TABLE>
F-100
<PAGE> 216
RAYMOND EQUIPMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Equipment notes, secured by equipment, interest
at an average of approximately 8.00% payable
in various monthly installments through March
2002.......................................... $18,977,807 $21,303,549 $19,614,353
Two installment notes with a local bank, secured
by property, interest at 8.00% and 9.00%,
payable in various monthly installments
through December 1998 and June 2006,
respectively.................................. 5,520,522 4,579,631 3,854,218
----------- ----------- -----------
$24,498,329 $25,883,180 $23,468,571
=========== =========== ===========
</TABLE>
Maturities of the Company's debt at June 30, 1997 for the year ended June
30, are as follows:
<TABLE>
<S> <C>
1998........................................................ $10,670,581
1999........................................................ 6,404,076
2000........................................................ 6,489,429
2001........................................................ 1,743,065
2002........................................................ 95,915
Thereafter.................................................. 480,114
-----------
Total............................................. $25,883,180
===========
</TABLE>
8. PROFIT SHARING PLAN
The Company has a profit sharing plan the ("Plan") that covers
substantially all employees. The Plan allows for discretionary employer
contributions as determined by the Company's Board of Directors. Employer
contributions for the years ended June 30, 1996 and 1997 and the nine months
ended March 31, 1997 and 1998 were $150,000, $150,000, $150,000 (unaudited) and
$112,000 (unaudited), respectively.
9. COMMITMENTS AND CONTINGENCIES
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
10. SUBSEQUENT EVENT
Effective May 7, 1998, the Company entered into a definitive agreement for
the sale of all of the outstanding stock of the Company to NationsRent, Inc., an
unrelated third party, in exchange for cash and debt.
F-101
<PAGE> 217
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To General Rental, Inc.:
We have audited the accompanying division balance sheet for the Florida
Panhandle and Southeast Texas Divisions of General Rental, Inc. (a Delaware
corporation) as of December 31, 1997, and the related statements of division
operations, division equity and division cash flows for the year then ended.
These division financial statements are the responsibility of the Divisions'
management. Our responsibility is to express an opinion on these division
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the division financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the division financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall division financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the division financial statements referred to above present
fairly, in all material respects, the financial position of the Florida
Panhandle and Southeast Texas Divisions of General Rental, Inc. as of December
31, 1997, and the results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 29, 1998 (except with respect
to the matter referred to in Note 11 as
to which the date is July 10, 1998).
F-102
<PAGE> 218
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
DIVISION BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash........................................................ $ 7,550 $ 10,100
Accounts receivable, net of allowance for doubtful accounts
of $214,626 and $150,000 (unaudited) for December 31, 1997
and June 30, 1998, respectively........................... 1,912,175 1,475,197
Inventories................................................. 381,576 246,764
Rental equipment, net....................................... 11,970,725 11,303,294
Property and equipment, net................................. 392,292 361,013
Goodwill, net............................................... 2,067,955 2,032,317
Non-compete agreements, net................................. 1,390,000 1,232,000
Prepaid expenses and other assets........................... 19,402 20,970
----------- -----------
Total assets...................................... $18,141,675 $16,681,655
=========== ===========
LIABILITIES AND DIVISION EQUITY
LIABILITIES:
Accounts payable.......................................... $ 1,462,325 $ 1,138,944
Accrued expenses and other liabilities.................... 1,837,982 1,811,321
Revolver debt............................................. 4,125,533 4,125,533
Notes payable............................................. 8,648,739 7,750,466
----------- -----------
Total liabilities................................. 16,074,579 14,826,264
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 8, 9 and 11)
DIVISION EQUITY............................................. 2,067,096 1,855,391
----------- -----------
Total liabilities and division equity............. $18,141,675 $16,681,655
=========== ===========
</TABLE>
The accompanying notes to division financial statements are an integral part of
these division balance sheets.
F-103
<PAGE> 219
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
STATEMENTS OF DIVISION OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTH
FOR THE YEAR PERIOD ENDED JUNE 30,
ENDED -------------------------
DECEMBER 31, 1997 1997 1998
----------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Equipment rentals.................................... $7,238,033 $2,172,055 $4,494,090
Sales of equipment, parts and supplies............... 1,875,624 639,036 656,426
---------- ---------- ----------
Total revenue................................ 9,113,657 2,811,091 5,150,516
COST OF REVENUE:
Cost of equipment rentals, excluding depreciation.... 4,017,826 1,077,561 2,721,531
Rental equipment depreciation........................ 941,665 333,806 588,669
Cost of sales of equipment, parts and supplies....... 1,203,840 402,124 370,817
---------- ---------- ----------
Total cost of revenue........................ 6,163,331 1,813,491 3,681,017
---------- ---------- ----------
Gross profit................................. 2,950,326 997,600 1,469,499
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........... 1,494,933 505,994 520,828
NONRENTAL DEPRECIATION AND AMORTIZATION................ 407,605 87,086 228,025
---------- ---------- ----------
Operating income............................. 1,047,788 404,520 720,646
INTEREST EXPENSE....................................... 703,775 211,895 585,442
---------- ---------- ----------
Income before provision for income taxes..... 344,013 192,625 135,204
PROVISION FOR INCOME TAXES............................. 137,605 77,050 54,082
---------- ---------- ----------
NET INCOME............................................. $ 206,408 $ 115,575 $ 81,122
========== ========== ==========
</TABLE>
The accompanying notes to division financial statements are an integral part of
these division statements.
F-104
<PAGE> 220
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
STATEMENTS OF DIVISION EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE
SIX MONTH PERIOD ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
BALANCE, December 31, 1996.................................. $1,326,099
Net income................................................ 206,408
Net transfers from corporate.............................. 534,589
----------
BALANCE, December 31, 1997.................................. 2,067,096
Net income (unaudited).................................... 81,122
Net distributions to corporate (unaudited)................ (292,827)
----------
BALANCE, June 30, 1998 (unaudited).......................... $1,855,391
==========
</TABLE>
The accompanying notes to division financial statements are an integral part of
these division statements.
F-105
<PAGE> 221
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
STATEMENTS OF DIVISION CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTH
FOR THE YEAR PERIOD ENDED JUNE 30,
ENDED --------------------------
DECEMBER 31, 1997 1997 1998
----------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................... $ 206,408 $ 115,575 $ 81,122
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization............... 1,349,270 420,892 816,694
Gain on sale of rental equipment............ (221,170) (8,616) (34,877)
Changes in operating assets and liabilities:
Accounts receivable....................... (705,914) (335,340) 436,978
Inventories............................... (91,421) (24,755) 134,812
Prepaid expenses and other assets......... (19,402) (102,552) (1,568)
Accounts payable.......................... 368,097 286,347 (323,381)
Accrued expenses and other liabilities.... 243,240 120,067 (26,661)
----------- ----------- -----------
Total adjustments...................... 922,700 356,043 1,001,997
----------- ----------- -----------
Net cash provided by operating
activities........................... 1,129,108 471,618 1,083,119
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used in acquisitions...................... (4,125,533) (2,535,956) --
Purchases of rental equipment.................. (4,191,992) (2,197,735) (71,362)
Purchases of property and equipment............ (167,407) -- (3,108)
Proceeds from sale of rental equipment......... 695,353 136,616 185,001
----------- ----------- -----------
Net cash provided by (used in) investing
activities................................ (7,789,579) (4,597,075) 110,531
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolver debt.................... 4,125,533 2,535,956 --
Proceeds from notes payable.................... 3,735,697 1,903,638 --
Repayments of notes payable.................... (1,729,748) (334,410) (898,273)
Net transfers from (distributions to)
corporate................................... 534,589 21,623 (292,827)
----------- ----------- -----------
Net cash provided by (used in)
financing activities................. 6,666,071 4,126,807 (1,191,100)
----------- ----------- -----------
NET INCREASE IN CASH............................. 5,600 1,350 2,550
CASH, beginning of period........................ 1,950 1,950 7,550
----------- ----------- -----------
CASH, end of period.............................. $ 7,550 $ 3,300 $ 10,100
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest...................... $ 703,775 $ 211,895 $ 585,442
=========== =========== ===========
</TABLE>
The accompanying notes to division financial statements are an integral part of
these division statements.
F-106
<PAGE> 222
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
NOTES TO DIVISION FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION
General Rental, Inc. ("General"), a Delaware corporation, was incorporated
in 1996. General operates through various geographical divisions including the
Florida Panhandle and Southeast Texas Divisions (the "Divisions"). The Divisions
consist of six stores in the Florida Panhandle and seven stores in Texas. The
principal business of the Divisions is rental of a broad array of equipment to a
diverse customer base that includes construction industry participants,
industrial companies and others in Florida and Texas. The Divisions also engage
in related activities such as selling used equipment, acting as a distributor
for certain new equipment and selling related merchandise and parts. The nature
of the Divisions' business is such that short-term obligations are typically met
by cash flow generated from long-term assets. Consequently, consistent with
industry practice, the accompanying audited and unaudited division balance
sheets are presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying division financial statements include only the Florida
Panhandle and Southeast Texas Divisions of General. These division financial
statements were carved out of the financial statements of General on a specific
identification basis or by using the following allocations, as required.
Allocations
The accompanying division balance sheets and statements of division
operations include allocations of certain liabilities and expenses where
specific identification is not practicable. Management of the Divisions believes
that the following allocation methods used are reasonable:
<TABLE>
<CAPTION>
FINANCIAL STATEMENT CAPTION ALLOCATION METHOD
- --------------------------- -----------------
<S> <C>
- - Accounts payable - Portion based on the percentage of revenues related to
the Divisions
- - Accrued expenses and
other liabilities - Portion based on the percentage of revenues or debt
related to the Divisions
- - Revolver debt
- Based on the cash required for acquisitions (see Note 3)
- - Notes payable
- Based on the percentage of rental equipment financed
- - Selling, general and related to the Divisions
administrative expenses
- Portion based on the percentage of revenues related to
- - Interest expense the Divisions
- - Provision for income - Based on the average debt balance allocated to the
taxes Divisions using an average interest rate of 9.5%
- Provided at an assumed income tax rate of 40%, no
benefit is recorded for losses
</TABLE>
Inventories
Inventories consist of equipment and parts. New equipment and parts
inventories are stated at the lower of average cost or market.
F-107
<PAGE> 223
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
NOTES TO DIVISION FINANCIAL STATEMENTS -- (CONTINUED)
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment on a straight-line basis. The range of useful
lives estimated by management for rental equipment is three to ten years. Rental
equipment is depreciated to a salvage value of 20% of cost. Ordinary maintenance
and repair costs are charged to operations as incurred.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term. Earned but not billed revenue included in accounts receivable was
$221,206 at December 31, 1997 and $269,193 (unaudited) at June 30, 1998,
respectively.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using a straight-line basis. The range of useful lives
estimated by management for property and equipment is three to ten years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Long-lived assets
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of "
requires that long-lived assets, including certain identifiable intangibles and
the goodwill related to those assets, be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. Management has reviewed the long-lived assets
of the Divisions and has determined that there are no events requiring
impairment loss recognition.
Fair value of financial instruments
The carrying amounts for accounts receivable, accounts payable and accrued
expenses and other liabilities is not significantly different than fair value
due to the short-term nature of these accounts. The fair value of revolver debt
and notes payable is determined using current applicable interest rates for
similar instruments as of December 31, 1997 and June 30, 1998 (unaudited) and is
not significantly different than the carrying value of such debt.
Division equity
Division equity represents the difference between division assets and
division liabilities. Changes in division equity result from operating results
of the Divisions and any net transfers from or net distributions to corporate.
These transfers and distributions to and from corporate consist mainly of
funding for operating losses, funding of purchases of rental equipment and fixed
assets, funding of debt service costs and distributions of excess cash.
Concentrations of credit risk
Financial instruments that potentially subject the Divisions to significant
concentrations of credit risk consist principally of accounts receivable.
Concentrations of credit risk with respect to accounts receivable are limited
because a large number of geographically diverse customers make up the
Divisions' customer base. No
F-108
<PAGE> 224
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
NOTES TO DIVISION FINANCIAL STATEMENTS -- (CONTINUED)
single customer represents greater than 10% of total accounts receivable. The
Divisions control credit risk through credit approvals, credit limits, and
monitoring, generally without requiring collateral.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the division financial
statements and accompanying notes. Actual results could differ from those
estimates.
Interim financial information
In the opinion of management, the unaudited interim financial information
as of June 30, 1998 and for the six month periods ended June 30, 1997 and 1998
furnished herein reflects all adjustments consisting of normal recurring
accruals that, in the opinion of management, are necessary for a fair
presentation of the results for the interim period. The results of operations
for the three months ended June 30, 1998 are not necessarily indicative of the
results to be expected for the entire year.
3. ACQUISITIONS
During 1997, General purchased the assets and assumed certain liabilities
of stores (the "Acquired Stores") which are included in the division financial
statements beginning on their dates of acquisition. The acquisitions of the
Acquired Stores were accounted for under the purchase method. As a result, the
Divisions recorded approximately $1.0 million of goodwill and $1.4 million of
non-compete agreement costs. The assets and liabilities of the Acquired Stores
at their dates of acquisition are as follows:
<TABLE>
<S> <C>
Accounts receivable, net of allowance for doubtful accounts
of $27,361................................................ $ 932,877
Inventories................................................. 45,000
Prepaid expenses and other assets........................... 100,000
Rental equipment............................................ 6,780,603
Property and equipment...................................... 51,760
Goodwill.................................................... 977,833
Non-compete agreements...................................... 1,430,000
Accounts payable............................................ (348,726)
Accrued expenses and other liabilities...................... (1,386,018)
Notes payable............................................... (4,457,796)
-----------
Cash paid for acquisitions........................ $ 4,125,533
===========
</TABLE>
4. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Rental equipment.......................................... $12,959,442 $12,771,707
Less -- accumulated depreciation.......................... (988,717) (1,468,413)
----------- -----------
Rental equipment, net........................... $11,970,725 $11,303,294
=========== ===========
</TABLE>
F-109
<PAGE> 225
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
NOTES TO DIVISION FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY AND EQUIPMENT
Property and equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Property and equipment...................................... $ 507,909 $ 510,975
Less -- accumulated depreciation............................ (115,617) (149,962)
--------- ---------
Property and equipment, net....................... $ 392,292 $ 361,013
========= =========
</TABLE>
6. INTANGIBLE ASSETS
Goodwill and related accumulated amortization consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Goodwill................................................... $2,138,270 $2,138,270
Less -- accumulated amortization........................... (70,315) (105,953)
---------- ----------
Goodwill, net.................................... $2,067,955 $2,032,317
========== ==========
</TABLE>
Goodwill amortization expense was $47,930 for the year ended December 31,
1997 and $31,841 (unaudited) and $35,638 (unaudited) for the six months ended
June 30, 1997 and 1998, respectively.
Non-compete agreements and related accumulated amortization consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Non-compete agreements..................................... $1,580,000 $1,580,000
Less -- accumulated amortization........................... (190,000) (348,000)
---------- ----------
Non-compete agreements, net...................... $1,390,000 $1,232,000
========== ==========
</TABLE>
Non-compete agreements amortization expense was $187,500 for the year ended
December 31, 1997 and $38,333 (unaudited) and $158,000 (unaudited) for the six
months ended June 30, 1997 and 1998, respectively.
Goodwill and non-compete agreements are amortized over their estimated
useful lives of 30 years and 5 years, respectively.
F-110
<PAGE> 226
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
NOTES TO DIVISION FINANCIAL STATEMENTS -- (CONTINUED)
7. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Payroll-related accrued expenses........................... $ 181,893 $ 179,255
Non-payroll tax-related accrued expenses................... 144,484 142,388
Non-compete agreement liabilities.......................... 1,353,412 1,333,780
Other...................................................... 158,193 155,898
---------- ----------
Accrued expenses and other liabilities........... $1,837,982 $1,811,321
========== ==========
</TABLE>
8. REVOLVER DEBT AND NOTES PAYABLE
The revolver debt and notes payable have been allocated from General as
discussed in Note 2. All assets of the Divisions are pledged as collateral for
General's debt. As a result of cash flow difficulties at General, all such debt
is currently in default and is due on demand. The interest rate on such debt was
at a variable rate for the revolver debt and a fixed rate for the notes payable,
and approximated 9.5% for all periods presented in the accompanying division
financial statements.
9. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Divisions lease rental equipment, real estate, vehicles and certain
office equipment under noncancelable operating leases. These leases expire at
various dates through January 31, 2011. Certain real estate leases require the
Divisions to pay maintenance, insurance, taxes and certain other expenses in
addition to the stated rentals. Future minimum lease payments, by year and in
the aggregate, for noncancelable operating leases with initial or remaining
terms of one year or more are as follows at December 31, 1997:
<TABLE>
<S> <C>
1998........................................................ $ 764,393
1999........................................................ 732,495
2000........................................................ 782,424
2001........................................................ 449,930
2002........................................................ 157,550
Thereafter.................................................. 339,099
----------
$3,225,891
==========
</TABLE>
Rent expense under noncancelable operating leases was $567,163 for the year
ended December 31, 1997 and $149,127 (unaudited) and $365,104 (unaudited) for
the six months ended June 30, 1997 and 1998, respectively.
10. EMPLOYEE BENEFIT PLAN
The Divisions participate in a 401(k) plan (the "Plan") which covers
certain full-time employees over 21 years old who have worked a minimum of one
year for the Divisions. The Plan is funded by employee deferrals of income and
matching contributions by the Divisions of $.50 per $1.00 up to a matching
contribution of 3% of a participant's compensation. The Divisions' matching
contributions totaled $8,000 for the year ended December 31, 1997, and $1,881
(unaudited) and $5,565 (unaudited) for the six months ended June 30, 1997 and
1998, respectively.
F-111
<PAGE> 227
THE FLORIDA PANHANDLE AND SOUTHEAST TEXAS DIVISIONS
OF GENERAL RENTAL, INC.
NOTES TO DIVISION FINANCIAL STATEMENTS -- (CONTINUED)
11. SUBSEQUENT EVENT
In May 1998, General entered into a definitive agreement to sell the assets
of the Divisions to NationsRent, Inc., an unrelated third party, in exchange for
cash and the assumption of certain accrued liabilities. General's management
intends to utilize the proceeds of the sale to reduce its debt obligations. Such
transaction was completed on July 10, 1998.
F-112
<PAGE> 228
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Associated Rental Equipment Management Company, Inc.:
We have audited the accompanying balance sheets of Associated Rental
Equipment Management Company, Inc. (a Texas Corporation) as of December 31, 1996
and 1997, and the related statements of income, stockholder's equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Associated Rental Equipment
Management Company, Inc. as of December 31, 1996 and 1997, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
June 11, 1998.
F-113
<PAGE> 229
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents.............................. $ 337,694 $ 828,345 $ 857,453
Accounts receivable, net of allowances for doubtful
accounts of $553,000, $461,000 and $558,000
(unaudited) for 1996, 1997 and 1998, respectively.... 2,904,093 4,436,887 4,318,353
Due from stockholder................................... 315,000 75,000 75,000
Marketable securities.................................. 2,235,030 2,612,642 2,897,167
Inventories............................................ 1,111,530 1,914,717 --
Prepaid expenses and other assets...................... 251,809 573,934 1,223,658
Rental equipment, net.................................. 35,287,240 59,982,594 77,127,029
Property and equipment, net............................ 2,561,625 4,975,581 6,567,816
----------- ----------- -----------
Total assets................................. $45,004,021 $75,399,700 $93,066,476
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable..................................... $ 1,156,178 $ 2,027,383 $ 1,552,768
Accrued expenses and other liabilities............... 2,362,396 2,915,667 2,974,918
Debt................................................. 36,017,937 61,598,630 78,601,281
----------- ----------- -----------
Total liabilities................................. 39,536,511 66,541,680 83,128,967
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 7, 8 and 11)
STOCKHOLDER'S EQUITY:
Common stock -- no par value; 1,000 shares
authorized, issued and outstanding................ 1,000 1,000 1,000
Paid-in capital...................................... 25,134 25,134 25,134
Unrealized gains on marketable securities............ 27,934 96,677 331,546
Retained earnings.................................... 5,413,442 8,735,209 9,579,829
----------- ----------- -----------
Total stockholder's equity................... 5,467,510 8,858,020 9,937,509
----------- ----------- -----------
Total liabilities and stockholder's equity... $45,004,021 $75,399,700 $93,066,476
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-114
<PAGE> 230
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE SIX-MONTH PERIOD
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
Equipment rentals........... $20,726,189 $18,930,099 $24,261,338 $10,095,345 $15,241,684
Sales of equipment.......... 4,167,919 4,827,389 16,527,647 8,809,907 7,431,821
----------- ----------- ----------- ----------- -----------
24,894,108 23,757,488 40,788,985 18,905,252 22,673,505
----------- ----------- ----------- ----------- -----------
COST OF REVENUE:
Cost of equipment rentals,
excluding depreciation... 2,390,006 2,341,976 4,972,991 2,733,388 4,999,032
Rental equipment
depreciation............. 5,867,435 6,369,939 8,625,665 4,604,572 5,815,385
Cost of sales of
equipment................ 3,041,939 4,233,657 13,463,673 6,483,611 5,698,587
----------- ----------- ----------- ----------- -----------
11,299,380 12,945,572 27,062,329 13,821,571 16,513,004
----------- ----------- ----------- ----------- -----------
Gross profit........ 13,594,728 10,811,916 13,726,656 5,083,681 6,160,501
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES..... 8,114,872 6,751,686 6,144,202 1,593,754 2,250,012
NON-RENTAL DEPRECIATION AND
AMORTIZATION................ 300,697 385,806 466,240 213,577 239,523
----------- ----------- ----------- ----------- -----------
Operating income.... 5,179,159 3,674,424 7,116,214 3,276,350 3,670,966
----------- ----------- ----------- ----------- -----------
OTHER (EXPENSE) INCOME:
Investment earnings......... 62,767 227,717 344,301 19,762 71,713
Interest expense............ (2,290,370) (2,803,824) (3,748,335) (1,737,625) (2,803,998)
Other, net.................. (66,316) (14,093) 13,358 16,735 5,939
----------- ----------- ----------- ----------- -----------
Other (expense)
income, net....... (2,293,919) (2,590,200) (3,390,676) (1,701,128) (2,726,346)
----------- ----------- ----------- ----------- -----------
Income before
benefit for income
taxes............. 2,885,240 1,084,224 3,725,538 1,575,222 944,620
BENEFIT FOR INCOME TAXES...... (836,000) -- -- -- --
----------- ----------- ----------- ----------- -----------
NET INCOME.................... 3,721,240 1,084,224 3,725,538 1,575,222 944,620
PRO FORMA PROVISION FOR INCOME
TAXES....................... 1,990,096 433,690 1,490,215 890,088 377,848
----------- ----------- ----------- ----------- -----------
PRO FORMA NET INCOME.......... $ 1,731,144 $ 650,534 $ 2,235,323 $ 685,134 $ 566,772
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-115
<PAGE> 231
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
NO PAR VALUE
------------------ UNREALIZED
NUMBER PAID-IN GAINS ON RETAINED
OF SHARES AMOUNT CAPITAL SECURITIES EARNINGS TOTAL
--------- ------ ------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1995............................. 1,000 $1,000 $25,134 $ -- $1,144,683 $ 1,170,817
Net income......................................... -- -- -- -- 3,721,240 3,721,240
----- ------ ------- -------- ---------- -----------
BALANCE, December 31, 1995........................... 1,000 1,000 25,134 -- 4,865,923 4,892,057
Unrealized gains on marketable securities.......... -- -- -- 27,934 -- 27,934
Dividends to stockholder........................... -- -- -- -- (536,705) (536,705)
Net income......................................... -- -- -- -- 1,084,224 1,084,224
----- ------ ------- -------- ---------- -----------
BALANCE, December 31, 1996........................... 1,000 1,000 25,134 27,934 5,413,442 5,467,510
Unrealized gains on marketable securities.......... -- -- -- 68,743 -- 68,743
Dividends to stockholder........................... -- -- -- -- (403,771) (403,771)
Net income......................................... -- -- -- -- 3,725,538 3,725,538
----- ------ ------- -------- ---------- -----------
BALANCE, December 31, 1997........................... 1,000 1,000 25,134 96,677 8,735,209 8,858,020
Unrealized gains on marketable securities
(unaudited)...................................... -- -- -- 234,869 -- 234,869
Dividends to stockholder (unaudited)............... -- -- -- -- (100,000) (100,000)
Net income (unaudited)............................. -- -- -- -- 944,620 944,620
----- ------ ------- -------- ---------- -----------
BALANCE, June 30, 1998 (unaudited)................... 1,000 $1,000 $25,134 $331,546 $9,579,829 $ 9,937,509
===== ====== ======= ======== ========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-116
<PAGE> 232
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX-MONTH PERIOD
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------ ---------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................... $ 3,721,240 $ 1,084,224 $ 3,725,538 $ 1,575,222 $ 944,620
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization................ 6,168,132 6,755,745 9,091,905 4,818,149 6,054,908
Gain on sale of rental equipment............. (1,125,980) (593,732) (3,063,974) (2,326,296) (1,733,234)
Changes in operating assets and liabilities:
Accounts receivable........................ (259,253) 182,134 (1,532,794) (871,313) 118,534
Prepaid expenses and other assets.......... (117,912) (45,002) (322,125) (257,201) (649,724)
Accounts payable........................... (679,218) 351,343 871,205 (93,614) (474,615)
Accrued expenses and other liabilities..... 199,573 (73,953) 553,271 687,236 59,251
------------ ------------ ------------ ------------ ------------
Net cash provided by operating
activities............................. 7,906,582 7,660,759 9,323,026 3,532,183 4,319,740
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............ (641,045) (1,548,066) (2,880,196) (2,066,946) (1,831,758)
Proceeds from sale of rental equipment......... 4,167,919 4,827,389 16,527,647 8,809,907 7,431,821
Marketable securities.......................... 16,954 (2,207,096) (308,869) (7,481) (49,656)
------------ ------------ ------------ ------------ ------------
Net cash provided by investing activities.... 3,543,828 1,072,227 13,338,582 6,735,480 5,550,407
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt............................. 469,999 1,718,414 12,326,137 2,521,625 4,305,120
Repayments of debt............................. (10,671,000) (11,758,122) (34,333,323) (12,261,899) (14,046,159)
Dividends to stockholder....................... -- (536,705) (403,771) -- (100,000)
Due from stockholder........................... (191,450) 18,133 240,000 -- --
------------ ------------ ------------ ------------ ------------
Net cash used in financing activities.... (10,392,451) (10,558,280) (22,170,957) (9,740,274) (9,841,039)
------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................... 1,057,959 (1,825,294) 490,651 527,389 29,108
CASH AND CASH EQUIVALENTS, beginning of period... 1,105,029 2,162,988 337,694 337,694 828,345
------------ ------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period......... $ 2,162,988 $ 337,694 $ 828,345 $ 865,083 $ 857,453
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of capitalization
of $150,000 in 1997........................ $ 2,290,405 $ 2,798,349 $ 3,419,630 $ 1,616,841 $ 2,941,867
============ ============ ============ ============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Rental equipment financing with debt......... $ 7,846,334 $ 17,830,405 $ 47,587,879 $ 24,585,645 $ 26,743,690
============ ============ ============ ============ ============
Transfers of rental equipment to (from)
inventory, net............................. $ -- $ 1,111,530 $ 803,187 $ 14,119 $ (1,914,717)
============ ============ ============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-117
<PAGE> 233
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Associated Rental Equipment Management Company, Inc. (the "Company") was
incorporated on July 28, 1989 in the state of Texas. The Company rents a broad
array of equipment to a diverse customer base that includes construction
industry participants, industrial companies and others in the states of Texas
and Louisiana. The Company also engages in related activities such as selling
used rental equipment. The nature of the Company's business is such that
short-term obligations are typically met by cash flows generated from long-term
assets. Consequently, consistent with industry practice, the accompanying
balance sheets are presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. At December 31, 1996
and 1997 and June 30, 1998 (unaudited), the Company had no cash equivalents.
Marketable Securities
In accordance with the provisions of Statement of Financial Accounting
Standards No. 115, unrealized gains and losses on investments available-for-sale
(which are stated at quoted fair value) are included as a separate component of
stockholder's equity. All of the Company's marketable securities are held as
available-for-sale.
Inventories
Inventories consist of used rental equipment held for resale and are stated
at the lower of cost or market.
Rental Equipment
Rental equipment is recorded at cost and depreciated to zero salvage value
over the estimated useful lives of the equipment on a straight-line basis. The
average useful life estimated by management for rental equipment is seven years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Significant improvements that extend the useful life of rental equipment are
capitalized.
Revenue Recognition
Revenue related to the sale of rental equipment is recognized at the point
of sale. Revenue related to rental equipment is recognized over the contract
term.
Property and Equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using accelerated methods. The range of useful lives
estimated by management for property and equipment is five to forty years.
Property and equipment is depreciated to a salvage value of zero to twenty
percent. Ordinary maintenance and repair costs are charged to operations as
incurred. Interest costs incurred during the construction period are capitalized
in accordance with generally accepted accounting principles.
Impairment of Long-Lived Assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
F-118
<PAGE> 234
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value of Financial Instruments
The carrying amounts reported in the accompanying balance sheets for
accounts receivable, due from stockholder, accounts payable, accrued expenses
and other liabilities approximate fair value due to the short-term nature of
these accounts. The fair value of debt is determined using current interest
rates for similar instruments as of December 31, 1996 and 1997 and June 30, 1998
(unaudited) and approximates the carrying value of these obligations due to the
fact that the underlying instruments bear interest at market rates or include
provisions to adjust note balances and interest rates to approximate fair market
value.
Income Taxes
The Company has been an S corporation for income tax purposes since January
1, 1995. Accordingly, income, losses and related temporary differences which
arise in the recording of income and expense items for financial reporting and
tax reporting purposes are included in the individual tax return of the
stockholder. Therefore, no historical provision or liability for Federal and
state income taxes has been included in the accompanying financial statements
for the years ended December 31, 1996 and 1997.
Included in the accompanying statement of income for the year ended
December 31, 1995 is a benefit for income taxes of $836,000, which represents
the reversal of the deferred income tax liability balance as of December 31,
1994 due to the change in the Company's tax status to an S corporation. The
deferred income tax liability as of December 31, 1994 arose due to the use of
accelerated depreciation methods for income tax reporting purposes.
An enterprise that changes from taxable C corporation status to nontaxable
S corporation status should continue to recognize a deferred tax liability to
the extent that the enterprise would be subject to a corporate-level tax on net
unrecognized built-in gains, as defined by Federal tax rules. At the time of the
change in tax status, the Company determined that it had no net unrecognized
built-in gains.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for informational purposes only. The pro forma provision
for income taxes has been provided so that the estimated effective Federal and
state income rate will be 40% for all periods presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of geographically diverse
customers make up the Company's customer base. No single customer represents
greater than 10% of total accounts receivable. The Company controls credit risk
through credit approvals, credit limits, and monitoring procedures.
Interim Financial Information
In the opinion of management, the unaudited financial information as of
June 30, 1998 and for the six-month periods ended June 30, 1997 and 1998
furnished herein reflects all adjustments, consisting of normal recurring
accruals that are necessary for a fair presentation of the results for the
interim periods. The results of
F-119
<PAGE> 235
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
operations for the six months ended June 30, 1998 are not necessarily indicative
of the results to be expected for the entire year.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"). This statement establishes standards for reporting and display of
comprehensive income. Comprehensive income is defined as the change in equity
during the financial reporting period of a business enterprise resulting from
non-owner sources. Comprehensive income was $3,721,240, $1,112,158, $3,794,281,
$1,774,539 (unaudited) and $1,179,489 (unaudited) for the years ended December
31, 1995, 1996 and 1997 and the six months ended June 30, 1997 and 1998,
respectively.
3. MARKETABLE SECURITIES
The cost and estimated fair market value of marketable securities are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cost............................................. $2,207,096 $2,515,965 $2,565,621
Unrealized gains................................. 27,934 96,677 331,546
---------- ---------- ----------
Estimated market value........................... $2,235,030 $2,612,642 $2,897,167
========== ========== ==========
</TABLE>
The Company uses the specific identification method to determine cost of
securities upon sale. The net change in unrealized appreciation on the
securities available for sale of $27,934, $68,743 and $234,869 (unaudited) for
the years ended December 31, 1996 and 1997 and the six-month period ended June
30, 1998, respectively, has been reflected in the accompanying statements of
stockholder's equity.
4. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Rental equipment............................. $ 46,551,847 $ 69,017,032 $ 88,319,802
Less -- accumulated depreciation............. (11,264,607) (9,034,438) (11,192,773)
------------ ------------ ------------
Rental equipment, net.............. $ 35,287,240 $ 59,982,594 $ 77,127,029
============ ============ ============
</TABLE>
Net rental equipment under rental equipment financing obligations was
$27,801,496, $43,501,198 and $63,116,616 (unaudited) as of December 31, 1996 and
1997 and June 30, 1998, respectively.
F-120
<PAGE> 236
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land..................................................... $ -- $ 144,013 $ 144,013
Buildings................................................ 39,244 2,703,212 2,696,472
Leaseholds............................................... 553,616 980,102 963,847
Furniture and fixtures................................... 206,051 383,720 383,720
Machinery and equipment.................................. 120,912 171,876 194,876
Vehicles................................................. 1,915,599 2,175,748 2,650,465
Construction in process.................................. 849,507 -- 1,410,878
---------- ---------- ----------
3,684,929 6,558,671 8,444,271
Less -- accumulated depreciation and amortization........ (1,123,304) (1,583,090) (1,876,455)
---------- ---------- ----------
Property and equipment, net............................ $2,561,625 $4,975,581 $6,567,816
========== ========== ==========
</TABLE>
Buildings include structures and improvements constructed on land that is
leased from the stockholder (see Note 9). Interest costs of $150,000 were
capitalized in 1997.
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued payroll and related expenses..................... $ 125,334 $ 161,089 $ 67,086
Interest accrual......................................... 25,440 354,145 216,276
Accrued taxes............................................ 1,621,679 1,293,892 1,229,114
Bank overdrafts.......................................... 584,740 1,096,046 1,435,826
Other.................................................... 5,203 10,495 26,616
---------- ---------- ----------
Total accrued expenses and other liabilities... $2,362,396 $2,915,667 $2,974,918
========== ========== ==========
</TABLE>
F-121
<PAGE> 237
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
LINES OF CREDIT:
Rental equipment financing line of credit from a
financing company with borrowings up to $4,000,000
(increased to $5,484,000 on March 26, 1998); interest
at 1.25% over the greater of prime or commercial
paper rates (changed to 3.25% over the commercial
paper rate effective March 26, 1998) and payable
monthly; collateralized by equipment held for sale
and personally guaranteed by the stockholder......... $ -- $ 2,258,900 $ 55,188
Working capital line of credit from a bank with
borrowings up to $2,000,000; interest at prime plus
1/2% with interest payable monthly; collateralized by
accounts receivable, inventory and property and
equipment and personally guaranteed by the
stockholder; the underlying credit agreement expires
September 1, 1998.................................... 768,207 1,231,407 1,607,907
Working capital line of credit from a financial
services institution with borrowings up to
$2,000,000; interest at 2.40% over the 30-day
commercial paper rate; collateralized by marketable
securities; the underlying credit agreement expires
October 31, 1999..................................... -- -- --
----------- ----------- -----------
Subtotal..................................... 768,207 3,490,307 1,663,095
NOTES PAYABLE:
Various notes payable, secured by equipment, payable in
monthly principal and interest installments; interest
ranging from 3.99% to 7.9%; due between April 1997
and January 2002..................................... 8,055,522 15,364,724 14,480,226
</TABLE>
(CONTINUED)
F-122
<PAGE> 238
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
RENTAL EQUIPMENT FINANCING OBLIGATIONS:
Rental equipment financing obligations, secured by
equipment, payable in monthly installments,
capitalized at the Company's incremental borrowing
rate of approximately 8%, due between January 1998
and October 2002..................................... 27,194,208 42,743,599 62,457,960
----------- ----------- -----------
Total debt................................... $36,017,937 $61,598,630 $78,601,281
=========== =========== ===========
</TABLE>
Maturities of the Company's debt at December 31, 1997 for the years ended
December 31, are as follows:
<TABLE>
<CAPTION>
RENTAL EQUIPMENT
FINANCING
LINES OF CREDIT NOTES PAYABLE OBLIGATIONS TOTAL
--------------- ------------- ---------------- -----------
<S> <C> <C> <C> <C>
1998.................... $ 3,490,307 $ 4,069,770 $30,934,508 $38,494,585
1999.................... -- 5,271,727 6,446,122 11,717,849
2000.................... -- 4,058,990 5,393,486 9,452,476
2001.................... -- 1,951,908 4,114,374 6,066,282
2002.................... -- 12,329 1,863,571 1,875,900
----------- ----------- ----------- -----------
$ 3,490,307 $15,364,724 48,752,061 67,607,092
=========== ===========
Less amount representing interest (6,008,462) (6,008,462)
----------- -----------
$42,743,599 $61,598,630
=========== ===========
</TABLE>
Each of the above lines of credit agreements subject the Company to certain
restrictive covenants including financial ratios, minimum net worth requirements
and payment of dividend restrictions. As of December 31, 1997, the Company was
not in compliance with certain of these restrictive covenants. The existence of
these events of default permits the lenders to take certain actions, including
increasing interest rates and accelerating repayment of the debt obligations.
Although the lenders have not exercised any of these rights, there is no
assurance that they will not do so in the future.
Rental equipment financing obligations include leases and rental purchase
option agreements, both of which meet the criteria for treatment as capital
leases under generally accepted accounting principles. The rental purchase
option agreements are noncancellable and have terms up to one year.
Substantially all rental equipment is purchased during or at the conclusion of
the option period and subsequently refinanced through third party leasing
arrangements with terms up to 60 months.
Interest expense related to rental equipment under rental equipment
financing leases for the years ended December 31, 1995, 1996 and 1997 and for
the six month period ended June 30, 1998 was $1,884,180, $2,142,810, $2,746,663
and $2,219,911 (unaudited), respectively.
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases real estate, certain office equipment and vehicles under
noncancelable operating leases. These leases expire at various dates through
September 30, 2002. Certain real estate leases require the Company to pay
maintenance, insurance, taxes and certain other expenses in addition to the
stated rentals.
F-123
<PAGE> 239
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments, by year and in the aggregate, for noncancelable
operating leases with initial or remaining terms of one year or more are as
follows at December 31, 1997:
<TABLE>
<S> <C>
1998............................................. $ 396,813
1999............................................. 414,886
2000............................................. 329,701
2001............................................. 378,199
2002............................................. 295,796
2003 and thereafter.............................. 94,046
----------
$1,909,441
==========
</TABLE>
Rent expense under noncancelable operating leases for the years ended
December 31, 1995, 1996 and 1997 was $312,083, $329,776 and $403,226,
respectively.
Sales and Use Tax Audit
During the three years ended December 31, 1997, various taxing authorities
conducted and completed audits of sales and use tax with respect to the
Company's equipment rental activities. The additional sales and use tax payable
by the Company resulting from the ultimate audit settlements was less than the
amounts accrued during the periods covered by the audits. The Company recorded
these differences in the period in which the settlements were reached. Included
in selling, general and administrative expenses for the year ended December 31,
1997 is a $655,000 credit that arose from the reversal of sales and use tax
provided for in 1995. The Company believes that its remaining sales and use tax
accruals are adequate.
Litigation, Claims and Disputes
The Company is involved in routine litigation, claims and disputes arising
in the normal course of business. Management has reviewed these matters with
legal counsel and believes that the ultimate liability, if any, resulting from
these matters will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
9. RELATED PARTY TRANSACTIONS
The Company leases land and buildings used in its operations from its
stockholder. The leases cover several operating locations and expire annually on
December 31. The total rent paid related to these leases for the years ended
December 31, 1995, 1996 and 1997 was $252,000, $262,500 and $240,000,
respectively.
The Company leases rental equipment from an affiliated company. The total
rent paid for the years ended December 31, 1995, 1996 and 1997 was $322,648,
$361,742 and $288,687, respectively. The Company also guarantees certain debt of
the affiliate. Such debt had a balance of $226,295 at December 31, 1997.
The Company had the following balances due from/payable to affiliated
companies at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- -------
<S> <C> <C>
Due from........................................ $108,861 $62,028
======== =======
Payable to...................................... $ 58,624 $61,684
======== =======
</TABLE>
F-124
<PAGE> 240
ASSOCIATED RENTAL EQUIPMENT MANAGEMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. EMPLOYEE BENEFIT PLAN
The Company sponsors a 401(k) plan (the "Plan") which covers full-time
employees over 21 years old who have worked a minimum of one year for the
Company. The Plan is funded by employee deferrals of income and discretionary
contributions by the Company. The Company's matching contributions totaled
$20,998, $25,741 and $27,675 for the years ended December 31, 1995, 1996 and
1997, respectively. Amounts due to the Plan at December 31, 1996 and 1997 were
$25,127 and $29,020, respectively.
11. SUBSEQUENT EVENT
In June 1998, the stockholder entered into an asset purchase agreement
whereby substantially all of the Company's operating assets and liabilities,
except for real property and certain equipment, will be purchased by
NationsRent, Inc., an unrelated third party, in exchange for cash and a
convertible promissory note. Completion of this transaction is subject to
customary closing conditions.
F-125
<PAGE> 241
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Revco Equipment Rentals, Inc.:
We have audited the accompanying balance sheet of Revco Equipment Rentals,
Inc. (a Florida corporation) as of December 31, 1997, and the related statements
of income, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Revco Equipment Rentals,
Inc. as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
July 11, 1998.
F-126
<PAGE> 242
REVCO EQUIPMENT RENTALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 104,038 $ 70,576
Accounts receivable......................................... 283,747 269,246
Inventories................................................. 42,600 51,527
Other assets................................................ 51,797 50,629
Rental equipment, net....................................... 1,831,082 1,693,161
Property and equipment, net................................. 303,335 302,575
---------- ----------
Total assets...................................... $2,616,599 $2,437,714
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accrued expenses and other liabilities.................... 11,680 11,243
Debt...................................................... 1,525,991 1,336,347
---------- ----------
Total liabilities................................. 1,537,671 1,347,590
COMMITMENTS AND CONTINGENCIES (Notes 6 and 7)
STOCKHOLDERS' EQUITY:
Common stock -- $10 par value, 1,000 shares authorized,
100 issued and outstanding............................. 1,000 1,000
Treasury stock, at cost................................... (150,000) (150,000)
Additional paid-in capital................................ 131,243 131,243
Retained earnings......................................... 1,096,685 1,107,881
---------- ----------
Total stockholders' equity........................ 1,078,928 1,090,124
---------- ----------
Total liabilities and stockholders' equity........ $2,616,599 $2,437,714
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-127
<PAGE> 243
REVCO EQUIPMENT RENTALS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTH PERIOD
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, --------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Equipment rentals...................................... $2,128,701 $566,346 $492,627
Sales of rental equipment, parts and supplies.......... 495,146 154,380 40,314
---------- -------- --------
2,623,847 720,726 532,941
COST OF REVENUE:
Cost of equipment rentals.............................. 1,004,217 240,983 189,115
Rental equipment depreciation.......................... 612,634 133,993 139,390
Cost of sales of rental equipment, parts and
supplies............................................ 222,818 65,172 27,216
---------- -------- --------
1,839,669 440,148 355,721
---------- -------- --------
Gross profit................................... 784,178 280,578 177,220
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................................... 312,470 79,465 79,246
NONRENTAL EQUIPMENT DEPRECIATION......................... 24,743 5,438 760
---------- -------- --------
Operating income............................... 446,965 195,675 97,214
---------- -------- --------
OTHER INCOME (EXPENSE), net:
Interest expense....................................... (122,252) (32,885) (31,010)
Interest income........................................ 3,304 -- --
---------- -------- --------
Total other income (expense), net.............. (118,948) (32,885) (31,010)
---------- -------- --------
Net income..................................... 328,017 162,790 66,204
PRO FORMA PROVISION FOR INCOME TAX....................... 131,207 65,116 26,482
---------- -------- --------
PRO FORMA NET INCOME..................................... $ 196,810 $ 97,674 $ 39,722
========== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-128
<PAGE> 244
REVCO EQUIPMENT RENTALS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------
NUMBER TREASURY ADDITIONAL RETAINED
OF SHARES AMOUNT STOCK, AT COST PAID-IN CAPITAL EARNINGS TOTAL
--------- ------ -------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997..... 100 $1,000 $(150,000) $131,243 $ 932,030 $ 914,273
Distributions.............. -- -- -- -- (163,362) (163,362)
Net income................. -- -- -- -- 328,017 328,017
--- ------ --------- -------- ---------- ----------
BALANCE, December 31, 1997... 100 1,000 (150,000) 131,243 1,096,685 1,078,928
Distributions
(unaudited)............. -- -- -- -- (55,008) (55,008)
Net income (unaudited)..... -- -- -- -- 66,204 66,204
--- ------ --------- -------- ---------- ----------
BALANCE, March 31, 1998
(unaudited)................ 100 $1,000 $(150,000) $131,243 $1,107,881 $1,090,124
=== ====== ========= ======== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-129
<PAGE> 245
REVCO EQUIPMENT RENTALS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTH PERIOD
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, ---------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 328,017 $ 162,790 $ 66,204
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation..................................... 637,377 139,431 140,150
Gain on sale of rental equipment................. (229,374) (93,176) (10,584)
Changes in operating assets and liabilities:
Accounts receivable............................ (49,063) (47,463) 14,501
Inventories.................................... (17,942) (21,300) (8,927)
Other assets................................... (714) 26 1,168
Accrued expenses and other liabilities......... 1,372 85 (437)
--------- --------- ---------
Net cash provided by operating activities... 669,673 140,393 202,075
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment....................... (948,004) (140,698) (9,198)
Purchases of property and equipment................. (13,716) -- --
Proceeds from sales of rental equipment............. 458,514 150,034 18,313
--------- --------- ---------
Net cash provided by (used in) investing
activities................................ (503,206) 9,336 9,115
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of distributions............................ (126,792) (60,212) (55,008)
Additional borrowings of debt....................... 716,630 179,158 --
Repayments of debt.................................. (702,694) (256,730) (189,644)
--------- --------- ---------
Net cash used in financing activities....... (112,856) (137,784) (244,652)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................................... 53,611 11,945 (33,462)
CASH AND CASH EQUIVALENTS, beginning of period........ 50,427 50,427 104,038
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period.............. $ 104,038 $ 62,372 $ 70,576
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF
NON-CASH TRANSACTIONS:
Distributions of property and equipment............. $ 36,570 $ 36,570 $ --
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.............................. $ 122,252 $ 32,885 $ 31,010
========= ========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-130
<PAGE> 246
REVCO EQUIPMENT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Revco Equipment Rentals, Inc. (the "Company") was incorporated on April 15,
1980, as a Florida S Corporation. The Company rents a broad array of equipment
to a customer base that includes principally construction industry participants
and industrial companies. The Company also engages in related activities such as
selling used rental equipment and selling related merchandise and parts. The
nature of the Company's business is such that short-term obligations are
typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying audited and unaudited
balance sheets are presented on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. The Company had no
cash equivalents at December 31, 1997 and March 31, 1998 (unaudited).
Inventories
Inventories consist of equipment, tools, parts, fuel and related supply
items and are stated at the lower of weighted average cost or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using an accelerated method. The range of useful
lives estimated by management for rental equipment is five to ten years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using an accelerated method. The range of useful lives
estimated by management for property and equipment is five to thirty-nine years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Fair value of financial instruments
The carrying amounts reported in the balance sheets for accounts
receivable, accounts payable and accrued expenses and other liabilities
approximate fair value due to the short-term nature of these accounts. The fair
value of debt is determined using current applicable interest rates as of
December 31, 1997 and March 31, 1998 (unaudited) and approximates the carrying
value of such debt.
Income taxes
The Company is an S Corporation for income tax purposes. Accordingly,
income, losses, and related temporary differences which arise in the recording
of income and expense items for financial reporting and tax
F-131
<PAGE> 247
REVCO EQUIPMENT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
reporting purposes are included in the individual tax returns of the
stockholders. Therefore, no provision or liability for Federal and state income
taxes has been included in the accompanying financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for information purposes only. The pro forma provision
for income tax has been provided at the estimated rate of 40%.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base.
3. RENTAL EQUIPMENT
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Rental equipment............................................ $ 3,582,745 $ 3,567,215
Less -- accumulated depreciation............................ (1,751,663) (1,874,054)
----------- -----------
Rental equipment, net............................. $ 1,831,082 $ 1,693,161
=========== ===========
</TABLE>
4. PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture, fixtures and office equipment.................... $ 33,396 $ 33,396
Vehicles.................................................... 241,528 241,528
Buildings................................................... 176,810 176,810
Leasehold improvements...................................... 27,750 27,750
Land........................................................ 101,600 101,600
--------- ---------
581,084 581,084
Less -- accumulated depreciation............................ (277,749) (278,509)
--------- ---------
Property and equipment, net....................... $ 303,335 $ 302,575
========= =========
</TABLE>
F-132
<PAGE> 248
REVCO EQUIPMENT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Term loans, secured by accounts receivable, inventories and
rental equipment, interest at rates ranging from 6.32% to
10.9%, payable in monthly installments.................... $1,322,456 $1,137,672
Mortgage, secured by building and land, interest at 8.25%,
Payable in monthly installments through December 1,
2007...................................................... 120,130 118,167
Unsecured note payable to a former stockholder, interest at
8.5%, payable in monthly installments through August 25,
2003...................................................... 83,405 80,508
---------- ----------
Total debt........................................ $1,525,991 $1,336,347
========== ==========
</TABLE>
Debt maturities at December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 607,270
1999........................................................ 435,368
2000........................................................ 235,259
2001........................................................ 135,976
2002........................................................ 28,051
Thereafter.................................................. 84,067
----------
Total............................................. $1,525,991
==========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment used for rental purposes under a
noncancellable operating lease. Future minimum lease payments, by year and in
the aggregate, for this lease are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 37,740
1999........................................................ 37,740
2000........................................................ 37,740
2001........................................................ 37,740
2002........................................................ 31,422
--------
Total............................................. $182,382
========
</TABLE>
7. SUBSEQUENT EVENT
Effective April 3, 1998, substantially all of the Company's operating
assets and liabilities were purchased by NationsRent, Inc. in exchange for cash
and debt.
F-133
<PAGE> 249
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To High Reach Company, Inc. and
High Reach Leasing Company:
We have audited the accompanying combined balance sheet of High Reach
Company, Inc. (a Florida corporation) and High Reach Leasing Company (an
unincorporated entity wholly owned by Rodger A. Renzulli) as of September 30,
1997 and the related combined statements of income, stockholder's equity and
owner's capital, and cash flows for the year then ended. These financial
statements are the responsibility of the companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of High Reach Company,
Inc. and High Reach Leasing Company as of September 30, 1997 and the combined
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
September 4, 1998.
F-134
<PAGE> 250
HIGH REACH COMPANY, INC.
AND
HIGH REACH LEASING COMPANY
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1998
------------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 1,314,872 $ 1,642,254
Accounts receivable, net of allowances for doubtful accounts
of $90,000 and $110,000 (unaudited) at September 30, 1997
and June 30, 1998, respectively........................... 2,630,784 3,315,566
Inventories................................................. 355,128 565,973
Trading securities.......................................... -- 1,986,971
Due from affiliates......................................... 773,043 1,093,982
Rental equipment, net....................................... 33,678,259 40,677,638
Land, property and equipment, net........................... 4,047,129 5,176,161
Other assets................................................ 326,702 166,439
----------- -----------
Total assets...................................... $43,125,917 $54,624,984
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
AND OWNER'S CAPITAL
LIABILITIES:
Accounts payable.......................................... $ 573,521 $ 421,540
Accrued expenses and other liabilities.................... 889,036 870,423
Debt...................................................... 31,071,691 40,663,144
Deferred income taxes..................................... 2,815,780 3,416,855
----------- -----------
Total liabilities................................. 35,350,028 45,371,962
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 3, 8 and 11)
STOCKHOLDER'S EQUITY AND OWNER'S CAPITAL:
Common stock - $1 par value; 7,500 shares authorized;
100 shares issued and outstanding.................... 100 100
Additional paid-in capital............................. 41,406 41,406
Retained earnings...................................... 7,734,383 9,211,516
----------- -----------
Total stockholder's equity and owner's capital.... 7,775,889 9,253,022
----------- -----------
Total liabilities and stockholder's equity and
owner's capital................................. $43,125,917 $54,624,984
=========== ===========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these combined balance sheets.
F-135
<PAGE> 251
HIGH REACH COMPANY, INC.
AND
HIGH REACH LEASING COMPANY
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE NINE MONTH PERIOD
ENDED ENDED JUNE 30,
SEPTEMBER 30, -------------------------
1997 1997 1998
------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Equipment rentals..................................... $15,138,252 $11,048,680 $14,977,675
Sales of equipment, parts and supplies................ 2,551,688 2,223,083 1,787,415
Other................................................. 532,689 197,831 75,658
----------- ----------- -----------
18,222,629 13,469,594 16,840,748
Cost of revenue:
Cost of equipment rentals, excluding depreciation..... 6,007,162 4,224,494 5,264,014
Rental equipment depreciation......................... 3,152,484 2,313,396 3,021,190
Cost of sales of equipment, parts and supplies........ 1,703,227 1,449,352 1,294,022
----------- ----------- -----------
10,862,873 7,987,242 9,579,226
----------- ----------- -----------
Gross profit....................................... 7,359,756 5,482,352 7,261,522
Selling, general and administrative expenses............ 2,739,286 2,071,330 2,961,852
Nonrental depreciation and amortization................. 343,627 239,627 267,859
----------- ----------- -----------
Operating income................................... 4,276,843 3,171,395 4,031,811
----------- ----------- -----------
Other income (Expense), net:
Interest expense...................................... (2,185,187) (1,563,294) (2,163,455)
Interest income....................................... 13,014 -- 57,042
Net gain on sale of trading securities................ -- -- 152,810
----------- ----------- -----------
(2,172,173) (1,563,294) (1,953,603)
----------- ----------- -----------
Income before provision for income taxes........... 2,104,670 1,608,101 2,078,208
Provision for income taxes.............................. 720,603 456,000 601,075
----------- ----------- -----------
Net income.............................................. 1,384,067 1,152,101 1,477,133
Pro forma provision for income taxes.................... 220,624 198,759 211,867
----------- ----------- -----------
Pro forma net income.................................... $ 1,163,443 $ 953,342 $ 1,265,266
=========== =========== ===========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these combined statements.
F-136
<PAGE> 252
HIGH REACH COMPANY, INC.
AND
HIGH REACH LEASING COMPANY
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
AND OWNER'S CAPITAL
<TABLE>
<CAPTION>
COMMON STOCK RETAINED EARNINGS
------------------ ADDITIONAL -------------------------------
NUMBER PAID-IN HIGH REACH HIGH REACH
OF SHARES AMOUNT CAPITAL COMPANY, INC. LEASING COMPANY TOTAL
--------- ------ ---------- ------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, October 1, 1996.................. 100 $100 $41,406 $5,170,712 $1,179,604 $6,391,822
Net income.............................. -- -- -- 832,508 551,559 1,384,067
--- ---- ------- ---------- ---------- ----------
BALANCE, September 30, 1997............... 100 100 41,406 6,003,220 1,731,163 7,775,889
Net income (unaudited).................. -- -- -- 947,464 529,669 1,477,133
--- ---- ------- ---------- ---------- ----------
BALANCE, June 30, 1998 (unaudited)........ 100 $100 $41,406 $6,950,684 $2,260,832 $9,253,022
=== ==== ======= ========== ========== ==========
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these combined statements.
F-137
<PAGE> 253
HIGH REACH COMPANY, INC.
AND
HIGH REACH LEASING COMPANY
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIOD
FOR THE YEAR ENDED ENDED JUNE 30,
SEPTEMBER 30, --------------------------
1997 1997 1998
------------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... $ 1,384,067 $ 1,152,101 $ 1,477,133
Adjustments to reconcile net income to net cash
Provided by operating activities-
Depreciation and amortization............... 3,496,111 2,553,023 3,289,049
Deferred income tax provision............... 720,603 456,000 601,075
Gain on sale of assets...................... (660,854) (605,423) (296,577)
Unrealized loss on trading securities....... -- -- 91,616
Changes in operating assets and liabilities:
Accounts receivable...................... (182,467) (5,544) (684,782)
Inventories.............................. (58,376) (35,065) (210,845)
Other assets............................. (264,762) 19,100 151,448
Accounts payable......................... (1,753) (178,780) (151,981)
Accrued expenses and other liabilities... 206,718 20,441 (18,613)
------------ ----------- ------------
Net cash provided by operating
activities............................. 4,639,287 3,375,853 4,247,523
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of trading securities................ -- -- (2,078,587)
Purchases of property and equipment................ (1,314,334) (715,555) (1,413,134)
Proceeds from sale of property and equipment....... 15,234 1,500 32,250
Purchases of rental equipment...................... (12,222,032) (8,324,695) (10,582,060)
Proceeds from sale of rental equipment............. 1,600,529 1,401,367 861,659
------------ ----------- ------------
Net cash used in investing activities.... (11,920,603) (7,637,383) (13,179,872)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt, net of costs................... 17,288,784 12,817,335 11,545,773
Repayments of debt................................. (8,624,596) (7,638,280) (1,965,103)
Advances to affiliates, net........................ (422,661) (463,369) (320,939)
------------ ----------- ------------
Net cash provided by financing activities... 8,241,527 4,715,686 9,259,731
------------ ----------- ------------
Net increase in cash and cash equivalents.......... 960,211 454,156 327,382
Cash and cash equivalents, beginning of period..... 354,661 354,661 1,314,872
------------ ----------- ------------
Cash and cash equivalents, end of period........... $ 1,314,872 $ 808,817 $ 1,642,254
============ =========== ============
Supplemental disclosure of cash flow information:
Cash paid for interest........................ $ 2,131,616 $ 1,549,882 $ 2,170,418
============ =========== ============
Cash paid for income taxes.................... $ 173,200 $ 127,800 $ 8,400
============ =========== ============
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these combined statements.
F-138
<PAGE> 254
HIGH REACH COMPANY, INC.
AND
HIGH REACH LEASING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
September 30, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
High Reach Company, Inc. was incorporated in 1978 in the State of Florida
and High Reach Leasing Company, an unincorporated entity wholly-owned by Rodger
A. Renzulli, was formed in the same year. High Reach Company, Inc. and High
Reach Leasing Company, collectively referred to as the "Companies", do business
in Florida as High Reach, a dealer/distributor of off-road, hydraulic
self-propelled aerial work platforms. The Companies rent, sell and service
self-propelled aerial work platforms. Operations are conducted throughout
Florida from operating facilities in Sanford, Tampa, Jacksonville, and Deerfield
Beach. The customer base includes the construction trades employed in all types
of vertical building. Other customers include those in the business of
maintaining existing residential, commercial and industrial structures,
including Central Florida area attractions and the motion picture and television
industries. Rental periods are generally less than one year and the related
contracts are cancelable at the discretion of the customer. The nature of the
Companies' business is such that short-term obligations are typically met by
cash flow generated from long-term assets. Consequently, consistent with
industry practice, the accompanying combined balance sheets are presented on an
unclassified basis.
The combined financial statements include High Reach Company, Inc. and High
Reach Leasing Company, both of which are wholly owned by the same person. All
significant intercompany accounts and transactions have been eliminated in
combination.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
The Companies consider all highly liquid instruments with an original
maturity of three months or less when purchased to be cash equivalents. As of
September 30, 1997 and June 30, 1998, $963,314 and $1,000,990 (unaudited),
respectively, of the total cash and cash equivalents was interest bearing.
Marketable Securities
In accordance with the provisions of Statement Financial Accounting
Standards No. 115, unrealized gains and losses on trading securities (which are
stated at quoted fair value) are included in income. All of the Companies
marketable securities are classified as trading securities.
Inventories
Inventories consist of equipment, tools, parts, fuel and related rental
equipment supplies and accessories. Inventories are stated at the lower of cost,
using the first-in, first-out method, or market.
Rental Equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The useful lives
estimated by management for rental equipment is seven or ten years. Ordinary
maintenance and repair costs are charged to operations as incurred. Betterments
which substantially extend the useful life of rental equipment are capitalized.
F-139
<PAGE> 255
HIGH REACH COMPANY, INC.
AND
HIGH REACH LEASING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
Land, Property and Equipment
Land is stated at cost. Property and equipment are stated at cost less
accumulated depreciation and are depreciated on the straight-line method using
the following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements.................................. 7-40 years
Transportation equipment.................................... 5-10 years
Office and shop equipment................................... 3-7 years
</TABLE>
The cost of additions and improvements which substantially extend the
useful life of a particular asset are capitalized. Upon sale, the cost and
related accumulated depreciation are removed from the accounts and any gain or
loss is included in other income.
Loan Costs
Loan costs are amortized on a straight-line basis over the term of the
related loan or mortgage, which range from 12 to 120 months.
Impairment of Long-Lived Assets
The Companies periodically review their valuation for long-lived assets
used in operations when indicators of impairment are present. If the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount, the Companies record impairment as required under
generally accepted accounting principles. No such impairment losses were
incurred for the periods presented.
Fair Value of Financial Instruments
The carrying amounts reported in the accompanying combined balance sheets
for cash and cash equivalents, accounts receivable, accounts payable and accrued
expenses approximate fair value as of September 30, 1997 and June 30, 1998
(unaudited) due to the short-term nature of these amounts. The fair value of
debt is determined using current applicable interest rates as of September 30,
1997 and June 30, 1998 (unaudited) and approximates the carrying value of such
debt.
Revenue Recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Equipment rental revenue is recognized as earned over the
respective contract term.
Income Taxes
High Reach Leasing Company, a proprietorship, is not a tax paying entity
for purposes of federal and state income taxes. Accordingly, income, losses and
related temporary differences which arise in the recording of income and expense
items for financial reporting and tax reporting purposes are included in the
individual tax return of the proprietor. Therefore, no provision or liability
for Federal and state income taxes has been included in the accompanying
combined financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
combined statements of income is for informational purposes only. The pro forma
provision for income tax has been provided at the estimated effective rate of
40% on the proprietorship's income only.
F-140
<PAGE> 256
HIGH REACH COMPANY, INC.
AND
HIGH REACH LEASING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
High Reach Company, Inc. follows Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," which requires, among other
things, recognition of future tax effects measured at enacted rates attributable
to deductible temporary differences between the financial statement and income
tax bases of assets and liabilities to the extent that realization of said
effects is more likely than not.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Companies to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Companies' customer base. No single customer represents greater than 10%
of total accounts receivable. The Companies control credit risk through credit
approvals, credit limits and monitoring procedures.
Interim Financial Information
In the opinion of management, the unaudited interim financial information
as of June 30, 1998 and for the nine month periods ended June 30, 1997 and 1998
furnished herein reflects all adjustments consisting of normal recurring
accruals that, in the opinion of management, are necessary for a fair
presentation of the results for the interim periods. The results of operations
for the nine months ended June 30, 1998 are not necessarily indicative of the
results to be expected for the year ended December 31, 1998.
3. RENTAL EQUIPMENT, NET
Rental equipment consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1998
------------- -----------
(UNAUDITED)
<S> <C> <C>
Rental equipment, at cost........................... $42,265,893 $51,656,967
Less- Accumulated depreciation...................... (8,587,634) (10,979,329)
----------- -----------
Rental equipment, net............................. $33,678,259 $40,677,638
=========== ===========
</TABLE>
Through September 4, 1998, the Companies had purchased or committed to
purchase approximately $3,000,000 of additional rental equipment.
F-141
<PAGE> 257
HIGH REACH COMPANY, INC.
AND
HIGH REACH LEASING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
4. LAND, PROPERTY AND EQUIPMENT, NET
Land, property and equipment consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1998
------------- -----------
(UNAUDITED)
<S> <C> <C>
Land................................................. $ 977,623 $1,074,485
Buildings and improvements........................... 1,430,499 2,178,503
Transportation equipment............................. 2,019,086 2,151,203
Office and shop equipment............................ 355,274 394,531
Construction in progress............................. 574,371 884,611
----------- ----------
5,356,853 6,683,333
Less - accumulated depreciation...................... (1,309,724) (1,507,172)
----------- ----------
Land, property and equipment, net.................... $ 4,047,129 $5,176,161
=========== ==========
</TABLE>
As of September 30, 1997, the Companies were in the process of expanding
their Sanford operating facility and were obtaining the permits necessary to
begin construction of a Tampa operating facility. The Sanford operating facility
was completed in January, 1998 for a total cost of $785,050, excluding land. The
total cost incurred on the Tampa facility as of September 4, 1998 was
$1,268,969.
Construction in progress includes $13,346 of capitalized interest in
conjunction with the expansion of the Companies' Sanford facilities.
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1998
------------- -----------
(UNAUDITED)
<S> <C> <C>
Personal property taxes............................... $102,547 $282,244
Payroll-related....................................... 212,876 252,310
Interest.............................................. 208,523 224,655
Real estate property taxes............................ 268,470 28,830
Other................................................. 96,620 82,384
-------- --------
Accrued expenses and other liabilities.............. $889,036 $870,423
======== ========
</TABLE>
F-142
<PAGE> 258
HIGH REACH COMPANY, INC.
AND
HIGH REACH LEASING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1998
------------- -----------
(UNAUDITED)
<S> <C> <C>
Revolving credit facility with borrowings up to $27,000,000
based on specified assets; collateralized by substantially
all assets of the Companies and the personal guarantee of
the sole owner of the
Companies; interest payable monthly at LIBOR plus 2.25%
(7.97% at September 30, 1997); maturing in June 1999...... $24,065,646 $25,923,660
Equipment obligations with total borrowings up to $7,850,000
and $22,850,000 for 1997 and 1998, respectively;
collateralized by the related equipment and the personal
guarantee of the sole owner of the Companies; interest
payable monthly at rates ranging from 7.97% to 8.50%;
maturing through September 2004........................... 6,632,261 13,969,902
Mortgage loans; collateralized by land, buildings and
improvements; payable in monthly installments of $7,788
and $19,539 as of September 30, 1997 and June 30, 1998,
respectively; interest at LIBOR plus 2.56% (8.28% at
September 30, 1997); maturities to May 2003............... 373,784 769,582
----------- -----------
$31,071,691 $40,663,144
=========== ===========
</TABLE>
A substantial portion of the Companies' rental fleet is financed under the
$27,000,000 revolver. The revolver is renewable annually at the option of the
lender. Should the revolver not be renewed, the loan agreement specifies the
lender may convert the outstanding balance into a five-year term loan at a
mutually agreed upon interest rate.
The Companies were in compliance with all debt covenants as of September
30, 1997 and June 30, 1998 (unaudited).
Maturities of the Companies' debt at September 30, 1997, are as follows:
<TABLE>
<S> <C>
1998........................................................ $25,716,530
1999........................................................ 1,525,887
2000........................................................ 1,399,251
2001........................................................ 1,290,905
2002........................................................ 645,833
2003 and thereafter....................................... 493,285
-----------
$31,071,691
===========
</TABLE>
F-143
<PAGE> 259
HIGH REACH COMPANY, INC.
AND
HIGH REACH LEASING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
7. INCOME TAXES
The provision for federal and state income taxes for High Reach Company,
Inc. is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
Current..................................................... $ --
Deferred.................................................... 720,603
--------
$720,603
========
Federal..................................................... $629,181
State....................................................... 91,422
--------
$720,603
========
</TABLE>
A reconciliation of the difference between the expected provision for
income taxes using the statutory federal income tax rate of 34% and High Reach
Company, Inc.'s actual provision is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
Income tax at federal statutory rate........................ $715,588
Exclusion of proprietorship income.......................... (187,530)
State income tax............................................ 45,788
Other, net.................................................. 146,757
--------
$720,603
========
</TABLE>
Deferred income taxes arise primarily due to the carryforward of net
operating losses and tax credits, temporary differences in recognizing certain
revenues and expenses for tax purposes and the use of accelerated depreciation
for tax purposes. The components of the deferred income taxes are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts........................... $ 26,341
Accrued expenses.......................................... 29,601
Federal and state net operating loss carryforwards........ 978,382
Alternative minimum tax credit carryforwards.............. 666,726
----------
1,701,050
Deferred tax liability:
Depreciation.............................................. 4,491,953
Other..................................................... 24,877
----------
4,516,830
----------
Net deferred tax liability.................................. $2,815,780
==========
</TABLE>
The Corporation has available federal and state net operating loss
carryforwards of $351,752 and $2,282,189, which expire in 2011 and 2012,
respectively, and federal and state alternative minimum tax credit
F-144
<PAGE> 260
HIGH REACH COMPANY, INC.
AND
HIGH REACH LEASING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
carryforwards of $593,022 and $73,704, respectively, which do not expire and
therefore may be carried forward indefinitely, to reduce regular federal and
state income taxes.
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Companies lease certain office and service facilities in Tampa and
Jacksonville, Florida under operating leases. The Tampa lease was canceled
during September 1998 as operations were moved to new Company-owned facilities.
Certain real estate leases require the Company to pay maintenance, insurance,
taxes, and certain other expenses in addition to the stated rentals.
Future minimum lease payments to unrelated third parties at September 30,
1997 for the noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1998........................................................ $ 76,860
1999........................................................ 38,340
2000........................................................ 6,390
--------
Total............................................. $121,590
========
</TABLE>
Under the terms of the above operating leases and other short-term,
month-to-month rentals, rent expenses amounted to $71,594 for the year ended
September 30, 1997.
Litigation, Claims and Assessments
From time to time, the Companies may be engaged in routine litigation and
disputes incidental to their business. The Companies do not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying combined financial statements.
Self-Insurance
Due to the rising cost of insurance, the Companies have elected to be
self-insured for a substantial portion of the risk of rental and transportation
equipment damage or loss. As of September 30, 1997, coverage by insurance
companies for such equipment was $8,000,000.
9. RELATED PARTY TRANSACTIONS
Various personal expenses and cash advances are periodically paid to the
shareholder and the employees of the Companies and are included as due from
affiliates in the accompanying combined balance sheets. The receivable from the
shareholder is an interest bearing open credit arrangement. Amounts due from
affiliates consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER JUNE 30,
30, 1997 1998
--------- -----------
(UNAUDITED)
<S> <C> <C>
Shareholder................................................. $728,866 $ 56,063
Employees................................................... 44,177 1,037,919
-------- ----------
$773,043 $1,093,982
======== ==========
</TABLE>
F-145
<PAGE> 261
HIGH REACH COMPANY, INC.
AND
HIGH REACH LEASING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
10. EMPLOYEE BENEFIT PLAN
High Reach Company, Inc. has adopted a defined contribution employee
benefit plan under Section 401(k) of the Internal Revenue Code. All employees
who have met minimum age and length of service requirements are qualified to
participate. Employee contributions are voluntary and employer contributions are
made at the discretion of the Board of Directors in an amount not to exceed the
amount deductible for income tax purposes. Plan expense was $68,918 for fiscal
year 1997.
11. SUBSEQUENT EVENT
Effective September 4, 1998, all of the outstanding stock of High Reach
Company, Inc. and substantially all of the operating assets and related
liabilities of High Reach Leasing Company were purchased by NationsRent, Inc.,
an unrelated third party, in exchange for cash.
F-146
<PAGE> 262
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Reliable Rental & Supply Co., Inc.:
We have audited the accompanying balance sheet of Reliable Rental & Supply
Co., Inc. (an Alabama S corporation) as of December 31, 1997, and the related
statements of income, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Reliable Rental & Supply
Co., Inc. as of December 31, 1997, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
September 18, 1998.
F-147
<PAGE> 263
RELIABLE RENTAL & SUPPLY CO., INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 202,074 $ --
Accounts receivable, net of allowances for doubtful accounts
of $25,000 for both December 31, 1997 and June 30, 1998
(unaudited)............................................... 1,041,815 1,392,179
Inventories................................................. 120,241 191,163
Rental equipment, net....................................... 4,838,244 7,284,873
Property and equipment, net................................. 744,682 917,811
Other assets................................................ 800 78,192
---------- ----------
Total assets...................................... $6,947,856 $9,864,218
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable.......................................... $ 390,661 $ 673,117
Accrued expenses and other liabilities.................... 375,076 455,998
Debt...................................................... 4,602,766 6,859,316
---------- ----------
Total liabilities................................. 5,368,503 7,988,431
COMMITMENTS AND CONTINGENCIES (Notes 7 and 9)
STOCKHOLDERS' EQUITY:
Common stock $1.00 par value, 5,000 shares authorized,
1,666 shares issued and outstanding.................... 1,666 1,666
Additional paid-in capital................................ 343,333 343,333
Retained earnings......................................... 1,234,354 1,530,788
---------- ----------
Total stockholders' equity........................ 1,579,353 1,875,787
---------- ----------
Total liabilities and stockholders' equity........ $6,947,856 $9,864,218
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-148
<PAGE> 264
RELIABLE RENTAL & SUPPLY CO., INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTH PERIOD
FOR THE YEAR ENDED ENDED JUNE 30,
DECEMBER 31, -------------------------
1997 1997 1998
------------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Equipment rentals................................... $8,315,475 $3,896,252 $5,110,775
Sales of equipment, parts and supplies.............. 1,150,832 456,788 552,610
---------- ---------- ----------
9,466,307 4,353,040 5,663,385
Cost of revenue:
Cost of equipment rentals, excluding depreciation... 4,183,338 1,867,855 2,306,355
Rental equipment depreciation....................... 1,291,306 652,543 844,370
Cost of sales of equipment, parts and supplies...... 625,438 222,450 282,461
---------- ---------- ----------
6,100,082 2,742,848 3,433,186
---------- ---------- ----------
Gross profit..................................... 3,366,225 1,610,192 2,230,199
Selling, general and administrative
expenses............................................ 2,040,860 917,709 1,237,401
Nonrental depreciation and amortization............... 297,649 144,000 182,000
---------- ---------- ----------
Operating income................................. 1,027,716 548,483 810,798
---------- ---------- ----------
Other income (expense), net:
Interest expense.................................... (419,379) (196,128) (228,346)
Other, net.......................................... 15,350 12,446 13,982
---------- ---------- ----------
Total other income (expense), net........... (404,029) (183,682) (214,364)
---------- ---------- ----------
Net income............................................ 623,687 364,801 596,434
Pro forma provision for income taxes.................. 249,475 145,920 238,574
---------- ---------- ----------
Pro forma net income.................................. $ 374,212 $ 218,881 $ 357,860
========== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-149
<PAGE> 265
RELIABLE RENTAL & SUPPLY CO., INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------ ADDITIONAL
NUMBER PAID-IN RETAINED
OF SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996.................. 1,666 $1,666 $343,333 $1,151,489 $1,496,488
Net income................................ -- -- -- 623,687 623,687
Distributions............................. -- -- -- (540,822) (540,822)
----- ------ -------- ---------- ----------
Balance, December 31, 1997.................. 1,666 1,666 343,333 1,234,354 1,579,353
Net income (unaudited).................... -- -- -- 596,434 596,434
Distributions (unaudited)................. -- -- -- (300,000) (300,000)
----- ------ -------- ---------- ----------
Balance, June 30, 1998 (unaudited).......... 1,666 $1,666 $343,333 $1,530,788 $1,875,787
===== ====== ======== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-150
<PAGE> 266
RELIABLE RENTAL & SUPPLY CO., INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTH PERIOD
FOR THE YEAR ENDED ENDED JUNE 30,
DECEMBER 31, -------------------------
1997 1997 1998
------------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 623,687 $ 364,801 $ 596,434
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization................ 1,588,955 796,543 1,026,370
(Gain) loss on sale of assets................ (435,347) (280,834) 108,554
Changes in operating assets and liabilities:
Accounts receivable....................... (240,171) (102,542) (350,364)
Inventories............................... (25,404) 3,687 (70,922)
Other assets.............................. 21,045 2,227 (77,392)
Accounts payable.......................... (179,692) (329,188) 607,730
Accrued expenses and other liabilities.... 177,006 (13,712) 80,922
------------------ ----------- -----------
Net cash provided by operating
activities.............................. 1,530,079 440,982 1,921,332
------------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment................. (277,061) (89,206) (198,178)
Proceeds from sale of property and equipment........ 124,771 7,507 6,398
Purchases of rental equipment....................... (1,397,815) (1,201,054) (3,875,379)
Proceeds from sale of rental equipment.............. 684,670 293,948 312,477
------------------ ----------- -----------
Net cash used in investing activities..... (865,435) (988,805) (3,754,682)
------------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt.................................. $ 3,037,983 $ 1,246,698 $ 6,032,687
Repayments of debt................................ (2,974,559) (388,935) (4,101,411)
Distributions..................................... (540,822) (245,916) (300,000)
------------------ ----------- -----------
Net cash provided by (used in) financing
activities.............................. (477,398) 611,847 1,631,276
------------------ ----------- -----------
Net increase (decrease) in cash and cash
equivalents....................................... 187,246 64,024 (202,074)
Cash and cash equivalents, beginning of period...... 14,828 14,828 202,074
------------------ ----------- -----------
Cash and cash equivalents, end of period............ $ 202,074 $ 78,852 $ --
================== =========== ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest......................... $ 410,629 $ 192,265 $ 194,124
================== =========== ===========
Supplemental schedule of noncash
investing and financing activities:
Rental equipment acquired under capital lease
obligations.................................. $ 543,517 $ -- $ --
================== =========== ===========
Transfers of property and equipment to rental
equipment.................................... $ 131,044 $ -- $ --
================== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-151
<PAGE> 267
RELIABLE RENTAL & SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Reliable Rental & Supply Co., Inc. (the "Company") was incorporated in
Alabama for the purpose of creating a local diversified equipment rental company
in Birmingham, Alabama. The Company rents a broad array of equipment to a
diverse customer base that includes construction industry participants,
industrial companies, homeowners and others. The Company also engages in related
activities such as selling used rental equipment and related merchandise and
parts. The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying balance sheets are presented
on an unclassified basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. At December 31, 1997
and June 30, 1998 (unaudited), the Company had no cash equivalents.
Inventories
Inventory consists of equipment, tools, parts, fuel and related supply
items. Inventories are stated at the lower of cost, using the first-in,
first-out method, or market.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The range of
useful lives estimated by management for rental equipment is five to seven
years. Ordinary maintenance and repair costs are charged to operations as
incurred.
Property and equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using the straight-line method. The range of useful lives
estimated by management for property and equipment is three to ten years.
Ordinary maintenance and repair costs are charged to operations as incurred.
