<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1999
COMMISSION FILE NUMBER 0-13292
-------------------------------------------------------------
MCGRATH RENTCORP
(Exact name of registrant as specified in its Charter)
CALIFORNIA 94-2579843
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5700 LAS POSITAS ROAD, LIVERMORE, CA 94550
(Address of principal executive offices)
Registrant's telephone number: (925) 606-9200
-------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of August 6, 1999, 13,319,588 shares of Registrant's Common
Stock were outstanding.
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<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MCGRATH RENTCORP
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- --------------------------
(in thousands, except per share amounts) 1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Rental $19,099 $17,340 $38,078 $34,321
Rental Related Services 3,100 2,727 5,534 4,950
------- ------- ------- -------
Rental Operations $22,199 20,067 $43,612 39,271
Sales 9,208 13,234 16,071 21,186
Other 232 174 450 368
------- ------- ------- -------
Total Revenues 31,639 33,475 60,133 60,825
------- ------- ------- -------
COSTS AND EXPENSES
Direct Costs of Rental Operations
Depreciation 4,753 3,810 9,419 7,657
Rental Related Services 1,825 1,544 3,163 3,208
Other 3,531 3,535 6,664 6,560
------- ------- ------- -------
Total Direct Costs of Rental Operations 10,109 8,889 19,246 17,425
Costs of Sales 6,187 8,723 11,047 13,972
------- ------- ------- -------
Total Costs 16,296 17,612 30,293 31,397
------- ------- ------- -------
Gross Margin 15,343 15,863 29,840 29,428
Selling and Administrative 3,989 3,839 8,188 7,544
------- ------- ------- -------
Income from Operations 11,354 12,024 21,652 21,884
Interest 1,581 1,583 3,097 3,034
------- ------- ------- -------
Income Before Provision for Income Taxes 9,773 10,441 18,555 18,850
Provision for Income Taxes 3,836 4,114 7,283 7,427
------- ------- ------- -------
Income Before Minority Interest 5,937 6,327 11,272 11,423
Minority Interest in Income of Subsidiary 90 353 54 481
------- ------- ------- -------
Net Income $ 5,847 $ 5,974 $11,218 $10,942
======= ======= ======= =======
Earnings Per Share:
Basic $ 0.44 $ 0.42 $ 0.82 $ 0.77
======= ======= ======= =======
Diluted $ 0.43 $ 0.42 $ 0.81 $ 0.75
======= ======= ======= =======
Shares Used in Per Share Calculation:
Basic 13,403 14,122 13,611 14,296
======= ======= ======= =======
Diluted 13,568 14,309 13,780 14,497
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
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MCGRATH RENTCORP
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------- ------------
(in thousands) 1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Cash $ 586 $ 857
Accounts Receivable, less allowance for doubtful
accounts of $650 in 1999 and 1998 23,356 21,811
Rental Equipment, at cost:
Relocatable Modular Offices 227,105 216,414
Electronic Test Instruments 67,534 66,573
--------- ---------
$ 294,639 282,987
Less Accumulated Depreciation (88,842) (82,959)
--------- ---------
Rental Equipment, net 205,797 200,028
--------- ---------
Land, at cost 19,303 18,953
Buildings, Land Improvements, Equipment and Furniture,
at cost, less accumulated depreciation of $4,594
in 1999 and $ 3,858 in 1998 32,018 31,460
Prepaid Expenses and Other Assets 5,640 5,567
--------- ---------
Total Assets $ 286,700 $ 278,676
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes Payable $ 102,900 $ 97,000
Accounts Payable and Accrued Liabilities 26,062 22,964
Deferred Income 4,058 5,574
Minority Interest in Subsidiary 2,638 2,584
Deferred Income Taxes 50,199 45,160
--------- ---------
Total Liabilities 185,857 173,282
--------- ---------
Shareholders' Equity:
Common Stock, no par value --
Authorized -- 40,000 shares
Outstanding -- 13,320 shares in 1999 and
13,970 shares in 1998 7,768 8,138
Retained Earnings 93,075 97,256
--------- ---------
Total Shareholders' Equity 100,843 105,394
--------- ---------
Total Liabilities and Shareholders' Equity $ 286,700 $ 278,676
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 4
MCGRATH RENTCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
(In thousands) 1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 11,218 $ 10,942
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 10,215 8,379
Gain on Sale of Rental Equipment (2,674) (2,955)
Change In:
Accounts Receivable (1,545) (1,397)
Prepaid Expenses and Other Assets (74) 1,824
Accounts Payable and Accrued Liabilities 2,953 (10,064)
Deferred Income (1,517) (268)
Deferred Income Taxes 5,039 4,243
-------- --------
Net Cash Provided by Operating Activities 23,615 10,704
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Rental Equipment (19,723) (25,044)
Purchase of Land, Buildings, Land Improvements,
Equipment and Furniture (1,704) (1,996)
Proceeds from Sale of Rental Equipment 7,209 7,545
-------- --------
Net Cash Used in Investing Activities (14,218) (19,495)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Net Borrowings Under Notes Payable 5,900 21,500
Net Proceeds from the Exercise of Stock Options 28 215
Repurchase of Common Stock (12,583) (9,810)
Payment of Dividends (3,013) (2,576)
-------- --------
Net Cash Provided by (Used in) Financing Activities (9,668) 9,329
-------- --------
Net Increase (Decrease) in Cash (271) 538
Cash Balance, Beginning of Period 857 538
-------- --------
Cash Balance, End of Period $ 586 $ 1,076
======== ========
Interest Paid During the Period $ 2,991 $ 2,996
======== ========
Income Taxes Paid During the Period $ 2,107 $ 3,103
======== ========
Dividends Declared but not yet Paid $ 1,598 $ 1,410
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 5
MCGRATH RENTCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1. CONSOLIDATED FINANCIAL INFORMATION
The consolidated financial information for the six months ended June 30,
1999 has not been audited, but in the opinion of management, all adjustments
(consisting of only normal recurring accruals, consolidation and eliminating
entries) necessary for the fair presentation of the consolidated results of
operations, financial position, and cash flows of McGrath RentCorp (the
"Company") have been made. The consolidated results of the six months ended June
30, 1999 should not be considered as necessarily indicative of the consolidated
results for the entire year. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's latest Form 10-K.
NOTE 2. NOTES PAYABLE
In June 1999, the Company amended its $75,000,000 unsecured line of
credit agreement with its banks to extend it to June 30, 2001 (other terms and
conditions remained the same). In addition, the Company amended its committed
line of credit related to its cash management services to increase it to
$4,000,000 and to extend it to June 30, 2000.
NOTE 3. BUSINESS SEGMENTS
The Company defines its business segments based on the nature of
operations for the purpose of reporting under Statement of Financial Accounting
Standard No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131). The Company's three reportable segments are Mobile
Modular Management Corporation (Modulars), McGrath-RenTelco (Electronics), and
Enviroplex. The operations of these three segments are described in the notes to
the consolidated financial statements included in the Company's latest Form
10-K. As a separate corporate entity, Enviroplex revenues and expenses are
separately maintained from Modulars and Electronics. Excluding interest expense,
allocations of revenues and expenses not directly associated with Modulars or
Electronics are generally allocated to these segments based on their pro-rata
share of direct revenues. Interest expense is allocated between Modulars and
Electronics based on their pro-rata share of average rental equipment, accounts
receivable and customer security deposits. The Company does not report total
assets by business segment. Summarized financial information for the six months
ended June 30, 1999 and 1998 for the Company's reportable segments is shown in
the following table:
4
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<TABLE>
<CAPTION>
(in thousands) MODULARS(1) ELECTRONICS(2) ENVIROPLEX CONSOLIDATED
- -------------- ------------ --------------- ---------- ------------
<S> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30,
1999
Rental Operation Revenues $ 30,501 $ 13,111 $ -- $ 43,612
Sales and Other Revenues 7,704 5,035 3,782 16,521
Total Revenues 38,205 18,146 3,782 60,133
Depreciation on Rental Equipment 5,096 4,323 -- 9,419
Interest Expense 2,381 806 (90) 3,097
Income before Income Taxes 11,694 6,538 323 18,555
Rental Equipment Acquisitions 13,771 5,952 -- 19,723
Accounts Receivable, net (period end) 11,648 8,391 3,317 23,356
Rental Equipment, at cost (period end) 227,105 67,534 -- 294,639
1998
Rental Operation Revenues $ 27,872 $ 11,399 -- $ 39,271
Sales and Other Revenues 6,403 4,599 10,552 21,554
Total Revenues 34,275 15,998 10,552 60,825
Depreciation on Rental Equipment 4,233 3,424 -- 7,657
Interest Expense 2,296 690 48 3,034
Income before Income Taxes 10,214 5,768 2,868 18,850
Rental Equipment Acquisitions 15,823 9,221 -- 25,044
Accounts Receivable, net (period end) 10,413 6,666 6,112 23,191
Rental Equipment, at cost (period end) 207,503 56,148 -- 263,651
</TABLE>
- --------
(1) Operates under the trade name Mobile Modular Management Corporation
(2) Operates under the trade name McGrath-RenTelco
5
<PAGE> 7
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Quarterly Report on Form 10-Q contains statements which constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements appear in a number of places.
Such statements can be identified by the use of forward-looking terminology such
as "believes", "expects", "may", "estimates", "will", "should", "plans" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. Readers are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
significant risks and uncertainties, and that actual results may vary materially
from those in the forward-looking statements as a result of various factors.
These factors include the effectiveness of management's strategies and
decisions, general economic and business conditions, new or modified statutory
or regulatory requirements and changing prices and market conditions. This
report identifies other factors that could cause such differences. No assurance
can be given that these are all of the factors that could cause actual results
to vary materially from the forward-looking statements.
THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Rental revenues for the three and six months ended June 30, 1999
increased $1,759,000 (10%) and $3,757,000 (11%), respectively, over the
comparative periods in 1998. Mobile Modular Management Corporation ("MMMC")
contributed $2,018,000 and McGrath-RenTelco contributed $1,739,000 of the
six-month increase. MMMC's rental revenues increased as a result of having an
average of $19,177,000 more equipment on rent compared to a year earlier. In
1999, Modulars average monthly yield of 1.91% and average utilization of 82.00%,
exclusive of equipment not previously rented, was approximately the same as the
comparative period in 1998. McGrath-RenTelco's rental revenues increased as a
result of having an average of $13,717,000 more equipment on rent compared to a
year earlier offset by an average monthly yield decline from 3.53% in 1998 to
3.20% in 1999 primarily as a result of average utilization declining from 55.4%
in 1998 to 51.4% in 1999.
Rental related services revenues for the three and six months ended June
30, 1999 increased $373,000 (14%) and $584,000 (12%), respectively, as compared
to the same periods in 1998 as a result of higher volume of modular equipment
movements and site requirements in 1999. Gross margins on these services for the
six-month period increased from 35% in 1998 to 43% in 1999 due to the mix of
services performed in 1999 and approximate the 1998 annual gross margin.
Sales for the three and six months ended June 30, 1999 declined
$4,026,000 (30%) and $5,115,000 (24%), respectively, as compared to the same
periods in 1998 primarily due to a reduction in sales by Enviroplex of
manufactured classrooms to school districts from the high levels in 1998 caused
by California's Class Size Reduction Program. Further, management believes
schools have delayed placing orders until allocation of funds from the $9.2
billion California bond measure, which passed in November 1998 is determined.
Both MMMC and McGrath-RenTelco's sales volumes have increased over the 1998
comparative period. Consolidated gross margin on sales declined for the
six-month period from 34% in 1998 to 31% in 1999 due to lower margin classroom
projects sold during the first six-months of 1999. Sales continue to occur
routinely as a normal part of the Company's rental business; however, these
sales can fluctuate from quarter to quarter and year to year depending on
customer demands and requirements.
Enviroplex's backlog of orders as of June 30, 1999 and 1998 was
$6,808,000 and $7,788,000, respectively. Backlog is not significant in MMMC's
modular business or in McGrath-RenTelco's electronics business.
Depreciation on rental equipment for the three and six months ended June
30, 1999 increased $943,000 (25%) and $1,762,000 (23%) over the comparative
periods in 1998 due to the additional rental equipment purchased during 1998.
Modular rental equipment, at cost, increased 9% and Electronics rental
equipment, at cost, increased 20% between June 30, 1998 and June 30, 1999.
Selling and administrative expenses for the three and six months ended
June 30, 1999 increased $150,000 (4%) and $644,000 (9%), respectively, over the
comparative periods in 1998. For the comparative six-month period
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the increase relates primarily to higher bad debt expense ($330,000) resulting
from an unusual write-off of $282,000 in the first quarter of 1999.
Additionally, higher depreciation expense for facilities and office equipment
($73,000) and advertising expenses ($60,000) for brochure development, web page
design, and yellow page advertising contributed to the increase in selling and
administrative expenses.
Interest expense for the six months ended June 30, 1999 increased
$63,000 (2%) over 1998 as a result of a higher average borrowing level offset by
a lower average interest rate in 1999. The debt increase funded part of the
significant rental equipment purchases made during the last twelve months.
Income before provision for taxes for the three and six months ended
June 30, 1999 decreased $668,000 (6%) and $295,000 (2%), respectively, while net
income decreased $127,000 (2%) and increased $276,000 (3%), respectively, from
the comparative periods in 1998. For the six-month comparative period, net
income increased while pretax income declined as a result of a lower effective
tax rate in 1999 of 39.25% compared to 39.40% in 1998 combined with a lower
contribution to earnings by the majority owned subsidiary, Enviroplex. Earnings
per share for the three and six months ending June 30, 1999 increased to $0.44
per share and $0.82 per share, respectively, on fewer outstanding shares.
LIQUIDITY AND CAPITAL RESOURCES
This section contains statements that constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See the statement at the beginning of this Item for cautionary
information with respect to such forward-looking statements.
The Company's operations produced a positive cash flow for the six
months ended June 30, 1999 of $23,615,000 as compared to $10,704,000 for the
year earlier period. During 1999, the primary uses of cash have been to purchase
additional rental inventory to satisfy customer requirements, to repurchase
shares of the Company's common stock on the open market, and to pay dividends to
the Company's shareholders.
The Company had total liabilities to equity ratios of 1.84 to 1 and 1.64
to 1 as of June 30, 1999 and December 31, 1998, respectively. The debt (notes
payable) to equity ratios were 1.02 to 1 and 0.92 to 1 as of June 30, 1999 and
December 31, 1998, respectively.
The Company has made purchases of shares of its common stock from time
to time in the over-the-counter market (NASDAQ) and/or through privately
negotiated, large block transactions under an authorization of the Board of
Directors. Shares repurchased by the Company are cancelled and returned to the
status of authorized but unissued stock. During the six months ended June 30,
1999, the Company repurchased 686,900 shares of its outstanding common stock for
an aggregate purchase price of $12,583,313 (or an average price of $18.32 per
share). As of August 6, 1999, 740,500 shares remain authorized for repurchase.
The Company believes that its needs for working capital and capital
expenditures through 1999 and beyond will be met adequately by cash flow and
bank borrowings.
MARKET RISK
This section contains statements that constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See the statement at the beginning of this Item for cautionary
information with respect to such forward-looking statements.
The Company currently has no material derivative financial instruments
that expose the Company to significant market risk. The Company is exposed to
cash flow and fair value risk due to changes in interest rates with respect to
its notes payable. As of June 30, 1999, the Company believes that the carrying
amounts of its financial instruments (cash and notes payable) approximate fair
value.
7
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YEAR 2000
This section contains statements that constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See the statement at the beginning of this Item for cautionary
information with respect to such forward-looking statements.
The "Year 2000" issue is the result of computer programs using two
digits rather than four to determine the applicable year. This could affect
date-sensitive calculations that treat "00" as the year 1900 rather than the
year 2000. An assessment of the Company's exposure related to Year 2000 issues
has been completed and it is not expected to have a significant impact on the
Company.
The Company initiated a number of major system projects in 1997 and 1998
to upgrade core computer hardware, networking and software systems. These
projects are replacing existing systems as opposed to simply fixing Year 2000
problems. Most of these projects have been completed and are operational; the
balance is expected to be operational by September 1999. Capitalized
expenditures for this process totaled $1,600,000 for the period January 1, 1997
to June 30, 1999 for external labor, hardware and software costs. This amount
includes the cost of new software applications installed as a result of
strategic replacement projects. Prior to December 31, 1998, the Company did not
separately track the internal costs incurred related to Year 2000 issues or the
system conversions described above. Such internal costs are principally the
related payroll costs for its information systems personnel and are not
necessarily considered incremental costs to the Company. Effective January 1,
1999, the Company began to track these internal costs in accordance with
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." The Company estimates approximately
$400,000 for completion of its system upgrades for the remainder of 1999, of
which approximately $150,000 is expected to be related to internal costs. All
future costs will be funded from operating cash flow.
The Company does not significantly rely on "embedded technology" in its
critical processes. Embedded technology, which means microprocessor-controlled
devices as opposed to multi-purpose computers, does control some building and
security operations, such as electric power management, ventilation, and
building access. All building facilities are presently being evaluated, and the
Company expects all systems using embedded technology to be confirmed as Year
2000 ready by September, 1999. The electronics test and measurement rental
equipment has been evaluated, and it appears only minor quantities of equipment
pose a Year 2000 problem. If deemed important, some equipment may be upgraded.
The Company asks its customers to seek definitive Year 2000 compliance guidance
directly from the equipment manufacturers.
