<PAGE>
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------
WILLIAMS SCOTSMAN, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MARYLAND 7389 52-0665775
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
8211 TOWN CENTER DRIVE
BALTIMORE, MARYLAND 21236
(410) 931-6000
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
------------------------------
MOBILE FIELD OFFICE COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEW JERSEY 7389 13-3933856
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
8211 TOWN CENTER DRIVE
BALTIMORE, MARYLAND 21236
(410) 931-6000
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
WILLSCOT EQUIPMENT, LLC
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7389 52-2037040
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
8211 TOWN CENTER DRIVE
BALTIMORE, MARYLAND 21236
(410) 931-6000
--------------------------
JOHN B. ROSS, ESQ.
VICE PRESIDENT - CORPORATE COUNSEL
8211 TOWN CENTER DRIVE
BALTIMORE, MARYLAND 21236
(410) 931-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
WITH A COPY TO:
MATTHEW NIMETZ, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
(212) 373-3000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------
If the Securities registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH AMOUNT MAXIMUM OFFERING PROPOSED AMOUNT OF
CLASS OF SECURED TO BE TO BE PRICE PER UNIT MAXIMUM AGGREGATE REGISTRATION
REGISTERED REGISTERED (1) OFFERING PRICE (1) FEE
<S> <C> <C> <C> <C>
9 7/8% Senior Notes due 2007............................... $400,000,000 99.75% $399,000,000 $120,909.09
Guarantees of 9 7/8% Senior Notes due 2007................. (2) (2) (2) None
Subordinated Guarantees of 9 7/8% Senior Notes due 2007.... (2) (2) (2) None
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended and
based upon the average of the bid and asked prices on June 27, 1997 of the
Company's outstanding 9 7/8% Senior Notes due 2007.
(2) No additional consideration will be paid by the purchasers of the 9 7/8%
Senior Notes due 2007 for the Guarantees and the Subordinated Guarantees.
Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
separate registration fee is payable for the Guarantees and the Subordinated
Guarantees.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
WILLIAMS SCOTSMAN, INC.
[LOGO]
OFFER TO EXCHANGE ITS 9 7/8% SENIOR NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ANY AND ALL OF ITS OUTSTANDING 9 7/8% SENIOR NOTES DUE 2007.
------------------
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME ON ,
1997, UNLESS EXTENDED
Williams Scotsman, Inc., formerly known as The Scotsman Group, Inc.
("Scotsman" or the "Company"), hereby offers to exchange up to $400,000,000
aggregate principal amount of its 9 7/8% Senior Notes due 2007 (the "New
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which this
Prospectus is part, for a like principal amount of its 9 7/8% Senior Notes due
2007 outstanding on the date hereof (the "Existing Notes") upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"). The
terms of the New Notes are identical in all material respects to those of the
Existing Notes, except for certain transfer restrictions and registration rights
relating to the Existing Notes. The New Notes will be issued pursuant to, and
entitled to the benefits of, the indenture, dated as of May 15, 1997 (the
"Indenture"), among the Company, Mobile Field Office Company (the "Guarantor"),
Willscot Equipment, LLC (the "Subordinated Guarantor") and The Bank of New York,
as trustee, governing the Existing Notes. The Existing Notes and New Notes
outstanding under the Indenture at any time are referred to collectively as the
"Notes." The offering of the Existing Notes on May 22, 1997 (the "Offering") was
part of the financing that was used to consummate the Recapitalization (as
defined), which was undertaken to permit certain stockholders of Scotsman
Holdings, Inc. ("Holdings"), the holding company for Scotsman, to reduce their
equity interest in Holdings and to permit the Investor Group (which includes
affiliates of The Cypress Group L.L.C. ("Cypress"), Keystone, Inc. ("Keystone")
and FW Strategic Partners, L.P. ("Strategic Partners") and certain other
investors) and existing management to acquire control of Holdings.
Interest on the Notes will be payable semi-annually in arrears on June 1 and
December 1 of each year, commencing on December 1, 1997, at the rate of 9 7/8%
per annum. The Notes will be redeemable, in whole or in part, at the option of
the Company on or after June 1, 2002 at the redemption prices set forth herein
plus accrued interest to the date of redemption. In addition, at any time on or
prior to June 1, 2000, the Company may, at its option, redeem up to 40% of the
$400 million aggregate principal amount of the Notes originally issued with the
net cash proceeds of one or more Public Equity Offerings (as defined), at a
redemption price equal to 109.875% of the aggregate principal amount of the
Notes to be redeemed plus accrued interest to the date of redemption; PROVIDED,
HOWEVER, that after giving effect to any such redemption at least 60% of the
$400 million aggregate principal amount of the Notes originally issued remains
outstanding.
The Notes are general unsecured obligations of the Company and rank PARI
PASSU in right of payment with all existing and future unsubordinated
indebtedness of the Company, if any, and senior in right of payment with all
existing and future subordinated indebtedness. The Notes are effectively
subordinated in right of payment to all secured indebtedness of the Company
(including indebtedness incurred under the New Credit Facility (as defined)). As
of May 31, 1997, the Company had approximately $497.6 million of indebtedness
outstanding (including approximately $97.3 million of secured indebtedness
outstanding under the New Credit Facility). The Company and its subsidiaries are
permitted to incur additional secured and unsecured indebtedness under the
Indenture (including indebtedness under the New Credit Facility).
The Notes are unconditionally guaranteed (the "Guarantees") on a senior
basis by the Guarantor and are unconditionally guaranteed (the "Subordinated
Guarantee") on a subordinated basis by the Subordinated Guarantor, a
newly-created special purpose subsidiary of the Company formed to hold a
substantial amount of the Company's assets. The Guarantees are general unsecured
obligations of the Guarantor and rank PARI PASSU in right of payment with all
existing and future unsubordinated indebtedness of the Guarantor and senior in
right of payment to all existing and future subordinated indebtedness of the
Guarantor. The Guarantees are effectively subordinated in right of payment to
all secured indebtedness of the Guarantor (including the Guarantor's guarantee
of the New Credit Facility (as defined herein)) to the extent of the value of
the assets securing such indebtedness. The Subordinated Guarantee is a general
unsecured obligation of the Subordinated Guarantor and is subordinated in right
of payment to all existing and future Subordinated Guarantor Senior Indebtedness
(as defined) of the Subordinated Guarantor (including the Subordinated
Guarantor's guarantee on a senior secured basis of all obligations of the
Company under or in respect of the New Credit Facility (and refinancings
thereof)).