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
Fair value of financial instruments
The carrying amounts reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable and accrued expenses
and other liabilities approximate fair value as of December 31, 1997 and June
30, 1998 (unaudited) due to the short-term nature of these accounts. The fair
value of debt at December 31, 1997 and June 30, 1998 (unaudited) approximate the
carrying value of debt.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
F-152
<PAGE> 268
RELIABLE RENTAL & SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes
The Company is an S Corporation for income tax purposes. Accordingly,
income, losses, and related temporary differences which arise in the recording
of income and expense items for financial reporting and tax reporting purposes
are included in the individual tax returns of the stockholders. Therefore, no
provision or liability for Federal and state income taxes has been included in
the accompanying financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
statements of income is for information purposes only. The pro forma provision
for income taxes has been provided at the estimated rate of 40%.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10%
of total accounts receivable. The Company controls credit risk through credit
approvals, credit limits and monitoring procedures.
Interim financial information
In the opinion of management, the unaudited interim financial information
as of June 30, 1998 and for the six months ended June 30, 1997 and 1998
furnished herein reflects all adjustments consisting of normal recurring
accruals that, in the opinion of management, are necessary for a fair
presentation of the results for the interim periods. The results of operations
for the six months ended June 30, 1998 are not necessarily indicative of the
results to be expected for the year ending December 31, 1998.
3. RENTAL EQUIPMENT, NET
Rental equipment and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1997 1998
----------------- -----------
(UNAUDITED)
<S> <C> <C>
Rental equipment................................. $8,147,662 $11,068,825
Less - accumulated depreciation.................. (3,309,418) (3,783,952)
---------- -----------
Rental equipment, net.......................... $4,838,244 $ 7,284,873
========== ===========
</TABLE>
F-153
<PAGE> 269
RELIABLE RENTAL & SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1997 1998
----------------- -----------
(UNAUDITED)
<S> <C> <C>
Furniture, fixtures and office equipment.......... $ 636,813 $ 647,647
Vehicles.......................................... 892,451 1,071,109
Less - accumulated depreciation................... (784,582) (800,945)
----------------- ----------
Property and equipment, net..................... $ 744,682 $ 917,811
================= ==========
</TABLE>
5. ACCRUED EXPENSES AND OTHER LIABILITIES:
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1997 1998
----------------- -----------
(UNAUDITED)
<S> <C> <C>
Personal property taxes............................ $ 155,151 $178,217
Payroll-related.................................... 167,557 200,676
Sales and rental taxes............................. 34,019 42,941
Other.............................................. 18,349 34,164
----------------- --------
Accrued expenses and other liabilities........ $ 375,076 $455,998
================= ========
</TABLE>
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1997 1998
----------------- -----------
(UNAUDITED)
<S> <C> <C>
Notes payable, secured by equipment and vehicles, interest
at 8.50% to 9.67%, payable in various monthly installments
through June 2001......................................... $3,561,932 $5,535,168
Capital lease obligation, secured by equipment, with monthly
payments of $6,728 plus interest at 6.98%, maturing in
January 2006.............................................. 543,517 521,559
Notes payable to related parties, unsecured, interest at 8%
to 10%, payable in annual or semi-annual installments
through December 2000..................................... 497,317 477,315
Bank overdraft.............................................. -- 325,274
---------- ----------
$4,602,766 $6,859,316
========== ==========
</TABLE>
F-154
<PAGE> 270
RELIABLE RENTAL & SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of the Company's debt at December 31, 1997, are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASE
NOTES PAYABLE OBLIGATION TOTAL
------------- ------------- ----------
<S> <C> <C> <C>
1998..................................................... $1,253,623 $ 80,738 $1,334,361
1999..................................................... 892,296 80,738 973,034
2000..................................................... 1,141,969 80,738 1,222,707
2001..................................................... 771,361 80,738 852,099
2002..................................................... -- 80,738 80,738
2003 and thereafter...................................... -- 328,877 328,877
---------- --------- ----------
4,059,249 732,567 4,791,816
Less- amounts representing interest...................... -- (189,050) (189,050)
---------- --------- ----------
$4,059,249 $ 543,517 $4,602,766
========== ========= ==========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases real estate for storage and office space and rental
equipment under operating leases. Certain real estate leases require the Company
to pay maintenance, insurance, taxes and certain other expenses in addition to
the stated rentals. The real estate leases cover several operating locations and
expire at various dates through December 2002. The rental equipment leases
expire at various dates through September 2005. Future minimum lease payments to
related and unrelated third parties, by year and in the aggregate, at December
31, 1997 for noncancelable operating leases with initial or remaining terms of
one year or more are as follows:
<TABLE>
<CAPTION>
RELATED UNRELATED
PARTIES THIRD PARTIES TOTAL
---------- ------------- ----------
<S> <C> <C> <C>
1998...................................................... $ 252,000 $ 450,754 $ 702,754
1999...................................................... 252,000 403,969 655,969
2000...................................................... 252,000 403,969 655,969
2001...................................................... 252,000 377,278 629,278
2002...................................................... 252,000 377,278 629,278
2003 and thereafter....................................... -- 571,191 571,191
---------- ---------- ----------
Total........................................... $1,260,000 $2,584,439 $3,844,439
========== ========== ==========
</TABLE>
Rent expense for the storage and office space under noncancellable
operating leases for the year ended December 31, 1997 and for the six months
ended June 30, 1998 (unaudited) is $293,604 and $141,114, respectively. Included
in total rent expense for the year ended December 31, 1997 and for the six
months ended June 30, 1998 (unaudited) is rent to a related party of
approximately $216,000 and $126,000, respectively.
Litigation, Claims and Assessments
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying financial statements.
8. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) defined contribution profit-sharing plan under
which employees having worked a minimum of twelve months are eligible to
participate. Employer contributions, which are
F-155
<PAGE> 271
RELIABLE RENTAL & SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
discretionary and depend on the Company's profitability, were approximately
$33,882 and $18,145 for the year ended December 31, 1997 and the six months
ended June 30, 1998 (unaudited), respectively.
9. SUBSEQUENT EVENT
Effective September 4, 1998, substantially all of the Company's operating
assets and related liabilities were purchased by NationsRent, Inc., an unrelated
third party, in exchange for cash and debt.
F-156
<PAGE> 272
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Ray L. O'Neal, Inc. and Arenco, LLC:
We have audited the accompanying combined balance sheets of Ray L. O'Neal,
Inc. (a Texas S corporation) and Arenco, LLC (a Texas limited liability company)
as of December 31, 1996 and 1997, and the related combined statements of income,
stockholders' and members' equity and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ray L. O'Neal, Inc. and
Arenco, LLC as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
September 4, 1998.
F-157
<PAGE> 273
RAY L. O'NEAL, INC. AND ARENCO, LLC
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1996 1997 1998
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................... $ 2,217,546 $ 2,073,743 $ 252,334
Accounts receivable, net of allowances for doubtful
accounts of $235,000, $300,000 and $384,000
(unaudited) for December 31, 1996, 1997, and September
30, 1998, respectively................................ 3,998,540 5,593,499 7,010,391
Inventories............................................. 2,015,560 1,689,786 2,230,794
Rental equipment, net................................... 23,156,614 30,316,374 38,277,607
Property, plant and equipment, net...................... 2,421,920 2,735,947 2,970,875
Other assets............................................ 461,503 718,131 1,919,802
----------- ----------- -----------
Total assets.................................. $34,271,683 $43,127,480 $52,661,803
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' AND MEMBERS' EQUITY
LIABILITIES:
Accounts payable...................................... $ 954,419 $ 820,004 $ 920,011
Accrued expenses and other liabilities................ 1,398,433 2,685,278 3,018,734
Debt.................................................. 9,880,862 14,190,466 14,682,708
----------- ----------- -----------
Total liabilities............................. 12,233,714 17,695,748 18,621,453
</TABLE>
<TABLE>
COMMITMENTS AND CONTINGENCIES
(Notes 8 and 10)
<S> <C> <C> <C>
STOCKHOLDERS' AND MEMBERS' EQUITY:
Voting common stock; no par value, 100,000 shares
authorized, 60,200 shares issued in 1996; 10,000
shares authorized, 6,020 shares issued in 1997 and
1998............................................... 62,000 6,200 6,200
Nonvoting common stock; 90,000 shares authorized,
54,180 shares issued in 1997 and 1998.............. -- 55,800 55,800
Members' contributed capital.......................... 200,000 200,000 200,000
Retained earnings..................................... 21,870,944 25,264,707 33,873,325
Less: treasury stock-at cost: Voting common
stock -- 838 shares in 1996 and 84 shares in 1997
and 1998; nonvoting common stock -- 754 shares in
1997 and 1998...................................... (94,975) (94,975) (94,975)
----------- ----------- -----------
Total stockholders' and members' equity....... 22,037,969 25,431,732 34,040,350
----------- ----------- -----------
Total liabilities and stockholders' and
members' equity............................. $34,271,683 $43,127,480 $52,661,803
=========== =========== ===========
</TABLE>
The accompanying notes to combined financial statements are
an integral part of these combined balance sheets.
F-158
<PAGE> 274
RAY L. O'NEAL, INC. AND ARENCO, LLC
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED NINE MONTH PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
Equipment rentals....................... $31,388,940 $33,326,317 $40,690,605 $30,141,995 $37,439,537
Sales of equipment, parts and
supplies.............................. 4,799,559 6,784,677 7,390,683 4,928,679 7,166,127
Other................................... 31,615 33,641 159,098 143,555 140,282
----------- ----------- ----------- ----------- -----------
36,220,114 40,144,635 48,240,386 35,214,229 44,745,946
COST OF REVENUE:
Cost of equipment rentals, excluding
depreciation.......................... 9,503,785 10,629,936 14,514,537 10,136,211 12,713,436
Rental equipment depreciation........... 9,732,033 11,383,135 14,740,582 11,115,205 13,761,737
Cost of sales of equipment, parts and
supplies.............................. 2,079,980 3,200,905 3,608,098 2,294,080 1,957,702
----------- ----------- ----------- ----------- -----------
21,315,798 25,213,976 32,863,217 23,545,496 28,432,875
----------- ----------- ----------- ----------- -----------
Gross profit.......................... 14,904,316 14,930,659 15,377,169 11,668,733 16,313,071
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................ 9,942,586 9,806,372 11,241,495 2,935,079 3,744,783
NONRENTAL DEPRECIATION AND AMORTIZATION... 258,507 390,030 372,108 247,659 238,326
----------- ----------- ----------- ----------- -----------
Operating income...................... 4,703,223 4,734,257 3,763,566 8,485,995 12,329,962
OTHER INCOME (EXPENSE), net
Interest expense........................ (602,032) (524,004) (698,175) (550,592) (788,634)
Interest income......................... 163,220 266,681 292,536 117,648 124,929
Other, net.............................. 71,118 113,046 35,836 92,461 172,361
----------- ----------- ----------- ----------- -----------
NET INCOME................................ 4,335,529 4,589,980 3,393,763 8,145,512 11,838,618
PRO FORMA PROVISION FOR INCOME TAXES...... 1,734,212 1,835,992 1,357,505 3,258,205 4,735,447
----------- ----------- ----------- ----------- -----------
PRO FORMA NET INCOME...................... $ 2,601,317 $ 2,753,988 $ 2,036,258 $ 4,887,307 $ 7,103,171
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to combined financial statements are
an integral part of these combined statements.
F-159
<PAGE> 275
RAY L. O'NEAL, INC. AND ARENCO, LLC
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
AND MEMBERS' CAPITAL
<TABLE>
<CAPTION>
COMMON STOCK - NO PAR VALUE
-----------------------------------------
NUMBER OF NUMBER OF
VOTING NONVOTING MEMBERS' RETAINED TREASURY
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
--------- ------- --------- ------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995............ 60,200 $62,000 -- $ - $ - $12,945,435 $(94,975) $12,912,460
Net income........................ -- -- -- -- -- 4,335,529 -- 4,335,529
-------- ------- ------- ------- -------- ----------- -------- -----------
Balance, December 31, 1995.......... 60,200 62,000 -- -- -- 17,280,964 (94,975) 17,247,989
Contributions..................... -- -- -- -- 200,000 -- -- 200,000
Net income........................ -- -- -- -- -- 4,589,980 -- 4,589,980
-------- ------- ------- ------- -------- ----------- -------- -----------
Balance, December 31, 1996.......... 60,200 62,000 -- -- 200,000 21,870,944 (94,975) 22,037,969
Recapitalization.................. (54,180) (55,800) 54,180 55,800 -- -- -- --
Net income........................ -- -- -- -- -- 3,393,763 -- 3,393,763
-------- ------- ------- ------- -------- ----------- -------- -----------
Balance, December 31, 1997.......... 6,020 6,200 54,180 55,800 200,000 25,264,707 (94,975) 25,431,732
Distributions (unaudited)......... -- -- -- -- -- (3,230,000) -- (3,230,000)
Net income (unaudited)............ -- -- -- -- -- 11,838,618 -- 11,838,618
-------- ------- ------- ------- -------- ----------- -------- -----------
Balance, September 30, 1998
(unaudited)....................... 6,020 $ 6,200 54,180 $55,800 $200,000 $33,873,325 $(94,975) $34,040,350
======== ======= ======= ======= ======== =========== ======== ===========
</TABLE>
The accompanying notes to combined financial statements are
an integral part of these combined statements.
F-160
<PAGE> 276
RAY L. O'NEAL, INC. AND ARENCO, LLC
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
NINE MONTH PERIOD ENDED
FOR THE YEAR ENDED SEPTEMBER 30,
------------------------------------------ --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 4,335,529 $ 4,589,980 $ 3,393,763 $ 8,145,512 $11,838,618
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization.................... 9,990,540 11,773,165 15,112,690 11,362,864 14,000,063
(Gain) loss on sale of assets.................... (2,721,534) (3,723,363) (3,640,008) (1,369,650) (4,375,680)
Changes in operating assets and liabilities:
Accounts receivable........................... (957,026) 201,512 (1,594,959) (3,192,318) (1,416,892)
Inventories................................... (95,524) (697,742) 325,774 255,439 (541,008)
Other assets.................................. 22,768 (26,462) (256,628) (241,811) (1,201,671)
Accounts payable.............................. 1,022,092 (635,211) (134,415) (128,828) 100,007
Accrued expenses and other liabilities........ 53,286 100,974 1,286,845 1,864,227 333,456
------------ ------------ ------------ ------------ -----------
Net cash provided by operating activities..... 11,650,131 11,582,853 14,493,062 16,695,435 18,736,893
------------ ------------ ------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment............ (391,093) (1,011,024) (630,768) (525,079) (473,254)
Purchases of rental equipment......................... (13,828,294) (15,711,033) (22,853,187) (18,543,953) (23,311,151)
Proceeds from sale of rental equipment................ 2,826,187 4,410,066 4,537,486 2,695,154 5,963,861
------------ ------------ ------------ ------------ -----------
Net cash used in investing activities......... (11,393,200) (12,311,991) (18,946,469) (16,373,878) (17,820,544)
------------ ------------ ------------ ------------ -----------
</TABLE>
(Continued)
F-161
<PAGE> 277
RAY L. O'NEAL, INC. AND ARENCO, LLC
COMBINED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED NINE MONTH PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------------- -------------------------
1995 1996 1997 1997 1998
---------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt........................................ $5,883,634 $5,710,619 $10,354,246 $6,112,025 $23,299,072
Repayments of debt........................................ (4,505,071) (5,575,127) (6,044,642) (4,481,432) (22,806,830)
Capital contribution...................................... -- 200,000 -- -- --
Distributions to owners................................... -- -- -- -- (3,230,000)
---------- ---------- ----------- ---------- -----------
Net cash provided by (used in) financing activities.... 1,378,563 335,492 4,309,604 1,630,593 (2,737,758)
---------- ---------- ----------- ---------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS...................................... 1,635,494 (393,646) (143,803) 1,952,150 (1,821,409)
CASH AND CASH EQUIVALENTS, beginning of period.............. 975,698 2,611,192 2,217,546 2,217,546 2,073,743
---------- ---------- ----------- ---------- -----------
CASH AND CASH EQUIVALENTS, end of period.................... $2,611,192 $2,217,546 $ 2,073,743 $4,169,696 $ 252,334
========== ========== =========== ========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest................................. $ 600,092 $ 519,407 $ 654,503 $ 456,444 $ 532,759
========== ========== =========== ========== ===========
Cash paid for income taxes............................. $ 121,017 $ 211,966 $ 233,772 $ 233,772 $ 207,432
========== ========== =========== ========== ===========
</TABLE>
The accompanying notes to combined financial statements are
an integral part of these combined statements.
F-162
<PAGE> 278
RAY L. O'NEAL, INC. AND ARENCO, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Ray L. O'Neal, Inc. was incorporated on December 23, 1968 in the State of
Texas and Arenco, LLC was formed on August 19, 1996 as a limited liability
corporation in the State of Texas. Ray L. O'Neal, Inc. and Arenco, LLC, do
business collectively as A-1 Rental (the "Company"). The Company operates
thirteen stores in the Dallas/Fort Worth metropolitan area renting a broad array
of equipment to a diverse customer base that includes construction industry
participants, industrial companies, homeowners and others. The Company also
engages in related activities such as selling new and used rental equipment and
related merchandise and parts. Rental periods are generally less than one year
and the related contracts are cancelable at the discretion of the customer. The
nature of the Company's business is such that short-term obligations are
typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying combined balance sheets are
presented on an unclassified basis.
The accompanying combined financial statements include Ray L. O'Neal, Inc.
and Arenco, LLC. Ownership of both entities is closely held. All significant
intercompany accounts and transactions have been eliminated in combination.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. Cash in
interest-bearing accounts was $2,178,170 and $1,254,579 as of December 31, 1996
and 1997 at interest rates in the ranges of 3%-5.07% and 3.18%-5.28%,
respectively. At December 31, 1996 and 1997 and September 30, 1998 (unaudited),
the Company had no cash equivalents.
Inventories
Inventories consist of equipment, tools, parts, fuel and related
merchandise supply items. Inventories are stated at the lower of cost or market.
Cost is determined using the weighted average method.
Rental equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using an accelerated method. The useful life
estimated by management for rental equipment is five years. Rental equipment
having a cost below a capitalization threshold is charged to rental equipment
depreciation expense at the time of purchase. Ordinary maintenance and repair
costs are charged to operations as incurred.
Property, plant and equipment
Property is stated at cost. Plant and equipment are recorded at cost and
depreciated over their estimated useful lives using an accelerated method. The
range of useful lives estimated by management for plant and equipment is five to
thirty nine years. The cost of additions and improvements which substantially
extend the useful life of a particular asset is capitalized. Upon sale, the cost
and related accumulated depreciation are removed from the accounts and any gain
or loss is included in other income. Ordinary maintenance and repair costs are
charged to expense as incurred.
Impairment of long-lived assets
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than
F-163
<PAGE> 279
RAY L. O'NEAL, INC. AND ARENCO, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
the assets' carrying amount, the Company records impairment as required under
generally accepted accounting principles. No such impairment losses were
incurred for the periods presented.
Fair value of financial instruments
The carrying amounts reported in the accompanying combined balance sheets
for cash and cash equivalents, accounts receivable, accounts payable and accrued
expenses and other liabilities approximate fair value as of December 31, 1996
and 1997 and September 30, 1998 (unaudited) due to the short term nature of
these accounts. The carrying amount of the vendor financing debt approximates
fair value due to their short maturity of up to one year. The fair value of
notes payable is determined using current applicable interest rates as of
December 31, 1996 and 1997 and September 30, 1998 (unaudited) and approximates
the carrying value of such debt.
Revenue recognition
Revenue related to the sale of equipment, parts and supplies is recognized
at the point of sale. Revenue related to rental equipment is recognized over the
contract term.
Income taxes
Ray L. O'Neal, Inc. became an S Corporation for tax purposes effective
November 1, 1987. Arenco, LLC is classified as a partnership for income tax
purposes. Accordingly, income, losses and related temporary differences which
arise in the recording of income and expense items for financial reporting and
tax reporting purposes are included in the tax returns of the stockholders of
Ray L. O'Neal, Inc. and the members of Arenco, LLC. Therefore, no provision or
liability for Federal and state income taxes has been included in the
accompanying combined financial statements.
The pro forma adjustment to reflect income taxes in the accompanying
combined statements of income is for informational purposes only. The pro forma
provision for income taxes has been provided at the estimated effective rate of
40%.
Ray L. O'Neal, Inc. was liable for income taxes imposed on any built-in
gain resulting from the disposition, within 10 years, of any asset held on the
first day of the S Corporation election. A built-in gain is the difference
between the net book value and the fair market value of an asset, on hand, as of
the S Corporation election date. The income tax on the built-in gains is
computed at the highest corporate tax rate effective for that year. Provisions
for the built-in gains income tax are made in the accompanying combined balance
sheet in accrued expenses and other liabilities for the year ended December 31,
1996. No further provision is required for disposition of assets after October
31, 1997.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10%
of total accounts receivable. The Company controls credit risk through credit
approvals, credit limits and monitoring procedures.
F-164
<PAGE> 280
RAY L. O'NEAL, INC. AND ARENCO, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Interim Financial Information
In the opinion of management, the unaudited interim financial information
as of September 30, 1998 and for the nine months ended September 30, 1997 and
1998 furnished herein reflects all adjustments consisting of normal recurring
accruals that, in the opinion of management, are necessary for a fair
presentation of the results for the interim periods. The results of operations
for the nine months ended September 30, 1998 are not necessarily indicative of
the results to be expected for the year ending December 31, 1998.
3. RENTAL EQUIPMENT, NET
Rental equipment and related accumulated depreciation consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1996 1997 1998
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Rental equipment................................ $57,292,733 $71,891,633 $83,834,303
Less -- accumulated depreciation................ 34,136,119 41,575,259 45,556,696
----------- ----------- -----------
Rental equipment, net......................... $23,156,614 $30,316,374 $38,277,607
=========== =========== ===========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30,
1996 1997 1998
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Land.............................................. $ 78,567 $ 78,567 $ 78,567
Building and leasehold Improvements............... 3,961,651 4,363,848 4,686,937
Office equipment.................................. 1,006,514 1,236,742 1,389,294
Less- accumulated depreciation and amortization... 2,624,812 2,943,210 3,183,923
---------- ---------- ----------
Property, plant and equipment, net........... $2,421,920 $2,735,947 $2,970,875
========== ========== ==========
</TABLE>
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30,
1996 1997 1998
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Payroll and related benefits...................... $ 432,952 $ 519,098 $ 428,170
Employee benefit plan............................. 447,817 1,559,100 1,335,846
Sales taxes payable............................... 223,538 276,385 369,410
Accrual for income tax on built-in gains.......... 36,535 -- --
Accrued interest.................................. 18,352 62,024 317,899
Other............................................. 239,239 268,671 567,409
---------- ---------- ----------
Accrued expenses and other liabilities.......... $1,398,433 $2,685,278 $3,018,734
========== ========== ==========
</TABLE>
F-165
<PAGE> 281
RAY L. O'NEAL, INC. AND ARENCO, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1996 1997 1998
---------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable, secured by specific equipment,
interest at prime minus 50 basis points (8.0%
at December 31, 1997), payable in monthly
installments ranging from $21,667 to $77,930
through March 2002............................. $4,581,799 $ 8,447,429 $ 2,941,640
Vendor financing, secured by specific equipment,
non-interest bearing, payable within one
year........................................... 1,749,063 2,443,037 2,691,068
Notes payable to a related parties substantially
unsecured, interest at 7.5% and 8.0%, payable
through January 2002........................... 3,550,000 3,300,000 3,500,000
Lines of credit, with borrowings up to $11.5
million, secured by specific equipment,
interest at prime less .50%, payable in monthly
installments through August 1, 1999............ -- -- 5,550,000
---------- ----------- -----------
$9,880,862 $14,190,466 $14,682,708
========== =========== ===========
</TABLE>
The indebtedness with the related party is, in the opinion of management,
at terms not more or less favorable than could have been obtained if the
indebtedness was with an unrelated party.
Maturities of the Company's debt at December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 5,086,558
1999........................................................ 4,456,019
2000........................................................ 2,393,520
2001........................................................ 1,934,719
2002........................................................ 319,650
-----------
Total debt........................................ $14,190,466
===========
</TABLE>
7. RECAPITALIZATION
Effective December 29, 1997, the articles of incorporation for Ray L.
O'Neal, Inc. were amended to authorize the issuance of voting and nonvoting
shares of common stock in lieu of a single class of common stock. The 60,200
common shares issued prior to the amendment were changed and reclassified to
6,020 shares of voting common stock and 54,180 shares of nonvoting common stock.
The stated capital of the corporation was not changed by the amendment.
F-166
<PAGE> 282
RAY L. O'NEAL, INC. AND ARENCO, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases real estate under operating leases from related parties
and from a third party on a month to month basis. Certain real estate leases
require the Company to pay maintenance, insurance, taxes and certain other
expenses in addition to the stated rentals. The leases cover several operating
locations and expire at various dates through July 31, 2005. Future minimum
lease payments to related parties, by year and in the aggregate, at December 31,
1997 for noncancelable operating leases with initial or remaining terms of one
year or more are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 987,616
1999........................................................ 918,684
2000........................................................ 692,684
2001........................................................ 772,116
2002........................................................ 704,066
2003 and thereafter......................................... 741,516
----------
Total............................................. $4,816,682
==========
</TABLE>
Rent expense under noncancellable operating leases for the years ended
December 31, 1995, 1996 and 1997 was $781,400, $804,476 and $1,027,525,
respectively, all of which was paid to related parties, except for $30,000 paid
to an unrelated third party in 1997.
Litigation, Claims and Assessments
From time to time, the Company may be engaged in routine litigation and
disputes incidental to its business. The Company does not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying combined financial statements.
9. EMPLOYEE BENEFIT PLANS
The Company has adopted a defined contribution employee benefit plan under
Section 401(k) of the Internal Revenue Code. All employees who have met minimum
age and length of service requirements are qualified to participate. Employee
contributions are voluntary and employer contributions are made at the
discretion of the Board of Directors in an amount not to exceed the amount
deductible for income tax purposes. Plan expense was $225,000, $250,000 and
$320,000 for the years ended December 31, 1995, 1996 and 1997, respectively.
The Company had a defined benefit pension plan covering substantially all
of its employees which was terminated effective December 31, 1997. The benefits
were based on years of service and compensation of the employee. Payment of
accrued benefits under the plan was only available upon death, disability or
retirement. The Company's policy was to annually expense and contribute a
minimum required contribution as determined by a consulting actuary. Annual
expenses and contributions related to the pension plan were $337,370, $459,768
and $552,796 for the years ended December 31, 1995, 1996 and 1997, respectively.
In addition, the estimated cost of terminating the plan of $906,985 was expensed
in 1997 and is included in accrued expenses and other liabilities on the
accompanying combined balance sheet as of December 31, 1997.
10. SUBSEQUENT EVENT
Effective September 9, 1998, substantially all of the Company's operating
assets and liabilities were purchased by NationsRent, Inc. an unrelated third
party, in exchange for cash and debt.
F-167
<PAGE> 283
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Action Equipment Company, Inc.
and Action Supply Co., Inc.:
We have audited the accompanying combined balance sheet of Action Equipment
Company, Inc. and Action Supply Co., Inc. (the "Companies"), both New Hampshire
S Corporations, as of December 31, 1997 and the related combined statements of
operations, stockholders' deficit and cash flows for the year then ended. These
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Action
Equipment Company, Inc. and Action Supply Co., Inc. as of December 31, 1997 and
the combined results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts,
November 13, 1998.
F-168
<PAGE> 284
ACTION EQUIPMENT COMPANY, INC. AND
ACTION SUPPLY CO., INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS................................... $ 190,171 $ 265,543
ACCOUNTS RECEIVABLE, net of allowances for doubtful accounts
of $435,000 and $329,000 at December 31, 1997 and
September 30, 1998 (unaudited), respectively.............. 2,899,637 2,832,781
INVENTORIES................................................. 1,353,174 1,557,659
DUE FROM AFFILIATES......................................... 27,514 461,444
RENTAL EQUIPMENT, NET....................................... 4,267,389 8,649,446
PROPERTY AND EQUIPMENT, NET................................. 722,989 857,301
OTHER ASSETS, NET........................................... 170,087 404,365
----------- -----------
Total assets...................................... $ 9,630,961 $15,028,539
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
DEBT........................................................ $ 6,642,922 $ 9,398,776
OBLIGATIONS UNDER CAPITAL LEASES............................ 297,484 259,425
ACCOUNTS PAYABLE............................................ 1,574,026 4,162,889
ACCRUED EXPENSES AND OTHER LIABILITIES...................... 291,186 511,585
SUBORDINATED DEBT........................................... 1,229,978 1,247,497
----------- -----------
Total liabilities................................. 10,035,596 15,580,172
COMMITMENTS AND CONTINGENCIES (Notes 7, 8, 9 and 13)
PUT WARRANTS................................................ 278,700 1,875,000
----------- -----------
STOCKHOLDERS' DEFICIT:
Stockholders' investment.................................. 1,529,648 1,633,650
Accumulated deficit....................................... (2,212,983) (4,060,283)
----------- -----------
Total stockholders' deficit....................... (683,335) (2,426,633)
----------- -----------
Total liabilities and stockholders' deficit....... $ 9,630,961 $15,028,539
=========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-169
<PAGE> 285
ACTION EQUIPMENT COMPANY, INC. AND
ACTION SUPPLY CO., INC
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR NINE MONTHS ENDED
ENDED SEPTEMBER 30,
DECEMBER 31, ------------------------
1997 1997 1998
------------ ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Equipment rentals................................... $ 6,114,187 $4,203,380 $ 5,626,434
Sale of equipment, parts and supplies............... 7,396,734 5,001,628 5,249,394
Service and Other................................... 334,751 196,791 215,029
----------- ---------- -----------
Total Revenue............................... 13,845,672 9,401,799 11,090,857
COST OF REVENUE:
Cost of equipment rentals, excluding depreciation... 3,187,304 2,376,958 2,657,283
Rental equipment depreciation....................... 660,750 314,014 598,236
Cost of sales of equipment, parts and supplies...... 6,315,063 4,224,843 4,689,604
----------- ---------- -----------
Total Cost of Revenue....................... 10,163,117 6,915,815 7,945,123
----------- ---------- -----------
Gross profit................................ 3,682,555 2,485,984 3,145,734
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.......... 3,432,129 2,456,364 2,450,721
NONRENTAL DEPRECIATION AND AMORTIZATION............... 189,636 90,122 153,378
----------- ---------- -----------
Operating income (loss)............................. 60,790 (60,502) 541,635
OTHER INCOME (EXPENSE), NET:
Interest expense.................................... (779,796) (524,745) (2,393,725)
Interest income..................................... 27,608 21,058 4,790
----------- ---------- -----------
Total other expense......................... (752,188) (503,687) (2,388,935)
----------- ---------- -----------
Loss before extraordinary item.............. (691,398) (564,189) (1,847,300)
EXTRAORDINARY ITEM :
Gain on extinguishment of debt...................... 651,354 -- --
----------- ---------- -----------
NET LOSS.............................................. $ (40,044) $ (564,189) $(1,847,300)
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-170
<PAGE> 286
ACTION EQUIPMENT COMPANY, INC. AND
ACTION SUPPLY CO., INC.
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
TOTAL
STOCKHOLDERS' ACCUMULATED STOCKHOLDERS'
INVESTMENT DEFICIT DEFICIT
------------- ----------- -------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1997.......................... $1,015,163 $(2,172,939) $(1,157,776)
Capital contribution............................ 514,485 -- 514,485
Net loss........................................ -- (40,044) (40,044)
---------- ----------- -----------
BALANCE, DECEMBER 31, 1997........................ 1,529,648 (2,212,983) (683,335)
Capital contribution (unaudited)................ 104,002 -- 104,002
Net loss (unaudited)............................ -- (1,847,300) (1,847,300)
---------- ----------- -----------
BALANCE, SEPTEMBER 30, 1998 (unaudited)........... $1,633,650 $(4,060,283) $(2,426,633)
---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-171
<PAGE> 287
ACTION EQUIPMENT COMPANY, INC. AND
ACTION SUPPLY CO., INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, -------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................ $ (40,044) $ (564,189) $(1,847,300)
Adjustments to reconcile net loss to net cash (used
in) provided by operating activities --
Depreciation and amortization.................. 850,386 404,136 751,614
Gain on extinguishment of debt................. (651,354) -- --
Accretion of put warrants...................... -- -- 1,596,300
Accretion of subordinated debt................. 8,678 -- 17,519
Changes in assets and liabilities --
Accounts receivable......................... (1,020,433) (331,889) 66,856
Inventories................................. (79,330) 17,841 (204,485)
Due from affiliates......................... 557,788 (117,635) (433,930)
Other assets................................ 33,803 (136,802) (234,278)
Accounts payable............................ (136,172) (498,608) 2,588,863
Accrued expenses and other liabilities...... 91,391 (89,948) 220,399
----------- ----------- -----------
Net cash provided by (used in) operating
activities............................. (385,287) (1,317,094) 2,521,558
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchase of rental equipment.................... (205,215) (156,000) (2,200,000)
Net purchase of property and equipment.............. (66,649) (50,000) (197,432)
----------- ----------- -----------
Net cash used in investing activities..... (271,864) (206,000) (2,397,432)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) of debt................. (719,967) 91,431 (48,754)
Proceeds from subordinated debt issuance............ 1,221,300 1,221,300 --
Issuance of put warrants............................ 278,700 278,700 --
----------- ----------- -----------
Net cash provided by (used in) financing
activities............................. 780,033 1,591,431 (48,754)
----------- ----------- -----------
Net increase in cash and cash
equivalents............................ 122,882 68,337 75,372
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........ 67,289 67,289 190,171
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............. $ 190,171 $ 135,626 $ 265,543
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Acquisition of equipment financed by debt and
capital leases................................... $ 1,061,398 $ 760,188 $ 2,870,551
=========== =========== ===========
Conversion of debt to capital....................... $ 514,485 $ 514,485 $ 104,002
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for taxes................................. $ 14,500 $ 7,107 $ 12,950
=========== =========== ===========
Cash paid for interest.............................. $ 817,485 $ 612,509 $ 712,852
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-172
<PAGE> 288
ACTION EQUIPMENT COMPANY, INC. AND
ACTION SUPPLY CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) ORGANIZATION AND BASIS OF PRESENTATION
Action Equipment Company, Inc. was incorporated in 1980 in the state of New
Hampshire. Action Supply Co., Inc. was incorporated in 1985 in the state of New
Hampshire. Action Equipment Company, Inc. and Action Supply Co., Inc.,
collectively referred to hereafter as the "Companies," do business in New
Hampshire, Massachusetts, Vermont and Maine. The Companies rent and sell a broad
array of equipment to a customer base that includes principally construction
industry participants and industrial companies. The nature of the Companies'
business is such that short-term obligations are typically met by cash flow
generated from long-term assets. Consequently, consistent with industry
practice, the accompanying audited and unaudited balance sheets are presented on
an unclassified basis.
The combined financial statements include Action Equipment Company, Inc.
and Action Supply Co., Inc., both of which are closely held by the same
shareholder group. All significant intercompany accounts and transactions have
been eliminated in combination.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Interim Financial Information
The accompanying combined financial statements as of September 30, 1998 and
for the nine-month periods ended September 30, 1997 and 1998 are unaudited, but
in the opinion of management, include all adjustments consisting of normal
recurring adjustments necessary for a fair presentation of results for the
interim periods. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been omitted with respect to the interim periods,
although the Companies believe that the disclosures included are adequate to
make the information presented not misleading. Results for the nine months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
(b) Cash and Cash Equivalents
The Companies consider all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. As of December 31,
1997, $82,022 of the total cash and cash equivalents was interest bearing at
approximately 2.5%, of which $51,449 was restricted to comply with loan
covenants (see Note 6).
(c) Inventories
Inventories consist of equipment, tools, parts and related rental equipment
supplies and accessories. Inventories are stated at the lower of cost, using the
specific identification method, or market.
(d) Rental Equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The useful lives
estimated by management for rental equipment are 3 to 12 years. Ordinary
maintenance and repair costs are charged to operations as incurred. Betterments,
which substantially extend the useful life of rental equipment, are capitalized.
Upon sale of rental equipment, the cost and related accumulated depreciation are
removed from the accounts and any gain or loss is included in income.
(e) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
are depreciated on the straight-line method using the following estimated useful
lives:
F-173
<PAGE> 289
ACTION EQUIPMENT COMPANY, INC. AND
ACTION SUPPLY CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<S> <C>
Transportation equipment............................... 3 -- 12 years
Furniture and fixtures................................. 5 -- 12 years
Computer equipment..................................... 3 -- 5 years
Leasehold improvements................................. 5 years
</TABLE>
The cost of additions and improvements, which substantially extend the
useful life of a particular asset, is capitalized.
(f) Other Assets
Included in other assets are deferred financing costs and costs incurred in
relation to the possible sale of the Companies (Note 15). Deferred financing
costs are amortized on a straight-line basis over the term of the related loan
or mortgage, which ranges from 24 to 84 months.
(g) Impairment of Long-Lived Assets
The Companies periodically review the valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amounts, the Companies record impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
periods presented.
(h) Fair Value of Financial Instruments
The carrying amounts reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable, accrued expenses
and other liabilities approximate fair value as of December 31, 1997 and
September 30, 1998 (unaudited) due to the short-term nature of these amounts.
The fair value of debt is determined using current applicable interest rates as
of December 31, 1997 and September 30, 1998 (unaudited) and approximates the
carrying value of such debt.
(i) Revenue Recognition
Revenues from the sales and service of equipment, parts and accessories are
recognized upon shipment or as the services are provided. Rental revenues are
recognized ratably over the contractual periods, which are typically less than
one year. Allowances are established to recognize estimated bad debts and
adjustments to revenues.
(j) Income Taxes
The Companies have elected under the Internal Revenue Code to be S
corporations. For federal income tax purposes, income, losses and other tax
attributes are primarily passed through to the stockholders. Therefore, no
provision or liability for federal income taxes has been included in the
combined financial statements. The Companies have operating facilities in
various states and provide for state income tax liability based upon the
respective taxable income and statutory requirements of each state.
The Companies follow Statement of Financial Accounting Standards (SFAS) No.
109, Accounting for Income Taxes, which requires, among other things,
recognition of future tax effects measured at enacted rates attributable to
deductible temporary differences between the financial statement and income tax
bases of assets and liabilities to the extent that realization of said effects
is more likely than not.
As of December 31, 1997, the Companies had net operating loss carryforwards
of approximately $300,000 and tax credits of $20,000, which begin to expire in
1998. The deferred tax asset associated with these tax attributes has a 100%
offsetting valuation allowance due to the uncertainty of usage prior to
expiration.
F-174
<PAGE> 290
ACTION EQUIPMENT COMPANY, INC. AND
ACTION SUPPLY CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(k) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(l) Concentrations of Credit Risk
Financial instruments that potentially subject the Companies to significant
concentrations of credit risk consist primarily of cash equivalents and accounts
receivable. The Companies maintain cash and cash equivalents with high-quality
financial institutions. Concentrations of credit risk with respect to accounts
receivable are limited because a large number of diverse customers make up the
Companies' customer base. No single customer represents greater than 10% of
total accounts receivable. The Companies control credit risk through credit
approvals, credit limits and monitoring procedures.
(3) RENTAL EQUIPMENT
Rental equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
Rental equipment....................................... $ 6,102,028 $10,790,160
Less accumulated depreciation.......................... (1,834,639) (2,140,714)
----------- -----------
Rental equipment, net.................................. $ 4,267,389 $ 8,649,446
=========== ===========
</TABLE>
(4) PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
Transportation equipment............................... $ 921,322 $ 1,091,689
Furniture and fixtures................................. 303,265 303,883
Computer equipment..................................... 48,195 52,956
Leasehold improvements................................. 38,731 123,609
----------- -----------
1,311,513 1,572,137
Less accumulated depreciation.......................... (588,524) (714,836)
----------- -----------
Property and equipment, net............................ $ 722,989 $ 857,301
=========== ===========
</TABLE>
F-175
<PAGE> 291
ACTION EQUIPMENT COMPANY, INC. AND
ACTION SUPPLY CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(5) ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
Interest............................................... $ 39,241 $ 97,617
Professional Fees...................................... 136,181 197,699
Payroll-related........................................ 37,793 21,130
Deferred Taxes......................................... 30,000 30,000
Inventory received, but not invoiced................... 24,604 113,081
Other.................................................. 23,367 52,058
----------- -----------
$ 291,186 $ 511,585
=========== ===========
</TABLE>
(6) DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
Lines of credit. Revolving loan with borrowings up to
$2,000,000 ($1,996,780 at December 31, 1997); final
maturity November 1999; variable rate (10% at
December 31, 1997); collateralized by all personal
property; guaranteed by stockholders and Action
Supply Co., Inc...................................... $ 1,996,780 $ 1,985,274
Demand note ($154,000 at December 31, 1997) with
variable rate (10.5% at December 31, 1997);
collateralized by inventories and receivables;
guaranteed by stockholders........................... 154,000 140,000
Equipment obligations; collateralized by the related
equipment and the personal guarantee of the majority
owner of the Companies; interest payable monthly at
rates ranging from 3.21% to 22.91% at December 31,
1997................................................. 3,604,993 6,484,197
Note Payable; interest at prime plus 1.5% (10.0% at
December 31, 1997); monthly payments of $10,000
principal plus interest maturing March 2002;
collateralized by equipment, life insurance policy
and certificate of deposit; guaranteed by stockholder
and affiliated companies............................. 887,149 789,305
----------- -----------
Debt......................................... $ 6,642,922 $ 9,398,776
=========== ===========
</TABLE>
The terms of some of the Companies' debt instruments contain financial
covenants with respect to total net worth, current ratio, debt to equity ratio,
debt service coverage and other debt and capital ratios. As of December 31, 1997
the Companies are not in compliance with such requirements. The Companies have
received waivers from their creditors with respect to compliance with these
covenants.
F-176
<PAGE> 292
ACTION EQUIPMENT COMPANY, INC. AND
ACTION SUPPLY CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of long-term debt for each of the next five years as of December
31, 1997 are as follows:
<TABLE>
<S> <C>
1998..................................................... $4,026,469
1999..................................................... 1,244,401
2000..................................................... 696,227
2001..................................................... 497,107
2002..................................................... 178,718
----------
Total.......................................... $6,642,922
==========
</TABLE>
(7) LEASE OBLIGATIONS
(a) Capital Leases
The Companies have entered into long-term capital lease agreements related
to certain revenue-earning equipment. As of December 31, 1997, the present value
of future minimum lease payments under the capital leases was as follows:
<TABLE>
<S> <C>
1998..................................................... $ 79,086
1999..................................................... 79,086
2000..................................................... 79,086
2001..................................................... 79,086
2002..................................................... 58,959
---------
Total future minimum lease payments...................... 375,303
Less amounts representing interest....................... (77,819)
---------
Present value of net minimum capital lease payments...... $ 297,484
=========
</TABLE>
(b) Operating Leases
The Companies have obligations under operating leases primarily for office
space and equipment that expire through August 2001 including obligations to
related parties. Rent expense for 1997 amounted to $251,720, including $184,600
paid to a related party.
Minimum future rental obligations for noncancellable operating leases as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
EQUIPMENT PROPERTY RELATED
YEAR ENDED LEASES LEASES TOTAL PARTY
---------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C>
1998.................................... $ 497,506 $223,300 $ 720,806 $247,420
1999.................................... 479,526 229,300 708,826 253,420
2000.................................... 411,064 218,100 629,164 242,220
2001.................................... 381,255 107,100 488,355 131,220
2002.................................... 150,374 -- 150,374 20,100
---------- -------- ---------- --------
Total future minimum lease payments....... $1,919,725 $777,800 $2,697,525 $894,380
========== ======== ========== ========
</TABLE>
(8) SUBORDINATED DEBT AND COMMON STOCK PUT WARRANTS
In August 1997, the Company issued 12% subordinated debentures maturing
August 2004 to a venture capital firm. Principal payments, which are subordinate
to all senior debt, are subject to mandatory or optional prepayment under
certain conditions, as defined. In conjunction with the debentures, common stock
purchase warrants were issued for 39,588 shares of common stock for each
company, respectively. Both the exercise price ($10.93 per share for Action
Equipment Company, Inc. and $2.19 per share for Action Supply Co., Inc.)
F-177
<PAGE> 293
ACTION EQUIPMENT COMPANY, INC. AND
ACTION SUPPLY CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
and the number of shares available are subject to adjustment based upon certain
terms. The warrant certificates fully expire in August 2007.
Under the warrant agreement, the warrant holder may put the warrant back to
the Companies at any time after August 31, 2004, or earlier if the debenture has
been repaid in full. The put feature expires at the earlier of the event of an
initial public offering of stock by the Companies from which the Companies
receive net proceeds in excess of $10,000,000 and in which the price per share
of common stock would yield net proceeds in respect of shares covered by the
warrants in excess of $3,000,000, or the expiration date. The redemption price,
in the event of a put, is equal to the appraised fair market value of the
Companies multiplied by the shares issuable under the warrant, divided by the
total shares outstanding at the time of the put, plus the number of shares
represented by the warrant, or will be based on a formula in which the fair
value of the Companies is determined based on six times EBITDA, less the amount
of outstanding debt at the time of redemption.
The initial allocation of value assigned to the notes and warrants was
determined using the Black-Scholes option valuation model. The assumptions used
were as follows: dividend yield of 0%, risk-free interest rate of 6.13%,
expected warrant life of 10 years, and expected volatility of 25%.
As a result of this valuation of the warrants, the Companies have recorded
a discount on the subordinated note and are accreting this discount using the
effective yield method over the term of the debt. The Companies recognize
changes in the estimated fair value of the warrants in earnings. During the
period ended September 30, 1998 the Company recognized $1,596,300 of interest
related to an increase in the estimated fair value of the warrants.
(9) COMMITMENTS AND CONTINGENCIES
Litigation, Claims and Assessments
From time to time, the Companies may be engaged in routine litigation and
disputes incidental to their business. The Companies do not believe that the
ultimate resolution of any of these matters will have a material adverse effect
on the accompanying combined financial statements.
(10) RELATED PARTY TRANSACTIONS AND BALANCES
By virtue of common ownership and/or control, the Companies have several
relationships with certain entities. Some entities are involved in services or
sales within the construction industry, while others provide administrative
services or lease real estate. Sales and services charged to related parties
were approximately $1.4 million for 1997, while approximately $3.3 million in
products and services were purchased from related parties in 1997 and included
as cost of equipment rentals. Management believes these to be arm's-length
transactions done at fair market value.
In addition, the Companies hold various notes receivable, a note payable,
and open accounts with related parties, which are included within due to/from
related parties.
(11) CAPITAL STOCK
Common stock consists of the following:
<TABLE>
<CAPTION>
ACTION
EQUIPMENT ACTION SUPPLY
COMPANY, INC. CO., INC.
---------------- ----------------
<S> <C> <C>
Common stock, no par value:
Authorized....................................... 1,000,000 shares 1,000,000 shares
Issued and outstanding........................... 65,000 shares 65,000 shares
</TABLE>
F-178
<PAGE> 294
ACTION EQUIPMENT COMPANY, INC. AND
ACTION SUPPLY CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In August 1997, both Companies increased their authorized common stock, no
par value, from 300 shares to 1,000,000 shares. In conjunction with the
subordinated debt and common stock warrant issuance (Note 8), the Companies
declared a stock split (303.3 shares for each share held by Action Equipment
Company, Inc. stockholders; 650 shares for each share held by Action Supply,
Inc. stockholders), and each company reserved 39,588 shares for common stock
warrants.
In 1997, the majority stockholder assumed $514,485 of debt owed by the
Companies to related parties. In 1998, the majority stockholder forgave $104,002
of the Companies' debt. Both transactions are recorded as capital contributions
in the combined statements of stockholders' deficit.
(12) EXTRAORDINARY ITEM
In 1997, a settlement of an outstanding note payable was negotiated with
the lender, resulting in a gain of $651,354, included as extraordinary income.
(13) CHAPTER 11 PLAN OF REORGANIZATION
On October 18, 1990, Action Equipment Company, Inc. filed a petition for
relief under Chapter 11 of the federal bankruptcy laws in the United States
Bankruptcy Court for the District of New Hampshire. On January 31, 1992, the
Bankruptcy Court confirmed the Plan of Reorganization, which included provision
for installment payments on certain priority tax claims and equipment
obligations, pro-rata payout on unsecured obligations, and subordinated debt
issuance of $514,485. Future installments of approximately $20,000 for tax
claims are included within accrued expenses at December 31, 1997.
(14) EMPLOYEE BENEFIT PLAN
The Companies have adopted a defined contribution employee benefit plan
under Section 401(k) of the Internal Revenue Code. All employees who have met
minimum age and length of service requirements are qualified to participate.
Employee contributions are voluntary and the Companies do not match employee
contributions.
(15) SUBSEQUENT EVENTS
In August 1998, the Companies purchased certain rental equipment assets
from related parties for approximately $2.5 million. Prior to the acquisition,
the Companies leased the equipment from the sellers which were used in the
Companies' operations. The Companies issued debt to the sellers as
consideration. This asset purchase is subject to a call provision if the
Companies do not enter into an agreement to be acquired by November 15, 1998.
Under the terms of this call provision, the seller has the option to reacquire
these assets in return for the consideration received from the Companies. This
feature is subject to certain requirements and expires on October 31, 1998.
Included in the December 31, 1997 and September 30, 1998 statement of operations
is $1,459,200 and $844,420, respectively, of rent expense related to the
operating leases of these assets.
Effective October 1998, the Companies signed a letter of intent for
substantially all of the Companies' operating assets and liabilities to be
purchased by NationsRent, Inc., an unrelated third party, in exchange for cash
and debt.
F-179
<PAGE> 295
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Logan Equipment Corporation:
We have audited the accompanying balance sheet of Logan Equipment
Corporation (the Company) as of December 31, 1997, and the related statements of
income, changes in stockholders' equity, and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Logan Equipment Corporation
at December 31, 1997, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
February 20, 1998,
Boston, Massachusetts.
F-180
<PAGE> 296
LOGAN EQUIPMENT CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------- -------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash........................................................ $ 240 $ 1,760
Accounts receivable, net of allowance for doubtful accounts
of $33 and $274 for December 31, 1997 and September 30,
1998, respectively........................................ 6,068 8,169
Inventories................................................. 2,735 5,871
Other assets................................................ 105 785
Rental equipment inventory, net of accumulated depreciation
of $3,505 and $5,950 for December 31, 1997 and September
30, 1998, respectively.................................... 18,439 35,343
Property and equipment, net of accumulated depreciation of
$380 and $1,109 for December 31, 1997 and September 30,
1998, respectively........................................ 978 2,396
Goodwill, net of accumulated amortization of $31............ -- 1,831
------- -------
Total assets...................................... $28,565 $56,155
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and other accrued expenses................. $ 3,011 $ 8,882
Bank debt and other obligations............................. 22,871 42,359
------- -------
Total liabilities................................. 25,882 51,241
------- -------
Redeemable preferred stock.................................. 200 --
STOCKHOLDERS' EQUITY:
Common stock, no par value; 100 shares authorized, issued
and outstanding........................................ 5 5
Additional paid-in capital................................ 507 507
Retained earnings......................................... 1,971 4,402
------- -------
Total stockholders' equity........................ 2,483 4,914
------- -------
Total liabilities and stockholders' equity........ $28,565 $56,155
======= =======
</TABLE>
See Accompanying Notes.
F-181
<PAGE> 297
LOGAN EQUIPMENT CORPORATION
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE
FOR THE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, -----------------
1997 1997 1998
------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES:
Equipment rentals......................................... $ 5,882 $ 4,536 $12,881
Sales of equipment........................................ 7,297 4,419 13,250
Sales of merchandise, parts and service................... 2,335 1,382 4,798
------- ------- -------
Total revenues.................................... 15,514 10,337 30,929
COST OF REVENUES:
Depreciation, equipment rentals........................... 1,297 927 3,253
Cost of sales equipment................................... 6,200 3,659 10,779
Cost of sales of merchandise, parts and service........... 1,018 714 2,709
Cost of equipment rentals, excluding depreciation......... 358 310 360
Direct operating expenses................................. 839 616 1,747
------- ------- -------
Total cost of revenues............................ 9,712 6,226 18,848
------- ------- -------
Gross profit...................................... 5,802 4,111 12,081
Selling, general and administrative expense................. 3,466 2,463 7,518
Nonrental depreciation and amortization..................... 74 52 176
------- ------- -------
Operating income............................................ 2,262 1,596 4,387
Interest expense............................................ 922 606 1,912
------- ------- -------
Income before income taxes.................................. 1,340 990 2,475
Provision for income taxes.................................. -- -- 44
------- ------- -------
Net income........................................ $ 1,340 $ 990 $ 2,431
======= ======= =======
</TABLE>
See Accompanying Notes.
F-182
<PAGE> 298
LOGAN EQUIPMENT CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996........................ 100 $5 $507 $ 631 $1,143
Net income........................................ -- -- -- 1,340 1,340
---- -- ---- ------ ------
Balance at December 31, 1997........................ 100 5 507 1,971 2,483
Net income (unaudited)............................ -- -- -- 2,431 2,431
---- -- ---- ------ ------
Balance at September 30, 1998 (unaudited)........... 100 $5 $507 $4,402 $4,914
==== == ==== ====== ======
</TABLE>
See Accompanying Notes.
F-183
<PAGE> 299
LOGAN EQUIPMENT CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTH
FOR THE PERIOD ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, -------------------
1997 1997 1998
------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................... $ 1,340 $ 990 $ 2,431
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization....................... 1,371 979 3,429
Gain on sale of equipment........................... (1,099) (367) (875)
Provision for losses on accounts receivable......... 18 -- --
Changes in operating assets and liabilities, net of
effects of asset acquisition:
Accounts receivable................................. (1,880) (350) (1,341)
Inventories......................................... 321 (6) (2,701)
Other current assets................................ (91) (5) (534)
Accounts payable and other accrued expenses......... 1,291 760 5,571
-------- -------- --------
Net cash provided by operating activities........... 1,271 2,001 5,980
INVESTING ACTIVITIES
Purchases of equipment................................... (10,126) (4,944) (16,361)
Cash acquired from asset acquisition..................... 134 -- 242
Capital expenditures..................................... (187) (133) (749)
Proceeds from sale of equipment.......................... 7,320 1,810 4,818
-------- -------- --------
Net cash used in investing activities.......... (2,859) (3,267) (12,050)
FINANCING ACTIVITIES
Payments to preferred stockholders....................... -- -- (200)
Proceeds from bank debt and long-term obligations........ 1,635 1,343 7,790
-------- -------- --------
Net cash provided by financing activities................ 1,635 1,343 7,590
-------- -------- --------
Net increase in cash and cash equivalents................ 47 77 1,520
Cash and cash equivalents at beginning of year........... 193 193 240
-------- -------- --------
Cash and cash equivalents at end of year................. $ 240 $ 270 $ 1,760
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................ $ 919 $ 606 $ 1,912
======== ======== ========
Income taxes........................................ $ 37 $ -- $ 44
======== ======== ========
Noncash investing and financing activities:
Acquisition of assets, net of cash received............ $ 13,963 $ -- $ 11,757
======== ======== ========
Liabilities incurred as a result of asset acquisition.... $ 14,097 $ -- $ 11,998
======== ======== ========
</TABLE>
See Accompanying Notes.
F-184
<PAGE> 300
LOGAN EQUIPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Logan Equipment Corporation (Logan or Company), was founded in 1963. The
Company operates in a single industry segment: the short-term rental and sale of
equipment, including sales of parts, supplies and service through a network of
full service center locations in Massachusetts, Rhode Island, Vermont and Maine.
The nature of the Company's business is such that short-term obligations are
generally met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying balance sheet is presented
on an unclassified basis.
Revenue Recognition
Equipment rental revenue is recorded as earned over the contract term.
Revenue from the sale of equipment, parts and service is recorded at the time of
delivery to or pick-up by the customer.
Inventory and Rental Equipment
Inventory consists of new equipment, parts and accessories held for sale.
Fleet rental equipment inventory is depreciated to a salvage value of 20% of
cost. Depreciation is provided on the fleet rental equipment using the
straight-line method over the estimated useful lives of the assets, generally 5
to 7 years. Inventory is recorded at the lower of cost using the first-in,
first-out (FIFO) method or market.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is provided using
the straightline method over the estimated useful lives of the assets, generally
3 to 10 years.
Income Taxes
The Company uses the liability method of accounting for income taxes as set
forth in the Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes. Under this method, deferred taxes are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. Recognition of deferred tax assets is
limited to amounts considered by management to be more likely than not to be
realized in future periods.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash, accounts
receivable, and accounts payable and other accrued expenses approximate fair
value because of the immediate or short-term maturity of these financial
instruments. The fair value of the revolving credit agreement is determined
using current interest rates as of the balance sheet date and approximates the
carrying value of such debt because the underlying instruments are at variable
rates which are repriced frequently.
Concentrations of Credit Risk
The Company maintains cash with various financial institutions. The Company
performs periodic evaluations of the relative credit standing of these
institutions and limits the amount of exposure with any institution.
F-185
<PAGE> 301
LOGAN EQUIPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's customers are located throughout New England and are
concentrated in the construction industry. No single customer accounted for
greater than 10% of the Company's revenues and there were no accounts receivable
from any single customer greater than 10% of total accounts receivable. The
Company reviews a customer's credit history before extending credit. The
Company's allowance for doubtful accounts is based upon factors surrounding the
credit risk of its customers, historical trends and other information.
Collective Bargaining Agreements
At December 31, 1997, the Company had approximately 115 employees.
Approximately 15% of the Company's employees are covered by collective
bargaining agreements negotiated with a local union that is affiliated with an
international union. The Agreement has a three-year term that expires in August
2000. The Company is currently negotiating with the same local union to cover an
additional 15% of its employees. The Company considers its relationship with its
employees and the representatives of the union to be excellent.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in its financial statements and
accompanying notes. Actual results could differ from these estimates.
2. ACQUISITION OF BUSINESS
On January 31, 1998, the Company completed its acquisition of a company
that sells and rents equipment to the construction industry. The effective date
of the acquisition was December 31, 1997.
F-186
<PAGE> 302
LOGAN EQUIPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following pro forma balance sheet reflects the purchase accounting
adjustments included in the December 31, 1997 balance sheet. The following pro
forma balance sheet also reflects the borrowings entered into on January 31,
1998 to effect the transaction as more fully described in Note 4:
PRO FORMA BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATED
LOGAN ACQUIRED LOGAN PRO FORMA
EQUIPMENT COMPANY EQUIPMENT ADJUSTMENTS PRO FORMA
DECEMBER 31, DECEMBER 31, DECEMBER 31, FOR DECEMBER 31,
1997 1997 1997 REFINANCING 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash..................................... $ 106 $ 134(a) $ 240 $ 240
Accounts receivable, net................. 3,289 2,779(a) 6,068 6,068
Inventories.............................. 1,016 1,719(a) 2,735 2,735
Other current assets..................... 100 5(a) 105 105
Rental equipment, net.................... 9,282 9,157(a) 18,439 18,439
Property and equipment, net.............. 675 303(a) 978 978
------- ------- ------- -------
Total assets..................... $14,468 $14,097(a) $28,565 $28,565
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other accrued
expenses............................... $ 2,411 $ 600(b) $ 3,011 $ (320)(b) $ 2,691
Long-term debt/revolving credit
agreement.............................. 9,374 13,497(c) 22,871 520(c) 23,391
------- ------- ------- ------- -------
Total liabilities................ 11,785 14,097 25,882 200 26,082
Redeemable preferred stock............... 200 200 (200)(d) 0
Stockholder's equity:
Common stock, no par value; 100 shares
authorized, issued and outstanding... 5 5 5
Additional paid-in capital............. 507 507 507
Retained earnings...................... 1,971 1,971 1,971
------- ------- ------- -------
Total stockholders' equity....... 2,483 2,483 2,483
------- ------- ------- -------
Total liabilities and
stockholders' equity........... $14,468 $14,097 $28,565 $28,565
======= ======= ======= =======
</TABLE>
F-187
<PAGE> 303
LOGAN EQUIPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following pro forma income statement is intended to reflect the results
of operations of the Company as if the transaction had occurred at the beginning
of the year:
PRO FORMA INCOME STATEMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
LOGAN ACQUIRED
EQUIPMENT COMPANY PRO FORMA
DECEMBER 31, DECEMBER 31, PRO FORMA DECEMBER 31,
1997 1997 ADJUSTMENTS 1997
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Equipment rentals............... $ 5,882 $ 4,848 $10,730
Sales of equipment.............. 7,297 10,177 17,474
Sales of merchandise, parts and
service...................... 2,335 4,367 6,702
------- ------- ------- -------
Total revenues.......... 15,514 19,392 34,906
COST OF REVENUES:
Depreciation, equipment
rentals...................... 1,297 3,141 $(1,786)(e) 2,652
Cost of sales equipment......... 6,200 7,237 13,437
Cost of sales of merchandise,
parts and service............ 1,018 2,944 3,962
Cost of equipment rentals,
excluding depreciation....... 358 358
Direct operating expenses....... 839 841 1,680
------- ------- ------- -------
Total cost of
revenues.............. 9,712 14,163 (1,786) 22,089
------- ------- ------- -------
Gross Profit...................... 5,802 5,229 1,786 12,817
Selling, general and
administrative costs............ 3,466 3,789 7,255
Nonrental depreciation and
amortization.................... 74 114 188
------- ------- ------- -------
Operating income........ 2,262 1,326 1,786 5,374
Interest expense.................. 922 441 717(f) 2,080
------- ------- ------- -------
Income before income taxes........ 1,340 885 1,069(g) 3,294
Provision for income taxes........ -- 250 250
------- ------- ------- -------
Net income.............. $ 1,340 $ 635 $ 1,069 $ 3,044
======= ======= ======= =======
</TABLE>
- ---------------
(a) All current assets were recorded at their respective fair values on the date
of acquisition and the remaining purchase price of $9,157,000 has been
allocated to rental equipment.
(b) Reflects expenses incurred in connection with the purchase of which $320,000
was paid with proceeds from the financing described in Note (c) below.
(c) Reflects payment of $9,273,000 in various debt instruments bearing interest
at rates ranging from 8% to 11.25% payable in various installments through
2001. Adjustment also reflects the issuance of $23,290,000 in new debt in
the form of a revolving credit facility of $21,290,000 bearing interest at
the Prime Rate (currently 8.5%) with payment of interest only until maturity
in February 2001, and $2,000,000 in subordinated debt bearing interest at
the LIBOR rate plus 4% (currently 10%) with payment of interest only until
maturity in February 2000.
(d) Reflects the payment of $200,000 in preferred stock.
F-188
<PAGE> 304
LOGAN EQUIPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(e) Adjustments reflect charges to conform acquired company depreciation
policies to those of Logan Equipment.
(f) Reflects interest expense under the new credit facilities, assuming they had
been in place since January 1, 1997.
(g) There has been no pro forma income tax provision due to the Company's net
operating loss carryforwards.
3. REVOLVING LINE OF CREDIT AGREEMENT
The Company had a $600,000 revolving line of credit agreement with First
Massachusetts Bank, of which $600,000 was outstanding at December 31, 1997.
Under the terms of the agreement, the Company could borrow 80% of accounts
receivable less than 90 days old at the Prime Rate plus 1.5% (10.0% at December
31, 1997). The line is secured by accounts receivable and parts inventory. This
loan was repaid with the initial advance from the revolving credit facility
described in Note 2.
4. BANK DEBT AND LONG-TERM OBLIGATIONS
Prior to the refinancing described in Note 2, the Company had $9,374,000 in
bank debt and other long-term obligations payable to ten lenders and related
parties with interest rates ranging from 0% to 12% and various maturities
through December 2002. Subsequent to December 31, 1997, all of the above loans
were repaid with the initial advance from the line described in Note 2.
Based on the borrowing rates currently available to the Company for loans
with similar terms and average maturities, the fair value of the long-term debt
approximates its carrying value.
On January 31, 1998, the Company entered into a Credit Facilities Agreement
with Deutsche Financial Services Corp. The total amount of credit available
under the Agreement is limited to the lesser of $25 million or a borrowing base
consisting of eligible receivables, inventory and vehicles. The credit facility
bears interest at the prime rate as defined in the agreement (currently 8.5%).
The Agreement expires on January 31, 2001. The obligation of the lender to make
advances under the Agreements is subject to certain customary conditions. In
addition the Agreement contains financial covenants for the Company regarding
interest coverage, maximum indebtedness, minimum net worth, maximum inventory
and capital expenditures and minimum fleet utilization. Borrowings under the
Agreement are secured by all the real and personal property of the Company. The
Agreement also restricts the Company from making certain distributions,
including cash dividends. on its common stock.
5. PROPERTY AND EQUIPMENT
Fixed assets consist of the following at December 31, 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Motor vehicles.............................................. $ 380
Furniture and fixtures...................................... 33
Communications and computer equipment....................... 190
Shop equipment.............................................. 35
Leasehold improvements...................................... 720
------
1,358
Less accumulated depreciation and amortization.............. (380)
------
$ 978
======
</TABLE>
F-189
<PAGE> 305
LOGAN EQUIPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases certain operating premises and equipment under operating
leases. The property leases require the Company to pay maintenance, insurance,
taxes and other expenses in addition to the rental amounts. Rental expense under
such operating leases totaled $306,000 for the year ended December 31, 1997.
Future minimum lease payments, by year and in the aggregate, for noncancellable
operating leases with initial or remaining terms of one year or more are as
follows at December 31, 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEAR ENDING AMOUNT
----------- --------------
<S> <C>
1998........................................................ $201
1999........................................................ 183
2000........................................................ 124
2001........................................................ 106
2002........................................................ 30
Thereafter.................................................. 6
----
Total............................................. $650
====
</TABLE>
7. INCOME TAXES
The components of income tax expense for the year ended December 31, 1997
are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AMOUNT
--------------
<S> <C>
Current:
Federal................................................... $ 42
State..................................................... 35
----
Total............................................. 77
Deferred:
Federal................................................... (42)
State..................................................... (35)
----
(77)
----
Income tax expense................................ $ 0
====
</TABLE>
Deferred taxes are principally attributable to temporary differences
relating to basis differences of the rental fleet, resulting in a deferred tax
liability of $1,200,000, and net operating loss carryforwards, resulting in a
deferred tax asset of $1,280,000. The Company has recorded a 100% valuation
allowance on the net deferred tax assets. For federal income tax purposes, the
Company has net operating loss carryforwards of approximately $3,200,000 and tax
credit carryforwards of approximately $200,000 at December 31, 1997.
Accordingly, because of the use of the net operating loss carryforwards, there
is no tax provision recorded for the year ended December 31, 1997. These
carryforwards will expire at various times from 2005 to 2008.
8. RELATED-PARTY TRANSACTIONS
At December 31, 1994, $395,203 of related-party debt was converted to
equity along with $111,600 of loans payable to officers. This amount of $506,803
has been classified in the equity section of the balance sheet at December 31,
1997 as "Additional Paid-In Capital."
Included in long-term debt are $322,689 of notes payable to related parties
of the stockholders of the Company at December 31, 1997 which were paid off as
part of the refinancing described in Notes 2 and 4.
F-190
<PAGE> 306
LOGAN EQUIPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company leases its headquarters in Shrewsbury, Massachusetts and a
branch facility in Boston, Massachusetts from one of its stockholders. These
leases are on a "tenant-at-will" arrangement. Real estate taxes and operating
costs are included in the base monthly rent. Rental expense for 1997 was
approximately $101,000,
9. REDEEMABLE PREFERRED STOCK
As part of a debt restructuring with Concord Commercial Corporation, the
Company issued 200 shares of $.01 par value preferred stock on April 27, 1992.
The stock was redeemable upon the termination of the debt with the lender, and
was repaid subsequent to December 31, 1997, with the initial advance from the
revolving credit facility described in Note 2.
10. SUBSEQUENT EVENT
On January 20, 1998, the Articles of Incorporation of the Company were
amended to change the authorized number of shares outstanding from 100 shares of
no par common stock and 200 shares of $.01 preferred stock to 100,000 shares of
no par common stock.
F-191
<PAGE> 307
------------------------------------------------------
------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL OR
BUY ANY SECURITIES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION IN
THIS PROSPECTUS IS CURRENT AS OF , 1998.
---------------------------------
TABLE OF CONTENTS
---------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information........................... ii
Summary......................................... 1
Risk Factors.................................... 13
The Exchange Offer.............................. 20
Use of Proceeds................................. 28
Capitalization.................................. 29
Selected Consolidated Historical and Pro Forma
Financial Information and Operations Data..... 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 33
Business........................................ 40
Management...................................... 49
Principal Stockholders.......................... 55
Certain Relationships and Transactions.......... 56
Description of Certain Indebtedness............. 58
Description of Notes............................ 60
Registration Rights............................. 92
Book-Entry, Delivery and Form................... 94
Plan of Distribution............................ 96
Certain United States Federal Income
Tax Considerations............................ 96
Legal Matters................................... 100
Experts......................................... 100
Index to Pro Forma Consolidated Financial
Statements.................................... PF-1
Index to Consolidated Financial
Statements.................................... F-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
NATIONSRENT, INC. (LOGO)
$175,000,000
10 3/8% SENIOR SUBORDINATED
NOTES DUE 2008
--------------------------------------
PROSPECTUS
--------------------------------------
, 1998
------------------------------------------------------
------------------------------------------------------
<PAGE> 308
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation, as amended provides that the Company
shall indemnify to the fullest extent permitted by Section 145 of the DGCL, each
person who is involved in any litigation or other proceeding because such person
is or was a director or officer of the Company, against all expense, loss or
liability reasonably incurred or suffered in connection therewith. The Bylaws,
as amended, provide that a director or officer may be paid expenses incurred in
defending any proceeding in advance of its final disposition upon receipt by the
Company of an undertaking, by or on behalf of the director or officer, to repay
all amounts so advanced if it is ultimately determined that such director or
officer is not entitled to indemnification.
Section 145 of the DGCL permits a corporation to indemnify any director or
officer of the corporation against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any action, suit or proceeding brought by reason of the fact
that such person is or was a director or officer of the corporation, if such
person acted in good faith and in a manner that he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, if he had no reason to believe his conduct
was unlawful. In a derivative action, (i.e., one brought by or on behalf of the
corporation), indemnification may be made only for expenses, actually and
reasonably incurred by any director or officer in connection with the defense or
settlement of such an action or suit, if such person acted in good faith and in
a manner that he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made if
such person shall have been adjudged to be liable to the corporation, unless and
only to the extent that the court in which the action or suit was brought shall
determine that the defendant is fairly and reasonably entitled to indemnity for
such expenses despite such adjudication of liability.
Pursuant to Section 102(b)(7) of the DGCL, the Certificate eliminates the
liability of a director to the corporation or its stockholders for monetary
damages for such breach of fiduciary duty as a director, except for liabilities
arising (i) from any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) from acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, or (iv) from any transaction from which the director
derived an improper personal benefit.
The Company has obtained primary and excess insurance policies insuring the
directors and officers of the Company and its subsidiaries against certain
liabilities they may incur in their capacity as directors and officers. Under
such policies, the insurer, on behalf of the Company, may also pay amounts for
which the Company has granted indemnification to the directors or officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-1
<PAGE> 309
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<C> <S>
1.1 Purchase Agreement dated December 8, 1998, between the
Company and the Initial Purchasers.
3.1** Amended and Restated Certificate of Incorporation of the
Company.
3.2* Amended and Restated By-Laws of the Company.
4.1 10 3/8% Global Senior Subordinated Note due 2008.
4.2*** Form of 10 3/8% Senior Subordinated Notes to be issued upon
consummation of the Exchange Offer.
4.3 Senior Subordinated Guarantee dated December 11, 1998 of the
Guarantors.
4.4 Indenture dated December 11, 1998, between the Company, the
Guarantors and The Bank of New York, including table of
contents and cross-reference table.
4.5 Registration Rights Agreement dated December 11, 1998,
between the Company, the Guarantors and the Initial
Purchasers.
4.6**** Second Amended and Restated Revolving Credit Agreement,
dated as of September 24, 1998, by and among the Company,
BankBoston, N.A., LaSalle National Bank, Fleet Bank N.A.,
NationsBank, N.A., BancBoston Securities, Inc. and other
lending institutions named therein.
4.7 Amendment No. 1 and Consent to Second Amendment and Restated
Revolving Credit and Term Loan Agreement dated as of October
9, 1998 among the Company, its named subsidiaries therein
and BankBoston, N.A., LaSalle National Bank, and other
lending institutions and parties named therein.
4.8 Second Amendment to the Second Amended and Restated
Revolving Credit Agreement dated as of November 2, 1998 by
and among the Company, its named subsidiaries therein and
Citicorp Del-Lease, Erste Bank Der Oesterreichischen
Sparkassen AG and other lending institutions and parties
named therein.
4.9 Amendment No. 3 to the Second Amended and Restated Revolving
Credit and Term Loan Agreement dated as of November 4, 1998
among the Company, its subsidiaries named therein and
BankBoston, N.A. and lending institutions and other parties
named therein.
4.10* Security Agreement, dated as of March 18, 1998, between the
Company and Bank Boston, N.A.
4.11* Omnibus Amendment to Security Documents, dated as of June
29, 1998, among the Company, its subsidiaries and Bank
Boston, N.A.
4.12**** Omnibus Amendment No. 2 to Security Documents, dated as of
September 24, 1998, among the Company, its subsidiaries and
Bank Boston, N.A.
5.1 Opinion of Akerman, Senterfitt & Eidson, P.A.
10.1* Stock Purchase Agreement dated August 15, 1997, among the
Company, Sam's and the shareholders of Sam's, together with
Amendment Nos. 1 - 6.
10.2* Form of Unsecured Subordinated Promissory Notes -- Sam's
10.3* Form of Unsecured Convertible Subordinated Promissory
Note -- Sam's
10.4* Form of Unsecured Contingent Convertible Subordinated
Promissory Notes -- Sam's
10.5* Agreement, dated September 22, 1997, between the Company and
Gary L. Gabriel
10.6* Asset Purchase Agreement dated December 8, 1997 among
NationsRent of Ohio, Inc., R&R and the shareholder of R&R,
together with an Amendment dated December 10, 1997.
</TABLE>
II-2
<PAGE> 310
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<C> <S>
10.7* Form of Unsecured Subordinated Promissory Note -- R&R
10.8* Asset Purchase Agreement dated December 8, 1997, as amended,
among NationsRent of Indiana, Inc. and C&E, together with an
Amendment dated December 23, 1997.
10.9* Form of Unsecured Convertible Subordinated Promissory
Note -- C&E
10.10* Stock Purchase Agreement dated December 20, 1997, as
amended, among NationsRent of West Virginia, Inc., Titan and
the shareholders of Titan, together with an Amendment dated
December 31, 1997.
10.11* Form of Unsecured Convertible Subordinated Promissory
Notes -- Titan
10.12* Stock Purchase Agreement dated March 24, 1998 among the
Company, Bode-Finn and the shareholders of Bode-Finn,
together with Amendment No. 1 dated April 6, 1998 and
Amendment No. 2 dated April 17, 1998.
10.13* Form of Unsecured Convertible Subordinated Promissory
Notes -- Bode-Finn
10.14* Form of Warrant -- Bode-Finn
10.15* Registration Rights Agreement dated May 5, 1998 among the
Company, Bode-Finn, L.P. and Raymond E. Mason Foundation
10.16* Asset Purchase Agreement dated March 25, 1998 among
NationsRent of Indiana, Inc., RFL and the shareholder of RFL
10.17* Asset Purchase Agreement dated April 21, 1998 among
NationsRent of Florida, Inc. and Naples
10.18* Form of Unsecured Convertible Subordinated Promissory
Note -- Naples
10.19* Stock Purchase Agreement dated May 7, 1998 among the
Company, Jobs and the shareholders of Jobs
10.20* Form of Unsecured Subordinated Promissory Notes -- Jobs
10.21* Form of Unsecured Convertible Subordinated Promissory
Note -- Jobs
10.22* Asset Purchase Agreement dated May 14, 1998 among the
Company and General Rental
10.23* Stock Purchase Agreement dated May 30, 1998 among the
Company, J. Kelly and the shareholders of J. Kelly
10.24* Form of Unsecured Convertible Subordinated Promissory
Note -- J. Kelly
10.25* Form of Registration Rights Agreement among the Company and
the shareholders of J. Kelly
10.26* Asset Purchase Agreement dated June 7, 1998 among the
Company, Associated and the sole shareholder of Associated
10.27* Form of Unsecured Convertible Subordinated Promissory
Note -- Associated
10.28* Form of Registration Rights Agreement -- Associated
10.29* Form of Subscription Agreement, dated May 1998, between the
Company and certain subscribers
10.30* NationsRent 1998 Stock Option Plan
10.31* Form of Stock Option Agreement
10.32***** Amended and Restated Purchase Agreement dated as of
September 9, 1998, by and among NationsRent, Inc., Ray L.
O'Neal, Inc., Arenco, L.L.C., Don R. O'Neal, Elizabeth M.
O'Neal and the O'Neal Revocable Trust dated December 29,
1987.
10.33***** Unsecured Convertible Subordinated Promissory Note dated as
of October 23, 1998 from NationsRent, Inc. to Ray L. O'Neal,
Inc.
12.1 Statement of Computation of Ratio of Earnings to Fixed
Charges
</TABLE>
II-3
<PAGE> 311
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<C> <S>
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of Akerman, Senterfitt & Eidson, P.A. (included in
Exhibit 5.1 above)
24.1 Powers of Attorney (included as part of the signature page
hereto)
25.1 Form T-1 Statement of Eligibility of Trustee
99.1 Letter of Transmittal relating to the Exchange Offer.
99.2 Notice of Guaranteed Delivery relating to the Exchange
Offer.
</TABLE>
- ---------------
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1, as amended, Commission File No. 333-56233.
** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the period ended June 30, 1998.
*** Included in Exhibit 4.3 hereto as Exhibit A.2.
**** Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1998.
***** Incorporated by reference to the Company's Current Report on Form 8-K
filed on November 9, 1998.
(B) Financial Statement Schedule. The following financial statement
schedule together with report of independent certified public accountants is
filed on pages S-1 and S-2 herewith:
Financial Statement Schedule II, Valuation and Qualifying Accounts and
Reserves, for the Period Ended December 31, 1997.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value
of the securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
on any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
II-4
<PAGE> 312
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment, any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person thereof in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-5
<PAGE> 313
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT, INC.