The Company cannot predict the likelihood of a significant disruption of
its customers' or suppliers' businesses or the economy as a whole, either of
which could have a material adverse impact on the Company. However, because the
markets for the Company's products are comprised of numerous customers with a
variety of sizes and levels of sophistication, the noncompliance with Year 2000
of any one would not be expected to have a detrimental impact on the Company's
financial position or results of operations. As a normal course of business, the
Company seeks to maintain multiple suppliers where possible. The Company
continues to communicate with vendors, customers, suppliers, service providers,
and government agencies to monitor their compliance.
The Company presently believes that its Year 2000 exposures will not
present a material adverse risk to the Company's future consolidated results of
operations, liquidity, and capital resources. However, if all systems are not
completed in a timely manner, or the level of timely compliance by key suppliers
or service providers is not sufficient, the Year 2000 issue could have a
material adverse effect on the Company's operations. This includes, but is not
limited to, delays of equipment shipments resulting in loss of revenues,
increased operating costs, loss of customers and suppliers, or other significant
disruptions to the Company's business.
The Company's contingency plan includes (1) all critical computer
operating and financial data will be backed-up and printed at key dates to
provide the basis, if necessary, for a manual system, (2) in the event a
significant number of customers are unable to issue payments, the Company has
sufficient liquidity with its existing line of credit to function adequately,
and (3) the Company continues to look for multiple suppliers and is also
8
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evaluating power and communication alternatives in the event of a loss of
service. The contingency plan is enhanced by the fact that existing management
has been in place since before computer systems were used.
PART II OTHER INFORMATION
ITEM 3. OTHER INFORMATION
On June 3, 1999, the Company declared a quarterly dividend on its Common
Stock; the dividend was $0.12 per share. Subject to its continued profitability
and favorable cash flow, the Company intends to continue the payment of
quarterly dividends.
ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
------ ----------- ----------------
<S> <C> <C>
4.1 Amended and Restated Credit Agreement Filed herewith.
4.2 $4,000,000 Committed Credit Facility Filed herewith.
</TABLE>
(b) Reports on Form 8-K.
No reports on form 8-K have been filed during the quarter for which
this report is filed.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Date: August 6, 1999. MCGRATH RENTCORP
by: /s/ Thomas J. Sauer
---------------------------------
Thomas J. Sauer
Vice President and Chief
Financial Officer
9
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EXHIBIT 4.1
AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
MCGRATH RENTCORP,
FLEET BANK, N.A.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AND
UNION BANK OF CALIFORNIA, N.A., AS AGENT
DATED AS OF JUNE 30, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 DEFINITIONS 1
1.1. Defined Terms 1
1.2. Accounting Terms 8
1.3. Exhibits and Schedules 8
1.4. Miscellaneous Terms 8
ARTICLE 2 THE CREDITS 9
2.1. Revolving Loan Facility 9
2.1.1. General 9
2.1.2. Revolving Notes 9
2.2. Term Loan Facility 9
2.2.1. General 9
2.2.2. Term Notes 9
2.3. Interest on Loans 10
2.3.1. General 10
2.3.2. Rate Options and Applicable Margins 10
2.3.3. Interest on Overdue Payments 10
2.3.4. Computation 10
2.4. Procedure for Loans 10
2.4.1. General 10
2.4.2. Alternate Procedure 11
2.4.3. Extensions and Conversations 11
2.4.4. Minimum Amount of Revolving Loans 11
2.4.5. Minimum Payment of Revolving Loans 11
2.5. Funding of Loans 11
2.6. Non-Receipt of Funds by Agent 12
2.7. Reduction or Termination of the Commitment 12
ARTICLE 3 PAYMENTS AND FEES 12
3.1. Revolving Loans 12
3.1.1. Interest 12
3.1.2. Principal 13
3.2. Term Loans 13
3.2.1. Interest 13
3.2.2. Principal 13
3.3. Optional Repayment 13
3.4. Mandatory Prepayments 13
3.5. Payments 14
3.6. Commitment Fee 14
3.7. Agent's Fee 14
ARTICLE 4 ADDITIONAL PROVISIONS RELATING TO EURODOLLAR
LOANS AND CAPITAL ADEQUACY 14
4.1. Eurodollar Loans 14
4.1.1. Eurodollar Increased Cost 14
4.1.2. Eurodollar Deposits Unavailable or Interest
Rate Unascertainable 15
4.1.3. Changes in Law Affecting Eurodollar Loans 15
4.1.4. Eurodollar Loan Indemnity 15
4.2. Discretion as to Manner of Funding 16
</TABLE>
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<TABLE>
<S> <C>
4.3. Capital Adequacy 16
ARTICLE 5 CONDITIONS PRECEDENT 17
5.1. Conditions to Effectiveness of this Agreement 17
5.2. Each Loan 17
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BORROWER 18
6.1. Due Organization 18
6.2. Subsidiaries 18
6.3. Requisite Power 18
6.4. Binding Agreement 18
6.5. Other Agreement 19
6.6. Litigation 19
6.7. Consents 19
6.8. Financials 19
6.9. Use of Proceeds 19
6.10. Regulation U 19
6.11. ERISA 20
6.12. Tax Returns 20
6.13. Licenses and Trademarks 20
6.14. Burdensome Agreement 20
6.15. Title and Lien 20
6.16. Existing Defaults 20
6.17. Other Contracts 20
6.18. Leases 20
6.19. Fire and Explosion 21
6.20. No Default 21
ARTICLE 7 AFFIRMATIVE COVENANTS 21
7.1. Inspection 21
7.2. Proceeds 21
7.3. Financial Statements 21
7.4. Corporate Existence 23
7.5. Compliance and Law 23
7.6. Insurance 23
7.7. Facilities 23
7.8. Taxes and Other Liabilities 24
7.9. Litigation 24
7.10. Change of Location 24
7.11. Financial Tests 24
ARTICLE 8 NEGATIVE COVENANTS 24
8.1. Mergers/Changes 24
8.2. Sale of Assets 25
8.3. Liens 25
8.4. Indebtedness 26
8.5. Prepayment 26
8.6. Transaction with Affiliates 26
8.7. Misrepresentations 26
8.8. Regulations 26
8.9. Partnerships 26
ARTICLE 9 EVENTS OF DEFAULT 26
9.1. Events of Default 26
9.2. Acceleration 28
ARTICLE 10 AGENT 28
</TABLE>
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<TABLE>
<S> <C>
10.1. Appointment; Powers 28
10.2. Agent as Bank 28
10.3. Independent Credit Analysis 28
10.4. General Immunity 29
10.5. Right to Indemnity 30
10.6. Action by Agent 30
10.7 Payee of Note Treated as Owner 31
10.8. Agent's Resignation 31
ARTICLE 11 MISCELLANEOUS 31
11.1 Amendments 31
11.2. Preservation of Rights 32
11.3. Setoff 32
11.4. Ratable Payments 32
11.5. Expenses 32
11.6. Indemnity 33
11.7. Survival of Representations 33
11.8. Governmental Regulation 33
11.9. Taxes 33
11.10. Headings 33
11.11. Several Obligations 33
11.12. Numbers of Documents 33
11.13. Severability of Provisions 33
11.14. Non-Liability of Banks 34
11.15. Choice of Law 34
11.16. Consent of Jurisdiction 34
11.17. Compliance with Applicable Laws 34
11.18. Confidentiality 35
11.19. Successors and Assigns 35
11.20. Notices 36
11.21. Entire Agreement 36
11.22. Jury Trial 36
EXHIBIT A Compliance Certificate
EXHIBIT B Loan Request
EXHIBIT C Officer's Certificate
EXHIBIT D Revolving Note
EXHIBIT E Term Note
</TABLE>
2
<PAGE> 5
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 30, 1999 is
entered into by and among McGRATH RENTCORP, a California corporation (the
"Borrower"), the banks listed on the signature pages hereof (individually a
"Bank" and collectively "Banks"), and UNION BANK OF CALIFORNIA, N.A., as agent
(the "Agent") for Banks.
The parties hereto desire to amend and restate the Credit Agreement
dated July 10, 1997, by and among the Borrower, Banks and Agent, as agent for
Banks, as amended by the First Amendment to Credit Agreement dated as of
December 31, 1997, Second Amendment to Credit Agreement dated as of March 3,
1998, Third Amendment to Credit Agreement dated as of April 8, 1998, and Fourth
Amendment to Credit Agreement dated as of April 30, 1999 (collectively, the
"Existing Agreement").
In consideration of the mutual covenants and agreements contained
herein, the parties hereto agree to amend and restate the Existing Agreement as
follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Adjusted Borrowing Base" means the excess, if any, of (a) the
Borrowing Base over (b) Outside Debt.
"Adjusted Net Income" means for any period of four (4)
consecutive fiscal quarters, determined as of the last day of such period, the
sum of (a) Net Income, (b) provision for income taxes, (c) interest expense, (d)
depreciation, (e) amortization, and (f) minority interest in the Net Income of
any Subsidiary, and minus minority interest in the Net Loss of any Subsidiary.
"Affiliate" means, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (and the
correlative terms, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise).
"Agreement" means this Amended and Restated Credit Agreement as
originally executed and as the same may from time to time be amended,
supplemented or restated.
"Applicable Law" means, with respect to any Bank at any time, the
Law of any jurisdiction applicable to Loans made by such Bank to Borrower
hereunder, including, without limitation, Laws prescribing the maximum rates of
interest on loans and extensions of credit.
"Applicable Margin" means the percentage to be added to a Rate
Option in determining the rate of interest applicable to a Loan, as set forth in
Section 2.3 hereof.
"Authorized Officer" means the President, or Senior Vice
President, or Chief Financial Officer of Borrower.
"Bank" means, individually, Union Bank of California, N.A., Fleet
Bank, N.A., Bank of America National Trust and Savings Association, and their
respective successors, and such other banks as may become party to this
Agreement, collectively referred to herein as "Banks."
"Borrowing Base" means, at any time and from time to time, an
amount equal to seventy-five percent (75%) of Borrower's Eligible Equipment.
"Business Day" means any day other than a Saturday or Sunday on
which national banks are generally open for business in San Francisco,
California and, with respect to Eurodollar Loans, such a day on which dealings
in foreign currencies and exchange are also carried on in the interbank
Eurodollar market.
"Capitalized Lease Obligations" means any and all lease
obligations that, in accordance with GAAP, are required to be capitalized on the
books of a lessee.
"Commercial Account" means Borrower's deposit account number
001-201-6481 at the office of Agent.
<PAGE> 6
"Commitment" means, subject to the terms and conditions of this
Agreement, and adjusted from time to time in accordance therewith, the
obligation of Banks to make Loans to Borrower in the aggregate principal amount
outstanding at any time not to exceed the lesser of (a) Seventy-Five Million
Dollars ($75,000,000), and (b) the Adjusted Borrowing Base.
"Commitment Fee" means the commitment fee payable by Borrower
pursuant to and as provided in Section 3.6.
"Compliance Certificate" means a certificate in the form of
Exhibit A to be delivered to Agent in accordance with Section 7.3(c).
"Conversion Date" means June 30, 2001.
"Debt" means, with respect to Borrower, the aggregate amount of,
without duplication, (a) all obligations for borrowed money, including, without
limitation, the Loans, and the Real Property Debt, (b) all obligations evidenced
by bonds, other than assessment and other special bonds associated with real
property holdings, debentures, notes or other similar instruments, (c) all
Capitalized Lease Obligations, (d) all obligations or liabilities of others
secured by a Lien on any asset of Borrower, whether or not such obligation or
liability is assumed, and (e) all obligations or liabilities of Borrower,
whether direct or indirect, contingent or otherwise, with respect to the
obligations or liability of another, including, without limitation, all
guaranties.
"Debt Service" means, determined as of the last day of a fiscal
quarter, the sum of (a) all payments of principal on Debt (excluding any Loans)
scheduled to become due or to be made during the succeeding period of four (4)
consecutive quarters, (b) the amount outstanding under all Loans divided by an
amount equal to the number of years or quarterly fractions thereof (rounded to
the nearest quarter) remaining until the Term Loan Maturity Date, and (c)
interest on Debt (including any Loans) due or to be made during the succeeding
period of four (4) consecutive quarters. Where any item of interest varies or
depends upon a floating rate, for purposes of calculating Debt Service such rate
shall be computed on the basis of the average interest rate on the applicable
item for the quarter ending on the date of determination.
"Default" means any event that with the giving of notice or
passage of time, or both, would be an Event of Default.
"Dollars and $" means United States dollars or 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 in the United States.
"EBIT" means for any period of four (4) consecutive fiscal
quarters, determined as of the last day of such period, the sum of (a) Net
Income, (b) provision for income taxes, (c) interest expense, and (d) minority
interest in the Net Income of any Subsidiary, and minus minority interest in the
Net Loss of any Subsidiary.
"Effective Date" means June 30, 1999, provided that all
conditions precedent specified in Section 5.1 have been satisfied and that
satisfaction of such conditions precedent has been confirmed by written notice
delivered by the Agent to Borrower and Banks.
"Eligible Equipment" means equipment which is an asset of
Borrower designated as "Rental Equipment, net" on Borrower's most recent
financial statements, in accordance with GAAP, or any substitute for such
designation, and which:
(a) is owned by Borrower free and clear of all Liens and rights
of others except Permitted Liens;
(b) is permanently located in the United States of America; and
(c) is not, in the reasonable opinion of Agent, obsolete,
unsalable, unfit for use or otherwise unacceptable to Agent.
"ERISA" means the Employee Retirement Income Security Act of
1974, as the same may from time to time be amended or supplemented, including
any rules or regulations issued in connection therewith and any successor
statute.
"Eurocurrency Reserve Percentage" means, with respect to each
Eurodollar Period, the percentage, as prescribed by the Federal Reserve Board,
for determining reserve requirements (including any marginal, supplemental or
emergency reserves) applicable to Eurocurrency liabilities pursuant to
Regulation D, or any other then applicable regulation of the Board of Governors
which prescribes reserve requirements applicable to 'Eurocurrency liabilities,'
as presently defined in Regulation D, in each case, as applicable to Agent. The
1
<PAGE> 7
Interbank Rate (Reserve Adjusted) shall be adjusted automatically on the
effective date of any change in the Eurocurrency Reserve Percentage. For
purposes of this definition, any Eurodollar Loans hereunder shall be deemed to
be Eurocurrency liabilities. The Eurocurrency Reserve Percentage shall be
conclusive and binding, absent manifest error, even if estimated or projected.
"Eurodollar Loan" means any Loan which bears interest at a rate
determined with reference to the Interbank Rate (Reserve Adjusted).
"Eurodollar Period" means, with respect to any Eurodollar Loan,
the period commencing on the date specified by Borrower in a Loan Request and
ending one (1), two (2), three (3), six (6) or (if available to Banks) twelve
(12) months thereafter, as specified by Borrower in such Loan Request; provided
that
(a) the first day of any Eurodollar Period shall be a Business
Day;
(b) no Eurodollar Period for any Eurodollar Loan made prior to
the Conversion Date shall extend beyond the Conversion Date;
(c) no Eurodollar Period shall extend beyond a date when a
principal payment is due if the principal balance of the Loans after such
payment will be less than the aggregate Eurodollar Loans outstanding;
(d) no Eurodollar Period shall extend beyond the Term Loan
Maturity Date; and
(e) any Eurodollar Period which would otherwise end on a day
which is not a Business Day shall be extended to the next succeeding Business
Day unless such next succeeding Business Day falls in another calendar month, in
which case such Eurodollar Period shall end on the next preceding Business Day.
"Event of Default" means an event set forth in Article 9.
"Federal Funds Effective Rate" means, for any period, a
fluctuating interest rate per annum equal for each day during such period to (a)
the weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is
not published for any day which is a Business Day, the average of the quotations
at approximately 10:00 a.m. San Francisco time for such day on such transactions
received by Agent from three (3) federal funds brokers of recognized standing
selected by it.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any governmental authority succeeding to its
functions.
"Funding Date" means the date of the funding of a Loan, including
the date a Loan is converted from a Revolving Loan to a Term Loan, and from a
Loan with one Rate Option to a Loan with another Rate Option.
"GAAP" means generally accepted accounting principles,
consistently applied.
"Governmental Agency" means (a) any international, foreign,
federal, state, county or municipal government or political subdivision thereof,
or (b) any governmental or quasi-governmental agency, authority, board, bureau,
commission, department, instrumentality or public body, or (c) any court or
administrative tribunal.
"Interbank Rate" means, with respect to each Eurodollar Period,
the rate per annum determined by the Agent two (2) Business Days prior to the
beginning of such Eurodollar Period, at which the Agent is offered deposits in
dollars by major banks in the interbank eurodollar market at or about 11:00 a.m.
London time, for delivery on the first day of such Eurodollar Period, in an
amount and period equal to the amount of the Eurodollar Loan to be outstanding
during such Eurodollar Period.
"Interbank Rate (Reserve Adjusted)" means, with respect to any
Eurodollar Loan for any Eurodollar Period, a rate per annum (rounded upwards, if
necessary, to the nearest one-hundredth of one percent (1/100 of 1%)) determined
pursuant to the following formula:
Interbank Rate (Reserve Adjusted) = Interbank Rate
---------------------------------
1-Eurocurrency Reserve Percentage
"Law" means collectively all international, foreign, federal,
state and local statutes, treaties, rules, regulations, directives, ordinances,
policies, orders and codes.
"Liabilities" means the aggregate amount of all liabilities of
Borrower that would, in accordance with GAAP, be required to be set forth on a
balance sheet as liabilities, excluding deferred taxes.