Upon a Change of Control (as defined), (i) the Company will have the option,
at any time on or prior to June 1, 2002, to redeem the Notes, in whole but not
in part, at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium (as defined), together with accrued interest to the
date of redemption, and (ii) if the Company does not so redeem the Notes or if
such Change of Control occurs after June 1, 2002, the Company will be required
to make an offer to repurchase the Notes at a price equal to 101% of the
principal amount thereof plus accrued interest to the date of repurchase. In
addition under certain circumstances, the Company will be obligated to offer to
repurchase the Notes at 100% of the principal amount thereof plus accrued
interest, to the date of repurchase, with the proceeds of certain Asset Sales
(as defined). See "Description of the Notes."
(CONTINUED ON NEXT PAGE)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 15, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company, the Guarantor and the Subordinated Guarantor
contained in two separate Registration Rights Agreements, each dated as of May
22, 1997 (the "Registration Rights Agreements"), among (i) the Company, the
Guarantor and the Subordinated Guarantor and BT Securities Corporation,
Alex.Brown & Sons Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation, as the initial purchasers of the Existing Notes (the "Initial
Purchasers") and (ii) the Company, the Guarantor and the Subordinated Guarantor
and Oak Hill Securities Fund, L.P., as a direct purchaser of the Existing Notes
(the "Direct Purchaser").
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all of the expenses incident to the Exchange Offer. Tenders of
Existing Notes pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date (as defined) of the Exchange Offer. The Company expressly
reserves the right to terminate or amend the Exchange Offer upon the occurrence
of any of the events specified under "The Exchange Offer--Conditions to the
Exchange Offer." If any such termination or amendment occurs, the Company will
notify the Exchange Agent and will either issue a press release or give oral or
written notice to the holders of the Existing Notes as promptly as practicable.
The Exchange Offer will expire at 5:00 P.M., New York City time, on ,
1997, unless the Company, in its sole discretion, has extended the period of
time for which the Exchange Offer is open. In the event the Company terminates
the Exchange Offer and does not accept for exchange any Existing Notes with
respect to the Exchange Offer, the Company will promptly return such Existing
Notes to the holders thereof. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivery of a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Existing Notes where such Existing Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 120 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the
Existing Notes. Holders of the Existing Notes whose Existing Notes are not
tendered and accepted in the Exchange Offer will continue to hold the Existing
Notes. Following consummation of the Exchange Offer, the holders of the Existing
Notes will continue to be subject to the existing restrictions upon transfer
thereof and, except as provided herein, the Company will have no further
obligation to such holders to provide for registration under the Securities Act
of the Existing Notes held by them. To the extent Existing Notes are tendered
and accepted in the Exchange Offer, the trading market for untendered and
tendered but unaccepted Existing Notes could be adversely affected.
The Company currently does not intend to list the New Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active public market for the
New Notes will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes being tendered for exchange pursuant to the Exchange Offer.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE NEW NOTES OR EXISTING NOTES BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH
AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE
EXCHANGE PROPOSED TO BE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF EXISTING NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Commission. Reports and
other information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at Seven World Trade Center, Suite 1300, New York, New York
10048; and Northwestern Atrium Center, 500 West Madison Street (Suite 1400),
Chicago, Illinois 60661 and copies of such material may be obtained from the
Public Reference Section of the Commission, at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission also maintains
an Internet Web Site at http://www.sec.gov that contains reports and other
information.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules thereto
for further information with respect to the Company and the securities offered
hereby. Statements contained herein concerning the provisions of any documents
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete.
Pursuant to the Indenture, the Company has agreed to provide the Trustee and
holders and prospective holders of the Notes with annual, quarterly and other
reports at the times and containing the information specified in Sections 13 and
15(d) of the Exchange Act and to file such reports with the Commission, whether
or not the Company is subject to such filing requirements.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS OF THE
COMPANY, INCLUDING THE NOTES THERETO (THE "FINANCIAL STATEMENTS"), INCLUDED
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE NOTED, THE "COMPANY" OR
"SCOTSMAN" REFERS TO WILLIAMS SCOTSMAN, INC. AND ITS CONSOLIDATED SUBSIDIARIES.
FOR PURPOSES OF THIS PROSPECTUS, THE PHRASE "ON A PRO FORMA BASIS AFTER GIVING
EFFECT TO THE RECAPITALIZATION" SHALL MEAN AFTER GIVING EFFECT TO THE
RECAPITALIZATION AS IF ALL TRANSACTIONS RELATED TO THE RECAPITALIZATION OCCURRED
ON THE APPLICABLE DATE. PROSPECTIVE INVESTORS ARE URGED TO READ THIS PROSPECTUS
IN ITS ENTIRETY. CERTAIN STATEMENTS IN THE PROSPECTUS (INCLUDING IN THIS
"PROSPECTUS SUMMARY") CONSTITUTE FORWARD-LOOKING STATEMENTS. SEE "SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS."
THE COMPANY
Founded in 1946, Scotsman is the second largest lessor of mobile office
units in the United States with over 42,500 units leased through 60 branch
offices in 33 states. The Company's mobile office units provide high quality,
cost-effective relocatable space solutions to over 12,500 customers in 450
industries including construction, education, healthcare and retail. In recent
years, Scotsman's leasing operations have generated recurring revenues due to
high levels of repeat business and average lease periods of approximately 19
months. In addition to its core leasing operations, Scotsman sells new and
previously leased mobile office units and provides delivery, installation and
other ancillary products and services. For the twelve months ended March 31,
1997, Scotsman generated revenues and EBITDA of $205.2 million and $79.4
million, respectively.
The Company's fleet is generally comprised of standardized, versatile
products that can be configured to meet a wide variety of customer needs. The
units are fitted with axles and hitches and are towed to various locations. Most
units are wood frame construction, contain materials used in conventional
buildings, and are equipped with air conditioning and heating, electrical
outlets and, where necessary, plumbing facilities. Mobile office units are
durable and have an estimated useful life of 20 years. The average age of the
Company's fleet is approximately 8 years. From January 1, 1994 to December 31,
1996, the Company was able to sell used units in the ordinary course of its
business (excluding units sold pursuant to purchase options) at an average of
more than 95% of their total capitalized cost and a 20% premium to net book
value. Capitalized costs include the costs of the units as well as the costs of
significant improvements made to the units. The net book value of the lease
fleet as of March 31, 1997 was $366.0 million.
Based on its experience, management believes that the mobile office industry
(excluding manufacturing operations) exceeds $2.0 billion and has grown
significantly in recent years. This growth has been primarily driven by
population shifts, demographic trends, economic expansion, and the increased
demand for outsourcing space needs (for example, school expansion programs,
construction starts, recreation and entertainment activities.) By outsourcing
their space needs, the Company's customers are able to achieve flexibility,
preserve capital for core operations, and convert fixed costs into variable
costs.