By: /s/ JAMES L. KIRK
------------------------------------
James L. Kirk
Chairman of the Board and
Chief Executive Officer
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the registration statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES L. KIRK Chairman of the Board and December 23, 1998
- --------------------------------------------------- Chief Executive Officer
James L. Kirk
/s/ GENE J. OSTROW Executive Vice President and December 23, 1998
- --------------------------------------------------- Chief Financial Officer
Gene J. Ostrow
/s/ KRIS E. HANSEL Vice President and December 23, 1998
- --------------------------------------------------- Controller
Kris E. Hansel
/s/ H. WAYNE HUIZENGA Director December 23, 1998
- ---------------------------------------------------
H. Wayne Huizenga
/s/ HARRIS W. HUDSON Director December 23, 1998
- ---------------------------------------------------
Harris W. Hudson
/s/ GARY L. GABRIEL Director December 23, 1998
- ---------------------------------------------------
Gary L. Gabriel
/s/ THOMAS H. BRUINOOGE Director December 23, 1998
- ---------------------------------------------------
Thomas H. Bruinooge
</TABLE>
II-6
<PAGE> 314
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
A-ACTION RENTAL, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board and December 23, 1998
- --------------------------------------------------- Sole Director (Principal
Gene J. Ostrow Executive Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-7
<PAGE> 315
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
ACME RENTAL, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-8
<PAGE> 316
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
A TO Z RENTS IT, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board and December 23, 1998
- --------------------------------------------------- Sole Director (Principal
Gene J. Ostrow Executive Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-9
<PAGE> 317
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
A TO Z RENTS IT, INC. #2
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board and December 23, 1998
- --------------------------------------------------- Sole Director (Principal
Gene J. Ostrow Executive Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-10
<PAGE> 318
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
CENTRAL ALABAMA RENTAL CENTER, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board and December 23, 1998
- --------------------------------------------------- Sole Director (Principal
Gene J. Ostrow Executive Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-11
<PAGE> 319
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
GABRIEL TRAILER MANUFACTURING
COMPANY, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Executive Vice President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Executive Vice President, December 23, 1998
- --------------------------------------------------- Chief Financial Officer and
Gene J. Ostrow Sole Director (Principal
Executive Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
</TABLE>
II-12
<PAGE> 320
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
GOLD COAST AERIAL LIFT, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board and December 23, 1998
- --------------------------------------------------- Sole Director (Principal
Gene J. Ostrow Executive Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-13
<PAGE> 321
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
HIGH REACH COMPANY, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board and December 23, 1998
- --------------------------------------------------- Sole Director (Principal
Gene J. Ostrow Executive Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-14
<PAGE> 322
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF ALABAMA, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-15
<PAGE> 323
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF CALIFORNIA, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-16
<PAGE> 324
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF GEORGIA, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-17
<PAGE> 325
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF FLORIDA, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-18
<PAGE> 326
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF INDIANA, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-19
<PAGE> 327
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF KENTUCKY, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-20
<PAGE> 328
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF LOUISIANA, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-21
<PAGE> 329
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF MICHIGAN, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-22
<PAGE> 330
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF NEW HAMPSHIRE, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-23
<PAGE> 331
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF OHIO, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-24
<PAGE> 332
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF TENNESSEE, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-25
<PAGE> 333
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF TEXAS, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-26
<PAGE> 334
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NATIONSRENT OF WEST VIRGINIA, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-27
<PAGE> 335
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
NRI/LEC MERGER CORP., INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-28
<PAGE> 336
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
RAYMOND EQUIPMENT CO.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-29
<PAGE> 337
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
SAM'S EQUIPMENT RENTAL, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Executive Vice President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Executive Vice President, December 23, 1998
- --------------------------------------------------- Chief Financial Officer and
Gene J. Ostrow Sole Director (Principal
Executive Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-30
<PAGE> 338
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
SOUTHEAST RENTAL & LEASING, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board and December 23, 1998
- --------------------------------------------------- Sole Director (Principal
Gene J. Ostrow Executive Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-31
<PAGE> 339
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
TENNESSEE TOOL & SUPPLY, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board and December 23, 1998
- --------------------------------------------------- Sole Director (Principal
Gene J. Ostrow Executive Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-32
<PAGE> 340
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
THE BODE-FINN COMPANY
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Executive Vice President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Executive Vice President, December 23, 1998
- --------------------------------------------------- Chief Financial Officer and
Gene J. Ostrow Sole Director (Principal
Executive Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
</TABLE>
II-33
<PAGE> 341
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
THE J. KELLY CO., INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Sole Director and President December 23, 1998
- --------------------------------------------------- (Principal Executive
Gene J. Ostrow Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-34
<PAGE> 342
SIGNATURES
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of
Florida, on December 23, 1998.
TITAN RENTALS, INC.
By: /s/ GENE J. OSTROW
------------------------------------
Gene J. Ostrow
Chairman of the Board and President
Know all persons by these presents, that each person whose signature
appears below hereby severally constitutes and appoints Gene J. Ostrow and Kris
E. Hansel, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each said attorneys-in-fact and agents or any of them or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE J. OSTROW Chairman of the Board, Sole December 23, 1998
- --------------------------------------------------- Director and President
Gene J. Ostrow (Principal Executive
Officer)
/s/ KRIS E. HANSEL Vice President -- Controller December 23, 1998
- ---------------------------------------------------
Kris E. Hansel
/s/ PAMELA K.M. BEALL Treasurer December 23, 1998
- --------------------------------------------------- (Prinicipal Financial
Pamela K.M. Beall Officer)
</TABLE>
II-35
<PAGE> 343
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
To the Stockholders of NationsRent, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of NationsRent, Inc., and subsidiaries
included in this registration statement and have issued our report thereon dated
June 3, 1998, except with respect to the matters referred to in the third and
fifth paragraphs of Note 10 as to which the date is July 15, 1998. Our audit was
made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The schedule included under Item (16)(b) is the responsibility
of the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
June 3, 1998.
S-1
<PAGE> 344
NATIONSRENT, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE II
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO ACCOUNTS BALANCE AT
BEGINNING COSTS AND WRITTEN END
DESCRIPTIONS OF PERIOD(1) EXPENSES OFF OTHER(2) OF YEAR
------------ ------------ ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Period ended December 31, 1997
Allowance for Doubtful Accounts........ $ -- -- (40) 627 $587
</TABLE>
- ---------------
(1) August 14, 1997 (inception).
(2) Represents the historical allowances of the acquired companies.
S-2
<PAGE> 345
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<C> <S>
1.1 Purchase Agreement dated December 8, 1998, between the
Company and the Initial Purchasers.
3.1** Amended and Restated Certificate of Incorporation of the
Company.
3.2* Amended and Restated By-Laws of the Company.
4.1 10 3/8% Global Senior Subordinated Note due 2008.
4.2*** Form of 10 3/8% Senior Subordinated Notes to be issued upon
consummation of the Exchange Offer.
4.3 Senior Subordinated Guarantee dated December 11, 1998 of the
Guarantors.
4.4 Indenture dated December 11, 1998, between the Company, the
Guarantors and The Bank of New York, including table of
contents and cross-reference table.
4.5 Registration Rights Agreement dated December 11, 1998,
between the Company, the Guarantors and the Initial
Purchasers.
4.6**** Second Amended and Restated Revolving Credit Agreement,
dated as of September 24, 1998, by and among the Company,
BankBoston, N.A., LaSalle National Bank, Fleet Bank N.A.,
NationsBank, N.A., BancBoston Securities, Inc. and other
lending institutions named therein.
4.7 Amendment No. 1 and Consent to Second Amendment and Restated
Revolving Credit and Term Loan Agreement dated as of October
9, 1998 among the Company, its named subsidiaries therein
and BankBoston, N.A., LaSalle National Bank, and other
lending institutions and parties named therein.
4.8 Second Amendment to the Second Amended and Restated
Revolving Credit Agreement dated as of November 2, 1998 by
and among the Company, its named subsidiaries therein and
Citicorp Del-Lease, Erste Bank Der Oesterreichischen
Sparkassen AG and other lending institutions and parties
named therein.
4.9 Amendment No. 3 to the Second Amended and Restated Revolving
Credit and Term Loan Agreement dated as of November 4, 1998
among the Company, its subsidiaries named therein and
BankBoston, N.A. and lending institutions and other parties
named therein.
4.10* Security Agreement, dated as of March 18, 1998, between the
Company and Bank Boston, N.A.
4.11* Omnibus Amendment to Security Documents, dated as of June
29, 1998, among the Company, its subsidiaries and Bank
Boston, N.A.
4.12**** Omnibus Amendment No. 2 to Security Documents, dated as of
September 24, 1998, among the Company, its subsidiaries and
Bank Boston, N.A.
5.1 Opinion of Akerman, Senterfitt & Eidson, P.A.
10.1* Stock Purchase Agreement dated August 15, 1997, among the
Company, Sam's and the shareholders of Sam's, together with
Amendment Nos. 1 - 6.
10.2* Form of Unsecured Subordinated Promissory Notes -- Sam's
10.3* Form of Unsecured Convertible Subordinated Promissory
Note -- Sam's
10.4* Form of Unsecured Contingent Convertible Subordinated
Promissory Notes -- Sam's
10.5* Agreement, dated September 22, 1997, between the Company and
Gary L. Gabriel
10.6* Asset Purchase Agreement dated December 8, 1997 among
NationsRent of Ohio, Inc., R&R and the shareholder of R&R,
together with an Amendment dated December 10, 1997.
10.7* Form of Unsecured Subordinated Promissory Note -- R&R
10.8* Asset Purchase Agreement dated December 8, 1997, as amended,
among NationsRent of Indiana, Inc. and C&E, together with an
Amendment dated December 23, 1997.
</TABLE>
<PAGE> 346
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<C> <S>
10.9* Form of Unsecured Convertible Subordinated Promissory
Note -- C&E
10.10* Stock Purchase Agreement dated December 20, 1997, as
amended, among NationsRent of West Virginia, Inc., Titan and
the shareholders of Titan, together with an Amendment dated
December 31, 1997.
10.11* Form of Unsecured Convertible Subordinated Promissory
Notes -- Titan
10.12* Stock Purchase Agreement dated March 24, 1998 among the
Company, Bode-Finn and the shareholders of Bode-Finn,
together with Amendment No. 1 dated April 6, 1998 and
Amendment No. 2 dated April 17, 1998.
10.13* Form of Unsecured Convertible Subordinated Promissory
Notes -- Bode-Finn
10.14* Form of Warrant -- Bode-Finn
10.15* Registration Rights Agreement dated May 5, 1998 among the
Company, Bode-Finn, L.P. and Raymond E. Mason Foundation
10.16* Asset Purchase Agreement dated March 25, 1998 among
NationsRent of Indiana, Inc., RFL and the shareholder of RFL
10.17* Asset Purchase Agreement dated April 21, 1998 among
NationsRent of Florida, Inc. and Naples
10.18* Form of Unsecured Convertible Subordinated Promissory
Note -- Naples
10.19* Stock Purchase Agreement dated May 7, 1998 among the
Company, Jobs and the shareholders of Jobs
10.20* Form of Unsecured Subordinated Promissory Notes -- Jobs
10.21* Form of Unsecured Convertible Subordinated Promissory
Note -- Jobs
10.22* Asset Purchase Agreement dated May 14, 1998 among the
Company and General Rental
10.23* Stock Purchase Agreement dated May 30, 1998 among the
Company, J. Kelly and the shareholders of J. Kelly
10.24* Form of Unsecured Convertible Subordinated Promissory
Note -- J. Kelly
10.25* Form of Registration Rights Agreement among the Company and
the shareholders of J. Kelly
10.26* Asset Purchase Agreement dated June 7, 1998 among the
Company, Associated and the sole shareholder of Associated
10.27* Form of Unsecured Convertible Subordinated Promissory
Note -- Associated
10.28* Form of Registration Rights Agreement -- Associated
10.29* Form of Subscription Agreement, dated May 1998, between the
Company and certain subscribers
10.30* NationsRent 1998 Stock Option Plan
10.31* Form of Stock Option Agreement
10.32***** Amended and Restated Purchase Agreement dated as of
September 9, 1998, by and among NationsRent, Inc., Ray L.
O'Neal, Inc., Arenco, L.L.C., Don R. O'Neal, Elizabeth M.
O'Neal and the O'Neal Revocable Trust dated December 29,
1987.
10.33***** Unsecured Convertible Subordinated Promissory Note dated as
of October 23, 1998 from NationsRent, Inc. to Ray L. O'Neal,
Inc.
12.1 Statement of Computation of Ratio of Earnings to Fixed
Charges
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ernst & Young LLP
</TABLE>
<PAGE> 347
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<C> <S>
23.3 Consent of Akerman, Senterfitt & Eidson, P.A. (included in
Exhibit 5.1 above)
24.1 Powers of Attorney (included as part of the signature page
hereto)
25.1 Form T-1 Statement of Eligibility of Trustee
99.1 Letter of Transmittal relating to the Exchange Offer.
99.2 Notice of Guaranteed Delivery relating to the Exchange
Offer.
</TABLE>
- ---------------
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1, as amended, Commission File No. 333-56233.
** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the period ended June 30, 1998.
*** Included in Exhibit 4.3 hereto as Exhibit A.2.
**** Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1998.
***** Incorporated by reference to the Company's Current Report on Form 8-K
filed on November 9, 1998.
(B) Financial Statement Schedule. The following financial statement
schedule together with report of independent certified public accountants is
filed on pages S-1 and S-2 herewith:
Financial Statement Schedule II, Valuation and Qualifying Accounts and
Reserves, for the Period Ended December 31, 1997.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
<PAGE> 1
Exhibit 1.1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NATIONSRENT, INC.
and
THE GUARANTORS NAMED ON THE SIGNATURE PAGES HERETO
$175,000,000
10 3/8% Senior Subordinated Notes due 2008
Purchase Agreement
December 8, 1998
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
BT ALEX. BROWN INCORPORATED
BANCBOSTON ROBERTSON STEPHENS INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 2
NATIONSRENT, INC.
$175,000,000
10 3/8% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
December 8, 1998
New York, New York
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
BT ALEX. BROWN INCORPORATED
BANCBOSTON ROBERTSON STEPHENS INC.
C/O BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
Ladies & Gentlemen:
NationsRent, Inc., a Delaware corporation (the "COMPANY"), proposes to
issue and sell to Bear, Stearns & Co. Inc., NationsBanc Montgomery Securities
LLC, BT Alex. Brown Incorporated, and BancBoston Robertson Stephens Inc. (each,
individually, an "INITIAL PURCHASER" and collectively, the "INITIAL PURCHASERS")
$175,000,000 aggregate principal amount of its 10 3/8% Senior Subordinated Notes
due 2008 (collectively with the Guarantees referred to below, the "SERIES A
NOTES"), subject to the terms and conditions set forth herein. The Series A
Notes will be issued pursuant to the provisions of an indenture dated December
11, 1998 (the "INDENTURE"), among the Company and The Bank of New York, as
trustee (the "TRUSTEE"). The Notes will be fully and unconditionally guaranteed
(the "GUARANTEES") as to payment of principal, interest, liquidated damages and
premium, if any, on a senior subordinated unsecured basis, jointly and
severally, by each of the Company's subsidiaries whose signature is attached
hereto (collectively, the "GUARANTORS"). Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Offering
Memorandum referred to below or in the Indenture.
The Series A Notes will be offered and sold to the Initial Purchasers
without registration under the Securities Act of 1933, as amended (the "ACT"),
in reliance on an exemption from the registration requirements pursuant to
Section 4(2) of the Act. In connection with the sale of the Series A Notes, the
Company prepared a preliminary offering memorandum dated November 25, 1998 (the
"PRELIMINARY OFFERING MEMORANDUM") and a final offering memorandum dated
December 8, 1998 (the "OFFERING MEMORANDUM"), each setting forth certain
information concerning the Company and the Series A Notes. The Company hereby
confirms that it has authorized the use of
<PAGE> 3
the Preliminary Offering Memorandum and the Offering Memorandum in connection
with the offer and resale of the Series A Notes by the Initial Purchasers on the
terms and in the manner set forth in the Preliminary Offering Memorandum, the
Offering Memorandum and this Purchase Agreement (this "AGREEMENT"). Unless
stated to the contrary, all references herein to the Offering Memorandum are to
the Offering Memorandum at the date hereof, together with any amendment or
supplement thereto as of the date hereof.
The Company understands that the Initial Purchasers propose to make
offerings of the Series A Notes only on the terms and in the manner set forth in
the Offering Memorandum and Sections 2 and 3 hereof, as soon as the Initial
Purchasers deem advisable after this Agreement has been executed and delivered,
to persons in the United States and Canada whom the Initial Purchasers
reasonably believe to be qualified institutional buyers ("QIBS") as defined in
Rule 144A under the Act, as such rule may be amended from time to time ("RULE
144A"), in transactions meeting the requirements of Rule 144A.
1. ISSUANCE OF SECURITIES. The Company proposes, upon the terms and
subject to the conditions set forth herein, to issue and sell to the Initial
Purchasers an aggregate of $175,000,000 principal amount of Series A Notes.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Series A Notes
(and all securities issued in exchange therefor or in substitution thereof)
shall bear the following legend:
THIS SECURITY AND THE GUARANTEES HEREOF HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL
NOT WITHIN ONE YEAR AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL
OF OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR (AS DEFINED
IN RULE 501(A) OF THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
2
<PAGE> 4
THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (C) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER
THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (E)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY AND THE GUARANTEES HEREOF ARE TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN ONE YEAR AFTER THE ORIGINAL ISSUANCE
OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
2. OFFERING. The Series A Notes will be offered and sold to the Initial
Purchasers pursuant to an exemption from the registration requirements under
Section 4(2) of the Act.
The Initial Purchasers have advised the Company that they propose to
offer the Series A Notes for resale (the "EXEMPT RESALES") on the terms and
conditions set forth in this Agreement and in the Offering Memorandum, as
amended or supplemented, solely to persons whom the Initial Purchasers
reasonably believe to be QIBs (the "ELIGIBLE PURCHASERS"). The Initial
Purchasers will offer the Series A Notes to such Eligible Purchasers initially
at a price equal to 100% of the principal amount thereof. Such price may be
changed at any time without notice.
The Initial Purchasers and other holders (including subsequent
transferees) of the Series A Notes will have the registration rights set forth
in the registration rights agreement relating thereto (the "REGISTRATION RIGHTS
AGREEMENT"), to be dated the Closing Date (as defined below) and substantially
in the form of EXHIBIT A hereto, for so long as such Notes constitute
"REGISTRABLE SECURITIES" (as defined in the Registration Rights Agreement).
Pursuant to the Registration Rights Agreement, the Company will agree to file
with the Securities and Exchange Commission (the "COMMISSION"), under the
circumstances set forth therein, (i) a registration statement under the Act (the
"EXCHANGE OFFER REGISTRATION STATEMENT") relating to the 10 3/8% Senior
Subordinated Notes due 2008 (collectively with the Guarantees, the "EXCHANGE
NOTES") to be offered in exchange for the
3
<PAGE> 5
Series A Notes (the "EXCHANGE OFFER") and (ii) a shelf registration statement
pursuant to Rule 415 under the Act (the "SHELF REGISTRATION STATEMENT") relating
to the resale by certain holders of the Series A Notes, and to use their best
efforts to cause such Registration Statements to be declared effective and to
consummate the Exchange Offer. The Series A Notes and the Exchange Notes are
collectively referred to herein as the "NOTES." This Agreement, the Notes, the
Indenture and the Registration Rights Agreement are hereinafter sometimes
referred to collectively as the "OPERATIVE DOCUMENTS."
3. PURCHASE, SALE AND DELIVERY. (a) The Company agrees to issue and
sell to each Initial Purchaser, severally and not jointly, and, on the basis of
the representations, warranties and covenants contained in this Agreement and
subject to the terms and conditions set forth herein, each Initial Purchaser
agrees, severally and not jointly, to purchase from the Company, the aggregate
principal amount of Series A Notes set forth in EXHIBIT B opposite the name of
such Initial Purchaser. The purchase by any Initial Purchaser of any Series A
Notes shall require such Initial Purchaser to purchase the aggregate amount of
Series A Notes as set forth in EXHIBIT B. The purchase price for the Series A
Notes will be $970 per $1,000 principal amount of Series A Notes.
(b) Delivery of the Series A Notes shall be made, against payment of
the purchase price therefor, at the offices of Bear, Stearns & Co. Inc., 245
Park Avenue, New York, New York 10167 at 10:00 a.m., New York City time, on
December 11, 1998, or such other location, date and time as the Initial
Purchasers and the Company shall agree (such date and time of delivery and
payment for the Series A Notes being herein called the "CLOSING DATE").
(c) One or more of the Series A Notes in definitive form, registered in
the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"),
having an aggregate amount corresponding to the aggregate amount of the Series A
Notes sold pursuant to Exempt Resales to QIBs (the "GLOBAL NOTE"), shall be
delivered by the Company to the Initial Purchasers (or as the Initial Purchasers
direct), against payment by the Initial Purchasers of the purchase price
therefor, by wire transfer of same day funds, to an account designated by the
Company, provided that the Company shall give at least two business days' prior
written notice to the Initial Purchasers of the information required to effect
such wire transfer. The Global Note shall be made available to the Initial
Purchasers for inspection not later than 9:30 a.m. New York City time on the
business day immediately preceding the Closing Date.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by any of the Initial Purchasers, confirm such advice in
writing, (i) of the issuance to the Company's knowledge by any state
securities commission of any order suspending the qualification or
exemption from qualification of any Notes for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by
any state securities commission or other
4
<PAGE> 6
regulatory authority and (ii) of the occurrence of any event that makes
any statement of a material fact made in the Preliminary Offering
Memorandum or the Offering Memorandum untrue or that requires the
making of any additions to or changes in the Preliminary Offering
Memorandum or the Offering Memorandum in order to make the statements
therein, in the light of the circumstances under which they are made,
not misleading. The Company shall make every reasonable effort to
prevent the issuance of any stop order or order suspending the
qualification or exemption of any Notes under any state securities or
"Blue Sky" laws and, if any such order is issued, to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) The Company will furnish to the Initial Purchasers,
counsel for the Initial Purchasers and those persons identified by the
Initial Purchasers to the Company, without charge, as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and
any amendments or supplements thereto, as the Initial Purchasers and
their counsel may reasonably request. The Company consents to the use
of the Preliminary Offering Memorandum and the Offering Memorandum, and
any amendments and supplements thereto, by the Initial Purchasers in
connection with Exempt Resales on the terms and in the manner set forth
in the Preliminary Offering Memorandum, the Offering Memorandum and
this Agreement.
(c) Before amending or supplementing the Preliminary Offering
Memorandum or the Offering Memorandum, to furnish to the Initial
Purchasers a copy of each such proposed amendment or supplement and not
to make any such proposed amendment or supplement to which the Initial
Purchasers reasonably object. The Company shall promptly prepare, upon
the Initial Purchasers' request, any amendment or supplement to the
Preliminary Offering Memorandum or the Offering Memorandum that may be
necessary or advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to completion of any
Exempt Resale by the Initial Purchasers to purchasers who are not
affiliated with any Initial Purchaser, any event shall occur or
condition shall exist as a result of which, in the judgment of the
Company or counsel for the Company or counsel for the Initial
Purchasers, it becomes necessary or advisable to amend or supplement
the Offering Memorandum so that it does not include an untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances when
such Offering Memorandum is delivered to a purchaser, not misleading,
or if in the opinion of the Company or counsel for the Company or
counsel to the Initial Purchasers it is necessary or advisable to amend
or supplement the Offering Memorandum to comply with applicable law,
the Company will (i) notify the Initial Purchasers, in writing, to
suspend use of the Offering Memorandum as promptly as practicable, and
(ii) promptly prepare, at its own expense, an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein
as so amended or supplemented will not include an untrue statement of a
material fact or omit
5
<PAGE> 7
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances when it is so delivered to a
purchaser, not misleading, or so that such Offering Memorandum will
comply with applicable law.
(e) To cooperate with the Initial Purchasers and counsel for
the Initial Purchasers in connection with the qualification or
registration of the Notes for the offering and sale under the
securities or "Blue Sky" laws of such states and other jurisdictions as
the Initial Purchasers may request and to continue such qualification
in effect so long as required for the Exempt Resales; PROVIDED,
HOWEVER, that the Company shall not be required in connection therewith
to register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to service of
process in suits or taxation, in each case, other than as to matters
and transactions relating to the Preliminary Offering Memorandum, the
Offering Memorandum or Exempt Resales, in any jurisdiction where it is
not now so subject. The Company shall promptly advise the Initial
Purchasers of the receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of the
Notes for offering or sale in any jurisdiction or the institution, or,
to the Company's knowledge, the threat or contemplation, of any
proceeding for such purpose.
(f) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is
terminated, the Company hereby agrees to pay all costs, expenses, fees
and taxes incident to the performance of the obligations of the Company
hereunder, including in connection with: (i) the preparation, printing,
filing and distribution of the Preliminary Offering Memorandum and the
Offering Memorandum (including, without limitation, financial
statements) and all amendments and supplements thereto required
pursuant hereto, (ii) the issuance, transfer and delivery by the
Company of the Notes to the Initial Purchasers, (iii) the qualification
or registration of the Notes for offer and sale under the securities or
Blue Sky laws of the several states (including, without limitation, the
cost of preparing, printing and mailing a preliminary and final Blue
Sky Memorandum and the reasonable fees and disbursements of counsel for
the Initial Purchasers relating thereto) and the expenses related to
all other agreements, memoranda, correspondence and all other documents
prepared and delivered in connection herewith and with Exempt Resales,
(iv) furnishing such copies of the Preliminary Offering Memorandum and
the Offering Memorandum, and all amendments and supplements thereto, as
may be requested for use in connection with Exempt Resales, (v) the
preparation of certificates for the Notes (including, without
limitation, printing and engraving thereof), (vi) the fees,
disbursements and expenses of the Company's counsel and accountants,
(vii) all expenses and listing fees in connection with the application
for quotation of the Notes in the PORTAL market, (viii) all fees and
expenses (including fees and expenses of counsel) of the Company in
connection with the approval of the Notes by DTC for "book-entry"
transfer, (ix) rating the Notes by rating agencies, (x) the reasonable
fees and expenses of the Trustee and its counsel, (xi) the performance
by the Company of its other obligations under this Agreement
6
<PAGE> 8
and the other Operative Documents, and (xii) "roadshow" travel and
other expenses of the parties hereto (with the exception of the Initial
Purchasers and their Advisors) incurred in connection with the
marketing and sale of the Notes. Except as provided in this Section
4(f) and Sections 6, 7 and 10(d) hereof, the Initial Purchasers shall
pay all of their own costs and expenses, including the fees of their
counsel.
(g) The Company will apply the proceeds from the sale of the
Notes as set forth in the Offering Memorandum under the caption "Use of
Proceeds."
(h) The Company will not voluntarily claim, and will resist
actively any attempts to claim, the benefit of any usury laws against
the holders of any Notes.
(i) None of the Company, any of its subsidiaries or any of its
affiliates (as defined in Rule 501(b) under the Act) will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of
any security (as defined in the Act) that could reasonably be expected
to be integrated with the sale of the Notes in a manner that would
require the registration of the Notes under the Act, or take any other
action that would result in the Exempt Resales not being exempt from
registration under the Act.
(j) The Company will, for so long as any of the Notes remain
outstanding and during any period in which the Company is not subject
to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), and any holder of the Notes is still
relying on Rule 144A or another exemption from the registration
requirements of the Act, make available to any holder or beneficial
owner of Notes in connection with any sale thereof and any prospective
purchaser of such Notes from such holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Act.
(k) The Company will cause the Exchange Offer to be made in
the appropriate form to permit registered Exchange Notes to be offered
in exchange for the Notes and to comply with all applicable federal and
state securities laws in connection with the Exchange Offer.
(l) The Company will comply with all of the agreements set
forth herein and in the other Operative Documents and all agreements
set forth in the representation letters of the Company to DTC relating
to the approval of the Notes by DTC for "book-entry" transfer.
(m) The Company will use its best efforts to effect the
inclusion of the Notes in PORTAL and obtain approval of the Notes by
DTC for "book-entry" transfer.
(n) For so long as any of the Notes remain outstanding but in
no event beyond a period of three years following the Closing Date, the
Company will deliver without charge to the Initial Purchasers, as they
may reasonably request, promptly upon their becoming
7
<PAGE> 9
available, copies of (i) all reports or other publicly available
information that the Company shall mail or otherwise make available to
its stockholders, and (ii) all reports, financial statements and proxy
or information statements filed by the Company with the Commission or
any national securities exchange or market and such other publicly
available information concerning the Company or any of its
subsidiaries, including without limitation, press releases.
(o) Neither the Company nor any of its subsidiaries will take,
directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company in order to
facilitate the sale or resale of the Notes. Except as permitted by the
Act, the Company will not distribute any (i) preliminary offering
memorandum, including, without limitation, the Preliminary Offering
Memorandum, (ii) offering memorandum, including, without limitation,
the Offering Memorandum or (iii) other offering material in connection
with the offering and sale of the Notes.
(p) Neither the Company nor any of its affiliates (as defined
in Rule 501(b) under the Act) will solicit any offer to buy or offer or
sell the Series A Notes or the Exchange Notes by means of any form of
general solicitation or general advertising (as such terms are used in
Regulation D under the Act), or in any manner involving a public
offering within the meaning of Section 4(2) of the Act, prior to the
effectiveness of a registration statement with respect to the Series A
Notes or the Exchange Notes, as applicable.
(q) On or before December 16, 1998, the Company will cause the
transfer agent for the Company's Common Stock to deliver to the holders
of the A-1 Notes (as defined herein), in exchange for the A-1 Notes
marked cancelled, certificates representing the shares of Common Stock
of the Company into which the A-1 Notes have been converted (the "A-1
Stock Certificates"). Prior to such delivery, the Company shall not
amend, modify or terminate the irrevocable instructions it has provided
to such transfer agent to effect such delivery or waive any provision
thereof without the prior written consent of Bear, Stearns and Co. Inc.
As used in this Agreement, "A-1 Notes" means the unsecured convertible
subordinated promissory notes in the aggregate principal amount of
$50,000,000 issued by the Company in connection with the acquisition of
A-1 Rentals.
(r) Each of the Company and the Guarantors will conduct its
business and financial affairs in such a manner as to ensure that it
will not become an "investment company" or an entity "controlled" by an
"investment company."
5. REPRESENTATIONS AND WARRANTIES.
(a) The Company and the Guarantors represent and warrant to,
and agree with, the Initial Purchasers that:
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<PAGE> 10
(i) The Preliminary Offering Memorandum and the Offering
Memorandum have been prepared in connection with the Exempt Resales.
The Preliminary Offering Memorandum and Offering Memorandum do not, and
any supplement or amendment to them will not, contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. No representation and warranty is made in this
subsection (i), however, with respect to any information contained in
or omitted from the Preliminary Offering Memorandum or the Offering
Memorandum or any amendment thereof or supplement thereto in reliance
upon and in conformity with information furnished in writing to the
Company by or on behalf of any of the Initial Purchasers relating to
the Initial Purchasers expressly for use in connection with the
preparation thereof. The Company and the Guarantors acknowledge that
the statements set forth in the sixth full paragraph on page (ii) of
the Offering Memorandum, relating to possible stabilization
transactions, in the table listing Initial Purchasers under the caption
"Plan of Distribution" in the Offering Memorandum and in the fifth
paragraph under the caption "Plan of Distribution" in the Offering
Memorandum constitute the only information furnished in writing by or
on behalf of any Initial Purchaser expressly for use in the Offering
Memorandum.
(ii) Neither the Commission nor the "Blue Sky" or securities
authority of any jurisdiction has issued an order preventing or
suspending the use of the Preliminary Offering Memorandum or the
Offering Memorandum, or any amendment or supplement thereto, nor, to
the knowledge of the Company, has any of such authorities instituted or
threatened to institute any proceedings with respect to a stop order or
instituted or threatened to institute any order or in any way asserted
that any of the transactions contemplated by this Agreement is subject
to the registration requirements of the Act. As used in this Agreement,
"knowledge of the Company" means the knowledge of the senior officers
of the Company after reasonable inquiry under the circumstances.
(iii) Arthur Andersen LLP, who have certified the financial
statements included in the Offering Memorandum, are independent public
accountants with regard to the Company and its subsidiaries as required
by the Act and the regulations under the Act if the Offering were
required to be registered under the Act.
(iv) Subsequent to the respective dates as of which information
is given in the Offering Memorandum, except as otherwise set forth in
the Offering Memorandum, there has been no material adverse change, or
any development known to the Company or any Guarantor which is
reasonably expected to result in a material adverse change, in the
business, prospects, properties (whether or not insured), assets,
earnings, operations, condition (financial or other) or results of
operations of the Company and its subsidiaries taken as a whole,
whether or not arising from transactions in the ordinary course of
business (any such event, a "MATERIAL ADVERSE EFFECT"). Since the date
of the latest balance sheet
9
<PAGE> 11
presented in the Offering Memorandum, except as expressly disclosed in
the Offering Memorandum, neither the Company nor any of its
subsidiaries has (i) incurred or undertaken any liabilities or
obligations, direct or contingent, not in the ordinary course of
business that could reasonably be expected to have a Material Adverse
Effect, (ii) entered into any material transaction not in the ordinary
course of business and consistent with past practice, (iii) entered
into any agreement or made any commitment binding on the Company to
acquire any company or business that could reasonably be expected to
have a Material Adverse Effect, or (iv) declared or paid any dividend
or made any distribution on any shares of its capital stock redeemed,
purchased or otherwise acquired or agreed to redeem, purchase or
otherwise acquire any shares of its capital stock.
(v) Each of the Company and the Guarantors has the requisite
corporate power and authority to enter into this Agreement and each of
the other Operative Documents to which it is a party, perform each of
its obligations hereunder and thereunder and issue, sell, deliver and
perform its obligations under the Series A Notes to be sold by it
hereunder. This Agreement and the transactions contemplated herein have
been duly and validly authorized by the Company and each of the
Guarantors and this Agreement has been duly and validly executed and
delivered by the Company and each of the Guarantors and is a legal,
valid and binding obligation of the Company and each of the Guarantors,
enforceable against the Company and each of the Guarantors in
accordance with its terms, except (i) as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles and public policy.
(vi) The execution, delivery and performance by the Company and
each of the Guarantors of this Agreement and the other Operative
Documents, and the consummation by the Company and each of the
Guarantors of the transactions contemplated hereby (including the
issuance, sale and delivery of the Series A Notes and the Guarantees by
the Company and the Guarantors, respectively), do not and will not (i)
conflict with or result in a breach of any of the terms and provisions
of, or constitute a default (or an event which with notice or lapse of
time, or both, would constitute a default) under, give rise to any
right to accelerate the maturity or require the prepayment of any
material obligation of the Company or any of the Guarantors or require
any consent, or result in the creation or imposition of any material
lien, charge or encumbrance upon any property or assets of the Company
or any of the Guarantors, pursuant to the terms of any agreement,
instrument, franchise, license or permit to which the Company or any of
the Guarantors is a party or by which any of such corporations or their
respective properties or assets may be bound, or (ii) violate or
conflict with any provision of the certificate of incorporation or
by-laws of the Company or any of the Guarantors or any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over the
Company or any of the Guarantors or any of their respective properties
or assets.
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<PAGE> 12
(vii) No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or any
public, governmental or regulatory agency or body having jurisdiction
over the Company or any of the Guarantors or any of their respective
properties or assets is required for the valid execution, delivery and
performance by the Company and each of the Guarantors of this Agreement
or any of the other Operative Documents to which it is a party or the
consummation of the transactions contemplated hereby and thereby,
including the issuance, sale and delivery of the Series A Notes to be
issued, sold and delivered by the Company and the Guarantors hereunder,
except such as have been obtained and made (or, in the case of the
Registration Rights Agreement, will be obtained or made) under the Act,
the Trust Indenture Act of 1939, as amended (the "TRUST INDENTURE
ACT"), and state securities or Blue Sky laws and regulations or such as
may be required by the National Association of Securities Dealers, Inc.
("NASD").
(viii) All of the outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and
non-assessable, were issued in compliance with all applicable United
States federal and state securities laws and were not issued and are
not now in violation of or subject to any preemptive rights, or, except
as disclosed in the Offering Memorandum, co-sale rights, registration
rights, repurchase rights, right of first refusal or any other similar
right. The Company had, at September 30, 1998, a duly authorized and
outstanding capitalization as set forth under the caption
"Capitalization" in the Offering Memorandum. On September 30, 1998,
after giving PRO FORMA effect to the issuance and sale of the Series A
Notes pursuant hereto and the other transactions referred to therein,
the Company would have had an authorized and outstanding capitalization
as set forth in the Offering Memorandum in the "Pro Forma As Adjusted"
column under the caption "Capitalization" in the Offering Memorandum.
There is no commitment, plan or arrangement to issue, and no
outstanding option, warrant, security or other right or instrument
which requires, permits or provides for the issuance, subscription or
purchase of, any share of capital stock of the Company or any security
or other instrument which by its terms is convertible into, exercisable
for, or exchangeable for capital stock of the Company, except as
accurately described in all material respects in the Offering
Memorandum or as set forth in EXHIBIT C attached hereto. Except as
described in the Offering Memorandum or as may be required by
applicable securities laws, there are no restrictions on the voting or
transfer of any shares of capital stock of the Company.
(ix) Each of the Company and the Guarantors has been duly
organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation. Each of the
Company and the Guarantors is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the character or
location of its properties (owned, leased or licensed) or the nature or
conduct of its business makes such qualification necessary, except for
those failures to be so qualified or in good standing which could not
reasonably be expected to, individually or the aggregate, have a
Material Adverse Effect and neither the Company nor any of the
Guarantors has received any claim or notice
11
<PAGE> 13
from any official in any jurisdiction that it is required to be
qualified or licensed to do business in any jurisdiction in which it is
not so qualified or licensed. Each of the Company and the Guarantors
has all requisite power and authority, and all necessary consents,
approvals, authorizations, orders, registrations, qualifications,
licenses and permits of and from all public, regulatory or governmental
agencies and bodies, to own, lease and operate its properties and
conduct its business as now being conducted and as described in the
Offering Memorandum and neither the Company nor any of the Guarantors
has received any notice of any proceedings relating to the revocation
or modification of any thereof, and no such consent, approval,
authorization, order, registration, qualification, franchise, license
or permit contains a materially burdensome restriction that is not
accurately disclosed in all material respects in the Offering
Memorandum.
(x) As of September 30, 1998 and as of the date hereof, all of
the outstanding shares of capital stock of each of the Guarantors have
been duly authorized and validly issued, are fully paid and
non-assessable and were not issued and are not now in violation of or
subject to any preemptive rights, co-sale rights, registration rights,
repurchase rights, rights of first refusal or any other similar right,
and are owned directly by the Company, free and clear of any lien,
pledge, encumbrance, claim, security interest, restriction on transfer,
stockholders' agreement, voting trust or other defect of title
whatsoever. Except for the wholly-owned subsidiaries of the Company set
forth in EXHIBIT D, each of which is a Guarantor and which together
constitute all of the Company's subsidiaries, the Company owns no
controlling interest in any other corporation, partnership or other
entity and does not directly or indirectly own any shares of stock or
any other securities of any corporation or have any equity interest in
any firm, partnership, association or other entity, other than minority
investments in marketable securities that may be made in the ordinary
course of business as a part of its investment of excess cash assets.
There is no commitment, plan or arrangement to issue, and no
outstanding option, warrant, security or other right or instrument
which requires, permits or provides for the issuance, subscription or
purchase of, any share of capital stock of any of the Guarantors or any
security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for capital stock of any of the
Guarantors. Except as may be required by applicable securities laws,
there are no restrictions on the voting or transfer of any shares of
capital stock of any of the Guarantors.
(xi) Except as described in the Offering Memorandum, there is no
action, suit, investigation or proceeding, governmental or otherwise,
to which the Company or any of the Guarantors is a party or to which
any property of the Company or any of the Guarantors is subject or
which is pending or, to the knowledge of the Company, contemplated
against the Company or any of the Guarantors which (i) if adversely
decided or concluded, could reasonably be expected to have a Material
Adverse Effect, (ii) would be required to be disclosed in a prospectus
pursuant to the Act, or (iii) seeks to restrain, enjoin, prevent the
consummation of, or otherwise challenge the issuance of, the Notes or
the Guarantees or the execution and delivery of this Agreement or any
of the other Operative Documents or any
12
<PAGE> 14
of the transactions contemplated hereby or thereby, or questions the
legality or validity of any such transactions or that seeks to recover
damages or obtain other relief in connection with any of such
transactions.
(xii) Except as provided for in this Agreement, neither the
Company nor any of the Guarantors has (A) taken and neither the Company
nor any Guarantor will take, directly or indirectly, any action
designed to cause or result in, or which constitutes or which might
reasonably be expected to constitute, the stabilization or manipulation
of the price of any security of the Company in order to facilitate the
sale or resale of the Notes or (B) since the date of the Preliminary
Offering Memorandum (y) sold, bid for, purchased or paid any person any
compensation for soliciting purchases of the Notes or (z) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(xiii) The financial statements, including the notes thereto and
supporting schedules included in the Offering Memorandum present fairly
the financial condition, results of operations, stockholders' equity
and cash flows and other information purported to be shown therein of
the Company, its subsidiaries and its predecessor and the businesses
acquired by the Company at the dates and for the periods indicated and
present fairly the information required to be stated therein. Such
financial statements and supporting schedules have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, and are in accordance in all
material respects with the books and records of the Company, its
subsidiaries and its predecessor and the businesses acquired by the
Company, respectively. No other financial statements or supporting
schedules would be required by Form S-1 to be included in the Offering
Memorandum if the Offering Memorandum were subject to the disclosure
requirements applicable to Form S-1. The financial data set forth in
the Offering Memorandum under the captions "Offering Memorandum Summary
-- Summary Consolidated Historical and Pro Forma Financial Data", "Risk
Factors -- Substantial Debt", "Capitalization", "Selected Consolidated
Historical and Pro Forma Financial Information and Operations Data" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" fairly present, on the basis stated in the
Offering Memorandum, the information set forth therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Offering Memorandum. The pro forma and "as
adjusted" financial information included under the captions "Offering
Memorandum Summary -- Summary Consolidated Historical and Pro Forma
Financial Data", "Capitalization", "Selected Consolidated Historical
and Pro Forma Financial Information and Operations Data" and
"Management's Discussion and Analysis of Financial Conditions and
Results of Operations" and elsewhere in the Offering Memorandum that
gives effect to the issuance of the Notes, the application of the net
proceeds therefrom and the other transactions and events specified
therein presents fairly the information contained therein, has been
properly compiled on the basis of the assumptions set forth with
respect thereto, and the assumptions used in the preparation thereof
are
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<PAGE> 15
reasonable, the pro forma adjustments to the historical figures have
been properly applied to such figures and such pro forma financial
information complies in all material respects with Regulation S-X of
the Commission applicable to registration statements on Form S-1 under
the Act. All other financial information and statistical data set forth
in the Offering Memorandum are, in all material respects, accurately
presented and, in the case of such financial information, has been
prepared on an accounting basis consistent with the financial
statements included in the Offering Memorandum, PROVIDED that with
respect to statistical data derived from industry sources, the Company
has not made any independent investigation or verification of such
data, but nothing has come to the attention of the Company or any
Guarantor that leads it to believe that such statistical data is
inaccurate.
(xiv) Each of the Company and the Guarantors has good and
marketable title to all the properties and assets reflected as owned in
the financial statements (or elsewhere) in the Offering Memorandum,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except (i) those, if any, reflected in the financial statements, or
(ii) those which are not material in amount and do not adversely affect
the use made and proposed to be made of such property by the Company
and the Guarantors. Each of the Company and the Guarantors holds its
leased properties under valid, subsisting and enforceable leases, with
such exceptions as are not, individually or in the aggregate, material
and do not, individually or in the aggregate, interfere with the use
made or proposed to be made of such properties by the Company or the
applicable Guarantor. Except as disclosed in the Offering Memorandum,
each of the Company and the Guarantors owns or leases all such
properties as are necessary to its operations as now conducted or as
proposed to be conducted.
(xv) None of the Company or any of the Guarantors is, nor upon
consummation of the transactions contemplated hereby will be, subject
to registration as an "investment company" or an entity "controlled by"
an "investment company" within the meaning of the Investment Company
Act of 1940 and the rules and regulations promulgated thereunder.
(xvi) The Company and each of the Guarantors owns or possesses
adequate licenses or other rights to use all patents, trademarks,
service marks, trade names, copyrights, technology and know-how
necessary to conduct the business now or proposed to be conducted by
the Company and each of the Guarantors as described in the Offering
Memorandum, except for those patents, trademarks, service marks, trade
names, copyrights, technology and know-how the failure to own or have
the right to use would not have a Material Adverse Effect and, except
as disclosed in the Offering Memorandum, neither the Company nor any of
the Guarantors has received any notice of infringement of or conflict
with (or knows of such infringement of or conflict with) rights of
others with respect to any patents, trademarks, service marks, trade
names, copyrights or know-how; and to the knowledge of the Company, the
Company and each of the Guarantors does not, in the conduct of their
business as now conducted or proposed to be conducted, infringe or
conflict with any such rights of any third party.
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<PAGE> 16
(xvii) There are no contracts, indentures, mortgages, loan
agreements, notes, leases or other agreements or instruments or other
documents (collectively, "DOCUMENTS") required to be described or
referred to in a Registration Statement on Form S-1 other than those
described or referred to in the Offering Memorandum; all such
descriptions are accurate in all material respects and present fairly
the information required to be described therein. All such Documents to
which the Company or a Guarantor is a party have been duly authorized,
executed and delivered by the Company or such Guarantor, constitute
valid and binding agreements of the Company or such Guarantor and are
enforceable against the Company or such Guarantor in accordance with
the terms thereof, except as the enforceability thereof may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
(xviii) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business), or
guarantees of indebtedness by the Company or any of the Guarantors to
or for the benefit of any of the executive officers or directors of the
Company or any of the Guarantors or any of the members of the families
of any of them, and there are no business relationships or
related-party transactions involving the Company or any Guarantor or
any other person required to be described in the Offering Memorandum
except as disclosed in the Offering Memorandum; all such descriptions
are accurate in all material respects and present fairly the
information required to be described in a Registration Statement on
Form S-1.
(xix) Each of the Company and the Guarantors maintains a system
of internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with
management's general or specific authorizations; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (C) access to assets is permitted
only in accordance with management's general or specific authorization;
and (D) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(xx) Neither the Company nor any of the Guarantors is in
violation or breach of, or in default (nor has any event occurred which
with notice, or lapse of time, or both, would constitute a default)
under any contract, agreement, indenture, loan or other agreement,
instrument, mortgage, note, permit, lease, license, arrangement or
understanding to which the Company or any of the Guarantors is a party
or by which the Company, any of the Guarantors or any of their
respective properties may be bound where such default, either
individually or together with all such other defaults, could reasonably
be expected to have a Material Adverse Effect or a material adverse
effect on the ability of the Company or any Guarantor to perform its
obligations hereunder. Each material contract, agreement,
15
<PAGE> 17
indenture, loan or other agreement, instrument, mortgage, note, permit,
lease, license, arrangement and understanding to which the Company or
any of the Guarantors is a party or by which the Company, any of the
Guarantors or any of their respective properties may be bound is in
full force and effect and is the legal, valid, and binding obligation
of the Company or the Guarantor, as the case may be, and, to the
knowledge of the Company, the other parties thereto and is enforceable
against the Company or the Guarantor, as the case may be, and, to the
knowledge of the Company, against the other parties thereto in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles. Each of the Company and each of the Guarantors enjoys
peaceful and undisturbed possession under all material leases and
material licenses under which the Company and the Guarantors are
operating. Except as disclosed in the Offering Memorandum, neither the
Company nor any of the Guarantors is a party to or bound by any
contract, agreement, indenture, loan or other agreement, instrument,
mortgage, note, permit, lease, license, arrangement, or understanding,
or subject to any charter or other restriction, which has had or is
reasonably expected in the future to have a Material Adverse Effect.
Neither the Company nor any of the Guarantors is in violation or breach
of, or in default with respect to, any term of its respective
certificate of incorporation or bylaws. Neither the Company nor any of
the Guarantors is in violation of, or in default with respect to, any
law, rule, regulation, order, judgment or decree, except such as are
described in the Offering Memorandum or such as, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(xxi) Except as described in the Offering Memorandum, (i) no
labor dispute with the employees of the Company or any of the
Guarantors exists or, to the knowledge of the Company, is threatened
and (ii) the Company is not aware of any labor disturbance by the
employees of any of its significant manufacturers, suppliers, customers
or contractors, that could reasonably be expected, in the case of both
clauses (i) and (ii), to have a Material Adverse Effect.
(xxii) Except as described in the Offering Memorandum, (i) neither
the Company nor any Guarantor is a party to or bound by any
stockholders agreements or voting trusts with respect to any securities
of the Company or any Guarantor and (ii) there are no contracts,
agreements or understandings between the Company or any of the
Guarantors and any person or entity granting such person or entity the
right to require the Company or any Guarantor to file a registration
statement under the Act with respect to any securities of the Company
or any Guarantor owned or to be owned by such person or entity or to
require the Company or any Guarantor to include such securities in the
securities to be registered in the Exchange Offer.
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<PAGE> 18
(xxiii) Except as disclosed in the Offering Memorandum, neither the
Company nor any of the Guarantors is in material violation of any
federal, state or local law or regulation relating to occupational
safety and health or to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including
without limitation, laws, codes and regulations relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous materials or
substances, solid or hazardous wastes, petroleum and petroleum products
(collectively, "MATERIALS OF ENVIRONMENTAL CONCERN"), or otherwise
relating to the manufacture, processing, distribution, use, generation,
treatment, storage, disposal, transport or handling of Materials of
Environment Concern, underground or above ground storage tanks and
related piping, and emissions, discharges, releases or threatened
releases therefrom and damages to natural resources (collectively,
"ENVIRONMENTAL LAWS"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations
required for the operation of the business of the Company or the
Guarantors under applicable Environmental Laws, or noncompliance with
the terms and conditions thereof, nor has the Company or any of the
Guarantors received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that
alleges that the Company or any of the Guarantors is in violation of
any Environmental Law; (ii) there is no claim, action or cause of
action filed with a court or governmental authority, no investigation
with respect to which the Company has received written notice, and no
written notice by any person or entity alleging potential liability for
investigatory costs, clean-up costs, governmental responses costs,
natural resources damages, property damages, personal injuries,
attorneys' fees or penalties arising out of, based on or resulting from
the presence, or release into the environment, of any Material of
Environmental Concern at any location owned, leased, controlled or
operated by the Company or any of the Guarantors, now or in the past
(collectively, "ENVIRONMENTAL CLAIMS"), pending or, to the knowledge of
the Company, threatened against the Company or any of the Guarantors or
any person or entity whose liability for any Environmental Claim the
Company or any of the Guarantors has retained or assumed either
contractually or by operation of law; (iii) to the knowledge of the
Company, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that reasonably could result in
a violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or any of the Guarantors or
against any person or entity whose liability for any Environmental
Claim the Company or any of the Guarantors has retained or assumed
either contractually or by operation of law; (iv) the Company and each
of the Guarantors have received all permits, licenses or other
approvals required under applicable federal, state and local
occupational safety and health and Environmental Laws and regulations
to conduct their respective businesses; and (v) the Company and each of
the Guarantors is in compliance with all terms and conditions of any
such permits, licenses or approvals, except any such violation of law
or regulation, failure to receive required permits,
17
<PAGE> 19
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals which could not,
individually or together with all such other violations or failures,
have a Material Adverse Effect.
(xxiv) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the
business, operations and properties of the Company and the Guarantors,
in the course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to
third parties). On the basis of such review and the amount of its
established reserves, the Company has reasonably concluded that such
associated costs and liabilities would not, individually or in the
aggregate, have a Material Adverse Effect.
(xxv) The Company, either directly or through one or more the
Guarantors, maintains reasonably adequate insurance with respect to its
business and properties and the business and properties of the
Guarantors.
(xxvi) The Company has complied and will comply with all
provisions of Florida Statutes Section 517.075 (Chapter 92-198, Laws of
Florida). Neither the Company nor any affiliate thereof does business
with the government of Cuba or with any person or affiliate located in
Cuba.
(xxvii) Each of the Company and the Guarantors has (i) filed all
federal, state and local and foreign tax returns which are required to
be filed through the date hereof, and all such tax returns are true,
complete and accurate in all material respects, or (ii) received valid
extensions thereof and has paid all taxes shown on such returns and all
assessments received by it except (A) for such taxes as are being
contested in good faith and as to which adequate reserves have been
provided, or (B) where, in the case of state and local and foreign tax
returns, the failure to file in clause (ii), or extend the due date of
or pay the same in clause (ii), in the aggregate, could not reasonably
be expected to have a Material Adverse Effect; the Company has no
knowledge of any tax deficiency which has been or might be asserted
against the Company or any of the Guarantors which could have a
Material Adverse Effect; to the Company's knowledge, all tax
liabilities are adequately provided for on the consolidated books of
the Company.
(xxviii) The Company and the Guarantors and any "employee benefit
plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations
thereunder (collectively, "ERISA")) established or maintained by the
Company, any of the Guarantors or their "ERISA Affiliates" (as defined
below) are in compliance in all material respects with ERISA. "ERISA
AFFILIATE" means, with respect to the Company or a Guarantor, any
member of any group of organizations
18
<PAGE> 20
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue
Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "CODE") of which the Company or such
Guarantor is a member. No "reportable event" (as defined under ERISA)
has occurred or is reasonably expected to occur with respect to any
"employee benefit plan" established or maintained by the Company, any
Guarantor or any of their ERISA Affiliates. No "employee benefit plan"
established or maintained by the Company, any of the Guarantors or any
of their ERISA Affiliates, if such "employee benefit plan" were
terminated, would have any "amount of unfunded benefit liabilities" (as
defined under ERISA). Neither the Company, any Guarantor nor any of
their ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of,
or withdrawal from, any "employee benefit plan" or (ii) Sections 412,
4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, any of the Guarantors or any
of their ERISA Affiliates that is intended to be qualified under
Section 401(a) of the Code is so qualified and nothing has occurred,
whether by action or failure to act, which would cause the loss of such
qualification.
(xxix) The Company has made in all material respects in the
Offering Memorandum all disclosures required by the Commission's Staff
Legal Bulletin No. 5 (as amended or otherwise modified through the date
of this Agreement) related to Year 2000 compliance.
(xxx) The Company has not incurred any liability for any finder's
fees or similar payments in connection with the transactions herein
contemplated.
(xxxi) When the Notes are issued and delivered pursuant to this
Agreement, no Note will be of the same class (within the meaning of
Rule 144A under the Act) as securities of the Company that are listed
on a national securities exchange registered under Section 6 of the
Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(xxxii) The Indenture and the transactions contemplated therein
have been duly and validly authorized by the Company and the Guarantors
and, when duly and validly executed and delivered by the Company and
the Guarantors (assuming the due execution and delivery thereof by the
Trustee), will be the legal, valid and binding obligation of the
Company and each of the Guarantors, enforceable against the Company and
each of the Guarantors in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles and public policy. The Indenture meets the
requirements for qualification under the Trust Indenture Act. The
Offering Memorandum contains a summary of the terms of the Indenture
which is accurate in all material respects.
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<PAGE> 21
(xxxiii) The Registration Rights Agreement and the transactions
contemplated therein have been duly and validly authorized by the
Company and the Guarantors and, when duly and validly executed and
delivered by the Company and the Guarantors (assuming the due execution
and delivery thereof by the Initial Purchasers), will be the legal,
valid and binding obligation of the Company and each of the Guarantors,
enforceable against the Company and each of the Guarantors in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles and public policy. The Offering Memorandum contains a
summary of the terms of the Registration Rights Agreement which is
accurate in all material respects.
(xxxiv) The Series A Notes and the Guarantees have been duly and
validly authorized by the Company and each of the Guarantors for
issuance and sale to the Initial Purchasers pursuant to this Agreement
and, when executed, issued and authenticated in accordance with the
terms of the Indenture and delivered against payment therefor in
accordance with the terms hereof and thereof, will be the legal, valid
and binding obligations of the Company and the Guarantors,
respectively, enforceable against the Company and each of the
Guarantors in accordance with their terms and entitled to the benefits
of the Indenture, except as the enforceability thereof may be limited
by rights of acceleration or by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles and public policy. The Offering Memorandum contains a
summary of the terms of the Series A Notes which is accurate in all
material respects.
(xxxv) The Exchange Notes and the Guarantees have been duly and
validly authorized for issuance by the Company and each of the
Guarantors and, when duly and validly executed, issued and
authenticated in accordance with the terms of the Exchange Offer and
the Indenture, will be the legal, valid and binding obligations of the
Company and each of the Guarantors, respectively, enforceable against
the Company and the Guarantors in accordance with their terms and
entitled to the benefits of the Indenture, except as the enforceability
thereof may be limited by rights of acceleration or by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles and public policy. The Offering
Memorandum contains a summary of terms of the Exchange Notes which is
accurate in all material respects.
(xxxvi) No registration of the Notes is required under the Act for
the sale of the Series A Notes to the Initial Purchasers as
contemplated hereby or for the Exempt Resales assuming (A) that the
purchasers who buy the Series A Notes in the Exempt Resales are QIBs
and (B) the accuracy of the Initial Purchasers' representations
regarding the absence of general solicitation in connection with the
sale of Series A Notes to the Initial Purchasers and Exempt Resales
contained herein. No form of general solicitation or general
advertising (as
20
<PAGE> 22
those terms are used in Regulation D under the Act) was used by the
Company or any of its representatives (other than the Initial
Purchasers, as to which the Company makes no representation or
warranty) in connection with the offer and sale of any of the Series A
Notes in connection with Exempt Resales, including, but not limited to,
articles, notices or other communications published in any newspaper,
magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as
the Series A Notes have been issued and sold by the Company or any of
the Guarantors within the six-month period immediately prior to the
date hereof.
(xxxvii) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Notes, the application of the
proceeds from the issuance and sale of the Notes or the consummation of
the transactions contemplated thereby as set forth in the Offering
Memorandum, will violate Regulations G, T, U or X promulgated by the
Board of Governors of the Federal Reserve System.
(xxxviii) The Company (i) has provided written notice to the holders
of the A-1 Notes in connection with the conversion by the Company of
the A-1 Notes into shares of Common Stock of the Company, (ii) has
delivered irrevocable instructions to the transfer agent for the
Company's Common Stock to issue and deliver the A-1 Stock Certificates
to the holders of the A-1 Notes in exchange for the A-1 Notes marked
"canceled" on or before December 16, 1998 and (iii) has taken all
corporate and other action required by it to effect the conversion of
the A-1 Notes, subject only to the issuance and delivery by such
transfer agent of the A-1 Stock Certificates.
(xxxix) Neither the Company nor any Guarantor intends to, nor
believes that it will, incur debts beyond its ability to pay such debts
as they mature. The present fair saleable value of the assets of the
Company and each Guarantor exceeds the amount that will be required to
be paid on or in respect of its existing debts and other liabilities
(including contingent liabilities) as they become absolute and matured.
The assets of the Company and each Guarantor do not constitute
unreasonably small capital to carry on its business as now conducted or
as proposed to be conducted. Upon the issuance of the Notes and the
Guarantees, the present fair saleable value of the assets of the
Company and each Guarantor will exceed the amount that will be required
to be paid on or in respect of its existing debts and other liabilities
(including contingent liabilities) as they become absolute and matured.
Upon the issuance of the Notes and the Guarantees, the assets of the
Company and each Guarantor will not constitute unreasonably small
capital to carry on its business as not conducted, including the
capital needs of the Company and each Guarantor, taking into account
the projected capital requirements and capital availability.
The Company acknowledges that the Initial Purchasers and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Section 8
hereof, counsel for the Company and
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<PAGE> 23
counsel for the Initial Purchasers, will rely upon the accuracy and truth of the
foregoing representations and hereby consents to such reliance.
(b) Each Initial Purchaser as to itself represents, warrants
and covenants to the Company and agrees that:
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order
to evaluate the merits and risks of an investment in the Series A
Notes.
(ii) Such Initial Purchaser (A) is not acquiring the Series A
Notes with a view to any distribution thereof that would violate the
Act or the securities laws of any state of the United States or any
other applicable jurisdiction and (B) will be reoffering and reselling
the Series A Notes only to QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A in a private
placement exempt from the registration requirements of the Act.
(iii) No form of general solicitation or general advertising has
been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of any of the
Series A Notes, including, but not limited to, articles, notices or
other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or
general advertising.
(iv) Such Initial Purchaser agrees that, in connection with the
Exempt Resales, it will solicit offers to buy the Series A Notes only
from, and will offer to sell the Series A Notes only to, QIBs. Such
Initial Purchaser further agrees (A) that it will offer to sell the
Series A Notes only to, and will solicit offers to buy the Series A
Notes only from QIBs who in purchasing such Series A Notes will be
deemed to have represented and agreed that they are purchasing the
Series A Notes for their own accounts or accounts with respect to which
they exercise sole investment discretion and that they or such accounts
are QIBs and (B) that, in the case of such QIBs, acknowledges and
agrees that such Series A Notes will not have been registered under the
Act and may be resold, pledged or otherwise transferred only (x)(i) to
a person who the seller reasonably believes is a QIB in a transaction
meeting the requirements of Rule 144A, (ii) in a transaction meeting
the requirements of Rule 144, (iii) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904
under the Act, (iv) to an institutional Accredited Investor (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Act) that, prior to such
transfer, furnishes the Trustee a signed letter containing certain
representations and agreements relating to the registration of transfer
of such Series A Notes and an opinion of counsel acceptable to the
Company that such transfer is in compliance with the Act or (v) in
accordance with another exemption from the registration requirements of
the Act (and based upon an opinion of counsel if the
22
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Company requests), (y) to the Company, (z) pursuant to an effective
registration statement under the Act and, in each case, in accordance
with any applicable securities laws of any state of the United States
or any other applicable jurisdiction and (C) that the holder will, and
each subsequent holder is required to, notify any purchaser of the
security evidenced thereby of the resale restrictions set forth in (B)
above.
Each Initial Purchaser understands that the Company and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 8 hereof, counsel for the Company and counsel for the Initial Purchasers
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Initial Purchaser and each person, if any, who controls any Initial Purchaser
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against any and all losses, liabilities, claims, damages and expenses
whatsoever as incurred (including but not limited to attorneys' fees and any and
all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act, any state securities or Blue Sky law or otherwise, such losses,
liabilities, claims, damages, obligations, penalties, judgments, awards, costs,
disbursements or expenses (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum or the Offering Memorandum, or
in any supplement thereto or amendment thereof, or arise out of or are based
upon the omission or alleged omission to state therein any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; PROVIDED, HOWEVER, that (i) the Company will not be
liable in any such case to the extent, but only to the extent, that any such
loss, liability, claim, damage, obligation, penalty, judgment, award, cost,
disbursement or expense arises out of or is based upon any such untrue statement
or alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Initial Purchaser expressly for use therein and
(ii) the indemnity agreement contained in this Section 6(a) with respect to the
Preliminary Offering Memorandum (or the Offering Memorandum) shall not inure to
the benefit of any Initial Purchaser (or to the benefit of any person
controlling such Initial Purchaser) from whom the person asserting any such
losses, liabilities, claims, damages or expenses purchased the Notes which is
the subject thereof (or to the benefit of any person controlling such Initial
Purchaser) if at or prior to the written confirmation of the sale of such Notes
a copy of the Offering Memorandum (or the Offering Memorandum as amended or
supplemented) was not sent or delivered to such person and the untrue statement
or omission of a material fact contained in such Preliminary Offering Memorandum
(or the Offering Memorandum) was corrected in the Offering Memorandum (or the
Offering Memorandum as amended or supplemented) and delivery of such Offering
Memorandum (or the Offering
23
<PAGE> 25
Memorandum as amended or supplemented) would have eliminated any such loss,
liability, claim, damage or expense unless the failure is the result of
non-compliance by the Company with Section 4(b) hereof. This indemnity agreement
will be in addition to any liability which the Company may otherwise have,
including under this Agreement.
(b) Each Initial Purchaser severally, and not jointly, agrees
to indemnify and hold harmless the Company, each of the directors of the Company
and each other person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever as incurred (including but
not limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
are based solely upon any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum or in any amendment thereof or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Initial Purchaser
expressly for use therein; PROVIDED, HOWEVER, that in no case shall any Initial
Purchaser be liable or responsible for any amount in excess of the discounts and
commissions applicable to the Notes purchased by such Initial Purchaser
hereunder. This indemnity will be in addition to any liability which any Initial
Purchaser may otherwise have, including under this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure to so notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 6. In case any such action is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case provided that in connection with any indemnification
hereunder, the indemnifying party shall not be liable for the expenses of more
than one separate counsel for all indemnified parties, but the fees and expenses
of such counsel shall be at the expense of such indemnified party or parties
unless (i) the employment of such counsel shall have been authorized in writing
by one
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<PAGE> 26
of the indemnifying parties in connection with the defense of such action, (ii)
the indemnifying parties shall not have employed counsel to have charge of the
defense of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses shall be borne by the indemnifying parties.
Anything in this subsection to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; PROVIDED, HOWEVER, that such consent was not
unreasonably withheld.
7. CONTRIBUTION. In order to provide for contribution in circumstances
in which the indemnification provided for in Section 6 hereof is for any reason
unavailable from any indemnifying party or is insufficient to hold harmless a
party indemnified thereunder, then each indemnifying party shall contribute to
the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including without limitation any
investigation, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claims asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company, any contribution received by
the Company from persons, other than the Initial Purchasers, who may also be
liable for contribution, including persons who control the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and
directors of the Company) as incurred to which the Company and the Initial
Purchasers may be subject, in such proportions as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Initial
Purchasers, on the other hand, from the offering of the Notes or, if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company, on the one hand, and the Initial Purchasers,
on the other hand, in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the Initial Purchasers, on the other hand, shall
be deemed to be in the same proportion as (x) the total proceeds from the
offering (net of discounts and commissions but before deducting expenses)
received by the Company, and (y) the discounts and commissions received by the
Initial Purchasers, in each case as set forth on the cover page of the Offering
Memorandum, bear to the aggregate offering price of the Notes. The relative
fault of the Company, on the one hand, and the Initial Purchasers, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable
25
<PAGE> 27
considerations referred to above. Notwithstanding the provisions of this Section
7, (i) in no case shall any Initial Purchaser be liable or responsible for any
contribution obligation imposed on all Initial Purchasers in excess of its pro
rata share of the total discounts and commissions set forth on the cover page of
the Offering Memorandum, based on the amount of Notes purchased as compared to
the amount of Notes purchased by all Initial Purchasers who do not default on
their obligations under this Section 7, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act shall have the same rights to contribution as
such Initial Purchaser, and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and
each director of the Company shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of the immediately
preceding sentence. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties, notify each party or parties from whom contribution may be
sought, but the omission to so notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have under this Section 7 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
PROVIDED, HOWEVER, that such consent was not unreasonably withheld.
8. CONDITIONS TO THE PARTIES' OBLIGATIONS. The obligations of the
Initial Purchasers to purchase and pay for the Notes, as provided herein, shall
be subject, in the Initial Purchasers' discretion, to the satisfaction of the
following conditions precedent:
(a) All of the representations and warranties of the Company
contained in this Agreement shall be true and correct on the date
hereof and on the Closing Date with the same force and effect as if
made on and as of the date hereof and the Closing Date, respectively.
The Company shall have performed or complied with all of the agreements
herein contained and required to be performed or complied with by it at
or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers not later than 10:00 a.m., New
York City time, on the day following the date of this Agreement or at
such later date and time as to which the Initial Purchasers may agree,
and no stop order suspending the qualification or exemption from
qualification of the Notes in any jurisdiction referred to in Section
4(e) shall have been issued and no proceeding for that purpose shall
have been initiated or threatened.
(c) The Company and the Guarantors shall not have sustained,
(i) since the date of the most recent financial statements included in
the Offering Memorandum, any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or
26
<PAGE> 28
decree otherwise than as set forth or expressly contemplated in the
Offering Memorandum which loss or interference is material to the
Company and the Guarantors taken as a whole and (ii) since the
respective dates as of which information is given in the Offering
Memorandum, there shall not have been any change in the capital stock
(other than as disclosed in the Offering Memorandum) or in the
long-term or short-term debt of the Company or the Guarantors or any
change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company or the
Guarantors, otherwise than as set forth or expressly contemplated in
the Offering Memorandum, the effect of which, in any such case
described in clauses (i) or (ii) of this Section 8(c), in the Initial
Purchasers' reasonable judgment, makes it impracticable or inadvisable
to proceed with the Offering or the delivery of the Notes being
delivered on the Closing Date on the terms and in the manner
contemplated in the Offering Memorandum.
(d) The Initial Purchasers shall have received a certificate,
dated the Closing Date, executed on behalf of the Company by the Chief
Executive Officer and Chief Financial Officer, in form and substance
satisfactory to the Initial Purchasers, confirming, as of the Closing
Date, the matters set forth in paragraphs (a) and (b) of this Section 8
and that, as of the Closing Date, the obligations of the Company to be
performed hereunder on or prior thereto have been duly performed and
subsequent to the respective dates as of which information is given in
the Preliminary Offering Memorandum and the Offering Memorandum, there
has not been any Material Adverse Effect, or any development involving
a prospective material adverse change, on the Company, except in each
case as described in the Offering Memorandum.
(e) The Initial Purchasers shall have received on the Closing
Date an opinion dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers, of Akerman, Senterfitt & Eidson, counsel for the Company
and the Guarantors, to the effect set forth in EXHIBIT E hereto. In
rendering such opinion such counsel (i) need not express any opinion
with regard to the application of laws of any jurisdiction other than
the Federal law of the United States, the General Corporation Law of
the State of Delaware and the law of the State of Florida and (ii) may
rely as to factual matters upon representations or certificates of
officers of the Company and public officials.
(f) The Initial Purchasers shall have received on the Closing
Date an opinion dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers, of New York counsel to the Company and the Guarantors to
the effect set forth in EXHIBIT F hereto. In rendering such opinion,
such counsel (i) may rely, with the consent of Akerman, Senterfitt &
Eidson, on such counsel's opinion with respect to the application of
the General Corporation Law of the State of Delaware and the law of the
State of Florida and (ii) may rely as to factual matters upon
representations or certificates of officers of the Company and public
officials.
27
<PAGE> 29
(g) The Initial Purchasers shall have received on the Closing
Date an opinion dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers, of local counsel to the Guarantors listed on EXHIBIT H to
the effect set forth in EXHIBIT G hereto. In rendering such opinion,
such counsel (i) may rely, with the consent of Akerman, Senterfitt &
Eidson, on such counsel's opinion with respect to the application of
the General Corporation Law of the State of Delaware and the law of the
State of Florida, (ii) may rely, with the consent of New York counsel
to the Company, on such counsel's opinion with respect to the
application of the law of the State of New York and (iii) may rely as
to factual matters upon representations or certificates of officers of
the Company and public officials.
(h) At the time this Agreement is executed and at the Closing
Date, the Initial Purchasers shall have received a letter from each of
Arthur Andersen LLP and Ernst & Young LLP, independent public
accountants for the Company and the Guarantors, dated as of the date of
this Agreement and as of the Closing Date, customary comfort letters
addressed to the Initial Purchasers and in form and substance
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers with respect to the financial statements and certain
financial information of the Company and its subsidiaries contained in
the Offering Memorandum.
(i) The Initial Purchasers shall have received an opinion,
dated the Closing Date, in form and substance reasonably satisfactory
to the Initial Purchasers, of Paul, Hastings, Janofsky & Walker LLP,
counsel for the Initial Purchasers, with respect to certain matters set
forth in EXHIBIT H hereto.
(j) Paul, Hastings, Janofsky & Walker LLP shall have been
furnished with such documents, in addition to those set forth above, as
they may reasonably require for the purpose of enabling them to review
or pass upon the matters referred to in this Section 8 and in order to
evidence the accuracy, completeness or satisfaction in all material
respects of any of the representations, warranties or conditions herein
contained.
(k) Prior to the Closing Date, the Company shall have
furnished to the Initial Purchasers such further information,
certificates and documents as the Initial Purchasers may reasonably
request.
(l) The Company and the Trustee shall have entered into and
delivered the Indenture and the Initial Purchasers shall have received
a counterpart thereof, conformed as executed. The Indenture shall be in
full force and effect.
(m) The Company shall have entered into the Registration
Rights Agreement and the Initial Purchasers shall have received a
counterpart thereof, conformed as executed. The Registration Rights
Agreement shall be in full force and effect.
28
<PAGE> 30
(n) After the execution and delivery of this Agreement, there
shall not have been (i) any downgrading by Standard & Poor's Ratings
Group ("S&P") or Moody's Investors Service Inc. ("MOODY'S") in the
rating of the Notes; or (ii) any notice given by S&P or Moody's of any
intended or potential downgrading in any such rating or of a possible
change in any such rating that does not indicate the direction of the
possible change.
The obligations of the Company and the Guarantors to issue,
sell and deliver the Notes and the Guarantees, as provided herein, shall be
subject in the Company's discretion, to the condition that all of the
representations and warranties of each of the Initial Purchasers contained in
this Agreement shall be true and correct on the date hereof and on the Closing
Date with the same force and effect as if made on and as of the date hereof and
the Closing Date, respectively.
All opinions, certificates, letters and other documents
required by this Section 8 to be delivered by the Company will be in compliance
with the provisions hereof only if they are reasonably satisfactory in form and
substance to the Initial Purchasers. The Company will furnish the Initial
Purchasers with such conformed copies of such opinions, certificates, letters
and other documents as it shall reasonably request.
If any condition specified above in this Section 8 shall not
have been fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Initial Purchasers by notice to the Company, and such
termination shall be without liability of any party to any other party except as
provided in Section 4(f); PROVIDED, HOWEVER, that notwithstanding any such
termination, the provisions of Sections 6, 7 and 11 through 16 shall remain in
effect. Notice of such cancellation shall be given to the Company in writing by
personal delivery or facsimile transmission or by telephone promptly confirmed
in writing.
9. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations and
warranties, covenants and agreements of the Initial Purchasers and the Company
and the Guarantors contained in this Agreement, including the agreements
contained in Sections 4(f) and 10(d), the indemnity agreements contained in
Section 6 and the contribution agreements contained in Section 7, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Initial Purchaser or any controlling person thereof or by or
on behalf of the Company, any Guarantor, any of their officers and directors or
any controlling person thereof, and shall survive delivery of and payment for
the Notes to and by the Initial Purchasers. The representations contained in
Section 5 and the agreements contained in Sections 4(f), 6, 7 and 10(d) hereof
shall survive the termination of this Agreement, including any termination
pursuant to Section 10 hereof.
10. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective upon execution and
delivery of a counterpart hereof by each of the parties hereto.
29
<PAGE> 31
(b) The Initial Purchasers shall have the right to terminate
this Agreement at any time prior to the Closing Date by notice to the
Company from the Initial Purchasers, without liability (other than with
respect to Sections 6 and 7 hereof) on the part of any Initial
Purchaser to the Company if, on or prior to such date, (i) the Company
shall have failed, refused or been unable to perform in any material
respect any agreement on its part to be performed hereunder; (ii) any
other condition to the obligations of the Initial Purchasers hereunder
as provided in Section 8 is not fulfilled when and as required in any
material respect; (iii) trading in securities on the New York or
American Stock Exchanges or over-the-counter market shall have been
suspended or materially limited, or minimum or maximum prices shall
have been established, or maximum price ranges for prices for
securities shall have been required, on the New York or American Stock
Exchanges or in the over-the-counter market by the Commission, or by
such exchange or other regulatory body or governmental authority having
jurisdiction; (iv) a general banking moratorium shall have been
declared by a federal or state authority or any new restriction
materially and adversely affecting the Notes shall have become
effective; (v) there shall have occurred an outbreak or escalation of
armed hostilities involving the United States on or after the date
hereof, or if there has been a declaration by the United States of a
national emergency or war, the effect of which shall be, in the Initial
Purchasers' judgment, to make it inadvisable or impracticable to
proceed with the Offering or the sale and delivery of the Notes on the
terms and in the manner contemplated in the Offering Memorandum; (vi)
there shall have occurred such a material adverse change since the
respective dates as of which information is given in the Preliminary
Offering Memorandum or the Offering Memorandum in the condition
(financial or other), of the Company and its subsidiaries, taken as a
whole, whether or not arising in the ordinary course of business other
than as set forth in the Offering Memorandum, such as, in the judgment
of Bear, Stearns & Co. Inc., makes it inadvisable or impracticable to
proceed with the Offering or the sale and delivery of the Notes as
contemplated hereby and by the Offering Memorandum; (vii) there shall
have occurred such a material adverse change in general economic,
political or financial conditions or if the effect of international
conditions on the financial markets in the United States shall be such
as, in the judgment of Bear, Stearns & Co. Inc., makes it inadvisable
or impracticable to proceed with the Offering or the sale and delivery
of the Notes as contemplated hereby and by the Offering Memorandum; or
(viii) any domestic or international event or act or occurrence has
materially disrupted, or in the opinion of the Initial Purchasers will
in the immediate future materially disrupt, the market for the
Company's securities or for securities in general. The right of the
Initial Purchasers to terminate this Agreement will not be waived or
otherwise relinquished by their failure to give notice of termination
prior to the time that the event giving rise to the right to terminate
shall have ceased to exist, provided that notice is given prior to the
Closing Date.
(c) Any notice of termination pursuant to this Section 10
shall be by telephone, telex, telephonic facsimile, or telegraph,
confirmed promptly in writing by letter.
30
<PAGE> 32
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to Section 10(b) (except
clauses (i) and (ii) thereof)), or if the sale of the Notes provided
for herein is not consummated because any condition to the obligations
of the Initial Purchasers set forth herein is not satisfied or because
of any refusal, inability or failure on the part of the Company or the
Guarantors to perform any agreement herein or comply with any provision
hereof, the Company will reimburse the Initial Purchasers for all
reasonable out-of-pocket expenses (including the fees and expenses of
the Initial Purchasers' counsel), incurred by the Initial Purchasers in
connection herewith.