2
<PAGE> 8
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, lien or charge of any kind, whether voluntarily
incurred or arising by operation of law or otherwise, affecting any asset of
Borrower, including any agreement to give any of the foregoing, any conditional
sale or other title retention agreement, any lease in the nature of a security
interest, and/or the filing of or agreement to give any financing statement
(other than a financing statement which disclaims the existence of a security
interest and states that it is filed only as a precaution) under the Uniform
Commercial Code or comparable Law with respect to any asset of Borrower.
"Loan" means a Revolving Loan and/or Term Loan or, if the context
requires, the Revolving Loans and/or Term Loans.
"Loan Documents" means, collectively, this Agreement, the Notes,
and any and all other agreements, documents, instruments and certificates of any
type or nature heretofore or hereafter executed or delivered by Borrower to
Agent or Banks in any way relating to or in furtherance of this Agreement, in
each case either as originally executed or as the same may from time to time be
supplemented, modified, amended, restated or extended.
"Loan Request" means a written request by Borrower for a Loan,
substantially in the form of Exhibit B, duly executed on Borrower's behalf and
properly completed to provide all information required to be included therein.
"Maximum Amount" means, with respect to each Loan by each Bank at
any time, the maximum amount of interest which, under Applicable Law, such Bank
is permitted to charge with respect to such Loan.
"Net Income" has the meaning ascribed to it in accordance with
GAAP.
"Net Loss" has the meaning ascribed to it in accordance with
GAAP.
"Notes" means, collectively, the Revolving Notes and the Term
Notes.
"Obligations" means all present and future obligations of every
kind or nature of Borrower or at any time and from time to time owed to Agent or
Banks or any one or more of them, under any one or more of the Loan Documents,
whether due or to become due, matured or unmatured, liquidated or unliquidated,
or contingent or non-contingent, including obligations of performance as well as
obligations of payment, and including interest that accrues after the
commencement of any proceeding under any debtor relief law by or against
Borrower.
"Officer's Certificate" means a certificate substantially in the
form of Exhibit C, completed and duly executed by an Authorized Officer of
Borrower.
"Outside Debt" means all Debt other than Loans and Real Property
Debt.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Lien" has the meaning ascribed to it in Section 8.3.
"Person" means any individual or entity.
"Plan" means an employee pension or other benefit plan of
Borrower subject to Title IV of ERISA or to which Section 412 of the Internal
Revenue Code of 1954, as amended, applies, other than Borrower's Employee Stock
Ownership Plan as amended in existence as of the date of this Agreement.
"Pro Rata Share" means, with respect to each Bank, the percentage
set forth next to that Bank's name as follows:
<TABLE>
<CAPTION>
Bank Pro Rata Share
---- --------------
<S> <C>
Union Bank of California, N.A. 34%
Bank of America NT&SA 33%
Fleet Bank, N.A. 33%
</TABLE>
"Rate Option" means one of the interest rate options available to
Borrower for the Loans as provided in Section 2.3.2, which are the Interbank
Rate (Reserve Adjusted) or Reference Rate.
"Real Property Debt" means Debt which is secured by any or all of
Borrower's real property holdings.
"Reference Rate" means, at any time, Agent's floating commercial
loan rate then most recently announced by Agent at San Francisco, California as
its prime or reference rate. Each change in the Reference Rate shall take effect
hereunder on the effective date of the change in such Reference Rate. The
Reference Rate
3
<PAGE> 9
is used as a reference point for pricing certain loans. Agent may price its
loans at, above or below the Reference Rate.
"Reference Rate Loan" means any Loan which bears interest at a
rate determined by reference to the Reference Rate.
"Regulation D" means Regulation D, as at any time amended, of the
Federal Reserve System, or any other regulation in substance substituted
therefor.
"Required Banks" means Banks having Pro Rata Shares at least
sixty-six and two-thirds percent (66-2/3%) of the Commitment or, if the
Commitment has been terminated, Banks holding at least sixty-six and two-thirds
percent (66-2/3%) of the aggregate principal amount of outstanding Loans.
"Revolving Loan Facility" means the credit accommodation provided
to Borrower as more fully described in Section 2.1.
"Revolving Loan" means an extension of credit under the Revolving
Credit Facility in accordance with Section 2.1.
"Revolving Loan Commitment Period" means the period from and
including the date of this Agreement to, but not including, the Revolving Loan
Termination Date.
"Revolving Loan Termination Date" means the earlier of (a) the
Conversion Date, or (b) the date Banks may terminate making Loans or accelerate
the due date of the Revolving Loans pursuant to the rights of Banks under
Article 9.
"Revolving Note" means each promissory note payable to a Bank
evidencing the Revolving Loans, substantially in the form set forth in Exhibit
D, with appropriate insertions.
"Subsidiary" means any corporation at least the majority of whose
securities having ordinary voting power for the election of directors (other
than securities having such power only by reason of the happening of a
contingency) are at the time owned by Borrower and/or one or more Subsidiaries.
"Tangible Net Worth" means, with respect to Borrower, its assets
as determined in accordance with GAAP, minus (a) Liabilities and (b) all
intangible assets of Borrower, including, without limitation (i) all assets
which should be classified as intangible assets (such as goodwill, patents,
trademarks, copyrights, franchises, and deferred charges (including unamortized
debt discount and research and development costs)), (ii) treasury stock, (iii)
cash held in a sinking or other similar fund established for the purpose of
redemption or other retirement of capital stock, (iv) to the extent not already
deducted from total assets, reserves for depreciation, depletion, obsolescence
or amortization of properties and other reserves or appropriations of retained
earnings which have been or should be established in connection with the
business conducted by Borrower, and (v) any revaluation or other write-up in
book value of assets subsequent to the fiscal year of Borrower last ended at the
date of this Agreement.
"Term Loan Facility" means the credit accommodation provided to
Borrower as more fully described in Section 2.2.
"Term Loan" means an extension of credit under the Term Loan
Facility in accordance with Section 2.2 of this Agreement.
"Term Loan Maturity Date" means the earlier of (a) the second
year anniversary of the Conversion Date, or (b) the date to which the due date
of the Term Loan is accelerated pursuant to the rights of Banks under Article 9.
"Term Note" means each promissory note payable to a Bank
evidencing the Term Loans, substantially in the form set forth in Exhibit E,
with appropriate insertions.
1.2 Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed, and all financial data required to be
submitted by this Agreement shall be prepared, in conformity with GAAP except as
otherwise specifically prescribed herein. In the event that GAAP changes during
the term of this Agreement such that the financial covenants contained herein
would then be calculated in a different manner or with different components,
Borrower and Banks agree to amend this Agreement in such respects as are
necessary to conform those covenants as criteria for evaluating Borrower's
financial condition to substantially the same criteria as were effective prior
to such change in GAAP.
4
<PAGE> 10
1.3 Exhibits and Schedules. All Exhibits and Schedules to this
Agreement, either as originally existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this reference.
1.4 Miscellaneous Terms. All terms defined in this Agreement shall be
applicable to both the singular and plural forms thereof, as the context
requires. The term "or" is disjunctive; the term "and" is conjunctive. The term
"shall" is mandatory; the term "may" is permissive. The term "including" is by
way of example and not limitation. Terms not otherwise expressly defined herein
shall have the meaning ascribed to them in the California Uniform Commercial
Code, if applicable.
ARTICLE 2
THE CREDITS
2.1. Revolving Loan Facility.
2.1.1. General. Subject to the terms and conditions of this
Agreement, at any time and from time to time, during the Revolving Loan
Commitment Period, each Bank severally, and not jointly, according to its Pro
Rata Share, agrees to make Revolving Loans to Borrower in such amounts as
Borrower may request that do not exceed in the aggregate at any one time
outstanding the amount of such Bank's Pro Rata Share of the Commitment. Subject
to the terms and conditions of this Agreement, Borrower may borrow, repay and
reborrow, in whole or in part, under the Revolving Credit Facility at any time
prior to the Revolving Loan Termination Date. The Revolving Loans and all
amounts owing with respect thereto shall be due and payable on the Revolving
Loan Termination Date. No Bank shall be responsible for any default by any other
Bank in such other Bank's obligation to make a Revolving Loan hereunder, nor
shall the Pro Rata Share of any Bank be increased or decreased as a result of
the default by any other Bank in such other Bank's obligation to make a
Revolving Loan hereunder.
2.1.2. Revolving Notes. The Revolving Loans shall be evidenced by
a Revolving Note for each Bank in the principal amount of such Bank's Pro Rata
Share of the Commitment. Each Bank is hereby authorized to record the amount and
type of each Revolving Loan made by such Bank and the date and the amount of
each payment or prepayment of principal thereof on the schedule annexed to its
Revolving Note, or on its books and records, and any such recordation shall, in
the absence of manifest error, constitute prima facie evidence of the accuracy
of the information so recorded; provided, however, that failure by a Bank to
make any such recordation on its Revolving Note or on its books and records
shall not affect any of the Obligations of Borrower under such Revolving Note or
this Agreement.
2.2. Term Loan Facility.
2.2.1. General. Subject to the terms and conditions of this
Agreement, each Bank severally, and not jointly, agrees to make a Term Loan to
Borrower on the Conversion Date in a principal amount equal to such Bank's Pro
Rata Share of the aggregate principal amount of Revolving Loans outstanding on
the Conversion Date (the "Term Loans"); provided, however, that the aggregate
Term Loans shall not exceed the Commitment. Each Bank shall apply the proceeds
of the Term Loans to the concurrent payment in full of the principal amount of
its Revolving Loans outstanding on the Conversion Date. No Bank shall be
responsible for any default by any other Bank in such other Bank's obligation to
make a Term Loan hereunder, nor shall the Pro Rata Share of any Bank be
increased or decreased as a result of the default by any other Bank in such
other Bank's obligation to make a Term Loan hereunder.
2.2.2. Term Notes. The Term Loans shall be evidenced by a Term
Note for each Bank in the principal amount of such Bank's Term Loan. Upon
receipt of its Term Note, each Bank shall deliver to Borrower its Revolving
Note, marked "CANCELLED." Each Bank is hereby authorized to record the amount of
each payment or prepayment of principal thereof on the schedule annexed to its
Term Note, or on its books and records, and any such recordation shall, in the
absence of manifest error, constitute prima facie evidence of the accuracy of
the information so recorded, provided that failure by a Bank to make any such
recordation on its Term Note or on its books and records shall not affect any of
the Obligations of Borrower under such Term Note or this Agreement.
5
<PAGE> 11
2.3 Interest on Loans. The Loans shall bear interest at a rate per annum
equal to the lesser of (a) the sum of (i) the Applicable Margin plus (ii) the
Rate Option(s) specified by Borrower pursuant to a Loan Request, and (b) the
Maximum Amount; provided, however, that interest on overdue payments shall bear
interest in accordance with Section 2.3.3.
2.3.1. General. Interest on the outstanding principal balance of
the Loans shall accrue daily from the date of each Loan until payment in full.
2.3.2. Rate Options and Applicable Margins. The Rate Options and
Applicable Margins for Loans shall be determined by the matrix set forth below.
<TABLE>
<S> <C> <C>
Revolving Loans:
Loan Rate Option Applicable Margin
Reference Rate Loans Reference Rate 0.00%
Eurodollar Loans Interbank Rate (Reserve Adjusted) 0.70%
Term Loans:
Loan Rate Option Applicable Margin
Reference Rate Loans Reference Rate 0.25%
Eurodollar Loans Interbank Rate (Reserve Adjusted) 0.95%
</TABLE>
2.3.3. Interest on Overdue Payments. Overdue payments of
principal (and of interest to the extent permitted by law) on the Loans shall
bear interest at a fluctuating rate per annum equal to the lesser of (i) the
Reference Rate plus two percent (2%) or (ii) the Maximum Amount until such
unpaid amount has been paid in full (whether before or after judgment). All
interest provided for in this Section 2.3.3 shall be compounded monthly and
payable on demand.
2.3.4. Computation. Interest shall be computed for the actual
number of days elapsed on the basis of a year consisting of 360 days from, and
including, the first day of a Loan, but excluding, the last day thereof.
2.4 Procedure for Loans.
2.4.1 General. Borrower shall deliver to Agent an irrevocable
Loan Request (i) no later than 10:00 a.m. San Francisco time on the proposed
Funding Date of any Reference Rate Loan, and (ii) at least three (3) Business
Days prior to the Revolving Loan Termination Date or the proposed Funding Date
of any Eurodollar Loan. Each Loan Request shall specify:
(a) the Funding Date of such Loan, which shall be a
Business Day;
(b) the amount of such Loan;
(c) the Rate Option(s) selected for such Loan; and
(d) if applicable, the Eurodollar Period(s) therefor.
If Borrower shall fail to specify a Rate Option, such Loan shall be made as a
Reference Rate Loan. If Borrower shall fail to specify a Eurodollar Period with
respect to a proposed Eurodollar Loan , Borrower shall be deemed to have elected
a Eurodollar Period of one (1) month's duration.
2.4.2. Alternate Procedure. Alternatively, on any Business Day,
an Authorized Officer , may give Agent telephonic notice of the proposed Loan
within the notice periods, and specifying the information, required in Section
2.4.1, provided that (a) an Authorized Officer may designate any other person to
provide such telephonic notice for a specific period of time by delivering to
Agent by telecopy a copy of such person's authorization to give telephonic
notice of the proposed Loan within the notice periods, which authorization must
be signed by an Authorized Officer, and (b) such telephonic notice of the
proposed Loan shall be confirmed in writing by delivery to Agent of a Loan
Request signed by an Authorized Officer no later than the third day after such
telephonic notice. All such telephonic notices shall be irrevocable. Neither
Agent nor Bank shall incur any liability to Borrower in acting upon any such
telephonic notice that Agent believes in good faith to have been given by a
person duly authorized to give such notice on behalf of Borrower or for
otherwise acting in good faith under this Section 2.4.2.
2.4.3. Extensions and Conversions. Subject to the terms and
conditions of this Agreement, Borrower may continue a Rate Option for any
Eurodollar Loan, or convert any Loan into a different Rate Option by complying
with the provisions of Section 2.4.1 or 2.4.2 in the same manner as if Borrower
were
6
<PAGE> 12
requesting a new Loan; provided, however, that Eurodollar Loans may be converted
without penalty only on the last day of the applicable Eurodollar Period.
2.4.4. Minimum Amount of Revolving Loans. Each Loan Request for
Revolving Loans shall be in a minimum amount of One Hundred Twenty-Five Thousand
Dollars ($125,000) and integral multiples of Twenty-Five Thousand Dollars
($25,000) in excess of that amount.
2.4.5. Minimum Payment of Revolving Loans. The Company shall have
the right to prepay the Revolving Loans in whole or in part in minimum principal
amounts equal to at least Twenty-Five Thousand Dollars ($25,000) and integral
multiples thereof.
2.5. Funding of Loans.
(a) Promptly after receipt of a Loan Request (or telephonic
notice thereof), Agent shall notify each Bank of the amount of the proposed
Loan, the Pro Rata Share of such Bank, and the Rate Option and (if applicable)
Eurodollar Period selected by Borrower therefor.
(b) In the case of Revolving Loans, each Bank shall make the
amount of its Loan available to Agent, in same day funds, at the office of Agent
specified on the signature pages of this Agreement no later than noon San
Francisco time on the Funding Date. Agent shall make the proceeds of such Loans
available to Borrower on such Funding Date by causing an amount of same day
funds equal to the proceeds of all such Loans received by Agent to be credited
to Borrower's Commercial Account no later than 2:00 p.m. San Francisco time on
the Funding Date.
(c) In the case of Term Loans, each Bank shall fund its Term Loan
by applying the proceeds thereof to the payment of the aggregate principal
amount of all Revolving Loans of such Bank outstanding on the Conversion Date.
2.6. Non-Receipt of Funds by Agent. Unless the Borrower or a Bank, as
the case may be, notifies Agent prior to the date on which it is scheduled to
make payment to Agent of (a) in the case of a Bank, the proceeds of a Loan or
(b) in the case of the Borrower, a payment of principal, interest or fees to
Agent for the account of Banks, that it does not intend to make such payment,
Agent may assume that such payment has been made. Agent may, but shall not be
obligated to, make the amount of such payment available to the intended
recipient in reliance upon such assumption. If such Bank or the Borrower, as the
case may be, has not in fact made such payment to Agent, the recipient of such
payment shall, on demand by Agent, repay to Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date such amount was so made available by Agent until the date
Agent recovers such amount at a rate per annum equal to (a) in the case of
repayment by a Bank, the Federal Funds Effective Rate for such day or (b) in the
case of repayment by the Borrower, the interest rate applicable to the relevant
Loan.
2.7. Reduction or Termination of the Commitment. Upon not less than
three Business Days' notice to the Agent at any time, and from time to time,
Borrower may, at any time permanently reduce the amount of the Commitment in
increments of One Million Dollars ($1,000,000) or integral multiples thereof;
provided, however, that the Commitment may not be reduced to an amount less than
the amount of the then outstanding Loans. Except as expressly provided in this
Section 2.7, the Commitment may not be adjusted by Borrower.
ARTICLE 3
PAYMENTS AND FEES
3.1. Revolving Loans.
3.1.1. Interest. Interest accrued on each Revolving Loan shall be
payable in arrears (a) if a Reference Rate Loan, monthly on the last Business
Day of each calendar month, or (b) if a Eurodollar Loan, on the last day of the
Eurodollar Period and, if such Eurodollar Period is in excess of three (3)
months, each three (3) month anniversary of the commencement of such Eurodollar
Period. Such interest payments shall commence on the first such day after the
Effective Date and continue through the Revolving Loan Termination Date, on
which date all accrued and unpaid interest shall be due and payable in full.