From 1993 to 1996, the Company increased revenues at a compound annual
growth rate ("CAGR") of 17.9% to $195.1 million. Over the same period, EBITDA
grew at a CAGR of 28.2% to $75.4 million, lease fleet units grew by 59.0% to
40,662 units and the average annual utilization rate of its lease fleet
increased from 81.1% to 85.5%. The Company has achieved this growth by expanding
its lease fleet through factory purchases and acquisitions, expanding its branch
network, increasing ancillary high margin services and product lines and
improving fleet management.
3
<PAGE>
COMPETITIVE STRENGTHS
The Company attributes its success in the mobile office industry to the
following competitive strengths:
- MARKET LEADERSHIP. The Company is one of two national operators competing
in the highly fragmented mobile office industry and believes its lease
fleet is more than three times larger than that of its next largest
competitor. The Company is the first or second largest provider of leased
fleet units in most of its regional markets.
- NATIONAL PRESENCE AND CUSTOMER DIVERSITY. The Company's national presence
provides it with the benefits of (i) customer and geographic
diversification, (ii) less sensitivity to regional economic downturns,
(iii) the ability to redeploy units within its branch network to optimize
utilization levels, respond to regional economic downturns and reduce the
need for new unit purchases and (iv) economies of scale. The Company has
over 12,500 customers, the largest of which accounted for only 2.3% of
1996 revenues.
- EFFECTIVE FLEET MANAGEMENT. The Company's lease fleet is actively managed
to maximize customer satisfaction, optimize fleet utilization and improve
fleet quality and flexibility. Scotsman's proprietary management
information system provides comprehensive fleet statistics and lease
information that allows the Company to effectively monitor and allocate
its units throughout its branch network. Effective fleet management has
helped to improve the average annual utilization rate from 81.1% in 1993
to 85.5% in 1996.
- DEDICATED MARKETING AND CUSTOMER SERVICE. Through extensive marketing and
customer service programs, the Company focuses on maintaining and
expanding long-term customer relationships. Scotsman is the only industry
operator that maintains its own full-service national support staff to
prepare units for lease and maintain units while on lease. As a result of
this extensive customer service, Scotsman's leasing operations have
generated recurring revenues due to high levels of repeat business.
- PROVEN TRACK RECORD. Since 1993, the current management team has
substantially increased the Company's utilization rate of its fleet,
increased the size of its fleet by approximately 17,100 units or 67%,
doubled the size of its branch network and completed 15 strategic
acquisitions. As a result of these and other factors, since 1993, EBITDA
has increased at a CAGR of 28.2% to $75.4 million in 1996. Nearly all of
the top nine executive officers of the Company (including the President
and Chief Executive Officer, Chief Financial Officer and the Northern and
Southern Division Managers) retained all of their common stock and stock
options in Holdings (a total of $10.9 million at the Common Stock
Repurchase price) as part of the Recapitalization. This represents a
significant economic commitment to and confidence in the Company.
4
<PAGE>
BUSINESS AND GROWTH STRATEGY
Management's business and growth strategy includes the following:
- FLEET AND BRANCH EXPANSION. The Company plans to continue to capitalize on
the industry's favorable growth trends by increasing customer penetration
and fleet size in existing markets. In addition, the Company plans to open
branches in new markets where positive business fundamentals exist. From
January 1, 1994 to March 31, 1997, the Company increased its number of
branches from 30 to 60 and the number of units from approximately 25,500
to 42,500. The Company has opened five branches in the first three months
of 1997 and plans to continue expanding its network.
- SELECTIVE FLEET ACQUISITIONS. To complement its internal fleet and branch
expansion, the Company plans to capitalize on the industry's fragmentation
and expand its geographic coverage by making selective acquisitions of
mobile office and storage product lease fleets. From January 1, 1994 to
March 31, 1997, Scotsman made 15 acquisitions of approximately 10,500 units
for a total purchase price of $55.0 million. These units have accounted for
approximately 30% of the value of the Company's total fleet purchases
during that period.
The Company has generally been able to acquire units at less than the cost
of new factory purchased units. Typically, there is a low cost of
integrating acquired fleets and acquired units have existing leases that
generate immediate revenues and EBITDA. In addition, the Company has
historically been able to improve the financial operating performance,
utilization and growth rates of acquired fleets.
- ANCILLARY PRODUCTS AND SERVICES. The Company continues to identify new
applications for its existing products, diversify into new product
offerings and deliver ancillary products and services to leverage the
Company's existing branch network. For example, in 1996, the Company began
focusing on the market for storage product units, which are used for
secured storage space. Since January 1, 1996, the Company has completed
four acquisitions totaling approximately 2,050 storage units. Ancillary
products and services also include the rental of steps, ramps and
furniture.
- EDUCATION MARKET TRENDS. The Company believes that the education market
accounted for approximately 19% of 1996 revenues and offers growth
opportunities as a result of the following: (i) an increase in state and
local initiatives governing maximum class sizes, (ii) state and local
governmental pressures to decrease spending and find cost-effective ways
to expand classroom capacity, and (iii) increased interstate and
intrastate migrations necessitating rapid expansion of education space.
For example, California has mandated a statewide classroom size reduction
initiative to lower class sizes to 20 students from an average of
approximately 29 in kindergarten through third grade, which the Company
believes will increase demand for mobile office units for classrooms in
California.
5
<PAGE>
THE RECAPITALIZATION
On April 11, 1997, Holdings, Odyssey Partners, L.P. ("Odyssey") and certain
other stockholders of the Company (including members of senior management of the
Company) entered into a Recapitalization Agreement (the "Recapitalization
Agreement") with the Investor Group. Pursuant to the Recapitalization Agreement,
on May 22, 1997, Holdings repurchased 3,210,679 shares of its outstanding common
stock (the "Holdings Common Stock") for an aggregate of approximately $293.8
million in cash and approximately $21.8 million of Promissory Notes from Odyssey
and certain other existing stockholders (the "Common Stock Repurchase") and
issued 1,475,410 shares of Holdings Common Stock to the Investor Group for $135
million (the "Common Stock Issuance"). After giving effect to the
Recapitalization, on a primary basis, (i) the Investor Group and (ii) Odyssey
and certain other prior stockholders of Holdings (including members of senior
management) own approximately 90% and 10%, respectively, of the outstanding
Holdings Common Stock. The offering of the Existing Notes (the "Offering") was
part of an overall recapitalization of the Company and Holdings (the
"Recapitalization") which included the Common Stock Repurchase, the Common Stock
Issuance, tender offers and related consent solicitations for Scotsman's 9 1/2%
Senior Secured Notes due 2000 (the "Senior Secured Notes") and Holdings' Series
B 11% Senior Notes due 2004 (the "Holdings Notes") and the refinancing of all
outstanding indebtedness under the Company's prior credit facility (the "Prior
Credit Facility") with a new $300 million revolving bank credit facility (the
"New Credit Facility"). As part of the Recapitalization, a special purpose
subsidiary was created to acquire and hold certain Rental Equipment (as defined
in "Description of the Notes--Certain Definitions") primarily in cases where
such Rental Equipment is not evidenced by certificates of title. See "The
Recapitalization."