11. NOTICES. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the Initial
Purchasers shall be mailed, delivered, or telexed, telegraphed or telecopied and
confirmed in writing to Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New
York 10167, Attention: Corporate Finance Department, telecopy number: (212)
272-3092, with a copy to Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue,
New York, New York 10022, Attention: Leigh P. Ryan, Esq., telecopy number (212)
319-4090; and if sent to the Company, shall be mailed, delivered or telexed,
telegraphed or telecopied and confirmed in writing to NationsRent, Inc. 450 East
Las Olas Boulevard, Ft. Lauderdale, Florida 33301, Attention: James L. Kirk,
Chairman and Chief Executive Officer, telecopy number: (954) 760-6585, with a
copy to Akerman, Senterfitt & Eidson, P.A. Attention: Stephen K. Roddenberry,
Esq., telecopy number: 305-374-5095.
12. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Initial Purchasers and the Company and the Guarantors
and the controlling persons, directors, officers, employees and agents referred
to in Sections 6 and 7 hereof, and their respective successors and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors and assigns" shall not include
a purchaser, in its capacity as such, of Notes from the Initial Purchasers.
In all dealings hereunder, Bear, Stearns & Co. Inc. shall act
on behalf of each of the Initial Purchasers, and the parties hereto shall be
entitled to act and rely upon any statement, request, notice or agreement on
behalf of any of the Initial Purchasers made or given by Bear, Stearns & Co.
Inc. on behalf of the Initial Purchasers.
13. CAPTIONS. The captions included in this Agreement are included
solely for convenience of reference and are not to be considered a part of this
Agreement.
14. GOVERNING LAW; CONSTRUCTION. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without giving effect to any provisions relating to conflicts of laws. TIME IS
OF THE ESSENCE IN THIS AGREEMENT.
31
<PAGE> 33
15. COUNTERPARTS. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of shall be deemed to be
an original, but all such counterparts shall together constitute one and the
same instrument.
16. PARTIAL INVALIDITY. In case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
[Remainder of page intentionally left blank]
32
<PAGE> 34
If the foregoing correctly sets forth the understanding among the
Initial Purchasers, the Company and the Guarantors, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
NATIONSRENT, INC.
By: /s/ Kris E. Hansel
----------------------------------------
Name: Kris E. Hansel
Title: Vice President
GUARANTORS:
A-ACTION RENTAL, INC. (doing business as
A-ACTION RENTAL & SALES, INC.)
A TO Z RENTS IT, INC.
A TO Z RENTS IT, INC. #2
ACME RENTAL, INC.
CENTRAL ALABAMA RENTAL CENTER, INC.
GABRIEL TRAILER MANUFACTURING
COMPANY, INC.
GOLD COAST AERIAL LIFT, INC.
HIGH REACH COMPANY, INC.
NATIONSRENT OF ALABAMA, INC.
NATIONSRENT OF CALIFORNIA, INC.
NATIONSRENT OF FLORIDA, INC.
NATIONSRENT OF GEORGIA, INC.
NATIONSRENT OF INDIANA, INC.
NATIONSRENT OF KENTUCKY, INC.
NATIONSRENT OF LOUISIANA, INC.
NATIONSRENT OF MICHIGAN, INC.
NATIONSRENT OF NEW HAMPSHIRE, INC.
NATIONSRENT OF OHIO, INC.
NATIONSRENT OF TENNESSEE, INC.
NATIONSRENT OF TEXAS, INC.
NATIONSRENT OF WEST VIRGINIA, INC.
NRI/LEC MERGER CORP., INC.
RAYMOND EQUIPMENT CO. (doing
business as JOBS RENTAL)
<PAGE> 35
SAM'S EQUIPMENT RENTAL, INC. (a
subsidiary of Gabriel Trailer Manufacturing
Company, Inc.)
SOUTHEAST RENTAL & LEASING, INC.
TENNESSEE TOOL AND SUPPLY, INC.
THE BODE-FINN COMPANY
THE J. KELLY CO., INC.
TITAN RENTALS, INC.
By its authorized officer:
/s/ Kris E. Hansel
-------------------------------------------
Name: Kris E. Hansel
Title: Vice President
<PAGE> 36
Accepted and agreed to as
of the date first above
written:
BEAR, STEARNS & CO. INC.
By: /s/ James C. Diao
----------------------------------------
Name: James C. Diao
Title: Senior Managing Director
NATIONSBANC MONTGOMERY
SECURITIES LLC
By: /s/ Mark T. Wilson
----------------------------------------
Name: Mark T. Wilson
Title: Managing Director
BT ALEX. BROWN INCORPORATED
By: /s/ David M. Gray
----------------------------------------
Name: David M. Gray
Title: Managing Director
BANCBOSTON ROBERTSON STEPHENS INC.
By: /s/ Neal Reiner
----------------------------------------
Name: Neal Reiner
Title: Managing Director
<PAGE> 37
EXHIBIT A
Form of Registration Rights Agreement
(Filed separately as Exhibit 4.5
to this Registration Statement)
<PAGE> 38
EXHIBIT B
Principal Amount of Senior Subordinated
Initial Purchaser Notes to be Purchased
----------------- ---------------------------------------
Bear, Stearns & Co. Inc. $ 87,500,000
NationsBanc Montgomery Securities LLC $ 35,000,000
BT Alex. Brown Incorporated $ 35,000,000
BancBoston Robertson Stephens Inc. $ 17,500,000
<PAGE> 39
EXHIBIT C
Commitments, Plans or Arrangements to Issue, Etc.
1. Reference is made to the description of warrants and options under the
heading "Description of Capital Stock - Warrants and Options" in the
Company's Prospectus dated August 7, 1998 relating to the Company's
initial public offering of Common Stock.
2. In connection with the acquisition of Logan Equipment Corp., Action
Equipment Company, Inc., Action Supply Co., Inc., River City Rentals
and the other businesses that the Company currently has under letters
of intent, the Company intends to issue convertible subordinated
promissory notes as part of the consideration to the sellers and
shareholders of such businesses in accordance with the terms of the
definitive acquisition agreements and letters of intent with respect
thereto.
3. In connection with the acquisition of Logan Equipment Corp., the
Company has agreed to assume outstanding options granted to certain
employees of Logan, which options will be converted into options to
acquire shares of NationsRent Common Stock in accordance with the terms
of the definitive acquisition agreement with respect thereto.
4. The Company has granted and intends to grant in the future options to
acquire shares of its Common Stock to its employees and other eligible
persons in the ordinary course of business pursuant to its 1998 Stock
Option Plan which reserves an aggregate of 5,000,000 shares of Common
Stock for issuance pursuant to options granted thereunder.
<PAGE> 40
EXHIBIT D
SUBSIDIARIES
A-Action Rental, Inc., a Pennsylvania corporation
Acme Rental, Inc., a Michigan corporation
A to Z Rents It, Inc., a Texas corporation
A to Z Rents It, Inc. #2, a Texas corporation
Central Alabama Rental Center, Inc., an Alabama corporation
Gabriel Trailer Manufacturing Company, Inc., an Ohio corporation
Gold Coast Aerial Lift, Inc., a Florida corporation
High Reach Company, Inc., a Florida corporation
NationsRent of Alabama, Inc., a Delaware corporation
NationsRent of California, Inc., a Delaware corporation
NationsRent of Florida, Inc., a Delaware corporation
NationsRent of Georgia, Inc., a Delaware corporation
NationsRent of Indiana, Inc., a Delaware corporation
NationsRent of Kentucky, Inc., a Delaware corporation
NationsRent of Louisiana, Inc., a Delaware corporation
NationsRent of Michigan, Inc., a Delaware corporation
NationsRent of New Hampshire, Inc., a Delaware corporation
NationsRent of Ohio, Inc., a Delaware corporation
NationsRent of Tennessee, Inc., a Delaware corporation
NationsRent of Texas, Inc., a Delaware corporation
NationsRent of West Virginia, Inc., a Delaware corporation
NRI/LEC Merger Corp., Inc., a Delaware corporation
Raymond Equipment Company, a Kentucky corporation
Sam's Equipment Rental, Inc., an Ohio corporation
Southeast Rental & Leasing, Inc., a Florida corporation
Tennessee Tool & Supply, Inc., a Tennessee corporation
The Bode-Finn Company, an Ohio corporation
The J. Kelly Co., Inc., a Michigan corporation
Titan Rentals, Inc., a West Virginia corporation
<PAGE> 41
EXHIBIT E
Form of Opinion of Akerman, Senterfitt
& Eidson
1. To such counsel's knowledge, neither the Commission nor the
"Blue Sky" or securities authority of any jurisdiction has issued an order
preventing or suspending the use of the Preliminary Offering Memorandum or the
Offering Memorandum, or any amendment or supplement thereto, nor has any of such
authorities instituted or threatened to institute any proceedings with respect
to an order or instituted or threatened to institute any proceedings with
respect to an order or instituted or threatened to institute any order or in any
way asserted that any of the transactions contemplated by the Purchase Agreement
is subject to the registration requirements of the Act.
2. The Company and each of the Guarantors which is organized
in the State of Delaware or Florida (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation, (B) is duly qualified and in good standing as a foreign
corporation in each jurisdiction where the character or location of its
properties (owned, leased or licensed) or the nature or conduct of its business
makes such qualification necessary, except for those failures to be so qualified
or in good standing which would not, individually or in the aggregate, have a
Material Adverse Effect, and (C) has all requisite power and authority to own,
lease and operate its properties and to conduct its business as now being
conducted and as described in the Offering Memorandum.
3. All of the outstanding shares of capital stock of the
Company, as reflected in the Company's corporate records, are duly authorized,
validly issued, fully paid and non-assessable, were issued in compliance with
all applicable United States federal and state securities laws and, to the
knowledge of such counsel, were not issued in violation of or subject to any
preemptive rights, or, except as disclosed in the Offering Memorandum, co-sale
rights, registration rights, repurchase rights, rights of first refusal or any
other similar right. The Company has authorized capital stock as set forth in
the Offering Memorandum under the caption "Capitalization."
4. All of the outstanding shares of capital stock of each of
the Guarantors which is incorporated in the State of Delaware or Florida are
duly authorized and validly issued, are fully paid and non-assessable and, to
the knowledge of such counsel, were not issued and are not now in violation of
or subject to any preemptive rights, co-sale rights, registration rights,
repurchase rights, rights of first refusal or any other similar right, and are
owned directly by the Company, free and clear of any lien, pledge, encumbrance,
claim, security interest, restriction on transfer, stockholders' agreement,
voting trust or other defect of title whatsoever other than liens granted
pursuant to the Credit Agreement (as defined in the Indenture).
E-1
<PAGE> 42
5. Except as described in the Offering Memorandum, to such
counsel's knowledge, there is no commitment, plan or arrangement to issue, and
no outstanding option, warrant, security or other right or instrument which
requires, permits or provides for the issuance, subscription or purchase of, any
share of capital stock of the Company or any security or other instrument which
by its terms is convertible into, exercisable for, or exchangeable for capital
stock of the Company. Except as described in the Offering Memorandum or as may
be required by applicable securities laws, to such counsel's knowledge there are
no restrictions on the voting or transfer of any shares of capital stock of the
Company.
6. To such counsel's knowledge, there is no commitment, plan
or arrangement to issue, and no outstanding option, warrant, security or other
right or instrument which requires, permits or provides for the issuance,
subscription or purchase of, any share of capital stock of any of the Guarantors
or any security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for capital stock of any of the Guarantors.
Except as may be required by applicable securities laws, to such counsel's
knowledge there are no restrictions on the voting or transfer of any shares of
capital stock of any of the Guarantors which is incorporated in the State of
Delaware or Florida.
7. When the Series A Notes are issued and delivered pursuant
to the Purchase Agreement, no Series A Note will be of the same class (within
the meaning of Rule 144A under the Act) as securities of the Company that are
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that are quoted in a United States automated inter-dealer
quotation system.
8. Each of the Company and the Guarantors which is organized
in the State of Delaware or Florida has the requisite corporate power and
authority to enter into the Purchase Agreement and each of the other Operative
Documents to which it is a party, perform each of its obligations thereunder and
issue, sell, deliver and perform its obligations under the Series A Notes to be
sold by it under the Purchase Agreement.
9. The Purchase Agreement and the transactions contemplated
therein have been duly and validly authorized by the Company and each of the
Guarantors which is organized in the State of Delaware or Florida and the
Purchase Agreement has been duly and validly executed and delivered by the
Company and each of such Guarantors.
10. The Indenture and the transactions contemplated therein
have been duly and validly authorized, executed and delivered by the Company and
the Guarantors.
11. The Registration Rights Agreement and the transactions
contemplated therein have been duly and validly authorized, executed and
delivered by the Company and the Guarantors.
E-2
<PAGE> 43
12. The Offering Memorandum contains a summary of the terms of
the Indenture, the Series A Notes, the Exchange Notes and the Registration
Rights Agreement which is accurate in all material respects.
13. The Series A Notes and the Guarantees have been duly and
validly authorized by the Company and the Guarantors for issuance and sale to
the Initial Purchasers pursuant to the Purchase Agreement.
14. The Exchange Notes and the Guarantees of the Exchange
Notes have been duly and validly authorized for issuance by the Company and each
of the Guarantors.
15. To such counsel's knowledge, neither the Company nor any
of the Guarantors is in violation or breach of, or in default (nor has any event
occurred which with notice, or lapse of time, or both, would constitute a
default) under any contract, agreement, indenture, loan or other agreement,
instrument, mortgage, note, permit, lease, license, arrangement or understanding
to which the Company or any of the Guarantors is a party or by which the
Company, any of the Guarantors or any of their respective properties may be
bound where such default either individually, or together with all such other
defaults, could reasonably be expected to have a Material Adverse Effect on the
ability of the Company or any Guarantor to perform its obligations under the
Purchase Agreement. To such counsel's knowledge, neither the Company nor any of
the Guarantors which is incorporated in the State of Delaware or Florida is in
violation or breach of, or in default with respect to, any term of its
certificate of incorporation or bylaws.
16. The execution, delivery and performance by the Company and
each of the Guarantors of the Purchase Agreement and the other Operative
Documents and the consummation of the transactions contemplated thereby
(including the issuance, sale and delivery of the Series A Notes and the
Guarantees by the Company and the Guarantors) do not and will not (i) conflict
with or result in a breach of any of the terms and provisions of, or constitute
a default ( or an event which with notice or lapse of time, or both, would
constitute a default) under, give rise to any right to accelerate the maturity
or require the prepayment of any material obligation known to such counsel of
the Company or any of the Guarantors or require any consent, or result in the
creation or imposition of any material lien, charge or encumbrance upon any
property or assets of the Company or any of the Guarantors, pursuant to the
terms of any agreement, instrument, franchise, license or permit known to such
counsel to which the Company or any of the Guarantors is a party or by which any
of such corporations or their respective properties or assets may be bound, (ii)
violate or conflict with any provision of the certificate of incorporation or
by-laws of the Company or any of the Guarantors or (iii) to the knowledge of
such counsel, violate or conflict with any judgment, decree, order, statute,
rule or regulation of any court of any public, governmental or regulatory agency
or body having jurisdiction over the Company or any of the Guarantors or any of
their respective properties or assets (except for such violations or conflicts
that would not have a Material Adverse Effect).
E-3
<PAGE> 44
Assuming compliance with applicable state securities and Blue
Sky laws, as to which such counsel need express no opinion, and except for the
filing of a registration statement under the Act and qualification of the
Indenture under the Trust Indenture Act, or in connection with the Registration
Rights Agreement, no consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body of the United States or the State of
Florida having jurisdiction over the Company or any of the Guarantors or any of
their respective properties or assets or under the Delaware General Corporation
Law is required for the valid execution, delivery and performance by the Company
and each of the Guarantors of this Agreement or any of the other Operative
Documents to which it is a party or the consummation of the transactions
contemplated thereby, including the issuance, sale and delivery of the Series A
Notes to be issued, sold and delivered by the Company and the Guarantors under
the Purchase Agreement, except (a) such as have been obtained or made (or, in
the case of the Registration Rights Agreement, will be obtained or made) under
the Act or the Trust Indenture Act of 1939, as amended or (b) such as may be
required under state securities or Blue Sky laws and regulations or such as may
be required by the National Association of Securities Dealers, Inc. in
connection with the purchase and distribution of the Series A Notes by the
Initial Purchasers ( as to which such counsel need not express an opinion).
17. To such counsel's knowledge, there is no action, suit,
investigation or proceeding, governmental or otherwise, before any court or
before or by any public, regulatory or governmental agency or body pending or
threatened against, or involving the properties or business of, the Company or
any of the Guarantors which, (i) is of a character required to be disclosed in
the Preliminary Offering Memorandum and the Offering Memorandum which has not
been properly disclosed therein.
18. None of the Company nor any of the Guarantors is, nor upon
consummation of the transactions contemplated in the Purchase Agreement will be,
subject to registration as an "investment company" or any entity "controlled by
an investment company" within the meaning of the Investment Company Act of 1940
and the rules and regulations promulgated thereunder.
19. Except as described in the Offering Memorandum to such
counsel's knowledge, (i) neither the Company nor any Guarantor is a party to or
bound by any stockholders agreement or voting trusts with respect to any
securities of the Company or any Guarantor and (ii) there are no contracts,
written agreements or written understandings between the Company or any of the
Guarantors and any person or entity granting such person or entity the right to
require the Company or any Guarantor to file a registration statement under the
Act with respect to any securities of the Company or any Guarantor or to be
owned by such person or entity or to require the Company or any Guarantor to
include such securities in the securities to be registered in the Exchange
Offer.
20. Assuming (i) the accuracy of, and compliance with, the
representations, warranties, covenants and agreements of the Company and the
Initial Purchasers contained in the
E-4
<PAGE> 45
Purchase Agreement, (ii) the accuracy of, and compliance with, the
representations, warranties, covenants and agreements of each of the persons to
whom the Initial Purchasers initially resell or otherwise transfer the Notes, as
specified in the Offering Memorandum, and (iii) the compliance by the Initial
Purchasers with the offering and transfer procedures and restrictions described
in the Offering Memorandum, it is not necessary in connection with the offer,
sale and delivery of the Notes to the Initial Purchasers or in connection with
the initial resale of the Notes by the Initial Purchasers in the manner
contemplated by the Purchase Agreement and the Offering Memorandum to register
the sale of the Notes to the Initial Purchasers or the Exempt Resales under the
Act (it being understood that such counsel need not express any opinion as to
any subsequent reoffers, resales or other transfers of any Notes), or to qualify
the Indenture under the Trust Indenture Act of 1939, as amended.
21. None of the execution, delivery and performance of the
Purchase Agreement, the issuance and sale of the Notes, the application of the
proceeds from the issuance and sale of the Notes or the consummation of the
transactions contemplated thereby as set forth in the Offering Memorandum, will
violate Regulations G, T, U or X promulgated by the Board of Governors of the
Federal Reserve System.
22. The statements in the Preliminary Offering Memorandum and
the Offering Memorandum under the headings "Offering Memorandum Summary -- The
Offering," and "Description of Notes," insofar as such statements constitute
summaries of the legal matters and documents referred to therein, fairly
summarize such legal matters and documents in all material respects.
23. The statements in the Preliminary Offering Memorandum and
the Offering Memorandum under the heading "Certain Federal Income Tax
Consequences", insofar as it constitutes a summary of matters of United States
federal tax law and regulations or legal conclusions with respect thereto,
constitute fair and accurate summaries of the matters described therein in all
material respects.
In addition, such counsel shall state that it has participated
in conferences with officers and other representatives of the Company,
representatives of the independent certified public accountants of the Company
and representatives of the Initial Purchasers and its counsel at which the
contents of the Offering Memorandum and related matters were discussed and,
although it has not undertaken to investigate or independently verify, and does
not assume any responsibility for, the accuracy, completeness or fairness of the
statements contained in the Preliminary Offering Memorandum or the Offering
Memorandum or any amendment thereof or supplement thereto (except as indicated
above), on the basis of the foregoing, and, relying as to factual matters on
certificates of officers and other representatives of the Company, no facts have
come to its attention which lead it to believe that the Offering Memorandum, as
of its date or the Closing Date, contained an untrue statement of a material
fact or omitted to state any fact required to be stated therein in order to or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except as to financial
statements and schedules and other financial data included therein, as to which
counsel need not express any opinion).
E-5
<PAGE> 46
EXHIBIT F
Form of Opinion of New York Counsel of the Company
1. Assuming that the Indenture has been duly authorized,
executed and delivered by the Company, the Guarantors and the Trustee, the
Indenture is a legal, valid and binding agreement of the Company and the
Guarantors, enforceable against each of them in accordance with its terms,
except that (a) the enforceability thereof may be (I) limited by rights of
acceleration and (ii) subject to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally, (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought and (c) the stay, extension and usury
waivers therein may be deemed unenforceable.
2. Assuming the Notes have been duly and validly authorized by
the Company and the Guarantors for sale to the Initial Purchases pursuant to the
Purchase Agreement, when executed and authenticated in accordance with the terms
of the Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the Purchase Agreement, the Notes will be validly issued and
will constitute legal, valid and binding obligations of the Company and the
Guarantors, entitled to the benefits of the Indenture and enforceable against
each of them in accordance with their terms, except that (a) the enforceability
thereof may be (I) limited by rights of acceleration and (ii) subject to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally, (b) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceedings therefor may be brought and (c) the
stay, extension and usury waivers therein may be deemed unenforceable.
3. Assuming that the Registration Rights Agreement and the
transactions contemplated therein have been duly and validly authorized,
executed and delivered by the Company and the Guarantors, the Registration
Rights Agreement is a legal, valid and binding agreement of the Company and the
Guarantors, enforceable against each of them in accordance with its terms,
except (a) that the enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditors' rights generally, (b)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceedings therefor may be brought, (c) that the
enforceability of provisions imposing liquidated damages, penalties or an
increase in interest rate upon the occurrence of a default may be limited in
certain circumstances and (d) to the extent that rights of indemnification and
contribution thereunder may be limited by federal or state securities laws or
public policy relating thereto.
F-1
<PAGE> 47
4. Assuming that the Purchase Agreement and the transactions
contemplated thereby have been duly authorized, executed and delivered by the
Company and the Guarantors, the Purchase Agreement is a legal, valid and binding
obligation of the Company and the Guarantors, enforceable against each of them
in accordance with its terms, except (a) that enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally, (b) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought and (c) to the extent that rights of indemnification and
contribution thereunder may be limited by federal or state securities laws or
public policy relating thereto.
F-2
<PAGE> 48
EXHIBIT G
Form of Opinion of Local Counsel to each of the Guarantors
Listed Below
1. The Guarantor (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation, (B) is duly qualified and in good standing as a foreign
corporation in each jurisdiction where the character or location of its
properties (owned, leased or licensed) or the nature or conduct of its business
makes such qualification necessary, except for those failures to be so qualified
or in good standing which would not, individually or in the aggregate, have a
Material Adverse Effect, and (C) has all requisite power and authority to own,
lease and operate its properties and to conduct its business as now being
conducted and as described in the Offering Memorandum.
2. All of the outstanding shares of capital stock of the
Guarantor are duly authorized and validly issued, are fully paid and
non-assessable and to the knowledge of such counsel were not issued and are not
now in violation of or subject to any preemptive rights, co-sale rights,
registration rights, repurchase rights, rights of first refusal or any other
similar right, and are owned directly by the Company, free and clear of any
lien, pledge, encumbrance, claim, security interest, restriction on transfer,
stockholders' agreement, voting trust or other defect of title whatsoever.
3. Except as may be required under applicable securities laws,
there are no restrictions on the voting or transfer of any shares of capital
stock of the Guarantor.
4. The Guarantor has the requisite corporate power and
authority to enter into the Purchase Agreement and each of the other Operative
Documents to which it is a party, perform each of its obligations thereunder and
issue, sell, deliver and perform its obligations under the Guarantees to be sold
by it under the Purchase Agreement.
5. The Purchase Agreement and the transactions contemplated
therein have been duly and validly authorized by the Guarantor and the Purchase
Agreement has been duly and validly executed and delivered by the Guarantor and
(assuming the due execution and delivery by the Initial Purchasers) is a legal,
valid and binding obligation of the Guarantor.
6. The Indenture and the transactions contemplated therein
have been duly and validly authorized, executed and delivered by the Guarantor,
and, assuming the due execution and delivery thereof by the Trustee, is a legal,
valid and binding obligation of the Guarantor.
7. The Registration Rights Agreement and the transactions
contemplated therein have been duly and validly authorized, executed and
delivered by the Guarantor and, assuming the
G-1
<PAGE> 49
due execution and delivery thereof by the Initial Purchasers, is a legal valid
and binding obligation of the Guarantor.
8. The Guarantees of the Series A Notes have been duly and
validly authorized by the Guarantor for issuance and sale to the Initial
Purchasers pursuant to the Purchase Agreement and, when executed, issued and
authenticated in accordance with the terms of the Indenture and delivered
against payment therefor in accordance with the terms hereof and thereof, will
be the legal, valid and binding obligations of the Guarantor.
9. The Guarantees of the Exchange Notes have been duly and
validly authorized for issuance by the Guarantor and, when duly and validly
executed, issued and authenticated in accordance with the terms of the Exchange
Offer and the Indenture, will be the legal, valid and binding obligations of the
Guarantors.
10. To such counsel's knowledge, the Guarantor is not in
violation or breach of, or in default with respect to, any term of its
certificate of incorporation or bylaws.
11. The execution, delivery and performance by the Guarantor
of the Purchase Agreement and the other Operative Documents and the consummation
of the transactions contemplated hereby and thereby (including the issuance,
sale and delivery of the Guarantees by the Guarantor) do not and will not (i)
violate or conflict with any provision of the certificate of incorporation or
by-laws of the Guarantor or (ii) to the knowledge of such counsel, violate or
conflict with any judgment, decree, order, statute, rule or regulation of any
court of any public, governmental or regulatory agency or body having
jurisdiction over the Guarantor or any of its properties or assets (except for
such violations or conflicts that would not have a Material Adverse Effect).
Assuming compliance with applicable state securities and Blue Sky laws, as to
which such counsel need express no opinion, and except for the filing of a
registration statement under the Act and qualification of the Indenture under
the Trust Indenture Act, or in connection with the Registration Rights
Agreement, no consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body of the State of having
jurisdiction over the Guarantor or any of its properties or assets is required
for the valid execution, delivery and performance by the Guarantor of the
Purchase Agreement or any of the other Operative Documents to which it is a
party or the consummation of the transactions contemplated hereby and thereby,
including the issuance, sale and delivery of the Guarantees to be issued, sold
and delivered by the Guarantor under the Purchase Agreement, except (a) such as
have been obtained or made (or, in the case of the Registration Rights
Agreement, will be obtained or made) under the Act or the Trust Indenture Act of
1939, as amended or (b) such as may be required under state securities or Blue
Sky laws and regulations or such as may be required by the National Association
of Securities Dealers, Inc. in connection with the purchase and distribution of
the Series A Notes by the Initial Purchasers (as to which such counsel need not
express an opinion).
G-2
<PAGE> 50
EXHIBIT H
Form of Opinion of Paul, Hastings, Janofsky & Walker LLP
1. Assuming that the Indenture has been duly authorized,
executed and delivered by the Company, the Guarantors and the Trustee, the
Indenture is a legal, valid and binding agreement of the Company and the
Guarantors, enforceable against each of them in accordance with its terms,
except that (a) the enforceability thereof may be (i) limited by rights of
acceleration and (ii) subject to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally, (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought and (c) the stay, extension and usury
waivers therein may be deemed unenforceable.
2. Assuming that the Notes have been duly authorized by the
Company and the Guarantors, when executed and authenticated in accordance with
the terms of the Indenture and delivered to and paid for by you in accordance
with the Purchase Agreement, the Notes will be validly issued and will
constitute legal, valid and binding obligations of the Company and the
Guarantors, entitled to the benefits of the Indenture and enforceable against
each of them in accordance with their terms, except that (a) the enforceability
thereof may be (i) limited by rights of acceleration and (ii) subject to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally, (b) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceedings therefor may be brought and (c) the
stay, extension and usury waivers therein may be deemed unenforceable.
3. Assuming that the Registration Rights Agreement has been
duly authorized, executed and delivered by the Company and the Guarantors, the
Registration Rights Agreement is a legal, valid and binding agreement of the
Company and the Guarantors, enforceable against each of them in accordance with
its terms, except (a) that the enforceability thereof may be subject to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally, (b) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought,
(c) that the enforceability of provisions imposing liquidated damages, penalties
or an increase in interest rate upon the occurrence of a default may be limited
in certain circumstances and (d) to the extent that rights of indemnification
and contribution thereunder may be limited by federal or state securities laws
or public policy relating thereto.
4. The Notes and the Indenture conform in all material
respects to the descriptions thereof in the Offering Memorandum under the
caption "Description of Notes."
H-1
<PAGE> 51
5. The Purchase Agreement has been duly authorized, executed
and delivered by the Company and the Guarantors and constitutes a legal, valid
and binding obligation of the Company and the Guarantors, enforceable against
each of them in accordance with its terms, except (a) that enforceability
thereof may be subject to bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect relating
to creditors' rights generally, (b) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought and (c) to the extent that rights of indemnification and
contribution thereunder may be limited by federal or state securities laws or
public policy relating thereto.
We have participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants of the Company, representatives of the Company's counsel, and your
representatives at which conferences the contents of the Offering Memorandum and
related matters were discussed and, although we have not independently verified
and are not passing upon and assume no responsibility for the accuracy,
completeness or fairness of the statements contained in the Offering Memorandum
(except to the extent provided in paragraph 4 above), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of
officers and other representatives of the Company), no facts have come to our
attention which lead us to believe that the Offering Memorandum, on the date
thereof or on the date hereof contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to be stated
therein or necessary to make the statements contained therein, in the light of
the circumstance under which they were made, not misleading; it being understood
that we express no view with respect to the financial statements, notes and
schedules thereto, and the other information of a financial, statistical and
accounting nature included or incorporated by reference therein or which should
have been included or incorporated by reference therein.
H-2
<PAGE> 1
EXHIBIT 4.1
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE
FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS
NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO
TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE> 2
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT WITHIN ONE YEAR AFTER THE
ORIGINAL ISSUANCE OF THE SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) THAT, PRIOR
TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN ONE YEAR AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
<PAGE> 3
CUSIP No.: 638588AA1
NATIONSRENT, INC.
10 3/8% SENIOR SUBORDINATED NOTE DUE 2008
No. 1 $175,000,000
NATIONSRENT, Inc., a Delaware corporation (the "Company," which term includes
any successor entity), for value received promises to pay to Cede & Co., or
registered assigns, the principal sum of One Hundred and Seventy Five Million
Dollars, on December 15, 2008.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Note contained herein, which
will for all purposes have the same effect as if set forth at this place.
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by
facsimile by its duly authorized officers.
NATIONSRENT, INC.
By: /s/ Thomas C. Richardson
------------------------------
Name: Thomas C. Richardson
Title: Vice President
By: /s/ Don R. O'Neal
------------------------------
Name: Don R. O'Neal
Title: President and
Chief Operating Officer
Dated: December 11, 1998
Certificate of Authentication
This is one of the 10 3/8% Senior
Subordinated Notes due 2008
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK, as
Trustee
By: /s/ Remo J. Reale
------------------------------
Authorized Signatory
Assistant Vice President
<PAGE> 5
(REVERSE OF SECURITY)
10 3/8% Senior Subordinated Note due 2008
1. INTEREST. NATIONSRENT, INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes (as defined in the Indenture
described below) will accrue from the most recent date on which interest has
been paid or, if no interest has been paid, from December 11, 1998. The Company
will pay interest and Additional Interest, if any, semi-annually in arrears on
each Interest Payment Date, commencing June 15, 1998. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Notes and on overdue installments of interest and Additional Interest, if
any, (without regard to any applicable grace periods) to the extent lawful.
2. METHOD OF PAYMENT. The Company shall pay interest and
Additional Interest, if any, on the Notes (except defaulted interest and
defaulted Additional Interest) to the Persons who are the registered Holders at
the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are canceled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender Notes to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest and Additional Interest, if any, in money of the United States that
at the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay principal and interest and
Additional Interest, if any, by its check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a Holder
at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York
(the "Trustee") will act as Paying Agent and Registrar. The Company may change
any Paying Agent, Registrar or co-Registrar without notice to the Holders.
4. INDENTURE. The Company issued the Notes under an Indenture,
dated as of December 11, 1998 (as amended from time to time, the "Indenture"),
by and among the Company, the Guarantors (as defined therein) and the Trustee
(as defined therein). Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. This Note is one of a duly authorized
issue of Initial Notes of the Company designated as its 10 3/8% Senior
Subordinated Notes due 2008 (the "Initial Notes"). The
<PAGE> 6
Notes include the Initial Notes, the Private Exchange Notes and the Unrestricted
Notes issued in exchange for the Initial Notes pursuant to the Registration
Rights Agreement or, with respect to Initial Notes issued under the Indenture
subsequent to the Issue Date, a registration rights agreement substantially
identical to the Registration Rights Agreement. The Initial Notes and the
Unrestricted Notes are treated as a single class of securities under the
Indenture. The terms of the Notes include those stated in this Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of
the Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and said Act for a statement of them. The Notes are general unsecured
obligations of the Company limited in aggregate principal amount to
$225,000,000. Under Article Eleven of the Indenture the payment on each Note is
guaranteed on a senior subordinated basis by the Guarantors. Each Holder, by
accepting a Note, agrees to be bound by all of the terms and provisions of the
Indenture.
5. SUBORDINATION. The Notes are subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Senior Debt of the
Company (other than Obligations under the Credit Agreement, which must be paid
in full in cash), whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed. The Guarantees in respect of the Notes
are subordinated in right of payment, in the manner and to the extent set forth
in the Indenture, to the prior payment in full in cash or Cash Equivalents of
all Guarantor Senior Debt of each Guarantor (other than Obligations under the
Credit Agreement, which must be paid in full in cash), whether outstanding on
the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by its acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on its behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee its
attorney-in-fact for such purposes.
6. REDEMPTION PROVISIONS. Except as provided below, the Notes
may not be redeemed prior to December 15, 2003.
(a) OPTIONAL REDEMPTION. On or after such date, the Notes may
be redeemed at the option of the Company, at any time as a whole, or from time
to time in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount), plus
accrued and unpaid interest (if any) and Additional Interest (if any) to the
date of redemption (subject to the rights of holders of record on the relevant
record date to receive interest due on the relevant
<PAGE> 7
interest payment date), if redeemed during the 12-month period commencing
December 15:
REDEMPTION
PRICE
-----------
2003............................................... 105.188%
2004............................................... 103.458%
2005............................................... 101.729%
2006 and thereafter................................ 100.000%
(b) Notwithstanding the foregoing, at any time on or prior to
December 15, 2001, the Company may, at its option, redeem, in part and from time
to time, with the net cash proceeds of one or more Public Equity Offerings or
Private Equity Offerings, up to 35% of the sum of (i) the initial aggregate
principal amount of the Notes originally issued on the date hereof and (ii) the
respective initial aggregate principal amount of the Notes issued under the
Indenture after the Issue Date, at a redemption price equal to 110.375% of the
principal amount thereof plus accrued and unpaid interest and Additional
Interest, if any, thereon to the redemption date; PROVIDED that at least 65% of
the sum of (i) the initial aggregate principal amount of the Notes issued in the
Offering and (ii) the respective initial aggregate principal amount of the Notes
issued under the Indenture after the Issue Date, remains outstanding immediately
after the occurrence of any such redemption (excluding Notes held by the Company
and its Subsidiaries) and that any such redemption occurs within 90 days
following the closing of any such Public Equity Offering or Private Equity
Offering, as the case may be.
7. NOTICE OF REDEMPTION. Notice of redemption shall be mailed
by first-class mail at least 30 days but not more than 60 days before the
Redemption Date to each Holder of Notes to be redeemed at its registered
address. Notes in denominations larger than $1,000 may be redeemed in part. If
any Note is to be redeemed in part only, the notice of redemption that relates
to such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the Redemption Date, interest and Additional
Interest, if any, will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the paying agent funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
<PAGE> 8
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued interest and
Additional Interest, if any, the Notes called for redemption will cease to bear
interest and Additional Interest from and after such Redemption Date and the
only right of the Holders of such Notes will be to receive payment of the
Redemption Price plus accrued interest and Additional Interest, if any.
8. OFFERS TO PURCHASE. Section 4.15 of the Indenture provides
that, upon a Change of Control if the Company does not redeem the Notes, each
holder will have the right, subject to certain conditions set forth in the
Indenture, to require the Company to repurchase such holder's Notes at a price
equal to 101% of the principal amount thereof plus accrued interest and
Additional Interest, if any, to the date of repurchase. Section 4.16 of the
Indenture provides that, after certain Asset Sales, and subject to further
limitations contained therein, the Company will make an offer to purchase
certain amounts of the Notes in accordance with the procedures set forth in the
Indenture.
9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal or
interest or Additional Interest remains unclaimed for two years, the Trustee and
the Paying Agent will pay the money back to the Company. After that, all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of, premium, if any, and interest
and Additional Interest on the Notes to redemption or maturity and complies with
the other provisions of the Indenture relating thereto, the Company will be
discharged from certain provisions of the
<PAGE> 9
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest and Additional Interest on the
Notes).
13. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain
exceptions, the Indenture, the Notes or the Guarantee, if any, may be amended or
supplemented with the written consent of the Holders of at least a majority in
aggregate principal amount of the Notes then outstanding, and any existing
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of a majority in aggregate principal
amount of the Notes then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the Notes
to, among other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Indenture or make any other change that does not
adversely affect in any material respect the rights of any Holder of a Note.
14. RESTRICTIVE COVENANTS. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness or Liens, make payments in
respect of its Capital Stock or certain Indebtedness, enter into transactions
with Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, incur additional Senior Subordinated Debt, merge or consolidate
with any other Person, sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets or adopt a plan of liquidation
and sell Capital Stock of a Restricted Subsidiary. Such limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
15. SUCCESSORS. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. DEFAULTS AND REMEDIES. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default
<PAGE> 10
(except a Default in payment of principal or interest or Additional Interest) if
it determines that withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS. No stockholder, director,
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company under the Notes or the Indenture.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
19. AUTHENTICATION. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
20. GOVERNING LAW. The laws of the State of New York shall
govern this Note and the Indenture, without regard to principles of conflict of
laws.
21. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST
(= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
23. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement, the Company
will be obligated to consummate an exchange offer pursuant to which the Holder
of this Note shall have the right to exchange this Note for the Company's
10 3/8% Senior Subordinated Notes due 2008 which have been registered under the
Securities Act, in like principal amount and having terms identical in all
material respects as this Note (other than as relates to registration rights and
transfer restrictions). The Holders shall be entitled to
<PAGE> 11
receive certain additional interest payments in the event such exchange offer is
not consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Right Agreement.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note in larger type. Requests may be made to: NationsRent, Inc., 450 East Las
Olas Boulevard, Fort Lauderdale, Florida 33133, Attn: Gene J. Ostrow.
<PAGE> 1
EXHIBIT 4.3
SENIOR SUBORDINATED GUARANTEE
Each of the undersigned (each a "Guarantor") has jointly and
severally unconditionally guaranteed on a senior subordinated basis (such
guarantee by each guarantor being referred to herein as the "Guarantee") (i) the
due and punctual payment of the principal of and interest and Additional
Interest on the Notes, whether at maturity, by acceleration or otherwise, the
due and punctual payment of interest on the overdue principal and interest and
Additional Interest, if any, on the Notes, to the extent lawful, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee all in accordance with the terms set forth in Article Eleven of the
Indenture and (ii) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of each Guarantor to the Holders and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth and
are expressly subordinated and subject in right of payment to the prior payment
in full in cash or Cash Equivalents of all Guarantor Senior Debt of such
Guarantor (other than Obligations under the Credit Agreement, which must be paid
in full in cash), to the extent and in the manner provided, in Article Eleven of
the Indenture, and reference is hereby made to such Indenture for the precise
terms of the Guarantee therein made.
No past, present or future stockholder, officer, director,
employee or incorporator, as such, of any of the Guarantors shall have any
liability under the Guarantee by reason of such person's status as stockholder,
officer, director, employee or incorporator. Each holder of a Note by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Guarantees.
<PAGE> 2
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Notes upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatures.
December 11, 1998
A-ACTION RENTAL, INC. (doing business as
A-ACTION RENTAL & SALES, INC.)
A TO Z RENTS IT, INC.
A TO Z RENTS IT, INC. #2
ACME RENTAL, INC.
CENTRAL ALABAMA RENTAL CENTER, INC.
GABRIEL TRAILER MANUFACTURING
COMPANY, INC.
GOLD COAST AERIAL LIFT, INC.
HIGH REACH COMPANY, INC.
NATIONSRENT OF ALABAMA, INC.
NATIONSRENT OF CALIFORNIA, INC.
NATIONSRENT OF FLORIDA, INC.
NATIONSRENT OF GEORGIA, INC.
NATIONSRENT OF INDIANA, INC.
NATIONSRENT OF KENTUCKY, INC.
NATIONSRENT OF LOUISIANA, INC.
NATIONSRENT OF MICHIGAN, INC.
NATIONSRENT OF NEW HAMPSHIRE, INC.
NATIONSRENT OF OHIO, INC.
NATIONSRENT OF TENNESSEE, INC.
NATIONSRENT OF TEXAS, INC.
NATIONSRENT OF WEST VIRGINIA, INC.
NRI/LEC MERGER CORP., INC.
RAYMOND EQUIPMENT CO. (doing
business as JOBS RENTAL)
SAM'S EQUIPMENT RENTAL, INC.
(a subsidiary of Gabriel Trailer Manufacturing
Company, Inc.)
SOUTHEAST RENTAL & LEASING, INC.
<PAGE> 3
TENNESSEE TOOL & SUPPLY, INC.
THE BODE-FINN COMPANY
THE J. KELLY CO., INC.
TITAN RENTALS, INC.
Each by its authorized officer:
/s/ Thomas C. Richardson
- -----------------------------------
Name: Thomas C. Richardson
Title: Vice President
<PAGE> 4
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint, __________________, agent to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
Date: ............................. Signed: ____________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ...................................................
In connection with any transfer of this Note occurring prior to the date which
is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) _____________ ___, 1999, the undersigned confirms that it has
not utilized any general solicitation or general advertising in connection with
the transfer and that this Note is being transferred:
[Check One]
(1) [ ] to the Company or a subsidiary thereof; or
(2) [ ] pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) [ ] to an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) that has furnished to the Trustee a signed letter
containing certain representations and agreements (the
form of which letter can be obtained from the Trustee); or
<PAGE> 5
(4) [ ] outside the United states to a "foreign person" in
compliance with Rule 904 of Regulation S under the
Securities Act; or
(5) [ ] pursuant to the exemption from registration provided by
Rule 144 under the Securities Act; or
(6) [ ] pursuant to an effective registration statement under the
Securities Act; or
(7) [ ] pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; PROVIDED that if box (2),(3), (4), (5) or (7) is
checked, the Company or the Trustee may require, prior to registering any such
transfer of the Notes, in its sole discretion, such legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Trustee or the Company has reasonably requested to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.16 of the Indenture shall have
been satisfied.
Date: Signed:
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
<PAGE> 6
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is
purchasing this Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date: ............................. Signed:
NOTICE: To be executed by
an executive officer
<PAGE> 7
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount you
elect to have purchased:
$...................................
Dated: Signed:
NOTICE: The signature on this
assignment must correspond
with the name as it appears
upon the face of the within
Note in every particular
without alteration or
enlargement or any change
whatsoever and be guaranteed
by an eligible guarantor
institution with membership in
the Medallion guaranty program
or similar association.
Signature Guarantee:
<PAGE> 1
Exhibit 4.4
EXECUTION COPY
NATIONSRENT, INC.
AS ISSUER,
and
THE GUARANTORS
(DEFINED HEREIN)
and
THE BANK OF NEW YORK
AS TRUSTEE
----------------------
INDENTURE
Dated as of December 11, 1998
----------------------
up to $225,000,000
10 3/8% Senior Subordinated Notes due 2008
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE ONE DEFINITIONS AND INCORPORATION BY
REFERENCE.......................................................................1
SECTION 1.01. Definitions.....................................................................1
SECTION 1.02. Incorporation by Reference of TIA..............................................27
SECTION 1.03. Rules of Construction..........................................................28
ARTICLE TWO THE NOTES......................................................................28
SECTION 2.01. Form and Dating................................................................28
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount.....................................................29
SECTION 2.03. Registrar and Paying Agent.....................................................30
SECTION 2.04. Paying Agent To Hold Assets in Trust...........................................31
SECTION 2.05. Noteholder Lists...............................................................31
SECTION 2.06. Transfer and Exchange..........................................................32
SECTION 2.07. Replacement Notes..............................................................32
SECTION 2.08. Outstanding Notes..............................................................33
SECTION 2.09. Treasury Notes.................................................................33
SECTION 2.10. Temporary Notes................................................................33
SECTION 2.11. Cancellation...................................................................34
SECTION 2.12. Defaulted Interest.............................................................34
SECTION 2.13. CUSIP Number...................................................................34
SECTION 2.14. Deposit of Moneys..............................................................35
SECTION 2.15. Book-Entry Provisions for Global Note..........................................35
SECTION 2.16. Special Transfer Provisions....................................................36
ARTICLE THREE REDEMPTION.....................................................................38
SECTION 3.01. Notices to Trustee.............................................................38
SECTION 3.02. Selection of Notes To Be Redeemed..............................................38
SECTION 3.03. Notice of Redemption...........................................................38
SECTION 3.04. Effect of Notice of Redemption.................................................39
SECTION 3.05. Deposit of Redemption Price....................................................40
SECTION 3.06. Notes Redeemed in Part.........................................................40
ARTICLE FOUR COVENANTS......................................................................40
SECTION 4.01. Payment of Notes...............................................................40
SECTION 4.02. Maintenance of Office or Agency................................................41
SECTION 4.03. Corporate Existence............................................................41
SECTION 4.04. Payment of Taxes and Other Claims..............................................41
SECTION 4.05. Maintenance of Properties and Insurance........................................41
SECTION 4.06. Compliance Certificate; Notice of Default......................................42
SECTION 4.07. Compliance with Laws...........................................................43
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SECTION 4.08. SEC Reports....................................................................43
SECTION 4.09. Waiver of Stay, Extension or Usury Laws........................................44
SECTION 4.10. Limitation on Restricted Payments..............................................44
SECTION 4.11. Limitation on Transactions with Affiliates.....................................46
SECTION 4.12. Limitation on Incurrence of Additional
Indebtedness...................................................................47
SECTION 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries............................................48
SECTION 4.14. Prohibition on Incurrence of Senior Subordinated
Debt...........................................................................48
SECTION 4.15. Change of Control..............................................................49
SECTION 4.16. Limitation on Asset Sales......................................................51
SECTION 4.17. Limitation on Preferred Stock
of Restricted Subsidiaries.....................................................54
SECTION 4.18. Limitation on Liens............................................................54
SECTION 4.19. Conduct of Business............................................................54
SECTION 4.20. Additional Subsidiary Guarantees; Additional
Pledge of Foreign Restricted Subsidiary Stock..................................54
ARTICLE FIVE SUCCESSOR CORPORATION..........................................................55
SECTION 5.01. When Company May Merge, Etc....................................................55
SECTION 5.02. Successor Corporation Substituted..............................................57
ARTICLE SIX DEFAULT AND REMEDIES...........................................................57
SECTION 6.01. Events of Default..............................................................57
SECTION 6.02. Acceleration...................................................................59
SECTION 6.03. Other Remedies.................................................................60
SECTION 6.04. Waiver of Past Defaults........................................................60
SECTION 6.05. Control by Majority............................................................60
SECTION 6.06. Limitation on Suits............................................................60
SECTION 6.07. Rights of Holders To Receive Payment...........................................61
SECTION 6.08. Collection Suit by Trustee.....................................................61
SECTION 6.09. Trustee May File Proofs of Claim...............................................62
SECTION 6.10. Priorities.....................................................................62
SECTION 6.11. Undertaking for Costs..........................................................63
SECTION 6.12. Restoration of Rights and Remedies.............................................63
ARTICLE SEVEN TRUSTEE........................................................................63
SECTION 7.01. Duties of Trustee..............................................................63
SECTION 7.02. Rights of Trustee..............................................................64
SECTION 7.03. Individual Rights of Trustee...................................................66
SECTION 7.04. Trustee's Disclaimer...........................................................66
SECTION 7.05. Notice of Default..............................................................66
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SECTION 7.06. Reports by Trustee to Holders..................................................66
SECTION 7.07. Compensation and Indemnity.....................................................67
SECTION 7.08. Replacement of Trustee.........................................................68
SECTION 7.09. Successor Trustee by Merger, Etc...............................................69
SECTION 7.10. Eligibility; Disqualification..................................................69
SECTION 7.11. Preferential Collection of Claims Against Company..............................69
ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE.............................................69
SECTION 8.01. Termination of the Company's Obligations.......................................69
SECTION 8.02 Legal Defeasance and Covenant Defeasance.......................................71
SECTION 8.03. Conditions to Legal Defeasance
or Covenant Defeasance.........................................................72
SECTION 8.04. Application of Trust Money.....................................................74
SECTION 8.05. Repayment to the Company or the Guarantors.....................................74
SECTION 8.06. Satisfaction and Discharge.....................................................75
SECTION 8.07. Reinstatement..................................................................75
ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS............................................76
SECTION 9.01. Without Consent of Holders.....................................................76
SECTION 9.02. With Consent of Holders........................................................76
SECTION 9.03. Effect on Senior Debt..........................................................78
SECTION 9.04. Compliance with TIA............................................................78
SECTION 9.05. Revocation and Effect of Consents..............................................78
SECTION 9.06. Notation on or Exchange of Notes...............................................79
SECTION 9.07. Trustee To Sign Amendments, Etc................................................79
ARTICLE TEN SUBORDINATION..................................................................79
SECTION 10.01. Notes Subordinated to Senior Debt of the Company...............................79
SECTION 10.02. No Payment on Notes in Certain Circumstances...................................80
SECTION 10.03. Payment Over of Proceeds Upon Dissolution, Etc.................................81
SECTION 10.04. Payments May Be Paid Prior to Dissolution......................................82
SECTION 10.05. Subrogation....................................................................83
SECTION 10.06. Obligations of the Company Unconditional.......................................83
SECTION 10.07. Notice to Trustee..............................................................84
SECTION 10.08. Reliance on Judicial Order or
Certificate of Liquidating Agent...............................................84
SECTION 10.09. Trustee's Relation to Senior Debt. ............................................85
SECTION 10.10. Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior
Debt...........................................................................85
SECTION 10.11. Noteholders Authorize Trustee To
Effectuate Subordination of Notes..............................................86
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SECTION 10.12. This Article Ten Not To
Prevent Events of Default......................................................86
SECTION 10.13. Trustee's Compensation Not Prejudiced..........................................87
ARTICLE ELEVEN GUARANTEES.....................................................................87
SECTION 11.01. Unconditional Guarantee........................................................87
SECTION 11.02. Subordination of Guarantee.....................................................88
SECTION 11.03. Severability...................................................................88
SECTION 11.04. Release of a Guarantor ........................................................88
SECTION 11.05. Limitation of Guarantor's Liability............................................89
SECTION 11.06. Guarantors May Consolidate, Etc.,
on Certain Terms...............................................................89
SECTION 11.07. Contribution...................................................................90
SECTION 11.08. Waiver of Subrogation..........................................................91
SECTION 11.09. Execution of Guarantee ........................................................91
SECTION 11.10. No Payment on Guarantees in Certain
Circumstances..................................................................92
SECTION 11.11. Payment Over of Proceeds Upon Dissolution, Etc.................................93
SECTION 11.12. Payments May Be Paid Prior to Dissolution......................................94
SECTION 11.13. Subrogation....................................................................95
SECTION 11.14. Obligations of Each Guarantor Unconditional....................................95
SECTION 11.15. Notice to Trustee..............................................................96
SECTION 11.16. Reliance on Judicial Order or
Certificate of Liquidating Agent...............................................96
SECTION 11.17. Trustee's Relation to
Guarantor Senior Debt. .....................................................97
SECTION 11.18. Subordination Rights Not Impaired
by Acts or Omissions of a Guarantor
or Holders of Guarantor Senior Debt............................................97
SECTION 11.19. Noteholders Authorize Trustee To
Effectuate Subordination of Guarantees.........................................98
SECTION 11.20. This Article Eleven Not To
Prevent Events of Default......................................................99
ARTICLE TWELVE MISCELLANEOUS..................................................................99
SECTION 12.01. TIA Controls...................................................................99
SECTION 12.02. Notices........................................................................99
SECTION 12.03. Communications by Holders with Others Holders.................................100
SECTION 12.04. Certificate and Opinion as to
Conditions Precedent. ....................................................100
SECTION 12.05. Statements Required in Certificate or Opinion.................................101
SECTION 12.07. Legal Holidays................................................................101
SECTION 12.08. Governing Law.................................................................102
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<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 12.09. No Adverse Interpretation of Other Agreements..................................102
SECTION 12.11. Successors.....................................................................102
SECTION 12.12. Duplicate Originals............................................................102
SECTION 12.13. Severability...................................................................102
Exhibit A(1) Form of Initial Note with Guarantee.........................................A.1-1
Exhibit A(2) Form of Exchange Note with Guarantee........................................A.2-1
Exhibit B Form of Legend for Global Notes...............................................B-1
Exhibit C Form of Certificate To Be Delivered in
Connection with Transfers to Non-QIB
Accredited Investors..........................................................C-1
Exhibit D Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S .....................................................D-1
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
-v-
<PAGE> 7
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1)..................................................................... 7.10
(a)(2).................................................................. 7.10
(a)(3).................................................................. N.A.
(a)(4).................................................................. N.A.
(a)(5).................................................................. 7.08; 7.10
(b)..................................................................... 7.08; 7.10;12.02
(c)..................................................................... N.A.
311(a)........................................................................ 7.11
(b)..................................................................... 7.11
(c)..................................................................... N.A.
312(a)........................................................................ 2.05
(b)..................................................................... 12.03
(c)..................................................................... 12.03
313(a)........................................................................ 7.06
(b)(1).................................................................. N.A.
(b)(2).................................................................. 7.06
(c)..................................................................... 7.06; 12.02
(d)..................................................................... 7.06
314(a)........................................................................ 4.06; 4.08; 12.02
(b)..................................................................... N.A.
(c)(1).................................................................. 12.04
(c)(2).................................................................. 12.04
(c)(3).................................................................. N.A.
(d)..................................................................... N.A.
(e)..................................................................... 12.05
(f)..................................................................... N.A.
315(a)........................................................................ 7.01(b)
(b)..................................................................... 7.05; 12.02
(c)..................................................................... 7.01(a)
(d)..................................................................... 7.01(c)
(e)..................................................................... 6.11
316(a)(last sentence)......................................................... 2.09
(a)(1)(A)............................................................... 6.05
(a)(1)(B)............................................................... 6.04
(a)(2).................................................................. N.A.
(b)..................................................................... 6.07
(c)..................................................................... 9.05
317(a)(1)..................................................................... 6.08
(a)(2).................................................................. 6.09
(b)..................................................................... 2.04
318(a)........................................................................ 12.01
(c)..................................................................... 12.01
</TABLE>
- ----------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE> 8
INDENTURE, dated as of December 11, 1998, among NationsRent,
Inc., a Delaware corporation (the "COMPANY"), the Guarantors (as hereinafter
defined) and The Bank of New York, a New York corporation, as trustee (the
"TRUSTEE").
The Company has duly authorized the creation of an issue of
10 3/8% Senior Subordinated Notes due 2008 and, to provide therefor, the
Company has duly authorized the execution and delivery of this Indenture. All
things necessary to make the Notes, when duly issued and executed by the
Company and authenticated and delivered hereunder, the valid obligations of
the Company, and to make this Indenture a valid and binding agreement of the
Company, have been done.
Each party hereto agrees as follows for the benefit of the
other parties and for the equal and ratable benefit of the Holders of the
Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACCELERATION NOTICE" has the meaning provided in Section 6.02.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any
of its Subsidiaries that is existing at the time such Person becomes a
Restricted Subsidiary of the Company or at the time it merges or consolidates
with the Company or any of its Subsidiaries or that is assumed in connection
with the acquisition of assets from such Person and in each case not incurred
by such Person in connection with, or in anticipation or contemplation of,
such Person becoming a Restricted Subsidiary of the Company or such
acquisition, merger or consolidation.
"ACT" means the Securities Act of 1933, as amended.
"ADDITIONAL INTEREST" means all liquidated damages then owing
pursuant to the Registration Rights Agreement.
"AFFILIATE" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative of the foregoing.
"AFFILIATE TRANSACTION" has the meaning provided in
Section 4.11.
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<PAGE> 9
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"AGENT MEMBERS" has the meaning provided in Section 2.15.
"ASSET ACQUISITION" means (a) an Investment by the Company or
any Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company or any
Restricted Subsidiary of the Company, or shall be merged with or into the
Company or any Restricted Subsidiary of the Company, or (b) the acquisition by
the Company or any Restricted Subsidiary of the Company of the assets of any
Person (other than a Restricted Subsidiary of the Company) which constitute
all or substantially all of the assets of such Person or comprises any
division or line of business of such Person or any other properties or assets
of such Person other than in the ordinary course of business.
"ASSET SALE" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Restricted Subsidiaries (including any Sale and
Leaseback Transaction or a foreclosure pursuant to the Credit Agreement) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary of
the Company of (a) any Capital Stock of any Restricted Subsidiary of the
Company; or (b) any other property or assets of the Company or any Restricted
Subsidiary of the Company other than in the ordinary course of business;
provided, however, that Asset Sales shall not include: (i) a transaction or
series of related transactions for which the Company or its Restricted
Subsidiaries receive aggregate consideration in any year of less than $1.0
million, (ii) the sale, lease, conveyance, disposition or other transfer of
all or substantially all of the assets of the Company as permitted under
Section 5.01, (iii) disposals or replacements of obsolete or outdated
equipment or inventory, and (iv) the sale or discount, in each case without
recourse (other than recourse for a breach of a representation or warranty),
of accounts receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof in the ordinary course of
business and not as part of a financing transaction.
"AUTHENTICATING AGENT" has the meaning provided in
Section 2.02.
"AVERAGE LIFE TO STATED MATURITY" means, as of the date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date
of determination to the date of each successive scheduled principal payment of
such Indebtedness multiplied by (b) the amount of each such principal payment
by (ii) the sum of all such principal payments.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
"BLOCKAGE PERIOD" has the meaning provided in Section 10.02(a).
-2-
<PAGE> 10
"BOARD OF DIRECTORS" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of
a resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and
to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"BUSINESS DAY" means a day that is not a Legal Holiday.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated and whether or not voting) of corporate stock,
including each class of Common Stock and Preferred Stock of such Person and
(ii) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligations of such Person under a lease that are required to be classified
and accounted for as capital lease obligations under GAAP and, for purposes of
this definition, the amount of such obligations at any date shall be the
capitalized amount of such obligations at such date, determined in accordance
with GAAP.
"CASH EQUIVALENTS" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation ("S&P")
or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper
maturing no more than 270 days from the date of creation thereof and, at the
time of acquisition, having a rating of at least A-1 from S&P or at least P-1
from Moody's; (iv) certificates of deposit or bankers' acceptances maturing
within one year from the date of acquisition thereof issued by any bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250.0 million; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds which invest substantially
all their assets in securities of the types described in clauses (i) through
(v) above.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events:
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<PAGE> 11
(i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all
of the assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group"), together with any
Affiliates thereof (whether or not otherwise in compliance with the provisions
of this Indenture) (other than to one or more of the Permitted Holders);
(ii) the approval by the holders of Capital Stock of the
Company of any plan or proposal for the liquidation or dissolution of the
Company (whether or not otherwise in compliance with the provisions of this
Indenture);
(iii) there is consummated any consolidation or merger of the
Company into another corporation in which the Company is not the surviving
entity (except that no Change of Control shall be deemed to have occurred if
the stockholders of the Company immediately prior to such transaction own 50%
or more of the aggregate voting power represented by the issued and
outstanding Capital Stock of such Person or Group immediately after such
transaction);
(iv) any Person or Group (other than one or more of the
Permitted Holders) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing more than 50% of the
aggregate voting power represented by the issued and outstanding Capital Stock
of the Company (except that no Change of Control shall be deemed to have
occurred if the stockholders of the Company immediately prior to such
transaction own 50% or more of the aggregate voting power represented by the
issued and outstanding Capital Stock of such Person or Group immediately after
such transaction); or
(v) the replacement of a majority of the Board of Directors of
the Company over a two-year period from the directors who constituted the
Board of Directors of the Company at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a majority of
the Board of Directors of the Company then still in office who either were
members of such Board of Directors at the beginning of such period or whose
election as a member of such Board of Directors was previously so approved.
"CHANGE OF CONTROL OFFER" has the meaning provided in Section
4.15.
"CHANGE OF CONTROL PAYMENT DATE" has the meaning provided in
Section 4.15.
"CHANGE OF CONTROL PURCHASE PRICE" has the meaning provided in
Section 4.15.
"COMMON STOCK" of any Person means any and all shares,
interests or other participations in, and other equivalents (however
designated and whether voting or
-4-
<PAGE> 12
non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"COMPANY" means NationsRent, Inc., a Delaware corporation, and
its successors that become a party to this Indenture in accordance with its
terms.
"CONSOLIDATED EBITDA" means, with respect to any Person, for
any period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been reduced thereby, (A) all
income taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable
to sales or dispositions outside the ordinary course of business), (B)
Consolidated Interest Expense and (C) Consolidated Non-Cash Charges, less any
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect
to any Person, the ratio of Consolidated EBITDA of such Person during the four
full fiscal quarters (the "Four Quarter Period") ending on or immediately
prior to the date of the transaction giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to
Consolidated Fixed Charges of such Person for the Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma (calculated on a basis
consistent with Regulation S-X under the Act) basis for the period of such
calculation to (i) the incurrence or repayment of any Indebtedness of such
Person or any of its Restricted Subsidiaries (and the application of the
proceeds thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in
the ordinary course of business for working capital purposes pursuant to
working capital facilities, occurring during the Four Quarter Period or at any
time subsequent to the last day of the Four Quarter Period and on or prior to
the Transaction Date, as if such incurrence or repayment, as the case may be
(and the application of the proceeds thereof), occurred on the first day of
the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need
to make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness and also including any Consolidated EBITDA (provided
that such Consolidated EBITDA shall be included only to the extent includable
pursuant to the definition of "Consolidated Net Income") attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale during the
Four Quarter Period) occurring
-5-
<PAGE> 13
during the Four Quarter Period or at any time subsequent to the last day of
the Four Quarter Period and on or prior to the Transaction Date, as if such
Asset Sale or Asset Acquisition (including the incurrence, assumption or
liability for any such Acquired Indebtedness) occurred on the first day of the
Four Quarter Period. If such Person or any of its Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the
preceding sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or any Restricted Subsidiary of such Person had
directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator of this "Consolidated Fixed Charge Coverage
Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the Transaction Date;
(2) if interest on any Indebtedness actually incurred on the Transaction Date
may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to
have been in effect during the Four Quarter Period; and (3) notwithstanding
clause (1) above, interest on Indebtedness determined on a fluctuating basis,
to the extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person
for any period, the sum, without duplication, of (i) Consolidated Interest
Expense, plus (ii) the product of (x) the amount of all dividend payments on
any series of Preferred Stock of such Person (other than dividends paid in
Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued
during such period times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective consolidated
federal, state and local income tax rate of such Person, expressed as a
decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any
Person for any period, the sum of, without duplication: (i) the aggregate of
the interest expense of such Person and its Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP, including
without limitation, (a) any amortization of debt discount and amortization or
write-off of deferred financing costs, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation; and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person,
for any period, the aggregate net income (or loss) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; provided
-6-
<PAGE> 14
that there shall be excluded therefrom (a) for purposes of calculating the
Consolidated Fixed Charge Coverage Ratio only, after-tax gains or losses (net
of any related fees and expenses) from Asset Sales or abandonments or reserves
relating thereto, (b) after-tax items classified as extraordinary or
nonrecurring gains or losses, (c) the net income (or loss) of any Person
acquired in a "pooling of interests" transaction accrued prior to the date it
becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted
Subsidiary of the referent Person to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that
income is restricted by a contract, operation of law or otherwise, (e) the net
income of any Person other than a Restricted Subsidiary of the referent
Person, except to the extent of cash dividends or distributions paid to the
referent Person or to a Restricted Subsidiary of the referent Person by such
Person (provided that in the case of cash dividends or distributions paid to
any such Restricted Subsidiary that is not a Wholly Owned Restricted
Subsidiary, the portion of net income included therein will be equal to the
Company's interest in such Restricted Subsidiary), (f) for purposes of
calculating the Consolidated Fixed Charge Coverage Ratio only, any restoration
to income of any contingency reserve, except to the extent that provision for
such reserve was made out of Consolidated Net Income accrued at any time
following the Issue Date, (g) income or loss attributable to discontinued
operations (including, without limitation, operations disposed of during such
period whether or not such operations were classified as discontinued), and
(h) in the case of a successor to the referent Person by consolidation or
merger or as a transferee of the referent Person's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of
assets.
"CONSOLIDATED NET WORTH" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person, provided that the Consolidated Net
Worth of any Person shall exclude the effect of any non-cash charges relating
to the acceleration of stock options or similar securities of such Person or
another Person with which such Person is merged or consolidated.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any
Person, for any period, the aggregate depreciation, amortization and other
non-cash expenses of such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and its Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP
(excluding any such charges constituting an extraordinary item or loss or any
such charge which requires an accrual of or a reserve for cash charges for any
future period).
"CONSOLIDATED TANGIBLE ASSETS" means, all accounts receivable,
inventory (including rental inventory), property, plant and equipment
(including titled equipment) of the Company and the Guarantors, determined on
a consolidated basis in accordance with GAAP.
-7-
<PAGE> 15
"COVENANT DEFEASANCE" has the meaning provided in
Section 8.02(c).
"CREDIT AGREEMENT" means the Second Amended and Restated
Revolving Credit and Term Loan Agreement dated as of September 24, 1998, as
amended, among the Company, the Company's subsidiaries party thereto, the
lenders party thereto in their capacities as lenders thereunder, BankBoston,
N.A., as administrative agent, LaSalle National Bank, as documentation agent,
and Fleet Bank, N.A. and NationsBank, N.A., as co-agents for the lenders party
thereto, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder or adding Restricted Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness
under such agreement or any successor or replacement agreement and whether by
the same or any other agent, lender or group of lenders.
"CURRENCY AGREEMENT" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any Restricted Subsidiary of the Company against
fluctuations in currency values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means an event or condition the occurrence of which
is, or with the lapse of time or the giving of notice or both would be, an
Event of Default.
"DEFAULT NOTICE" has the meaning provided in Section 10.02(a).
"DEPOSITARY" means The Depository Trust Company, its nominees
and successors.
"DESIGNATED SENIOR DEBT" means (i) Indebtedness of the Company
and its Subsidiaries under or in respect of the Credit Agreement and (ii) any
other Indebtedness constituting Senior Debt which, at the time of
determination, has an aggregate principal amount of at least $25,000,000 and
is specifically designated in the instrument evidencing such Senior Debt as
"Designated Senior Debt" by the Company.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the Notes.
-8-
<PAGE> 16
"EQUIPMENT DEBT" means that certain senior subordinated
supplier debt in an original principal amount not to exceed $25.0 million in
favor of one of the Company's suppliers or its designee.
"EQUITY INTEREST" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"EVENT OF DEFAULT" has the meaning provided in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"EXCHANGE NOTES" means the 103/8% Senior Subordinated Notes due
2008 to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement or, with respect to Initial Notes issued under
this Indenture subsequent to the Issue Date pursuant to Section 2.02, a
registration rights agreement substantially identical to the Registration
Rights Agreement.
"EXCHANGE OFFER" has the meaning assigned to such term in the
Registration Rights Agreement.
"FAIR MARKET VALUE" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors
of the Company acting reasonably and in good faith (which determination shall
be conclusive) and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
"FOREIGN RESTRICTED SUBSIDIARY" means any Restricted Subsidiary
of the Company that is incorporated in a jurisdiction other than the United
States of America, including its territories and possessions, or 80% of the
sales, earnings or assets of which are located in, generated from or derived
from operations located in, jurisdictions outside the United States of
America.
"FUNDING GUARANTOR" has the meaning provided in Section 11.07.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date. All ratios and computations based on
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<PAGE> 17
GAAP contained in this Indenture shall be computed in conformity with GAAP
applied on a consistent basis.
"GLOBAL NOTE" has the meaning provided in Section 2.01.
"GUARANTEE" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by agreement
to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part) (but if in
part, only to the extent thereof); PROVIDED, HOWEVER, that the term
"guarantee" shall not include (A) endorsements for collection or deposit in
the ordinary course of business and (B) guarantees (other than guarantees of
Indebtedness) by the Company in respect of assisting one or more Subsidiaries
in the ordinary course of their respective businesses, including without
limitation guarantees of trade obligations and operating leases, on ordinary
business terms. The term "guarantee" used as a verb has a corresponding
meaning.
"GUARANTEE" means the guarantee of the obligations under this
Indenture and the Notes by each of the Guarantors as set forth in Article
Eleven.
"GUARANTOR" means (i) each of A-Action Rental, Inc., a
Pennsylvania corporation, A to Z Rents It, Inc., a Texas corporation, A to Z
Rents It, Inc. #2, a Texas corporation, Acme Rental, Inc., a Michigan
corporation, Central Alabama Rental Center, Inc., an Alabama corporation,
Gabriel Trailer Manufacturing Company, Inc., an Ohio corporation, Gold Coast
Aerial Lift, Inc., a Florida corporation, High Reach Company, Inc., a Florida
corporation, NationsRent of Alabama, Inc., a Delaware corporation, NationsRent
of California, Inc., a Delaware corporation, NationsRent of Florida, Inc., a
Delaware corporation, NationsRent of Georgia, Inc., a Delaware corporation,
NationsRent of Indiana, Inc., a Delaware corporation, NationsRent of Kentucky,
Inc., a Delaware corporation, NationsRent of Louisiana, Inc., a Delaware
corporation, NationsRent of Michigan, a Delaware corporation, NationsRent of
New Hampshire, Inc., a Delaware corporation, NationsRent of Ohio, Inc., a
Delaware corporation, NationsRent of Tennessee, Inc., a Delaware corporation,
NationsRent of Texas, Inc., a Delaware corporation, NationsRent of West
Virginia, Inc., a Delaware corporation, NRI/LEC Merger Corp., Inc., a Delaware
corporation, Raymond Equipment Co., a Kentucky corporation, Sam's Equipment
Rental, Inc., an Ohio corporation, Southeast Rental & Leasing, Inc., a Florida
corporation, Tennessee Tool and Supply, Inc., a Tennessee
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<PAGE> 18
corporation, The Bode-Finn Company, an Ohio corporation, The J. Kelly Co.,
Inc., a Michigan corporation and Titan Rentals, Inc., a West Virginia
corporation, and (ii) each of the Company's Restricted Subsidiaries that in
the future executes a supplemental indenture in which such Restricted
Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor;
provided that any Person constituting a Guarantor as described above shall
cease to constitute a Guarantor when its respective Guarantee is released in
accordance with the terms of this Indenture.
"GUARANTOR BLOCKAGE PERIOD" has the meaning provided in
Section 11.10(a).
"GUARANTOR DEFAULT NOTICE" has the meaning provided in
Section 11.10(a).
"GUARANTOR NON-PAYMENT DEFAULT" has the meaning provided in
Section 11.10(a).
"GUARANTOR PAYMENT DEFAULT" has the meaning provided in
Section 11.10(a).
"GUARANTOR SENIOR DEBT" means with respect to any Guarantor,
the principal of, premium, if any, and interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on any Indebtedness of a
Guarantor, whether outstanding on the Issue Date or thereafter created,
incurred or assumed, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Guarantee of such Guarantor. Without limiting the
generality of the foregoing, "Guarantor Senior Debt" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of: (x) all monetary obligations (including guarantees thereof) of every
nature of such Guarantor under the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities, (y) all
Interest Swap Obligations (including guarantees thereof), and (z) all
obligations (including guarantees thereof) under Currency Agreements, in each
case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include: (i)
any Indebtedness of such Guarantor to a Restricted Subsidiary of such
Guarantor or any Affiliate of such Guarantor or any of such Affiliate's
Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of, any
shareholder, director, officer or employee of such Guarantor or any Restricted
Subsidiary of such Guarantor (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts
incurred in connection with obtaining goods, materials or services (excluding
Purchase Money
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<PAGE> 19
Indebtedness), (iv) Indebtedness represented by Disqualified Capital Stock,
(v) any liability for federal, state, local or other taxes owed or owing by
such Guarantor, (vi) that portion of any Indebtedness incurred in violation of
the provisions set forth in this Indenture under Section 4.12, (vii)
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to the
Company, and (viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of such Guarantor.
"HOLDER" or "NOTEHOLDER" means the person in whose name a Note
is registered on the Registrar's books.
"INCUR" has the meaning provided in Section 4.12.
"INDEBTEDNESS" means with respect to any Person, without
duplication, (i) all Obligations of such Person for borrowed money, (ii) all
Obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
(iv) all Obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all Obligations under
any title retention agreement (but excluding trade accounts payable, leases
that are not Capitalized Lease Obligations and other accrued liabilities
arising in the ordinary course of business), (v) all Obligations for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (vi) guarantees and other contingent obligations
in respect of Indebtedness referred to in clauses (i) through (v) above and
clause (viii) below, (vii) all Obligations of any other Person of the type
referred to in clauses (i) through (vi) which are secured by any lien on any
property or asset of such Person, the amount of such Obligation being deemed
to be the lesser of the fair market value of such property or asset or the
amount of the Obligation so secured, (viii) all Obligations under Currency
Agreements and all Interest Swap Obligations of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be
required to be determined pursuant to this Indenture, and if such price is
based upon, or measured by, the fair market value of such Disqualified Capital
Stock, such fair market value shall be determined reasonably and in good faith
by the Board of Directors of the issuer of such Disqualified Capital Stock.
Indebtedness shall not include any liability for (i) federal, state, local or
other taxes, (ii) endorsements of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business or (iii)
any indebtedness that has been defeased or satisfied in accordance with the
terms of the documents governing such indebtedness.
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<PAGE> 20
The amount of Indebtedness of any Person at any date shall be
the outstanding balance on such date of all unconditional Obligations as
described above, and the maximum liability upon the occurrence of the
contingency giving rise to the Obligation, on any contingent Obligations at
such date; provided, however, that the amount outstanding at any time of any
Indebtedness incurred with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP. The amount of any item of Indebtedness shall be an amount of such
Indebtedness properly classified as a liability on a balance sheet prepared in
accordance with GAAP.
"INDENTURE" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"INDEPENDENT" means with respect to the Company and its
Subsidiaries, any person who (i) is in fact independent, (ii) does not have
any direct financial interest or any material indirect financial interest in
the Company or any of its Subsidiaries, or in any Affiliate of the Company or
any of its Subsidiaries (other than as a result of holding securities of the
Company or an Affiliate of the Company in trading accounts) and (iii) is not
an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions for the Company or any of its Subsidiaries
or any Affiliate of the Company or any of its Subsidiaries.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does
not, and whose directors, officers and employees or Affiliates do not, have a
direct or indirect financial interest in the Company and (ii) which, in the
judgment of the Board of Directors of the Company, is otherwise Independent
and qualified to perform the task for which it is to be engaged.
"INITIAL NOTES" means, collectively, (i) the 103/8% Senior
Subordinated Notes due 2008 of the Company issued on the Issue Date and (ii)
one or more series of 103/8% Senior Subordinated Notes due 2008 that are
issued under this Indenture subsequent to the Issue Date pursuant to Section
2.02, in each case for so long as such securities constitute Restricted
Securities.
"INITIAL PURCHASERS" means Bear, Stearns & Co. Inc.,
NationsBanc Montgomery Securities LLC, BT Alex. Brown Incorporated and
BancBoston Robertson Stephens Inc.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2),
(3) or (7) under the Act.
"INTEREST PAYMENT DATE" when used with respect to any Note,
means the stated maturity of an installment of interest specified in such
Note.
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<PAGE> 21
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
other Person calculated by applying a fixed or a floating rate of interest on
the same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.
"INVESTMENT" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition by such Person of
any Capital Stock, bonds, notes, debentures or other securities or evidences
of Indebtedness issued by, any Person. "Investment" shall exclude extensions
of trade credit by the Company and its Restricted Subsidiaries on commercially
reasonable terms in accordance with normal trade practices of the Company or
such Restricted Subsidiary, as the case may be. For the purposes of Section
4.10, (i) "Investment" shall include and be valued at the fair market value of
the net assets of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary and shall exclude the fair
market value of the net assets of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii)
the amount of any Investment shall be the original cost of such Investment
plus the cost of all additional Investments by the Company or any of its
Restricted Subsidiaries, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such
Investment, reduced by the payment of dividends or distributions in connection
with such Investment or any other amounts received in respect of such
Investment; provided that no such payment of dividends or distributions or
receipt of any such other amounts shall reduce the amount of any Investment if
such payment of dividends or distributions or receipt of any such amounts
would be included in Consolidated Net Income. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Common Stock of
any direct or indirect Restricted Subsidiary of the Company (other than all of
the Common Stock of such Restricted Subsidiary) such that, after giving effect
to any such sale or disposition, such Person is no longer a Restricted
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Person not sold or disposed of.
"ISSUE DATE" means the date of original issuance of the Notes.
"LEGAL DEFEASANCE" has the meaning provided in Section 8.02(b).
"LEGAL HOLIDAY" has the meaning provided in Section 12.07.
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<PAGE> 22
"LIEN" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof and any agreement to give any security interest).
"MATURITY DATE" means December 15, 2008.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable
after taking into account any reduction in consolidated tax liability due to
available tax credits or deductions and any tax sharing arrangements, (c)
repayment of Indebtedness that either (A) is secured by a Lien on the property
or assets sold or (B) is required to be repaid in connection with such Asset
Sale (or in order to obtain a consent required in connection therewith), (d)
appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale, (e) any
consideration for an Asset Sale (which would otherwise constitute Net Cash
Proceeds) that is required to be held in escrow pending determination of
whether a purchase price adjustment will be made, but amounts under this
clause (e) shall become Net Cash Proceeds at such time and to the extent such
amounts are released to such Person and (f) a pro rata portion of the amount
of cash or Cash Equivalents received by any non-Guarantor Restricted
Subsidiary that is not a Wholly-Owned Restricted Subsidiary to the extent of
the interests in such non- Guarantor Restricted Subsidiary that are held by
Persons other than the Company or its Restricted Subsidiaries.
"NET PROCEEDS OFFER" has the meaning provided in Section 4.16.