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3.1.2. Principal. If not sooner paid, the principal indebtedness
evidenced by the Revolving Notes shall be due and payable as follows:
(a) the principal amount of each Eurodollar Loan shall be
converted, extended or due and payable on the last day of the Eurodollar Period
for such Loan;
(b) the amount, if any, by which the principal
indebtedness evidenced by the Revolving Notes at any time exceeds the Commitment
shall be due and payable immediately; and
(c) in any event, the principal indebtedness evidenced by
the Revolving Notes shall be due and payable on the Revolving Loan Termination
Date.
3.2. Term Loans.
3.2.1. Interest. Interest accrued on each Term Loan shall be
payable in arrears (a) if a Reference Rate Loan, monthly on the last Business
Day of each calendar month, and (b) if a Eurodollar Loan, on the last day of the
Eurodollar Period and, if such Eurodollar Period is in excess of three (3)
months, each three (3) month anniversary of the commencement of such Eurodollar
Period. Such payments shall commence on the first such day after the Conversion
Date and continue to and including the Term Loan Maturity Date, on which date
all accrued and unpaid interest shall be due and payable in full.
3.2.2. Principal. The principal indebtedness evidenced by the
Term Notes shall be due and payable in eight (8) equal consecutive quarterly
installments on the last Business Day of each March, June, September and
December, commencing on the first such date following the Conversion Date, and
continuing through the Term Loan Maturity Date; provided, however, that the last
such installment shall be an amount sufficient to repay in full the Term Loans
and all other amounts owed under this Agreement, including, without limitation,
accrued but unpaid interest.
3.3. Optional Repayment. The Term Loans may, at any time and from time
to time, be paid or prepaid in whole or in part without premium or penalty,
except that (a) any partial prepayment shall be an integral multiple of Two
Hundred Fifty Thousand Dollars ($250,000), (b) Agent shall have received written
notice of any prepayment at least three (3) Business Days before the date of
prepayment, which notice shall identify the date and amount of the prepayment
and the Loan(s) being prepaid and shall be irrevocable, (c) each prepayment of
principal shall be accompanied by payment of interest accrued through the date
of payment on the amount of principal paid, and (d) with respect to both
Revolving Loans and Term Loans, any prepayment of all or any part of any
Eurodollar Loan on a day other than the last day of the applicable Eurodollar
Period shall be subject to Section 4.1.4, as applicable, and Borrower shall pay
Banks all amounts due as therein provided. All prepayments shall be applied to
principal installments in the inverse order of their maturities.
3.4. Mandatory Prepayments. If at any time the aggregate principal
amount of the Loans outstanding exceeds the Commitment or the Adjusted Borrowing
Base, as then in effect, Borrower shall immediately upon demand by Agent prepay
an amount equal to such excess. All prepayments shall be applied to principal
installments in the inverse order of their maturities. The provisions of Section
3.3(d) shall also apply to mandatory prepayments pursuant to this Section 3.4.
3.5. Payments. All payments hereunder shall be in Dollars and in
immediately available funds and shall be made prior to 10:00 a.m. San Francisco
time on the date of the scheduled payment to Agent at its office set forth on
the signature pages of this Agreement. All payments received after 10:00 a.m.
San Francisco time shall be considered to have been received the next Business
Day. Any payment which falls on a non-Business Day shall be rescheduled to the
next succeeding Business Day and interest shall continue to accrue to such
Business Day.
3.6. Commitment Fee. Borrower shall pay to Agent, for distribution to
each Bank in proportion to that Bank's Pro Rata Share, commitment fees (the
"Commitment Fee") at the rate of two-tenths of one percent (0.20%) per annum of
the average daily unused Commitment, computed for the actual number of days
elapsed on the basis of a year consisting of 365 days for the period from and
including the date of this Agreement to and including the Conversion Date,
payable in arrears (i) in quarterly installments on the last Business Day of
each March, June September and December commencing on the first such date to
occur after the Effective Date, and
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(ii) on the Conversion Date or the date on which the Commitment is terminated in
full pursuant to Section 2.7 or Section 9.2,
3.7. Agent's Fee. Borrower shall pay Agent, for Agent's own account, an
agent fee in an amount and on the terms as mutually agreed between Agent and
Borrower.
ARTICLE 4
ADDITIONAL PROVISIONS RELATING TO
EURODOLLAR LOANS AND CAPITAL ADEQUACY
4.1. Eurodollar Loans.
4.1.1. Eurodollar Increased Cost. If, as a result of the adoption
or application of any Law, or any change therein, or in the interpretation,
administration or application thereof, including Regulation D, or compliance by
any Bank with any request or directive (whether or not having the force of law)
from any court or Governmental Agency, central bank or comparable authority or
instrumentality:
(a) the basis of taxation of payments to any Bank of the
principal of or interest on any Eurodollar Loan (other than income, franchise or
similar taxes imposed on the gross or net income of a Bank) is changed;
(b) any reserve, special deposit, minimum capital, capital
ratio or similar requirements against assets of, deposits with or for the
account of, credit extended by, or Commitment of, any Bank is imposed, modified
or deemed applicable; or
(c) any other condition affecting this Agreement, the
Eurodollar Loans or Commitment is imposed on any Bank or the interbank
eurodollar market;
and any Bank determines that, by reason thereof, the cost to such Bank of making
or maintaining any of the Eurodollar Loans is increased, or the amount of any
sum receivable by such Bank hereunder in respect of any of the Eurodollar Loans
is reduced; then, Borrower shall pay to such Bank within two (2) Business Days
after demand (which demand shall be accompanied by a statement setting forth the
basis for the calculation thereof but only to the extent not theretofore
provided to Borrower, a copy of which shall be delivered to Agent) such
additional amount or amounts as will compensate such Bank for such additional
cost or reduction (provided such amount has not been compensated for in the
calculation of the Eurocurrency Reserve Percentage). Determinations by a Bank
for purposes of this Section 4.1.1 of the additional amounts required to
compensate such Bank in respect of the foregoing circumstances shall be
conclusive, absent manifest error.
4.1.2. Eurodollar Deposits Unavailable or Interest Rate
Unascertainable. If any Bank determines (which determination shall be conclusive
and binding on Borrower) that deposits of the necessary amount for a Eurodollar
Period are not available to such Bank in the interbank Eurodollar market or
that, by reason of circumstances affecting such market, adequate and reasonable
means do not exist for ascertaining the Interbank Rate applicable to such
Eurodollar Period, such Bank shall promptly give notice of such determination to
Borrower and, thereupon, any Loan Request with respect to new Eurodollar Loan(s)
previously given by Borrower and not yet borrowed or converted shall be deemed a
Loan Request to make a Reference Rate Loan in the amount of the requested
Eurodollar Loan(s) and Borrower shall be obligated to convert any outstanding
Eurodollar Loan(s) to Reference Rate Loans on the last day of the then current
Eurodollar Period(s) with respect thereto.
4.1.3. Changes in Law Affecting Eurodollar Loans. If at any time
after the date of this Agreement due to any new Law, or any interpretation
thereof by any Governmental Agency or other regulatory authority charged with
the administration thereof, or for any other reason arising subsequent to the
date hereof, it shall become unlawful for any Bank to fund any Eurodollar Loan
which it is committed to make hereunder, the obligation of such Bank to provide
Eurodollar Loans shall, upon the happening of such event, forthwith be suspended
for the duration of such illegality. If any such change shall make it unlawful
for any Bank to continue Eurodollar Loans previously made by it hereunder, such
Bank shall, upon the happening of such event, notify
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Borrower stating the reasons therefor, and Borrower shall, on the earlier of (a)
the last day of the then current Eurodollar Period or (b) if required by such
Law or interpretation, on such date as shall be specified in such notice,
convert such unlawful Eurodollar Loans to Reference Rate Loans.
4.1.4. Eurodollar Loan Indemnity. Borrower agrees to indemnify
each Bank and shall hold each Bank harmless from any loss, cost, damage or
expense which such Bank may sustain or incur as a consequence of:
(a) any failure by Borrower to borrow, continue or convert
a Eurodollar Loan on a date specified in a Loan Request;
(b) failure by Borrower to make any prepayment of a
Eurodollar Loan, after Borrower has given a notice in accordance with Section
3.3(b);
(c) a payment, prepayment or conversion of a Eurodollar
Loan on a day which is not the last day of the Eurodollar Period with respect
thereto;
(d) the Revolving Loans not being converted to the Term
Loans on the Conversion Date, to the extent Borrower shall have theretofore
delivered a Loan Request selecting a Eurodollar Loan; and
(e) the acceleration of the obligations pursuant to
Section 9.2, in each case including any such loss, cost, damage or expense
arising from interest, fees or other charges payable by such Bank to lenders of
funds obtained by it in order to make or maintain such Eurodollar Loan
hereunder.
Borrower shall pay within two (2) Business Days after demand (which demand shall
be accompanied by a statement setting forth such Bank's calculation thereof, a
copy of which shall be delivered to Agent) the amount due hereunder. Such
statement and calculation shall, in the absence of manifest error, be
conclusive. This covenant shall survive termination of this Agreement and
payment in full of the Notes.
4.2. Discretion as to Manner of Funding. Notwithstanding any provision
of this Agreement to the contrary, each Bank shall be entitled to fund and
maintain its funding of all or any part of the Eurodollar Loans in any manner it
may elect, it being understood, however, that for the purposes of this Agreement
all determinations hereunder shall be made as if each Bank had actually funded
and maintained each Eurodollar Loan during the Eurodollar Period for such
Eurodollar Loan through the purchase of deposits having a maturity corresponding
to the last day of such Eurodollar Period and bearing an interest rate equal to
the Interbank Rate for such Eurodollar Period. Any Bank may, if it so elects,
fulfill any commitment to make Eurodollar Loans by causing a foreign branch or
affiliate to make or continue such Eurodollar Loans at no additional cost to
Borrower, provided, however, that in such event such Loans shall be deemed for
the purposes of this Agreement to have been made by such Bank, and the
obligation of Borrower to repay such Loans shall nevertheless be to such Bank
and shall be deemed held by such Bank, to the extent of such Loans, for the
account of such branch or affiliate.
4.3. Capital Adequacy. If after the date hereof, the adoption or
application of any Law regarding capital adequacy of general applicability, or
any change therein, or any change in the interpretation or administration
thereof by any Governmental Agency, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank
with any request or directive regarding capital adequacy of general
applicability (whether or not having the force of law) of any such Governmental
Agency, central bank or comparable agency, has or would have the effect, of
reducing the rate of return on such Bank's capital to a level below that which
such Bank could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's policies with respect to capital
adequacy) by an amount deemed by such Bank to be material, then such Bank may
increase the applicable interest rate(s) set forth in Section 2.3.2 above for
Loans from such Bank to compensate such Bank for such reduction in its rate of
return on capital. Such increase shall be effective thirty (30) days after
written notice thereof to Borrower; and such notice shall be accompanied by such
Bank's statement setting forth its calculations thereof, which shall, in the
absence of manifest error, be conclusive.
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ARTICLE 5
CONDITIONS PRECEDENT
5.1. Conditions to Effectiveness of this Agreement. The amendment and
restatement of the Existing Agreement accomplished by this Agreement shall not
become effective until the following conditions precedent have been satisfied:
(a) Agent shall have received the following on or before the
Effective Date, each dated as of the Effective Date or such earlier date as
shall be acceptable to Agent, in form and substance satisfactory to Agent and
(except for the Revolving Notes) in sufficient copies for each Bank.
(i) Counterparts of this Agreement duly executed by
Borrower, Agent and each of the Banks.
(ii) Revolving Notes, duly executed by Borrower, payable
to the order of each Bank.
(iii)Copies of the Articles of Incorporation and By-laws
of Borrower, together with all amendments thereto, to the extent such Articles
or By-laws have changed, or amendments thereto have been added, since such
documents were delivered to Agent in connection with the Existing Agreement.
(iv) Copies, certified by the Secretary or an Assistant
Secretary of Borrower, of its Board of Directors' resolutions (and resolutions
of other bodies, if any are deemed necessary by counsel for Agent) authorizing
Borrower to execute, deliver and perform this Agreement and the other Loan
Documents executed or to be executed by Borrower and to consummate the
transactions contemplated hereby and thereby.
(v) An incumbency certificate, certified by the Secretary
or an Assistant Secretary of Borrower, which shall identify by name and title
and bear the specimen signatures of the officers of Borrower authorized on
behalf of Borrower to execute, deliver and perform this Agreement and the other
Loan Documents executed or to be executed by Borrower and to consummate the
transactions contemplated hereby and thereby.
(vi) A duly completed Officer's Certificate.
(vii)Such other documents as Agent or its counsel may
reasonably request.
(b) The representations and warranties of Borrower contained in
Article 6 hereof and in the Officer's Certificate are true and correct as of the
Effective Date.
5.2. Each Loan. Banks shall not be required to make any Loan, or convert
or continue any Loan unless on the applicable Funding Date:
(a) There exists no Default or Event of Default.
(b) The representations and warranties contained in Article 6 are
true and correct as of such Funding Date, except to the extent that changes in
the facts and conditions on which such representations and warranties are based
are required or permitted under this Agreement.
(c) In the case of the Term Loans, Borrower shall have furnished
to each Bank the Term Notes, duly executed by Borrower, payable to the order of
each of Bank.
(d) Borrower shall have furnished such other documents as Agent
may have reasonably requested.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BORROWER
In order to induce Banks to enter into this Agreement, Borrower makes
the following representations and warranties which shall survive the execution
and delivery of this Agreement and the Notes, and the making of the Loans:
6.1. Due Organization. Borrower is a duly organized and validly existing
corporation in good standing under the laws of the jurisdiction on which it is
incorporated, and is duly qualified to conduct business as a foreign corporation
in all jurisdictions where the failure to do so would have a material or adverse
effect on its business.
6.2. Subsidiaries. Borrower has no Subsidiaries as of the date of this
Agreement, except Enviroplex, Inc.
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6.3. Requisite Power. Borrower has all requisite corporate powers and
all governmental licenses, authorizations, consents and approvals necessary to
own and operate its properties and to carry on its business as now conducted and
as proposed to be conducted, other than such governmental licenses,
authorizations, consents and approvals the absence of which will not materially
or adversely effect the business, operations or conditions, financial or
otherwise, of Borrower. Borrower has all requisite corporate powers to borrow
the sums provided for in this Agreement, and to execute and deliver this
Agreement and the Notes to which Borrower is required hereunder to be a party.
The execution, delivery and performance of this Agreement and the Notes to which
Borrower is required hereunder to be a party have been duly authorized by
Borrower's Board of Directors and do not require any consent or approval of the
stockholders of Borrower.
6.4. Binding Agreement. This Agreement has been duly executed and
delivered by Borrower and constitutes, and each of the Notes when executed and
delivered by Borrower will constitute, a legal, valid and binding obligation of
Borrower, enforceable against it in accordance with its terms, except as the
enforceability thereof may be affected by (a) bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally, (b) the
availability of certain equitable remedies or limitations imposed by certain
equitable principles of general applicability and (c) limitations based on
statutes or on public policy limiting a Person's right to waive the benefits of
statutory provisions or common law rights.
6.5. Other Agreements. The execution, delivery and performance of this
Agreement and the Notes will not (a) violate any provision of law or regulation
(including, without limitation, Regulations X and U of the Federal Reserve
Board), or any order of any governmental authority, court, arbitration board or
tribunal or Articles of Incorporation or By-laws of Borrower, other than such
violations which will not materially and adversely affect the business,
operations or conditions, financial or otherwise, of Borrower or (b) result in
the breach of, constitute a default under, contravene any provisions of, or
result in the creation of any security interest, lien, charge or encumbrance
upon any of the property or assets of Borrower pursuant to any indenture or
agreement to which Borrower or any of its properties is bound.
6.6. Litigation. There is no litigation, investigation or proceeding in
any court or before any arbitrator or governmental regulatory commission, board,
administrative agency or other governmental authority pending, or, to the
knowledge of Borrower, threatened against or affecting Borrower or any of its
properties, which (a) may affect the performance by Borrower of this Agreement
or the Notes or any of the transactions contemplated hereby or thereby and (b)
if adversely determined would have a material adverse effect on the business,
operations or condition, financial or otherwise, of Borrower.
6.7. Consents. No consent, license, permit, approval or authorization
of, exemption by, notice or report to, or registration, filing or declaration
with, any governmental authority or agency is required in connection with the
execution, delivery and performance by Borrower of this Agreement or the Notes
or the transactions contemplated hereby or thereby (except for standard
disclosure requirements of federal securities laws and regulations).
6.8. Financials. The audited consolidated financial statement of
Borrower as of December 31, 1998 for the fiscal year ended on such date and the
unaudited consolidated financial statement of Borrower as of March 31, 1999 for
the three (3) months ended on such date, copies of which (including the amended
versions of both financial statements which are in process of being filed with
the Securities and Exchange Commission) have been heretofore delivered to the
Banks, are true, complete and correct and fairly present the financial position
of Borrower as of such dates and the results of its operations and cash flow for
the periods then ended. The aforementioned financial statements have been
prepared in accordance with GAAP applied on a consistent basis. There has been
no material adverse change in the business, operations or condition, financial
or otherwise, of Borrower, since the date of such financial statements. As of
the date thereof, Borrower does not have any material liabilities, direct or
contingent, except as disclosed in the aforementioned financial statements.