The following table sets forth the sources and uses of funds in the
Recapitalization:
<TABLE>
<CAPTION>
AMOUNT
SOURCES OF FUNDS (IN MILLIONS)
- ------------------------------------------------ -------------
<S> <C>
AMOUNT
USES OF FUNDS(3) (IN MILLIONS)
- ------------------------------------------------ -------------
</TABLE>
<TABLE>
<S> <C>
Borrowings under New Credit Facility
(1)..................................... $ 109.1
Proceeds from the Offering................ 400.0
Proceeds from Common Stock Issuance....... 135.0
Equity rollover (2)....................... 26.4
-----------
Repayment of Prior Credit Facility........ $ 119.0
Purchase of Senior Secured Notes (4)...... 179.8
Purchase of Holdings Notes (5)............ 32.2
Common Stock Repurchase (6)............... 271.9
Equity rollover (2)....................... 26.4
Payments to cancel options (7)............ 2.5
Deferred compensation plan payments....... 6.2
Transaction fees and expenses............. 32.5
-----------
</TABLE>
<TABLE>
<S> <C>
Total................................. $ 670.5
-----------
-----------
Total................................. $ 670.5
-----------
-----------
</TABLE>
- ------------------------
(1) Includes approximately $2.8 million the Company expects to borrow within the
next sixty days to fund expenses related to the Recapitalization.
(2) Represents shares of Holdings Common Stock held by Odyssey and shares and
stock options held by management which remained outstanding after the
Recapitalization. Options are valued based on the difference between the per
share repurchase price under the Recapitalization Agreement and the option
exercise price.
(3) As part of the Recapitalization, the Company transferred by dividend
approximately $181.3 million to Holdings, its parent corporation, to effect
the Common Stock Repurchase and the Holdings Tender Offer (as defined) and
to pay certain fees and expenses.
(4) Based upon a tender offer price of 104.83% plus accrued and unpaid interest
to May 22, 1997 and fees.
(5) Based upon a tender offer price of 107.36% plus accrued and unpaid interest
to May 22, 1997 and fees.
(6) Under the Recapitalization Agreement, the existing stockholders had the
option to receive either cash or promissory notes issued by Holdings (the
"Promissory Notes") in exchange for Holdings Common Stock. The Promissory
Notes mature on January 15, 1998 and bear interest at a fixed rate based on
forward LIBOR. To fund the Promissory Notes upon their maturity, the Company
will transfer sufficient funds to Holdings in the form of a dividend. The
Company currently expects to borrow such funds under the New Credit
Facility. Approximately $21.8 million aggregate principal amount of the
Promissory Notes were issued. The Promissory Notes are supported by a
stand-by letter of credit in the amount of $22.7 million issued on behalf of
the Company for the benefit of the holders of the Promissory Notes.
(7) Under the Recapitalization Agreement, the holders of the stock options to
acquire Holdings Common Stock had the option to receive either a cash
payment in exchange for the cancellation of their stock options or to
continue their investment in such options. Stock options to acquire 42,800
shares of Holdings Common Stock were cancelled in the Recapitalization.
6
<PAGE>
As of March 31, 1997, the Company had $71.9 million of stockholder's equity.
On such date, on a pro forma basis after giving effect to the Recapitalization,
the Company would have had approximately $120.6 million of stockholder's deficit
(before giving effect to the dividend to Holdings to fund the repayment of the
Promissory Notes upon their maturity). On May 31, 1997, the Company had $497.6
million of outstanding indebtedness.
INVESTOR GROUP
As a result of the Recapitalization, Holdings is controlled by the Investor
Group. The Investor Group has extensive experience in investing in leveraged
companies. Generally, the members of the Investor Group seek to team with
manager/partners to invest in established operating businesses that have
historically demonstrated strong cash flow generating ability and that have a
favorable outlook for growth. Cypress manages a $1.05 billion private equity
fund which seeks to achieve long-term capital appreciation through investing in
a number of privately negotiated transactions. Since its founding, The Cypress
Group L.L.C. has made investments in Cinemark USA, Inc. and AMTROL Inc. Prior to
founding Cypress, the Cypress professionals managed the 1989 merchant banking
fund of Lehman Brothers Inc., which included investments in Infinity
Broadcasting Corporation, Lear Corporation, and together with Keystone, Wometco
Cable Corp. and Atlanta and Georgia Cable. Keystone, formerly Robert M. Bass
Group, Inc., is the principal investment entity of Robert M. Bass. Since 1987,
Keystone and associated entities have directly and indirectly sponsored over 25
leveraged acquisitions valued at more than $6.0 billion. These acquisitions have
included American Savings Bank, F.A., Bell & Howell Company, National
Reinsurance Corporation, Wometco Cable Corp. and Atlanta and Georgia Cable.
Strategic Partners is a Delaware limited partnership formed to invest primarily
in public and private equity securities. Mr. Bass is the lead investor in
Strategic Partners and the partners of its general partner are senior managers
of and other individuals associated with Keystone.
7
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered........... Up to $400,000,000 aggregate principal amount of 9 7/8%
Senior Notes due 2007 (the "New Notes") which have been
registered under the Securities Act. The terms of the New
Notes and those of the Existing Notes are identical in all
material respects, except for certain transfer restrictions
relating to the Existing Notes.
The Exchange Offer........... The New Notes are being offered in exchange for a like
principal amount of Existing Notes. Existing Notes may be
exchanged only in integral multiples of $1,000. The issuance
of the New Notes is intended to satisfy obligations of the
Company under the Registration Rights Agreements.
Expiration Date;
Withdrawal of Tender........ The Exchange Offer will expire at 5:00 p.m., New York City
time, on , 1997, or such later date and time to which
it is extended by the Company. The tender of Existing Notes
pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date. Any Existing Notes not
accepted for exchange for any reason will be returned
without expense to the tendering holder thereof as promptly
as practicable after the expiration or termination of the
Exchange Offer.
Conditions to the Exchange
Offer....................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The Company
currently expects that each of the conditions will be
satisfied and that no waivers will be necessary. See "The
Exchange Offer--Conditions to the Exchange Offer."
Procedures for Tendering
Existing Notes.............. Unless a tender of Existing Notes is effected pursuant to
the procedures for book-entry transfer as provided herein,
each holder of Existing Notes wishing to accept the Exchange
Offer must complete, sign and date a Letter of Transmittal,
or a facsimile thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise deliver
such Letter of Transmittal, or such facsimile, together with
such Existing Notes and any other required documentation, to
the Exchange Agent (as defined) at the address set forth
herein. See "The Exchange Offer--Procedures for Tendering
Existing Notes."