"NET PROCEEDS OFFER AMOUNT" has the meaning provided in
Section 4.16.
"NET PROCEEDS OFFER PAYMENT DATE" has the meaning provided in
Section 4.16.
"NET PROCEEDS OFFER TRIGGER DATE" has the meaning provided in
Section 4.16.
"NON-PAYMENT DEFAULT" has the meaning provided in
Section 10.02(a).
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<PAGE> 23
"NON-U.S. PERSON" means a person who is not a U.S. person, as
defined in Regulation S.
"NOTES" means, collectively, the Initial Notes, the Private
Exchange Notes, if any, and the Unrestricted Notes, treated as a single class
of securities, as amended or supplemented from time to time in accordance with
the terms hereof, that are issued pursuant to this Indenture.
"OBLIGATIONS" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"OFFICER" means, with respect to any person, the Chairman of
the Board, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Assistant Treasurer, the
Controller, or the Secretary of such person, or any other officer designated
by the Board of Directors serving in a similar capacity.
"OFFICERS' CERTIFICATE" means, with respect to any person, a
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such Person and otherwise complying
with the requirements of Sections 12.04 and 12.05, as they relate to the
making of an Officers' Certificate.
"OFFSHORE PHYSICAL NOTES" has the meaning provided in
Section 2.01.
"OPINION OF COUNSEL" means a written opinion from legal
counsel, who may be counsel for the Company and who is reasonably acceptable
to the Trustee, complying with the requirements of Sections 12.04 and 12.05,
as they relate to the giving of an Opinion of Counsel.
"PAYING AGENT" has the meaning provided in Section 2.03.
"PAYMENT DEFAULT" has the meaning provided in Section 10.02(a).
"PERMITTED HOLDER(S)" means H. Family Investments, Inc., James
L. Kirk, Don R. O'Neal, Gene J. Ostrow, H. Wayne Huizenga and Harris W. Hudson
and any of their respective Affiliates, spouses, siblings, lineal descendants
or lineal ascendants or any trust for the benefit of such persons.
"PERMITTED INDEBTEDNESS" means, without duplication, each of
the following:
(i) Indebtedness under the Notes, this Indenture and the
Guarantees;
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<PAGE> 24
(ii) Indebtedness incurred pursuant to the Credit Agreement in
an aggregate principal amount at any time outstanding not to exceed the
greater of (A) $435.0 million and (B) the product of (x) Consolidated Tangible
Assets and (y) 1.0; reduced in the case of the preceding clause (A) by any
required permanent repayments from the application of the use of proceeds from
Asset Sales (which in the case of a revolving credit facility are accompanied
by a corresponding permanent commitment reduction) thereunder;
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid or
permanent reductions thereof;
(iv) Interest Swap Obligations of the Company or any of its
Restricted Subsidiaries covering Indebtedness of the Company or such
Restricted Subsidiary; provided, however, that such Interest Swap Obligations
are entered into to protect the Company and its Restricted Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance with
this Indenture to the extent the notional principal amount of such Interest
Swap Obligation does not exceed the principal amount of the Indebtedness to
which such Interest Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in
the case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary of
the Company to the Company or to a Restricted Subsidiary of the Company for so
long as such Indebtedness is held by the Company or a Wholly Owned Restricted
Subsidiary of the Company, in each case subject to no Lien held by a Person
other than the Company, a Wholly Owned Restricted Subsidiary of the Company or
the lenders under the Credit Agreement; provided that if as of any date any
Person other than the Company, a Wholly Owned Restricted Subsidiary of the
Company or the lenders under the Credit Agreement owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, then the Company
or such Restricted Subsidiary shall be deemed to have incurred as of such date
Indebtedness not constituting Permitted Indebtedness pursuant to this clause
(vi);
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Restricted Subsidiary of the Company or the lenders under the Credit
Agreement, in each case subject to no Lien (other than a lien in favor of the
lenders under the Credit Agreement); provided that (a) any Indebtedness of the
Company to any Wholly Owned Restricted Subsidiary of the Company that is not a
Guarantor is unsecured and subordinated,
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<PAGE> 25
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and (b) if as of any date any Person other than a
Wholly Owned Restricted Subsidiary of the Company or the lenders under the
Credit Agreement owns or holds any such Indebtedness or any Person holds a
Lien in respect of such Indebtedness, then Indebtedness not constituting
Permitted Indebtedness by the Company pursuant to this clause (vii) shall be
deemed to have been incurred on such date;
(viii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided, however, that
such Indebtedness is extinguished within two business days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the Company
or such Restricted Subsidiary, as the case may be, in order to provide
security for workers' compensation claims, payment obligations in connection
with self-insurance or similar requirements in the ordinary course of
business;
(x) Refinancing Indebtedness;
(xi) Capitalized Lease Obligations and Purchase Money
Indebtedness of the Company or any of its Restricted Subsidiaries not to
exceed $10.0 million at any one time outstanding;
(xii) guarantees of Indebtedness otherwise permitted under this
Indenture;
(xiii) additional Indebtedness of the Company and its
Restricted Subsidiaries in an aggregate principal amount (or, in the case of
Indebtedness issued at a discount, an accreted amount (determined in
accordance with GAAP)) not to exceed $20.0 million at any one time outstanding
(which may, but need not, be incurred in whole or in part under the Credit
Agreement); and
(xiv) Equipment Debt.
For purposes of determining compliance with Section 4.12, in
the event that an item of Indebtedness meets the criteria of more than one of
the types of Permitted Indebtedness described in the above clauses, the
Company, in its sole discretion shall classify such item of Indebtedness and
only be required to include the amount and type of such Indebtedness in one of
such clauses. Any Permitted Indebtedness initially incurred pursuant to any of
the clauses in the preceding paragraph may at any time at the sole discretion
of the Company be treated as having been incurred pursuant to any other clause
as long as the outstanding amount of such Permitted Indebtedness at the time
of any reclassification could be made pursuant to such other clause.
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<PAGE> 26
"PERMITTED INVESTMENTS" means (i) Investments by the Company or
any Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company, (ii) Investments in the Company by any
Restricted Subsidiary of the Company; provided that any Indebtedness
evidencing such Investment is unsecured and, to the extent made by a
Restricted Subsidiary that is not a Guarantor, subordinated, pursuant to a
written agreement, to the Company's obligations under the Notes and this
Indenture; (iii) investments in cash and Cash Equivalents; (iv) loans and
advances to employees and officers of the Company and its Restricted
Subsidiaries in the ordinary course of business for bona fide business
purposes not in excess of $2.0 million at any one time outstanding; (v)
Currency Agreements and Interest Swap Obligations entered into in the ordinary
course of the Company's or its Restricted Subsidiaries' businesses and
otherwise in compliance with this Indenture; (vi) Investments in securities of
trade creditors or customers received pursuant to any plan of reorganization
or similar arrangement upon the bankruptcy or insolvency of such trade
creditors or customers; (vii) Investments made by the Company or its
Restricted Subsidiaries as a result of non-cash consideration received in
connection with an Asset Sale made in compliance with Section 4.16; (viii)
Investments existing on the Issue Date; (ix) guarantees of Indebtedness
otherwise permitted under this Indenture, (x) obligations of one or more
officers or other employees of the Company or any of its Restricted
Subsidiaries in connection with such officers' or employees' acquisition of
shares of Common Stock of the Company so long as no cash is paid by the
Company or any of its Restricted Subsidiaries to such officers or employees in
connection with the acquisition of any such obligations; and (xi) additional
Investments in an aggregate amount that, together with all other Investments
made pursuant to this clause (xi), does not exceed $5.0 million.
For purposes of determining compliance with Section 4.10, in
the event that an Investment meets the criteria of more than one of the types
of Permitted Investments described in the clauses in the preceding paragraph,
the Company, in its sole discretion, shall classify such Permitted Investment
and only be required to include the amount and type of such Permitted
Investment in one of such clauses. Any Permitted Investment initially made
pursuant to any of the clauses in the preceding paragraph may at any time at
the sole discretion of the Company be treated as having been made pursuant to
any other clause as long as the outstanding amount of such Permitted
Investment at the time of any reclassification could be made pursuant to such
other clause.
"PERMITTED LIENS" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or
claims that are either (a) not yet due or are delinquent for less than ninety
days or (b) being contested in good faith by appropriate proceedings and as to
which the Company or its Restricted Subsidiaries shall have set aside on its
books such reserves, if any, as may be required pursuant to GAAP;
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<PAGE> 27
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security;
(iv) Liens securing (a) letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money) and any bank's unexercised right of set off
with respect to deposits made in the ordinary course and (b) indemnity
obligations in respect of the disposition of any business or assets of the
Company or any Restricted Subsidiary (provided that the property subject to
such Lien does not have a fair market value in excess of the cash or Cash
Equivalent proceeds received by the Company and its Restricted Subsidiaries in
connection with such disposition);
(v) judgment Liens not giving rise to an Event of Default;
(vi) easements, rights-of-way, municipal ordinances, zoning
restrictions and other similar charges, encumbrances, title defects or
irregularities not interfering in any material respect with the ordinary
conduct of the business of the Company or any of its Restricted Subsidiaries;
(vii) any interest or title of a lessor under any Capitalized
Lease Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(viii) purchase money Liens to finance property or assets of
the Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; provided, however, that (A) the related Purchase
Money Indebtedness shall not exceed the cost of such property or assets
(including the cost of design, development, improvement, production,
acquisition, construction, installation and integration) and shall not be
secured by any property or assets of the Company or any Restricted Subsidiary
of the Company other than the property and assets so acquired or constructed
(and any accounts, contract rights, chattel paper, documents and instruments
arising from the sale, lease or rental of such property or assets and all
attachments, parts, accessions, accessories and replacements thereof, and all
proceeds therefrom) and (B) the Lien securing such Indebtedness shall be
created within six months of such acquisition, construction or improvement;
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<PAGE> 28
(ix) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other goods;
(x) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(xi) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual, or warranty requirements of
the Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(xii) Liens securing Interest Swap Obligations which Interest
Swap Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xiii) Liens securing Indebtedness under Currency Agreements;
(xiv) any lease or sublease to a third party not interfering in
any material respect with the business of the Company and its Restricted
Subsidiaries; and
(xv) Liens securing Acquired Indebtedness incurred in
accordance with Section 4.12; provided that (A) such Liens secured such
Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company
and were not granted in connection with, or in anticipation of, the incurrence
of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company and (B) such Liens do not extend to or cover any property or assets of
the Company or of any of its Restricted Subsidiaries other than the property
or assets and the proceeds thereof that secured the Acquired Indebtedness
prior to the time such Indebtedness became Acquired Indebtedness of the
Company or a Restricted Subsidiary of the Company and are no more favorable to
the lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company.
"PERSON" means an individual, partnership, corporation,
unincorporated organization, association, limited liability company, joint
stock company, trust or joint venture, or a governmental agency or political
subdivision thereof or any other entity.
"PHYSICAL NOTES" has the meaning provided in Section 2.01.
"PREFERRED STOCK" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
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"PRINCIPAL" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"PRIVATE EQUITY OFFERING" means an issuance of Qualified
Capital Stock of the Company for cash in a private placement.
"PRIVATE EXCHANGE NOTES" has the meaning set forth in the
Registration Rights Agreement.
"PRIVATE PLACEMENT LEGEND" means the legend initially set forth
on the Initial Notes in the form set forth in EXHIBIT A(1).
"PRO FORMA" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Act, as determined by
the Officers of the Company in consultation with its independent public
accountants.
"PROCEEDS PURCHASE DATE" has the meaning provided in
Section 4.16.
"PROPERTY" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such person whether or not
included in the most recent consolidated balance sheet of such person and its
Subsidiaries under GAAP.
"PUBLIC EQUITY OFFERING" means an underwritten public offering
of Qualified Capital Stock of the Company for cash pursuant to a registration
statement filed with the SEC in accordance with the Act, the net proceeds of
which are at least $40.0 million.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company
and its Restricted Subsidiaries incurred in the normal course of business for
the purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning
specified in Rule 144A under the Act.
"RECORD DATE" means, with respect to any Note, any of the
Record Dates specified in such Note, whether or not a Legal Holiday.
"REDEMPTION DATE," when used with respect to any Note to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Notes.
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"REDEMPTION PRICE," when used with respect to any Note to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Notes.
"REFERENCE DATE" has the meaning provided in Section 4.10.
"REFINANCE" means, in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "REFINANCED" and "REFINANCING"
shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company
or any Restricted Subsidiary of the Company of Indebtedness incurred in
accordance with Section 4.12, in each case (except in the case of Indebtedness
incurred pursuant to clause (ii), (iv), (v), (vi), (vii), (viii) or (ix) of
the definition of Permitted Indebtedness) that does not (1) result in an
increase in the aggregate principal amount of Indebtedness of such Person as
of the date of such proposed Refinancing (plus the amount of any interest or
premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable fees and expenses incurred by
the Company in connection with such Refinancing) or (2) create Indebtedness
with (A) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced or (B) a final
maturity earlier than the final maturity of the Indebtedness being Refinanced;
provided that (x) if such Indebtedness being Refinanced is Indebtedness solely
of the Company, then such Refinancing Indebtedness shall be Indebtedness
solely of the Company and (y) if such Indebtedness being Refinanced is
subordinate or junior to the Notes, then such Refinancing Indebtedness shall
be subordinate to the Notes at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
"REGISTRAR" has the meaning provided in Section 2.03.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated as of the Issue Date among the Company, the Guarantors and the
Initial Purchasers.
"REGULATION S" means Regulation S under the Act.
"REPLACEMENT ASSETS" has the meaning provided in Section 4.16.
"REPRESENTATIVE" means the indenture trustee or other trustee,
agent or representative in respect of any Designated Senior Debt; PROVIDED
that if, and for so long as, any Designated Senior Debt lacks such a
representative, then the Representative for such Designated Senior Debt shall
at all times constitute the holders of a majority in outstanding principal
amount of such Designated Senior Debt in respect of any Designated Senior
Debt.
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"RESTRICTED PAYMENT" has the meaning provided in Section 4.10.
"RESTRICTED SECURITY" has the meaning assigned to such term in
Rule 144(a)(3) under the Act; PROVIDED that the Trustee shall be entitled to
request and conclusively rely on an Opinion of Counsel with respect to whether
any Note constitutes a Restricted Security.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of
such Person which at the time of determination is not an Unrestricted
Subsidiary.
"RULE 144A" means Rule 144A under the Act.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company
or such Restricted Subsidiary to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of such
Property.
"SEC" means the United States Securities and Exchange
Commission.
"SELLER NOTES" means any Indebtedness incurred by the Company
or any of the Restricted Subsidiaries in favor of any Person or Persons from
whom the Company or such Restricted Subsidiary acquires a business or the
assets or properties of a business directly in connection with such
acquisition.
"SENIOR DEBT" means the principal of, premium, if any, and
interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on any Indebtedness of the Company, whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Debt" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, (x) all monetary obligations (including guarantees thereof) of every
nature of the Company under the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities, (y) all
Interest Swap Obligations (including guarantees thereof) and (z) all
obligations (including guarantees thereof) under Currency Agreements, in each
case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the
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foregoing, "Senior Debt" shall not include: (i) any Indebtedness of the
Company to a Subsidiary of the Company or any Affiliate of the Company or any
of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on
behalf of, any shareholder, director, officer or employee of the Company or
any Subsidiary of the Company (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts
incurred in connection with obtaining goods, materials or services (excluding
Purchase Money Indebtedness), (iv) Indebtedness represented by Disqualified
Capital Stock, (v) any liability for federal, state, local or other taxes owed
or owing by the Company, (vi) that portion of any Indebtedness incurred in
violation of the provisions of this Indenture set forth under Section 4.12,
(vii) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without recourse to
the Company, and (viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company.
"SHELF REGISTRATION STATEMENT" has the meaning specified in the
Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" shall have the meaning set forth in
Rule 1.02(w) of Regulation S-X under the Act.
"SUBORDINATED OBLIGATIONS" means any Indebtedness of the
Company which is expressly subordinated or junior in right of payment to the
Notes.
"SUBSIDIARY", with respect to any Person, means (i) any
corporation of which the outstanding Capital Stock having at least a majority
of the votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or indirectly,
owned by such Person.
"SURVIVING ENTITY" has the meaning provided in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa- 77bbbb), as amended, as in effect on the date of this Indenture, except
as otherwise provided in Section 9.04.
"TREASURY RATE" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled by, and published in, the most recent Federal Reserve Statistical
Release H.15 (519) which has become publicly available at least two business
days prior to the date fixed for redemption of the Notes following a Change of
Control (or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to the then
remaining Average Life to Stated Maturity of the Notes; provided, however,
that if the Average Life to Stated Maturity of the Notes is not equal to the
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constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which such
yields are given, except that if the Average Life to Stated Maturity of the
Notes is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
"TRUSTEE" means the party named as such in this Indenture until
a successor replaces it in accordance with the provisions of this Indenture
and thereafter means such successor.
"TRUST OFFICER" means any officer of the Trustee assigned by
the Trustee to administer this Indenture, or in the case of a successor
trustee, an officer assigned to the department, division or group performing
the corporation trust work of such successor and assigned to administer this
Indenture.
"U.S. GOVERNMENT OBLIGATIONS" means non-callable direct
obligations of, and non-callable obligations guaranteed by, the United States
of America for the payment of which the full faith and credit of the United
States of America is pledged.
"U.S. LEGAL TENDER" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"U.S. PHYSICAL NOTES" has the meaning provided in Section 2.01.
"UNRESTRICTED NOTES" means one or more Notes that do not and
are not required to bear the private placement legend in the form set forth on
EXHIBIT A(1), including, without limitation, the Exchange Notes in the form
set forth as EXHIBIT A(2) hereto.
"UNRESTRICTED SUBSIDIARY" of any Person means (i) any
Subsidiary of such Person that at the time of determination shall be or
continue to be designated an Unrestricted Subsidiary by the Board of Directors
of such Person in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, the Company or any other Restricted
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided that (x) the Company certifies to the Trustee that such
designation complies with Section 4.10 and (y) each Subsidiary to be so
designated and each of its Subsidiaries has not at the time of designation,
and does not thereafter, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to any Indebtedness pursuant
to which the lender has recourse to any of the assets of the
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Company or any of its Restricted Subsidiaries. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if
(x) immediately after giving effect to such designation, the Company is able
to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with Section 4.12 and (y) immediately before and
immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing. Any such designation by the
Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the Board Resolution giving effect to such designation
and an Officers' Certificate certifying that such designation complied with
the foregoing provisions.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b) the
sum of the total of the products obtained by multiplying (i) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payment of principal, including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest one-twelfth)
which will elapse between such date and the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company, the
Guarantors, if any, or any other obligor on the Notes or the Guarantees, if
any.
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All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular; and
(5) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING.
The Initial Notes, the notation thereon relating to the
Guarantees and the Trustee's certificate of authentication shall be
substantially in the form of EXHIBIT A(1) hereto. The Exchange Notes, the
notation thereon relating to the Guarantees and the Trustee's certificate of
authentication shall be substantially in the form of EXHIBIT A(2) hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or depositary rule or usage. The Company and the Trustee shall
approve the form of the Notes and any notation, legend or endorsement on them.
Each Note shall be dated the date of its issuance.
The terms and provisions contained in the Notes and the
Guarantees, if any, annexed hereto as EXHIBITS A(1) and A(2), shall
constitute, and are hereby expressly made, a part of this Indenture and, to
the extent applicable, the Company, the Guarantors and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered
form, substantially in the form set forth in Exhibit A(1) (the "GLOBAL NOTE"),
deposited with the Trustee, as custodian for the Depositary, and shall bear
the legend set forth in EXHIBIT B, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The
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aggregate principal amount of the Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance
on Regulation S shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A(1) (the
"OFFSHORE PHYSICAL NOTES"). Notes offered and sold in reliance on any other
exemption from registration under the Act other than as described in the
preceding paragraph shall be issued, and Notes offered and sold in reliance on
Rule 144A may be issued, in the form of permanent certificated Notes in
registered form, in substantially the form set forth in Exhibit A(1) (the
"U.S. PHYSICAL NOTES"). The Offshore Physical Notes and the U.S. Physical
Notes are sometimes collectively herein referred to as the "PHYSICAL NOTES."
SECTION 2.02. EXECUTION AND AUTHENTICATION;
AGGREGATE PRINCIPAL AMOUNT.
Two Officers, or an Officer and an Assistant Secretary, shall
sign, or one Officer shall sign and one Officer or an Assistant Secretary
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Notes for the Company by manual or
facsimile signature. Each Guarantor shall execute the Guarantee in the manner
set forth in Section 11.09.
If an Officer or Assistant Secretary whose signature is on a
Note was an Officer or Assistant Secretary at the time of such execution but
no longer holds that office or position at the time the Trustee authenticates
the Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original
issue in the aggregate principal amount not to exceed $225,000,000 in one or
more series, (ii) Private Exchange Notes from time to time only in exchange
for a like principal amount of Initial Notes and (iii) Unrestricted Notes from
time to time only (x) in exchange for a like principal amount of Initial Notes
or (y) in an aggregate principal amount of not more than the excess of
$225,000,000 over the sum of the aggregate principal amount of (A) Initial
Notes then outstanding, (B) Private Exchange Notes then outstanding and (C)
Unrestricted Notes issued in accordance with (iii)(x) above, in each case upon
a written order of the Company in the form of an Officers' Certificate of the
Company. Each such written order shall specify the amount of Notes to be
authenticated and the date on which the Notes are to be authenticated, whether
the Notes are to be Initial Notes, Private Exchange Notes or Unrestricted
Notes and whether the Notes are to be issued as Physical Notes or Global Notes
or such other information as the Trustee
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may reasonably request. In addition, with respect to authentication pursuant
to clauses (ii) or (iii) of the first sentence of this paragraph, the first
such written order from the Company shall be accompanied by an Opinion of
Counsel of the Company in a form reasonably satisfactory to the Trustee
stating that the issuance of the Private Exchange Notes or the Unrestricted
Notes, as the case may be, does not give rise to an Event of Default, complies
with this Indenture and has been duly authorized by the Company. The aggregate
principal amount of Notes outstanding at any time may not exceed $225,000,000,
except as provided in Section 2.07.
In the event that the Company shall issue and the Trustee shall
authenticate any Notes issued under this Indenture subsequent to the Issue
Date pursuant to clauses (i) and (iii) of the first sentence of the
immediately preceding paragraph, the Company shall use its best efforts to
obtain the same "CUSIP" number for such Notes as is printed on the Notes
outstanding at such time; PROVIDED, HOWEVER, that if any series of Notes
issued under this Indenture subsequent to the Issue Date is determined,
pursuant to an Opinion of Counsel of the Company in a form reasonably
satisfactory to the Trustee, to be a different class of security than the
Notes outstanding at such time for federal income tax purposes, the Company
may obtain a "CUSIP" number for such Notes that is different than the "CUSIP"
number printed on the Notes then outstanding. Notwithstanding the foregoing,
all Notes issued under this Indenture shall vote and consent together on all
matters as one class and no series of Notes will have the right to vote or
consent as a separate class on any matter.
The Trustee may appoint an authenticating agent (the
"AUTHENTICATING AGENT") reasonably acceptable to the Company to authenticate
Notes. Unless otherwise provided in the appointment, an Authenticating Agent
may authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
Authenticating Agent. An Authenticating Agent has the same rights as an Agent
to deal with the Company and Affiliates of the Company.
The Notes shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New
York) where (a) Notes may be presented or surrendered for registration of
transfer or for exchange ("REGISTRAR"), (b) Notes may be presented or
surrendered for payment ("PAYING AGENT") and (c) notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company, upon prior written notice to the Trustee, may have one
or more co-Registrars and one or more additional paying agents reasonably
acceptable to the Trustee. The term "Paying Agent" includes any additional
Paying
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Agent. Neither the Company nor any Affiliate of the Company may act as Paying
Agent.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which agreement shall
incorporate the provisions of the TIA and implement the provisions of this
Indenture that relate to such Agent. The Company shall notify the Trustee, in
advance, of the name and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, or fails to give the foregoing notice,
the Trustee shall act as such and shall be entitled to appropriate
compensation in accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of demands and notices in connection with the
Notes, until such time as the Trustee has resigned or a successor has been
appointed. The Paying Agent or Registrar may resign upon 30 days prior written
notice to the Company.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that, subject to Articles Ten and Eleven, each
Paying Agent shall hold in trust for the benefit of the Holders or the Trustee
all assets held by the Paying Agent for the payment of principal of, or
interest and Additional Interest on, the Notes (whether such assets have been
distributed to it by the Company or any other obligor on the Notes), and the
Company and the Paying Agent shall notify the Trustee in writing of any
Default by the Company (or any other obligor on the Notes) in making any such
payment. The Company at any time may require a Paying Agent to distribute all
assets held by it to the Trustee and account for any assets disbursed and the
Trustee may at any time during the continuance of any payment Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets held by it to the Trustee and to account for any assets distributed.
Upon distribution to the Trustee of all assets that shall have been delivered
by the Company to the Paying Agent, the Paying Agent shall have no further
liability for such assets.
SECTION 2.05. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Noteholders. If the Trustee is not the Registrar, the Company
shall furnish or cause the Registrar to furnish to the Trustee as of each
Record Date and before each related Interest Payment Date and at such other
times as the Trustee may request in writing a list as of such date and in such
form as the Trustee may reasonably require of the names and addresses of
Noteholders, which list may be conclusively relied upon by the Trustee.
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SECTION 2.06. TRANSFER AND EXCHANGE.
Subject to the provisions of Sections 2.15 and 2.16, when Notes
are presented to the Registrar or a co-Registrar with a request to register
the transfer of such Notes or to exchange such Notes for an equal principal
amount of Notes of other authorized denominations, the Registrar or
co-Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; PROVIDED, HOWEVER, that the
Notes presented or surrendered for registration of transfer or exchange shall
be duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar or co-Registrar, duly executed
by the Holder thereof or his attorney duly authorized in writing. To permit
registrations of transfer and exchanges, the Company shall issue and execute
and the Trustee shall authenticate Notes at the Registrar's or co-Registrar's
request. No service charge shall be made to a Noteholder for any registration
of transfer or exchange. The Company may require from such Noteholder payment
of a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchanges or transfers pursuant to Sections
2.10, 3.06, 4.15, 4.16 or 9.06, in which event the Company shall be
responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register
the transfer of or exchange of any Note (i) during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
Notes and ending at the close of business on the day of such mailing and (ii)
selected for redemption in whole or in part pursuant to Article Three, except
the unredeemed portion of any Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such
Global Note, agree that transfers of beneficial interests in such Global Notes
may be effected only through a book entry system maintained by the Holder of
such Global Note (or its agent) and that ownership of a beneficial interest in
the Note shall be required to be reflected in a book entry.
SECTION 2.07. REPLACEMENT NOTES.
If a mutilated Note is surrendered to the Trustee or if the
Holder of a Note claims that the Note has been lost, destroyed or wrongfully
taken, the Company shall issue and execute and the Trustee shall authenticate
a replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, such Holder must provide an affidavit of lost
certificate and an indemnity bond or other indemnity, sufficient in the
judgment of both the Company and the Trustee, to protect the Company, the
Trustee or any Agent from any loss which any of them may suffer if a Note is
replaced. The Company may charge such Holder for its reasonable, out-of-pocket
expenses in replacing a Note, including reasonable fees and expenses of the
Trustee and counsel, and the Trustee may charge the Company for the Trustee's
reasonable out-of-pocket expenses in replacing such Note. Every replacement
Note shall constitute an additional Obligation of the Company.
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SECTION 2.08. OUTSTANDING NOTES.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to
it for cancellation and those described in this Section as not outstanding.
Subject to the provisions of Section 2.09, a Note does not cease to be
outstanding because the Company, any Guarantor or any of their respective
Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Note is
held by a BONA FIDE purchaser. A mutilated Note ceases to be outstanding upon
surrender of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date, the Paying Agent
holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all
of the principal and interest and Additional Interest due on the Notes payable
on that date and is not prohibited from paying such money to the Holders
thereof pursuant to the terms of this Indenture, then on and after that date
such Notes cease to be outstanding and interest and Additional Interest on
them ceases to accrue.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver, consent or notice,
Notes owned by the Company, any Guarantor or any of their respective
Affiliates shall be considered as though they are not outstanding, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Notes which a Trust
Officer of the Trustee actually knows are so owned shall be so considered. The
Company shall notify the Trustee, in writing, when it or any of its Affiliates
repurchases or otherwise acquires Notes, and of the aggregate principal amount
of such Notes so repurchased or otherwise acquired.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon receipt of a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Notes to be
authenticated and the date on which the temporary Notes are to be
authenticated, and shall direct the Trustee to authenticate such Notes and
certify that all conditions precedent to the issuance of such Notes contained
herein have been complied with. Temporary Notes shall be substantially in the
form of definitive
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Notes but may have variations that the Company and the Trustee consider
appropriate for temporary Notes. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate upon receipt of a written order of
the Company pursuant to Section 2.02 definitive Notes in exchange for
temporary Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and, in accordance with its customary procedures, shall
(subject to the record-retention requirements of the Exchange Act) dispose of
all Notes surrendered for registration of transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new Notes to
replace Notes that it has paid or delivered to the Trustee for cancellation.
If the Company or any Guarantor shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest or Additional
Interest on the Notes, it shall pay the defaulted interest or Additional
Interest, as the case may be, plus (to the extent lawful) any interest payable
on the defaulted interest or Additional Interest, as the case may be, to the
Persons who are Holders on a subsequent special record date, which date shall
be the fifteenth day next preceding the date fixed by the Company for the
payment of defaulted interest or Additional Interest, as the case may be, or
the next succeeding Business Day if such date is not a Business Day. At least
15 days before the subsequent special record date, the Company shall mail to
each Holder, with a copy to the Trustee, a notice that states the subsequent
special record date, the payment date and the amount of defaulted interest or
Additional Interest, as the case may be, and interest payable on such
defaulted interest or Additional Interest, if any, to be paid.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Notes may use one or more "CUSIP"
numbers, and if so, the appropriate CUSIP number(s) shall be included in all
notices of redemption or exchange as a convenience to Holders; PROVIDED that
any such notice may state that no representation is made by the Trustee as to
the correctness or accuracy of any CUSIP number(s) printed in the notice or on
the Notes, and that reliance may be placed only on the other identification
numbers printed on the Notes. The Company shall promptly notify the Trustee of
any change in the CUSIP number.
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SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 10:00 a.m., New York City time, on each Interest
Payment Date and on the Maturity Date, the Company shall have deposited with
the Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date or Maturity Date, as the
case may be, in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date or Maturity Date, as the
case may be.
SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTE.
(a) The Global Note initially shall (i) be registered in the
name of the Depositary or the nominee of such Depositary, (ii) be delivered to
the Trustee as custodian for such Depositary and (iii) bear legends as set
forth in EXHIBIT B.
Members of, or participants in, the Depositary ("AGENT
MEMBERS") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary, or the Trustee as its custodian,
or under the Global Note, and the Depositary may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner
of the Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers
in whole, but not in part, to the Depositary, its successors or their
respective nominees. Interests of beneficial owners in the Global Note may be
transferred or exchanged for Physical Notes in accordance with the rules and
procedures of the Depositary and the provisions of Section 2.16. In addition,
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in the Global Note if (i) the Depositary notifies
the Company that it is unwilling or unable to continue as Depositary for the
Global Note and a successor depositary is not appointed by the Company within
90 days of such notice or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a request from the Depositary to
issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of
the beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver, one or
more Physical Notes of like tenor and amount.
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(d) In connection with the transfer of the entire Global Note
to beneficial owners pursuant to paragraph (b), the Global Note shall be
deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the Global Note, an equal aggregate principal amount of Physical
Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security
delivered in exchange for an interest in the Global Note pursuant to paragraph
(b) or (c) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c)
of Section 2.16, bear the legend regarding transfer restrictions applicable to
the Physical Notes set forth in EXHIBIT A.
(f) The Holder of the Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 2.16. SPECIAL TRANSFER PROVISIONS.
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS AND
NON- U.S. PERSONS. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the Private
Placement Legend, if (x) the requested transfer is after December 11, 2000 and
the transferor certifies that the Restricted Security was not acquired from
the Company or Affiliate of the Company less than two years prior to the date
of the proposed transfer or (y) (1) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB (excluding Non-U.S.
Persons), the proposed transferee has delivered to the Registrar a certificate
substantially in the form of EXHIBIT C hereto or (2) in the case of a transfer
to a Non-U.S. Person, the proposed transferor has delivered to the Registrar a
certificate substantially in the form of EXHIBIT D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of (x)
the certificate, if any, required by paragraph (i) above and (y) instructions
given in accordance with the Depositary's and the Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date
and (if the transfer does not involve a transfer of outstanding Physical
Notes) a decrease in the principal amount of the Global Note in an amount
equal to the principal amount of the beneficial interest in the Global Note to
be transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
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(b) TRANSFERS TO QIBS. The following provisions shall apply
with respect to the registration of any proposed transfer of a Note
constituting a Restricted Security to a QIB (excluding transfers to Non-U.S.
Persons):
(i) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the Company
and the Registrar in writing, that it is purchasing the Note for its own
account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon its foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Notes to be transferred consist of Physical Notes which after transfer are to
be evidenced by an interest in the Global Note, upon receipt by the Registrar
of instructions given in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date and
an increase in the principal amount of the Global Note in an amount equal to
the principal amount of the Physical Notes to be transferred, and the Trustee
shall cancel the Physical Notes so transferred.
(c) PRIVATE PLACEMENT LEGEND. Upon the registration of
transfer, exchange or replacement of Notes not bearing the Private Placement
Legend, the Registrar shall deliver Notes that do not bear the Private
Placement Legend. Upon the registration of transfer, exchange or replacement
of Notes bearing the Private Placement Legend, the Registrar shall deliver
only Notes that bear the Private Placement Legend unless (i) the circumstance
contemplated by paragraph (a)(i)(x) of this Section 2.16 exist or (ii) there
is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to
the Company and the Trustee to the effect that neither such legend nor the
related restrictions on transfer are required in order to maintain compliance
with the provisions of the Act.
(d) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.15 or this Section
2.16 for a period of three years. The Company shall have the right to inspect
and make copies of all such
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letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to Paragraph Six
of the Notes, it shall notify both the Trustee and the Paying Agent in writing
of the Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this Section
3.01 at least 30 days before the Redemption Date (unless a shorter notice
period shall be satisfactory to the Trustee, as evidenced in a writing signed
on behalf of the Trustee), together with an Officers' Certificate and Opinion
of Counsel stating that such redemption shall comply with the conditions
contained herein and in the Notes.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If fewer than all of the Notes are to be redeemed, the Trustee
shall select the Notes to be redeemed on a PRO RATA basis, by lot or in such
other fair and appropriate manner chosen at the discretion of the Trustee and,
if the Notes are listed on any national securities exchange, by a method that
complies with the requirements of such exchange; PROVIDED, HOWEVER, that if
partial redemption is made with the proceeds of a Public Equity Offering or a
Private Equity Offering prior to December 15, 2001, selection of the Notes or
portions thereof for redemption shall be made by the Trustee only on a PRO
RATA basis or on as nearly a PRO RATA basis as is practicable (subject to the
applicable procedures of the Depositary) unless such method is otherwise
prohibited. The Trustee shall make the selection from the Notes outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Notes selected for redemption and, in the case of any Note
selected for partial redemption, the principal amount thereof to be redeemed.
Notes in denominations of $1,000 may be redeemed only in whole. The Trustee
may select for redemption portions (equal to $1,000 or any integral multiple
thereof) of the principal of Notes that have denominations larger than $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail or cause to be mailed a notice of redemption by
first-class mail, postage prepaid, to each Holder (at its registered address)
whose Notes are to be redeemed, with a copy to the Trustee and any Paying
Agent.
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Each notice for redemption shall identify the Notes to be
redeemed (including the CUSIP numbers of such Notes) and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest and
Additional Interest, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such
redemption is being made;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest and
Additional Interest, if any;
(6) that, unless (a) the Company defaults in making the
redemption payment or (b) such redemption payment is prohibited pursuant to
Article Ten or Eleven hereof or otherwise, interest and Additional Interest on
Notes called for redemption ceases to accrue on and after the Redemption Date,
and the only remaining right of the Holders of such Notes is to receive
payment of the Redemption Price plus accrued interest and Additional Interest,
if any, upon surrender to the Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of such
Note to be redeemed and that, on or after the Redemption Date, and upon
surrender of such Note, a new Note or Notes in the aggregate principal amount
equal to the unredeemed portion thereof will be issued; and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be redeemed, as
well as the aggregate principal amount of Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding after such partial
redemption.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.03, Notes called for redemption become due and payable on the Redemption
Date and at the Redemption Price plus accrued interest and Additional
Interest, if any. Upon surrender to the Trustee or Paying Agent, such Notes
called for redemption, unless prohibited pursuant to Article Ten or Eleven or
otherwise pursuant to this Indenture, shall be paid at the Redemption Price
(which shall include accrued interest and Additional Interest thereon to the
Redemption Date), but installments of interest and Additional Interest, the
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maturity of which is on or prior to the Redemption Date, shall be payable to
Holders of record at the close of business on the relevant record dates
referred to in the Notes.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before noon New York City time on the day of the
Redemption Date, the Company shall deposit with the Paying Agent in
immediately available funds U.S. Legal Tender sufficient to pay the Redemption
Price plus accrued interest and Additional Interest, if any, of all Notes or
portions thereof to be redeemed on that date. The Paying Agent shall promptly
return to the Company any U.S. Legal Tender so deposited which is not required
for that purpose, except with respect to monies owed as obligations to the
Trustee pursuant to Article Seven.
If the Company complies with the preceding paragraph and
payment of the Notes is not prohibited under Article Ten or Eleven or
otherwise, then, unless the Company defaults in the payment of such Redemption
Price plus accrued interest and Additional Interest, if any, interest and
Additional Interest on the Notes to be redeemed will cease to accrue on and
after the applicable Redemption Date, whether or not such Notes are presented
for payment.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is to be redeemed in part, the
Company shall issue and execute, and the Trustee shall authenticate for the
Holder, a new Note or Notes equal in principal amount to the unredeemed
portion of the Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay the principal of and interest and
Additional Interest on the Notes on the dates and in the manner provided in
the Notes and in this Indenture. An installment of principal of or interest
and Additional Interest, if any, on the Notes shall be considered paid on the
date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate of the Company) holds, as of 11:00 a.m., on that date U.S. Legal
Tender designated for and sufficient to pay the installment in full and is not
prohibited from paying such money to the Holders pursuant to the terms of this
Indenture.
The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and on overdue installments of interest and
Additional Interest, if any, (without regard to any applicable grace periods)
from time to time on demand at the rate borne by the Notes. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
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SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain the office or agency required under
Section 2.03. The Company shall give prior written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 12.02.
SECTION 4.03. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five, the Company
shall do or cause to be done, at its own cost and expense, all things
necessary to preserve and keep in full force and effect its corporate
existence and the corporate existence of each of its Restricted Subsidiaries
in accordance with the respective organizational documents of each such
Restricted Subsidiary and the material rights (charter and statutory) and
franchises of the Company and each such Restricted Subsidiary; PROVIDED,
HOWEVER, that the Company shall not be required to preserve, with respect to
itself, any right or franchise and, with respect to any of its Restricted
Subsidiaries, any such existence, right or franchise, if the Board of
Directors of the Company shall determine in good faith that the preservation
thereof is no longer desirable in the conduct of the business of the Company
and its Restricted Subsidiaries, taken as a whole.
SECTION 4.04. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon it or any
of its Subsidiaries or its Properties or any of its Subsidiaries' Properties
and (ii) all material lawful claims for labor, materials and supplies that, if
unpaid, might by law become a Lien upon its Properties or any of its
Subsidiaries' Properties, except, in each case, as would not be, in the
aggregate, reasonably likely to have a material adverse effect on the business
and financial condition of the Company and its Restricted Subsidiaries, taken
as a whole; PROVIDED, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings properly instituted and diligently conducted
for which adequate reserves, to the extent required under GAAP, have been
taken.
SECTION 4.05. MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its Properties in good working order and condition
(subject to ordinary wear and tear) and make all necessary repairs, renewals,
replacements,
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additions, betterments and improvements thereto and actively conduct and carry
on its business, unless the failure to do so, in each case, would not be, in
the aggregate, reasonably likely to have a material adverse effect on the
business and financial condition of the Company and its Restricted
Subsidiaries, taken as a whole; PROVIDED, that nothing in this Section 4.05
shall prevent the Company or any of its Restricted Subsidiaries from
discontinuing the operation and maintenance of any of its Properties if such
discontinuance is, in the ordinary course of business or, in the good faith
judgment of the Board of Directors or other governing body of the Company or
the Restricted Subsidiary concerned, as the case may be, desirable in the
conduct of its businesses and is not disadvantageous in any material respect
to the Holders.
(b) The Company shall maintain insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the good faith
judgment of the Company, are adequate and appropriate for the conduct of the
business of the Company and its Restricted Subsidiaries in a prudent manner,
with reputable insurers or with the government of the United States of America
or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as shall be consistent with past practice or
customary, in the good faith judgment of the Company, for companies similarly
situated in the industry, except for any omissions thereof which would not be,
in the aggregate, reasonably likely to have a material adverse effect on the
business and financial condition of the Company and its Restricted
Subsidiaries, taken as a whole.
SECTION 4.06. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of the Company's fiscal year, an Officers' Certificate, one of
the signers of which shall be the principal executive officer, the principal
financial officer or the principal accounting officer of the Company, which
complies with TIA ss. 314(a)(4) stating that a review of its activities during
the preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether it has kept, observed, performed
and fulfilled its Obligations under this Indenture and further stating, as to
each such Officer signing such certificate, that to the best of such Officer's
knowledge the Company during such preceding fiscal year has, in all material
respects, kept, observed, performed and fulfilled each and every such covenant
and the Obligations contained in this Indenture and the Notes and no Default
or Event of Default occurred during such year and at the date of such
certificate there is no Default or Event of Default that has occurred and is
continuing or, if such signers do know of such Default or Event of Default,
the certificate shall describe the Default or Event of Default and its status
with particularity. The Officers' Certificate shall also notify the Trustee
should the Company elect to change the manner in which it fixes its fiscal
year end.
(b) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 12.02
hereof, by registered or certified mail or
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by facsimile transmission followed by hard copy by registered or certified
mail an Officers' Certificate specifying such event, notice or other action
(including any action the Company is taking or proposes to take in respect
thereof) as promptly as reasonably possible and in any event within thirty
days after the Company becomes aware of such occurrence.
SECTION 4.07. COMPLIANCE WITH LAWS.
The Company shall, and shall cause each of its Subsidiaries to,
comply with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of its businesses and the ownership of its properties, except for
such noncompliances as are not in the aggregate reasonably likely to have a
material adverse effect on the business or financial condition of the Company
and its Subsidiaries, taken as a whole.
SECTION 4.08. SEC REPORTS.
(a) The Company shall file with the SEC all information,
documents and reports to be filed with the SEC pursuant to Sections 13 or
15(d) of the Exchange Act, whether or not the Company is subject to such
filing requirements so long as the SEC will accept such filings. The Company
(at its own expense) shall file with the Trustee within 15 days after it files
them with the SEC, copies of the quarterly and annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Company files with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. Upon qualification of this Indenture under the TIA, the Company shall
also comply with the provisions of TIA ss. 314(a).
(b) At the Company's expense, regardless of whether the Company
is required to furnish such reports and other information referred to in
paragraph (a) above to its stockholders pursuant to the Exchange Act, from the
Issue Date the Company will file with the SEC, to the extent permitted, such
annual reports and other information, documents and other reports specified in
Sections 13 or 15(d) of the Exchange Act and the Company will cause such to be
mailed to the Trustee and the Holders at their addresses appearing in the
register of Notes maintained by the Registrar so long as any Notes are
outstanding.
(c) The Company shall provide to any Holder any information
reasonably requested by such Holder concerning the Company (including
financial statements) necessary in order to permit such Holder to sell or
transfer Notes in compliance with Rule 144A under the Act.
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(d) Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein
or determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.09. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company and each Guarantor covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or any such Guarantor, as the case may be, from paying all or any
portion of the principal of or interest or Additional Interest, if any, on the
Notes or performing its Guarantee, as the case may be and as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company and each Guarantor, if any, hereby
expressly waives all benefit or advantage of any such law, and covenants that
it shall not hinder, delay or impede the execution of any power herein granted
to the Trustee, but shall suffer and permit the execution of every such power
as though no such law had been enacted.
SECTION 4.10. LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions
payable in Qualified Capital Stock of the Company) on or in respect of shares
of the Company's Capital Stock to holders of such Capital Stock; (b) declare
or pay any dividend or make any distribution on or in respect of shares of any
Restricted Subsidiary's Capital Stock other than (i) to the Company or any of
its Restricted Subsidiaries or (ii) to all holders of any class, series or the
same type of Capital Stock of such Restricted Subsidiary on a pro rata basis;
provided that in the case of this clause (b) such dividend or distribution
shall not constitute Indebtedness or Disqualified Stock; (c) purchase, redeem
or otherwise acquire or retire for value any Capital Stock of the Company or
any warrants, rights or options to purchase or acquire shares of any class of
such Capital Stock, other than repurchases of equity interests of the Company
deemed to occur upon the exercise of options to acquire Capital Stock of the
Company if such equity interests represent a portion of the exercise price of
such options; (d) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes or the Guarantees other than (1) Indebtedness of
the Company to a Wholly Owned Restricted Subsidiary and (2) Seller Notes; or
(e) make any Investment (other than Permitted
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Investments) (each of the actions set forth in clauses (a), (b), (c), (d) and
(e) being referred to as a "RESTRICTED PAYMENT"), if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default
or an Event of Default shall have occurred and be continuing, or (ii) the
Company is not able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with Section 4.12, or (iii) the
aggregate amount of Restricted Payments (including such proposed Restricted
Payment) made subsequent to the Issue Date (the amount expended for such
purposes, if other than in cash, being the fair market value of such property
as determined reasonably and in good faith by the Board of Directors of the
Company) shall exceed the sum of the following amounts (without duplication):
(1) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the
Company accrued on a cumulative basis during the period beginning on the first
day of the fiscal quarter immediately following the Issue Date and ending on
the last day of the last fiscal quarter preceding the date the Restricted
Payment occurs (the "REFERENCE DATE") (treating such period as a single
accounting period); plus (2) 100% of the aggregate net cash proceeds received
by the Company from any Person (other than a Subsidiary of the Company) from
the issuance and sale subsequent to the Issue Date and on or prior to the
Reference Date of Qualified Capital Stock of the Company or any options,
warrants or other rights to acquire Qualified Capital Stock of the Company;
plus (3) 100% of the aggregate net cash proceeds received subsequent to the
Issue Date by the Company from any Person (other than a Subsidiary of the
Company) from the issuance or sale of debt securities or shares of
Disqualified Capital Stock that have been converted into or exchanged for
Qualified Capital Stock, together with the aggregate cash received by the
Company at the time of such conversion or exchange; plus (4) 100% of the
aggregate net cash proceeds of any equity contribution received by the Company
subsequent to the Issue Date from a holder of the Company's Capital Stock
(other than from a Subsidiary of the Company); plus (5) the lesser of (y) an
amount equal to the net reduction in Investments made after the Issue Date
pursuant to clauses (a) and (b) of the first paragraph of this Section 4.10 in
any Person resulting from payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in each case to
the Company or any Restricted Subsidiary (except to the extent any such
payment is included in the calculation of Consolidated Net Income), or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries valued
in each case as provided in the definition of "Investments," and (z) the
amount of Investments previously made by the Company or any Restricted
Subsidiary in such Person.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any
dividend or the consummation of any irrevocable redemption within 60 days
after the date of declaration of such dividend or the giving of notice of such
irrevocable redemption if the dividend or redemption would have been permitted
on the date of declaration or the giving of such irrevocable redemption
notice; (2) if no Default or Event of Default shall have occurred and be
continuing, the repurchase, redemption or other acquisition or retirement of
any shares of Capital Stock of the Company, either (i) solely in exchange
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for shares of Qualified Capital Stock of the Company or any options, warrants
or other rights to acquire Qualified Capital Stock of the Company or (ii)
through the application of net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of shares of Qualified
Capital Stock of the Company, or any options, warrants, or other rights to
acquire Qualified Capital Stock of the Company; (3) if no Default or Event of
Default shall have occurred and be continuing, the acquisition for value or
payment of principal of any Indebtedness of the Company that is subordinate or
junior in right of payment to the Notes either (i) solely in exchange for
shares of Qualified Capital Stock of the Company or any options, warrants or
other rights to acquire Qualified Capital Stock of the Company or (ii) through
the application of net proceeds of (A) a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of shares of Qualified
Capital Stock of the Company or any options, warrants or other rights to
acquire Qualified Capital Stock of the Company, or (B) Refinancing
Indebtedness; (4) if no Default or Event of Default shall have occurred and be
continuing, repurchases by the Company of Common Stock of the Company from
employees of the Company or any of its Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of
such employees, in an aggregate amount not to exceed $1.0 million in any
calendar year; and (5) other Restricted Payments in an aggregate amount not to
exceed $15.0 million.
In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of the first
paragraph of this Section 4.10, amounts expended pursuant to clauses (1),
(2)(ii), 3(ii)(A), (4) and (5) of the immediately preceding paragraph shall be
included in such calculation.
Not later than the date any Restricted Payment is made, the
Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment complies with this Indenture and setting forth in
reasonable detail the basis upon which the required calculations were
computed, which calculations shall be based upon the Company's latest
available public quarterly financial statements.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each, an "Affiliate Transaction"), other than (x) Affiliate Transactions
permitted under paragraph (b) below and (y) Affiliate Transactions on terms
that are no less favorable than those that might reasonably have been obtained
in a comparable transaction at such time on an arm's-length basis from a
Person that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate Transactions
which is similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $5.0 million shall be
approved by the Board of Directors of the Company or such Restricted
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Subsidiary, as the case may be, such approval to be evidenced by a Board
Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary of the Company enters into an Affiliate Transaction (or
a series of related Affiliate Transactions related to a common plan) that
involves an aggregate fair market value of more than $10.0 million, the
Company or such Restricted Subsidiary, as the case may be, shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view,
from an Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) above shall not
apply to (i) reasonable fees and compensation paid to, loans or advances to,
and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Restricted Subsidiary of the Company as
determined in good faith by the Company's Board of Directors or senior
management; (ii) transactions exclusively between or among the Company and any
of its Wholly Owned Restricted Subsidiaries or exclusively between or among
such Wholly Owned Restricted Subsidiaries, provided such transactions are not
otherwise prohibited by this Indenture; (iii) any payments or transactions
pursuant to agreements in effect as of the Issue Date or any amendment thereto
or any transaction contemplated thereby (including pursuant to any amendment
thereto) in any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Holders in any
material respect than the original agreement as in effect on the Issue Date;
(iv) Restricted Payments permitted by this Indenture; (v) any Investments by
an Affiliate of the Company in the Capital Stock (other than Disqualified
Stock) of the Company or any Restricted Subsidiary of the Company; and (vi)
any transaction, the terms of which are entered into on an arm's-length basis
with a Person that is not then an Affiliate, which becomes an Affiliate
Transaction upon the consummation thereof.
SECTION 4.12. LIMITATION ON INCURRENCE OF ADDITIONAL
INDEBTEDNESS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee, acquire, become liable, contingently or otherwise, with respect to,
or otherwise become responsible for payment of (collectively, "incur") any
Indebtedness (other than Permitted Indebtedness); provided, however, that if
no Default or Event of Default shall have occurred and be continuing at the
time of or as a consequence of the incurrence of any such Indebtedness, the
Company or any Restricted Subsidiary may incur Indebtedness (including,
without limitation, Acquired Indebtedness), if on the date of the incurrence
of such Indebtedness, after giving effect to the incurrence thereof, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to
1.0. For purposes of determining any particular amount of Indebtedness under
this Section 4.12, guarantees, Liens or
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obligations with respect to letters of credit supporting Indebtedness
otherwise included in the determination of such particular amount shall not be
included.
SECTION 4.13. LIMITATION ON DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or
make any other distributions on or in respect of its Capital Stock; (b) make
loans or advances or to pay any Indebtedness or other obligation owed to the
Company or any other Restricted Subsidiary of the Company; or (c) transfer any
of its property or assets to the Company or any other Restricted Subsidiary of
the Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture and the Notes; (3) customary
non-assignment provisions of any contract or any lease governing a leasehold
interest of any Restricted Subsidiary of the Company; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired,
provided that such Acquired Indebtedness was permitted by the terms of this
Indenture; (5) the Credit Agreement; (6) agreements existing on the Issue Date
to the extent and in the manner such agreements are in effect on the Issue
Date; (7) restrictions on the transfer of assets subject to any Lien permitted
under this Indenture imposed by the holder of such Lien; (8) restrictions
imposed by any agreement with respect to an Asset Sale permitted under this
Indenture to any Person pending the closing of such sale; (9) any agreement or
instrument governing Capital Stock of any Person that is acquired; (10)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (c) above;
or (11) any agreement governing Refinancing Indebtedness issued, assumed or
incurred pursuant to an agreement referred to in clause (2), (4), (5) or (6)
above; provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of the
Company in its reasonable and good faith judgment than the provisions relating
to such encumbrance, or restriction contained in agreements referred to in
such clause (2), (4), (5) or (6), respectively.
SECTION 4.14. PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED
DEBT.
The Company shall not incur or permit to exist Indebtedness
that is senior in right of payment to the Notes and subordinate or junior in
right of payment to any other Senior Debt of the Company. No Guarantor will
incur or permit to exist Indebtedness that is subordinate or junior in right
of payment to Guarantor Senior Debt of such Guarantor and senior in right of
payment to such Guarantor's Guarantee.
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SECTION 4.15. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company
will be required to make an offer to purchase all or a portion of a Holder's
Notes (in multiples of $1,000) pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest and Additional Interest, if
any (the "Change of Control Purchase Price"), to the date of purchase (the
"Change of Control Payment Date"). The Company will not be required to make a
Change of Control Offer if a third party makes a Change of Control Offer that
would be in compliance with the provisions described in this Section 4.15 if
it were made by the Company, and such third party purchases (for the
consideration referred to in the immediate preceding sentence) the Notes
validly tendered and not withdrawn.
(b) Within 30 days following the date upon which the Change of
Control occurred, the Company shall send, by first class mail, a notice to
each Holder, with a copy to the Trustee, which notice shall govern the terms
of the Change of Control Offer. The notice to the Holders shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.15 and that all Notes tendered will be accepted for payment;
(2) the purchase price (including the amount of accrued
interest) and the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed, other than as may be
required by law) (the "CHANGE OF CONTROL PAYMENT DATE");
(3) that any Note not tendered will continue to accrue interest
and Additional Interest, if interest or Additional Interest, is then accruing;
(4) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest and Additional Interest after the Change
of Control Payment Date;
(5) that Holders electing to have a Note purchased pursuant to
a Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third business day prior to the Change of Control
Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than 5:00 p.m., New York City time, on
the second Business Day preceding the Change of Control Payment Date, a
facsimile transmission
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or letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased; and
(7) the circumstances and relevant facts regarding such Change
of Control.
On or before the Change of Control Payment Date, the Company
shall (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal
Tender sufficient to pay the purchase price plus accrued interest and
Additional Interest, if any, of all Notes or portions thereof so tendered and
accepted and (iii) deliver to the Trustee Notes so accepted together with an
Officers' Certificate stating the aggregate principal amount of Notes or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail or deliver to the Holders of Notes so accepted payment in an
amount equal to the purchase price plus accrued interest and Additional
Interest, if any, and the Company shall execute and issue, and the Trustee
shall promptly authenticate and mail or deliver to such Holders new Notes
equal in principal amount to any unpurchased portion of the Notes surrendered.
Any Notes not so accepted shall be promptly mailed or delivered by the Company
to the Holder thereof. The Company shall publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date. For purposes of this Section 4.15, the Trustee shall act
as the Paying Agent.
(c) Prior to the mailing of the notice referred to in clause
(b) above, but in any event within 30 days following any Change of Control,
the Company shall (i) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement and all other Senior Debt the terms of
which require repayment upon a Change of Control, or offer to repay in full
and terminate all commitments under all Indebtedness under the Credit
Agreement and all such other Senior Debt and repay the Indebtedness owed to
each lender which has accepted such offer or (ii) obtain the requisite
consents under the Credit Agreement and all such other Senior Debt to permit
the repurchase of the Notes as provided below. The Company shall first comply
with the covenant in the immediately preceding sentence before it shall be
required to repurchase Notes in the event of a Change of Control; PROVIDED
that the Company's failure to comply with the covenant described in the
immediately preceding sentence shall constitute an Event of Default described
in Section 6.01(3) and not in Section 6.01(2).
The Company shall comply with all applicable securities laws
and regulations in connection with any Change of Control Offer, including Rule
14e-1 under the Exchange Act. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Section
4.15, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under
this Section 4.15 by virtue thereof.
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SECTION 4.16. LIMITATION ON ASSET SALES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or
the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors); and (ii) at least 75% of the
consideration received by the Company or the Restricted Subsidiary, as the
case may be, from such Asset Sale shall be in the form of cash or Cash
Equivalents and is received at the time of such disposition. Within 365 days
of the consummation of an Asset Sale, the Company shall apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale either: (A) to prepay any Senior Debt or Guarantor Senior Debt and, in
the case of any Senior Debt or Guarantor Senior Debt under any revolving
credit facility, effect a permanent reduction in the availability under such
revolving credit facility, (B) to make an investment in properties and assets
or Persons that replace the properties and assets that were the subject of
such Asset Sale or in properties and assets that will be used in the business
of the Company and its Restricted Subsidiaries as existing on the Issue Date
or in businesses reasonably related thereto ("REPLACEMENT ASSETS"), or (C) a
combination of prepayment and investment permitted by the foregoing clauses
(A) and (B). Pending the final application of any such Net Cash Proceeds, the
Company may temporarily reduce Senior Debt or otherwise invest such Net Cash
Proceeds in any manner that is not prohibited by this Indenture. On the 366th
day after an Asset Sale or such earlier date, if any, as the Board of
Directors of the Company or of such Restricted Subsidiary determines not to
apply the Net Cash Proceeds relating to such Asset Sale as set forth in
clauses (A), (B) and (C) of the second sentence of this paragraph (each, a
"NET PROCEEDS OFFER TRIGGER DATE"), such aggregate amount of Net Cash Proceeds
which have not been applied on or before such Net Proceeds Offer Trigger Date
as permitted in clauses (A), (B) and (C) of the second sentence of this
paragraph (each, a "NET PROCEEDS OFFER AMOUNT") shall be applied by the
Company or such Restricted Subsidiary to make an offer to purchase (the "NET
PROCEEDS OFFER") on a date (the "NET PROCEEDS OFFER PAYMENT DATE") not less
than 30 nor more than 45 days following the applicable Net Proceeds Offer
Trigger Date, from all Holders on a pro rata basis, that amount of Notes equal
to the Net Proceeds Offer Amount at a price equal to 100% of the principal
amount of the Notes to be purchased, plus accrued and unpaid interest and
Additional Interest, if any, thereon to the date of purchase. If at any time
any non-cash consideration received by the Company or any Restricted
Subsidiary of the Company, as the case may be, in connection with any Asset
Sale is converted into or sold or otherwise disposed of for cash (other than
interest received with respect to any such non-cash consideration), then such
conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance
with this Section 4.16. The Company may defer the Net Proceeds Offer until
there is an aggregate unutilized Net Proceeds Offer Amount equal to or in
excess of $10.0 million resulting from one or more Asset Sales (at which time,
the entire unutilized Net Proceeds Offer Amount, and not just the
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amount in excess of $10.0 million, shall be applied as required pursuant to
this paragraph).
In the event of the transfer of substantially all (but not all)
of the property and assets of the Company and its Restricted Subsidiaries as
an entirety to a Person in a transaction permitted under Section 5.01, the
successor corporation shall be deemed to have sold the properties and assets
of the Company and its Restricted Subsidiaries not so transferred for purposes
of this Section 4.16, and shall comply with the provisions of this Section
4.16 with respect to such deemed sale as if it were an Asset Sale. In
addition, the fair market value of such properties and assets of the Company
or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net
Cash Proceeds for purposes of this Section 4.16.
Each Net Proceeds Offer will be mailed to the record Holders as
determined on a date shown on the register of Holders within 30 days following
the Net Proceeds Offer Trigger Date, with a copy to the Trustee. A Net
Proceeds Offer shall remain open for a period of 20 business days or such
longer period as may be required by law. The notice shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Net Proceeds Offer and shall state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to
Section 4.16 and that all Notes tendered will be accepted for payment;
PROVIDED, HOWEVER, that if the aggregate principal amount of Notes tendered in
a Net Proceeds Offer plus accrued interest and Additional Interest, if any, at
the expiration of such offer exceeds the aggregate amount of the Net Proceeds
Offer, the Company shall select the Notes to be purchased on a PRO RATA basis
(based on amounts tendered) (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000 or
multiples thereof shall be purchased);
(2) the purchase price (including the amount of accrued
interest and Additional Interest, if any) and the purchase date (which shall
be no earlier than 30 days nor later than 60 days from the date such notice is
mailed, other than as may be required by law) (the "PROCEEDS PURCHASE DATE");
(3) that any Note not tendered will continue to accrue interest
and Additional Interest if interest or Additional Interest is then accruing;
(4) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Net Proceeds Offer
shall cease to accrue interest and Additional Interest after the Proceeds
Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to
a Net Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at
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the address specified in the notice prior to 5:00 p.m., New York City time, on
the second Business Day prior to the Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than 5:00 p.m., New York City time, on
the second Business Day preceding the Proceeds Purchase Date, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Notes the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Note purchased; and
(7) that Holders whose Notes were purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered.
On or before the Proceeds Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (b)(1) above,
(ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price of all Notes to be purchased and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to the Holders of Notes so accepted payment in an amount equal
to the purchase price plus accrued interest and Additional Interest, if any,
and the Company shall execute and issue, and the Trustee shall promptly
authenticate and mail or deliver to such Holders new Notes equal in principal
amount to any unpurchased portion of the Notes surrendered. The Company shall
publicly announce the results of the Net Proceeds Offer on or as soon as
practicable after the Proceeds Purchase Date. For purposes of this Section
4.16, the Trustee shall act as the Paying Agent.
If the aggregate purchase price of Notes tendered pursuant to
the Net Proceeds Offer is less than the Net Cash Proceeds allotted to the
purchase of the Notes, the Company may apply the remaining Net Cash Proceeds
for any purpose not otherwise prohibited by this Indenture.
The Company will comply with all applicable securities laws in
connection with any Net Proceeds Offer, including Rule l4e-1 under the
Exchange Act. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Section 4.16, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section 4.16 by virtue
thereof.
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SECTION 4.17. LIMITATION ON PREFERRED STOCK OF RESTRICTED
SUBSIDIARIES.
The Company shall not permit any of its Restricted Subsidiaries
to issue any Preferred Stock (other than to the Company or to a Wholly Owned
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company.
SECTION 4.18. LIMITATION ON LIENS.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property
or assets of the Company or any of its Restricted Subsidiaries whether owned
on the Issue Date or acquired after the Issue Date, or any proceeds therefrom,
or assign or otherwise convey any right to receive income or profits
therefrom, except for: (A) Liens equally and ratably securing (i) Indebtedness
that ranks pari passu with the Notes and the Guarantees, and (ii) the Notes
and the Guarantees; (B) Liens existing as of the Issue Date to the extent and
in the manner such Liens are in effect on the Issue Date; (C) Liens securing
Senior Debt and Liens securing Guarantor Senior Debt; (D)Liens securing the
Notes and the Guarantees; (E) Liens of the Company or a Wholly Owned
Restricted Subsidiary of the Company on assets of any Subsidiary of the
Company; (F) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which has been secured by a Lien permitted under
this Indenture and which has been incurred in accordance with the provisions
of this Indenture; provided, however, that such Liens (x) are no less
favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (y) do not extend to or cover any property or assets of the
Company or any of its Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and (G) Permitted Liens.
SECTION 4.19. CONDUCT OF BUSINESS.
The Company and its Restricted Subsidiaries shall not engage in
any businesses which are not the same, similar or related to the businesses in
which the Company and its Restricted Subsidiaries are engaged on the Issue
Date.
SECTION 4.20. ADDITIONAL SUBSIDIARY GUARANTEES; ADDITIONAL
PLEDGE OF FOREIGN RESTRICTED SUBSIDIARY STOCK.
If (a) the Company or any of its Restricted Subsidiaries
acquires or creates another Restricted Subsidiary or (b) an Unrestricted
Subsidiary of the Company is redesignated as a Restricted Subsidiary or
otherwise ceases to be an Unrestricted Subsidiary and thereafter is a
Restricted Subsidiary, then such newly acquired, created or redesignated
Restricted Subsidiary (other than a Foreign Restricted Subsidiary) shall (i)
execute and deliver to the Trustee a supplemental indenture in form reasonably
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satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Notes and
this Indenture on the terms set forth in this Indenture and (ii) deliver to
the Trustee an Opinion of Counsel that such supplemental indenture has been
duly authorized, executed and delivered by such Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary. Thereafter, such Restricted Subsidiary shall be a
Guarantor for all purposes of this Indenture.
If (a) the Company or any of its Restricted Subsidiaries
acquires or creates another Foreign Restricted Subsidiary or (b) an
Unrestricted Subsidiary of the Company is redesignated as a Foreign Restricted
Subsidiary or otherwise ceases to be an Unrestricted Subsidiary and thereafter
is a Foreign Restricted Subsidiary, then the Company shall (i) execute and
deliver to the Trustee a pledge agreement in form reasonably satisfactory to
the Trustee pursuant to which the Company shall pledge to the Trustee for the
benefit of the Holders 65% of the outstanding Capital Stock and any warrants,
rights or options to purchase or acquire shares of any class of such Capital
Stock of such Foreign Restricted Subsidiary to secure the Company's
obligations under the Notes; provided, however, that if the Company is
prohibited from pledging the Capital Stock of such foreign Subsidiary by the
Credit Agreement or otherwise, then such foreign Subsidiary shall not be
permitted to be a Foreign Restricted Subsidiary; and (ii) deliver to the
Trustee an Opinion of Counsel that such pledge agreement has been duly
authorized, executed and delivered by the Company and constitutes a legal,
valid, binding and enforceable obligation of the Company.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC.
(a) The Company shall not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit
any Restricted Subsidiary of the Company to sell, assign, transfer, lease,
convey or otherwise dispose of) all or substantially all of the Company's
assets (determined on a consolidated basis for the Company and the Company's
Restricted Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless:
(i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety (the "SURVIVING ENTITY") (x) shall
be a corporation organized and validly existing under the laws of the United
States or any State thereof or the District of Columbia and (y) shall
expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee),
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executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest and Additional Interest, if
any, on all of the Notes and the performance of every covenant of the Notes,
this Indenture and the Registration Rights Agreement on the part of the
Company to be performed or observed;
(ii) immediately after giving effect to such transaction and
the assumption contemplated by clause (i)(2)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, (1) shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction and (2) shall be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant
to Section 4.12;
(iii) immediately before and immediately after giving effect to
such transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred and be continuing; and
(iv) the Company or the Surviving Entity shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply with
the applicable provisions of this Indenture and that all conditions precedent
in this Indenture relating to such transaction have been satisfied.
(b) For purposes of clause (a) above, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one
or more Restricted Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
(c) Each Guarantor (other than any Guarantor whose Guarantee is
to be released in accordance with the terms of the Guarantee and this
Indenture in connection with any transaction complying with the provisions of
Section 4.16) will not, and the Company will not cause or permit any Guarantor
to, consolidate with or merge with or into any Person other than the Company
or any other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) is a corporation
organized and existing under the laws of the United States or any State
thereof or the District of Columbia; (ii) such surviving entity (if other than
the Guarantor) assumes by supplemental indenture all of the obligations of the
Guarantor on the Guarantee; (iii) immediately after giving effect to such
transaction, no Default or
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Event of Default shall have occurred and be continuing; and (iv) immediately
after giving effect to such transaction and the use of any net proceeds
therefrom on a pro forma basis, the Company could satisfy the provisions of
clause (a)(ii) of the first paragraph of this Section 5.01.
In connection with any merger or consolidation of a Guarantor
with and into the Company (with the Company being the surviving entity) or
another Guarantor that is a Wholly Owned Restricted Subsidiary of the Company,
the Company need only comply with the clause (iv) of Section 5.01(a).
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation, combination or merger or any transfer
of all or substantially all of the assets of the Company in accordance with
this Article Five, in which the Company is not the continuing corporation, the
Surviving Entity shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Indenture and the Notes with
the same effect as if such surviving entity had been named as such, and
thereafter the predecessor corporation shall be relieved of all Obligations
and covenants under this Indenture and the Notes; PROVIDED that solely for the
purpose of calculating amounts described in clause (c) of the first paragraph
of Section 4.10, any such Surviving Person shall only be deemed to have
succeeded to and be substituted for the Company with respect to the period
subsequent to the effective time of this transaction (and the Company shall be
deemed to be the "Company" for such purposes for all prior periods).
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" is:
(1) the failure to pay interest or Additional Interest on any
Notes when the same becomes due and payable and the default continues for a
period of 30 days (whether or not such payment shall be prohibited by the
subordination provisions of this Indenture);
(2) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered pursuant
to a Change of Control Offer or a Net Proceeds Offer) (whether or not such
payment shall be prohibited by the subordination provisions of this
Indenture);
(3) default in the observance or performance of any other
covenant or agreement contained in this Indenture which default continues for
a period of 30 days
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after the Company receives written notice specifying the default (and
demanding that such default be remedied) from the Trustee or the Holders of at
least 25% of the outstanding principal amount of the Notes (except in the case
of a default with respect to Section 5.01, which will constitute an Event of
Default with such notice requirement but without such passage of time
requirement);
(4) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount of
any Indebtedness of the Company or any Restricted Subsidiary of the Company
(including, without limitation, Indebtedness under the Credit Agreement) and
such failure continues for a period of 20 days or more, or the acceleration of
the final stated maturity of any such Indebtedness (which acceleration is not
rescinded, annulled or otherwise cured within 20 days of receipt by the
Company or such Restricted Subsidiary of notice of any such acceleration) if
the aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to pay
principal at final maturity or which has been accelerated, in each case with
respect to which the 20- day period described above has passed, aggregates
$10,000,000 or more at any time;
(5) one or more judgments in an aggregate amount in excess of
$3,000,000 shall have been rendered against the Company or any of its
Significant Subsidiaries and such judgments remain undischarged, unpaid or
unstayed within a period of 60 days after such judgment or judgments become
final and non-appealable;
(6) the Company or any of its Significant Subsidiaries (A)
commences a voluntary case or proceeding under any Bankruptcy Law with respect
to itself, (B) consents to the entry of a judgment, decree or order for relief
against it in an involuntary case or proceeding under any Bankruptcy Law, (C)
consents to the appointment of a Custodian of it or for substantially all of
its property, (D) consents to or acquiesces in the institution of a bankruptcy
or an insolvency proceeding against it, (E) makes a general assignment for the
benefit of its creditors, or (F) takes any corporate action to authorize or
effect any of the foregoing;
(7) a court of competent jurisdiction enters a judgment, decree
or order for relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case or proceeding under any Bankruptcy Law,
which shall (A) approve as properly filed a petition seeking reorganization,
arrangement, adjustment or composition in respect of the Company or any of its
Significant Subsidiaries, (B) appoint a Custodian of the Company or any of its
Significant Subsidiaries or for substantially all of its property or (C) order
the winding-up or liquidation of its affairs; and such judgment, decree or
order shall remain unstayed and in effect for a period of 60 consecutive days;
or
(8) any of the Guarantees of a Guarantor that is a Significant
Subsidiary ceases to be in full force and effect or any of such Guarantees is
declared to be null and void and unenforceable or any of such Guarantees is
found to be invalid or
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any of such Guarantors denies its liability under its Guarantee (other than by
reason of release of such Guarantor in accordance with the terms of this
Indenture).
SECTION 6.02. ACCELERATION.
(a) If an Event of Default (other than an Event of Default
specified in Section 6.01(6) or (7) with respect to the Company) occurs and is
continuing and has not been waived pursuant to Section 6.04, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by notice in writing to the Company and the Trustee
specifying the respective Event of Default and that it is a "notice of
acceleration" (the "ACCELERATION NOTICE"), may declare the entire principal
amount of and accrued interest and Additional Interest on the Notes to be due
and payable immediately, and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Credit
Agreement, shall become due and payable upon the first to occur of an
acceleration under the Credit Agreement (which acceleration is not rescinded,
annulled or otherwise cured within 20 days of receipt by the Company or such
Restricted Subsidiary of notice of any such acceleration) or 5 Business Days
after receipt by the Company and the Representative under the Credit Agreement
of such Acceleration Notice, unless all Events of Default specified in such
Acceleration Notice (other than any Event of Default in respect of non-payment
of principal) shall have been cured or waived. If an Event of Default
specified in Section 6.01(6) or (7) occurs with respect to the Company, the
principal amount of and accrued interest and Additional Interest on the Notes
shall become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holder.
(b) At any time after a declaration of acceleration with
respect to the Notes as described in the preceding paragraph, the Holders of a
majority in principal amount of the Notes may rescind and cancel such
declaration and its consequences (i) if the rescission would not conflict with
any judgment or decree, (ii) if all existing Events of Default have been cured
or waived except nonpayment of principal or interest or Additional Interest
that has become due solely because of the acceleration, (iii) to the extent
the payment of such interest is lawful, interest on overdue installments of
interest and Additional Interest and overdue principal, which has become due
otherwise than by such declaration of acceleration, has been paid, (iv) if the
Company has paid the Trustee its reasonable compensation and reimbursed the
Trustee for its expenses, disbursements and advances and (v) in the event of
the cure or waiver of an Event of Default of the type described in clause (6)
or (7) of Section 6.01, the Trustee shall have received an Officers'
Certificate and an Opinion of Counsel that such Event of Default has been
cured or waived. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.
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SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, subject to
Article 10 the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of or interest or Additional
Interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy
is exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 2.09, 6.07 and 9.02, the Holders of a
majority in principal amount of the outstanding Notes by notice to the Trustee
may waive an existing Default or Event of Default and its consequences, except
a Default in the payment of principal of or interest or Additional Interest,
if any, on any Note as specified in clauses (1) and (2) of Section 6.01. When
a Default or Event of Default is waived, it is cured and ceases.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to Section 2.09, the Holders of a majority in principal
amount of the outstanding Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it, including, without limitation,
any remedies provided for in Section 6.03. Subject to Section 7.01, however,
the Trustee may refuse to follow any direction that the Trustee reasonably
believes conflicts with any law or this Indenture, that the Trustee determines
may be unduly prejudicial to the rights of another Holder, or that may involve
the Trustee in personal liability; PROVIDED that the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction.
SECTION 6.06. LIMITATION ON SUITS.
A Holder may not pursue any remedy with respect to this
Indenture or the Notes unless:
(1) the Holder gives to a Trust Officer of the Trustee written
notice of a continuing Event of Default;
(2) Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
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(3) such Holder or Holders offer to the Trustee indemnity
reasonably satisfactory to the Trustee against any loss, liability or expense
to be incurred in compliance with such request;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of satisfactory indemnity
satisfactory to it; and
(5) during such 60-day period the Holders of a majority in
principal amount of the outstanding Notes do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
The foregoing limitations shall not apply to a suit instituted
by a Holder for the enforcement of the payment of principal and premium, if
any, or interest and Additional Interest on such Note on or after the
respective due dates set forth in such Note (including upon acceleration
thereof); PROVIDED that upon institution of any proceeding or exercise of any
remedy, such Holders provide the Trustee with prompt written notice thereof.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, and
subject to Articles Ten and Eleven hereof, the right of any Holder to receive
payment of principal of and interest and Additional Interest on a Note, on or
after the respective due dates expressed in such Note, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest or
Additional Interest specified in clause (1) or (2) of Section 6.01 occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company, any Guarantor or any other obligor on
the Notes for the whole amount of principal and accrued interest and
Additional Interest remaining unpaid, together with interest on overdue
principal and, to the extent that payment of such interest is lawful, interest
on overdue installments of interest and Additional Interest, in each case at
the rate per annum borne by the Notes, and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
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SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any
other obligor upon the Notes, any of their respective creditors or any of
their respective property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any Custodian in any such judicial proceedings
is hereby authorized by each Holder to make such payments to the Trustee and,
in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, taxes, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.07. The Company's payment obligations under this Section 6.09 shall
be secured in accordance with the provisions of Section 7.07 hereunder.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this
Article Six, it shall, subject to Article Ten, pay out the money in the
following order:
First: to the Trustee for amounts due under Section 7.07;
Second: subject to Articles Ten and Eleven, to Holders for
amounts due and unpaid on the Notes for interest and premium and Additional
Interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Notes for interest and Additional Interest
and premium, respectively;
Third: subject to Articles Ten and Eleven, to Holders for
amounts due and unpaid on the Notes for principal, ratably without preference
or priority of any kind, according to the amounts due and payable on the Notes
for principal; and
Fourth: subject to Articles Ten and Eleven, to the Company, the
Guarantors, if any, or any other obligor on the Notes, as their interests may
appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section
6.10.
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SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or
Holders of more than 10% in principal amount of the outstanding Notes.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture or any Note and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case the Company, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of
the Trustee and the Holders shall continue as though no such proceeding had
been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as
a prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and the TIA and no others and no
covenants or obligations shall be implied in this Indenture against the
Trustee.
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any such certificate or opinion which by any provision
hereof is specifically required to be furnished to the
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Trustee, the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained,
the Trustee may not be relieved from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this
Section 7.01 and Section 7.02.
(f) The Trustee shall not be liable for interest on any money
or assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or an Opinion of
Counsel, or both, which shall conform to Sections 12.04 and 12.05. The Trustee
shall not be liable for any
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action it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any attorney or
agent appointed with due care.
(d) The Trustee shall not be liable for any action that it
takes or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it
may see fit.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred by it in compliance with such request, order
or direction.
(g) The Trustee may consult with counsel of its selection and
the advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.
(h) The Trustee shall not be charged with knowledge of any
Defaults or Events of Default unless either (1) a Trust Officer of the Trustee
shall have actual knowledge of such Default or Event of Default or (2) written
notice of such Default or Event of Default shall have been given to the
Trustee by any Holder or by the Company or any other obligor on the Notes or
any holder of Senior Debt or Guarantor Senior Debt or any representative
thereof.
(i) The rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and to each agent, custodian and other Person
employed by the Trustee.