6.9. Use of Proceeds. The proceeds of the Loans shall be used by
Borrower for general corporate purposes.
6.10. Regulation U. Borrower is not engaged principally, or as one of
its principal activities in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations G, T, U
or X of the Federal Reserve Board). No part of the proceeds of the Loans will be
used by
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Borrower to purchase or carry any such margin stock or to extend credit to
others for the purpose of purchasing or carrying any such margin stock.
6.11. ERISA. Borrower is in compliance in all material aspects with all
applicable provisions of ERISA and the regulations and published interpretations
thereunder. If Borrower has a Plan, no Reportable Event (as defined in ERISA)
has occurred with respect to any such Plan nor are there any unfunded vested
liabilities thereunder; Borrower has met its minimum funding requirements under
ERISA with respect to each such Plan and has not incurred any material liability
to the PBGC in connection with any such Plan.
6.12. Tax Returns. All tax returns required to be filed by Borrower
which are now due in any jurisdiction have been filed; all taxes, assessments,
fees and other governmental charges upon Borrower, or upon any of its
properties, incomes or franchises, which are due and payable have been paid, or
adequate reserve has been provided, in Borrower's financial statements, for
payment thereof.
6.13. Licenses and Trademarks. Borrower has all patents, licenses,
trademarks, trademark rights, trade names, trade name rights, copyrights,
permits and franchises which are required in order for it to conduct its
business and to operate its properties as now or proposed to be conducted
without known conflict with the rights of others.
6.14. Burdensome Agreement. Borrower is not a party to any unusual or
unduly burdensome agreement or undertaking, nor is it subject to any unusual or
unduly burdensome court order, court writ, injunction or decree of any court or
governmental instrumentality, domestic or foreign, which materially and
adversely affects its business or property, assets, operations or condition,
financial or otherwise.
6.15. Title and Lien. Except for Permitted Liens, the real property and
all other property and assets of Borrower reflected in the audited consolidated
financial statement of Borrower dated December 31, 1998 referenced in Section
6.8, are free from all liens, charges, security interests and encumbrances of
any nature whatsoever; and, except as aforesaid, Borrower has a good and
marketable title in fee simple to all such real property and good and marketable
title to all other such property and assets, except those disposed of in the
ordinary course of business.
6.16. Existing Defaults. Borrower is not in default under any material
term of any mortgage, indenture, deed of trust or any other material agreement
to which it is a party or by which it or any of its properties may be bound.
Borrower is not in violation of any Law to which it or any of its properties is
subject, other than such Laws the violation of which will not materially and
adversely effect the business, operations or conditions, financial or otherwise,
of Borrower.
6.17. Other Contracts. Borrower is not in default in any material
respect under the provision of any contract or commitment with a party which
does not contemplate completion of performance by either party within one year,
and to the best of Borrower's knowledge, there are no facts or conditions which,
with the giving of notice or passage of time (or both), would result in such a
default under any provision of any such contract or commitment which would,
individually or in the aggregate, materially and adversely affect Borrower's
business or financial position.
6.18. Leases. Borrower enjoys peaceful and undisturbed possession under
all the leases to which it is a party or under which it is a lessee. All such
leases and all leases under which Borrower is lessor are legal, valid and
binding obligations of lessor and lessee and are enforceable in accordance with
their terms, except as the enforceability thereof may be affected by (a)
bankruptcy, insolvency or similar laws affecting the enforcement of creditor's
rights generally, (b) the availability of certain equitable principles of
general applicability, and (c) limitations based on statutes or on public policy
limiting a Person's right to waive the benefits of statutory provisions or
common law rights. No default exists under any such leases under which Borrower
is lessee and Borrower is not in default under any such leases under which it is
lessor.
6.19. Fire and Explosion. Neither the business nor the properties or
operations of Borrower are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy or other casualty (whether or not covered by
insurance), materially and adversely affecting such business or properties or
operations.
6.20. No Default. No Default or Event of Default has occurred and is
continuing.
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ARTICLE 7
AFFIRMATIVE COVENANTS
Borrower covenants that, so long as any Obligations remain unpaid or not
fully performed or any Commitment remains unused in whole or in part, unless the
Required Banks shall otherwise consent in writing:
7.1. Inspection. Borrower shall maintain adequate books and accounts
established and admitted in accordance with GAAP and permit Banks by their
representatives and agents at least on an annual basis to inspect any of the
properties, operating procedures, corporate books and financial records of
Borrower, to examine and make copies of the books of account and other financial
records of Borrower, and to discuss the affairs, finances and accounts of
Borrower with, and to be advised of the same by, Borrower's officers at such
reasonable times and intervals as Banks may designate by reasonable prior notice
to Borrower.
7.2. Proceeds. Borrower shall use the proceeds of the Loans for general
corporate purposes.
7.3. Financial Statements. Borrower will furnish to Agent:
(a) within forty-five (45) days after the close of each of the
first three fiscal quarters of each fiscal year, a copy of the consolidated
balance sheet of Borrower and the related statement of consolidated income of
Borrower for such fiscal quarter and for the period from the beginning of the
fiscal year to the end of such fiscal quarter, and the consolidated cash flow
statement of Borrower from the beginning of the fiscal year to the end of such
fiscal quarter, all in reasonable detail, subject to year-end audit adjustments
and certified by an Authorized Officer to be complete and correct in all
material respects and to fairly present the consolidated financial position of
Borrower at the dates indicated and the results of its operations and cash flow
for the periods indicated;
(b) within ninety (90) days after the close of each fiscal year.
(i) a copy of the annual audit report of Borrower for such fiscal year including
therein a consolidated balance sheet and related statements of consolidated
income, consolidated shareholders equity, and consolidated cash flow, audited by
Arthur Andersen, LLP or another independent certified public accountant
acceptable to the Banks, and certified by such accountants to have been prepared
in accordance with GAAP consistently applied, together with (ii) a certificate
of such accounting firm, stating that in the course of the regular audit of the
business of Borrower, which audit was conducted by such accounting firm in
accordance with generally accepted auditing standards, such accounting firm has
obtained no knowledge of an Event of Default (insofar as it pertains to
accounting matters), or an event which with notice or the passage of time or
both would constitute an Event of Default (insofar as it pertains to accounting
matters), has occurred and is continuing, or if, in the opinion of such
accounting firm, an Event of Default (insofar as it pertains to accounting
matters) has occurred and is continuing, a statement as to the nature thereof;
(c) contemporaneously with the delivery of financial statements
required by Sections 7.3(a) and 7.3(b), a Compliance Certificate of an
Authorized Officer stating that such officer has individually reviewed the
provisions of this Agreement and has individually reviewed or supervised the
review of the activities of Borrower during such year or quarterly period, as
the case may be, with a view to determining whether Borrower has fulfilled all
its obligations under this Agreement, and that Borrower has observed and
performed each undertaking contained in the Agreement and is not in Default in
the observance or performance of any of the provisions hereof or, if Borrower
shall be so in Default, specifying all such Defaults and events of which such
officer may have knowledge, and otherwise containing the information and
certifications (including calculation of the financial covenants set forth in
Section 7.11 hereof) required in the form of Compliance Certificate shown on
Exhibit A;
(d) promptly after sending or making available or filing of the
same, copies of all reports, proxy statements and financial statements that
Borrower sends or makes available to its stockholders and all registration
statements and reports that Borrower files with the Securities and Exchange
Commission, or any other governmental official, agency or authority;
(e) as soon as possible and in any event within five (5) days
after Borrower has knowledge of (i) the occurrence of a Default or an Event of
Default, or (ii) any default or event of default as defined in any evidence of
Debt or under any agreement, indenture or other instrument under which such Debt
has been issued, whether or not such Debt is accelerated or such default waived
and which default or event of default has resulted
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or may result in a material adverse change in Borrower's condition (financial or
otherwise) or operations, a statement of an Authorized Officer setting forth
details thereof, and the action which Borrower proposes to take with respect
thereto;
(f) as soon as available any written report pertaining to
material items in respect to Borrower's internal control matters submitted to
Borrower by independent accountants in connection with each annual or interim
special audit of the financial conditions of Borrower made by Borrower's
independent public accountants;
(g) prompt written notice of any condition or event which has
resulted or might result in (i) a material adverse change in Borrower's
condition (financial or otherwise) or operations, or (ii) a breach of or
noncompliance with any term, condition or covenant contained herein, or (iii) a
material breach of or noncompliance with any term, condition or covenant of any
material contract to which Borrower is a party or by which it or its property
may be bound;
(h) prompt written notice of any claims, proceedings or disputes
(whether or not purportedly on behalf of Borrower) against, or to the knowledge
of Borrower threatened, or affecting, Borrower which, if adversely determined,
would have a material adverse effect on the business, properties or condition
(financial or otherwise) of Borrower (without in any way limiting the foregoing,
claims, proceedings or disputes involving monetary amounts in excess of Five
Hundred Thousand Dollars ($500,000) not fully covered by insurance shall be
deemed to be material), or any material labor controversy resulting in or
threatening to result in a strike against Borrower, or any proposal by any
public authority to acquire any of the material assets or business of Borrower;
(i) promptly after receipt thereof a copy of any notice Borrower
receives from the Pension Benefit Guaranty Corporation or the Internal Revenue
Service with respect to any Plan; provided, however, that this Section 7.3(i)
shall not apply to notices of general application promulgated by the Department
of Labor, and prompt written notice if Borrower adopts or becomes liable to
contribute to any Plan; and
(j) at least fifteen (15) days prior to incurring any Real
Property Debt, a statement by Borrower to Agent, in form and substance
satisfactory to Agent, which (i) verifies that Borrower is in compliance with
Section 8.4(a) of this Agreement; (ii) details Borrower's calculation of such
compliance; and (iii) includes, without limitation, attachments detailing the
appraisal of Borrower's property which is the subject of such Real Property
Debt.
(k) such other financial or other information as Agent may from
time to time reasonably request.
7.4. Corporate Existence. Borrower shall preserve and maintain its
corporate existence and all of its rights, privileges, and franchises necessary
or desirable in the normal course of its business.
7.5. Compliance with Law. Borrower shall comply with the requirements of
all applicable Laws (including without limitation, ERISA with respect to each of
Borrower's Plans) and all material agreements to which it is a party, other than
such requirements or agreements with respect to which the non-compliance of
Borrower will not materially and adversely effect the business, operations or
conditions, financial or otherwise, of Borrower.
7.6. Insurance. Borrower shall maintain and keep in force insurance of
the types and in amounts customarily carried in its lines of business, including
but not limited to fire, public liability, property damage, workmen's
compensation insurance carried by companies and in amounts satisfactory to
Banks, and deliver to Banks from time to time, as Banks may request, schedules
setting forth all insurance then in effect. Borrower shall maintain and keep in
full force and effect property damage insurance covering Eligible Equipment, or
shall require lessees of such Eligible Equipment to do so provided that Borrower
maintains secondary insurance on such Eligible Equipment in amounts customarily
carried on such Eligible Equipment.
7.7. Facilities. Borrower shall keep those properties useful or
necessary to its business in good repair and condition, and from time to time
make necessary repairs, renewals, and replacements thereto so that its property
shall be fully and efficiently preserved and maintained.
7.8. Taxes and Other Liabilities. Borrower shall pay and discharge when
due any and all indebtedness, obligations, assessments, taxes real and personal,
including federal and state income taxes, except such as it may
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in good faith contest or as to which a bona fide dispute may arise; provided
provision is made to the satisfaction of the Required Banks for prompt payment
thereof in the event that it is found that the same is its obligation.
7.9. Litigation. Borrower shall give immediate notice to Banks of: (a)
any litigation or proceeding in which it is a party if any adverse decision
therein would require Borrower to pay more than Five Hundred Thousand Dollars
($500,000) or require Borrower to deliver assets the value of which exceeds such
sum (whether or not the claim is considered to be covered by insurance); and (b)
the institution of any other suit or proceeding involving it that might
materially and adversely affect Borrower's operations, financial condition,
property or business.
7.10. Change of Location. Borrower shall notify Banks (30) thirty days
in advance of any change in the location of any of its places of business or of
the establishment of any new, or the discontinuance of any existing, place of
business.
7.11. Financial Tests. Borrower will maintain, measured quarterly on a
consolidated basis as of the last day of each fiscal quarter in accordance with
GAAP:
(a) Tangible Net Worth at all times of at least the sum of (i)
Eighty-Five Million Dollars ($85,000,000), plus (ii) fifty percent (50%) of
Borrower's Net Income (without reduction for any Net Loss) generated after March
31, 1999, plus (iii) ninety percent (90%) of the proceeds from the issuance of
Borrower's capital stock after March 31, 1999, excluding the first Two Million
Six Hundred Fifty Thousand Dollars ($2,650,000) of such proceeds from the
exercise of stock options after March 31, 1999.
(b) a ratio of Liabilities to Tangible Net Worth for Borrower at
all times of not more than three to one (3 to 1);
(c) a ratio of EBIT to interest expense for the period of four
(4) consecutive fiscal quarters determined as of the last day of such period of
at least two to one (2.0 to 1); and
(d) a ratio of Adjusted Net Income to Debt Service of at least
1.15 to 1.
ARTICLE 8
NEGATIVE COVENANTS
So long as any Obligations remain unpaid or not fully performed
or any Commitment remains unused in whole or in part, unless the Required Banks
shall otherwise consent to in writing, Borrower agrees that:
8.1. Mergers/Changes. Borrower shall not change its name, change the
nature of its business, sell (whether in any one transaction or a series of
transactions) all or substantially all of its assets, enter into any merger,
consolidation, reorganization or recapitalization, reclassify its capital stock,
cease to be a publicly held company, or become a subsidiary of any other
company.
8.2. Sale of Assets. Borrower shall not sell, transfer, lease or
otherwise dispose of any of its assets outside the ordinary course of its
business except for cash or a cash equivalent and then only if such sale occurs
after the Conversion Date and all the net proceeds (i.e., gross proceeds less
funds used to discharge liens securing the assets sold) therefrom are used to
reduce the principal outstanding on the Term Loans. Sale of assets through the
Investor-Owner Sales Program are recognized as sales of assets in the ordinary
course of Borrower's business.
8.3. Liens. Borrower shall not mortgage, pledge, grant or permit to
exist a Lien upon any of its assets of any kind, now owned or hereafter
acquired, except for (collectively the "Permitted Liens"):
(a) existing Liens reflected on the audited consolidated
financial statement of Borrower dated December 31, 1998 furnished to Banks
pursuant to Section 6.8 hereof, or any Lien which replaces an existing Lien,
provided the principal amount of the debt secured by the replacing Lien does not
exceed the principal amount at the time of replacement of the existing Lien, or
cover property other than the property covered by the existing Lien;
(b) Liens of carriers, warehousemen, mechanics, landlords,
materialmen, suppliers, tax, assessments, other governmental charges and other
like Liens arising in the ordinary course of business securing obligations that
are not incurred in connection with the obtaining of any advance or credit and
which are not
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overdue or are being contested in good faith by appropriate proceedings,
provided provision is made to the satisfaction of Agent for the eventual payment
thereof in the event it is found that such obligation is payable by Borrower;
(c) Liens arising in connection with workmen's compensation,
unemployment insurance, appeal and release bonds and progress payments under
government contracts;
(d) the giving, simultaneously with or within ninety (90) days
after the acquisition or construction of real property or tangible personal
property, of any purchase money Lien (including vendor's rights under purchase
contracts under an agreement whereby title is retained for the purpose of
securing the purchase price thereof) on real property or tangible personal
property hereafter acquired or constructed and not heretofore owned by Borrower,
or the acquiring hereafter of real property or personal tangible property not
heretofore owned by Borrower subject to any then existing Lien (whether or not
assumed); provided, however, that in each such case such Lien is limited to such
acquired or constructed real or tangible personal property;
(e) judgment Liens in existence less than thirty (30) days after
the entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full by insurance; and
(f) Liens arising from the Real Property Debt, provided, however,
that Borrower is in compliance with Sections 7.3(j) and 8.4(a) of this
Agreement.
8.4. Indebtedness. Borrower shall not incur, create, assume, or permit
to exist:
(a) Real Property Debt which in the aggregate exceeds Twenty-Five
Million Dollars ($25,000,000); and
(b) Outside Debt, which in the aggregate exceeds Seventy Million
Dollars ($70,000,000).
8.5. Prepayment. Borrower shall not prepay any Debt (other than Loans),
or enter into or modify any agreement as a result of which the terms of payment
of the Debt are waived or modified unless such prepayment or modification will
have no material adverse affect on the condition (financial or otherwise) or
operations of Borrower.
8.6 Transaction with Affiliates. Borrower shall not, directly or
indirectly, enter into any transaction with or for the benefit of an Affiliate
on terms more favorable to the Affiliate than would have been obtainable in
arms' length dealings.
8.7. Misrepresentations. Borrower shall not furnish any Bank any
certificate or other document that will contain any untrue statement of material
fact or that will omit to state a material fact necessary to make it not
misleading in light of the circumstances under which it was furnished.
8.8. Regulations. Borrower shall not directly or indirectly apply any
part of the proceeds of the Loans to the purchasing or carrying of any "margin
stock" within the meaning of Regulation U of the Federal Reserve Board, or any
regulations, interpretations or rulings thereunder.
8.9. Partnerships. Borrower shall not be a general or limited partner in
any partnership or a joint venturer in any joint venture without the written
consent of the Required Banks.