Use of Proceeds.............. There will be no proceeds to the Company from the exchange
of Notes pursuant to the Exchange Offer.
Certain Federal Income
Tax Considerations.......... The exchange pursuant to the Exchange Offer should not be a
taxable event for federal income tax purposes. See "Certain
Federal Income Tax Considerations."
Exchange Agent............... The Bank of New York is serving as the Exchange Agent in
connection with the Exchange Offer.
</TABLE>
8
<PAGE>
CONSEQUENCE OF EXCHANGING EXISTING NOTES
PURSUANT TO THE EXCHANGE OFFER
Based on certain no action letters issued by the staff of the Commission to
third parties in unrelated transactions, the Company believes that New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any holder who is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or (ii) any broker-dealer that purchases Notes from the Company to resell
pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other
available exemption) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of the holder's business and such holders have
no arrangement or understanding with any person to participate in a distribution
of such New Notes and are not participating in, and do not intend to participate
in, the distribution of such New Notes. By tendering, each holder will represent
to the Company in the Letter of Transmittal that, among other things, the New
Notes acquired pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving such New Notes whether or not such
person is the holder, that neither the holder nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such New Notes, that neither the holder nor any such other person is
participating in or intends to participate in the distribution of such New Notes
and that neither the holder nor any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company. Each broker-dealer
that receives New Notes for its own account in exchange for Existing Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution." In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes may not
be offered or sold unless they have been registered or qualified for sale in
such jurisdiction or an exemption from registration or qualification is
available and complied with. The Company has agreed, pursuant to the
Registration Rights Agreements and subject to certain specified limitations
therein, to register or qualify the New Notes for offer or sale under the
securities or blue sky laws of such jurisdictions as any holder of the Notes
reasonably requests in writing. If a holder of Existing Notes does not exchange
such Existing Notes for New Notes pursuant to the Exchange Offer, such Existing
Notes will continue to be subject to the restrictions on transfer contained in
the legend thereon. In general, the Existing Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. See "The Exchange Offer--Consequences of Failure to
Exchange; Resales of New Notes."
The Existing Notes are currently eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
Following commencement of the Exchange Offer but prior to its consummation, the
Existing Notes may continue to be traded in the PORTAL market. Following
consummation of the Exchange Offer, the New Notes will not be eligible for
PORTAL trading.
9
<PAGE>
THE NOTES
Except as otherwise indicated, the following description relates both to the
Existing Notes and to the New Notes to be issued in exchange for Existing Notes
in connection with the Exchange Offer. The New Notes will be obligations of the
Company evidencing the same indebtedness as the Existing Notes, and will be
entitled to the benefits of the same Indenture. The form and terms of the New
Notes are the same as the form and terms of the Existing Notes, except that the
New Notes have been registered under the Securities Act and therefore will not
bear legends restricting the transfer thereof. For a more complete description
of the Notes, see "Description of the Notes." Throughout this Prospectus,
references to the "Notes" refer to the New Notes and the Existing Notes
collectively.
<TABLE>
<S> <C>
ISSUER............................ Williams Scotsman, Inc. (the "Issuer")
MATURITY DATE..................... June 1, 2007.
INTEREST RATE..................... The Notes bear interest at the rate of 9 7/8% per annum.
INTEREST PAYMENT DATES............ Interest on the Notes will be payable semi-annually in
arrears on each June 1 and December 1, commencing
December 1, 1997.
RANKING........................... The Notes are general unsecured obligations of the
Issuer and rank PARI PASSU in right of payment with all
existing and future unsubordinated indebtedness of the
Issuer and senior in right of payment to all existing
and future subordinated indebtedness of the Issuer. The
Notes are effectively subordinated in right of payment
to all secured indebtedness of the Issuer (including
indebtedness incurred under the New Credit Facility and
any Senior Secured Notes to the extent not repurchased
in the Recapitalization) to the extent of the value of
the assets securing such indebtedness. As of May 31,
1997, the Issuer had approximately $497.6 million of
indebtedness outstanding (including approximately $97.3
million of secured indebtedness outstanding under the
New Credit Facility). The New Credit Facility provides
for a total line of revolving credit of up to $300
million subject to the satisfaction of certain
requirements (including a borrowing base test).
GUARANTEES........................ The Notes are unconditionally guaranteed on a senior
basis by the Guarantor and on a subordinated basis by
the Subordinated Guarantor. The Guarantees are general
unsecured obligations of the Guarantor and rank PARI
PASSU in right of payment with all existing and future
unsubordinated indebtedness of the Guarantor and senior
in right of payment to all existing and future
subordinated indebtedness of the Guarantor. The
Guarantees are effectively subordinated in right of
payment to all secured indebtedness of the Guarantor
(including the Guarantor's guarantee of the New Credit
Facility) to the extent of the value of the assets
securing such indebtedness. The Subordinated Guarantee
is a general unsecured obligation of the Subordinated
Guarantor and is subordinated in right of payment to all
existing and future Subordinated Guarantor Senior
Indebtedness (including the guarantee on a senior
secured basis by the Subordinated Guarantor of all
obligations of the Issuer under or in respect of the New
Credit Facility (and refinancings thereof)).
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
OPTIONAL REDEMPTION............... The Notes are redeemable in whole or in part, at the
option of the Issuer on or after June 1, 2002, at the
redemption prices set forth herein plus interest to the
date of redemption. In addition, at any time on or prior
to June 1, 2000, the Issuer may, at its option, redeem
up to 40% of the $400 million aggregate principal amount
of the Notes originally issued with the net cash
proceeds of one or more Public Equity Offerings, at a
redemption price equal to 109.875% of the aggregate
principal amount of the Notes to be redeemed plus
accrued interest to the date of redemption; PROVIDED,
HOWEVER, that after giving effect to any such redemption
at least 60% of the $400 million aggregate principal
amount of the Notes originally issued remains
outstanding.
CHANGE OF CONTROL................. Upon a Change of Control, (i) the Company will have the
option, at any time on or prior to June 1, 2002, to
redeem the Notes, in whole but not in part, at a
redemption price equal to 100% of the principal amount
thereof plus the Applicable Premium, together with
accrued interest, to the date of redemption, and (ii) if
the Company does not so redeem the Notes or if such
Change of Control occurs after June 1, 2002, the Company
will be required to make an offer to repurchase the
Notes at a price equal to 101% of the principal amount
thereof, plus accrued interest, to the date of
repurchase.
CERTAIN COVENANTS................. The Indenture governing the Notes (the "Indenture")
contains certain covenants that limit the ability of the
Issuer and its restricted subsidiaries to, among other
things, incur additional indebtedness, pay dividends or
make certain other restricted payments, consummate
certain asset sales, enter into certain transactions
with affiliates, incur liens, impose restrictions on the
ability of a restricted subsidiary to pay dividends or
make certain payments to the Issuer and its restricted
subsidiaries, merge or consolidate with any other person
or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the
Issuer. In addition, under certain circumstances, the
Issuer will be required to offer to purchase the Notes,
in whole or in part, at a purchase price equal to 100%
of the principal amount thereof plus accrued interest to
the date of repurchase, with the proceeds of certain
Asset Sales (as defined).