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SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Notes, and it shall not be accountable for
the Company's use of the proceeds from the Notes, and it shall not be
responsible for any statement of the Company in this Indenture or the Notes
other than the Trustee's certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing
and if it is actually known to any Trust Officer, the Trustee, the Trustee
shall mail to each Holder notice of the uncured Default or Event of Default
within 90 days after such Default or Event of Default becomes known to the
Trustee. Except in the case of a Default or an Event of Default in payment of
principal of, or interest or Additional Interest on, any Note, the Trustee may
withhold the notice if and so long as its Board of Directors, the executive
committee of its Board of Directors or a committee of its directors and/or
Trust Officers in good faith determines that withholding the notice is in the
interest of the Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each November 15, 1999 following initial
issuance, the Trustee shall, to the extent that any of the events described in
TIA ss. 313(a) occurred within the previous twelve months, but not otherwise,
mail to each Holder a brief report dated as of such date that complies with
TIA ss. 313(a). The Trustee also shall comply with TIA ss.ss. 313(b) and (c).
A copy of each report at the time of its mailing to Holders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Notes are listed.
The Company shall promptly notify the Trustee in writing if the
Notes become listed or delisted on any stock exchange and the Trustee shall
comply with TIA ss. 313(d).
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SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such
compensation as the Company and the Trustee shall from time to time agree in
writing for its services rendered by it hereunder. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it in connection with the
performance of its duties under this Indenture. Such expenses shall include
the reasonable fees and out-of-pocket expenses of the Trustee's agents and
counsel.
The Company and the Guarantors shall indemnify the Trustee and
its agents, employees, officers, directors and shareholders for, and hold it
harmless against, any and all loss, damage, claims, liability or expense
including taxes (other than taxes based upon, measured by or determined by the
income of the Trustee) incurred by it except for such actions to the extent
caused by any negligence, bad faith or willful misconduct on its part, arising
out of or in connection with the acceptance or administration of this trust
including the reasonable costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of
its rights, powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim (whether asserted by the Company, a Holder or other
person) asserted against the Trustee for which it may seek indemnity. Failure
by the Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. At the Trustee's sole discretion, the Company shall
defend the claim and the Trustee shall provide reasonable cooperation and may
participate at the Company's expense in the defense. Alternatively, the
Trustee may at its option have separate counsel of its own choosing and the
Company shall pay the reasonable fees and expenses of such counsel; PROVIDED
that the Company will not be required to pay such fees and expenses if it
assumes the Trustee's defense, there is no conflict of interest between the
Company and the Trustee in connection with such defense as reasonably
determined by the Trustee and no Default or Event of Default has occurred and
is continuing. The Company need not pay for any settlement made without its
written consent, which consent shall not be unreasonably withheld. The Company
need not reimburse any expense or indemnify against any loss or liability to
the extent incurred by the Trustee which is attributable to its negligence,
bad faith or willful misconduct.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Notes on all assets or money
held or collected by the Trustee, in its capacity as Trustee, except assets or
money held in trust to pay principal of or interest or Additional Interest on
particular Notes.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(6) or (7) occurs, such expenses and
the compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
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The obligations of the Company under this Section 7.07 and any
lien arising hereunder shall survive the resignation or removal of the
Trustee, the discharge of the Company's Obligations pursuant to Article Eight
or the termination of this Indenture.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing,
such resignation to be effective upon the appointment of a successor Trustee.
The Holders of a majority in principal amount of the outstanding Notes may
remove the Trustee by so notifying the Company and the Trustee in writing and
may appoint a successor Trustee with the Company's consent which consent shall
not be unreasonably withheld. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. Within one year
after the successor Trustee takes office, the Holders of a majority in
principal amount of the Notes may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, subject to the lien provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Holder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the outstanding
Notes may petition at the expense of the Company any court of competent
jurisdiction for the appointment of a successor Trustee.
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If the Trustee fails to comply with Section 7.10, any Holder
may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation without any further act shall, if such resulting,
surviving or transferee corporation is otherwise eligible hereunder, be the
successor Trustee; PROVIDED that such corporation shall be otherwise qualified
and eligible under this Article Seven.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Section 310(a)(1), (2) and (5). The Trustee (or, in the case
of a corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least $100
million as set forth in its most recent published annual report of condition. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA Section 310(a)(2). The Trustee shall comply with TIA
Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
the Company are outstanding, if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. TERMINATION OF THE COMPANY'S OBLIGATIONS.
The Company may terminate its obligations under the Notes and
this Indenture, except those obligations referred to in the penultimate
paragraph of this Section 8.01, if all Notes previously authenticated and
delivered (other than destroyed,
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lost or stolen Notes which have been replaced or paid or Notes for whose
payment U.S. Legal Tender has theretofore been deposited with the Trustee or
the Paying Agent in trust or segregated and held in trust by the Company and
thereafter repaid to the Company, as provided in Section 8.05) have been
delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall
have given notice to the Trustee and mailed a notice of redemption to each
Holder of the redemption of all of the Notes under arrangements satisfactory
to the Trustee for the giving of such notice or (ii) all Notes have otherwise
become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to
be deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance satisfactory
to the Trustee, as trust funds in trust solely for the benefit of the Holders
for that purpose, U.S. Legal Tender in such amount as is sufficient without
consideration of reinvestment of such interest, to pay principal of, premium,
if any, and interest and Additional Interest on the outstanding Notes to
maturity or redemption; PROVIDED that the Trustee shall have been irrevocably
instructed to apply such U.S. Legal Tender to the payment of said principal,
premium, if any, and interest and Additional Interest with respect to the
Notes and, PROVIDED, FURTHER, that from and after the time of deposit, the
money deposited shall not be subject to the rights of holders of Senior Debt
pursuant to the provisions of Article Ten;
(c) no Default or Event of Default with respect to this
Indenture or the Notes shall have occurred and be continuing on the date of
such deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any
other instrument to which the Company is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent providing for the termination of the Company's
obligations under the Notes and this Indenture have been complied with. Such
Opinion of Counsel shall also state that such satisfaction and discharge does
not result in a default under the Credit Agreement (if then in effect) or any
other agreement or instrument then known to such counsel that binds or affects
the Company.
Notwithstanding the foregoing paragraph, the Company's
obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and
8.06 shall survive until the Notes are no longer outstanding pursuant to the
last paragraph of Section 2.08. After the Notes are no longer outstanding, the
Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive.
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After such delivery or irrevocable deposit, the Trustee upon
request shall acknowledge in writing the discharge of the Company's and the
Guarantors' obligations under the Notes, the Guarantees and this Indenture
except for those surviving obligations specified above.
SECTION 8.02 LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) The Company may, at its option by Board Resolution of the
Board of Directors of the Company, at any time, elect to have either paragraph
(b) or (c) below be applied to all outstanding Notes upon compliance with the
conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (b), the Company and the Guarantors
shall, subject to the satisfaction of the conditions set forth in Section
8.03, be deemed to have been discharged from its obligations with respect to
the outstanding Notes and Guarantees on the date the conditions set forth
below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Notes, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.04
hereof and the other Sections of this Indenture referred to in (i) and (ii)
below, and to have satisfied all its other obligations under such Notes and
this Indenture (and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging the same), and Holders
of the Notes and any amounts deposited under Section 8.03 hereof shall cease
to be subject to any obligations to, or the rights of, any holder of Senior
Debt or Guarantor Senior Debt under Article Ten or Eleven, as the case may be,
or otherwise, except for the following provisions, which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect
of the principal of, premium, if any, and interest and Additional Interest on
such Notes when such payments are due, (ii) the Company's obligations with
respect to such Notes under Article Two and Section 4.02 hereof, (iii) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (iv) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this paragraph (b) notwithstanding the prior exercise of its
option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03 hereof, be released
from its obligations under the covenants contained in Sections 4.10 through
4.20 and Article Five hereof with respect to the outstanding Notes and
Guarantees on and after the date the conditions set forth below are satisfied
(hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
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declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall
not be deemed outstanding for accounting purposes) and Holders of the Notes
and any amounts deposited under Section 8.03 hereof shall cease to be subject
to any obligations to, or the rights of, any holder of Senior Debt or
Guarantor Senior Debt under Article Ten or Article Eleven or otherwise. For
this purpose, such Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any
such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any
such covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event or Default under
Section 6.01(3) hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under paragraph (a) hereof of the option applicable to this
paragraph (c), subject to the satisfaction of the conditions set forth in
Section 8.03 hereof, those events described in Section 6.01 (except those
events described in Section 6.01(1), (2), (6) and (7)) shall not constitute
Events of Default.
SECTION 8.03. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02(b) or 8.02(c) hereof to the out standing Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, U.S. Legal Tender or U.S. Government
Obligations, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Additional Interest on the Notes on the stated date for payment thereof or on
the applicable redemption date, as the case may be, of such principal or
installment of principal of or interest and Additional Interest on the Notes;
PROVIDED that the Trustee shall have received an irrevocable written order
from the Company instructing the Trustee to apply such U.S. Legal Tender or
the proceeds of such U.S. Government Obligations to said payments with respect
to the Notes, and the Company must specify in such written order whether the
Notes are being defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02(b) hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable United States
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Federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the Notes will not
recognize income, gain or loss for United States Federal income tax purposes
as a result of such Legal Defeasance and will be subject to United States
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.02(c) hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the Holders
of the Notes will not recognize income, gain or loss for United States Federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to United States Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(d) immediately after giving effect to such deposit on a PRO
FORMA basis, no Default or Event of Default with respect to the Notes shall
have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the incurrence of Indebtedness all
or a portion of the proceeds of which will be used to defease the Notes
pursuant to this Article Eight concurrently with such incurrence) or insofar
as Sections 6.01(6) and 6.01(7) hereof are concerned, at any time in the
period ending on the 91st day after the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of or constitute a default under this
Indenture (other than a Default or Event of Default resulting from the
incurrence of Indebtedness, all or a portion of the proceeds of which will be
used to defease the Notes) or any other material agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company
with the intent of preferring the Holders over any other creditors of the
Company or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with;
(h) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that (A) the trust funds will not be subject to any
rights of any holders of Senior Debt, including, without limitation, those
arising under this Indenture and (B) after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable Bankruptcy
Law;
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(i) The Company shall have paid or duly provided for payment of
all amounts then due to the Trustee pursuant to Section 7.07 hereof; and
(j) No such deposit will result in a Default under this
Indenture (other than a Default or Event of Default resulting from the
incurrence of Indebtedness, all or a portion of the proceeds of which will be
used to defease the Notes) or a breach or violation of, or constitute a
default under, any other instrument or agreement (including, without
limitation, the Credit Agreement) to which the Company or any of its
subsidiaries is a party or by which it or its property is bound.
Notwithstanding the foregoing, the Opinion of Counsel required
by clause (b) above need not be delivered if all Notes not theretofore
delivered to the Trustee for cancellation (x) have become due and payable, (y)
will become due and payable within one year or (z) are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company.
SECTION 8.04. APPLICATION OF TRUST MONEY.
The Trustee or Paying Agent shall hold in trust U.S. Legal
Tender or U.S. Government Obligations deposited with it pursuant to Article
Eight, and shall apply the deposited U.S. Legal Tender and the money from U.S.
Government Obligations in accordance with this Indenture to the payment of
principal of and interest and Additional Interest on the Notes. The Trustee
shall be under no obligation to invest said U.S. Legal Tender or U.S.
Government Obligations except as it may agree with the Company.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Legal Tender
or U.S. Government Obligations deposited pursuant to Section 8.03 hereof or
the principal and interest and Additional Interest received in respect thereof
other than any such tax, fee or other charge which by law is for the account
of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary not
withstanding, the Trustee shall deliver or pay to the Company from time to
time upon the Company's request any U.S. Legal Tender or U. S. Government
Obligations held by it as provided in Section 8.03 hereof which, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof that would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.05. REPAYMENT TO THE COMPANY OR THE GUARANTORS.
Subject to Article Eight, the Trustee and the Paying Agent
shall promptly pay to the Company, or if deposited with the Trustee by any
Guarantor, to such Guarantor, upon request any excess U.S. Legal Tender or
U.S. Government Obligations
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held by them at any time and thereupon shall be relieved from all liability
with respect to such money. The Trustee and the Paying Agent shall pay to the
Company, or if deposited with the Trustee by any Guarantor, to such Guarantor,
upon request any money held by them for the payment of principal or interest
or Additional Interest that remains unclaimed for two years; PROVIDED that the
Trustee or such Paying Agent, before being required to make any payment, shall
at the expense of the Company cause to be published once in a newspaper of
general circulation in the City of New York or mail to each Holder entitled to
such money notice that such money remains unclaimed and that after a date
specified therein which shall be at least 30 days from the date of such
publication or mailing any unclaimed balance of such money then remaining will
be repaid to the Company or a Guarantor. After payment to the Company or a
Guarantor, as the case may be, Noteholders entitled to such money must look to
the Company for payment as general creditors unless an applicable law
designates another Person.
SECTION 8.06. SATISFACTION AND DISCHARGE.
This Indenture will be discharged and will cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of the Notes, as expressly provided for in this Indenture) as to all
outstanding Notes when (i) either (a) all the Notes theretofore authenticated
and delivered (except lost, stolen or destroyed Notes which have been replaced
or paid and Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust) have been delivered to the Trustee
for cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest and Additional Interest, if any, on the Notes to
the date of deposit together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment thereof at maturity
or redemption, as the case may be; (ii) the Company has paid all other sums
payable under this Indenture by the Company; and (iii) the Company has
delivered to the Trustee an Officers' Certificate and an opinion of counsel
stating that all conditions precedent under this Indenture relating to the
satisfaction and discharge of this Indenture have been complied with.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S.
Legal Tender or U.S. Government Obligations in accordance with Article Eight
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's and each Guarantor's obligations
under this Indenture and the Notes shall be revived and reinstated as though
no deposit had occurred pursuant to Article Eight until such time as the
Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or
U.S.
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Government Obligations in accordance with Article Eight; PROVIDED that if the
Company or any Guarantor, as the case may be, has made any payment of interest
or Additional Interest on or principal of any Notes because of the
reinstatement of its obligations, the Company or any Guarantor, as the case
may be, shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the U.S. Legal Tender or U.S. Government Obligations
held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company, when authorized by a Board Resolution, and the
Trustee, together, may (subject to Section 9.03) amend or supplement this
Indenture, the Notes or any Guarantee without notice to or consent of any
Holder:
(1) to cure any ambiguity, defect or inconsistency; PROVIDED
that such amendment or supplement does not adversely affect the rights of any
Holder;
(2) to comply with Article Five;
(3) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(4) to comply with any requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA; or
(5) to make any change that would provide any additional
benefit or rights to the Holders or that does not adversely affect the rights
of any Holder;
PROVIDED that the Company has delivered to the Trustee an
Opinion of Counsel and an Officers' Certificate stating that such amendment or
supplement complies with the provisions of this Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to Sections 6.07 and 9.03, the Company, when authorized
by a Board Resolution, and the Trustee, together, with the written consent of
the Holder or Holders of at least a majority in aggregate principal amount of
the outstanding Notes, may amend or supplement this Indenture, the Notes or
any Guarantee without notice to any other Holders. Subject to Section 6.07,
the Holder or Holders of a majority in aggregate principal amount of the
outstanding Notes may waive compliance by the Company with any provision of
this Indenture or the Notes without notice to any other Holder. No amendment,
supplement or waiver, including a waiver pursuant to Section 6.04, shall,
without the consent of each Holder of each Note affected thereby:
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(1) change the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture, the Notes or any Guarantee;
(2) reduce the rate of or change or have the effect of changing
the time for payment of interest or Additional Interest, including defaulted
interest or defaulted Additional Interest, on any Notes;
(3) reduce the principal amount of or change or have the effect
of changing the fixed maturity of any Notes, or change the date on which any
Notes may be subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor;
(4) make any changes in provisions concerning waivers of
Defaults or Events of Default by Holders of the Notes or the rights of Holders
to recover the principal of, interest or Additional Interest on, premium, if
any, or redemption payment with respect to, any Note;
(5) make the principal of, or the interest or Additional
Interest on any Note payable with anything or in any manner other than as
provided for in this Indenture and the Notes as in effect on the date hereof;
(6) make any change in provisions of this Indenture protecting
the right of each Holder to receive payment of principal of and interest and
Additional Interest on such Note on or after the due date thereof or to bring
suit to enforce such payment, or permitting Holders of a majority in principal
amount of Notes to waive Defaults or Events of Default;
(7) amend, change or modify in any material respect the
obligation of the Company to make and consummate a Change of Control Offer
after the occurrence of an event which constitutes a Change of Control or make
and consummate a Net Proceeds Offer with respect to any Asset Sale that has
been consummated or modify any of the provisions or definitions with respect
thereto;
(8) modify or change any provision of this Indenture or the
related definitions affecting the subordination or ranking of the Notes or any
Guarantee in a manner which adversely affects the Holders; or
(9) release any Guarantor from any of its obligations under its
Guarantee or this Indenture otherwise than in accordance with the terms of
this Indenture.
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It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby
a notice briefly describing the amendment, supplement or waiver. Any failure
of the Company to mail such notice, or any defect therein, shall not, however,
in any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. EFFECT ON SENIOR DEBT.
No amendment, supplement or waiver of this Indenture shall
affect the rights of any holder of Senior Debt or Guarantor Senior Debt, if
any (including their rights under Article Ten or Article Eleven of this
Indenture), without the written consent of such holder.
SECTION 9.04. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect.
SECTION 9.05. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt
as the consenting Holder's Note, even if notation of the consent is not made
on any Note. Subject to the following paragraph, any such Holder or subsequent
Holder may revoke the consent as to such Holder's Note or portion of such Note
by written notice to the Trustee or the Company received before the date on
which the Trustee receives an Officers' Certificate certifying that the
Holders of the requisite principal amount of Notes have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver, which record date shall be at least 30 days
prior to the first solicitation of such consent. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 90
days after such record date.
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After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless it makes a change described in any of clauses
(1) through (7) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt
as the consenting Holder's Note; PROVIDED that any such waiver shall not
impair or affect the right of any Holder to receive payment of principal of
and interest and Additional Interest on a Note, on or after the respective due
dates expressed in such Note, or to bring suit for the enforcement of any such
payment on or after such respective dates without the consent of such Holder.
SECTION 9.06. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment, supplement or waiver changes the terms of a
Note, the Trustee may, at the written direction of the Company, require the
Holder of the Note to deliver it to the Trustee. The Trustee at the written
direction of the Company may place an appropriate notation on the Note about
the changed terms and return it to the Holder. Alternatively, if the Company
or the Trustee so determines, the Company in exchange for the Note shall issue
and the Trustee shall authenticate a new Note that reflects the changed terms.
Any such notation or exchange shall be made at the sole cost and expense of
the Company. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.07. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; PROVIDED that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, if requested, an
indemnity reasonably satisfactory to it and to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture. Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
SUBORDINATION
SECTION 10.01. NOTES SUBORDINATED TO SENIOR DEBT OF THE
COMPANY.
The Company covenants and agrees and the Trustee and each
Holder of the Notes, by its acceptance thereof, likewise covenants and agrees,
that all Notes shall be issued subject to the provisions of this Article Ten;
and the Trustee and each person holding any Note, whether upon original issue
or upon transfer, assignment or exchange thereof, accepts and agrees that the
payment of all Obligations on the Notes by the
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Company shall, to the extent and in the manner herein set forth, be
subordinated and junior in right of payment to the prior payment in full in
cash or Cash Equivalents of all Obligations on the Senior Debt (other than
Obligations under the Credit Agreement, which must be paid in full in cash);
that the subordination is for the benefit of, and shall be enforceable
directly by, the holders of Senior Debt, and that each holder of Senior Debt
whether now outstanding or hereinafter created, incurred, assumed or
guaranteed shall be deemed to have acquired Senior Debt in reliance upon the
covenants and provisions contained in this Indenture and the Notes.
SECTION 10.02. NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES.
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest or Additional Interest on, unpaid drawings for letters
of credit issued in respect of, or regularly accruing fees with respect to,
any Senior Debt (a "PAYMENT DEFAULT"), no payment of any kind or character
shall be made by or on behalf of the Company or any other Person on its behalf
with respect to any Obligations on the Notes or to acquire any of the Notes
for cash or property or otherwise. In addition, if any event of default other
than a Payment Default (a "NON-PAYMENT DEFAULT") occurs and is continuing with
respect to any Designated Senior Debt, as such event of default is defined in
the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the Non-payment Default to the
Trustee (a "DEFAULT NOTICE"), then, unless and until all Non-payment Defaults
have been cured or waived or have ceased to exist or the Trustee receives
notice from the Representative for the respective issue of Designated Senior
Debt terminating the Blockage Period (as defined below), during the 179 days
after the delivery of such Default Notice (the "BLOCKAGE PERIOD"), neither the
Company nor any other Person on its behalf shall (x) make any payment of any
kind or character with respect to any Obligations on the Notes or (y) acquire
any of the Notes for cash or property or otherwise. For all purposes of this
Section 10.02(a), in no event will a Blockage Period extend beyond 179 days
from the date the payment on the Notes was due and only one such Blockage
Period may be commenced within any 360 consecutive days. No Non-payment
Default which existed or was continuing on the date of the commencement of any
Blockage Period with respect to the Designated Senior Debt shall be, or be
made, the basis for commencement of a second Blockage Period by the
Representative of such Designated Senior Debt whether or not within a period
of 360 consecutive days, unless such Non-payment Default shall have been cured
or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period, that in either case, would give rise to a Non-payment Default
pursuant to any provisions under which a Non-payment Default previously
existed or was continuing shall constitute a new Non-payment Default for this
purpose).
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(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 10.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior Debt
(PRO RATA to such holders on the basis of the respective amount of Senior Debt
held by such holders) or their respective Representatives, as their respective
interests may appear. The Trustee shall be entitled to rely on information
regarding amounts then due and owing on the Senior Debt, if any, received from
the holders of Senior Debt (or their Representatives) or, if such information
is not received from such holders or their Representatives, from the Company
and only amounts included in the information provided to the Trustee shall be
paid to the holders of Senior Debt.
Nothing contained in this Article Ten shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; PROVIDED that all Senior Debt thereafter due or declared
to be due shall first be paid in full in cash or Cash Equivalents (other than
Obligations under the Credit Agreement which must be paid in full in Cash)
before the Holders are entitled to receive any payment of any kind or
character with respect to the Obligations on the Notes.
SECTION 10.03. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets or securities of
the Company of any kind or character, whether in cash, property, securities or
otherwise, to creditors upon any total or partial liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of creditors or
marshaling of assets of the Company, or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, whether voluntary or involuntary, all Obligations with respect to
all Senior Debt shall first be paid in full, in cash or Cash Equivalents
(other than Obligations under the Credit Agreement which must be paid in full
in cash), before any payment or distribution of any kind or character is made
on account of any Obligations on the Notes, or for the acquisition of any of
the Notes for cash or property or otherwise; and until all such Obligations
with respect to all Senior Debt are paid in full in cash or Cash Equivalents
(other than Obligations under the Credit Agreement which must be paid in full
in cash), any distribution to which the Holders of the Notes would be entitled
but for the subordination provisions will be made to the holders of Senior
Debt as their interests may appear. Upon any such dissolution, winding-up,
liquidation, reorganization, bankruptcy, insolvency, receivership or similar
proceeding or assignment for the benefit of creditors or marshaling of assets,
any payment or distribution of assets of the Company of any kind or character,
whether in cash, property, securities or otherwise, to which the Holders of
the Notes or the Trustee under this Indenture would be entitled, except for
the provisions hereof, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by the Holders of the Notes or by the Trustee
under this Indenture if received by them, directly to the holders of Senior
Debt (PRO RATA to such
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holders on the basis of the respective amounts of Senior Debt held by such
holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Debt may have been
issued, as their respective interests may appear, for application to the
payment of Senior Debt remaining unpaid until all such Senior Debt has been
paid in full in cash or Cash Equivalents (other than Obligations under the
Credit Agreement which must be paid in full in cash) after giving effect to
any concurrent payment, distribution or provision therefor to or for the
holders of Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside
or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar person, the Senior Debt or part
thereof originally intended to be satisfied shall be deemed to be reinstated
and outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or
any Holder when such payment or distribution is prohibited by Section
10.03(a), such payment or distribution shall be held in trust for the benefit
of, and shall be paid over or delivered to, the holders of Senior Debt (PRO
RATA to such holders on the basis of the respective amount of Senior Debt held
by such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Debt may
have been issued, as their respective interests may appear, for application to
the payment of Senior Debt remaining unpaid until all such Senior Debt has
been paid in full in cash or Cash Equivalents (other than Obligations under
the Credit Agreement which must be paid in full in cash), after giving effect
to any concurrent payment, distribution or provision therefor to or for the
holders of such Senior Debt.
SECTION 10.04. PAYMENTS MAY BE PAID PRIOR TO DISSOLUTION.
Nothing contained in this Article Ten or elsewhere in this
Indenture shall prevent (i) the Company, except under the conditions described
in Sections 10.02 and 10.03, from making payments at any time for the purpose
of making payments of principal of and interest and Additional Interest on the
Notes, or from depositing with the Trustee any moneys for such payments, or
(ii) in the absence of actual knowledge of the Trustee that a given payment
would be prohibited by Section 10.02 or 10.03, the application by the Trustee
of any moneys deposited with it for the purpose of making such payments of
principal of and interest and Additional Interest on the Notes to the Holders
entitled thereto unless at least one Business Day prior to the date upon which
such payment would otherwise become due and payable, the Trustee shall have
received
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the written notice provided for in Section 10.02(a) or in Section 10.07
(PROVIDED that, notwithstanding the foregoing, such application shall
otherwise be subject to the provisions of the first sentence of Section
10.02(a) and Section 10.03). The Company shall give prompt written notice to
the Trustee of any dissolution, winding-up, liquidation or reorganization of
the Company.
SECTION 10.05. SUBROGATION.
After the payment in full in cash or Cash Equivalents (other
than Obligations under the Credit Agreement which must be paid in full in
cash) of all Senior Debt and until the Notes are paid in full, the Holders of
the Notes shall be subrogated to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Debt; and, for the purposes of such
subrogation, no such payments or distributions to the holders of the Senior
Debt by or on behalf of the Company by virtue of this Article Ten which
otherwise would have been made to the Holders shall, as between the Company
and the Holders of the Notes, be deemed to be a payment by the Company to or
on account of the Notes, it being understood that the provisions of this
Article Ten are and are intended solely for the purpose of defining the
relative rights of the Holders of the Notes, on the one hand, and the holders
of the Senior Debt, on the other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article Ten shall
have been applied, pursuant to the provisions of this Article Ten, to the
payment of amounts payable under the Senior Debt, then the Holders shall be
entitled to receive from the holders of such Senior Debt any payments or
distributions received by such holders of Senior Debt in excess of the amount
sufficient to pay all amounts payable under or in respect of the Senior Debt
in full in cash or Cash Equivalents (other than Obligations under the Credit
Agreement which must be paid in full in cash).
SECTION 10.06. OBLIGATIONS OF THE COMPANY UNCONDITIONAL
Nothing contained in this Article Ten or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as among the
Company, its creditors other than the holders of Senior Debt, and the Holders
of the Notes, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Notes the principal of and any
interest and Additional Interest on the Notes as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders of the Notes and creditors of
the Company other than the holders of the Senior Debt, nor shall anything
herein or therein prevent the Holder of any Note or the Trustee on its behalf
from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, in respect of
cash, property or securities of the Company received upon the exercise of any
such remedy.
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SECTION 10.07. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment
to or by the Trustee in respect of the Notes pursuant to the provisions of
this Article Ten, but the failure to give such notice shall not affect the
subordination of the Notes to the Senior Debt as provided in this Article 10.
Regardless of anything to the contrary contained in this Article Ten or
elsewhere in this Indenture, the Trustee shall not be charged with knowledge
of the existence of any default or event of default with respect to any Senior
Debt or of any other facts which would prohibit the making of any payment to
or by the Trustee unless and until the Trustee shall have received notice in
writing from the Company, or from a holder of Senior Debt or a Representative
therefor, and, prior to the receipt of any such written notice, the Trustee
shall be entitled to assume (in the absence of actual knowledge to the
contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any person as a holder of
Senior Debt (other than Indebtedness under the Credit Agreement) to
participate in any payment or distribution pursuant to this Article Ten, the
Trustee may request such person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amounts of Senior Debt (other than
Indebtedness under the Credit Agreement) held by such person, the extent to
which such person is entitled to participate in such payment or distribution
and any other facts pertinent to the rights of such person under this Article
Ten and, if such evidence is not furnished, the Trustee may defer any payment
to such person pending judicial determination as to the right of such person
to receive such payment.
SECTION 10.08. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company
referred to in this Article Ten, the Trustee, subject to the provisions of
Article Seven hereof, and the Holders of the Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings
are pending, or upon certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or
distribution, delivered to the Trustee or the Holders of the Notes, for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Ten.
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SECTION 10.09. TRUSTEE'S RELATION TO SENIOR DEBT.
The Trustee and any agent of the Company or the Trustee shall
be entitled to all the rights set forth in this Article Ten with respect to
any Senior Debt which may at any time be held by it in its individual or any
other capacity to the same extent as any other holder of Senior Debt and
nothing in this Indenture shall deprive the Trustee or any such agent of any
of its rights as such holder.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt and shall not be liable to any
such holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Company or any other person money or assets to which any
holders of Senior Debt shall be entitled by virtue of this Article Ten, except
if such payment is made as a result of willful misconduct or gross negligence
of the Trustee.
Whenever a distribution is to be made or a notice given to
holders or owners of Senior Debt, the distribution may be made and the notice
given to their Representatives, if any.
In the event that the Trustee or any Holder receives any
payment of any Obligations with respect to the Notes at a time when the
Trustee or such Holder, as applicable, has actual knowledge that such payment
is prohibited by Article 10 hereof, such payment shall be held by the Trustee
or such Holder, in trust for the benefit of, and shall be paid forthwith over
and delivered, upon written request, to, the holders of Senior Debt as their
interests may appear or their Representative under the indenture or other
agreement (if any) pursuant to which Senior Debt may have been issued, as
their respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent
necessary to pay such Obligations in full in cash in accordance with their
terms, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt.
SECTION 10.10. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR
OMISSIONS OF THE COMPANY OR HOLDERS OF SENIOR
DEBT.
No right of any present or future holders of any Senior Debt to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of
any knowledge thereof which any such holder may have or otherwise be charged
with.
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Without in any way limiting the generality of this Section
10.10, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without
impairing or releasing the subordination provided in this Article Ten or the
obligations hereunder of the Holders of the Notes to the holders of the Senior
Debt, do any one or more of the following: (i) change the manner, place or
terms of payment or extend the time of payment of, or renew or alter, Senior
Debt, or otherwise amend or supplement in any manner Senior Debt, or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding; (ii) sell, exchange, release, foreclose against or otherwise deal
with any property pledged, mortgaged or otherwise securing Senior Debt; (iii)
release any Person liable in any manner for the payment or collection of
Senior Debt; and (iv) exercise or refrain from exercising any rights against
the Company, any Subsidiary thereof and any other Person.
SECTION 10.11. NOTEHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF NOTES.
Each Holder of Notes by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior Debt
and the Holders of Notes, the subordination provided in this Article Ten, and
appoints the Trustee its attorney-in-fact for such purposes, including, in the
event of any dissolution, winding-up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise), the filing of a claim for the unpaid balance of its or his Notes
and accrued interest and Additional Interest in the form required in those
proceedings.
If the Trustee does not file a proper claim or proof of debt in
the form required in such proceeding prior to 30 days before the expiration of
the time to file such claim or claims, then the holders of the Senior Debt or
their Representative are or is hereby authorized to have the right to file and
are or is hereby authorized to file an appropriate claim for and on behalf of
the Holders of said Notes. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Debt or their Representative to
authorize or consent to or accept or adopt on behalf of any Holders any plan
of reorganization, arrangement, adjustment or composition affecting the Notes
or the rights of any Holder thereof, or to authorize the Trustee or the
holders of Senior Debt or their Representative to vote in respect of the claim
of any Holder in any such proceeding.
SECTION 10.12. THIS ARTICLE TEN NOT TO PREVENT EVENTS OF
DEFAULT.
The failure to make a payment on account of principal of or
interest or Additional Interest on the Notes by reason of any provision of
this Article Ten will not
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be construed as preventing the occurrence of a Default or an Event of Default
under Section 6.01.
Nothing contained in this Article Ten shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article Six or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any,
under this Article Ten of the holders, from time to time, of Senior Debt.
SECTION 10.13. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article Ten will apply to amounts due to the
Trustee, in its capacity as such, pursuant to other sections in this
Indenture.
ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. UNCONDITIONAL GUARANTEE.
Subject to this Article 11, each Guarantor hereby
unconditionally, jointly and severally, guarantees (such guarantee to be
referred to herein as the "GUARANTEE") to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its successors and
assigns, the Notes or the obligations of the Company hereunder or thereunder,
that: (i) the principal of and interest and Additional Interest on the Notes
will be promptly paid in full when due, subject to any applicable grace
period, whether at maturity, by acceleration or otherwise and interest on the
overdue principal, if any, and interest on any interest and Additional
Interest, to the extent lawful, of the Notes and all other obligations of the
Company to the Holders or the Trustee hereunder or thereunder will be promptly
paid in full or performed, all in accordance with the terms hereof and
thereof; and (ii) in case of any extension of time of payment or renewal of
any Notes or of any such other obligations, the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, subject to any applicable grace period, whether at stated maturity,
by acceleration or otherwise, subject, however, in the case of clauses (i) and
(ii) above, to the limitations set forth in Section 11.05. Each Guarantor
hereby agrees that its Obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or
this Indenture, the absence of any action to enforce the same, any waiver or
consent by any Holder of the Notes with respect to any provisions hereof or
thereof, the recovery of any judgment against the Company, any action to
enforce the same or any other circumstances which might otherwise constitute a
legal or equitable discharge or defense of a guarantor, subject to the
provisions of this Article 11. Each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest, notice and all demands whatsoever and
covenants that this Guarantee will not be discharged except by complete
performance of the
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obligations contained in the Notes, this Indenture and in this Guarantee. If
any Holder or the Trustee is required by any court or otherwise to return to
the Company, any Guarantor, or any custodian, trustee, liquidator or other
similar official acting in relation to the Company or any Guarantor, any
amount paid by the Company or any Guarantor to the Trustee or such Holder,
this Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect as to such amount only. Each Guarantor further agrees
that, as between each Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Obligations guaranteed
hereby may be accelerated as provided in Article Six for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the Obligations guaranteed hereby,
and (y) in the event of any acceleration of such obligations as provided in
Article Six, such Obligations (whether or not due and payable) shall forthwith
become due and payable by each Guarantor for the purpose of this Guarantee.
SECTION 11.02. SUBORDINATION OF GUARANTEE.
Each Guarantor agrees, and each Holder by accepting a Guarantee
agrees, that all Obligations owed under and in respect of such Guarantees are
subordinated in right of payment, to the extent and in the manner provided in
this Article Eleven, to the prior indefeasible payment in full in cash or Cash
Equivalents (other than Obligations under the Credit Agreement, which must be
paid in full in cash), of all Guarantor Senior Debt of such Guarantor on the
same basis as the Notes are junior and subordinated to the Senior Debt of the
Company, and that the subordination of the Guarantees pursuant to this Article
Eleven is for the benefit of, and shall be enforceable directly by, all
holders of all Guarantor Senior Debt of such Guarantor, whether outstanding on
the Issue Date or issued thereafter, and that each holder of Guarantor Senior
Debt shall be deemed to have acquired Guarantor Senior Debt in reliance upon
the covenants and provisions contained in this Indenture and the Notes.
SECTION 11.03. SEVERABILITY.
In case any provision of this Guarantee shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.04. RELEASE OF A GUARANTOR.
(a) Upon the direct or indirect sale or disposition of all of
the Capital Stock, or all or substantially all of the assets, of a Guarantor
by the Company or one or more Restricted Subsidiaries of the Company in a
transaction constituting an Asset Sale (including, without limitation, a
foreclosure pursuant to the Credit Agreement), the Net Cash Proceeds of which
are applied in accordance with Section 4.16 and the Guarantor is released from
all of its obligations under the Credit Agreement, or upon the consolidation
or merger of a Guarantor with or into any Person in compliance with Article
Five (in each case, other than to the Company or a Wholly Owned Restricted
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Subsidiary), or if any Guarantor is dissolved or liquidated in accordance with
this Indenture, or if a Guarantor is designated an Unrestricted Subsidiary,
such Guarantor and each Subsidiary of such Guarantor that is also a Guarantor
shall be automatically and unconditionally released from all obligations under
this Article Eleven without any further action required on the part of the
Trustee or any Holder or any other person; PROVIDED, HOWEVER, that each such
Guarantor is sold or disposed of in accordance with this Indenture. Any
Guarantor not so released or the entity surviving such Guarantor, as
applicable, shall remain or be liable under its Guarantee as provided in this
Article Eleven.
(b) The Trustee shall deliver an appropriate instrument
evidencing the release of a Guarantor upon receipt of a request by the Company
or such Guarantor accompanied by an Officers' Certificate and an Opinion of
Counsel certifying as to the compliance with this Section 11.04, PROVIDED the
legal counsel delivering such Opinion of Counsel may rely as to matters of
fact on one or more Officers' Certificates.
The Trustee shall execute any documents reasonably requested by
the Company or a Guarantor in order to evidence the release of such Guarantor
from its obligations under its Guarantee endorsed on the Notes and under this
Article Eleven.
SECTION 11.05. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by
such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer
or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or
state law. To effectuate the foregoing intention, the Holders and such
Guarantor hereby irrevocably agree that the Obligations of such Guarantor
under its Guarantee shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Guarantor
and after giving effect to any collections from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to Section 11.07, result in the
Obligations of such Guarantor under its Guarantee not constituting such
fraudulent transfer or conveyance.
SECTION 11.06. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN
TERMS.
(a) Nothing contained in this Indenture or in any of the Notes
shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor that is a Wholly Owned Restricted Subsidiary of
the Company or shall prevent any sale or conveyance of the assets of a
Guarantor to the Company or another Guarantor that is a Wholly Owned
Restricted Subsidiary of the Company. Upon any such consolidation, merger,
sale or conveyance, the Guarantee given by such Guarantor shall be released.
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(b) Except as set forth in Article Four hereof, nothing
contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into a corporation or
corporations other than the Company or another Guarantor (whether or not
affiliated with the Guarantor), or successive consolidations or mergers in
which a Guarantor or its successor or successors shall be a party or parties,
or shall prevent any sale or conveyance of all or substantially all of the
assets of a Guarantor to a corporation other than the Company or another
Guarantor (whether or not affiliated with the Guarantor); PROVIDED, HOWEVER,
that, subject to Sections 11.04 and 11.06(a), either (x) the transaction is an
Asset Sale consummated in accordance with Section 4.16, or (y) (i) the entity
formed by or surviving any such consolidation or merger (if other than such
Guarantor) or to which such sale, lease, conveyance or other disposition shall
have been made is a corporation organized and existing under the laws of the
United States, any State thereof or the District of Columbia, (ii) immediately
after such transaction, and giving effect thereto, no Default or Event of
Default shall have occurred as a result of such transaction and be continuing
and (iii) each Guarantor hereby covenants and agrees that, upon any such
consolidation, merger, sale or conveyance, the Guarantee of such Guarantor set
forth in this Article Eleven, and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture to be
performed by such Guarantor, shall be expressly assumed (in the event that the
Guarantor is not the surviving corporation in such transaction), by
supplemental indenture satisfactory in form to the Trustee, executed and
delivered to the Trustee, together with an Officers' Certificate of the
Company and an Opinion of Counsel stating that the transaction and such
supplemental indenture comply with this Indenture, by the corporation formed
by such consolidation, or into which the Guarantor shall have merged, or by
the corporation that shall have acquired such property. In the case of any
such consolidation, merger, sale or conveyance that is not an Asset Sale
consummated in accordance with Section 4.16, upon the assumption by the
successor corporation, by supplemental indenture executed and delivered to the
Trustee and satisfactory in form to the Trustee of the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor.
SECTION 11.07. CONTRIBUTION.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, INTER SE, that in the event any payment
or distribution is made by any Guarantor (a "FUNDING GUARANTOR") under this
Guarantee, such Funding Guarantor shall be entitled, subject to Section 11.05
hereof, to a contribution from all other Guarantors in a PRO RATA amount based
on the net assets of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in
discharging the Company's obligations with respect to the Notes or any other
Guarantor's Obligations with respect to this Guarantee.
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SECTION 11.08. WAIVER OF SUBROGATION.
Each Guarantor hereby irrevocably waives any claim or other
rights which it may now or hereafter acquire against the Company or other
Guarantors that arise from the existence, payment, performance or enforcement
of such Guarantor's Obligations under this Guarantee and this Indenture,
including, without limitation, any right of subrogation, reimbursement,
exoneration, indemnification, and any right to participate in any claim or
remedy of any Holder of Notes against the Company or other Guarantors, whether
or not such claim, remedy or right arises in equity, or under contract,
statute or common law, including, without limitation, the right to take or
receive from the Company or other Guarantors, directly or indirectly, in cash
or other property or by set-off or in any other manner, payment or security on
account of such claim or other rights. If any amount shall be paid to any
Guarantor in violation of the preceding sentence and the Notes shall not have
been paid in full, such amount shall have been deemed to have been paid to
such Guarantor for the benefit of, and held in trust for the benefit of, the
Holders of the Notes and holders of the Guarantor Senior Debt, and shall
forthwith be paid to the Trustee to be credited and applied in accordance with
the terms of this Indenture. Each Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated by
this Indenture and that the waiver set forth in this Section 11.08 is
knowingly made in contemplation of such benefits.
SECTION 11.09. EXECUTION OF GUARANTEE.
To evidence their Guarantee to the Noteholders specified in
Section 11.01, the Guarantors hereby agree to execute the Guarantee in
substantially the form of EXHIBIT A recited to be endorsed on each Note
ordered to be authenticated and delivered by the Trustee. Each Guarantor
hereby agrees that its Guarantee set forth in Section 11.01 shall remain in
full force and effect notwithstanding any failure to endorse on each Note a
notation of such Guarantee. Each such Guarantee shall be signed on behalf of
each Guarantor by two Officers, or an Officer and an Assistant Secretary or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to such Guarantee prior to the authentication of the
Note on which it is endorsed, and the delivery of such Note by the Trustee,
after the authentication thereof hereunder, shall constitute due delivery of
such Guarantee on behalf of such Guarantor. Such signatures upon the Guarantee
may be by manual or facsimile signature of such officers and may be imprinted
or otherwise reproduced on the Guarantee, and in case any such officer who
shall have signed the Guarantee shall cease to be such officer before the Note
on which such Guarantee is endorsed shall have been authenticated and
delivered by the Trustee or disposed of by the Company, such Note nevertheless
may be authenticated and delivered or disposed of as though the person who
signed the Guarantee had not ceased to be such officer of the Guarantor.
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SECTION 11.10. NO PAYMENT ON GUARANTEES IN CERTAIN
CIRCUMSTANCES.
(a) If any default occurs and is continuing in the payment when
due, whether at maturity, upon any redemption, by declaration or otherwise, of
any principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Guarantor Senior
Debt or Senior Debt guaranteed by any Guarantor (a "GUARANTOR PAYMENT
DEFAULT"), no payment of any kind or character shall be made by or on behalf
of the Guarantor or any other Person on its behalf with respect to any
Obligations on the Notes or any of the obligations of such Guarantor on its
Guarantee or to acquire any of the Notes for cash or property or otherwise. In
addition, if any event of default other than a Guarantor Payment Default (a
"GUARANTOR NON-PAYMENT DEFAULT") occurs and is continuing with respect to any
Designated Senior Debt guaranteed by a Guarantor (which guarantee constitutes
Guarantor Senior Debt of such Guarantor), as such event of default is defined
in the instrument creating or evidencing such Designated Senior Debt,
permitting the holders of such Designated Senior Debt then outstanding to
accelerate the maturity thereof and if the Representative for the respective
issue of Designated Senior Debt gives written notice of the Guarantor
Non-payment Default to the Trustee (a "GUARANTOR DEFAULT NOTICE"), then,
unless and until all Guarantor Non-payment Defaults have been cured or waived
or have ceased to exist or the Trustee receives notice from the Representative
for the respective issue of Designated Senior Debt terminating the Guarantor
Blockage Period (as defined below), during the 179 days after the delivery of
such Guarantor Default Notice (the "GUARANTOR BLOCKAGE PERIOD"), neither the
Guarantor nor any other Person on its behalf shall (x) make any payment of any
kind or character with respect to any Obligations on the Notes or under its
Guarantee or (y) acquire any of the Notes for cash or property or otherwise.
For all purposes of this Section 11.10(a), in no event will a Guarantor
Blockage Period extend beyond 179 days from the date the payment on the Notes
was due and only one such Guarantor Blockage Period may be commenced within
any 360 consecutive days. No Guarantor Non-payment Default which existed or
was continuing on the date of the commencement of any Guarantor Blockage
Period with respect to the Designated Senior Debt shall be, or be made, the
basis for commencement of a second Guarantor Blockage Period by the
Representative of such Designated Senior Debt whether or not within a period
of 360 consecutive days, unless such Non-payment Default shall have been cured
or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action or any breach of any financial
covenants for a period commencing after the date of commencement of such
Guarantor Blockage Period that, in either case, would give rise to a Guarantor
Non-payment Default pursuant to any provisions under which a Guarantor
Non-payment Default previously existed or was continuing shall constitute a
new Guarantor Non-payment Default for this purpose).
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 11.10(a), such payment shall be held in trust for the
benefit of, shall be paid over or delivered to, the holders of Guarantor
Senior Debt (PRO RATA to such holders on the basis
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of the respective amount of Guarantor Senior Debt held by such holders) or
their respective Representatives, as their respective interests may appear.
The Trustee shall be entitled to rely on information regarding amounts then
due and owing on the Guarantor Senior Debt, if any, received from the holders
of Guarantor Senior Debt (or their Representatives) or, if such information is
not received from such holders or their Representatives, from such Guarantor
and only amounts included in the information provided to the Trustee shall be
paid to the holders of Guarantor Senior Debt.
Nothing contained in this Article Eleven shall limit the right
of the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided that all Guarantor Senior Debt thereafter due or
declared to be due shall first be paid in full in cash or Cash Equivalents
(other than Obligations under the Credit Agreement which must be paid in full
in cash) before the Holders are entitled to receive any payment of any kind or
character with respect to the Obligations on the Notes or on account of any
Guarantor's Guarantee.
SECTION 11.11. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets of any Guarantor
of any kind or character, whether in cash, property, securities or otherwise,
to creditors upon any total or partial liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors or marshaling of
assets of such Guarantor, or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to any Guarantor or its property,
whether voluntary or involuntary, all Obligations with respect to all
Guarantor Senior Debt shall first be paid in full, in cash or Cash Equivalents
(other than Obligations under the Credit Agreement which must be paid in full
in cash), before any payment or distribution of any kind or character is made
on account of any Obligations on the Notes or any of the Obligations of such
Guarantor on its Guarantee, or for the acquisition of any of the Notes for
cash or property or otherwise; and until all such Obligations with respect to
all Guarantor Senior Debt are paid in full in cash or Cash Equivalents (other
than Obligations under the Credit Agreement which must be paid in full in
cash), any distribution to which the Holders of the Notes would be entitled
but for the subordination provisions will be made to the holders of Guarantor
Senior Debt as their interests may appear. Upon any such dissolution,
winding-up, liquidation, reorganization, bankruptcy, insolvency, receivership
or similar proceeding or assignment for the benefit of creditors or marshaling
of assets, any payment or distribution of assets of any Guarantor of any kind
or character, whether in cash, property, securities or otherwise, to which the
Holders of the Notes or the Trustee under this Indenture would be entitled,
except for the provisions hereof, shall be paid by such Guarantor or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the Holders of the Notes or by the
Trustee under this Indenture if received by them, directly to the holders of
Guarantor Senior Debt (PRO RATA to such holders on the basis of the respective
amounts of Guarantor Senior Debt held by such holders) or their respective
Representatives, or to the trustee or trustees under any
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indenture pursuant to which any of such Guarantor Senior Debt may have been
issued, as their respective interests may appear, for application to the
payment of Guarantor Senior Debt remaining unpaid until all such Guarantor
Senior Debt has been paid in full in cash or Cash Equivalents (other than
Obligations under the Credit Agreement which must be paid in full in cash)
after giving effect to any concurrent payment, distribution or provision
therefor to or for the holders of Guarantor Senior Debt.
(b) To the extent any payment of Guarantor Senior Debt (whether
by or on behalf of such Guarantor, as proceeds of security or enforcement of
any right of setoff or otherwise) is declared to be fraudulent or
preferential, set aside or required to be paid to any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar person under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then, if such payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar person, the
Guarantor Senior Debt or part thereof originally intended to be satisfied
shall be deemed to be reinstated and outstanding as if such payment had not
occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of a Guarantor of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or
any Holder when such payment or distribution is prohibited by Section
11.11(a), such payment or distribution shall be held in trust for the benefit
of, and shall be paid over or delivered to, the holders of Guarantor Senior
Debt (PRO RATA to such holders on the basis of the respective amount of
Guarantor Senior Debt held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Guarantor Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Guarantor
Senior Debt remaining unpaid until all such Guarantor Senior Debt has been
paid in full in cash or Cash Equivalents (other than Obligations under the
Credit Agreement which must be paid in full in cash), after giving effect to
any concurrent payment, distribution or provision therefor to or for the
holders of such Guarantor Senior Debt.
SECTION 11.12. PAYMENTS MAY BE PAID PRIOR TO DISSOLUTION.
Nothing contained in this Article Eleven or elsewhere in this
Indenture shall prevent (i) any Guarantor, except under the conditions
described in Sections 10.02, 10.03, 11.10 and 11.11, from making payments at
any time for the purpose of making payments of principal of and interest and
Additional Interest on the Notes, or from depositing with the Trustee any
moneys for such payments, or (ii) in the absence of actual knowledge by the
Trustee that a given payment would be prohibited by Section 10.02, 10.03,
11.10 or 11.11, the application by the Trustee of any moneys deposited with it
for the purpose of making such payments of principal of and interest and
Additional Interest on the Notes to the Holders entitled thereto unless at
least one Business Day prior to the date upon which such payment would
otherwise become due and payable, the Trustee shall have received the written
notice provided for in Section
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10.02(a), 10.07, 11.10(a) or in Section 11.15 (provided that, notwithstanding
the foregoing, such application shall otherwise be subject to the provisions
of the first sentence of Section 10.02(a), 11.10(a) and Section 11.11). Each
Guarantor shall give prompt written notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of any Guarantor.
SECTION 11.13. SUBROGATION.
After the payment in full in cash or Cash Equivalents (other
than Obligations under the Credit Agreement which must be paid in full in
cash) of all Guarantor Senior Debt and until the Notes are paid in full, the
Holders shall be subrogated to the rights of the holders of Guarantor Senior
Debt to receive payments or distributions of cash, property or securities of
such Guarantor applicable to the Guarantor Senior Debt of such Guarantor; and,
for the purposes of such subrogation, no such payments or distributions to the
holders of the Guarantor Senior Debt by or on behalf of such Guarantor by
virtue of this Article Eleven which otherwise would have been made to the
Holders shall, as between the Guarantors and the Holders of the Notes, be
deemed to be a payment by such Guarantor to or on account of the Notes, it
being understood that the provisions of this Article Eleven are and are
intended solely for the purpose of defining the relative rights of the Holders
of the Notes, on the one hand, and the holders of the Guarantor Senior Debt,
on the other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article Eleven
shall have been applied, pursuant to the provisions of this Article Eleven, to
the payment of amounts payable under the Guarantor Senior Debt, then the
Holders shall be entitled to receive from the holders of such Guarantor Senior
Debt any payments or distributions received by such holders of Guarantor
Senior Debt in excess of the amount sufficient to pay all amounts payable
under or in respect of the Guarantor Senior Debt in full in cash or Cash
Equivalents (other than Obligations under the Credit Agreement which must be
paid in full in cash).
SECTION 11.14. OBLIGATIONS OF EACH GUARANTOR UNCONDITIONAL.
Nothing contained in this Article Eleven or elsewhere in this
Indenture or in the Notes or the Guarantees is intended to or shall impair, as
among any Guarantor, its creditors, other than the holders of Guarantor Senior
Debt and the Holders of the Notes, the obligation of such Guarantor, which is
absolute and unconditional, to pay to the Holders of the Notes the principal
of and any interest and Additional Interest on the Notes as and when the same
shall become due and payable in accordance with the terms of the Guarantees,
or is intended to or shall affect the relative rights of the Holders of the
Notes and creditors of any Guarantor other than the holders of Guarantor
Senior Debt, nor shall anything herein or therein prevent the Holder of any
Note or the Trustee on its behalf from exercising all remedies otherwise
permitted by applicable law upon default
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under this Indenture, subject to the rights, if any, in respect of cash,
property or securities of any Guarantor received upon the exercise of any such
remedy.
SECTION 11.15. NOTICE TO TRUSTEE.
The Company or any Guarantor shall give prompt written notice
to the Trustee of any fact known to the Company or any such Guarantor which
would prohibit the making of any payment to or by the Trustee in respect of
the Guarantees pursuant to the provisions of this Article Eleven, but the
failure to give such notice shall not affect the subordination of the
Guarantees to the Guarantor Senior Debt as provided in this Article 11.
Regardless of anything to the contrary contained in this Article Eleven or
elsewhere in this Indenture, the Trustee shall not be charged with knowledge
of the existence of any default or event of default with respect to any
Guarantor Senior Debt or of any other facts which would prohibit the making of
any payment to or by the Trustee unless and until the Trustee shall have
received notice in writing from the Company or a Guarantor, or from a holder
of Guarantor Senior Debt or a Representative therefor, and, prior to the
receipt of any such written notice, the Trustee shall be entitled to assume
(in the absence of actual knowledge to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any person as a holder of
Guarantor Senior Debt (other than Indebtedness under the Credit Agreement) to
participate in any payment or distribution pursuant to this Article Eleven,
the Trustee may request such person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amounts of Guarantor Senior Debt (other
than Indebtedness under the Credit Agreement) held by such person, the extent
to which such person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such person under
this Article Eleven, and if such evidence is not furnished the Trustee may
defer any payment to such person pending judicial determination as to the
right of such person to receive such payment.
SECTION 11.16. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT.
Upon any payment or distribution of assets of any Guarantor
referred to in this Article Eleven, the Trustee, subject to the provisions of
Article Seven hereof, and the Holders of the Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings
are pending, or upon certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or
distribution, delivered to the Trustee or the holders of the Notes, for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Guarantor Senior Debt and other Indebtedness
of such Guarantor, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article Eleven.
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SECTION 11.17. TRUSTEE'S RELATION TO GUARANTOR SENIOR DEBT.
The Trustee and any agent of any Guarantor or the Trustee shall
be entitled to all the rights set forth in this Article Eleven with respect to
any Guarantor Senior Debt which may at any time be held by it in its
individual or any other capacity to the same extent as any other holder of
Guarantor Senior Debt and nothing in this Indenture shall deprive the Trustee
or any such agent of any of its rights as such holder.
With respect to the holders of Guarantor Senior Debt, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Eleven, and no
implied covenants or obligations with respect to the holders of Guarantor
Senior Debt shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Guarantor
Senior Debt and shall not be liable to any such holders if the Trustee shall
pay over or distribute to or on behalf of Holders or any such Guarantor or any
other person money or assets to which any holders of Guarantor Senior Debt
shall be entitled by virtue of this Article, except if such payment is made as
a result of willful misconduct or gross negligence of the Trustee.
Whenever a distribution is to be made or a notice given to
holders or owners of Guarantor Senior Debt, the distribution may be made and
the notice given to their Representatives, if any.
In the event that the Trustee or any Holder receives any
payment of any Obligations with respect to the Notes at a time when the
Trustee or such Holder, as applicable, has actual knowledge that such payment
is prohibited by Article 11 hereof, such payment shall be held by the Trustee
or such Holder, in trust for the benefit of, and shall be paid forthwith over
and delivered, upon written request, to, the holders of Guarantor Senior Debt
as their interests may appear or their Representative under the indenture or
other agreement (if any) pursuant to which Guarantor Senior Debt may have been
issued, as their respective interests may appear, for application to the
payment of all Obligations with respect to Guarantor Senior Debt remaining
unpaid to the extent necessary to pay such Obligations in full in cash in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Guarantor Senior Debt.
SECTION 11.18. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR
OMISSIONS OF A GUARANTOR OR HOLDERS OF GUARANTOR
SENIOR DEBT.
No right of any present or future holders of any Guarantor
Senior Debt to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Guarantor or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by such Guarantor
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with the terms of this Indenture, regardless of any knowledge thereof which
any such holder may have or otherwise be charged with.
Without in any way limiting the generality of this Section
11.18, the holders of Guarantor Senior Debt may, at any time and from time to
time, without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders and without impairing or
releasing the subordination provided in this Article Eleven or the obligations
hereunder of the Holders to the holders of the Guarantor Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Guarantor Senior Debt, or
otherwise amend or supplement in any manner Guarantor Senior Debt, or any
instrument evidencing the same or any agreement under which Guarantor Senior
Debt is outstanding; (ii) sell, exchange, release, foreclose against or
otherwise deal with any property pledged, mortgaged or otherwise securing
Guarantor Senior Debt; (iii) release any person liable in any manner for the
payment or collection of Guarantor Senior Debt; and (iv) exercise or refrain
from exercising any rights against such Guarantor, any Subsidiary thereof and
any other person.
SECTION 11.19. NOTEHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF GUARANTEES.
Each Holder by its acceptance of them authorizes and expressly
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Guarantor Senior Debt and
the Holders, the subordination provided in this Article Eleven, and appoints
the Trustee its attorney-in-fact for such purposes, including, in the event of
any dissolution, winding-up, liquidation or reorganization of any Guarantor
(whether in bankruptcy, insolvency, receivership, reorganization or similar
proceedings or upon an assignment for the benefit of creditors or otherwise),
the filing of a claim for the unpaid balance of its or his Notes and accrued
interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in
the form required in such proceeding prior to 30 days before the expiration of
the time to file such claim or claims, then the holders of the Guarantor
Senior Debt or their Representative are or is hereby authorized to have the
right to file and are or is hereby authorized to file an appropriate claim for
and on behalf of the Holders of said Notes. Nothing herein contained shall be
deemed to authorize the Trustee or the holders of Guarantor Senior Debt or
their Representative to authorize or consent to or accept or adopt on behalf
of any Holders any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Guarantor Senior Debt or their
Representative to vote in respect of the claim of any Holder in any such
proceeding.
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SECTION 11.20. THIS ARTICLE ELEVEN NOT TO PREVENT EVENTS OF
DEFAULT.
The failure to make a payment on account of principal of or
interest or Additional Interest on the Notes by reason of any provision of
this Article Eleven will not be construed as preventing the occurrence of an
Event of Default.
SECTION 11.21. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article Eleven will apply to amounts due to the
Trustee, in its capacity as such, pursuant to other sections in this
Indenture.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
SECTION 12.02. NOTICES.
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by private courier service guaranteeing next day delivery, by telex,
by telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company or the Guarantors, if any:
NationsRent, Inc.
450 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
Attention: Gene J. Ostrow
Telecopy: (305) 954-6585
with a copy to:
Akerman, Senterfitt & Eidson
One S.E. 3rd Avenue
28th Floor
Miami, Florida 33131
Attention: Steven K. Roddenbury, Esq.
Telecopy: (305) 374-5095
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if to the Trustee:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Telecopy: (212) 815-5195
Each of the Company, the Guarantors and the Trustee by written
notice to each other such Person may designate additional or different
addresses for notices to such Person. Any notice or communication to the
Company, the Guarantors, if any, or the Trustee shall be deemed to have been
given or made as of the date so delivered if personally delivered or delivered
by private courier service guaranteeing next day delivery; when receipt is
acknowledged, if faxed; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by
the addressee).
Any notice or communication mailed to a Holder shall be mailed
to such Holder by first class mail or other equivalent means at such Holder's
address as it appears on the registration books of the Registrar and shall be
sufficiently given to such Holder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
SECTION 12.03. COMMUNICATIONS BY HOLDERS WITH OTHERS HOLDERS.
Holders may communicate pursuant to TIA ss. 312(b) with other
HolderS with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, if any, the Trustee, the Registrar and any other
Person shall have the protection of TIA ss. 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee upon request:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of the signers, all
conditions
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precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with;
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel, all
such conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and
(3) where applicable, a certificate or opinion by an
independent certified public accountant reasonably satisfactory to the Trustee
that complies with TIA ss. 314(c).
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is reasonably necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been complied with.
SECTION 12.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 12.07. LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" used with respect to a particular place of
payment is a Saturday, a Sunday or a day on which banking institutions in New
York, New York, or the city in which the principal corporate trust office of
the Trustee is located, or at such place of payment are not required to be
open. If a payment date is a Legal Holiday at
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<PAGE> 109
such place, payment may be made at such place on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue for the intervening
period.
SECTION 12.08. GOVERNING LAW.
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 12.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorporator, as
such, of the Company, the Guarantors, if any, or of the Trustee shall not have
any liability for any obligations of the Company under the Notes or this
Indenture. Each Holder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Notes. This provision does not affect any possible claims
under federal securities laws.
SECTION 12.11. SUCCESSORS.
All agreements of the Company and the Guarantors in this
Indenture, the Notes and the Guarantees shall bind their successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 12.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together shall
represent the same agreement.
SECTION 12.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or
in the Notes or in the Guarantees shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other
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<PAGE> 110
respect and of the remaining provisions shall not in any way be affected or
impaired thereby, it being intended that all of the provisions hereof shall be
enforceable to the full extent permitted by law.
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<PAGE> 111
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
NATIONSRENT, INC.
By: /s/ Thomas C. Richardson
-----------------------------
Name: Thomas C. Richardson
Title: Vice President
GUARANTORS
A-ACTION RENTAL, INC. (doing business as A-ACTION RENTAL & SALES, INC.)
A TO Z RENTS IT, INC.
A TO Z RENTS IT, INC. #2
ACME RENTAL, INC.
CENTRAL ALABAMA RENTAL CENTER, INC.
GABRIEL TRAILER MANUFACTURING COMPANY, INC.
GOLD COAST AERIAL LIFT, INC.
HIGH REACH COMPANY, INC.
NATIONSRENT OF ALABAMA, INC.
NATIONSRENT OF CALIFORNIA, INC.
NATIONSRENT OF FLORIDA, INC.
NATIONSRENT OF GEORGIA, INC.
NATIONSRENT OF INDIANA, INC.
NATIONSRENT OF KENTUCKY, INC.
NATIONSRENT OF LOUISIANA, INC.
NATIONSRENT OF MICHIGAN, INC.
NATIONSRENT OF NEW HAMPSHIRE, INC.
NATIONSRENT OF OHIO, INC.
NATIONSRENT OF TENNESSEE, INC.
NATIONSRENT OF TEXAS, INC.
NATIONSRENT OF WEST VIRGINIA, INC.
NRI/LEC MERGER CORP., INC.
RAYMOND EQUIPMENT CO. INC. (doing business as JOBS RENTAL)
SAM'S EQUIPMENT RENTAL, INC. (a subsidiary of Gabriel Trailer Manufacturing
Company, Inc.)
SOUTHEAST RENTAL & LEASING, INC.
TENNESSEE TOOL AND SUPPLY, INC.
<PAGE> 112
THE BODE-FINN COMPANY
THE J. KELLY CO., INC.
TITAN RENTALS, INC.
Each by its authorized officer:
/s/ Thomas C. Richardson
--------------------------------------
Name: Thomas C. Richardson
Title: Vice President
of the Guarantors listed above
THE BANK OF NEW YORK, as Trustee
/s/ Remo J. Reale
------------------------------------
Name: Remo J. Reale
Title: Assistant Vice President
<PAGE> 113
EXHIBIT A(1)
[FORM OF INITIAL NOTE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT WITHIN ONE YEAR
AFTER THE ORIGINAL ISSUANCE OF THE SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED
INVESTOR THAT (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT), PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS
BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN ONE YEAR AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF
THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.
A.1-1
<PAGE> 114
CUSIP No.:
NationsRent, Inc.
10 3/8% SENIOR SUBORDINATED NOTE DUE 2008
No. $
NATIONSRENT, Inc., a Delaware corporation (the "Company," which term includes
any successor entity), for value received promises to pay to or registered
assigns, the principal sum of Dollars, on December 15, 2008.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Note contained herein, which
will for all purposes have the same effect as if set forth at this place.
A.1-2
<PAGE> 115
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by
facsimile by its duly authorized officers.
NATIONSRENT, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
Dated: [ ], 1998
Certificate of Authentication
This is one of the 10 3/8% Senior
Subordinated Notes due 2008
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK, as
Trustee
By:
----------------------------------
Authorized Signatory
A.1-3
<PAGE> 116
(REVERSE OF SECURITY)
10 3/8% Senior Subordinated Note due 2008
1. INTEREST. NATIONSRENT, INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes (as defined in the Indenture
described below) will accrue from the most recent date on which interest has
been paid or, if no interest has been paid, from December 11, 1998. The Company
will pay interest and Additional Interest, if any, semi-annually in arrears on
each Interest Payment Date, commencing June 15, 1998. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on
overdue installments of interest and Additional Interest, if any, from time to
time on demand at the rate borne by the Notes and on overdue installments of
interest and Additional Interest, if any, (without regard to any applicable
grace periods) to the extent lawful.
2. METHOD OF PAYMENT. The Company shall pay interest and
Additional Interest, if any, on the Notes (except defaulted interest and
defaulted Additional Interest) to the Persons who are the registered Holders at
the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are canceled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender Notes to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest and Additional Interest, if any, in money of the United States that
at the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay principal and interest and
Additional Interest, if any, by its check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a Holder
at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York
(the "Trustee") will act as Paying Agent and Registrar. The Company may change
any Paying Agent, Registrar or co-Registrar without notice to the Holders.
4. INDENTURE. The Company issued the Notes under an Indenture,
dated as of December 11, 1998, as amended from time to time (the "Indenture"),
by and among the Company, the Guarantors (as defined therein) and the Trustee
(as defined therein). Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. This Note is one of a duly authorized
issue of Initial Notes of the Company designated as its 103/8% Senior
Subordinated Notes due 2008 (the "Initial Notes"). The Notes include the Initial
Notes, the Private Exchange Notes and the Unrestricted Notes issued in exchange
for the Initial Notes pursuant to the Registration Rights Agreement or, with
respect to Initial Notes issued under the Indenture subsequent to the Issue
Date, a registration rights agreement substantially identical to the
Registration Rights Agreement.
A.1-4
<PAGE> 117
The Initial Notes and the Unrestricted Notes are treated as a single class of
securities under the Indenture. The terms of the Notes include those stated in
this Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and said Act for a statement of them. The Notes are
general unsecured obligations of the Company limited in aggregate principal
amount to $225,000,000. Under Article Eleven of the Indenture the payment on
each Note is guaranteed on a senior subordinated basis by the Guarantors. Each
Holder, by accepting a Note, agrees to be bound by all of the terms and
provisions of the Indenture.
5. SUBORDINATION. The Notes are subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Senior Debt of the
Company (other than Obligations under the Credit Agreement, which must be paid
in full in cash), whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed. The Guarantees in respect of the Notes
are subordinated in right of payment, in the manner and to the extent set forth
in the Indenture, to the prior payment in full in cash or Cash Equivalents of
all Guarantor Senior Debt of each Guarantor (other than Obligations under the
Credit Agreement, which must be paid in full in cash), whether outstanding on
the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by its acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on its behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee its
attorney-in-fact for such purposes.
6. REDEMPTION PROVISIONS. Except as provided below, the Notes
may not be redeemed prior to December 15, 2003.
(a) OPTIONAL REDEMPTION. On or after such date, the Notes may
be redeemed at the option of the Company, at any time as a whole, or from time
to time in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount), plus
accrued and unpaid interest (if any) and Additional Interest (if any) to the
date of redemption (subject to the rights of holders of record on the relevant
record date to receive interest and Additional Interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing
December 15:
REDEMPTION
PRICE
-----------
2003............................................... 105.188%
2004............................................... 103.458%
2005............................................... 101.729%
2006 and thereafter................................ 100.000%
A.1-5
<PAGE> 118
(b) Notwithstanding the foregoing, at any time on or prior to
December 15, 2001, the Company may, at its option, redeem, in part and from time
to time, with the net cash proceeds of one or more Public Equity Offerings or
Private Equity Offerings, up to 35% of the sum of (i) the initial aggregate
principal amount of the Notes originally issued on the date hereof and (ii) the
respective initial aggregate principal amount of the Notes issued under the
Indenture after the Issue Date, at a redemption price equal to 110.375% of the
principal amount thereof plus accrued and unpaid interest and Additional
Interest, if any, thereon to the redemption date; PROVIDED that at least 65% of
the sum of (i) the initial aggregate principal amount of the Notes issued in the
Offering and (ii) the respective initial aggregate principal amount of the Notes
issued under the Indenture after the Issue Date, remains outstanding immediately
after the occurrence of any such redemption (excluding Notes held by the Company
and its Subsidiaries) and that any such redemption occurs within 90 days
following the closing of any such Public Equity Offering or Private Equity
Offering, as the case may be.
7. NOTICE OF REDEMPTION. Notice of redemption shall be mailed
by first-class mail at least 30 days but not more than 60 days before the
Redemption Date to each Holder of Notes to be redeemed at its registered
address. Notes in denominations larger than $1,000 may be redeemed in part. If
any Note is to be redeemed in part only, the notice of redemption that relates
to such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the Redemption Date, interest and Additional
Interest, if any, will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the paying agent funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued interest and
Additional Interest, if any, the Notes called for redemption will cease to bear
interest and Additional Interest from and after such Redemption Date and the
only right of the Holders of such Notes will be to receive payment of the
Redemption Price plus accrued interest and Additional Interest, if any.
8. OFFERS TO PURCHASE. Section 4.15 of the Indenture provides
that, upon a Change of Control if the Company does not redeem the Notes, each
holder will have the right, subject to certain conditions set forth in the
Indenture, to require the Company to repurchase such holder's Notes at a price
equal to 101% of the principal amount thereof plus accrued interest and
Additional Interest, if any, to the date of repurchase. Section 4.16 of the
Indenture provides that, after certain Asset Sales, and subject to further
limitations contained therein, the Company will make an offer to purchase
certain amounts of the Notes in accordance with the procedures set forth in the
Indenture.
A.1-6
<PAGE> 119
9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal or
interest or Additional Interest remains unclaimed for two years, the Trustee and
the Paying Agent will pay the money back to the Company. After that, all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of, premium, if any, and interest
and Additional Interest on the Notes to redemption or maturity and complies with
the other provisions of the Indenture relating thereto, the Company will be
discharged from certain provisions of the Indenture and the Notes (including
certain covenants, but excluding its obligation to pay the principal of and
interest and Additional Interest on the Notes).
13. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain
exceptions, the Indenture, the Notes or the Guarantee, if any, may be amended or
supplemented with the written consent of the Holders of at least a majority in
aggregate principal amount of the Notes then outstanding, and any existing
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of a majority in aggregate principal
amount of the Notes then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the Notes
to, among other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Indenture or make any other change that does not
adversely affect in any material respect the rights of any Holder of a Note.
14. RESTRICTIVE COVENANTS. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness or Liens, make payments in
respect of its Capital Stock or certain Indebtedness, enter into transactions
with Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, incur additional Senior Subordinated Debt, merge or consolidate
with any other Person, sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets or adopt a plan of liquidation
and sell
A.1-7
<PAGE> 120
Capital Stock of a Restricted Subsidiary. Such limitations are subject to a
number of important qualifications and exceptions. The Company must annually
report to the Trustee on compliance with such limitations.
15. SUCCESSORS. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. DEFAULTS AND REMEDIES. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest or Additional Interest) if it
determines that withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS. No stockholder, director,
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company under the Notes or the Indenture.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
19. AUTHENTICATION. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
20. GOVERNING LAW. The laws of the State of New York shall
govern this Note and the Indenture, without regard to principles of conflict of
laws.
21. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
A.1-8
<PAGE> 121
22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
23. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement, the Company
will be obligated to consummate an exchange offer pursuant to which the Holder
of this Note shall have the right to exchange this Note for the Company's 103/8%
Senior Subordinated Notes due 2008 which have been registered under the
Securities Act, in like principal amount and having terms identical in all
material respects as this Note (other than as relates to registration rights and
transfer restrictions). The Holders shall be entitled to receive certain
additional interest payments in the event such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Registration Right Agreement.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note in larger type. Requests may be made to: NationsRent, Inc., 450 East Las
Olas Boulevard, Miami, Florida 33133, Attn: Gene J. Ostrow.
A.1-9
<PAGE> 122
FORM OF SENIOR SUBORDINATED GUARANTEE
Each of the undersigned (each a "Guarantor") has jointly and
severally unconditionally guaranteed on a senior subordinated basis (such
guarantee by each guarantor being referred to herein as the "Guarantee") (i) the
due and punctual payment of the principal of and interest and Additional
Interest on the Notes, whether at maturity, by acceleration or otherwise, the
due and punctual payment of interest on the overdue principal and interest and
Additional Interest, if any, on the Notes, to the extent lawful, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee all in accordance with the terms set forth in Article Eleven of the
Indenture and (ii) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of each Guarantor to the Holders and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth and
are expressly subordinated and subject in right of payment to the prior payment
in full in cash or Cash Equivalents of all Guarantor Senior Debt of such
Guarantor (other than Obligations under the Credit Agreement, which must be paid
in full in cash), to the extent and in the manner provided, in Article Eleven of
the Indenture, and reference is hereby made to such Indenture for the precise
terms of the Guarantee therein made.
No past, present or future stockholder, officer, director,
employee or incorporator, as such, of any of the Guarantors shall have any
liability under the Guarantee by reason of such person's status as stockholder,
officer, director, employee or incorporator. Each holder of a Note by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Guarantees.
A.1-10
<PAGE> 123
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Notes upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatures.
[ ]
By:
------------------------------
Name:
Title:
A.1-11
<PAGE> 124
................................................... ASSIGNMENT FORM If you the
Holder want to assign this Note, fill in the form below and have your signature
guaranteed:
I or we assign and transfer this Note to:
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint, __________________, agent to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
Date: ............................. Signed: ______________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ....................................................
In connection with any transfer of this Note occurring prior to the date which
is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) _____________ ___, 1999, the undersigned confirms that it has
not utilized any general solicitation or general advertising in connection with
the transfer and that this Note is being transferred:
[Check One]
(1) to the Company or a subsidiary thereof; or
(2) pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) outside the United states to a "foreign person" in compliance
with Rule 904 of Regulation S under the Securities Act; or
A.1-12
<PAGE> 125
(5) pursuant to the exemption from registration provided by Rule
144 under the Securities Act; or
(6) pursuant to an effective registration statement under the
Securities Act; or
(7) pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; PROVIDED that if box (2), (3), (4), (5) or (7) is
checked, the Company or the Trustee may require, prior to registering any such
transfer of the Notes, in its sole discretion, such legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Trustee or the Company has reasonably requested to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.16 of the Indenture shall have
been satisfied.
Date: Signed:
------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
A.1-13
<PAGE> 126
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: ............................. Signed:
NOTICE: To be executed by
an executive officer
A.1-14
<PAGE> 127
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount you
elect to have purchased:
$...................................
Dated:
NOTICE: The signature on this
assignment must correspond
with the name as it appears
upon the face of the within
Note in every particular
without alteration or
enlargement or any change
whatsoever and be guaranteed
by an eligible Guarantor
Institution with membership in
the Medallion guaranty program
or similar association.
Signature Guarantee:
A.1-15
<PAGE> 128
EXHIBIT A(2)
[FORM OF EXCHANGE NOTE]
CUSIP No.:
NATIONSRENT, INC.
10 3/8% SENIOR SUBORDINATED NOTE DUE 2008
No.________________ $______________
NATIONSRENT, INC., a Delaware corporation (the
"Company," which term includes any successor entity), for value received
promises to pay TO OR registered assigns, the principal sum of Dollars, on
December 15, 2008.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
A.2-1
<PAGE> 129
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
NATIONSRENT, INC.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Certificate of Authentication
This is one of the 10 3/8% Senior
Subordinated Notes due 2008 referred
to in the within-mentioned
Indenture.
THE BANK OF NEW YORK,
as Trustee
By:
-----------------------------------
Authorized Signatory
A.2-2
<PAGE> 130
(REVERSE OF SECURITY)
10 3/8% Senior Subordinated Note due 2008
1. INTEREST. NationsRent, Inc., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at the rate per
annum shown above. Interest on the Notes will accrue from the most recent date
on which interest has been paid or, if no interest has been paid, from December
11, 1998. The Company will pay interest and Additional Interest, if any,
semi-annually in arrears on each Interest Payment Date, commencing June 15,
1998. Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Company shall pay interest on overdue principal and on overdue
installments of interest and Additional Interest, if any, from time to time on
demand at the rate borne by the Notes and on overdue installments of interest
and Additional Interest, if any (without regard to any applicable grace periods)
to the extent lawful.
2. METHOD OF PAYMENT. The Company shall pay interest and Additional
Interest, if any, on the Notes (except defaulted interest) to the Persons who
are the registered Holders at the close of business on the Record Date
immediately preceding the Interest Payment Date even if the Notes are canceled
on registration of transfer or registration of exchange after such Record Date.
Holders must surrender Notes to a Paying Agent to collect principal payments.
The Company shall pay principal and interest and Additional Interest, if any, in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest and Additional Interest, if any, by its check
payable in such U.S. Legal Tender. The Company may deliver any such interest
payment to the Paying Agent or to a Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York (the
"Trustee") will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-Registrar without notice to the Holders.
4. INDENTURE. The Company issued the Notes under an Indenture,
dated as of December 11, 1998, as amended from time to time (the "Indenture"),
by and among the Company, the Guarantors (as defined therein) and the Trustee
(as defined therein). Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. This Note is one of a duly authorized
issue of Unrestricted Notes of the Company designated as its 10 3/8% Senior
Subordinated Notes due 2008 (the "Unrestricted Notes"). The Notes include the
Initial Notes, the Private Exchange Notes and the Unrestricted Notes issued in
exchange for the Initial Notes pursuant to the Registration Rights Agreement or,
with respect to Initial Notes issued under the Indenture subsequent to the Issue
Date, a registration rights agreement substantially identical to the
Registration Rights Agreement. The Initial Notes and the Unrestricted Notes are
treated as a single class of securities under the Indenture. The terms of the
Notes include those stated in this Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of
A.2-3
<PAGE> 131
1939 (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date
of the Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and said Act for a statement of them. The Notes are general unsecured
obligations of the Company limited in aggregate principal amount to
$225,000,000. Under Article Eleven of the Indenture the payment on each Note is
guaranteed on a senior subordinated basis by the Guarantors. Each Holder, by
accepting a Note, agrees to be bound by all of the terms and provisions of the
Indenture.