ARTICLE 9
EVENTS OF DEFAULT
9.1. Events of Default. The occurrence of any of the following events
shall constitute an Event of Default:
(a) Borrower fails to pay any installment of principal (including
without limitation any mandatory prepayment pursuant to Section 3.4) when due,
or any installment of interest or a Commitment Fee within five (5) calendar days
after the date payable hereunder;
(b) Borrower fails to observe or perform any material, term,
covenant, obligation or agreement to be observed or performed by it under this
Agreement or any Loan Documents when required to be observed or performed and
(i) such failure shall continue for ten (10) calendar days after notice to
Borrower from Agent of such failure or (ii) such failure shall continue for
fifteen (15) calendar days after Agent is notified of such failure by Borrower.
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(c) a default shall occur as defined in any evidence of Debt by
Borrower or under any indenture, agreement or other instrument under which the
same may be issued, or any event upon any occurrence of which any holder or
holders of the Debt outstanding thereunder may declare the same due and payable
before its stated maturity, and which default (i) shall continue for a period of
ten (10) calendar days after notice thereof and (ii) in the reasonable opinion
of the Required Banks, has resulted or may result in a material adverse change
in Borrower's condition (financial or otherwise) or operations, provided,
however, that such default shall not be considered an Event of Default hereunder
when the amount thereof is being contested in good faith by appropriate
proceedings with adequate reserves therefor being set aside by Borrower;
(d) any certified or audited financial statement, representation,
warranty or certificate made or furnished by Borrower to Agent or any Bank in
connection with this Agreement, or as inducement to Banks to enter into this
Agreement, or in any separate statement or document to be delivered hereunder to
Banks, shall be materially false, incorrect, or incomplete when made;
(e) Borrower shall suffer one or more final judgments for payment
of money aggregating in excess of Five Hundred Thousand Dollars ($500,000) in
any one (1) year period and shall not discharge the same within a period of
thirty (30) days unless, pending further proceedings, execution has not been
commenced or, if commenced, has been effectively stayed;
(f) Borrower shall: (i) have an order for relief entered with
respect to it under the Federal Bankruptcy Code; (ii) not pay, or admit in
writing its inability to pay, its debts generally as they become due; (iii) make
an assignment for the benefit of creditors; (iv) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any substantial part of its property;
(v) institute any proceeding seeking an order for relief under the Federal
Bankruptcy Code or seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed against
it; (vi) take any corporate action to authorize or affect any of the foregoing
actions set forth in this Section 9.1(f); or (vii) fail to contest in good faith
any appointment or proceeding described in Section 9.1(g);
(g) without the application, approval or consent of Borrower, a
receiver, trustee, examiner, liquidator or similar official shall be appointed
for Borrower or any substantial part of the property of any thereof, or a
proceeding described in Section 9.1(f) shall be instituted against Borrower and
such appointment continues undischarged or such proceeding continues undismissed
or unstayed for a period of thirty (30) consecutive days;
(h) at any time Borrower has a Plan and any Reportable Event
occurs, as defined in ERISA, which creates or results in a liability in excess
of Five Hundred Thousand Dollars ($500,000) for which Borrower is or may become
obligated to pay, and such liability continues to exist for thirty (30)
consecutive days;
(i) the Required Banks shall have reasonably determined in good
faith (which determination, if made reasonably and in good faith, shall be final
and conclusive and shall be binding upon the parties to this Agreement) that one
or more conditions exist or events have occurred which might indicate, or result
in, a material adverse change in the operations, business, property or assets
of, or in the condition (financial or otherwise) of, Borrower or in the ability
of Borrower to meet in the normal course of business its obligations under this
Agreement or the Notes and such conditions of events continue for a period of
ten (10) calendar days following notice.
9.2. Acceleration. If any Event of Default described in Section 9.1(f)
or 9.1(g) shall occur and be continuing, the obligations of Banks to make Loans
hereunder shall automatically terminate and the Obligations shall immediately
become due and payable without any election or action on the part of Agent or
any Bank. If any other Event of Default shall occur and be continuing, the
Required Banks may (and at the direction of the Required Banks, Agent shall)
terminate or suspend the obligations of Banks to make Loans hereunder, or
declare the obligations to be due and payable, or both, whereupon the
Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of dishonor of any kind, as such terms are defined in
Division 3 of the California Commercial Code, all of which Borrower hereby
expressly waives. Agent shall
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<PAGE> 24
give Borrower prompt notice of any termination or suspension of its obligations
or acceleration of Borrower's Obligations hereunder. After any acceleration,
Banks shall have, in addition to the rights and remedies given to them by this
Agreement and the Notes, all those allowed by all Applicable Laws.
ARTICLE 10
AGENT
10.1. Appointment; Powers. Each Bank hereby irrevocably appoints and
authorizes Agent to act as its agent under the Loan Documents and authorizes
Agent to take such actions on Bank's behalf and to exercise such powers under
the Loan Documents as are specifically delegated to Agent by the terms thereof,
together with such powers as are reasonably incidental thereto. Agent agrees to
act as such upon the express conditions contained in this Article 10. Agent
shall have no duties or responsibilities except those expressly set forth in the
Loan Documents, may perform such duties by or through its agent or employees and
shall not by reason of the Loan Documents have a fiduciary relationship with any
Bank. The provisions of this Article 10 are solely for the benefit of Agent and
Banks; and Borrower shall not have any rights as a third party beneficiary of
any of the provisions hereof. In performing its functions and duties under this
Agreement, Agent shall act solely as agent of Banks, and does not assume and
shall not be deemed to have assumed any obligations towards or relationship of
agency or trust with or for Borrower.
10.2. Agent as Bank. The agency hereby created shall in no way impair or
affect any of the rights and powers of, or impose any duties or obligations upon
Agent in its individual capacity. With respect to its Commitments and the Loans
made by it, Agent shall have the same rights and powers under the Loan Documents
as any Bank and may exercise the same as though it were not Agent, and the term
"Bank" or "Banks" shall, unless the context otherwise indicates, include Agent
in its capacity as a Bank hereunder. Agent and any Bank and their respective
Affiliates may accept deposits from, lend money to (including loans which may be
repaid by Loans under this Agreement), and generally engage in any kind of
business with Borrower or any of its Affiliates as if it were not Agent or a
Bank and without any duty to account therefor to the other parties to this
Agreement.
10.3. Independent Credit Analysis. Each Bank represents and warrants
that (a) it has, independently and without reliance upon Agent, any other Bank,
or the directors, officers, agents, or employees of Agent or of any other Bank,
and instead in reliance upon information supplied to it by or on behalf of
Borrower, and upon such other information as it has deemed appropriate, made its
own independent investigation of the financial condition and affairs of Borrower
and its own independent credit analysis and decision to enter into this
Agreement, and (b) it shall independently and without reliance upon Agent, any
other Bank, or the directors, officers, agents or employees of Agent, or of any
other Bank, continue to make its own independent credit analyses and decisions
in acting or not acting under the Loan Documents. Agent shall not have any duty
or responsibility to make any such investigation or appraisal on behalf of Banks
or provide any Bank with any credit or other information concerning the affairs,
financial condition or business of Borrower which may at any time come into the
possession of Agent or any of its Affiliates, unless such information shall have
been delivered to Agent in writing (i) with directions to deliver the same to
Banks or (ii) in satisfaction of a specific requirement of this Agreement.
10.4. General Immunity. Neither Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under any of the Loan Documents or in connection
therewith, unless caused by its or their gross negligence or willful misconduct.
Without limiting the generality of the foregoing, Agent:
(a) shall not be responsible to any Bank for any recitals,
statements, warranties or representations in the Loan Documents or in any
written or oral statement or in any financial or other statements, agreements,
instruments, reports, certificates or other documents relative thereto or for
the financial condition of Borrower;
(b) shall not be responsible for the authenticity, accuracy,
completeness, value, validity, effectiveness, due execution, legality,
genuineness, enforceability or sufficiency of the Loan Documents or any other
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agreements or any assignments, certificates, requests, financial statements,
notice schedules or any opinions of counsel executed and delivered pursuant
thereto;
(c) shall not be bound to ascertain or inquire as to the
performance or observance of any of the terms, provisions, agreements, covenants
or conditions contained in the Loan Documents on the part of Borrower, or any of
the terms of any such agreement by any party thereto or as to the use of the
proceeds of the Loans and shall have no duty to inspect the property (including
the books and records) of Borrower;
(d) shall incur no liability under or in respect of the Loan
Documents or any other document by acting upon any notice, consent, certificate
or other instrument or writing believed by Agent in good faith to be genuine and
signed or sent by the proper party;
(e) may consult with legal counsel (including counsel for
Borrower), independent public accountants and other experts selected by Agent
and shall not be liable for any action taken or omitted to be taken in good
faith in accordance with the advice of such counsel, accountants or experts; and
(f) subject to the provisions of Section 10.6(c), (i) Agent may
act or refrain from acting under the Loan Documents in accordance with the
instructions of the Required Banks or Banks, where appropriate in accordance
with the terms of the Loan Documents, (ii) Agent shall be entitled to refrain
from exercising any power, discretion or authority vested in it under any Loan
Document unless and until it has obtained the instructions of Required Banks,
where appropriate in accordance with the terms of the Loan Documents, or Banks,
and (iii) no Bank shall have any right of action against Agent for acting or
refraining from acting in accordance with this Section 10.4(f).
10.5. Right to Indemnity. Agent shall be fully justified in failing or
refusing to take any action under the Loan Documents unless it shall first be
indemnified (upon requesting such indemnification) to its satisfaction by Banks
(in accordance with each Bank's Pro Rata Share) against any and all liability
and expense which it may incur by reason of taking or continuing to take any
such action. Each Bank severally agrees to indemnify Agent (to the extent not
reimbursed under Section 11.5), in the amount of its Pro Rata Share for any and
all liabilities, obligations, losses, damages, penalties, actions judgments,
suits, costs, expenses or disbursements of any kind and nature whatsoever which
may be imposed on, incurred by or asserted against Agent in any way relating to
or arising out of the Loan Documents or the transactions contemplated thereby,
or the enforcement of any of the terms thereof or of any other documents,
provided no such liability, obligation, loss, damage, penalty, action, judgment,
suit, claim, cost, expense or disbursement results from Agent's gross negligence
or willful misconduct. Each Bank agrees to reimburse Agent in the amount of its
Pro Rata Share of any out-of-pocket expenses and costs, including, without
limitation, attorneys' fees, incurred for the benefit of Banks and not
reimbursed by Borrower pursuant to Section 11.5 of this Agreement. Nothing
contained herein shall release Borrower from any obligations to make payments to
Agent pursuant to Section 3.7.
10.6. Action by Agent
(a) Actual Knowledge. Agent may assume that no Default or Event
of Default has occurred and is continuing, unless Agent has actual knowledge of
the Default or Event of Default, has received notice from Borrower, its counsel
or its independent certified public accountants stating the nature of the
Default or Event of Default, or has received notice from a Bank stating the
nature of the Default or Event of Default and that Bank considers the Default or
Event of Default to have occurred and be continuing.
(b) Agent; Obligations. Agent has only those obligations under
the Loan Documents that are expressly set forth therein. Without limitation on
the foregoing, Agent shall have no duty to inspect any property of Borrower,
although Agent may in its discretion periodically inspect the property from time
to time.
(c) Discretion to Act. Except for any obligation expressly set
forth in the Loan Documents and as long as Agent may assume that Default or
Event of Default has occurred and is continuing, Agent may, but shall not be
required to, exercise its discretion to act or not act, except that Agent shall
be required to act or not act upon the instructions of the Required Banks (or of
all Banks in any circumstances governed by the provisions of Section 11.1 of
this Agreement) and those instructions shall be binding upon Agent, all Banks,
and all holders of
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the Notes; provided, that Agent shall not be required to act or not act if to do
so would be contrary to any Loan Document or to Applicable Law.
(d) Action Upon Instructions. If Agent may not assume that no
Default or Event of Default has occurred and is continuing, Agent shall give
notice thereof to Banks and shall act or not act upon the instructions of the
Required Banks, where appropriate in accordance with the terms of this
Agreement, or Banks; or provided that Agent shall not be required to act or not
act if to do so would be contrary to any Loan Document or to Applicable Law. If
the Required Banks or Banks, as the case may be, entitled to instruct Agent
fail, for fifteen (15) Business Days after the giving of notice by Agent, to
instruct Agent, then Agent in its discretion may act or not act as it deems
advisable for the protection of the interests of Banks.
10.7. Payee of Note Treated as Owner. Agent may deem and treat the payee
of any Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment or transfer thereof shall have been filed with
Agent. Any request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is the payee of any
Note or the holder of any Note (if Agent has received written notice of the
assignment or transfer thereof) shall be conclusive and binding on any
subsequent holder, transferee or assignee of that Note or of any Note or Notes
issued in exchange therefor.
10.8. Agent's Resignation. Agent may resign at any time by giving at
least ninety (90) days' prior written notice of its intention to do so to each
Bank and to Borrower. Such resignation shall become effective upon the
appointment by Borrower, with the consent of the Required Banks, which consent
shall not be unreasonably withheld, of a successor Agent which is a Bank;
provided that upon the occurrence and continuance of an Event of Default, the
Required Banks shall appoint such successor without the consent of Borrower.
Upon the acceptance of any appointment as an Agent hereunder by a successor
Agent, that successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any resigning Agent's resignation hereunder as Agent, the
provisions of this Article 10 shall continue to inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent hereunder. Upon
such appointment, the term "Agent" shall for all purposes of this Agreement
thereafter mean such successor.
ARTICLE 11
MISCELLANEOUS
11.1. Amendments. Subject to the provisions of this Article 11 and
except as otherwise provided in any Loan Document, the Required Banks (or the
Agent with the consent in writing of the Required Banks) and the Borrower, may
enter into agreements supplemental hereto or thereto for the purpose of adding
to or modifying any provisions of the Loan Documents or changing in any manner
the rights of the Banks or of the Borrower, as the case may be, hereunder or
thereunder or waiving any Default or Event of Default hereunder or thereunder;
provided, however, that no such supplemental agreement shall, without the
consent of all the Banks:
(a) Extend the maturity of any Loan or Note, reduce the principal
amount thereof, reduce the rate, or extend the time of payment of interest or
fees thereon.
(b) Change the percentage specified in the definition of Required
Banks.
(c) Extend the Revolving Loan Termination Date or the Term Loan
Maturity Date, or reduce the amount or extend the payment date for, the
mandatory payments, or increase the Pro Rata Share of any Bank or amount of the
Commitment of any Bank hereunder, or permit the Borrower to assign its rights
under this Agreement.
(d) Amend this Section 11.1.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may amend or waive
payment of the fee required under Section 3.7 without obtaining the consent of
any of the Banks.
11.2. Preservation of Rights. No delay or omission of the Agent or any
Bank to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or Event of Default or an
acquiescence therein, and the making of a Loan notwithstanding the existence of
a Default or Event of default
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or the inability of the Borrower to satisfy the conditions precedent to such
Loan shall not constitute any waiver or acquiescence. Any single or partial
exercise of any such right shall not preclude other or further exercise thereof
or the exercise of any other right, and no waiver, amendment or other variation
of the terms, conditions or provisions of the Loan Documents whatsoever shall be
valid unless in writing signed by the Banks required pursuant to Section 11.1,
and then only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to the Banks until the Obligations have been paid in full.
11.3. Setoff. In addition to, and without limitation of, any rights of
the Banks under applicable Law, if the Borrower becomes insolvent, however
evidenced, or any Default or Event of Default occurs, any indebtedness from any
Bank to the Borrower (including all account balances, whether provisional or
final and whether or not collected or available) may be offset and applied
toward the payment of the Obligations owing to such Bank, whether or not the
Obligations, or any part hereof, shall then be due.
11.4. Ratable Payments. If any Bank, whether by setoff or otherwise, has
payment made to it upon its Loans in a greater proportion than that received by
any other Bank, such Bank agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Banks so that after such purchase each Bank will
hold its ratable proportion of Loans.
11.5. Expenses. Whether or not the transactions contemplated hereby
shall be consummated, Borrower agrees to promptly pay (a) all the actual and
reasonable costs and expenses of preparation of this Agreement, the Notes and
the other Loan Documents, and of all the costs of furnishing all opinions by
counsel for Borrower (including without limitation any opinions requested by
Agent as to any legal matters arising hereunder or thereunder), and of
Borrower's performance of and compliance with all agreements and conditions
contained herein on its part to be performed or complied with; (b) the
reasonable fees, expenses and disbursements of Agent (including fees, expenses
and disbursements of counsel to Agent) in connection with the administration of
this Agreement, the Notes, the other Loan Documents, and the Loans hereunder,
and any amendments and waivers hereto; and (c) after the occurrence of an Event
of Default, all costs and expenses (including reasonable attorneys' fees and
costs of settlement) incurred by Banks in enforcing any Obligations of or in
collecting any payments due from Borrower hereunder or under the Notes by reason
of such Event of Default or in connection with any refinancing or restructuring
of the credit arrangements provided under this Agreement in the nature of a
"work-out" or of any insolvency or bankruptcy proceeding.
11.6. Indemnity. In addition to the payment of expenses pursuant to
Section 11.5, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Banks and any holder of
any Note, and the officers, directors, employees and agents of Banks and such
holders (individually called an "Indemnitee" and collectively called the
"Indemnitees") harmless from and against, any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitee shall be designated a party thereto),
which may be imposed on, incurred by, or asserted against such Indemnitee, in
any manner relating to or arising out of the use or intended use of the proceeds
of the Loans hereunder (the "indemnified liabilities"); provided that Borrower
shall have no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of that
Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all indemnified liabilities incurred by the
Indemnitees or any of them.