</TABLE>
For additional information regarding the Notes, see "Description of the
Notes."
11
<PAGE>
COMPARISON OF NEW NOTES WITH EXISTING NOTES
<TABLE>
<S> <C>
Freely Transferable............... Generally, the New Notes will be freely transferable
under the Securities Act by holders thereof other than
any holder that is either an affiliate of the Company or
a broker-dealer that purchased the Notes from the
Company to resell pursuant to Rule 144A or any other
available exemption. The New Notes otherwise will be
substantially identical in all material respects
(including interest rate and maturity) to the Existing
Notes. See "The Exchange Offer."
Registration Rights............... The holders of Existing Notes currently are entitled to
certain registration rights pursuant to two separate
Registration Rights Agreements (the "Registration Rights
Agreements"), each dated as of May 22, 1997, among (i)
the Company, the Guarantor, the Subordinated Guarantor
and the Initial Purchasers and (ii) the Company, the
Guarantor, the Subordinated Guarantor and the Direct
Purchaser. However, upon consummation of the Exchange
Offer, subject to certain exceptions, holders of
Existing Notes who do not exchange their Existing Notes
for New Notes in the Exchange Offer will no longer be
entitled to registration rights and will not be able to
offer or sell their Existing Notes, unless such Existing
Notes are subsequently registered under the Securities
Act (which, subject to certain limited exceptions, the
Company will have no obligation to do), except pursuant
to an exemption from, or in a transaction not subject
to, the Securities Act and applicable state securities
laws. See "Risk Factors -- Adverse Consequences of
Failure to Adhere to Exchange Offer Procedures."
Absence of a Public Market for the
New Notes....................... The New Notes are new securities and there is currently
no established market for the New Notes. Accordingly,
there can be no assurances as to the development or
liquidity of any market for the New Notes. The Company
does not intend to apply for listing on a securities
exchange of the New Notes.
</TABLE>
RISK FACTORS
Holders of Existing Notes and prospective purchasers of New Notes should
carefully consider all of the information set forth in this Prospectus and, in
particular, should evaluate the specific factors set forth under "Risk Factors"
in connection with the Exchange Offer.
12
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The summary historical and unaudited pro forma financial data presented
below are derived from the Financial Statements, which are presented elsewhere
herein. The financial data for the three months ended March 31, 1996 and 1997
and the twelve months ended March 31, 1997 are derived from the unaudited
interim financial statements of the Company, which in the opinion of management
of the Company, have been prepared on the same basis as Financial Statements
included elsewhere in this Prospectus. Results of operations for the three
months ended March 31, 1997 are not necessarily indicative of the results that
may be expected for the full year ending December 31, 1997. For additional
information, see "Capitalization," "Selected Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE MONTHS
YEAR ENDED THREE MONTHS ENDED ENDED
DECEMBER 31, MARCH 31, MARCH 31,
-------------------------------- -------------------- --------------
1994 1995 1996 1996 1997 1997
--------- --------- ---------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Revenues............................................... $133,975 $158,520 $195,142 $42,644 $52,716 $205,214
Cost of sales and services............................. 81,934 90,467 109,499 23,877 29,547 115,169
--------- --------- ---------- --------- --------- --------------
Gross profit....................................... 52,041 68,053 85,643 18,767 23,169 90,045
--------- --------- ---------- --------- --------- --------------
Selling, general and administrative expenses........... 29,303 36,295 42,260 10,864 12,118 43,514
Other depreciation and amortization.................... 1,349 1,851 2,411 555 612 2,468
Interest expense....................................... 18,705 22,485 25,797 6,263 6,747 26,281
Restructuring costs.................................... 912 -- -- -- -- --
Income taxes........................................... 700 2,863 5,980 418 1,424 6,986
--------- --------- ---------- --------- --------- --------------
Net earnings....................................... $1,072 $4,559 $9,195 $667 $2,268 $10,796
--------- --------- ---------- --------- --------- --------------
--------- --------- ---------- --------- --------- --------------
OTHER DATA:
EBITDA (1)............................................. $42,067 $56,550 $75,371 $15,249 $19,268 $79,390
EBITDA margin (1)...................................... 31.4% 35.7% 38.6% 35.8% 36.6% 38.7%
Pro forma cash interest expense (2)(3)................. -- -- $50,295 -- $12,407 $50,943
Utilization rate (4)................................... 82.9% 81.1% 85.5% 82.0% 85.8% 86.2%
Lease fleet units (end of period)...................... 33,017 37,386 40,662 37,440 42,585 42,585
Net capital expenditures for lease fleet (5)........... $55,397 $64,443 $62,564 $5,599 $17,752 $74,717
Non-lease fleet capital expenditures................... 3,341 6,871 10,284 1,464 2,703 11,523
Number of branches..................................... 36 49 55 51 60 60
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31,
1997
AS OF DECEMBER 31, ----------
1996 ACTUAL
------------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Lease equipment, gross.................................. $423,703 $441,867
Lease equipment, net.................................... 356,183 365,993
Total assets............................................ 428,697 442,424
Total debt (6).......................................... 268,753 275,262
Stockholder's equity (deficit).......................... 69,633 71,901
<CAPTION>
AS ADJUSTED(2)
--------------
<S> <C>
BALANCE SHEET DATA:
Lease equipment, gross.................................. $441,867
Lease equipment, net.................................... 365,993
Total assets............................................ 468,430
Total debt (6).......................................... 509,440
Stockholder's equity (deficit).......................... (120,582)
</TABLE>
- ------------------------------
(1) EBITDA represents net earnings before deducting income taxes, interest,
restructuring costs, the non-cash portion of deferred compensation, and
depreciation and amortization. EBITDA and EBITDA margin data, which are not
measures of financial performance under generally accepted accounting
principles, are presented because such data are used by certain investors to
determine the Company's ability to meet historical debt service
requirements. Such data should not be considered as an alternative to net
earnings as an indicator of the Company's operating performance or as an
alternative to cash flows as measures of liquidity.
(2) Pro forma to give effect to the transactions contemplated by the
Recapitalization as if such transactions had occurred at the beginning of
the applicable period (and in the case of balance sheet data at the end of
such period). Assumes that the interest
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
13
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
rate for borrowing under the New Credit Facility is 8.25% and the commitment
fee charged on the unused commitment thereunder is 0.50%.
(3) Cash interest expense represents interest expense less amortization of
deferred financing costs.