5. SUBORDINATION. The Notes are subordinated in right of payment,
in the manner and to the extent set forth in the Indenture, to the prior payment
in full in cash or Cash Equivalents of all Senior Debt of the Company (other
than Obligations under the Credit Agreement, which must be paid in full in
cash), whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. The Guarantees in respect of the Notes are
subordinated in right of payment, in the manner and to the extent set forth in
the Indenture, to the prior payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt of each Guarantor (other than Obligations under the Credit
Agreement, which must be paid in full in cash), whether outstanding on the date
of the Indenture or thereafter created, incurred, assumed or guaranteed. Each
Holder by its acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Trustee, on its behalf, to take such action
as may be necessary or appropriate to effectuate the subordination provided for
in the Indenture and appoints the Trustee its attorney-in-fact for such
purposes.
6. REDEMPTION PROVISIONS. Except as provided below, the Notes may
not be redeemed prior to December 15, 2003.
(a) OPTIONAL REDEMPTION. On or after such date, the Notes may be
redeemed at the option of the Company, at any time as a whole, or from time to
time in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount), plus
accrued and unpaid interest (if any) and Additional Interest (if any) to the
date of redemption (subject to the rights of holders of record on the relevant
record date to receive interest and Additional Interest due on the date of
redemption), if redeemed during the 12-month period commencing December 15:
REDEMPTION
PRICE
-----------
2003........................................................... 105.188%
2004........................................................... 103.458%
2005........................................................... 101.729%
2006 and thereafter............................................ 100.000%
A.2-4
<PAGE> 132
(b) Notwithstanding the foregoing, at any time prior to
December 15, 2001, the Company may, at its option, redeem, in part and from time
to time, with the net cash proceeds of one or more Public Equity Offerings or
Private Equity Offerings, up to 35% of the sum of (i) the initial aggregate
principal amount of the Notes originally issued and (ii) the respective initial
aggregate principal amount of the Notes under the Indenture after the Issue Date
at a redemption price equal to 110.375% of the principal amount thereof plus
accrued and unpaid interest and Additional Interest, if any, thereon to the
redemption date; PROVIDED that at least 65% of the sum of (i) the initial
aggregate principal amount of the Notes issued in the Offering and (ii) the
respective initial aggregate principal amount of the Notes under the Indenture
after the Issue Date remains outstanding immediately after the occurrence of any
such redemption (excluding Notes held by the Company and its Subsidiaries) and
that any such redemption occurs within 90 days following the closing of any such
Public Equity Offering or Private Equity Offering, as the case may be.
7. NOTICE OF REDEMPTION. Notice of redemption shall be mailed
by first-class mail at least 30 days but not more than 60 days before the
Redemption Date to each Holder of Notes to be redeemed at its registered
address. Notes in denominations larger than $1,000 may be redeemed in part. If
any Note is to be redeemed in part only, the notice of redemption that relates
to such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the Redemption Date, interest and Additional
Interest, if any, will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the paying agent funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued interest and
Additional Interest, if any, the Notes called for redemption will cease to bear
interest and Additional Interest from and after such Redemption Date and the
only right of the Holders of such Notes will be to receive payment of the
Redemption Price plus accrued interest and Additional Interest, if any.
8. OFFERS TO PURCHASE. Section 4.15 of the Indenture provides
that, upon a Change of Control if the Company does not redeem the Notes, each
holder will have the right, subject to certain conditions set forth in the
Indenture, to require the Company to repurchase such holder's Notes at a price
equal to 101% of the principal amount thereof plus accrued interest and
Additional Interest, if any, to the date of repurchase. Section 4.16 of the
Indenture provides that, after certain Asset Sales, and subject to further
limitations contained therein, the Company will make an offer to purchase
certain amounts of the Notes in accordance with the procedures set forth in the
Indenture.
A.2-5
<PAGE> 133
9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal or
interest or Additional Interest remains unclaimed for two years, the Trustee and
the Paying Agent will pay the money back to the Company. After that, all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of, premium, if any, and interest
and Additional Interest on the Notes to redemption or maturity and complies with
the other provisions of the Indenture relating thereto, the Company will be
discharged from certain provisions of the Indenture and the Notes (including
certain covenants, but excluding its obligation to pay the principal of and
interest and Additional Interest on the Notes).
13. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain
exceptions, the Indenture, the Notes or the Guarantee, if any, may be amended or
supplemented with the written consent of the Holders of at least a majority in
aggregate principal amount of the Notes then outstanding, and any existing
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of a majority in aggregate principal
amount of the Notes then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the Notes
to, among other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Indenture or make any other change that does not
adversely affect in any material respect the rights of any Holder of a Note.
14. RESTRICTIVE COVENANTS. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness or Liens, make payments in
respect of its Capital Stock or certain Indebtedness, enter into transactions
with Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, incur additional Senior Subordinated Debt, merge or consolidate
with any other Person, sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets or adopt a plan of liquidation
and sell
A.2-6
<PAGE> 134
Capital Stock of a Restricted Subsidiary. Such limitations are subject to a
number of important qualifications and exceptions. The Company must annually
report to the Trustee on compliance with such limitations.
15. SUCCESSORS. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. DEFAULTS AND REMEDIES. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest or Additional Interest) if it
determines that withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS. No stockholder, director,
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company under the Notes or the Indenture.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
19. AUTHENTICATION. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
20. GOVERNING LAW. The laws of the State of New York shall
govern this Note and the Indenture, without regard to principles of conflict of
laws.
21. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
A.2-7
<PAGE> 135
22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
23. INDENTURE. Each Holder, by accepting a Note, agrees to be
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note in larger type. Requests may be made to: NationsRent, Inc., 450 East Las
Olas Boulevard, Fort Lauderdale, Florida 33301 Attn: Pamela K.M. Beall
A.2-8
<PAGE> 136
FORM OF SENIOR SUBORDINATED GUARANTEE
Each of the undersigned (each a "Guarantor") has jointly and
severally unconditionally guaranteed on a senior subordinated basis (such
guarantee by each guarantor being referred to herein as the "Guarantee") (i) the
due and punctual payment of the principal of and interest and Additional
Interest on the Notes, whether at maturity, by acceleration or otherwise, the
due and punctual payment of interest on the overdue principal and interest and
Additional Interest, if any, on the Notes, to the extent lawful, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee all in accordance with the terms set forth in Article Eleven of the
Indenture and (ii) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of each Guarantor to the Holders and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth and
are expressly subordinated and subject in right of payment to the prior payment
in full in cash or Cash Equivalents of all Guarantor Senior Debt of such
Guarantor (other than Obligations under the Credit Agreement, which must be paid
in full in cash) to the extent and in the manner provided, in Article Eleven of
the Indenture, and reference is hereby made to such Indenture for the precise
terms of the Guarantee therein made.
No past, present or future stockholder, officer, director,
employee or incorporator, as such, of any of the Guarantors shall have any
liability under the Guarantee by reason of such person's status as stockholder,
officer, director, employee or incorporator. Each holder of a Note by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Guarantees.
A.2-9
<PAGE> 137
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Notes upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.
[ ]
By:
-------------------------------
Name:
Title:
A.2-10
<PAGE> 138
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint, , agent to transfer this Note on the books of the
Company. The agent may substitute another to act for him.
Date: ............................. Signed:
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ........................................................
.............................................................................
A.2-11
<PAGE> 139
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount you elect to have purchased:
$...................................
Dated:
NOTICE: The signature on this
assignment must correspond
with the name as it appears
upon the face of the within
Note in every particular
without alteration or
enlargement or any change
whatsoever and be guaranteed
by an eligible Guarantor
Institution with membership in
the Medallion guaranty
signature or other similar
program.
Signature Guarantee: ..........................................................
A.2-12
<PAGE> 140
EXHIBIT B
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE
FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS
NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO
TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE> 141
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
TRANSFERS TO NON-QIB ACCREDITED INVESTOR
--------------, ----
The Bank of New York
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: NationsRent, Inc. (the "Company")
10 3/8% Senior Subordinated
NOTES DUE 2008 (THE "NOTES")
Ladies and Gentlemen:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Notes, we confirm that:
1. We have received a copy of the Offering Memorandum (the
"Offering Memorandum"), dated ______________ __, 1998, relating to the Notes and
such other information as we deem necessary in order to make our investment
decision. We acknowledge that we have read and agreed to the matters stated on
pages (i)-(iii) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum, including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture dated
as of __________ __, 1998 relating to the Notes (the "Indenture") and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and conditions
and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes may not be offered
or sold within the United States or to, or for the account or benefit of, U.S.
Persons except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Notes we will do so
only (i) to the Company or any subsidiary thereof, (ii) inside the
C-1
<PAGE> 142
United States in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act), (iii) inside the United States to an institutional "accredited investor"
(as defined below) that, prior to such transfer, furnishes (or has furnished on
its behalf by a U.S. broker-dealer) to you a signed letter containing certain
representatives and agreements relating to the restrictions on transfer of the
Notes, substantially in the form of this letter, (iv) outside the United States
in accordance with Rule 904 of Regulation S under the Securities Act, (v)
pursuant to the exemption from registration provided by Rule 144 under the
Securities Act (if available), or (vi) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
4. We are not acquiring the Notes for or on behalf of, and
will not transfer the Notes to, any pension or welfare plan (as defined in
Section 3 of the Employee Retirement Income Security Act of 1974), except as
permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Notes, we
will be required to furnish to you and the Company such certification, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Notes purchased by us will bear a legend to the
foregoing effect.
6. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You, the Company and the Initial Purchasers (as defined in the
Offering Memorandum) are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
--------------------------------
Authorized Signature
C-2
<PAGE> 143
EXHIBIT D
Form of Certificate to be Delivered
in Connection With Transfers
Pursuant to Regulation S
--------------, ----
The Bank of New York
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: NationRent, Inc. (the "Company")
10 3/8% Senior Subordinated Notes
DUE 2008 (THE "NOTES")
Ladies and Gentlemen:
In connection with our proposed sale of $___________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
1. the offer of the Notes was not made to a person in the
United States;
2. either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
3. no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
4. the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
D-1
<PAGE> 144
5. we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
------------------------------
Authorized Signature
D-2
<PAGE> 1
Exhibit 4.5
EXECUTION COPY
NOTES REGISTRATION RIGHTS AGREEMENT
Dated as of December 11, 1998
by and among
NATIONSRENT, INC.,
THE GUARANTORS NAMED ON THE SIGNATURE PAGES HERETO
and
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
BT ALEX. BROWN INCORPORATED
BANCBOSTON ROBERTSON STEPHENS INC.
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NOTES REGISTRATION RIGHTS AGREEMENT
THIS NOTES REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is
made and entered into as of December 11, 1998, among NationsRent, Inc., a
Delaware corporation (the "COMPANY"), the guarantors named on the signature
pages hereto (each, a "GUARANTOR") and Bear, Stearns & Co. Inc., NationsBanc
Montgomery Securities LLC, BT Alex. Brown Incorporated and BancBoston Robertson
Stephens Inc. (collectively, the "INITIAL PURCHASERS").
This Agreement is made pursuant to the Purchase Agreement
dated December 8, 1998 among the Company, the Guarantors and the Initial
Purchasers (the "PURCHASE AGREEMENT"), which provides for, in relevant part, the
sale by the Company to the Initial Purchasers of $175,000,000 aggregate
principal amount of the Company's 103/8% Senior Subordinated Notes due 2008
(collectively with the Guarantees referred to below, the "NOTES"), which will be
guaranteed (the "GUARANTEES") on a senior subordinated basis by the Guarantors.
In order to induce the Initial Purchasers to enter into the Purchase Agreement,
each of the Company and the Guarantors has agreed to provide to the Initial
Purchasers and their direct and indirect transferees and assigns the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time, and the rules and regulations of the SEC promulgated
thereunder.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC promulgated
thereunder.
"Additional Interest" shall have the meaning set forth in
Section 3(a) of this Agreement.
"Application" shall have the meaning set forth in Section
6(a)(i) of this Agreement.
"Business Day" shall mean a day other than Saturday or Sunday
or a day on which banking institutions located in New York City or in the place
where the Company maintains its principal office are authorized or obligated by
law, regulation or executive order to be closed.
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"Closing Date" shall mean the Closing Date as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble of
this Agreement and also includes the Company's successors.
"Depositary" shall mean The Depository Trust Company, or any
other depositary appointed by the Company, PROVIDED, HOWEVER, that any such
depositary must have an address in the Borough of Manhattan, in the City of New
York.
"Effectiveness Date" shall have the meaning set forth in
Section 2(a) of this Agreement.
"Effectiveness Deadline" shall mean the Effectiveness Date or
the Shelf Effectiveness Date, as applicable.
"Exchange Notes" shall mean 10 3/8% Senior Subordinated Notes
due 2008 issued by the Company, together with the guarantees issued by the
Guarantors (including any future subsidiaries of the Company which shall have
become a "Guarantor" pursuant to the terms of the Indenture), under the
Indenture containing terms identical in all respects to the Notes (except that
(i) interest thereon shall accrue from the last date on which interest was paid
on the Notes or, if no such interest has been paid, from the Closing Date, (ii)
the transfer restrictions thereon shall be eliminated and (iii) certain
provisions relating to an increase in the stated rate of interest thereon shall
be eliminated) to be offered to Holders of Notes in exchange for Exchange Notes
pursuant to the Notes Exchange Offer.
"Filing Date" shall have the meaning set forth in Section 2(a)
of this Agreement.
"Filing Deadline" shall mean the Filing Date or the Shelf
Filing Date, as applicable.
"Guarantees" shall have the meaning set forth in the preamble
of this Agreement.
"Guarantor" shall have the meaning set forth in the preamble
of this Agreement and also includes any such Guarantor's successor.
"Holders" shall mean the Initial Purchasers, for so long as
they own any Registrable Notes, and each of their successors, assigns and direct
and indirect transferees who become registered owners of Registrable Notes under
the Indenture.
"Indenture" shall mean the Indenture relating to the Notes
dated as of December 11, 1998 among the Company, the Guarantors and The Bank of
New York, as trustee, as the same may be amended from time to time in accordance
with the terms thereof.
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"Initial Purchasers" shall have the meaning set forth in the
preamble of this Agreement.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Notes; PROVIDED that
whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Company
or any Guarantor or any of their affiliates (as such term is defined in Rule 405
under the 1933 Act) (other than the Initial Purchasers or subsequent holders of
Registrable Notes if such subsequent holders are deemed to be such affiliates
solely by reason of their holding of such Registrable Notes) shall be
disregarded in determining whether such consent or approval was given by the
Holders of such required percentage or amount.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Notes" shall have the meaning set forth in the preamble of
this Agreement.
"Notes Exchange Offer" shall mean the exchange offer by the
Company of Registrable Notes for Exchange Notes pursuant to Section 2(a) hereof.
"Notes Exchange Offer Registration" shall mean a registration
under the 1933 Act effected pursuant to Section 2(a) hereof.
"Notes Exchange Offer Registration Statement" shall mean an
exchange offer registration statement of the Company and the Guarantors on SEC
Form S-4 (or, if applicable, on another appropriate form) pursuant to the
provisions of Section 2(a) hereof, and all amendments and supplements to such
registration statement, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference therein.
"Notes Participating Broker" shall have the meaning set forth
in Section 4(f) of this Agreement.
"Notes Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company and the Guarantors pursuant to the
provisions of Section 2(b) of this Agreement which covers all of the then
Registrable Notes on an appropriate form under Rule 415 under the 1933 Act, or
any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"Person" shall mean an individual, partnership, limited
liability company, corporation, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
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"Private Exchange" shall have the meaning set forth in Section
2(a) hereof.
"Private Exchange Notes" shall have the meaning set forth in
Section 2(a) hereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any such
prospectus as amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Notes covered by a Notes Shelf Registration Statement, and by
all other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble of this Agreement.
"Registrable Notes" shall mean the Notes and, if issued, the
Private Exchange Notes; PROVIDED, HOWEVER, that the Notes or Private Exchange
Notes, as the case may be, shall cease to be Registrable Notes when (i) a
Registration Statement with respect to such Notes or Private Exchange Notes or
the resale thereof shall have been declared effective under the 1933 Act and
such Notes or Private Exchange Notes, as the case may be, shall have been
disposed of pursuant to such Registration Statement, (ii) such Notes or Private
Exchange Notes, as the case may be, shall have been sold to the public pursuant
to Rule 144 (or any similar provision then in force, but not Rule 144A) under
the 1933 Act, (iii) such Notes or Private Exchange Notes, as the case may be,
shall have ceased to be outstanding, or (iv) with respect to the Notes, such
Notes have been exchanged for Exchange Notes pursuant to a Notes Exchange Offer
Registration Statement upon consummation of the Notes Exchange Offer.
"Registration Default" shall have the meaning set forth in
Section 3(a) of this Agreement.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company and the Guarantors with
this Agreement, including without limitation: (i) all SEC, stock exchange or
NASD registration and filing fees, (ii) all fees and expenses incurred in
connection with compliance with state or other securities or blue sky laws and
compliance with the rules of the NASD (including reasonable fees and
disbursements of counsel for any underwriters or Holders in connection with
state or other securities or blue sky qualification of any of the Exchange Notes
or Registrable Notes), (iii) all expenses of any Persons in preparing or
assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or supplements thereto,
certificates representing the Exchange Notes and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating agency fees,
(v) all fees and expenses incurred in connection with the listing, if any, of
any of the Registrable Notes on any securities exchange or exchanges, (vi) all
fees and disbursements relating to the qualification of the Indenture under
applicable securities laws, (vii) the reasonable fees and disbursements of
counsel for the Company and the Guarantors and, in the case of a Notes Shelf
Registration Statement, the
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reasonable fees and disbursements (including the expenses of preparing and
distributing any underwriting or securities sales agreement) of one counsel (in
addition to appropriate local counsel, if any) for the Holders (which counsel
shall be selected in writing by the Majority Holders), (viii) the fees and
expenses of the independent public accountants of the Company and the
Guarantors, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, (ix) the
fees and expenses of a "qualified independent underwriter" as defined by Conduct
Rule 2720 of the NASD (if required by the NASD rules) in connection with the
offering of the Registrable Notes, (x) the fees and expenses of the Trustee,
including its counsel, and any escrow agent or custodian and (xi) any reasonable
fees and disbursements of the underwriters customarily required to be paid by
issuers or sellers of securities and the reasonable fees and expenses of any
special experts retained by the Company or the Guarantors in connection with any
Registration Statement, but excluding underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of Registrable Notes
by a Holder.
"Registration Statement" shall mean any registration statement
of the Company and the Guarantors which covers any of the Exchange Notes or
Registrable Notes pursuant to the provisions of this Agreement, and all
amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Effectiveness Date" shall have the meaning set forth in
Section 2(b) of this Agreement.
"Shelf Filing Date" shall have the meaning set forth in
Section 2(b) of this Agreement.
"Shelf Registration" shall mean a registration under the 1933
Act effected pursuant to Section 2(b) hereof.
"Trustee" shall mean the trustee with respect to the Notes
under the Indenture.
2. REGISTRATION UNDER THE 1933 ACT.
(a) NOTES EXCHANGE OFFER REGISTRATION.
To the extent not prohibited by any applicable law or
applicable interpretation of the staff of the SEC, the Company and the
Guarantors shall (A) file on or prior to the 90th calendar day following the
Closing Date (the "Filing Date") one (but not more than one) Notes Exchange
Offer Registration Statement covering the offer by the Company and the
Guarantors to the Holders to exchange all of the Registrable Notes for Exchange
Notes, (B) use their best efforts to cause such Notes Exchange Offer
Registration Statement to be declared effective by
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the SEC on or prior to the 150th calendar day following the Closing Date (the
"Effectiveness Date"), (C) use their best efforts to cause such Notes Exchange
Offer Registration Statement to remain effective until the closing of the Notes
Exchange Offer and (D) use their best efforts to consummate the Notes Exchange
Offer on or prior to the 30th calendar day following the date on which the Notes
Exchange Offer Registration Statement is declared effective by the SEC. The
Exchange Notes will be issued under the Indenture. The Notes Exchange Offer will
comply with applicable federal and state securities laws.
Upon the effectiveness of the Notes Exchange Offer
Registration Statement, the Company and the Guarantors shall promptly commence
the Notes Exchange Offer, it being the objective of such Notes Exchange Offer to
enable each Holder (other than a Notes Participating Broker), eligible and
electing to exchange Registrable Notes for Exchange Notes (assuming that such
Holder is not an affiliate of the Company or any Guarantor within the meaning of
Rule 405 under the 1933 Act, acquires the Exchange Notes in the ordinary course
of such Holder's business and has no arrangements or understandings with any
Person to participate in the Notes Exchange Offer for the purpose of
distributing the Exchange Notes) to trade such Exchange Notes from and after
their receipt without any limitations or restrictions under the 1933 Act and
without material restrictions under the securities laws of a substantial
proportion of the several states of the United States.
In connection with the Notes Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Notes Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Notes Exchange Offer open for not less than 20
Business Days and not more than 45 days after the date notice thereof
is mailed to the Holders (or longer if required by applicable law);
(iii) use the services of the Depositary for the Notes
Exchange Offer with respect to Notes evidenced by global certificates;
(iv) permit Holders to withdraw tendered Registrable Notes at
any time prior to the close of business, New York City time, on the
last business day on which the Notes Exchange Offer shall remain open,
by sending to the institution specified in the notice, a telegram,
telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Notes delivered for
exchange, and a statement that such Holder is withdrawing his election
to have such Notes exchanged; and
(v) otherwise comply in all respects with all applicable laws
relating to the Notes Exchange Offer.
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If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them and having the status of an unsold
allotment in the initial distribution, the Company upon the request of the
Initial Purchasers shall, simultaneously with the delivery of the Exchange Notes
in the Exchange Offer, issue and deliver to the Initial Purchasers in exchange
(the "PRIVATE EXCHANGE") for Notes held by the Initial Purchasers a like
principal amount of debt securities of the Company that are identical (except
that such securities shall bear appropriate transfer restrictions) to the
Exchange Notes (the "PRIVATE EXCHANGE NOTES") and are issued pursuant to the
Indenture. The Private Exchange Notes shall be of the same series and bear the
same CUSIP number as the Exchange Notes.
As soon as practicable after the close of the Notes Exchange
Offer or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange Registrable Notes duly tendered and
not validly withdrawn pursuant to the Notes Exchange Offer in
accordance with the terms of the Notes Exchange Offer Registration
Statement and the letter of transmittal which is an exhibit thereto;
(ii) accept for exchange all Registrable Notes or portions
thereof duly tendered pursuant to the Private Exchange;
(iii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes so accepted for exchange by the
Company; and
(iv) cause the Trustee promptly to authenticate and deliver
Exchange Notes or Private Exchange Notes, as the case may be, to each
Holder of Registrable Notes equal in amount to the Registrable Notes of
such Holder so accepted for exchange.
Interest on each Exchange Note will accrue (1) from the later
of (y) the last interest payment date on which interest was paid on the
Registrable Note surrendered in exchange therefor and (z) if the Registrable
Note is surrendered for exchange on a date in a period which includes the record
date for an interest payment date to occur on or after the date of such exchange
and as to which interest will be paid, the date of such interest payment date
or, (2) if no interest has been paid on the Registrable Notes, from the Closing
Date.
The Notes Exchange Offer shall not be subject to any
conditions, other than that the Notes Exchange Offer, or the making of any
exchange by a Holder, does not violate applicable law or any applicable
interpretation of the staff of the SEC. Each Holder of Registrable Notes (other
than a Notes Participating Broker) who wishes to exchange such Registrable Notes
for Exchange Notes in the Notes Exchange Offer shall have represented that (i)
any Exchange Notes to be received by it were acquired in the ordinary course of
business, (ii) at the time of the commencement of the Notes Exchange Offer it
had no arrangement or understanding with any Person to participate in the
distribution (within the meaning of the 1933 Act) of the Exchange Notes, (iii)
it is not an "affiliate" (as defined in Rule 405 under the 1933
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Act) of the Company or any of the Guarantors, or if it is an affiliate it will
comply with the registration and prospectus delivery requirements of the 1933
Act to the extent applicable and (iv) it is not acting on behalf of any Person
who could not make the representations in clauses (i) through (iii) above. Each
Holder of Registrable Notes that is a Notes Participating Broker who wishes to
exchange such Registrable Notes for Exchange Notes in the Notes Exchange Offer
shall have represented that it will deliver a Prospectus in connection with any
resale of such Exchange Notes. The Company shall inform the Initial Purchasers
of the names and addresses of the Holders to whom the Notes Exchange Offer is
made, and the Initial Purchasers shall have the right to contact such Holders
and otherwise facilitate the tender of Registrable Notes in the Notes Exchange
Offer after the Notes Exchange Offer Registration Statement has been filed with
the SEC.
(b) SHELF REGISTRATION.
If (i) because of any change in law or currently prevailing
interpretations thereof by the staff of the SEC, the Company and the Guarantors
are not permitted to effect the Notes Exchange Offer as contemplated by Section
2(a) hereof, (ii) the Exchange Offer is not consummated within 180 days of the
Closing Date, (iii) any holder of Registrable Notes notifies the Company prior
to the 20th day following consummation of the Exchange Offer that (a) it is
prohibited by law or SEC policy from participating in the Exchange Offer, (b) it
may not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus contained in the Notes
Exchange Offer Registration Statement is not appropriate or available for such
resales or (c) it is a broker-dealer and owns Notes acquired directly from the
Company or any Guarantor or an affiliate of the Company or any Guarantor, or
(iv) the Holder of Private Exchange Notes so requests, then the Company and the
Guarantors shall promptly deliver written notice of such event to the Holders
and the Trustee and shall at the Company's expense:
(A) as promptly as practicable, and in any event
within 90 days after the date of the earliest to occur of the events in
clauses (i), (ii), (iii) or (iv) above in this paragraph (b) (the
"Shelf Filing Date"), file with the SEC a Notes Shelf Registration
Statement relating to the offer and sale of the then outstanding
Registrable Notes by the Holders from time to time in accordance with
the methods of distribution elected by the Majority Holders of such
Registrable Notes and set forth in such Notes Shelf Registration
Statement, and use their best efforts to cause such Notes Shelf
Registration Statement to be declared effective by the SEC on or prior
to 60 days after the date on which such filing occurs (the "Shelf
Effectiveness Date"). In the event that the Company and the Guarantors
are required to file a Notes Shelf Registration Statement upon the
request of any Holder (other than an Initial Purchaser) not eligible to
participate in the Notes Exchange Offer pursuant to clause (iii) above
or upon the request of any Holder of Private Exchange Notes pursuant to
clause (iv) above, the Company and the Guarantors shall file and have
declared effective by the SEC both a Notes Exchange Offer Registration
Statement pursuant to Section 2(a) with respect to all Registrable
Notes and a Notes Shelf Registration Statement (which may be a combined
Registration Statement
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with the Notes Exchange Offer Registration Statement) with respect to
offers and sales of Registrable Notes held by such Holder or such
Initial Purchaser after completion of the Notes Exchange Offer;
(B) use their best efforts to keep the Notes Shelf
Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders for a period of
two years after the Closing Date (or such shorter period which will
terminate when all of the Registrable Notes covered by the Notes Shelf
Registration Statement have been sold pursuant to the Notes Shelf
Registration Statement; and
(C) notwithstanding any other provisions hereof, use
their best efforts to ensure that (i) any Notes Shelf Registration
Statement and any amendment thereto and any Prospectus forming a part
thereof and any supplement thereto complies in all material respects
with the 1933 Act and the rules and regulations thereunder, (ii) any
Notes Shelf Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
Prospectus forming part of any Notes Shelf Registration Statement, and
any supplement to such Prospectus (as amended or supplemented from time
to time), does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements, in light of the circumstances under which they were made,
not misleading.
The Company and the Guarantors further agree, if necessary, to
supplement or amend the Notes Shelf Registration Statement if reasonably
requested by the Majority Holders with respect to information relating to the
Holders provided by or on behalf of the Holders and otherwise as required by
Section 4(b) hereof, to use all reasonable efforts to cause any such amendment
to become effective and such Notes Shelf Registration Statement to become usable
as soon as practicable thereafter, and to furnish to the Holders of Registrable
Notes copies of any such supplement or amendment promptly after its being used
or filed with the SEC.
(c) EXPENSES.
The Company shall pay all Registration Expenses in connection
with the registration pursuant to Section 2(a) and 2(b) hereof. Each Holder
shall pay all expenses of its counsel other than as set forth in the preceding
sentence, underwriting discounts and commissions (prior to the reduction thereof
with respect to selling concessions, if any) and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Notes pursuant
to the Notes Shelf Registration Statement.
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(d) EFFECTIVE REGISTRATION STATEMENT.
(i) The Company and the Guarantors will be deemed not to have
used their best efforts to cause a Registration Statement to become, or
to remain, effective during the requisite period if any of them
voluntarily takes any action that would result in any such Registration
Statement not being declared effective or in the Holders of Registrable
Notes covered thereby not being able to exchange or offer and sell such
Registrable Notes during that period unless (A) such action is required
by applicable law or (B) such action is taken by the Company and the
Guarantors in good faith and for valid business reasons (but not
including avoidance of the Company's and the Guarantors' obligations
hereunder), including without limitation a material corporate
transaction, so long as the Company and the Guarantors promptly comply
with the requirements of Section 4(k) hereof, if applicable.
(ii) A Notes Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Notes Shelf Registration Statement pursuant to
Section 2(b) hereof will not be deemed to have become effective unless
it has been declared effective by the SEC; PROVIDED, HOWEVER, that if,
after it has been declared effective, the offering of Registrable Notes
pursuant to a Registration Statement is interfered with by any stop
order, injunction or other order or requirement of the SEC or any other
governmental agency or court, such Registration Statement will be
deemed not to have been effective during the period of such
interference, until the offering of Registrable Notes pursuant to such
Registration Statement may legally resume.
3. ADDITIONAL INTEREST.
(a) LIQUIDATED DAMAGES.
The Company, the Guarantors and the Initial Purchasers agree
that the Holders of Registrable Notes will suffer damages if the Company and the
Guarantors fail to fulfill their respective obligations under Section 2 hereof
and that it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, the Company and the Guarantors hereby, jointly and
severally, agree to pay, as liquidated damages, additional interest on the
Registrable Notes ("ADDITIONAL INTEREST") under the circumstances (each, a
"REGISTRATION DEFAULT") and to the extent set forth below (without duplication):
(i) if (A) the Notes Exchange Offer Registration Statement is
not filed with the SEC pursuant to Section 2(a) hereof within 90
calendar days after the Closing Date or (B) notwithstanding that the
Company and the Guarantors filed the Notes Exchange Offer Registration
Statement on or prior to the Filing Date, the Company and the
Guarantors are required, pursuant to Section 2(b) hereof, to file a
Notes Shelf Registration Statement and such Notes Shelf Registration
Statement is not filed with the SEC on or prior to the date required by
Section 2(b) hereof, then commencing on the day after either such
Filing Deadline, Additional Interest shall accrue on the principal
amount of the Registrable
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Notes at a rate of 0.25% per annum, for the first 90 days immediately
following such Filing Deadline, such Additional Interest rate
increasing by an additional 0.25% per annum at the beginning of each
subsequent 90-day period; or
(ii) if (A) the Notes Exchange Offer Registration Statement is
not declared effective by the SEC on or prior to 150 calendar days
after the Closing Date or (B) notwithstanding that the Notes Exchange
Offer Registration Statement was declared effective on or prior to the
Effectiveness Date, the Company and the Guarantors are required to file
a Notes Shelf Registration Statement and such Notes Shelf Registration
Statement is not declared effective by the SEC on or prior to the 60th
day following the date such Notes Shelf Registration Statement was
filed, then, commencing on the day after either such Effectiveness
Deadline, Additional Interest shall accrue on the principal amount of
the Registrable Notes at a rate of 0.25% per annum for the first 90
days immediately following such Effectiveness Deadline, such Additional
Interest rate increasing by an additional 0.25% per annum at the
beginning of each subsequent 90-day period; or
(iii) If (A) the Company and the Guarantors have not exchanged
Exchange Notes for all Registrable Notes validly tendered in accordance
with the terms of the Exchange Offer on or prior to the 30th calendar
day after the date on which the Notes Exchange Offer Registration
Statement was declared effective or (B) if applicable, the Notes Shelf
Registration Statement filed pursuant to Section 2(b) hereof has been
declared effective and at any time prior to the second anniversary of
the Closing Date (other than after such time as all Notes have been
sold thereunder), such Registration Statement ceases to be effective or
fails to be useful for its intended purpose without being succeeded
immediately by a post-effective Registration Statement that cures such
failure and that is itself declared effective within five Business
Days, then Additional Interest shall accrue on the principal amount of
the Registrable Notes at a rate of 0.25% per annum for the first 90
days commencing on (x) the 31st day after such effective date, in the
case of (A) above, or (y) the day such Notes Shelf Registration
Statement ceases to be effective in the case of (B) above, such
Additional Interest rate increasing by an additional 0.25% per annum at
the beginning of each subsequent 90-day period;
PROVIDED, HOWEVER, that the Additional Interest rate on the Registrable Notes
may not exceed in the aggregate 2.0% per annum; and provided, further, that the
Company and the Guarantors shall in no event be required to pay Additional
Interest for more than one Registration Default at any given time; and PROVIDED,
FURTHER, that (1) upon the filing of the Notes Exchange Offer Registration
Statement or a Notes Shelf Registration Statement (in the case of clause (i)
above), (2) upon the effectiveness of the Notes Exchange Offer Registration
Statement or the Notes Shelf Registration Statement (in the case of clause (ii)
above), or (3) upon the exchange of Exchange Notes for all Registrable Notes
tendered (in the case of clause (iii) (A) above), or upon the effectiveness of
the Notes Shelf Registration Statement which had ceased to remain effective (in
the case of clause (iii) (B) above), Additional Interest on the Registrable
Notes as a result of such clause (or the relevant subclause thereof), as the
case may be, shall cease to accrue.
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(b) CALCULATION AND PAYMENT.
The Company and the Guarantors shall notify the Trustee within
one Business Day after each and every date on which an event occurs in respect
of which Additional Interest is required to be paid pursuant to Section 3(a)
hereof. Any amounts of Additional Interest due pursuant to Section 3(a)(i),
(a)(ii) or (a)(iii) will be payable to the Holders entitled thereto, commencing
with the first such date occurring after any such Additional Interest commences
to accrue, in the manner provided for the payment of interest in the Indenture
on each interest payment date, as more fully set forth in the Indenture and the
Notes or Private Exchange Notes, as the case may be. The amount of Additional
Interest will be determined by multiplying the applicable Additional Interest
rate by the principal amount of the Registrable Notes, multiplied by a fraction,
the numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
consisting of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed) and the denominator of which is 360. All
obligations of the Company and the Guarantors pursuant to Section 3(a) hereof
that are outstanding with respect to any Registrable Note at the time such
security ceases to be a Registrable Note shall survive until such time as all
such obligations with respect to such Note shall have been satisfied in full.
(c) SPECIFIC ENFORCEMENT.
Without limiting the remedies available to the Initial
Purchasers and the Holders, each of the Company and the Guarantors acknowledges
that any failure by each of the Company and the Guarantors to comply with its
respective obligations under Sections 2(a) and 2(b) hereof may result in
material irreparable injury to the Initial Purchasers or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Initial Purchasers or any Holder may obtain such relief as may be required
to specifically enforce the Company's obligations under Sections 2(a) and 2(b)
hereof.
4. REGISTRATION PROCEDURES.
In connection with the obligations of the Company and the Guarantors
with respect to the Registration Statements pursuant to Sections 2(a) and 2(b)
hereof, the Company and the Guarantors shall:
(a) prepare and file with the SEC a Registration Statement, within the
time period specified in Section 2, on the appropriate form under the 1933 Act,
which form shall (i) be selected by the Company, (ii) in the case of a Shelf
Registration, be available for the sale of the Registrable Notes by the selling
Holders thereof, and (iii) comply as to form in all material respects with the
requirements of the applicable form and include or incorporate by reference all
financial statements required by the SEC to be filed therewith, and use their
best efforts to cause such Registration Statement to become effective and remain
effective in accordance with Section 2 hereof;
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<PAGE> 14
(b) prepare and file with the SEC such amendments and post-effective
amendments to (i) the Notes Exchange Offer Registration Statement as may be
necessary under applicable law to keep such Notes Exchange Offer Registration
Statement effective for the period required to comply with Section 2(a) (except
to the extent the Company is unable to consummate the Notes Exchange Offer and
the Company and the Guarantors comply with Section 2(b), subject in all respects
to Section 4(f) hereof), and (ii) the Notes Shelf Registration Statement as may
be necessary under applicable law to keep such Notes Shelf Registration
Statement effective for the period required pursuant to Section 2(b) hereof;
cause each Prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933 Act; and
comply with the provisions of the 1933 Act and the 1934 Act applicable to the
Company and the Guarantors with respect to the disposition of all securities
covered by each Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the selling
Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Notes, at least 15 days prior to filing, that a Notes Shelf
Registration Statement with respect to the Registrable Notes is being filed and
advising such Holders that the distribution of Registrable Notes will be made in
accordance with the method elected by the Majority Holders; and (ii) furnish to
each Holder of Registrable Notes, to counsel for the Initial Purchasers, to
counsel for the Holders and to each underwriter of an underwritten offering of
Registrable Notes, if any, without charge, as many copies of each Prospectus,
including each preliminary Prospectus, and any amendment or supplement thereto
and such other documents as such Holder or underwriter may reasonably request,
including financial statements and schedules and, if the Holder so requests, all
exhibits (including those incorporated by reference) in order to facilitate the
public sale or other disposition of the Registrable Notes; and (ii) subject to
the last paragraph of Section 4 hereof, hereby consent to the use of the
Prospectus, including each preliminary Prospectus, or any amendment or
supplement thereto by each of the selling Holders of Registrable Notes in
connection with the offering and sale of the Registrable Notes covered by the
Prospectus or any amendment or supplement thereto;
(d) use its best efforts to register or qualify the Registrable Notes
under all applicable state securities or "blue sky" laws of such jurisdictions
as any Holder of Registrable Notes covered by a Registration Statement and each
underwriter of an underwritten offering of Registrable Notes shall reasonably
request by the time the applicable Registration Statement is declared effective
by the SEC, to cooperate with the Holders in connection with any filings
required to be made with the NASD, keep each such registration or qualification
effective during the period such Registration Statement is required to be
effective and do any and all other acts and things which may be reasonably
necessary or advisable to enable such Holder to consummate the disposition in
each such jurisdiction of such Registrable Notes owned by such Holder; PROVIDED,
HOWEVER, that the Company shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 4(d) or (ii) take any
action which would subject it to general service of process or taxation in any
such jurisdiction if it is not then so subject;
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<PAGE> 15
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes and counsel for such Holders promptly and, if requested by
such Holder or counsel, confirm such advice in writing promptly (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request by the
SEC or any state securities authority for post-effective amendments and
supplements to a Registration Statement and Prospectus or for additional
information after the Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable Notes covered
thereby, the representations and warranties of the Company or a Guarantor
contained in any underwriting agreement, securities sales agreement or other
similar agreement, if any, relating to such offering cease to be true and
correct in all material respects, (v) of the receipt by the Company or a
Guarantor of any notification with respect to the suspension of the
qualification of the Registrable Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (vi) of the
happening of any event known to the Company or a Guarantor or the discovery by
the Company or a Guarantor of any facts during the period a Notes Shelf
Registration Statement is effective which makes any statement made in such Notes
Shelf Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such Notes Shelf
Registration Statement or Prospectus in order to make the statements therein not
misleading and (vii) of any determination by the Company or a Guarantor that a
post-effective amendment to a Registration Statement would be appropriate;
(f) (A) in the case of the Notes Exchange Offer, (i) include in the
Notes Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Notes Exchange Offer
Registration Statement by broker-dealers who have exchanged their Registrable
Notes for Exchange Notes for the resale of such Exchange Notes, (ii) furnish to
each broker-dealer who desires to participate in the Notes Exchange Offer,
without charge, as many copies of each Prospectus included in the Notes Exchange
Offer Registration Statement, including any preliminary prospectus, and any
amendment or supplement thereto, as such broker-dealer may reasonably request,
(iii) include in the Notes Exchange Offer Registration Statement a statement
that any broker-dealer who holds Registrable Notes acquired for its own account
as a result of market-making activities or other trading activities (a "NOTES
PARTICIPATING BROKER"), and who receives Exchange Notes for Registrable Notes
pursuant to the Notes Exchange Offer, may be a statutory underwriter and must
deliver a prospectus meeting the requirements of the 1933 Act in connection with
any resale of such Exchange Notes, (iv) subject to the last paragraph of Section
4 hereof, hereby consent to the use of the Prospectus forming part of the Notes
Exchange Offer Registration Statement or any amendment or supplement thereto, by
any broker-dealer in connection with the sale or transfer of the Exchange Notes
covered by the Prospectus or any amendment or supplement thereto, and (v)
include in the transmittal letter or similar documentation to be executed by an
exchange offeree in order to participate in the Notes Exchange Offer (x) the
following provision:
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<PAGE> 16
If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Notes. If the
undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Registrable Notes,
it represents that the Registrable Notes to be exchanged for
Exchange Notes were acquired by it as a result of
market-making activities or other trading activities and
acknowledges that it will deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of
such Exchange Notes pursuant to the Notes Exchange Offer;
however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the 1933 Act;
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in subclause (x) and by delivering a Prospectus in
connection with the exchange of Registrable Notes, the broker-dealer will not be
deemed to admit that it is an underwriter within the meaning of the 1933 Act;
and
(B) to the extent any Notes Participating Broker participates
in the Notes Exchange Offer, the Company and the Guarantors shall use their best
efforts to cause to be delivered at the request of an entity representing the
Notes Participating Brokers (which entity shall be one of the Initial
Purchasers, unless it elects not to act as such representative) only one, if
any, "cold comfort" letter with respect to the Prospectus in the form existing
on the last date for which exchanges are accepted pursuant to the Notes Exchange
Offer and with respect to each subsequent amendment or supplement, if any,
effected during the period specified in clause (C) below; and
(C) to the extent any Notes Participating Broker participates
in the Notes Exchange Offer, the Company and the Guarantors shall use their best
efforts to maintain the effectiveness of the Notes Exchange Offer Registration
Statement for a period of 120 days following the closing of the Notes Exchange
Offer; and
(D) the Company and the Guarantors shall not be required to
amend or supplement the Prospectus contained in the Notes Exchange Offer
Registration Statement as would otherwise be contemplated by Section 4(b), or
take any other action as a result of this Section 4(f), for a period exceeding
120 days after the last date for which exchanges are accepted pursuant to the
Notes Exchange Offer (as such period may be extended by the Company) and Notes
Participating Brokers shall not be authorized by the Company to, and shall not,
deliver such Prospectus after such period in connection with resales
contemplated by this Section 4;
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<PAGE> 17
(g) (A) in the case of a Notes Exchange Offer, furnish to counsel for
the Initial Purchasers and (B) in the case of a Shelf Registration, furnish to
counsel for the Holders of Registrable Notes copies of any request by the SEC or
any state securities authority for amendments or supplements to a Registration
Statement and Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement as soon as practicable
and provide immediate notice to each Holder of the withdrawal of any such order;
(i) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(j) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Notes to facilitate the timely preparation and delivery
of certificates representing Registrable Notes to be sold and not bearing any
restrictive legends; and cause such Registrable Notes to be in such
denominations (consistent with the provisions of the Indenture) and registered
in such names as the selling Holders or the underwriters, if any, may reasonably
request at least one business day prior to the closing of any sale of
Registrable Notes;
(k) in the case of a Shelf Registration, upon the occurrence of any
event or the discovery of any facts, each as contemplated by Section 4(e)(vi)
hereof, use their best efforts to prepare a supplement or post-effective
amendment to a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Notes, such
Prospectus will not contain at the time of such delivery any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company agrees to notify each Holder to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an event, and
each Holder hereby agrees to suspend use of the Prospectus until the Company and
the Guarantors have amended or supplemented the Prospectus to correct such
misstatement or omission. At such time as such public disclosure is otherwise
made or the Company determines that such disclosure is not necessary, in each
case to correct any misstatement of a material fact or to include any omitted
material fact, the Company agrees promptly to notify each Holder of such
determination and to furnish each Holder such numbers of copies of the
Prospectus, as amended or supplemented, as such Holder may reasonably request;
(l) obtain a CUSIP number for all Exchange Notes, or Registrable Notes,
as the case may be, not later than the effective date of a Registration
Statement, and provide the Trustee with printed certificates for the Exchange
Notes or the Registrable Notes, as the case may be, in a form eligible for
deposit with the Depositary;
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<PAGE> 18
(m) (i) cause the Indenture to be qualified under the Trust Indenture
Act of 1939, as amended (the "TIA"), in connection with the registration of the
Exchange Notes, or Registrable Notes, as the case may be, (ii) cooperate with
the Trustee and the Holders to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with the terms of
the TIA and (iii) execute, and use their best efforts to cause the Trustee to
execute, all documents as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and appropriate
actions (including those reasonably requested by the Majority Holders) in order
to expedite or facilitate the disposition of such Registrable Notes and in such
connection whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration:
(i) make such representations and warranties to the Holders of
such Registrable Notes and the underwriters, if any, in form, substance
and scope as are customarily made by issuers to underwriters in similar
underwritten offerings as may be reasonably requested by them;
(ii) obtain opinions of counsel to the Company and the
Guarantors and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and the holders of a majority in principal amount
of the Registrable Notes being sold) addressed to each selling Holder
and the underwriters, if any, covering the matters customarily covered
in opinions requested in sales of securities or underwritten offerings;
(iii) obtain "cold comfort" letters and updates thereof from
the Company's and the Guarantors' independent certified public
accountants addressed to the underwriters, if any, and use their best
efforts to have such letters addressed to the selling Holders of
Registrable Notes, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters to
underwriters in connection with similar underwritten offerings;
(iv) enter into a securities sales agreement with the Holders
and an agent of the Holders providing for, among other things, the
appointment of such agent for the selling Holders for the purpose of
soliciting purchases of Registrable Notes, which agreement shall be in
form, substance and scope customary for similar offerings; and
(v) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in similar
offerings.
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<PAGE> 19
The above shall be done (i) with the exception of clause (n)(ii) above, at the
effectiveness of such Notes Shelf Registration Statement (and, if appropriate,
each post-effective amendment thereto) and (ii) at each closing under any
underwriting or similar agreement as and to the extent required thereunder. In
the case of any underwritten offering, the Company shall provide written notice
to the Holders of all Registrable Notes of such underwritten offering at least
30 days prior to the filing of a prospectus supplement for such underwritten
offering. Such notice shall (x) offer each such Holder the right to participate
in such underwritten offering, (y) specify a date, which shall be no earlier
than 10 days following the date of such notice, by which such Holder must inform
the Company of its intent to participate in such underwritten offering and (z)
include the instructions such Holder must follow in order to participate in such
underwritten offering;
(o) in the case of a Shelf Registration, make available for inspection
by representatives of the Holders of the Registrable Notes and any underwriters
participating in any disposition pursuant to a Notes Shelf Registration
Statement and any counsel or accountant retained by such Holders or
underwriters, at reasonable times and in a reasonable manner, all financial and
other records, pertinent corporate documents and properties of the Company and
the Guarantors reasonably requested by any such Persons, and cause the
respective officers, directors, employees, and any other agents of the Company
and the Guarantors, as applicable, to supply all information reasonably
requested by any such representative, underwriter, special counsel or accountant
in connection with such Notes Shelf Registration Statement; PROVIDED, HOWEVER,
that such Persons shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the Company in
writing as confidential at the time of delivery of such information shall be
kept confidential by such Persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information is
required by law (including any disclosure requirements pursuant to Federal
securities laws in connection with the filing of such Notes Shelf Registration
Statement or the use of any Prospectus), (iii) such information becomes
generally available to the public other than as a result of a disclosure or
failure to safeguard such information by such Person or (iv) such information
becomes available to such Person from a source other than the Company and the
Guarantors and such source is not bound by a confidentiality agreement;
PROVIDED, FURTHER, that the foregoing investigation shall be coordinated on
behalf of the Holders by one representative designated by and on behalf of such
Holders and any such confidential information shall be available from such
representative to such Holders so long as any Holder agrees to be bound by such
confidentiality agreement;
(p) (i) a reasonable time prior to the filing of any Notes Exchange
Offer Registration Statement, any Prospectus forming a part thereof, any
amendment to a Notes Exchange Offer Registration Statement or amendment or
supplement to a Prospectus, provide copies of such document to the Initial
Purchasers, and make such changes in any such document prior to the filing
thereof as any of the Initial Purchasers or their counsel may reasonably
request; (ii) in the case of a Shelf Registration, a reasonable time prior to
filing any Notes Shelf Registration Statement, any Prospectus forming a part
thereof, any amendment to such Notes Shelf Registration Statement or amendment
or supplement to such Prospectus, provide copies of such document to the Holders
of Registrable Notes, to the Initial Purchasers, to counsel on behalf of
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<PAGE> 20
the Holders and to the underwriter or underwriters of an underwritten offering
of Registrable Notes, if any, and make such changes in any such document prior
to the filing thereof as the Holders of Registrable Notes, the Initial
Purchasers on behalf of such Holders, their counsel and any underwriter may
reasonably request; and (iii) cause the representatives of the Company and the
Guarantors to be available for discussion of such document as shall be
reasonably requested by the Holders of Registrable Notes, the Initial Purchasers
on behalf of such Holders or any underwriter and shall not at any time make any
filing of any such document of which such Holders, the Initial Purchasers on
behalf of such Holders, their counsel or any underwriter shall not have
previously been advised and furnished a copy or to which such Holders, the
Initial Purchasers on behalf of such Holders, their counsel or any underwriter
shall reasonably object, each of which actions in this clause (iii) by the
Holders shall be coordinated by one representative for all the Holders at
reasonable times and in a reasonable manner;
(q) in the case of a Shelf Registration, use their best efforts to
cause all Registrable Notes to be listed on any securities exchange on which
similar debt securities issued by the Company are then listed if requested by
the Majority Holders or by the underwriter or underwriters of an underwritten
offering of Registrable Notes, if any;
(r) in the case of a Shelf Registration, unless the rating in effect
for the Notes applies to the Exchange Notes and the Notes to be sold pursuant to
a Shelf Registration, use their best efforts to cause the Registrable Notes to
be rated with the appropriate rating agencies, if so requested by the Majority
Holders or by the underwriter or underwriters of an underwritten offering of
Registrable Notes, if any, unless the Registrable Notes are already so rated;
(s) otherwise use their best efforts to comply with all applicable
rules and regulations of the SEC and make available to their security holders,
as soon as reasonably practicable, an earnings statement covering at least 12
months which shall satisfy the provisions of Section 11(a) of the 1933 Act and
Rule 158 thereunder; and
(t) cooperate and assist in any filings required to be made with the
NASD.
In the case of a Notes Shelf Registration Statement, the Company may
(as a condition to such Holder's participation in the Shelf Registration)
require each Holder of Registrable Notes to furnish to the Company such
information regarding such Holder and the proposed distribution by such Holder
of such Registrable Notes and make such representations, in each case, as the
Company may from time to time reasonably request in writing.
In the case of a Notes Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
or the discovery of any facts, each of the kind described in Section
4(e)(ii)-(vi) hereof, such Holder will forthwith discontinue disposition of
Registrable Notes pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 4(k) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at the Company's expense) all copies in its possession,
other than permanent file copies then in such Holder's
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<PAGE> 21
possession, of the Prospectus covering such Registrable Notes current at the
time of receipt of such notice. If the Company and the Guarantors shall give any
such notice to suspend the disposition of Registrable Notes pursuant to a Notes
Shelf Registration Statement as a result of the happening of any event or the
discovery of any facts, each of the kind described in Section 4(e)(vi) hereof,
the Company and the Guarantors shall be deemed to have used their best efforts
to keep the Notes Shelf Registration Statement effective during such period of
suspension; PROVIDED that the Company and the Guarantors shall use their best
efforts to file and have declared effective (if an amendment) as soon as
practicable an amendment or supplement to the Notes Shelf Registration Statement
and shall extend the period during which the Registration Statement shall be
maintained effective pursuant to this Agreement by the number of days during the
period from and including the date of the giving of such notice to and including
the date when the Holders shall have received copies of the supplemented or
amended Prospectus necessary to resume such dispositions.
5. UNDERWRITTEN REGISTRATIONS.
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Majority Holders of such Registrable Notes included in such offering and
shall be reasonably acceptable to the Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) Each of the Company and the Guarantors agrees to indemnify and hold
harmless each Holder and each Person, if any, who controls any Holder within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any
losses, claims, damages or liabilities, joint or several, to which such Holder
or such controlling Person may become subject under the 1933 Act, the 1934 Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in (A) any Registration Statement or Prospectus
or any amendments or supplements thereto or (B) any application or
other document, or any amendments or supplements thereto, executed by
the Company or any Guarantor or based upon written information
furnished by or on behalf of the Company or any Guarantor filed in any
jurisdiction in order to qualify the Registrable Notes or Exchange
Notes, as the case may
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<PAGE> 22
be, under the securities or blue sky laws thereof or filed with the SEC
or any securities association or securities exchange (each, an
"APPLICATION") or
(ii) the omission or alleged omission to state in any
Registration Statement or Prospectus or any amendment or supplement
thereto, or any Application a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse, as incurred, each Holder and each such controlling
Person for any legal or other expenses reasonably incurred by such
Holder or such controlling Person in connection with investigating,
defending against or appearing as a third-party witness in connection
with any such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that neither the Company nor any Guarantor will be liable in
any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission (i) made in
any Registration Statement or Prospectus or any amendment or supplement
thereto or any Application in reliance upon and in conformity with
written information relating to any Holder furnished to the Company by
any Holder specifically for use therein or (ii) contained in the
Preliminary Offering Memorandum and such untrue statement or alleged
untrue statement or omission or alleged omission was corrected in the
Offering Memorandum. This indemnity agreement will be in addition to
any liability which the Company or any Guarantor may otherwise have.
Neither the Company nor any Guarantor will, without the prior written
consent of each Holder, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder
(whether or not any Holder or any Person who controls any such Holder
within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act is a party to such claim, action, suit or proceeding), unless
such settlement, compromise or consent includes an unconditional
release of all of such Holder and such controlling Persons from all
liability arising out of such claim, action, suit or proceeding.
(b) Each Holder, severally and not jointly, agrees to indemnify and
hold harmless each of the Company and the Guarantors, each of their respective
directors, and each Person, if any, who controls the Company or a Guarantor
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
against any losses, claims, damages or liabilities to which the Company, the
Guarantor or any such director or controlling Person may become subject under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any Registration Statement or Prospectus or any amendment or supplement
thereto or any Application or (ii) the omission or alleged omission to state
therein a material fact required to be stated in any Registration Statement or
Prospectus or any amendment or supplement thereto, or any Application or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information relating to any Holder furnished to the
Company by such Holder specifically for use therein; and, subject to the
limitation set forth immediately
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<PAGE> 23
preceding this clause, will reimburse, as incurred, any legal or other expenses
reasonably incurred by the Company, any Guarantor or any such director or
controlling Person in connection with investigating or defending any such loss,
claim, damage, liability or any action in respect thereof; PROVIDED, HOWEVER,
that in no case shall a Holder be liable or responsible for any amount in excess
of the proceeds received by such Holder from sales of the Registrable Notes or
Exchange Notes, as the case may be, giving rise to such obligation. This
indemnity agreement will be in addition to any liability which such Holder may
otherwise have. The Holders will not, without the prior written consent of the
Company and the applicable Guarantor, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceedings in respect of which indemnification may be sought hereunder (whether
or not the Company, the Guarantor or any person who controls the Company or the
Guarantor within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of all of
the Company, such Guarantor and such controlling Persons from all liability
arising out of such claim, action, suit or proceeding.
(c) Promptly after receipt by an indemnified party under this Section 6
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 6, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 6. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel approved by such indemnified party (which
approval will not be unreasonably withheld); PROVIDED, HOWEVER, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such indemnified party or parties
and such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof and approval by such indemnified party of
counsel appointed to defend such action (which approval will not be unreasonably
withheld), the indemnifying party will not be liable to such indemnified party
under this Section 6 for any legal or other expenses, other than reasonable
costs of investigation, subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel for all indemnified parties (in addition to local counsel, if
any) in any one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by such Holder in the case of paragraph (a) of this Section 6,
-22-
<PAGE> 24
representing the indemnified parties under such paragraph (a) who are parties to
such action or actions) or (ii) the indemnifying party does not promptly retain
counsel a proved by the indemnified party (which approval will not be
unreasonably withheld) or (iii) the indemnifying party has authorized in writing
the employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the written consent of the indemnifying party.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 6 is unavailable or insufficient, for
any reason, to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Registrable Notes or
Exchange Notes, as the case may be, or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, not only such relative
benefits but also the relative fault of the indemnifying party or parties on the
one hand and the indemnified party on the other in connection with the
statements or omissions or alleged statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Guarantors, on the one hand, and such Holder, on the
other hand, shall be deemed to be in the same proportion as the total proceeds
from the offering (net of discounts and commissions but before deducting
expenses) received by the Company and the Guarantors bear to the total
underwriting discounts and commissions received by such Holder. The relative
fault of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or a Guarantor or such Holder, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances. The Company and the Guarantors, on the one hand, and each
Holder, on the other hand, agree that it would not be equitable if the amount of
such contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to above in this paragraph (d). Notwithstanding any
other provision of this paragraph (d), no Holder shall be obligated to make
contributions hereunder that in the aggregate exceed the total proceeds received
by such Holder from sales of Registrable Notes or Exchange Notes, as the case
may be, giving rise to such obligation, less the aggregate amount of any damages
that such Holder has otherwise been required to pay in respect of the same or
any substantially similar claim, and no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each Person, if any, who
controls a Holder within the meaning of Section 15 of the 1933 Act
-23-
<PAGE> 25
or Section 20 of the 1934 Act shall have the same rights to contribution as such
Holder, and each director of the Company or any of the Guarantors and each
Person, if any, who controls the Company or any of the Guarantors within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, shall have
the same rights to contribution as the Company and the Guarantors.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business Persons who were represented by counsel during the
negotiations regarding the provisions of this Agreement, including, without
limitation, the provisions of this Section 6, and are fully informed regarding
said provisions. They further acknowledge that the provisions of this Section 6
fairly allocate the risks in light of the ability of the parties to investigate
each of the Company and the Guarantors and their respective businesses in order
to assure that adequate disclosure is made in the Offering Memorandum as
required by the 1933 Act.
7. MISCELLANEOUS.
(a) RULE 144 AND RULE 144A. For so long as the Company and, if
applicable, each Guarantor, is subject to the reporting requirements of Section
13 or 15 of the 1934 Act, the Company and, if applicable, each Guarantor,
covenants that it will file the reports required to be filed by it under Section
13(a) or 15(d) of the 1934 Act and the rules and regulations adopted by the SEC
thereunder, that if it ceases to be so required to file such reports, it will
upon the request of any Holder of Registrable Notes (i) make publicly available
such information as is necessary to permit sales pursuant to Rule 144 under the
1933 Act, (ii) deliver such information to a prospective purchaser as is
necessary to permit sales pursuant to Rule 144A under the 1933 Act and it will
take such further action as any Holder of Registrable Notes may reasonably
request, and (iii) take such further action as is reasonable in the
circumstances, in each case, to the extent required from time to time to enable
such Holder to sell its Registrable Notes without registration under the 1933
Act within the limitation of the exemptions provided by (x) Rule 144 under the
1933 Act, as such Rule may be amended from time to time, (y) Rule 144A under the
1933 Act, as such Rule may be amended from time to time, or (z) any similar
rules or regulations hereafter adopted by the SEC. Upon the request of any
Holder of Registrable Notes, the Company and each Guarantor will deliver to such
Holder a written statement as to whether it has complied with such requirements.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any of the
Guarantors has entered into nor will the Company or any of the Guarantors on or
after the date of this Agreement enter into any agreement which is inconsistent
with the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or
-24-
<PAGE> 26
consents to departures from the provisions hereof may not be given unless the
Company and the Guarantors have obtained the written consent of Holders of at
least a majority in aggregate principal amount of the outstanding Registrable
Notes affected by such amendment, modification supplement, waiver or departure;
PROVIDED, HOWEVER, that no amendment, modification, supplement or waiver or
consent to any departure from the provisions of Section 6 hereof shall be
effective as against any Holder of Registrable Notes unless consented to in
writing by such Holder.
(d) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telecopier, or any courier guaranteeing overnight delivery (i)
if to a Holder (other than an Initial Purchaser), at the most current address
set forth on the records of the Registrar under the Indenture, (ii) if to an
Initial Purchaser, at the most current address given by such Initial Purchaser
to the Company by means of a notice given in accordance with the provisions of
this Section 7(d), which address initially is the address set forth in the
Purchase Agreement; and (iii) if to the Company or any Guarantor, initially at
the Company's address set forth in the Purchase Agreement and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 7(d).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged, if telecopied; and on the next business day if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; PROVIDED that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Notes in
violation of the terms hereof or of the Purchase Agreement or the Indenture. If
any transferee of any Holder shall acquire Registrable Notes, in any manner,
whether by operation of law or otherwise, such Registrable Notes shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Registrable Notes, such Person shall be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such Person shall be entitled to receive
the benefits hereof.
(f) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly
-25-
<PAGE> 27
to the extent it deems such enforcement necessary or advisable to protect its
rights or the rights of Holders hereunder.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
-26-
<PAGE> 28
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
NATIONSRENT, INC.
By: /s/ Joseph H. Izhakoff
---------------------------------------------
Name: Joseph H. Izhakoff
Title: Vice President, Secretary and
General Counsel
GUARANTORS:
A-ACTION RENTAL, INC. (doing business as
A-ACTION RENTAL & SALES, INC.)
A TO Z RENTS IT, INC.
A TO Z RENTS IT, INC. #2
ACME RENTAL, INC.
CENTRAL ALABAMA RENTAL CENTER, INC.
GABRIEL TRAILER MANUFACTURING
COMPANY, INC.
GOLD COAST AERIAL LIFT, INC.
HIGH REACH COMPANY, INC.
NATIONSRENT OF ALABAMA, INC.
NATIONSRENT OF CALIFORNIA, INC.
NATIONSRENT OF FLORIDA, INC.
NATIONSRENT OF GEORGIA, INC.
NATIONSRENT OF INDIANA, INC.
NATIONSRENT OF KENTUCKY, INC.
NATIONSRENT OF LOUISIANA, INC.
NATIONSRENT OF MICHIGAN, INC.
NATIONSRENT OF NEW HAMPSHIRE, INC.
NATIONSRENT OF OHIO, INC.
NATIONSRENT OF TENNESSEE, INC.
NATIONSRENT OF TEXAS, INC.
NATIONSRENT OF WEST VIRGINIA, INC.
NRI/LEC MERGER CORP., INC.
RAYMOND EQUIPMENT CO. (doing
business as JOBS RENTAL)
SAM'S EQUIPMENT RENTAL, INC. (a
subsidiary of Gabriel Trailer Manufacturing
Company, Inc.)
SOUTHEAST RENTAL & LEASING, INC.
<PAGE> 29
TENNESSEE TOOL AND SUPPLY, INC.
THE BODE-FINN COMPANY
THE J. KELLY CO., INC.
TITAN RENTALS, INC.
Each by its authorized officer:
/s/ Kris E. Hansel
-------------------------------------------------
Name: Kris E. Hansel
Title: Vice President - Controller and
Assistant Secretary
<PAGE> 30
Confirmed and accepted as of
the date first above written:
BEAR, STEARNS & CO. INC.
By: /s/ J. Andrew Bugas
--------------------------------
Name: J. Andrew Bugas
Title: Senior Managing Director
NATIONSBANC MONTGOMERY
SECURITIES LLC
By:
--------------------------------
Name:
Title:
BT ALEX. BROWN
By:
--------------------------------
Name:
Title:
BANCBOSTON ROBERTSON
STEPHENS INC.
By:
--------------------------------
Name:
Title:
<PAGE> 31
Confirmed and accepted as of
the date first above written:
BEAR, STEARNS & CO. INC.
By:
--------------------------------
Name:
Title:
NATIONSBANC MONTGOMERY
SECURITIES LLC
By: /s/ Gray Hampton
--------------------------------
Name: Gray Hampton
Title: Managing Director
BT ALEX. BROWN
By:
--------------------------------
Name:
Title:
BANCBOSTON ROBERTSON
STEPHENS INC.
By:
--------------------------------
Name:
Title:
<PAGE> 32
Confirmed and accepted as of
the date first above written:
BEAR, STEARNS & CO. INC.
By:
--------------------------------
Name:
Title:
NATIONSBANC MONTGOMERY
SECURITIES LLC
By:
--------------------------------
Name:
Title:
BT ALEX. BROWN
By: /s/ David M. Gray
--------------------------------
Name: David M. Gray
Title: Managing Director
BANCBOSTON ROBERTSON
STEPHENS INC.
By:
--------------------------------
Name:
Title:
<PAGE> 33
Confirmed and accepted as of
the date first above written:
BEAR, STEARNS & CO. INC.
By:
--------------------------------
Name:
Title:
NATIONSBANC MONTGOMERY
SECURITIES LLC
By:
--------------------------------
Name:
Title:
BT ALEX. BROWN
By:
--------------------------------
Name:
Title:
BANCBOSTON ROBERTSON
STEPHENS INC.
By: /s/ David Vega
--------------------------------
Name: David Vega
Title: Director
<PAGE> 1
EXHIBIT 4.7
AMENDMENT NO. 1 AND CONSENT
TO
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This Amendment No. 1 and Consent (the "Amendment"), dated as of
October 9, 1998, is among NATIONSRENT, INC., a Delaware corporation (the
"Parent"), and its Subsidiaries (collectively with the Parent, the
"Borrowers"), BANKBOSTON, N.A. ("BankBoston"), LASALLE NATIONAL BANK, THE FIFTH
THIRD BANK OF COLUMBUS, NATIONSBANK, N.A., FLEET BANK, N.A., HUNTINGTON
NATIONAL BANK, COMERICA BANK, NATIONAL CITY BANK, DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES, FIRST UNION NATIONAL BANK, US TRUST and BANKERS
TRUST COMPANY (collectively, the "Lenders"), BANKBOSTON, N.A., as
administrative agent for the Lenders (the "Administrative Agent"), LASALLE
NATIONAL BANK, as documentation agent for the Lenders (the "Documentation
Agent") and NATIONSBANK, N.A. and FLEET BANK, N.A. as co-agents for the
Lenders. Capitalized terms used herein unless otherwise defined herein shall
have the respective meanings set forth in the Credit Agreement (as hereinafter
defined).
WHEREAS, the Borrowers, the Lenders, the Documentation Agent, the
Co-Agents and the Administrative Agent are parties to that certain Second
Amended and Restated Revolving Credit and Term Loan Agreement dated as of
September 24, 1998 (as amended, restated, modified or supplemented and in
effect from time to time, the "Credit Agreement"); and
WHEREAS, the Borrowers have requested that the Majority Lenders agree,
and the Majority Lenders have agreed, on the terms and subject to the
conditions set forth herein, to make certain changes to the pricing provisions
under the Credit Agreement and to permit reallocations of the dollar amounts of
the Commitments and the Term Loan;
NOW, THEREFORE, in consideration of the foregoing premises, the
parties hereby agree as follows:
Section 1. AMENDMENT TO LOAN DOCUMENTs.
Section 1.1. THE CREDIT AGREEMENT. The Credit Agreement is
hereby amended as follows:
(a) The definition of "Pricing Table" set forth in Section 1.1 of the
Credit Agreement is amended by deleting the table contained in such
definition and substituting in place thereof the following table:
<PAGE> 2
<TABLE>
<CAPTION>
- ---------- -------------------------- ------------- ------------- -------------- ---------------- --------------
APPLICABLE APPLICABLE APPLICABLE APPLICABLE APPLICABLE
LEVEL PRICING RATIO EURODOLLAR BASE RATE L/C MARGIN COMMITMENT RATE EURODOLLAR
REVOLVER MARGIN (PER ANNUM) (PER ANNUM) TERM LOAN
MARGIN (PER ANNUM) MARGIN
(PER ANNUM) (PER ANNUM)
- ---------- -------------------------- ------------- ------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 Less than 2.75:1 2.00% 0.00% 2.00% 0.375% 3.00%
- ---------- -------------------------- ------------- ------------- -------------- ---------------- --------------
2 Greater than or equal to 2.25% 0.00% 2.25% 0.375% 3.00%
2.75:1 but less than
3.25:1
- ---------- -------------------------- ------------- ------------- -------------- ---------------- --------------
3 Greater than or equal to 2.50% 0.25% 2.50% 0.375% 3.25%
3.25:1 but less than
4.25:1
- ---------- -------------------------- ------------- ------------- -------------- ---------------- --------------
4 Greater than or equal to 2.75% 0.50% 2.75% 0.500% 3.25%
4.25:1
- ---------- -------------------------- ------------- ------------- -------------- ---------------- --------------
</TABLE>
(b) The text, "(except with respect to payments made in accordance
with Section 8.11)" is inserted immediately after the phrase
"Revolving Credit Maturity Date" in the definition of "Subordinated
Debt".
(c) The text, "except with respect to Subordinated Debt that is repaid
in accordance with Section 8.11" is inserted immediately after the
word "Lenders" in Section 8.1(e).
(d) The text ", except in accordance with Section 8.11," is inserted
immediately after the text "amended and prepaid" appearing in Section
8.1(e) of the Credit Agreement.
(e) The text ", except in accordance with Section 8.11," is inserted
immediately after the text "prepay, redeem or repurchase any of the
Subordinated Debt" appearing in the first sentence of Section 8.11 of
the Credit Agreement.
(f) The following sentence is added to the end of Section 8.11 of the
Credit Agreement:
"Subordinated Debt (other than Subordinated Debt Offering) may be
repaid prior to the scheduled maturity date thereof from the proceeds
of (i) an offer and sale of shares of common stock of the Parent or
(ii) a Subordinated Debt Offering, provided that prior to such
payments the Borrowers shall deliver to the Administrative Agent and
Lenders a Compliance Certificate demonstrating that on a pro forma
basis after giving effect to the proposed payment and any borrowings
needed to make such payment AND any other Indebtedness incurred since
the most recent Compliance Certificate delivered to the Administrative
Agent, assuming such payment and borrowing had been completed as of
the last day of the fiscal quarter immediately prior to such payment,
the Borrowers are and shall continue to be in compliance with all of
the covenants in Section 9 hereof as of such date of delivery of such
Compliance Certificate."
2
<PAGE> 3
(g) The text "total net property plant and equipment" in Section 7.19
is hereby deleted and replaced with the text "net rental equipment".
(h) All references to "The J. Kelly Company" in any Loan Document
shall be deemed to be references to "The J. Kelly Co., Inc.".
(i) SCHEDULE 2 to the Credit Agreement is hereby deleted and replaced
in its entirety with SCHEDULE 2 attached hereto.
Section 1.2 JOINDER DOCUMENTS. In the supplement to the stock pledge
agreement dated as of June 5, 1998 wherein NationsRent, Inc. pledges
the stock of Raymond Equipment Co., all references to "Action Rental"
shall be deemed to be references to "Jobs".
Section 2. CONSENT TO REALLOCATIONS. The Borrowers and the
Administrative Agent have advised the Lenders that in order to syndicate the
Term Loan, the Administrative Agent may need to reallocate the aggregate dollar
amounts of the Commitments and the Term Loan and have requested that the Lenders
permit the Administrative Agent, in its discretion, to make such reallocations
as the Administrative Agent may determine. Each of the Lenders and the Borrowers
hereby agrees that the Administrative Agent may reallocate the dollar amount of
the Commitments and the Term Loan in any manner that the Administrative Agent so
determines PROVIDED that (i) the aggregate dollar amount of the sum of the
Commitments and the Term Loan shall not be less than $435,000,000 (less any
permanent prepayments or scheduled principal payments that the Borrowers may
have made prior to the effectiveness of any reallocation), (ii) the aggregate
dollar amount of the Commitments shall not be less than $260,000,000, (iii) no
Lender's Commitment or portion of such Lender's Term Loan shall be changed
without the prior written consent of such Lender and (iv) prior to giving effect
to any such reallocation, the Administrative Agent shall have provided written
notice to the Lenders and the Borrowers of such reallocation. Each of the
Lenders and the Borrowers further agrees that the Administrative Agent may make
such conforming changes to the Credit Agreement as the Administrative Agent may
determine are necessary to accomplish the reallocations authorized herein,
including, without limitation, revisions to SCHEDULE 1 to the Credit Agreement
provided that prior to giving effect to any such changes, the Administrative
Agent shall have provided written notice to the Lenders and the Borrowers of
such changes. If requested by the Administrative Agent, the Borrowers agree to
issue new Notes, and the Lenders agree to return any old Notes that are replaced
by such new Notes, as applicable in connection with any such reallocations.
Section 3. CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Amendment shall be conditioned upon the satisfaction of the following
conditions precedent:
Section 3.1. DELIVERY OF DOCUMENTS. The Borrowers and the Majority
Lenders shall have delivered to the Administrative Agent, contemporaneously
with the execution hereof, this Amendment signed by each Borrower and the
Majority Lenders.
3
<PAGE> 4
Section 3.2. LEGALITY OF TRANSACTION. No change in applicable law
shall have occurred as a consequence of which it shall have become and continue
to be unlawful on the date this Amendment is to become effective (a) for the
Administrative Agent or any Lender to perform any of its obligations under any
of the Loan Documents or (b) for any Borrower to perform any of its agreements
or obligations under any of the Loan Documents.
Section 3.3. PERFORMANCE. The Borrowers shall have duly and properly
performed, complied with all terms and conditions contained in the Loan
Documents required to be performed or complied with by it on or prior to the
date this Amendment is to become effective, except with respect to certain
legal opinions to be delivered in connection with the Credit Agreement and the
termination of certain UCC-1 financing statements, all of which shall be
delivered to the Administrative Agent pursuant to the terms of a post-closing
agreement dated as of September 24, 1998. No event shall have occurred on or
prior to the date this Amendment is to become effective and be continuing, and
no condition shall exist on the date this Amendment is to become effective
which constitutes a Default or Event of Default under any of the Loan
Documents, in each case after giving effect to this Amendment.
Section 3.4. PROCEEDINGS AND DOCUMENTS. All corporate, governmental
and other proceedings in connection with the transactions contemplated by this
Amendment and all instruments and documents incidental thereto shall be in the
form and substance reasonably satisfactory to the Administrative Agent and its
counsel and the Administrative Agent and such counsel shall have received all
such counterpart originals or certified or other copies of all such instruments
and documents as the Administrative Agent or any Lender shall have reasonably
requested.
Section 4. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby
represents and warrants to the Lenders as follows:
(a) The representations and warranties of such Borrower contained in
the Credit Agreement, as amended hereby, the other Loan Documents or in any
document or instrument delivered pursuant to or in connection with the Credit
Agreement were true when made and continue to be true on the date hereof,
except to the extent of changes resulting from transactions contemplated or
permitted by the Credit Agreement and the other Loan Documents and changes
occurring in the ordinary course of business which singly or in the aggregate
are not materially adverse, or to the extent that such representations and
warranties related solely and expressly to an earlier date) and no Default or
Event of Default shall have occurred and be continuing;
(b) The execution, delivery and performance by the Borrower of this
Amendment and the consummation of the transactions contemplated hereby: (i) are
within the corporate powers of such Borrower; (ii) have been duly authorized by
all necessary corporate proceedings on the part of such Borrower; (iii) do not
require any approval, consent of, or filing with, any governmental agency or
authority, or any other person, association or entity, which bears on the
validity of this Amendment and which
4
<PAGE> 5
is required by law or the regulation or rule of any agency or authority, or
other person, association or entity, (iii) do not conflict with or result in
any breach or contravention of any provision of law, statute, rule or
regulation to which any Borrower is subject or any judgment, order, writ,
injunction, license or permit applicable to such Borrower, (iv) do not conflict
with any provision of the corporate charter or bylaws of such Borrower, and (v)
do not conflict with any provision of any agreement or other instrument binding
upon such Borrower in a manner which is reasonably likely to have a materially
adverse effect on the Borrowers taken as a whole; and
(c) This Amendment, the Credit Agreement as amended hereby, and the
other Loan Documents constitute the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms, provided that (i) enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
affecting the rights and remedies of creditors, and (ii) enforcement may be
subject to general principles of equity, and the availability of the remedies
of specific performance and injunctive relief may be subject to the discretion
of the court before which any proceeding for such remedies may be brought.
Section 5. NO OTHER AMENDMENTS. Except as expressly provided in this
Amendment, all of the terms and conditions of the Credit Agreement, the Notes
and the other Loan Documents shall remain in full force and
effect.
Section 6. EXECUTION IN COUNTERPARTS. This Amendment may be executed
in any number of counterparts and by each party on a separate counterpart, each
of which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Amendment, it shall
not be necessary to produce or account for more than one such counterpart
signed by the party against whom enforcement is sought.
Section 7. EFFECTIVE DATE. Subject to the satisfaction of the
conditions precedent set forth in ss.3 hereof, this Amendment shall be deemed
to be effective as of the date hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
<PAGE> 6
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment
as of the date first above written.
THE BORROWERS:
NATIONSRENT, INC.
NATIONSRENT OF ALABAMA, INC.
NATIONSRENT OF FLORIDA, INC.
NATIONSRENT OF GEORGIA, INC.
NATIONSRENT OF INDIANA, INC.
NATIONSRENT OF KENTUCKY, INC.
NATIONSRENT OF LOUISIANA, INC.
NATIONSRENT OF MICHIGAN, INC.
NATIONSRENT OF OHIO, INC.
NATIONSRENT OF TENNESSEE, INC.
NATIONSRENT OF TEXAS, INC.
NATIONSRENT OF WEST VIRGINIA, INC.
A-ACTION RENTAL, INC.
A TO Z RENTS IT, INC.
A TO Z RENTS IT, INC. #2
THE BODE-FINN COMPANY
CENTRAL ALABAMA RENTAL
CENTER, INC.