11.7. Survival of Representations. All representations and warranties of
the Borrower contained in this Agreement shall survive delivery of the Notes and
the making of the Loans herein contemplated.
11.8. Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Bank shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable Law.
22
<PAGE> 28
11.9. Taxes. Any taxes (excluding income taxes) payable or ruled payable
by Federal or State authority in respect of the Loan Documents shall be paid by
the Borrower, together with interest and penalties, if any.
11.10. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
11.11. Several Obligations. The respective obligations of the Banks
hereunder are several and not joint and no Bank shall be the partner or agent of
any other (except to the extent to which the Agent is authorized to act as
such). The failure of any Bank to perform any of its obligations hereunder shall
not relieve any other Bank from any of its obligations hereunder. This Agreement
shall not be construed so as to confer any right or benefit upon any Person
other than the parties to this Agreement and their respective successors and
assigns.
11.12. Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Banks.
11.13 Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability or validity of that provisions in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
11.14. Non-Liability of Banks. The relationship between the Borrower and
the Banks and the Agent shall be solely that of borrower and lender. Neither the
Agent nor any Bank shall have any fiduciary responsibilities to the Borrower.
Neither the Agent nor any Bank undertakes any responsibility to the Borrower to
review or inform the Borrower of any matter in connection with any phase of the
Borrower's business or operations.
11.15. Choice of Law. The Loan Documents (other than those containing a
contrary express choice of law provisions) shall be construed in accordance with
the internal laws (and not the law of conflicts) of the State of California, but
giving effect to federal laws applicable to national banks.
11.16. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR CALIFORNIA
STATE COURT SITTING IN SAN FRANCISCO IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
LIMIT THE RIGHT OF THE AGENT OR ANY BANK TO BRING PROCEEDINGS AGAINST THE
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.
11.17. Compliance with Applicable Laws. It is not the intent of the
Borrower, the Agent or the Banks to make an agreement in violation of Applicable
Law. Regardless of any provision contained herein, no Bank shall be entitled to
receive, collect or apply, as interest on the Loans, any amount in excess of the
Maximum Amount. If any Bank ever receives, collects or applies, as interest, any
such excess, such amount which would be excessive interest shall be deemed a
partial repayment of principal and treated hereunder as such; and if principal
is paid in full, any remaining excess shall be paid to the Borrower. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Maximum Amount, the Borrower and each Bank shall, to
the maximum extent permitted under Applicable Law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest, (b)
exclude voluntary prepayments and the effect thereof, and (c) amortize, prorate,
allocate and spread in equal parts, the total amount of interest throughout the
entire contemplated term of the Obligations so that the interest rate is uniform
throughout the entire term of the Obligations; provided, however, that if the
Loans are paid and performed in full prior to the end of the full contemplated
term of the Obligations, and if the interest received for the actual period of
existence thereof exceeds the Maximum Amount, each Bank shall refund to the
Borrower the amount of such excess or credit the amount of such excess against
the total principal amount of the Loans owing, and, in such event, each Bank
shall not be subject to any penalties provided by Applicable Law for contracting
for, charging or receiving interest in
23
<PAGE> 29
excess of the Maximum Amount. This Section 11.17 shall control every other
provision of all agreements pertaining to the transactions contemplated by or
contained in the Transaction Documents.
11.18. Confidentiality. Agent and each Bank agrees to hold any
information which it may receive from Borrower pursuant to this Agreement in
confidence, and further agrees not to disclose any such information to any
Person or to use any such information for any purpose other than in connection
with this Agreement. The restrictions of this Section 11.18 shall not apply to
any information which has been disseminated to the public.
(a) Agent and each Bank agrees that, at any time that it has in
its possession any of Borrower's confidential information and for not less than
seventy-two (72) hours after such information is made available to the public,
it will not buy or sell, or place orders to buy or sell, directly or indirectly,
any securities of Borrower.
(b) Notwithstanding the foregoing, Agent and Banks may disclose
such Borrower's confidential information to other Banks or to other Bank's
employees, attorneys, accountants, or other professional advisors as is
necessary for Agent or such Banks to perform its obligations or protect its
interests under this Agreement. Agent and each Bank shall take such steps to
protect Borrower's confidential information as it does to protect its own
confidential information, including but not limited to, obtaining written
agreements from all Persons given access to Borrower's confidential information
to: (i) protect the confidentiality of such information; (ii) not disclose it to
any other Person; (iii) not to use it for any purpose other than to assist Agent
or Banks to perform its obligations or protect its interests under this
Agreement; and (iv) not to buy or sell, or place orders to buy or sell, directly
or indirectly, any securities of Borrower at any time that such Person has in
his/her possession any of Borrower's confidential information and not for
seventy-two (72) hours after such information is made available to the public.
(d) Notwithstanding the foregoing, Agent and Banks may disclose
such of Borrower's confidential information as each of them may be required to
do so (i) to regulatory officials, (ii) pursuant to law, regulation or legal
process, or (iii) in connection with any legal proceeding to which Agent or a
Bank may be a party; provided that Agent or such Bank shall have first given
Borrower such written notice of its intention to so disclose Borrower's
confidential information promptly after it receives notice that it is required
to disclose such information.
11.19. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of Agent, Banks and Borrower and their respective
successors and assigns; provided, however, that neither Borrower nor any Bank
may assign or transfer its rights or obligations under this Agreement
(including, without limitation, through participations) without the prior
written consent of each party to this Agreement.
11.20. Notices.
(a) Except as otherwise expressly provided in this Agreement:
(i) All notices, requests, demands, directions and other
communications provided for hereunder or under any other Loan Document
must be in writing and must be mailed, telecopied, or delivered to the
appropriate party at the address set forth on the signature pages of
this Agreement or, as to any party to any Loan Document, at any other
address as may be designated by it in a written notice sent to all other
parties to such Loan Document in accordance with this Section 11.20; and
(ii) Any notice, request, demand, direction or other
communication given by telecopier must be confirmed within 48 hours by
letter mailed or delivered to the appropriate party at its respective
address.
(b) Except as otherwise expressly provided in any Loan Document,
if any notice, request, demand, direction or other communication required or
permitted by any Loan Document is given by mail it will be effective on the
earlier of receipt or the third calendar day after deposit in the United States
mail with first class or airmail postage prepaid; if given by telecopier, when
sent; or if given by personal delivery, when delivered.
11.21. Entire Agreement. The Loan Documents represent the final and
entire agreement between the parties hereto and supersede all prior and
contemporaneous agreements and understandings relating to the subject matter of
this Agreement.
24
<PAGE> 30
11.22. Jury Trial. EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER
ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT,
OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, Borrower, Agent, and Banks have caused this
Agreement to be duly executed on the day and year first written at the head of
this Agreement.
BORROWER:
McGRATH RENTCORP
------------------------------------------------
By: Thomas J. Sauer
Title:Vice President and Chief Financial Officer
Notice Address:
5700 Las Positas Road
Livermore, California 94550
Attention: Mr. Thomas Sauer, Chief Financial Officer
Fax: 925-453-3200
BANKS:
UNION BANK OF CALIFORNIA, N.A.,
individually and as Agent
------------------------------------------------
By: Robert J. Vernagallo
Title: Vice President
Notice Address: Commitment: $25,500,000
350 California Street, 6th Floor Pro Rata Share: 34%
San Francisco, CA 94104
Attention: Mr. Robert Vernagallo
Fax No.: (415) 705-7566
FLEET BANK, N.A.
------------------------------------------------
By: John Topolovec
25
<PAGE> 31
Title Assistant Vice President
Notice Address: Commitment: $24,750,000
Mail Stop: NY Y S16E Pro Rata Share: 33%
1185 Avenue of the Americas
New York, NY 10036
Attention: Mr. John Topolovec
Fax No.: (212) 819-6212
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
------------------------------------------------
By: Lisa M. Thomas
Title Vice President
Notice Address: Commitment: $24,750,000
300 Lakeside Drive, Suite 250 Pro Rata Share: 33%
Oakland, CA 94612
Attention: Mr. Peter Gould
Fax No.: (510) 273-5299
26
<PAGE> 32
EXHIBIT A
[Compliance Certificate]
COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished pursuant to Section 7.3(c) of that
certain Amended and Restated Credit Agreement dated as of June 30, 1999, among
the Borrower, certain Banks parties thereto and Union Bank of California, N.A.,
as Agent for the Banks, as from time to time modified, supplemented or amended
(the "Agreement"). Unless otherwise defined, all capitalized terms used in this
Compliance Certificate have the respective meanings ascribed to them in the
Agreement.
Borrower hereby represents and warrants as follows:
1. I am familiar with the Agreement and the business and operations of
Borrower.
2. Except as otherwise specifically indicated, the information contained
in this Certificate is true and accurate on and as of ______________________, __
(the "Certification Date").
3. As of the Certification Date and at all times during the quarter
ending on the Certification Date, Borrower has performed all obligations to be
performed by it under (a) the Agreement, (b) any instrument or agreement to
which Borrower is a party or under which Borrower is obligated, and (c) any
judgment, decree, or order of any court or governmental authority binding on
Borrower. No Default or Event of Default has occurred, whether or not the same
was cured, during such quarter.
4. As of the Certification Date, the information set forth below is
true, accurate and complete:
<TABLE>
<S> <C>
(a) Section 7.11(a): Tangible Net Worth
Tangible Net Worth $
==============
Minimum Tangible Net Worth calculation:
Base amount $ 85,000,000
--------------
Plus: Fifty percent of Net Income (without
reduction for Net Loss) after March 31, 1999 $
--------------
Plus: 90% of the gross proceeds from stock issuance
(excluding the first $2,650,000 of proceeds from the
exercise of stock options after March 31, 1999) $
--------------
Minimum Tangible Net Worth Total $
==============
(b) Section 7.11(b): Liabilities to Net Worth
Liabilities $
--------------
Less Deferred Taxes $( )
--------------
Total (A) $
--------------
Tangible Net Worth (B) $
--------------
Ratio of A to B
--------------
Maximum permitted: 3:1
(c) Section 7.11(c): Interest Expense Ratio
EBIT (A) $
--------------
Interest expense (B) $
--------------
Ratio of A to B
--------------
Minimum required: 2 to 1
(d) Section 7.11(d): Debt Service Coverage
Adjusted Net Income (A) $
--------------
Debt Service (B) $
--------------
Ratio of A to B
--------------
Minimum required: 1.15 to 1
Calculation of Adjusted Net Income:
EBIT $
--------------
Depreciation and amortization $
--------------
Adjusted Net Income (A) $
--------------
Calculation of Debt Service:
</TABLE>
<PAGE> 33
<TABLE>
<S> <C>
Loans $
--------------
Years (rnded to nearest qtr) to Term Loan Maturity
Date --------------
Assumed principal payments $
--------------
Debt (other than Loans) $
--------------
Other Debt principal payments due in next four quarters $
--------------
Interest on Loans in next four quarters $
--------------
Interest on other Debt in next four quarters $
--------------
Interest rate used for computation (floating rate Debt) $
--------------
</TABLE>
5. The Borrowing Base and the Adjusted Borrowing Base as of the Certification
Date are as set forth below. Borrower hereby further certifies the information
set forth below is true, accurate and complete and the aggregate amount of the
Loans outstanding under the Agreement, after giving effect to any new Loan made
as of the Certification Date, is not in excess of the Commitment or the Adjusted
Borrowing Base.
<TABLE>
<S> <C>
(a) Borrowing Base
Eligible Equipment $
--------------
Less: 25% $
--------------
Borrowing Base $
--------------
(b) Adjusted Borrowing Base
Borrowing Base $
--------------
Less: Outside Debt $
--------------
Adjusted Borrowing Base $
--------------
(c) Excess of Adjusted Borrowing Base over Loans Outstanding $
--------------
Adjusted Borrowing Base $
--------------
Less: Loans outstanding $
--------------
Excess of Adjusted Borrowing Base over Loans Outstanding $
--------------
</TABLE>
Executed this _____ day of _____________, _.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
EXHIBIT B
[Loan Request]
[Date]
Union Bank of California, N.A., as Agent
350 California Street, 6th Floor
San Francisco, California 94104
Attention: Robert J. Vernagallo, Vice President
Re: Amended and Restated Credit Agreement dated as of June 30, 1999
among McGrath RentCorp, a California corporation ("Borrower"), certain
Banks parties thereto, and Union Bank of California, N.A., as Agent for
the Banks, as from time to time modified, supplemented or amended (the
"Agreement"). (Terms defined in the Agreement shall have the same
meanings herein)
Dear Mr. Vernagallo:
<PAGE> 34
1. The Borrower hereby gives notice that it requests a Loan under the
Agreement, as follows:
(a) The Funding Date is ______________________________________.
(b) The amount is $___________________________________________.
(c) The Rate Option selected is:
( ) Eurodollar Loan
( ) Reference Rate Loan
(d) The Eurodollar Period selected (if applicable) is _______________.
2. The Borrower hereby gives notice that it requests continuation of an
existing Eurodollar Loan, as follows:
(a) The Funding Date is ___________________________________.
(b) The amount of the Loan to be continued is:_____________.
Original amount: $ _____________.
Increase (Decrease) being requested: $ _____________.
Amount to be continued: $ _____________.
(c) The new Eurodollar Period selected is _________________.
3. The Borrower hereby gives notice that it requests a conversion from one
Rate Option to another Rate Option, as follows:
(a) The Funding Date is ___________________________________.
(b) The aggregate amount to be converted is $______________.
(c) Convert the Rate Option:
From: To:
( ) Eurodollar Loan ( ) Eurodollar Loan
( ) Reference Rate Loan ( ) Reference Rate Loan
(d) The new Eurodollar Period selected (if applicable) is .
Borrower hereby represents and warrants that each of the conditions precedent
set forth in Section 5.2 of the Agreement will be satisfied on and as of the
Funding Date of such Loan and, specifically:
(a) There exists no Default or Event of Default;
(b) The representations and warranties contained in Article 6 of the
Agreement will be true and correct as of the Funding Date of the Loan, except to
the extent that changes in the facts and conditions on which such
representations and warranties are based are required or permitted under the
Agreement.
Very truly yours,
MCGRATH RENTCORP,
a California corporation
By: ______________________
Name:_____________________
Title: ___________________
EXHIBIT C
[Officer's Certificate]
[Borrower's Letterhead]
[Date]
<PAGE> 35
Union Bank of California, N.A.
350 California Street, 6th Floor
San Francisco, California 94104
Attention: Robert J. Vernagallo
Vice President
Dear Mr. Vernagallo:
Terms not otherwise defined herein shall have the meanings ascribed to them in
the Amended and Restated Credit Agreement dated as of June 30, 1999 (the
"Agreement"). In connection with the Agreement, the undersigned hereby certifies
that:
1. The representations and warranties of the Borrower contained in
Article 6 of the Agreement are true and correct on and as of the date of this
certificate with the same effect as though such representations and warranties
had been made on and as of such date.
2. The Borrower has performed and complied with all agreements and
covenants contained in the Agreement required to be performed and complied with
by it prior to or on the date of this certificate.
3. No proceedings looking toward the dissolution or liquidation of the
Borrower have been commenced and no such proceedings are contemplated.
4. Attached is a true and correct copy of certain resolutions, which
comply with the requirements of Section 5.1(a)(iv) of the Agreement, duly
adopted by the Board of Directors of the Borrower at a duly authorized meeting,
duly held at the office of the Borrower on _______________ at which meeting a
quorum of directors was present in person throughout and voted in favor thereof,
and such resolutions have not been in any way modified, amended, rescinded or
revoked and remain on the date hereof in full force and effect.
5. The Borrower is duly incorporated, validly existing and in good
standing under the laws of the State of California and no provision in the
Articles of Incorporation or By-laws of the Borrower, or any shareholder
agreement, limits the power of the Board of Directors to pass the foregoing
resolutions, that such resolutions are in conformity with the provisions of said
Articles of Incorporation and Bylaws and that no approval of the shareholders or
of the outstanding shares of the Borrower is required with respect to the
matters which are the subject of the foregoing resolutions.
6. Attached hereto is an incumbency certificate which complies with the
requirements of Section 5.1(a)(v) of the Agreement.
7. The copies of the Articles of Incorporation and By-laws of the
Borrower delivered to Agent in connection with the Agreement pursuant to Section
5.1(a)(iii) of the Agreement, are true, accurate and complete copies of such
Articles and By-laws of Borrower and such documents remain in effect and have
not been modified.
8. Agent is hereby authorized to rely on this Certificate until a new
Certificate certified by the Secretary (or Assistant Secretary) of the Borrower
is received by the Agent, even in the event that one or more of the foregoing
individuals ceases to act in such capacity.
IN WITNESS WHEREOF, we have hereto set our hand this _______ day of
________________________, 1999.
McGrath RentCorp
By: ______________________
Title: ___________________
EXHIBIT D
REVOLVING NOTE
NOT TO EXCEED
$_____________________ San Francisco, California
<PAGE> 36
June 30, 1999
FOR VALUE RECEIVED, the undersigned, McGrath Rentcorp, a
California corporation ("Borrower"), promises to pay to [Name of Bank] (the
"Bank"), or order, on or before the Revolving Loan Termination Date, or as
otherwise provided in the Amended and Restated Credit Agreement dated as of June
30, 1999 among the Borrower, certain banks parties thereto, and Union Bank of
California, N.A. , as Agent for the Banks, as from time to time modified,
supplemented or amended, (the "Agreement), the lesser of (i) the principal sum
of _________________________________________________ Dollars
($_________________) [maximum Commitment] or (ii) the aggregate unpaid principal
amount of all Revolving Loans made by the Bank to Borrower pursuant to the
Agreement. Terms defined in the Agreement have the same meanings herein.