(4) Utilization rate is defined as units on rent divided by the total units in
the Company's lease fleet. Units on rent and total units are calculated
based on the average of the number of such units at the end of each month
during the applicable period.
(5) Net capital expenditures for lease fleet represents purchases, asset
acquisitions, and other capitalized costs of units, reduced by the book
values of sold, previously leased units which were $6,425, $7,653 and $9,713
in 1994, 1995, and 1996 respectively, and were $2,075 and $2,566 in the
three months ended March 31, 1996 and 1997, respectively and $10,204 in the
twelve months ended March 31, 1997. In 1994, net capital expenditures
includes $16,648 of lease fleet additions related to the acquisition of
Mobile Field Office Company.
(6) Does not include $3,500 aggregate principal amount of long-term debt related
to discontinued manufacturing operations.
14
<PAGE>
RISK FACTORS
Set forth below are the principal risk factors involved in an exchange of or
investment in the Notes. Holders of Existing Notes and prospective purchasers of
the New Notes should carefully consider these risk factors as well as the other
information set forth elsewhere in this Prospectus, which may affect a decision
to acquire the New Notes. For a discussion of certain potential tax consequences
of such investment, see "Certain Federal Income Tax Considerations."
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
The Company incurred substantial indebtedness in connection with the
Recapitalization. As of May 31, 1997, the Company had total indebtedness of
$497.6 million. After giving pro forma effect to the Recapitalization as of
March 31, 1997, the Company would have had common stockholder's deficit of
$120.6 million (before giving effect to the dividend to Holdings to fund the
repayment of the Promissory Notes upon their maturity). Although the Indenture
contains limitations on the amount of additional Indebtedness (as defined
herein) that the Company may incur, under certain circumstances the amount of
such Indebtedness could be substantial and, in any case, such Indebtedness may
be secured. Although the Indenture limits the incurrence of Indebtedness and the
issuance of preferred stock of certain of the Company's subsidiaries, such
limitation is subject to a number of significant qualifications. Moreover, the
Indenture does not impose any limitation on the incurrence by such subsidiaries
of liabilities that are not considered Indebtedness under the Indenture.
Finally, Unrestricted Subsidiaries (as defined herein) are generally permitted
to incur Indebtedness without restriction under the Indenture. See "Description
of the Notes--Certain Covenants--Limitation on Indebtedness."
The degree to which the Company is leveraged could have significant
consequences to holders of the Notes, including the following: (i) the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired; (ii) a
substantial portion of the Company's cash flow from operations must be dedicated
to the payment of interest on the Notes and its other existing indebtedness,
thereby reducing the funds available to the Company for other purposes; (iii)
the agreements governing the Company's long-term indebtedness contain certain
restrictive financial and operating covenants; (iv) the indebtedness under the
New Credit Facility will be at variable rates of interest, which would cause the
Company to be vulnerable to increases in interest rates; (v) all of the
indebtedness outstanding under the New Credit Facility and the guarantees
thereof will be secured by substantially all the assets of the Company, the
Guarantors and the Subordinated Guarantor; (vi) the New Credit Facility has an
expiration date prior to the stated maturity of the Notes; (vii) the Company is
substantially more leveraged than certain of its competitors, which might place
the Company at a competitive disadvantage; (viii) the Company may be hindered in
its ability to pursue business opportunities; and (ix) the Company's substantial
degree of leverage could make it more vulnerable in the event of a downturn in
general economic conditions or in its business.
The Company may be required to refinance all or a portion of the New Credit
Facility at or prior to its maturity, which is prior to the maturity of the
Notes. Potential measures to raise cash may include the sale of assets or
equity, or by obtaining additional debt financing. However, the Company's
ability to raise funds by selling assets is restricted by the New Credit
Facility, and its ability to effect equity financings is dependent on results of
operations and market conditions. In the event that the Company is unable to
refinance the New Credit Facility or raise funds through asset sales, sales of
equity or otherwise, its ability to pay principal of and interest on the Notes
would be adversely affected.
EFFECT OF SUBORDINATION TO SECURED INDEBTEDNESS; ASSET ENCUMBRANCE
The Notes are unsecured and thus, will be effectively subordinated in right
of payment to any secured indebtedness of the Company, to the extent of the
value of any assets securing such indebtedness. The indebtedness outstanding
under the New Credit Facility will be secured by liens on substantially all of
the property of the Company, the Guarantors and the Subordinated Guarantor. The
New Credit Facility
15
<PAGE>
provides for a total line of revolving credit of up to $300 million subject to
the satisfaction of certain requirements (including a borrowing base test). The
Company had total secured indebtedness of $97.3 million at May 31, 1997. In
addition to indebtedness under the New Credit Facility and the Senior Secured
Notes, the Indenture also permits the Company and its Restricted Subsidiaries
(as defined herein) to incur additional secured indebtedness under certain
circumstances. See "Description of the Notes--Certain Covenants--Limitation on
Indebtedness."
The Subordinated Guarantee is a general unsecured obligation of the
Subordinated Guarantor and is subordinated in right of payment to all existing
and future Subordinated Guarantor Senior Indebtedness, including the guarantee
on a senior secured basis by the Subordinated Guarantor of all obligations of
the Issuer under or in respect of the New Credit Facility (and refinancings
thereof). Under certain circumstances, the Subordinated Guarantor may not make
payments in respect of the Subordinated Guarantee if a payment default or
non-payment default exists with respect to Subordinated Guarantor Senior
Indebtedness. In the event that holders of the Notes are required to turn over
amounts received by them to the holders of the Subordinated Guarantor Senior
Indebtedness, the holders of the Notes will be subrogated to the rights of the
holders of the Subordinated Guarantor Senior Indebtedness (upon the full payment
of all Subordinated Guarantor Senior Indebtedness in cash or cash equivalents)
and therefore subject to any available defenses or avoidance powers with respect
to such indebtedness. Under such circumstances, if the liens of the holders of
the Subordinated Guarantor Senior Indebtedness were released or failed to
constitute perfected liens, the holders of the Notes could lose the benefits of
such security interests and be adversely affected. See "Description of the
Notes--Ranking" and "--Subordinated Guarantee of the Notes."
The New Credit Facility includes certain covenants that, among other things,
restrict: (i) the making of investments, loans and advances and the paying of
dividends and other restricted payments; (ii) the incurrence of additional
indebtedness; (iii) the granting of liens, other than liens created pursuant to
the New Credit Facility and certain permitted liens; (iv) mergers,
consolidations, and sales of all or a substantial part of the Company's business
or property; (v) the sale of assets; and (vi) the making of capital
expenditures. The ability of the Company to comply with these and other
provisions of the New Credit Facility may be affected by events beyond the
Company's control. The breach of any of these covenants could result in a
default under the New Credit Facility, in which case, depending on the actions
taken by the lenders thereunder or their successors or assignees, such lenders
could elect to declare all amounts borrowed under the New Credit Facility,
together with accrued interest, to be due and payable, and the Company could be
unable to make payments of interest and principal on the Notes until the default
is cured or all amounts borrowed under the New Credit Facility are paid or
satisfied in full. If the Company were unable to repay such borrowings, such
lenders could proceed against their collateral. If the indebtedness under the
New Credit Facility were to be accelerated, there can be no assurance that the
assets of the Company would be sufficient to repay in full such indebtedness and
the other indebtedness of the Company, including the Notes. See "Description of
The New Credit Facility" and "Description of the Notes--Ranking."