GABRIEL TRAILER
MANUFACTURING COMPANY, INC.
GOLD COAST AERIAL LIFT, INC.
HIGH REACH COMPANY, INC.
THE J. KELLY CO., INC.
RAYMOND EQUIPMENT CO.
SAM'S EQUIPMENT RENTAL, INC.
TITAN RENTALS, INC.
TENNESSEE TOOL AND SUPPLY, INC.
SOUTHEAST RENTAL & LEASING, INC.
BY: /s/
---------------------------------------
NAME:
TITLE:
<PAGE> 7
THE LENDERS:
BANKBOSTON, N.A.,
individually and as Administrative Agent
By: /s/ Timothy M. Laurion
---------------------------------------
Timothy M. Laurion, Director
LASALLE NATIONAL BANK,
individually and as Documentation Agent
By: /s/ Beth S. Yura
---------------------------------------
Name: Beth S. Yura
Title: Vice President
THE FIFTH THIRD BANK OF COLUMBUS
By: /s/ Stephen S. Brooks
---------------------------------------
Name: Stephen S. Brooks
Title: Vice President
NATIONSBANK, N.A.,
individually and as Co-Agent
By: /s/ Michael Cooney
---------------------------------------
Name: Michael Cooney
Title: Vice President
FLEET BANK, N.A.,
individually and as Co-Agent
By: /s/ Christopher Mayrose
---------------------------------------
Name: Christopher Mayrose
Title: Vice President
<PAGE> 8
HUNTINGTON NATIONAL BANK
By: /s/ Mark Scurci
---------------------------------------
Name: Mark Scurci
Title: Vice President
COMERICA BANK
By: /s/ Dan M. Roman
---------------------------------------
Name: Don M. Roman
Title: Vice President
NATIONAL CITY BANK
By: /s/ Andrew J. Walshaw
---------------------------------------
Name: Andrew J. Walshaw
Title: Vice President
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN
ISLAND BRANCHES
By: /s/ Susan L. Pearson
---------------------------------------
Name: Susan L. Pearson
Title: Director
By: /s/ Jean Hannigan
---------------------------------------
Name: Jean Hannigan
Title: Director
FIRST UNION NATIONAL BANK
By: /s/ Frederick W. Price
---------------------------------------
Name: Frederick W. Price
Title: Senior Vice President
USTRUST
By: /s/
---------------------------------------
Name:
Title:
<PAGE> 9
BANKERS TRUST COMPANY
By: /s/ G. Andrew Keith
---------------------------------------
Name: G. Andrew Keith
Title: Vice President
<PAGE> 10
SCHEDULE 2
SUBSIDIARIES OF NATIONSRENT, INC.
As of October 9, 1998
NationsRent, Inc., a Delaware Corporation
WHOLLY OWNED SUBSIDIARIES THEREOF:
NationsRent of Ohio, Inc., a Delaware corporation
NationsRent of Georgia, Inc., a Delaware corporation
NationsRent of Louisiana, Inc., a Delaware corporation
NationsRent of Michigan, Inc., a Delaware corporation
NationsRent of Tennessee, Inc., a Delaware corporation
WHOLLY OWNED SUBSIDIARIES THEREOF:
Tennessee Tool and Supply, Inc., a Tennessee corporation
NationsRent of Indiana, Inc., a Delaware corporation
NationsRent of Kentucky, Inc., a Delaware corporation
Gabriel Trailer Manufacturing Company, Inc., an Ohio corporation
WHOLLY OWNED SUBSIDIARIES THEREOF:
Sam's Equipment Rental, Inc., an Ohio corporation
NationsRent of West Virginia, Inc., a Delaware corporation
WHOLLY OWNED SUBSIDIARIES THEREOF:
Titan Rentals, Inc., a West Virginia corporation
NationsRent of Florida, Inc., a Delaware corporation
NationsRent of Texas, Inc., a Delaware corporation
A-Action Rental, Inc., a Pennsylvania corporation
Raymond Equipment Company, a Kentucky corporation
The Bode-Finn Company, an Ohio corporation
The J. Kelly Co., Inc., a Michigan corporation
A to Z Rents It, Inc., a Texas corporation
A to Z Rents It, Inc. #2, a Texas corporation
Central Alabama Rental Center Inc., an Alabama corporation
High Reach Company, Inc., a Florida corporation
NationsRent of Alabama, Inc., a Delaware corporation
Gold Coast Aerial Lift, Inc., a Florida corporation
Southeast Rental & Leasing, Inc., a Florida corporation
<PAGE> 1
EXHIBIT 4.8
SECOND AMENDMENT
This Second Amendment (this "Agreement"), dated as of November 2,
1998, is among BankBoston, N.A. ("BKB"), Citicorp Del-Lease, Inc. ("Citicorp"),
Erste Bank Der Oesterreichischen Sparkassen AG ("Erste Bank"), First Source
Financial LLP ("FSF") and Union Planters Bank ("UP") (Citicorp, Erste Bank, FSF
and UP collectively, "the New Lenders"), the Borrowers referred to below, the
Lenders to the Credit Agreement (as hereinafter defined) and BankBoston, N.A.
in its capacity as administrative agent (the "Administrative Agent") for the
Lenders referred to below. All capitalized terms used herein without
definitions shall have the meanings given such terms in the Credit Agreement.
References in the Credit Agreement to the Total Commitment and Term Loan shall
be deemed to refer to the Total Commitment and Term Loan as amended hereby.
WHEREAS, NationsRent, Inc. (the "Parent"), its Subsidiaries
(collectively with the Parent, the "Borrowers"), BKB and the other lending
institutions listed on SCHEDULE 1 thereto (collectively, the "Lenders"), the
Administrative Agent, LaSalle National Bank as documentation agent for the
Lenders and Fleet Bank, N.A. and NationsBank, N.A. as co-agents for the Lenders
are parties to that certain Second Amended and Restated Revolving Credit and
Term Loan Agreement dated as of September 24, 1998 (as amended, restated,
modified or supplemented and in effect from time to time, the "Credit
Agreement");
WHEREAS, the Administrative Agent wishes to reallocate the aggregate
dollar amounts of the Commitments and the Term Loan;
WHEREAS, each of the New Lenders wishes to become a party to the
Credit Agreement, and has agreed to provide Loans and otherwise extend credit
to the Borrowers in the amounts as more specifically described on SCHEDULE 1
attached hereto;
WHEREAS, BKB (the "Assigning Lender") wishes to assign a certain
percentage to its rights and obligations in the Loans under the Credit
Agreement to Citicorp, Erste Bank, FSF and UP (such New Lenders are referred to
as "Assignee Lenders"), and each of the Assignee Lenders wishes to accept an
assignment of a certain percentage of the Assigning Lender's rights and
obligations in its Commitment and portion of its Term Loan;
WHEREAS, the parties to this Amendment wish to make conforming and
certain other changes to the Credit Agreement, as requested by the New Lenders;
NOW THEREFORE, the parties hereto hereby agree as follows:
<PAGE> 2
1. AMENDMENT TO LOAN DOCUMENTS.
(a) The definitions under Section 1.1 of the Credit Agreement are
hereby amended as follows:
(i) The definition of "Security Documents" is hereby amended by
inserting the words "the Omnibus Amendment to Security Documents dated as of
June 29, 1998," immediately following the phrase "Omnibus Security Amendment".
(ii) The definition of "Term Loan" is hereby amended by inserting the
phrase " , which amount is reduced to $161,000,000" at the end of the sentence
thereof.
(b) Section 2.1 of the Credit Agreement is hereby amended by deleting
the number "$260,000,000" and substituting in lieu thereof the number
"$274,000,000".
(c) Section 2.2.2 of the Credit Agreement is hereby amended by
deleting the phrase "$265,000,000 hereunder" and substituting in lieu thereof
the phrase "$279,000,000, as such amount may be further adjusted pursuant to
Section 2 of the Amendment No. 1 and Consent to the Second Amended and Restated
Revolving Credit and Term Loan Agreement".
(d) Section 2.2.2 of the Credit Agreement is further hereby amended by
adding the following sentence at the end of the section:
"Notwithstanding any of the foregoing, the sum of the Total Commitment
and Term Loan shall not in any event exceed $440,000,000."
(e) Section 3.1 of the Credit Agreement is hereby amended by adding
the following phrase at the end of the sentence immediately before the period:
"which amount is reduced to $161,000,000".
(f) SCHEDULE 1 of the Credit Agreement is hereby amended by replacing
in lieu thereof SCHEDULE 1 attached hereto.
(g) Section 3.6.2 is hereby amended by adding the following sentence
at the end of the subsection:
"In the event that the Borrowers fail to give the
Administrative Agent notice with respect to the continuation of any Eurodollar
Loan hereunder within three (3) days prior to the expiration of the Interest
Period relating thereto, then such Eurodollar Loan shall be converted to a
Eurodollar Loan with an interest period of one (1) month at the end of the then
expiring Interest Period relating thereto."
(h) Section 15.8 is hereby amended by deleting the phrase "including
any expenses" in the parenthetical immediately following the word "expenses" on
the fifth line thereto.
2
<PAGE> 3
(i) Section 15.8 is hereby amended by deleting the word
"Administrative" after the word "Documentation" on the tenth line thereto.
(j) Section 18.1 is hereby amended by deleting the phrase ", in the
case of the Parent," after the words "which consent" in clause (i) thereto.
(k) Section 21.2 is hereby amended by replacing the word "banking"
with the words "commercial lending" immediately following the words "safe and
sound" on the fifth line thereto.
(l) On the first page of the Omnibus Amendment No. 2 to Security
Documents, in the last clause beginning with the words "Whereas, the Borrowers,
BankBoston, N.A. and certain lending institutions", the words "an Amendment No.
1" is hereby deleted and replaced with the words "a Joinder and Commitment
Increase Agreement dated as of July 15, 1998".
2. REALLOCATION OF LOANS. Pursuant to Section 2 of the Amendment No. 1
and Consent to the Credit Agreement, dated as of October 9, 1998 (the
"Amendment 1"), among the Borrowers, the Lenders and the Administrative Agent,
the Administrative Agent hereby reallocates the aggregate dollar amounts of the
Commitments and the Term Loan such that the Total Commitment shall be equal to
$274,000,000 and the Term Loan shall be equal to $161,000,000. BkB hereby
assigns part of its Commitment and portions of its Term Loan as further
described in Section 4 below and on SCHEDULE 1 attached hereto.
3. CONSENT TO ASSIGNMENT TO CREDIT AGREEMENT. The Administrative Agent
and each of the Borrowers hereby consent to the addition of each of the New
Lenders as a Lender hereunder such that, after giving effect hereto and as of
the Effective Date, each New Lender shall be a party to the Credit Agreement
and shall have the rights and obligations of a Lender thereunder.
4. ASSIGNMENT AND ACCEPTANCE. (a) For the purposes of the assignments
contemplated herein, the provisions of ss.18.1 of the Credit Agreement,
including, but not limited to, the requirement of an Assignment and Acceptance,
are hereby waived, and the parties hereto hereby consent and agree to such
assignments.
(b) The Assigning Lender hereby assigns to each of the Assignee
Lenders, and each such Assignee Lender hereby purchases and assumes without
recourse to the Assigning Lender, a certain dollar interest in and to all of
the Assigning Lender's rights and obligations under the Credit Agreement as of
the Effective Date, including, without limitation, such dollar interest in the
Assigning Lender's Commitment and portion of the Term Loan as in effect on the
Effective Date, and the outstanding interest in any Revolving Credit Loans,
Commitment and Term Loan owing to the Assigning Lender on the Effective Date,
(such interest being hereinafter referred to as the "Assigned Portion") such
that, after giving effect to the assignments contemplated hereby and as of
3
<PAGE> 4
the Effective Date, the respective Commitment, Commitment Percentages, Term
Loan and Term Loan Percentages of the Assigning Lender and each of the Assignee
Lenders shall be as set forth on SCHEDULE 1 hereto and the Assigning Lender and
each of the Assignee Lenders shall have that percentage interest in the
outstanding Revolving Credit Loans and Term Loan. Notwithstanding any term or
provision of ss.18 of the Credit Agreement to the contrary, the execution and
delivery hereof by the Assigning Lender, each of the Assignee Lenders, the
Administrative Agent and the Borrowers shall constitute an Assignment and
Acceptance delivered in accordance with the Credit Agreement and shall be
effective in respect of the assignments contemplated hereby.
(c) The Assigning Lender (i) represents and warrants that as of the
date hereof, its Commitment and portion of the Term Loan is sufficient to give
effect to this Assignment and Acceptance; (ii) makes no representation or
warranty, express or implied, and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or any of the other Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any of the other Loan Documents or any other instrument or document
furnished pursuant thereto or the attachment, perfection or priority of any
security interest or mortgage, other than that it is the legal and beneficial
owner of the interest being assigned by it hereunder free and clear of any
claim or encumbrance and (iii) makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrowers or
any of their Subsidiaries or any other Person primarily or secondarily liable
in respect of any of the Obligations, or the performance or observance by the
Borrowers or any of their Subsidiaries or any other Person primarily or
secondarily liable in respect of any of the Obligations of any of its
obligations under the Credit Agreement or any of the other Loan Documents or
any other instrument or document delivered or executed pursuant thereto.
(d) Each New Lender (i) represents and warrants that (A) it is duly
and legally authorized to enter into this Agreement, (B) the execution,
delivery and performance of this Agreement does not conflict with any provision
of law or of the charter or by-laws of such New Lender, or of any agreement
binding on such New Lender, and (C) all acts, conditions and things required to
be done and performed and to have occurred prior to the execution, delivery and
performance of this Agreement, and to render the same the legal, valid and
binding obligation of such New Lender, enforceable against it in accordance
with its terms, have been done and performed and have occurred in due and
strict compliance with all applicable laws; (ii) confirms that it has received
a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Sections 7.4 and 8.4 thereof and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Agreement; (iii) agrees that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iv) appoints and authorizes the
Administrative Agent to take such action
4
<PAGE> 5
as agent on its behalf and to exercise such powers under the Credit Agreement
and the other Loan Documents as are delegated to the Administrative Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto; (v) agrees that it will perform in accordance with their terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender; and (vi) acknowledges and agrees that, if
applicable, it has made arrangements with the Administrative Agent satisfactory
to such New Lender with respect to its PRO RATA share of Letter of Credit Fees
in respect of outstanding Letters of Credit.
5. ISSUANCE OF NOTES. Erste Bank requests that the Borrowers issue a
new Revolving Credit Note payable to Erste Bank in the principal amount of
$4,000,000, and a new Term Note payable to Erste Bank in the principal amount
of $8,000,000. UP requests that the Borrowers issue a new Revolving Credit Note
payable to UP in the principal amount of $10,000,000. Citicorp requests that
the Borrowers issue a new Term Note payable to Citicorp in the principal amount
of $25,000,000. FSF requests that the Borrowers issue a new Term Note payable
to FSF in the principal amount of $12,500,000. BKB requests that the Borrowers
issue a Second Amended and Restated Term Note payable to BKB in the principal
amount of $106,500,000. BKB agrees to return its Amended and Restated Term Note
dated as of October 29, 1998 to the Borrowers upon its receipt of the new
Second Amended and Restated Term Note. BKB, the New Lenders and each of the
Borrowers agree that the Notes delivered pursuant to this ss.5, each dated as
of the Effective Date payable to the order of BKB and each of the New Lenders
in the principal amount of the Commitment or Term Loan set forth opposite each
Lender on SCHEDULE 1 to the Credit Agreement as amended hereby, and as attached
hereto, shall be deemed to be "Notes" under the Credit Agreement.
Section 6. CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Agreement shall be conditioned upon the satisfaction of the following
conditions precedent:
Section 6.1. DELIVERY OF DOCUMENTS.
(a) The Borrowers shall have delivered to the Administrative Agent,
contemporaneously with the execution hereof, the following, in form and
substance satisfactory to the Administrative Agent:
(i) this Agreement signed by each Borrower;
(ii) Notes signed by each Borrower and issued to the Assigning Lender
or New Lender, as the case may be, in the amount of such Lender's Commitment or
Term Loan;
(iii) certified copies of the resolutions of the Borrowers approving
this Agreement, the Notes in favor of each Lender referred to in clause (ii)
above and the other documents referred to herein; and
5
<PAGE> 6
(b) BKB, each New Lender, the Lenders and the Administrative Agent
shall have delivered to the Administrative Agent this Agreement, signed by each
such Lender.
(c) The Administrative Agent, BkB and each of the Lenders whose Notes
are replaced, suspended or amended as a result of the issuance of the new Notes
pursuant to Section 6.1 hereof (the "Old Notes") shall cancel such Old Notes
and return the original executed Old Notes to the Parent.
Section 6.2. LEGALITY OF TRANSACTION. No change in applicable law
shall have occurred as a consequence of which it shall have become and continue
to be unlawful on the date this Agreement is to become effective (a) for the
Administrative Agent or any Lender to perform any of its obligations under any
of the Loan Documents or (b) for any Borrower to perform any of its agreements
or obligations under any of the Loan Documents.
Section 6.3. PERFORMANCE. The Borrowers shall have duly and properly
performed, complied with all terms and conditions contained in the Loan
Documents required to be performed or complied with by it on or prior to the
date this Agreement is to become effective. No event shall have occurred on or
prior to the date this Agreement is to become effective and be continuing, and
no condition shall exist on the date this Agreement is to become effective
which constitutes a Default or Event of Default under any of the Loan
Documents.
Section 6.4. PROCEEDINGS AND DOCUMENTS. All corporate, governmental
and other proceedings in connection with the transactions contemplated by this
Agreement and all instruments and documents incidental thereto shall be in the
form and substance reasonably satisfactory to the Administrative Agent and its
counsel and the Administrative Agent and such counsel shall have received all
such counterpart originals or certified or other copies of all such instruments
and documents as the Agent or any Lender shall have reasonably requested.
Section 6.5. FUNDING ARRANGEMENTS. The Lenders and the Administrative
Agent shall have made such arrangements among themselves as shall be necessary
to provide that each Lender shall hold its Commitment Percentage or Term Loan
Percentage of outstanding Loans after giving effect to this Agreement.
Section 7. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby
represents and warrants to the Lenders as follows:
(a) The representations and warranties of such Borrower contained in
the Credit Agreement, as amended hereby, the other Loan Documents or in any
document or instrument delivered pursuant to or in connection with the Credit
Agreement were true when made and continue to be true on the date hereof,
except to the extent of changes resulting from transactions contemplated or
permitted by the Credit Agreement and the other Loan Documents and changes
occurring in the ordinary
6
<PAGE> 7
course of business which singly or in the aggregate are not materially adverse,
or to the extent that such representations and warranties related solely and
expressly to an earlier date) and no Default or Event of Default shall have
occurred and be continuing;
(b) The execution, delivery and performance by the Borrower of this
Agreement and the consummation of the transactions contemplated hereby: (i) are
within the corporate powers of such Borrower; (ii) have been duly authorized by
all necessary corporate proceedings on the part of such Borrower; (iii) do not
require any approval, consent of, or filing with, any governmental agency or
authority, or any other person, association or entity, which bears on the
validity of this Amendment and which is required by law or the regulation or
rule of any agency or authority, or other person, association or entity, (iii)
do not conflict with or result in any breach or contravention of any provision
of law, statute, rule or regulation to which any Borrower is subject or any
judgment, order, writ, injunction, license or permit applicable to such
Borrower, (iv) do not conflict with any provision of the corporate charter or
bylaws of such Borrower, and (v) do not conflict with any provision of any
agreement or other instrument binding upon such Borrower in a manner which is
reasonably likely to have a materially adverse effect on the Borrowers taken as
a whole; and
(c) This Agreement, the Credit Agreement as amended hereby, and the
other Loan Documents constitute the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms, provided that (i) enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
affecting the rights and remedies of creditors, and (ii) enforcement may be
subject to general principles of equity, and the availability of the remedies
of specific performance and injunctive relief may be subject to the discretion
of the court before which any proceeding for such remedies may be brought.
(d) The Borrowers hereby confirm that the increase of the Total
Commitment to $274,000,000 and the reduction of the Term Loan to $161,000,000
is not prohibited by the terms of the Subordinated Debt.
8. EFFECTIVE DATE. Subject to the satisfaction of the conditions
precedent set forth in ss.6, the effective date for this Agreement shall be
November 2, 1998 (the "Effective Date"). Following the execution of this
Agreement, the addition of the New Lenders shall be recorded in the Register by
the Administrative Agent. SCHEDULE 1 to the Credit Agreement shall thereupon be
replaced as of the Effective Date by the new SCHEDULE 1 annexed hereto.
9. RIGHTS UNDER CREDIT AGREEMENT. Upon the Effective Date, each New
Lender shall be a party to the Credit Agreement and, to the extent provided in
this Agreement, have the rights and obligations of a Lender thereunder.
10. GOVERNING LAW. THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A
SEALED INSTRUMENT TO BE GOVERNED BY, AND CONSTRUED
7
<PAGE> 8
IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT
REFERENCE TO CONFLICT OF LAWS).
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, but all of which together shall
constitute one instrument. In proving this Agreement, it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE> 9
IN WITNESS WHEREOF, BKB, the Lenders, the Borrowers and the
Administrative Agent have duly executed this Agreement as of the date first
above written.
BANKBOSTON, N.A.,
individually and as Administrative Agent
By: /s/ Timothy M. Laurion
------------------------------------
Timothy M. Laurion, Director
CITICORP DEL-LEASE, INC.
By: /s/ Daniel Krenicki, Jr.
------------------------------------
Name: Daniel Krenicki, Jr.
Title: Vice President
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSEN, AG
By: /s/ John S. Runnion
------------------------------------
Name: John S. Runnion
Title: First Vice President
By: /s/ John Fay
------------------------------------
Name: John Fay
Title: Assistant Vice President
FIRST SOURCE FINANCIAL LLP,
BY FIRST SOURCE FINANCIAL, INC., ITS
AGENT/ MANAGER
By: /s/ John P. Thacker
------------------------------------
Name: John P. Thacker
Title: Senior Vice President
UNION PLANTERS BANK
By: /s/ Tom Thureson
------------------------------------
Name: Tom Thureson
Title: Vice President
<PAGE> 10
LASALLE NATIONAL BANK,
individually and as Documentation Agent
By: /s/ Beth S. Yura
------------------------------------
Name: Beth S. Yura
Title: Vice President
THE FIFTH THIRD BANK OF COLUMBUS
By: /s/ Stephen S. Brooks
------------------------------------
Name: Stephen S. Brooks
Title: Vice President
NATIONSBANK, N.A.,
individually and as Co-Agent
By: /s/ Michael Cooney
------------------------------------
Name: Michael Cooney
Title: Vice President
FLEET BANK, N.A.,
individually and as Co-Agent
By: /s/ Christopher Mayrose
------------------------------------
Name: Christopher Mayrose
Title: Vice President
HUNTINGTON NATIONAL BANK
By: /s/ Mark A. Scurci
------------------------------------
Name: Mark A. Scurci
Title: Vice President
COMERICA BANK
By: /s/ Dan M. Roman
------------------------------------
Name: Dan M. Roman
Title: Vice President
<PAGE> 11
NATIONAL CITY BANK
By: /s/ Andrew J. Walshaw
------------------------------------
Name: Andrew J. Walshaw
Title: Vice President
DEUTSCHE BANK A.G., NEW YORK AND/OR
CAYMAN ISLAND BRANCH
By: /s/ Jean M. Hannigan
------------------------------------
Name: Jean M. Hannigan
Title: Vice President
By: /s/ Susan L. Pearson
------------------------------------
Name: Susan L. Pearson
Title: Director
FIRST UNION NATIONAL BANK
By: /s/ Frederick W. Price
------------------------------------
Name: Frederick W. Price
Title: Senior Vice President
USTRUST
By: /s/ Errin Siagel
------------------------------------
Name: Errin Siagel
Title: Vice President
BANKERS TRUST COMPANY
By: /s/ Patricia Hogan
------------------------------------
Name: Patricia Hogan
Title: Principal
<PAGE> 12
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Brian E. Miner
------------------------------------
Name: Brian E. Miner
Title: Risk Manager
<PAGE> 13
THE BORROWERS:
NATIONSRENT, INC.
NATIONSRENT OF ALABAMA, INC.
NATIONSRENT OF FLORIDA, INC.
NATIONSRENT OF GEORGIA, INC.
NATIONSRENT OF INDIANA, INC.
NATIONSRENT OF KENTUCKY, INC.
NATIONSRENT OF LOUISIANA, INC.
NATIONSRENT OF MICHIGAN, INC.
NATIONSRENT OF OHIO, INC.
NATIONSRENT OF TENNESSEE, INC.
NATIONSRENT OF TEXAS, INC.
NATIONSRENT OF WEST VIRGINIA, INC.
A-ACTION RENTAL, INC.
A TO Z RENTS IT, INC.
A TO Z RENTS IT, INC. #2
THE BODE-FINN COMPANY
CENTRAL ALABAMA RENTAL
CENTER, INC.
GABRIEL TRAILER
MANUFACTURING COMPANY, INC.
GOLD COAST AERIAL LIFT, INC.
HIGH REACH COMPANY, INC.
THE J. KELLY CO., INC.
RAYMOND EQUIPMENT CO.
SAM'S EQUIPMENT RENTAL, INC.
TITAN RENTALS, INC.
TENNESSEE TOOL AND SUPPLY, INC.
SOUTHEAST RENTAL & LEASING, INC.
By: /s/ Jonathan G. Usher
------------------------------------
Name: Jonathan G. Usher
Title: Vice President
<PAGE> 14
SCHEDULE 1
<TABLE>
<CAPTION>
- ------------------------------------- ---------------------------- -----------------------------
REVOLVING CREDIT FACILITY TERM LOAN FACILITY
- ------------------------------------- ---------------------------- -----------------------------
COMMITMENT TERM LOAN
LENDER COMMITMENT PERCENTAGE TERM LOAN PERCENTAGE
===================================== ============ =============== ============== ==============
<C> <C> <C> <C> <C>
BANKBOSTON, N.A.
100 Federal Street, $35,000,000 12.7737226277% $106,500,000 66.1490683230%
Boston, MA 02110
Attn: Timothy Laurion
Telephone: 617-434-9689
Telecopier: 617-434-2160
- ------------------------------------- ------------ --------------- -------------- --------------
LASALLE NATIONAL BANK
135 South LaSalle Street $35,000,000 12.7737226277% $0.00 0.00%
Chicago, IL 60603
Attn: David Knapp
Telephone: 312-904-6284
Telecopier: 312-904-8544
- ------------------------------------- ------------ --------------- -------------- --------------
NATIONSBANK, N.A.
1 East Broward Blvd., 4th Floor $35,000,000 12.7737226277% $0.00 0.00%
Ft. Lauderdale, FL 33301
Attn: Michael Cooney
Telephone: 954-765-1675
Telecopier: 954-765-1663
- ------------------------------------- ------------ --------------- -------------- --------------
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
- ------------------------------------- ------------ --------------- -------------- --------------
<C> <C> <C> <C> <C>
FLEET BANK, N.A.
1185 Avenue of the Americas $25,000,000 9.1240875912% $0.00 0.00%
New York, NY 10036
Attn: Christopher Mayrose
Telephone: 212-819-5727
Telecopier: 212-819-4113
- ------------------------------------- ------------ --------------- -------------- --------------
HUNTINGTON NATIONAL BANK
41 S. High Street, 8th floor $20,000,000 7.2992700730% $0.00 0.00%
Columbus, OH 43215
Attn: Mark Scurci
Telephone: 614-480-4196
Telecopier: 614-480-5791
- ------------------------------------- ------------ --------------- -------------- --------------
FIFTH THIRD BANK OF COLUMBUS
21 East State Street $15,000,000 5.4744525547% $0.00 0.00%
Columbus, OH 43215
Attn: Stephen Brooks
Telephone: 614-341-2671
Telecopier: 614-341-2606
- ------------------------------------- ------------ --------------- -------------- --------------
COMERICA BANK
500 Woodward Avenue $15,000,000 5.4744525547% $0.00 0.00%
Detroit, MI 48226
Attn: Dan Roman
Telephone: 313-222-3803
Telecopier: 313-222-3330
- ------------------------------------- ------------ --------------- -------------- --------------
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
- ------------------------------------- ------------ --------------- -------------- --------------
<C> <C> <C> <C> <C>
FIRST UNION NATIONAL BANK
310 South College Street, DC-5 $15,000,000 5.4744525547 $0.00 0.00%
Charlotte, NC 28288-0737
Attn: Ben Howatt
Telephone: 704-383-1357
Telecopier: 704-374-3300
- ------------------------------------- ------------ --------------- -------------- --------------
DEUTSCHE BANK A.G. / NEW YORK
AND/OR CAYMAN ISLAND BRANCH $15,000,000 5.4744525547% $0.00 0.00%
31 West 52nd Street
New York, NY 10019
Attn: Jean Hannigan
Telephone: 212-469-8648
Telecopier: 212-469-3632
- ------------------------------------- ------------ --------------- -------------- --------------
USTRUST
40 Court Street $15,000,000 5.4744525547% $0.00 0.00%
Boston, MA 02108
Attn: Errin Siagel
Telephone: 617-726-7217
Telecopier: 617-695-4185
- ------------------------------------- ------------ --------------- -------------- --------------
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
- ------------------------------------- ------------ --------------- -------------- --------------
<C> <C> <C> <C> <C>
BANKERS TRUST COMPANY
130 Liberty Street, 34th floor $10,000,000 3.6496350365% $0.00 0.00%
New York, NY 10006
Attn: Patsy Hogan
Telephone: 212-250-5175
Telecopier: 212-250-7218
- ------------------------------------- ------------ --------------- -------------- --------------
NATIONAL CITY BANK
1900 E. 9th Street $10,000,000 3.6496350365% $4,000,000 2.4844720497%
Cleveland, OH 44114
Attn: Andrew Walshaw
Telephone: 216-575-2193
Telecopier: 216-222-0003
- ------------------------------------- ------------ --------------- -------------- --------------
GENERAL ELECTRIC CAPITAL CORPORATION
777 Long Ridge Road $15,000,000 5.4744525547% $5,000,000 3.1055900621%
Building B, Floor 1
Stamford, CT 06927
Attn: Brian Miner
Telephone: 203-316-7709
Telecopier: 203-316-7689
- ------------------------------------- ------------ --------------- -------------- --------------
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
- ------------------------------------- ------------ --------------- -------------- --------------
<C> <C> <C> <C> <C>
CITICORP DEL-LEASE, INC.
450 Mamaroneck Ave. $0.00 0.00% $25,000,000.00 15.5279503106%
Harrison, NY 10528
Attn: Neil Marin
Telephone: 914-899-7176
Telecopier: 914-899-7237
- ------------------------------------- ------------ --------------- -------------- --------------
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSEN AG $4,000,000 1.4598540146% $8,000,000 4.9689440994%
280 Park Avenue
West Building
New York, NY 10017
Attn: John Fay
Telephone: 212-984-5636
Telecopier: 212-984-5627
- ------------------------------------- ------------ --------------- -------------- --------------
FIRST SOURCE FINANCIAL LLP
28250 W. Golf Road, 5th Floor $0.00 0.00% $12,500,000 7.7639751553%
Rolling Meadows, IL 60008
Attn: Gregory Cooper
Telephone: 847-734-2088
Telecopier: 847-734-7910
- ------------------------------------- ------------ --------------- -------------- --------------
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
- ------------------------------------- ------------ --------------- -------------- --------------
<C> <C> <C> <C> <C>
UNION PLANTERS BANK
1799 W. Oakland Park Blvd. $10,000,000 3.6496350365% $0.00 0.00%
3rd Floor
Fort Lauderdale, FL 33311
Attn: Tom Thureson
Telephone: 954-677-2107
Telecopier: 954-714-3142
- ------------------------------------- ------------ --------------- -------------- --------------
TOTAL $274,000,000 100.00000000% $161,000,000 100.00000000%
- ------------------------------------- ------------ --------------- -------------- --------------
</TABLE>
<PAGE> 1
EXHIBIT 4.9
BANKBOSTON, N.A.
100 Federal Street
Boston, Massachusetts 02110
Dated as of November 4, 1998
VIA FACSIMILE
To each of the Lenders (as defined below)
and each of the Borrowers (as defined below)
RE: NATIONSRENT, INC.
NOTICE OF:
CONFIRMATORY AMENDMENT NO. 3
Ladies and Gentlemen:
Reference is hereby made to that certain Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated as of September 24, 1998, among
NationsRent, Inc. (the "Parent"), its Subsidiaries (collectively with the
Parent, the "Borrowers"), BankBoston, N.A. ("BKB") and the other lending
institutions listed on SCHEDULE 1 thereto (collectively, the "Lenders"),
BankBoston, N.A., as administrative agent (the "Administrative Agent"), LaSalle
National Bank, as documentation agent for the Lenders, and Fleet Bank, N.A. and
NationsBank, N.A., as co-agents for the Lenders, as amended by the Amendment
No. 1 and Consent to Second Amended and Restated Revolving Credit and Term Loan
Agreement ("Amendment No. 1"), dated as of October 9, 1998, among the
Borrowers, the Lenders and the other parties named therein, as further amended
by the Second Amendment, dated as of November 2, 1998, among the Borrowers, the
Lenders and the other parties named therein (as amended, restated, modified or
supplemented and in effect from time to time, the "Credit Agreement").
All capitalized terms used herein without definitions shall have the
meanings given such terms in the Credit Agreement. References in the Credit
Agreement to the Total Commitment and Term Loan shall be deemed to refer to the
Total Commitment and Term Loan as amended hereby.
1. REALLOCATION OF LOANS. Pursuant to Section 2 of Amendment No. 1,
the Administrative Agent hereby notifies you of the reallocation of the
aggregate dollar amounts of the Commitments and the Term Loan such that the
Total Commitment shall be equal to $284,000,000 and the Term Loan shall be
equal to $151,000,000. BKB hereby consents to the reduction by $10,000,000 of
its portion of the Term Loan, subject to the assignment provisions of the
Assignment and Acceptance, dated as of the date hereof, among BKB, Bay View
Bank, Bay View Financial Corporation, the Borrowers and the
<PAGE> 2
Administrative Agent. SCHEDULE 1 attached hereto sets forth the respective
Commitment, Commitment Percentage, Term Loan and Term Loan Percentage of each
Lender after giving effect to such reallocation and assignment.
2. AMENDMENT TO LOAN DOCUMENTS. Pursuant to Section 2 of Amendment No.
1, the Administrative Agent hereby makes the following confirmatory amendments
to the Credit Agreement to effect the reallocations described herein:
(a) The definition of "Term Loan" in Section 1.1 of the Credit
Agreement is hereby amended by deleting the number "$161,000,000" as it appears
therein and substituting in lieu thereof the number "$151,000,000".
(b) Section 2.1 of the Credit Agreement is hereby amended by deleting
the number "$274,000,000" as it appears therein and substituting in lieu
thereof the number "$284,000,000".
(c) Section 3.1 of the Credit Agreement is hereby amended by deleting
the number "$161,000,000" as it appears therein and substituting in lieu
thereof the number "$151,000,000".
(d) SCHEDULE 1 of the Credit Agreement is hereby amended by deleting
such schedule in its entirety and substituting therefor the SCHEDULE 1 attached
hereto and all references in the Credit Agreement to Schedule 1 shall read and
be deemed to refer to refer to the SCHEDULE 1 attached hereto.
Please acknowledge your receipt of this Notice of Confirmatory
Amendment No. 3 by signing this letter and returning the same to the attention
of Francesco A. De Vito, Esq. via facsimile at (617) 951-8736.
Sincerely,
BANKBOSTON, N.A., individually and as
Administrative Agent
By: /s/ Timothy M. Laurion
---------------------------------
Name: Timothy M. Laurion
Title: Director
RECEIPT ACKNOWLEDGED:
By: /s/
----------------------------------
Institution:
-------------------------
Date:
--------------------------------
<PAGE> 3
SCHEDULE 1
<TABLE>
<CAPTION>
- ------------------------------------- ---------------------------- -----------------------------
REVOLVING CREDIT FACILITY TERM LOAN FACILITY
- ------------------------------------- ---------------------------- -----------------------------
COMMITMENT TERM LOAN
LENDER COMMITMENT PERCENTAGE TERM LOAN PERCENTAGE
===================================== ============ =============== ============== ==============
<C> <C> <C> <C> <C>
BANKBOSTON, N.A.100 Federal Street,
Boston, MA 02110 $35,000,000 12.3239436620% $96,500,000 63.9072847682%
Attn: Timothy Laurion
Telephone: 617-434-9689
Telecopier: 617-434-2160
- ------------------------------------- ------------ --------------- -------------- --------------
LASALLE NATIONAL BANK
135 South LaSalle Street $35,000,000 12.3239436620% $0.00 0.00%
Chicago, IL 60603
Attn: David Knapp
Telephone: 312-904-6284
Telecopier: 312-904-8544
- ------------------------------------- ------------ --------------- -------------- --------------
NATIONSBANK, N.A.
1 East Broward Blvd., 4th Floor $35,000,000 12.3239436620% $0.00 0.00%
Ft. Lauderdale, FL 33301
Attn: Michael Cooney
Telephone: 954-765-1675
Telecopier: 954-765-1663
- ------------------------------------- ------------ --------------- -------------- --------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
- ------------------------------------- ------------ --------------- -------------- --------------
<C> <C> <C> <C> <C>
FLEET BANK, N.A.
1185 Avenue of the Americas $25,000,000 8.8028169014% $0.00 0.00%
New York, NY 10036
Attn: Christopher Mayrose
Telephone: 212-819-5727
Telecopier: 212-819-4113
- ------------------------------------- ------------ --------------- -------------- --------------
HUNTINGTON NATIONAL BANK
41 S. High Street, 8th floor $20,000,000 7.0422535211% $0.00 0.00%
Columbus, OH 43215
Attn: Mark Scurci
Telephone: 614-480-4196
Telecopier: 614-480-5791
- ------------------------------------- ------------ --------------- -------------- --------------
FIFTH THIRD BANK OF COLUMBUS
21 East State Street $15,000,000 5.2816901408% $0.00 0.00%
Columbus, OH 43215
Attn: Stephen Brooks
Telephone: 614-341-2671
Telecopier: 614-341-2606
- ------------------------------------- ------------ --------------- -------------- --------------
COMERICA BANK
500 Woodward Avenue $15,000,000 5.2816901408% $0.00 0.00%
Detroit, MI 48226
Attn: Dan Roman
Telephone: 313-222-3803
Telecopier: 313-222-3330
- ------------------------------------- ------------ --------------- -------------- --------------
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
- ------------------------------------- ------------ --------------- -------------- --------------
<C> <C> <C> <C> <C>
FIRST UNION NATIONAL BANK
310 South College Street,DC-5 $15,000,000 5.2816901408% $0.00 0.00%
Charlotte, NC 28288-0737
Attn: Jorge Gonzalez
Telephone: 704-383-8461
Telecopier: 704-374-3300
- ------------------------------------- ------------ --------------- -------------- --------------
DEUTSCHE BANK AG
31 West 52nd Street $15,000,000 5.2816901408% $0.00 0.00%
New York, NY 10019
Attn: Jean Hannigan
Telephone: 212-469-8648
Telecopier: 212-469-3632
- ------------------------------------- ------------ --------------- -------------- --------------
USTRUST
40 Court Street $15,000,000 5.2816901408% $0.00 0.00%
Boston, MA 02108
Attn: Errin Siagel
Telephone: 617-726-7217
Telecopier: 617-695-4185
- ------------------------------------- ------------ --------------- -------------- --------------
BANKERS TRUST COMPANY
130 Liberty Street, 34th floor $10,000,000 3.5211267606% $0.00 0.00%
New York, NY 10006
Attn: Patsy Hogan
Telephone: 212-250-5175
Telecopier: 212-250-7218
- ------------------------------------- ------------ --------------- -------------- --------------
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
- ------------------------------------- ------------ --------------- -------------- --------------
<C> <C> <C> <C> <C>
NATIONAL CITY BANK
1900 E. 9th Street $10,000,000 3.5211267606% $4,000,000 2.6490066225%
Cleveland, OH 44114
Attn: Andrew Walshaw
Telephone: 216-575-2193
Telecopier: 216-222-0003
- ------------------------------------- ------------ --------------- -------------- --------------
GENERAL ELECTRIC CAPITAL CORPORATION
777 Long Ridge Road $15,000,000 5.2816901408% $5,000,000 3.3112582781%
Building B, Floor 1
Stamford, CT 06927
Attn: Brian Miner
Telephone: 203-316-7709
Telecopier: 203-316-7689
- ------------------------------------- ------------ --------------- -------------- --------------
CITICORP DEL-LEASE, INC.
450 Mamaroneck Ave. $0.00 0.00% $25,000,000.00 16.5562913907%
Harrison, NY 10528
Attn: Neil Marin
Telephone: 914-899-7176
Telecopier: 914-899-7237
- ------------------------------------- ------------ --------------- -------------- --------------
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
- ------------------------------------- ------------ --------------- -------------- --------------
<C> <C> <C> <C> <C>
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSEN AG $4,000,000 1.4084507042% $8,000,000 5.2980132450%
280 Park Avenue
West Building
New York, NY 10017
Attn: John Fay
Telephone: 212-984-5636
Telecopier: 212-984-5627
- ------------------------------------- ------------ --------------- -------------- --------------
FIRST SOURCE FINANCIAL
28250 W. Golf Road, 5th Floor $0.00 0.00% $12,500,000 8.2781456954%
Rolling Meadows, IL 60008
Attn: Gregory Cooper
Telephone: 847-734-2088
Telecopier: 847-734-7910
- ------------------------------------- ------------ --------------- -------------- --------------
UNION PLANTERS BANK
1799 W. Oakland Park Blvd. $10,000,000 3.5211267606% $0.00 0.00%
3rd Floor
Fort Lauderdale, FL 33311
Attn: Tom Thureson
Telephone: 954-677-2107
Telecopier: 954-714-3142
- ------------------------------------- ------------ --------------- -------------- --------------
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
- ------------------------------------- ------------ --------------- -------------- --------------
<C> <C> <C> <C> <C>
BAY VIEW FINANCIAL CORPORATION $10,000,000 3.5211267606% $0.00 $0.00
BAY VIEW BANK
16130 Ventura Boulevard
Suite 300
Encino, CA 91436
Attn: Sean Spring
Telephone: 818-905-3939
Telecopier: 818-905-3938
- ------------------------------------- ------------ --------------- -------------- --------------
TOTAL $284,000,000 100.00000000% $151,000,000 100.00000000%
- ------------------------------------- ------------ --------------- -------------- --------------
</TABLE>
<PAGE> 1
EXHIBIT 5.1
December 23, 1998
NationsRent, Inc.
450 East Las Olas Boulevard
Fort Lauderdale, FL 33301
RE: REGISTRATION STATEMENT ON FORM S-4
----------------------------------
Gentlemen:
We have acted as counsel to NationsRent, Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing by the Company
with the Securities and Exchange Commission of a Registration Statement on Form
S-4, including amendments thereto, (the "Registration Statement"), for the
proposed offer by the Company to exchange (the "Exchange Offer") 10 3/8% Senior
Subordinated Notes due 2008 (the "New Notes") for an equal principal amount of
its outstanding 10 3/8% Senior Subordinated Notes due 2008 (the "Old Notes").
In connection with the proposed Exchange Offer, we have examined the
Company's Certificate of Incorporation and By-laws, as amended and as presently
in effect, the Company's relevant corporate proceedings, the Registration
Statement, including the Prospectus filed as a part of the Registration
Statement (the "Prospectus"), the Indenture dated December 11, 1998, in respect
of the Old Notes and the New Notes (the "Indenture"), and such other documents,
records, certificates of public officials, statutes and decisions as we
considered necessary to express the opinions contained herein. In the
examination of such documents, we have assumed the genuineness of all signatures
and the authenticity of all documents submitted to us as originals and the
conformity to the original documents of all documents submitted to us as
certified or photostatic copies.
We understand that the New Notes are to be issued to the holders of the
Old Notes pursuant to the Exchange Offer and are to be available for resale by
such holders, all in the manner described in the Prospectus and in the
Indenture.
Based on the foregoing and upon the representations made to us by the
officers and directors of the Company, we are of the opinion that when the
Registration Statement has been declared effective by order of the Securities
and Exchange Commission and the New Notes have been duly issued to and exchanged
for the Old Notes, all in accordance with the terms of the Exchange Offer, the
Indenture and the Registration Statement, such New Notes will be validly issued,
fully paid and non-assessable, and will constitute binding obligations of the
Company, subject to (a) any applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws relating to or affecting
creditors' rights and remedies generally and (b) general principles of judicial
discretion and equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity or in a bankruptcy proceeding and except that (i)
rights to contribution or indemnification may be limited by the laws, rules or
regulations of any governmental authority or agency thereof or by public policy
and (ii) waivers as to usury, stay or extension laws may be unenforceable).
This firm consents to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to the firm under the caption "Legal
Matters" in the Prospectus. In giving such consent, we do not thereby admit that
we are included within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder.
Sincerely,
AKERMAN, SENTERFITT & EIDSON, P.A.
/s/ AKERMAN, SENTERFITT & EIDSON P.A.
<PAGE> 1
Exhibit 12.1
NATIONSRENT, INC.
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
------------------------------------------------
APRIL 1
THROUGH
AUGUST 31,
1994 1995 1996 1997 1997
---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Earnings:
Income before provision
for income taxes 1,094 1,482 1,710 2,755 2,255
Interest expense 162 239 583 866 580
Amortization of debt
issue costs
Interest portion of rent
expense(3) 38 81 259 362 140
---------- ---------- --------- ---------- -------------
Earnings as adjusted 1,294 1,802 2,552 3,983 2,975
========== ========== ========= ========== =============
Fixed charges:
Interest expense 162 239 583 866 580
Amortization of debt
issue costs -- -- -- -- --
Interest portion of rent
expense(3) 38 81 259 362 140
---------- ---------- --------- ---------- -------------
Fixed charges 200 320 842 1,228 720
========== ========== ========= ========== =============
Ratio of earnings to fixed
charges 65 5.6 3.0 3.2 4.1
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED
AUGUST 14 PRO FORMA --------------------------------
(INCEPTION) AS ADJUSTED NINE MONTHS NINE MONTHS TWELVE
THROUGH YEAR ENDED ENDED ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1997(1) 1998 1998(1) 1998(1)(2)
------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Earnings:
Income before provision
for income taxes 1,767 21,222 11,817 27,342 32,127
Interest expense 757 51,447 9,140 41,734 55,046
Amortization of debt
issue costs 3 3 251 251 254
Interest portion of rent
expense(3) 104 3,864 1,882 3,780 4,674
--------------- ---------------- ----------------- ------------------ ------------------
Earnings as adjusted 2,631 76,536 23,090 73,107 92,101
=============== ================ ================= ================== ==================
Fixed charges:
Interest expense 757 51,447 9,140 41,734 55,046
Amortization of debt
issue costs 3 3 251 251 254
Interest portion of rent
expense(3) 104 3,864 1,882 3,780 4,674
--------------- ---------------- ----------------- ------------------ ------------------
Fixed charges 864 55,314 11,273 45,765 59,974
=============== ================ ================= ================== ==================
Ratio of earnings to fixed
charges 3.0 1.4 2.0 1.6 1.5
</TABLE>
- ------------------------
(1) The pro forma as adjusted statement of operations data for the year ended
December 31, 1997 and the nine and twelve months ended September 30, 1998
give effect to the Acquisitions, the Founders' Additional Contribution, the
Common Stock Private Placement, the Initial Public Offering, the Changes in
Outstanding Indebtedness, this Offering, and the application of the net
proceeds of this Offering as described in the "Pro Forma Consolidated
Financial Statements" as if such transactions had occurred on the first day
of the period presented, and in the case of the pro forma as adjusted
balance sheet data, as of September 30, 1998.
(2) The unaudited pro forma as adjusted statement of operations data for the
twelve months ended September 30, 1998 includes the historical results of
the Company for the twelve months ended September 30, 1998 and the results
of the Acquisitions from the effective date of their acquisition by the
Company, and gives effect to the applicable 1997 Pro Forma Combined
Acquisitions and the applicable 1998 Pro Forma Combined Acquisitions
described in "Unaudited Pro Forma Consolidated Financial Statements," as
if these transactions had occurred on October 1, 1997. The results of the
Acquisitions subsequent in the dates of their acquisition are included in
the historical results of the Company.
(3) For purposes of determining the ratio of earnings to fixed charges,
(i) earnings consist of income before income taxes plus fixed charges and
(ii) fixed charges consists of interest expense, amortization of debt
issuance costs, and the estimated portion of rental expense.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF NATIONSRENT, INC.
A-Action Rental, Inc., a Pennsylvania corporation
Acme Rental, Inc., a Michigan corporation
A to Z Rents It, Inc., a Texas corporation
A to Z Rents It, Inc. #2, a Texas corporation
Central Alabama Rental Center, Inc., an Alabama corporation
Gabriel Trailer Manufacturing Company, Inc., an Ohio corporation
Gold Coast Aerial Lift, Inc., a Florida corporation
High Reach Company, Inc., a Florida corporation
NationsRent of Alabama, Inc., a Delaware corporation
NationsRent of California, Inc., a Delaware corporation
NationsRent of Florida, Inc., a Delaware corporation
NationsRent of Georgia, Inc., a Delaware corporation
NationsRent of Indiana, Inc., a Delaware corporation
NationsRent of Kentucky, Inc., a Delaware corporation
NationsRent of Louisiana, Inc., a Delaware corporation
NationsRent of Michigan, Inc., a Delaware corporation
NationsRent of New Hampshire, Inc., a Delaware corporation
NationsRent of Ohio, Inc., a Delaware corporation
NationsRent of Tennessee, Inc., a Delaware corporation
NationsRent of Texas, Inc., a Delaware corporation
NationsRent of West Virginia, Inc., a Delaware corporation
NRI/LEC Merger Corp., Inc., a Delaware corporation
Raymond Equipment Company, a Kentucky corporation
Sam's Equipment Rental, Inc., an Ohio corporation
Southeast Rental & Leasing, Inc., a Florida corporation
Tennessee Tool & Supply, Inc., a Tennessee corporation
The Bode-Finn Company, an Ohio corporation
The J. Kelly Co., Inc., a Michigan corporation
Titan Rentals, Inc., a West Virginia corporation
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
use of our reports (and to all references to our Firm) included in or made part
of this registration statement.
Arthur Andersen LLP
/s/
Fort Lauderdale, Florida,
December 23, 1998.
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
and to the use of our report dated February 20, 1998 with respect to the
financial statements of Logan Equipment Corporation included in the
Registration Statement on Form S-4 and related Prospectus of NationsRent, Inc.
for the registration of $175,000,000 Senior Subordinated Notes due 2008.
Ernst & Young LLP
/s/
Boston, Massachusetts
December 21, 1998
<PAGE> 1
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
---------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
---------------
NATIONSRENT, INC.
(Exact name of obligor as specified in its charter)
Delaware 31-1570069
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
TABLE OF ADDITIONAL REGISTRANTS
-------------------------------
A-Action Rental, Inc. Pennsylvania
Acme Rental, Inc. Michigan
A to Z Rents It, Inc. Texas
A to Z Rents It, Inc. #2 Texas
Central Alabama Rental Center, Inc. Alabama
Gabriel Trailer Manufacturing Company, Inc. Ohio
Gold Coast Aerial Lift, Inc. Florida
High Reach Company, Inc. Florida
NationsRent of Alabama, Inc. Delaware
NationsRent of California, Inc. Delaware
NationsRent of Florida, Inc. Delaware
NationsRent of Georgia, Inc. Delaware
NationsRent of Indiana, Inc. Delaware
NationsRent of Kentucky, Inc. Delaware
NationsRent of Louisiana, Inc. Delaware
<PAGE> 2
NationsRent of Michigan, Inc. Delaware
NationsRent of New Hampshire, Inc. Delaware
NationsRent of Ohio, Inc. Delaware
NationsRent of Tennessee, Inc. Delaware
NationsRent of Texas, Inc. Delaware
NationsRent of West Virginia, Inc. Delaware
NRI/LEC Merger Corp., Inc. Delaware
Raymond Equipment Company Kentucky
Sam's Equipment Rental, Inc. Ohio
Southeast Rental & Leasing, Inc. Florida
Tennessee Tool & Supply, Inc. Tennessee
The Bode-Finn Company Ohio
The J. Kelly Co., Inc. Michigan
Titan Rentals, Inc. West Virgina
450 East Las Olas Boulevard
Fort Lauderdale, FL 33301
(Address of principal executive offices) (Zip code)
----------------------
10-3/8% Senior Subordinated Notes due 2008
(Title of the indenture securities)
================================================================================
-2-
<PAGE> 3
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 21st day of December, 1998.
THE BANK OF NEW YORK
By: /s/ MARIE E. TRIMBOLI
----------------------------------
Name: MARIE E. TRIMBOLI
Title: ASSISTANT TREASURER
-4-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 21st day of December, 1998.
THE BANK OF NEW YORK
By: /s/ MARIE E. TRIMBOLI
----------------------------------
Name: MARIE E. TRIMBOLI
Title: ASSISTANT TREASURER
<PAGE> 6
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
in Thousands
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin.. $7,301,241
Interest-bearing balances........................... 1,385,944
Securities:
Held-to-maturity securities......................... 1,000,737
Available-for-sale securities....................... 4,240,655
Federal funds sold and Securities purchased under
agreements to resell................................ 971,453
Loans and lease financing receivables:
Loans and leases, net of unearned
income............................................ 38,788,269
LESS: Allowance for loan and
lease losses...................................... 632,875
LESS: Allocated transfer risk
reserve........................................... 0
Loans and leases, net of unearned income,
allowance, and reserve............................ 38,155,394
Assets held in trading accounts........................ 1,307,562
Premises and fixed assets (including capitalized
leases)............................................. 670,445
Other real estate owned................................ 13,598
Investments in unconsolidated subsidiaries and
associated companies................................ 215,024
Customers' liability to this bank on acceptances
outstanding......................................... 974,237
Intangible assets...................................... 1,102,625
Other assets........................................... 1,944,777
-----------
Total assets........................................... $59,283,692
===========
LIABILITIES
Deposits:
In domestic offices................................. $26,930,258
Noninterest-bearing................................. 11,579,390
Interest-bearing.................................... 15,350,868
In foreign offices, Edge and Agreement
subsidiaries, and IBFs............................ 16,117,854
Noninterest-bearing................................. 187,464
Interest-bearing.................................... 15,930,390
Federal funds purchased and Securities sold under
agreements to repurchase............................ 2,170,238
Demand notes issued to the U.S.Treasury................ 300,000
Trading liabilities.................................... 1,310,867
Other borrowed money:
With remaining maturity of one year or less......... 2,549,479
With remaining maturity of more than one year
through three years............................... 0
With remaining maturity of more than three years.... 46,654
Bank's liability on acceptances executed and
outstanding......................................... 983,398
Subordinated notes and debentures...................... 1,314,000
Other liabilities...................................... 2,295,520
-----------
Total liabilities...................................... 54,018,268
-----------
EQUITY CAPITAL
Common stock........................................... 1,135,284
Surplus................................................ 731,319
Undivided profits and capital reserves................. 3,385,227
Net unrealized holding gains (losses) on
available-for-sale securities....................... 51,233
Cumulative foreign currency translation adjustments.... (37,639)
-----------
Total equity capital................................... 5,265,424
-----------
Total liabilities and equity capital................... $59,283,692
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot }
Thomas A. Renyi } Directors
Alan R. Griffith }
- --------------------------------------------------------------------------------
<PAGE> 1
Exhibit 99.1
FORM OF
LETTER OF TRANSMITTAL
Offer For Any and All Outstanding
10 3/8% Senior Subordinated Notes due 2008
in Exchange for
10 3/8% Senior Subordinated Notes due 2008
Which Have Been Registered Under The Securities Act of 1933
Pursuant to the Prospectus dated December __, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON JANUARY __, 1999, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent For The Exchange Offer Is:
The Bank Of New York
<TABLE>
<CAPTION>
BY HAND OR OVERNIGHT DELIVERY: Facsimile Transmissions: BY REGISTERED OR CERTIFIED MAIL:
(Eligible Institutions Only)
<S> <C> <C>
The Bank of New York The Bank of New York
101 Barclay Street (212) 571-3080 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level To Confirm by Telephone Attention: Reorganization Section
Attention: Reorganization Section or for Information Call:
(212) 815-6333
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID
DELIVERY.
The undersigned acknowledges that he or she has received the
Prospectus, dated: December __, 1998 (the "Prospectus"), of NationsRent, Inc., a
Delaware corporation ("NationsRent"), and this Letter of Transmittal, which
together constitute NationsRent's offer (the "Exchange Offer") to exchange an
aggregate Principal Amount of up to $175,000,000 10 3/8% Senior Subordinated
Notes due 2008, which have been registered under the Securities Act of 1933, as
amended (the "Securities Act") (the "Old Notes") of NationsRent for a like
aggregate Principal Amount of the issued and outstanding 10 3/8% Senior
Subordinated Notes due 2008 (the "New Notes") of NationsRent from the holders
thereof.
<PAGE> 2
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same
meaning given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Old Notes
(as defined below) either if Old Notes are to be forwarded herewith or if
tenders of Old Notes are to be made by book-entry transfer to an account
maintained by The Bank of New York (the "Exchange Agent") at The Depository
Trust Company (the "Book-Entry Transfer Facility" or "DTC") pursuant to the
procedures set forth in "The Exchange Offer--Procedures for Tendering Old Notes"
in the Prospectus.
Holders of Old Notes whose certificates (the "Certificates") for such
Old Notes are not immediately available or who cannot deliver their Certificates
and all other required documents to the Exchange Agent on or prior to the
Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering Old Notes" in the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
The undersigned has completed the appropriate boxes below and signed
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer.
2
<PAGE> 3
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES 1 2 3
- ------------------------------------- ----------- ----------- ------------
<S> <C> <C> <C>
Aggregate Principal
Principal Amount of
Name(s) and Address(s) of Registered Holder(s): Certificate Amount Old Notes
(Please fill in, if blank) Number(s)* Old Notes Tendered**
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Total
----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
holders.
** Old Notes may be tendered in whole or in part in denominations of $1,000
and integral multiples thereof, provided that if any Old Notes are
tendered for exchange in part, the untendered principal amount thereof
must be $1,000 and any integral multiple thereof. See Instruction 4.
Unless otherwise indicated in the column, a holder will be deemed to have
tendered all Old Notes represented by the Old Notes indicated in Column 2.
See Instruction 4.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
-----------------------------------------
Account Number
--------------------------------------------------------
Transaction Code Number
-----------------------------------------------
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name of Registered Holder(s)
------------------------------------------
3
<PAGE> 4
Window Ticket Number (if any)
-----------------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------
Name of Institution which Guaranteed Delivery
-------------------------
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution
----------------------------------------
Account Number
--------------------------------------------------------
Transaction Code Number
-----------------------------------------------
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD
NOTES ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER SET FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER- DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Ladies and Gentlemen:
----------------------------------------------------------
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to NationsRent, the above described aggregate
Principal Amount of the Trust's 10 3/8% Senior Subordinated Notes due 2008 (the
"Old Notes") in exchange for a like aggregate Principal Amount of NationsRent's
10 3/8% Senior Subordinated Notes due 2008 (the "New Notes") which have been
registered under the Securities Act upon the terms and subject to the conditions
set forth in the Prospectus dated December __, 1998 (as the same may be amended
or supplemented from time to time, the "Prospectus"), receipt of which is
acknowledged, and in this Letter of Transmittal (which, together with the
Prospectus, constitute the "Exchange Offer").
4
<PAGE> 5
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of
NationsRent all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of NationsRent in connection with the
Exchange Offer) with respect to the tendered Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Old Notes to NationsRent
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Trust, upon receipt by the Exchange Agent, as the
undersigned's agent, of the New Notes to be issued in exchange for such Old
Notes, (ii) present Certificates for such Old Notes for transfer, and to
transfer the Old Notes on the books of NationsRent, and (iii) receive for the
account of NationsRent all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED, ______________________, HEREBY REPRESENTS AND WARRANTS
THAT THE UNDERSIGNED HAS FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL,
ASSIGN AND TRANSFER THE OLD NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE
ACCEPTED FOR EXCHANGE, THE TRUST WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED
TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND
ENCUMBRANCES, AND THAT THE OLD NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY
ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND
DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY NATIONSRENT OR THE EXCHANGE AGENT TO
BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF
THE OLD NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS
OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ
AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old
Notes tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the Exchange
Offer for any reason, or if Certificates are submitted for more Old Notes than
are tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered by
book-entry transfer, such Old
5
<PAGE> 6
Notes will be credited to an account maintained at DTC), without expense to the
tendering holder, promptly following the expiration or termination of the
Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any
one of the procedures described in "The Exchange Offer--Procedures for Tendering
Old Notes" in the Prospectus and in the instruction, attached hereto will, upon
NationsRent's acceptance for exchange of such tendered Old Notes, constitute a
binding agreement between the undersigned and NationsRent upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, NationsRent may
not be required to accept for exchange any of the Old Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be issued
in the name(s) of the undersigned or, in the case of a book-entry transfer of
Old Notes, that such New Notes be credited to the account indicated above
maintained at DTC. If applicable, substitute Certificates representing Old Notes
not exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Old Notes, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise indicated
under "Special Delivery Instructions," please deliver New Notes to the
undersigned at the address shown below the undersigned's signature.
BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF NATIONSRENT, (II) ANY NEW NOTES TO BE RECEIVED BY THE UNDERSIGNED
ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED
HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE
RECEIVED IN THE EXCHANGE OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A
BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE
IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH NEW NOTES.
BY TENDERING OLD NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER
OF TRANSMITTAL, A HOLDER OF OLD NOTES WHICH IS A BROKER-DEALER REPRESENTS AND
AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE
DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO
THIRD PARTIES, THAT (A) SUCH OLD NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY
AS A NOMINEE, OR (B) SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES
AND IT WILL DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO
TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN
6
<PAGE> 7
CONNECTION WITH ANY RESALE OF SUCH NEW NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING
AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT
THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
AND THE TRUST HAVE AGREED THAT, SUBJECT TO THE PROVISIONS OF THE
REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS
DEFINED BELOW) IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE FOR
OLD NOTES, WHERE SUCH OLD NOTES WERE ACQUIRED BY SUCH PARTICIPATING
BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR
OTHER TRADING ACTIVITIES, FOR A PERIOD ENDING 90 DAYS AFTER THE EXPIRATION DATE
(SUBJECT TO EXTENSION UNDER CERTAIN LIMITED CIRCUMSTANCES DESCRIBED IN THE
PROSPECTUS) OR, IF EARLIER, WHEN ALL SUCH NEW NOTES HAVE BEEN DISPOSED OF BY
SUCH PARTICIPATING BROKER-DEALER. IN THAT REGARD, EACH BROKER-DEALER WHO
ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER
TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER"), BY TENDERING SUCH OLD
NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, AGREES THAT, UPON RECEIPT OF
NOTICE FROM NATIONSRENT OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY
FACT WHICH MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE
PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT
TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR
INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH
THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS
SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER
WILL SUSPEND THE SALE OF NEW NOTES PURSUANT TO THE PROSPECTUS UNTIL NATIONSRENT
HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR
OMISSION AND HAVE FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO
THE PARTICIPATING BROKER-DEALER OR NATIONSRENT HAS GIVEN NOTICE THAT THE SALE OF
THE NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE. IF NATIONSRENT GIVES SUCH
NOTICE TO SUSPEND THE SALE OF THE NEW NOTES, THEY SHALL EXTEND THE 90-DAY PERIOD
REFERRED TO ABOVE DURING WHICH PARTICIPATING BROKER-DEALERS ARE ENTITLED TO USE
THE PROSPECTUS IN CONNECTION WITH THE RESALE OF NEW NOTES BY THE NUMBER OF DAYS
DURING THE PERIOD FROM AND INCLUDING THE DATE OF THE GIVING OF SUCH NOTICE TO
AND INCLUDING THE DATE WHEN PARTICIPATING BROKER-DEALERS SHALL HAVE RECEIVED
COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS NECESSARY
7
<PAGE> 8
TO PERMIT RESALES OF THE NEW NOTES OR TO AND INCLUDING THE DATE ON WHICH
NATIONSRENT HAS GIVEN NOTICE THAT THE SALE OF NEW NOTES MAY BE RESUMED, AS THE
CASE MAY BE.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last Interest Payment Date to which interest has been paid or duty provided for
on such Old Notes prior to the original issue date of the New Notes or, if no
such interest has been paid or duly provided for, will not receive any accrued
interest on such Old Notes, and the undersigned waives the right to receive any
interest on such Old Notes accrued from and after such Interest Payment Date or,
if no such interest has been paid or duly provided for, from and after December
15, 1998.
The undersigned will, upon request, execute and deliver any additional
documents deemed by NationsRent to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
herein conferred or agreed to be conferred in this Letter of Transmittal shall
survive the death or incapacity of the undersigned and any obligation of the
undersigned hereunder shall be binding upon the heirs, executors,
administrators, personal representatives, trustees in bankruptcy, legal
representatives, successors and assigns of the undersigned. Except as stated in
the Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD
NOTES AS SET FORTH IN SUCH BOX.
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2,5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 7)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Old Notes hereby tendered or on ________________________
the register of holders maintained by NationsRent, or by any person(s)
authorized to become the registered holder(s) by endorsements and documents
transmitted herewith (including such opinions of counsel, certifications and
other information as may be required by NationsRent for the Old Notes to comply
with the restrictions on transfer applicable to the Old Notes). If signature is
by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
8
<PAGE> 9
(SIGNATURE(S) OF HOLDER(S))
Date: , 199
------------- --
Name(s)
------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
----------------------------------------------------------
Address:
-----------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
-------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
- -------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
Date: , 199
---------------------- --
Name of Firm
-------------------------------------------------------------------
Capacity (full title)
-------------------------------------------------
(PLEASE PRINT)
9
<PAGE> 10
Address
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
-------------------------------------------------
10
<PAGE> 11
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New Notes or Old Notes not tendered are to be issued
in the name of someone other than the registered holder of the Old Notes whose
name(s) appear(s) above.
Issue
/ / Old Notes not tendered to:
/ / New Notes, to:
Name(s)
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
-----------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and
Telephone Number
---------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER(S))
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes or Old Notes not tendered are to be sent to
someone other than the registered holder of the Old Notes whose name(s)
appear(s) above, or such registered holder(s) at an address other than that
shown above.
Mail
/ / Old Notes not tendered to:
/ / New Notes, to:
Name(s)
-----------------------------------------------------------------------
Address
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(INCLUDE CODE)
11
<PAGE> 12
Area Code and
Telephone Number
---------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER(S))
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer--Procedures for Tendering Old Notes" in the Prospectus. Certificates, or
timely confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC, as well as this Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at its address set forth herein on or prior to
the Expiration Date. Old Notes may be tendered in whole or in part in the
principal amount of $1,000 (1 Note) and integral multiples of $1,000 in excess
thereof, provided that, if any Old Notes are tendered for exchange in part, the
untendered principal amount thereof must be $1,000 (1 Note) or any integral
multiple thereof.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal and all other required documents to the Exchange Agent on
or prior to the Expiration Date or (iii) who cannot complete the procedures for
delivery by book-entry transfer on a timely basis, may tender their Old Notes by
properly completing and duly executing a Notice of Guaranteed Delivery pursuant
to the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering Old Notes" in the Prospectus. Pursuant to such
procedures: (i) such tender must be made by or through an Eligible Institution
(as defined below); (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Company,
must be received by the Exchange Agent on or prior to the Expiration Date; and
(iii) the Certificates (or a book-entry confirmation (as defined in the
Prospectus)) representing all tendered Old Notes, in proper form for transfer,
together with a Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent within five New York Stock Exchange, Inc. trading days after the
date of execution of such Notice of Guaranteed Delivery, all is provided in "The
Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set
12
<PAGE> 13
forth in such Notice. For Old Notes to be properly tendered pursuant to the
guaranteed delivery procedure, the Exchange Agent must receive a Notice of
Guaranteed Delivery on or prior to the Expiration Date. As used herein and in
the Prospectus, "Eligible Institution" means a firm or other entity identified
in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer,
municipal securities broker or dealer or government securities broker or dealer;
(iii) a credit union; (v) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
NationsRent will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any
participant in DTC whose name appears on the register of
holders maintained by the Trust as the owner of the Old Notes)
of Old Notes tendered herewith, unless such holder(s) has
completed either the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery
Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm that is
an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the Certificate number(s) and/or the
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be
accepted only in the principal amount of $1,000 (1 Note) and integral multiples
thereof, provided that if any Old Notes are tendered
13
<PAGE> 14
for exchange in part, the untendered principal amount thereof must be $1,000 (1
Note) or any integral multiple thereof. If less than all the Old Notes evidenced
by any Certificate submitted are to be tendered, fill in the principal amount of
Old Notes which are to be tendered in the box entitled "Principal Amount of Old
Notes Tendered (if less than all)." In such case, new Certificate(s) for the
remainder of the Old Notes that were evidenced by your old Certificate(s) will
only be sent to the holder of the Old Notes, promptly after the Expiration Date.
All Old Notes represented by Certificates delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written, telegraphic,
telex or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at one of its addresses set forth above or in the
Prospectus on or prior to the Expiration Date. Any such notice of withdrawal
must specify the name of the person who tendered the Old Notes to be withdrawn,
the aggregate principal amount of Old Notes to be withdrawn, and (if
Certificates for Old Notes have been tendered) the name of the registered holder
of the Old Notes as set forth on the Certificate for the Old Notes, if different
from that of the person who tendered such Old Notes. If Certificates for the Old
Notes have been delivered or otherwise identified to the Exchange Agent, then
prior to the physical release of such Certificates for the Old Notes, the
tendering holder must submit the serial numbers shown on the particular
Certificates for the Old Notes to be withdrawn and the signature on the notice
of withdrawal must be guaranteed by an Eligible Institution, except in the case
of Old Notes tendered for the account of an Eligible Institution. If Old Notes
have been tendered pursuant to the procedures for book-entry transfer set forth
in the Prospectus under "The Exchange Offer--Procedures for Tendering Old
Notes," the notice of withdrawal must specify the name and number of the account
at DTC to be credited with the withdrawal of Old Notes, in which case a notice
of withdrawal will be effective if delivered to the Exchange Agent by written,
telegraphic, telex or facsimile transmission. Withdrawals of tenders of Old
Notes may not be rescinded. Old Notes properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer--Procedures for
Tendering Old Notes."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by NationsRent, in its
sole discretion, whose determination shall be final and binding on all parties.
None of NationsRent or any affiliates or assigns of NationsRent or the Exchange
Agent or any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Notes which have been tendered
but which are withdrawn will be returned to the holder thereof without cost to
such holder promptly after withdrawal.
14
<PAGE> 15
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Old Notes tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on
several Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any, Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to NationsRent, in its sole discretion, of each such
person's authority so to act.
When this Letter of Transmittal is signed by the registered owner(s) of
the Old Notes listed and transmitted hereby, no endorsement(s) of Certificate(s)
or separate bond power(s) are required unless New Notes are to be issued in the
name of a person other than the registered holder(s). Signature(s) on such
Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
NationsRent may require in accordance with the restrictions on transfer
applicable to the Old Notes. Signatures on such Certificates or bond powers must
be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. IRREGULARITIES. NationsRent will determine, in its sole discretion,
all questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Old Notes, which
determination shall be final and binding on all parties. NationsRent reserves
the absolute right to reject any and all tenders determined by either of them
not to be in proper form or the acceptance of which,
15
<PAGE> 16
or exchange for which, may, in the view of counsel to NationsRent, be unlawful.
NationsRent also reserves the absolute right, subject to applicable law, to
waive any of the conditions of the Exchange Offer set forth in the Prospectus
under "The Exchange Offer--Certain Conditions to the Exchange Offer" or any
conditions or irregularity in any tender of Old Notes of any particular holder
whether or not similar conditions or irregularities are waived in the case of
other holders. NationsRent's interpretation of the terms and conditions of the
exchange Offer (including this Letter of Transmittal and the instructions
hereto) will be final and binding. No tender of Old Notes will be deemed to have
been validly made until all irregularities with respect to such tender have been
cured or waived. NationsRent or any affiliates or assigns of NationsRent, the
Exchange Agent, or any other person shall not be under any, duty to give
notification of any irregularities in tenders or incur any liability for failure
to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal
income tax law, a holder whose tendered Old Notes are accepted for exchange is
required to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the holder or other payee to a $50 penalty. In addition,
payments to such holders or other payees with respect to Old Notes exchanged
pursuant to the Exchange Offer may be subject to 31 % backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid back-up withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31 % of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the
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<PAGE> 17
Old Notes are registered in more than one name or are not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax.
Rather, the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive satisfaction of any or all conditions enumerated in the Prospectus.
11. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter of Transmittal, shall waive any right to receive notice
of the acceptance of their Old Notes for exchanges.
Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Old Notes nor shall any of them incur any liability for failure to
give any such notice.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificate(s) have been followed.
13. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Old Notes
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Notes in connection with the Exchange Offer, then the amount of any such
transfer tax (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
17
<PAGE> 18
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND
ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT
ON OR PRIOR TO THE EXPIRATION DATE.
18
<PAGE> 19
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS
(See Instruction 9)
PAYER'S NAME: THE BANK OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C>
PART 1-PLEASE PROVIDE YOUR TIN ON THE LINE TIN:__________________________
AT RIGHT AND CERTIFY BY SIGNING AND DATING Social Security Number or
BELOW Employer Identification Number
------------------------------------------------------------------------------------------------
PART 2 -- TIN Applied for / /
------------------------------------------------------------------------------------------------
SUBSTITUTE CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
------------------------------------------------------------------------------------------------
Form W-9 (1) the number shown on this form is my correct taxpayer identification number (or I am waiting
Department of the Treasury for a number to be issued to me).
Internal Revenue Service
Payor's Request for (2) I am not subject to backup withholding either because (i) I am exempt from backup
Taxpayer withholding, (ii) I have not been notified by the Internal Revenue Service ("IRS")
Identification Number that I am subject to backup withholding as a result of a failure to report all
("TIN") interest or dividends, or (iii) the IRS has notified me that I am no longer subject to
and Certification backup withholding, and
(3) any other information provided on this form is true and correct
Signature___________________________________ Date______________________, 1998
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
You must cross out item (iii) in Part (2) above if you have been notified by the
IRS that you are subject to backup withholding because of under reporting
interest or dividends on your tax return and you have not been notified by the
IRS that you are no longer subject to backup withholding.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W--9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
payments made to me on account of the Exchange Capital Securities shall be
retained until I provide a taxpayer identification number to the Exchange Agent
and that, if I do not provide my taxpayer identification number within 60 days,
such retained amounts shall be remitted to the Internal Revenue Service as
backup withholding, and 31% of all reportable payments made to me thereafter
will be withheld and remitted to the Internal Revenue Service until I provide a
taxpayer identification number.
Signature____________________________________ Date___________________, 1998
19
<PAGE> 1
Exhibit 99.2
FORM OF
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
ANY AND ALL OUTSTANDING
10 3/8% SENIOR SUBORDINATED NOTES DUE 2008
(PRINCIPAL AMOUNT $1,000 PER NOTE)
OF
NATIONSRENT, INC.
FULLY AND UNCONDITIONALLY GUARANTEED
BY CERTAIN SUBSIDIARY GUARANTORS
Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the 10 3/8% Senior Subordinated Notes due 2008 (the "Old
Notes") of NationsRent, Inc. ("NationsRent") are not immediately available,
(ii) the Old Notes, the Letter of Transmittal and all other required documents
cannot be delivered to The Bank of New York (the "Exchange Agent") on or prior
to 5:00 P.M. New York City time, on the Expiration Date (as defined in the
Prospectus referred to below) or (iii) the procedures for delivery by book-entry
transfer cannot be completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand, overnight courier or mail, or transmitted by
facsimile transmission, to the Exchange Agent. See "The Exchange
Offer--Procedures for Tendering the Old Notes" in the Prospectus. In addition,
in order to utilize the guaranteed delivery procedure to tender Old Notes
pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal relating to the Old Notes (or facsimile thereof) must also be
received by the Exchange Agent prior to 5:00 P.M. New York City time, on the
Expiration Date. Capitalized terms not defined herein have the meanings assigned
to them in the Prospectus.
The Exchange Agent For The Exchange Offer Is:
The Bank Of New York
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL FACSIMILE TRANSMISSIONS: BY HAND OR OVERNIGHT DELIVERY
(Eligible Institutions Only)
<S> <C> <C>
The Bank of New York (212) 571 -3080 The Bank of New York
101 Barclay Street, 7E 101 Barclay Street
New York, New York 10286 CONFIRM BY TELEPHONE: Corporate Trust Services Window
Attn: Reorganization Section (212) 815-6333 Ground Level
New York, New York 10286
For Information Call: Attn: Reorganization Section
(212) 815-6333
</TABLE>
<PAGE> 2
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to NationsRent, Inc., a Delaware
Corporation ("NationsRent"), upon the terms and subject to the conditions set
forth in the Prospectus dated December __, 1998 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of the Old Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering Old
Notes."
Aggregate Principal Name(s) of Registered Holder(s):___________
Amount Tendered: $__________ ___________________________________________
___________________________________________
Certificate No(s)
(if available):_____________
__________________________________________
(Aggregate Principal Amount Represented by
the Old Notes Certificate(s))
$________________________________
If the Old Notes will be tendered by book-entry transfer, provide the following
information:
DTC Account Number:_____________
Date:____________________________
<PAGE> 3
- --------------------------------------------------------------------------------
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
X_________________________ ____________________________
X_________________________ ____________________________
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:______________________________
Must be signed by the holder(s) of the Old Capital Securities as their
name(s) appear(s) on certificates for Old Capital Securities or on a security
position listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
Please print name(s) and address(es)
Name(s):
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Capacity:
___________________________________________________________________
Address(es):
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
<PAGE> 4
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
learning agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Old Notes
tendered hereby in proper form for transfer, or confirmation of the book-entry
transfer of such Old Notes to the Exchange Agent's account at The Depositary
Trust Company ("DTC"), pursuant to the procedures for book-entry transfer set
forth in the Prospectus, in either case together, with one or more properly
completed and duly executed Letter(s) of Transmittal (or facsimile thereof) and
any other required documents within five business days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Old Notes tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
______________________________ ____________________________________
Name of Firm Authorized Signature
______________________________ ____________________________________
Address Title
______________________________ ____________________________________
Zip Code (Please Type or Print)
Area Code and Telephone No.______ Dated:______________________________
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