Borrower further promises to pay to the Bank, or order, interest
on the unpaid principal amount hereunder from time to time outstanding from the
date hereof until such amount shall have become due and payable (whether at the
stated maturity, by acceleration, or otherwise) at the rate(s) of interest and
at the times provided in the Agreement. Borrower further promises to pay
interest on any overdue payment of principal and (to the extent permitted by
law) interest as set forth in the Agreement.
Bank is authorized, but not required, to record the date, amount,
type, interest rate and Eurodollar Period (if applicable) of each Loan made by
the Bank to Borrower, and each payment made on account thereof, on its books and
records or on the schedule annexed hereto, and, in the absence of manifest
error, such recordation shall constitute prima facie evidence of the accuracy of
the information so recorded; provided, however, that failure by the Bank to make
any such recordation shall not affect any of the Obligations of Borrower.
All payments of principal, interest, fees, or other amounts due
from Borrower hereunder, shall be in Dollars and in immediately available funds,
without setoff, counterclaim or other deduction of any nature, and shall be made
to Agent, at its address set forth on the signature pages of the Agreement,
prior to 10:00 a.m., San Francisco time, on the last date permitted therefor.
Except as otherwise provided in the Agreement, if any payment of
principal or interest hereunder shall become due on a day which is not a
Business Day, such payment shall be made on the next following Business Day and
such extension of time shall be included in computing interest in connection
with such payment.
This Revolving Note is one of the "Revolving Notes" referred to
in, evidences obligations of Borrower under, and is entitled to the benefits of,
the Agreement, which, among other things, provides for the acceleration of the
maturity hereof upon the occurrence of certain circumstances and upon certain
terms and conditions. This Revolving Note supersedes and replaces that certain
Revolving Note dated December 31, 1997, as amended from time to time, in the
principal amount not to exceed __________________________________ Dollars
($__________), executed by Borrower in favor of Bank (the "Previous Note"). As
of the effective date of the Agreement, all unpaid principal, interest and other
amounts accrued and outstanding under the Previous Note shall for all purposes
be and constitute unpaid amounts outstanding under and evidenced by this
Revolving Note.
Borrower hereby expressly waives presentment, demand, notice of
dishonor, protest, as such terms are defined in Division 3 of the California
Commercial Code, and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Revolving Note
and the Agreement.
This Revolving Note shall be governed by, construed and enforced
in accordance with the laws of the State of California.
MCGRATH RENTCORP
By: ____________________________
Name: __________________________
Title: _________________________
SCHEDULE OF LOANS
<PAGE> 37
This Revolving Note evidences Loans made, continued or converted
under the Agreement to Borrower, on the dates, in the principal amounts, of the
types, bearing interest at the rates and having Eurodollar Periods (if
applicable) set forth below, subject to the payments, prepayments, continuations
and conversions of principal set forth below:
<TABLE>
<CAPTION>
Amount
Date Paid
Made, Principal Duration Prepaid
Continued Amount Type of Continued Unpaid
or of of Interest Eurodollar or Principal Notation
Converted Loan Loan Rate Period Converted Amount Made By
- --------- ---- ---- ---- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 38
EXHIBIT E
TERM NOTE
$_______________________ San Francisco, California
Date: __________________.
FOR VALUE RECEIVED, the undersigned, McGrath Rentcorp, a
California corporation ("Borrower"), promises to pay to [Name of Bank] (the
"Bank"), or order, the principal sum of
__________________________________________ Dollars ($__________________),
payable in installments on the dates and in the amounts provided for in the
Amended and Restated Credit Agreement dated as of June 30 1999 among the
Borrower, certain banks parties thereto, and Union Bank of California, N.A., as
Agent for the Banks, as from time to time modified, supplemented or amended,
(the "Agreement"), with the remaining unpaid balance of principal hereof payable
on the Term Loan Maturity Date. Terms defined in the Agreement have the same
meanings herein.
Borrower further promises to pay to the Bank, or order, interest
on the unpaid principal amount hereunder from time to time outstanding from the
date hereof until such amount shall have become due and payable (whether at the
stated maturity, by acceleration or otherwise) at the rate(s) of interest and at
the times provided in the Agreement. Borrower further promises to pay interest
on any overdue payment of principal and (to the extent permitted by law)
interest as set forth in the Agreement.
Bank is authorized, but not required, to record the date, amount,
type, interest rate and Eurodollar Period (if applicable) of each Loan made by
the Bank to Borrower, and each payment made on account thereof, on its books and
records or on the schedule annexed hereto, and, in the absence of manifest
error, such recordation shall constitute prima facie evidence of the information
so recorded; provided, however, that failure by the Bank to make any such
recordation shall not affect any of the Obligations of Borrower.
All payments of principal, interest, fees, or other amounts due
from Borrower hereunder, shall be in Dollars and in immediately available funds,
without setoff, counterclaim or other deduction of any nature, and shall be made
to Agent, at its address set forth on the signature pages of the Agreement,
prior to 10:00 a.m., San Francisco time, on the last date permitted therefor.
Except as otherwise provided in the Agreement, if any payment of
principal or interest hereunder shall become due on a day which is not a
Business Day, such payment shall be made on the next following Business Day and
such extension of time shall be included in computing interest in connection
with such payment.
This Term Note is one of the "Term Notes" referred to in,
evidences obligations of Borrower under, and is entitled to the benefits of the
Agreement, which among other things provides for the acceleration of the
maturity hereof upon the occurrence of certain circumstances and upon certain
terms and conditions. This Term Note may be prepaid only in accordance with the
terms and conditions of the Agreement.
Borrower hereby expressly waives presentment, demand, notice of
dishonor, protest, as such terms are defined in the California Commercial Code,
and all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Term Note and the Agreement.
This Term Note shall be governed by, construed and enforced in
accordance with the laws of the State of California.
MCGRATH RENTCORP
By: ____________________________
Name: __________________________
Title: _________________________
SCHEDULE OF LOANS
This Note evidences Loans made, continued or converted under the
Agreement on the dates, in the principal amounts, of the types, bearing interest
at the rates and having Eurodollar Periods (if applicable) set forth below,
subject to the payments, prepayments, continuations and conversions of principal
set forth below:
<PAGE> 39
<TABLE>
<CAPTION>
Amount
Date Paid
Made, Principal Duration Prepaid
Continued Amount Type of Continued Unpaid
or of of Interest Eurodollar or Principal Notation
Converted Loan Loan Rate Period Converted Amount Made By
- --------- ---- ---- ---- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
D-1
<PAGE> 1
EXHIBIT 4.2
June 30, 1999
Mr. Thomas J. Sauer
Vice President and Chief Financial Officer
McGrath RentCorp
5700 Las Positas Road
Livermore, CA 94550
Re: $4,000,000.00 Committed Credit Facility
Dear Mr Sauer:
Union Bank of California, N.A. ("Bank") is pleased to offer McGrath RentCorp, a
California corporation ("Borrower") a committed credit facility ("Facility")
under which the Bank will make advances to the Borrower from time to time up to
and including June 29, 2000, not to exceed at any time the maximum principal
amount of Four Million Dollars ($4,000,000), to be governed by the terms of the
enclosed Credit Line Note ("Credit Line Note") in favor of Bank, and subject to
the conditions and agreements set forth below.
1. This Facility is made available only in connection with Borrower's use of the
Bank's sweep service for management of its checking account balances ("Sweep
Service"). Therefore, this Facility shall terminate, if not earlier terminated,
on the date Borrower ceases to continue as a Sweep Service customer. Upon such
termination Bank shall have no further obligation to fund advances under this
Facility, and all amounts owing under the Credit Line Note shall become
immediately due and payable.
2. As provided in the Credit Line Note, the occurrence of an Event of Default
under the Multibank Agreement shall be a default under this Facility. The term
"Multibank Agreement" as used herein means that certain Amended and Restated
Credit Agreement dated as of June 30, 1999, by and among Borrower, Bank, Fleet
Bank, N.A. and Bank of America, National Trust & Savings Association, and shall
include any amendments thereto as are consented to by Bank. Each capitalized
term not otherwise defined herein shall have the meaning set forth in the
Multibank Agreement.
3. Borrower shall comply with, and repeats as if fully set forth herein as of
the date hereof, all of the representations, covenants and obligations of
Borrower set forth under Articles 6, 7, 8 and 11 (and including any definitions
and related provisions) of the Multibank Agreement. In the event the Multibank
Agreement terminates or expires prior to the termination or expiration of this
Facility the foregoing representations, covenants and obligations of Borrower
shall nevertheless survive as between Borrower and Bank with respect to this
Facility and shall continue in effect until this Facility terminates or expires.
No amendment or waiver of any provision of the Multibank Agreement after the
date hereof shall be effective with respect to this Facility unless the Bank
consents thereto in writing.
4. Borrower acknowledges that any amount outstanding under the Credit Line Note
is included within the definition of "Debt" and "Outside Debt" under the
Multibank Agreement.
5. Borrower shall pay to Bank a non-refundable commitment fee for this Facility
for the period of time during which this Facility is available. Such fee shall
be payable in arrears in quarterly installments on the last day of each March,
June, September, and December, and on the last day this Facility is available,
to be computed at the rate per annum equal to 0.125% on the average unused
amount of the Facility during such period, on the basis of a 360 day year.
6. This Facility letter will be governed by the laws of the State of California.
Enclosed is the original Credit Line Note and a copy of the this Facility letter
together with an Authorization to Pay Proceeds of Note and Loan Disbursement
Instructions, and any other contract, instrument or document Bank requires to be
executed and delivered in connection with this Facility (each a "Loan
Document"). The Borrower's executing the Loan Documents and returning them to
Bank together
<PAGE> 2
with an appropriate corporate resolution and incumbency certificate acceptable
to Bank constitutes its agreement to the terms and conditions of this Facility.
BORROWER AND BANK HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION ARISING UNDER THIS FACILITY LETTER, THE CREDIT LINE
NOTE OR ANY OTHER LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND ANY SUCH
CLAIM, DEMAND ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY. BORROWER OR BANK MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THIS CONSENT OF BORROWER AND
BANK TO WAIVE THEIR RIGHT TO TRIAL BY JURY.
We look forward to continuing to serve you.
Yours truly,
UNION BANK OF CALIFORNIA, N.A.
By: ______________________
Robert J. Vernagallo
Vice President
ACCEPTED AND AGREED:
MCGRATH RENTCORP, a
California Corporation
By: _____________________________
Thomas J. Sauer
Vice President and Chief Financial Officer
Date: ___________________________
D-1
<PAGE> 3
CREDIT LINE NOTE
Borrower Name
MCGRATH RENTCORP, a California corporation
<TABLE>
<S> <C> <C>
Borrower Address Office Loan Number
5700 Las Positas Road
Livermore, CA 94550 Maturity Date Amount
June 29, 2000 $4,000,000
</TABLE>
Date June 30, 1999 $4,000,000
FOR VALUE RECEIVED, on June 29, 2000, the undersigned ("Debtor") promises to pay
to the order of UNION BANK OF CALIFORNIA, N.A. ("Bank") as indicated below, the
principal sum of FOUR MILLION DOLLARS ($4,000,000), or so much thereof as is
disbursed, together with interest on the balance of such principal sum from time
to time outstanding, at a per annum rate equal to the Reference Rate, such per
annum rate to change as and when the Reference Rate shall change. Debtor may
borrow, repay and reborrow under this note.
As used herein, the term "Reference Rate" shall mean the rate announced by Bank
from time to time at its corporate headquarters as its "Reference Rate." The
Reference Rate is an index rate determined by Bank from time to time as a means
of pricing certain extensions of credit and is neither directly tied to any
external rate of interest or index nor necessarily the lowest rate of interest
charged by Bank at any given time. All computations of interest under this note
shall be made on the basis of a year of 360 days, for actual days elapsed.
1. PAYMENTS.
1.1 INTEREST PAYMENTS. Debtor shall pay interest on the last day of each
month commencing July 1999. Should interest not be so paid, it shall become a
part of the principal and thereafter bear interest as herein provided.
1.2 PRINCIPAL PAYMENTS. All principal outstanding on this note is due
and payable on the earlier of June 29, 2000 or any accelerated maturity date.
Debtor shall pay all amounts due under this note in lawful money of the United
States at Bank's San Francisco Office or such other office as may be designated
by Bank from time to time.
2. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the option of
Bank, and, to the extent permitted by law, interest shall be payable on the
outstanding principal under this note at a per annum rate equal to two percent
(2%) in excess of the interest rate specified in the initial paragraph of this
note, calculated from the date of default until all amounts payable under this
note are paid in full.
3. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include, but not
be limited to, any of the following: (a) the failure of Debtor to make any
payment required under this note when due; (b) any breach misrepresentation or
other default by Debtor, any guarantor, co-maker endorser, or any person or
entity other than Debtor providing security for this note (hereinafter
individually and collectively referred to as the "Obligor") under any security
agreement, guaranty or other agreement between Bank and any Obligor; (c) the
insolvency of any Obligor or the failure of any Obligor generally to pay such
Obligor's debts as such debts become due; (d) the commencement as to any Obligor
of any voluntary or involuntary proceeding under any laws relating to
bankruptcy, insolvency, reorganization, arrangement, debt adjustment or debtor
relief; (e) the assignment by any Obligor for the benefit of such Obligor's
creditors; (f), the appointment, or commencement of any proceedings for the
appointment, of a receiver, trustee, custodian
<PAGE> 4
or similar official for all or substantially all of any Obligor's property; (g)
the commencement of any proceeding for the dissolution or liquidation of any
Obligor; (h) the termination of existence or death of any Obligor; (i) the
failure of any Obligor to comply with any order, judgment, injunction, decree,
writ or demand of any court or other public authority; (j) the filing or
recording against any Obligor, or the property of any Obligor of any notice of
levy, notice to withhold, or other legal process for taxes other than property
taxes; (k) the default by any Obligor liable for amounts owed hereunder on any
obligation concerning the borrowing of money; (i) the issuance against any
Obligor or the property of any Obligor, of any writ of attachment, execution or
other; judicial lien; (m) the deterioration of the financial condition of any
Obligor which results in Bank deeming itself, in good faith, insecure, (n)
Debtor's failure to comply with any provision of the Multibank Agreement (as
defined in the facility letter between Debtor and Bank executed in connection
herewith), or (o) Debtor's failure to comply with any provision of the facility
letter between Debtor and Bank executed in connection herewith. Upon the
occurrence of any such default, Bank, in its discretion, may cease to advance
funds hereunder and may declare all obligations under this note immediately due
and payable; however, upon the occurrence of an event of default under d, e, f,
g, or n all principal and interest shall automatically become immediately due
and payable.
4. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this note are not
paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorneys' fees, incurred by Bank in the collection or enforcement of
this note. Debtor and any endorsers of this note, for the maximum period of time
and the full extent permitted by law (a) waive diligence, presentment, demand
notice of nonpayment, protest, notice of protest, and notice of every kind; (b)
waive the right to assert the defense of any statute of limitations to any debt
or obligation hereunder; and (c) consent to renewals and extensions of time for
the payment of any amounts due under this note. If this note is signed by more
than one party, the term 'Debtor" includes each of the undersigned and any
successors in interest thereof; all of whose liability shall be joint and
several. The receipt of any check or other item of payment by Bank, at its
option, shall not be considered a payment on account until such check or other
item of payment is honored when presented for payment at the drawee bank. Bank
may delay the credit of such payment based upon Bank's schedule of funds
availability, and interest under this note shall accrue until the funds are
deemed collected. In any action brought under or arising out of this note,
Debtor and any endorser of this note, including their successors and assigns,
hereby consents to the jurisdiction of any competent court within the State of
California, except as provided in any alternative dispute resolution agreement
executed between Debtor and Bank, and consents to service of process by any
means authorized by said state law. The term "Bank" includes, without
limitation, any holder of this note. This note shall be construed in accordance
with and governed by the laws of the State of California. This note is subject
to the terms of the facility letter between Debtor and Bank executed in
connection herewith but in the event of any conflict between the terms of such
facility letter and this note the terms of this note shall prevail.
MCGRATH RENTCORP, a
California corporation
By: _____________________________
Thomas J. Sauer
Vice President and Chief Financial Officer
D-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM McGRATH
RENTCORP FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 586
<SECURITIES> 0
<RECEIVABLES> 24,006
<ALLOWANCES> (650)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 350,554<F1>
<DEPRECIATION> (93,436)<F2>
<TOTAL-ASSETS> 286,700
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 7,768
<OTHER-SE> 93,075
<TOTAL-LIABILITY-AND-EQUITY> 286,700
<SALES> 60,133
<TOTAL-REVENUES> 60,133
<CGS> 30,293
<TOTAL-COSTS> 30,293
<OTHER-EXPENSES> 8,188
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,097
<INCOME-PRETAX> 18,555
<INCOME-TAX> 7,283
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,218<F3>
<EPS-BASIC> 0.82
<EPS-DILUTED> 0.81
<FN>
<F1>INCLUDES RENTAL EQUIPMENT, LAND, BUILDINGS, LAND IMPROVEMENTS FURNITURE AND
EQUIPMENT.
<F2>ACCUMULATED DEPRECIATION RELATED TO PP&E FOOTNOTE ABOVE.
<F3>NET INCOME INCLUDES REDUCTION OF MINORITY INTEREST IN INCOME OF SUBSIDIARY
</FN>
</TABLE>