RESTRICTIVE DEBT COVENANTS
The Indenture imposes significant operating and financial restrictions on
the Company. Such restrictions significantly limit or prohibit, among other
things, the ability of the Company and its restricted subsidiaries to incur
additional indebtedness, incur liens, pay dividends or make certain other
restricted payments or investments, consummate certain asset sales, enter into
certain transactions with affiliates, impose restrictions on the ability of a
restricted subsidiary to pay dividends or make certain payments to the Company,
merge or consolidate with any other person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of the assets of the
Company. These restrictions, in combination with restrictions imposed by the New
Credit Facility, could limit the ability of the Company to respond to market
conditions or meet extraordinary capital needs or otherwise restrict corporate
activities. There can be no assurances that such restrictions will not adversely
affect the ability of the Company to finance its
16
<PAGE>
future operations or capital needs. See "Description of The New Credit Facility"
and "Description of the Notes--Certain Covenants."
POSSIBLE INABILITY TO REPURCHASE NOTES UPON A CHANGE OF CONTROL
The Indenture provides that, upon the occurrence of any Change of Control,
under certain circumstances, the Company will be required to make an offer (a
"Change of Control Offer") to repurchase the Notes at a price equal to 101% of
the principal amount thereof, together with accrued interest, to the date of
repurchase. Any Change of Control under the Indenture would constitute a default
under the New Credit Facility. Therefore, upon the occurrence of a Change of
Control, the lenders under the New Credit Facility would have the right to
accelerate the Company's obligations under the New Credit Facility. Upon such
event, such lenders would be entitled to receive payment of all outstanding
obligations under the New Credit Facility. See "Description of the New Credit
Facility." If a Change of Control were to occur and waivers under the New Credit
Facility were not obtained (or such indebtedness was not refinanced), it is
unlikely that the Company would be able to repay all of its obligations under
the New Credit Facility and the Notes. Consequently, it is unlikely that the
Company would have sufficient funds available to repurchase the Notes pursuant
to the Change of Control Offer in the absence of a waiver under the New Credit
Facility or alternative financing.
RISK OF FRAUDULENT TRANSFER LIABILITY
The Company believes that the indebtedness represented by the Notes was
incurred for proper purposes and in good faith, and that, based on asset
valuations and other financial information, the Company is solvent, will have
sufficient capital for carrying on its businesses and will be able to pay its
debts as they mature. Notwithstanding the Company's belief, if a court of
competent jurisdiction in a suit by an unpaid creditor or a representative of
creditors (such as a trustee in bankruptcy or a debtor-in-possession) were to
find that either the Company did not receive fair consideration or reasonably
equivalent value for issuing the Notes and, at the time of the incurrence of
indebtedness represented by the Notes, the Company was insolvent, was rendered
insolvent by reason of such incurrence, was engaged in a business or transaction
for which its remaining assets constituted unreasonably small capital, intended
to incur, or believed that it would incur, debts beyond its ability to pay as
such debts matured, or intended to hinder, delay or defraud its creditors, such
court could avoid such indebtedness, subordinate such indebtedness to other
existing and future indebtedness of the Company or take other action detrimental
to the holders of the Notes. The measure of insolvency for purposes of the
foregoing will vary depending upon the law of the relevant jurisdiction.
Generally, however, a company would be considered insolvent for purposes of the
foregoing if the sum of the Company's debts is greater than all the Company's
property at a fair valuation, or if the present fair saleable value of the
Company's assets is less than the amount that will be required to pay its
probable liability on its existing debts as they become absolute and matured.
In addition, the Guarantees and the Subordinated Guarantee may be subject to
review under relevant federal and state fraudulent conveyance and similar
statutes in a bankruptcy or reorganization case or a lawsuit by or on behalf of
creditors of any of the Guarantors or the Subordinated Guarantor, as the case
may be. In such a case, the analysis set forth above would generally apply,
except that the Guarantees could also be subject to the claim that, since
Guarantees and the Subordinated Guarantee were incurred for the benefit of the
Company (and only indirectly for the benefit of the Guarantors or the
Subordinated Guarantor, as the case may be), the obligations of the Guarantors
or the Subordinated Guarantor, as the case may be, thereunder were incurred for
less than reasonably equivalent value or fair consideration. A court could avoid
a Guarantor's or Subordinated Guarantor's obligation under its Guarantee or
Subordinated Guarantee, subordinate the Guarantee or Subordinated Guarantee to
other indebtedness of a Guarantor or Subordinated Guarantor or take other action
detrimental to the holders of the Notes. In addition, the Subordinated Guarantee
provides that if in a bankruptcy or reorganization of the Subsidiary Guarantor
it is substantively consolidated with the Company, the terms of such
Subordinated Guarantee shall nevertheless be effective vis-a-vis the assets of
the Subordinated Guarantor thereby subordinating the
17
<PAGE>
claims of the holders of the Notes in respect of such assets to the claims of
creditors of the Company under the New Credit Facility (and refinancing
thereof). See "Description of the Notes--Guarantees of the Notes". At March 31,
1997, on a pro forma basis, after giving effect to the Recapitalization, the
assets of the Subordinated Guarantor would have included approximately 30,000 of
the Company's units and represented approximately 58% of the total consolidated
assets of the Company.
SENSITIVITY TO ECONOMIC ENVIRONMENT
A portion of the Company's revenues are derived from customers who are in
industries and businesses that are cyclical in nature and subject to changes in
general economic conditions, such as the construction industry. In addition,
because the Company conducts its operations in a variety of markets, it is
subject to economic conditions in each such market. Although the Company
believes that certain of its operating strategies and industry characteristics
may help to mitigate the effects of economic downturns, general economic
downturns or localized downturns in markets where the Company has operations,
including any downturns in the construction industry, could have a material
adverse effect on the Company and its business, results of operations and
financial condition.
COMPETITION
Although the Company's competition varies significantly by market, the
mobile office industry, in general, is highly competitive. The Company competes
primarily in terms of product availability, customer service and price. The
Company believes that its reputation for customer service and its ability to
offer a wide selection of units suitable for many varied uses at competitive
prices allows it to compete effectively. However, certain of the Company's
competitors, such as GE Capital Modular Space, are less leveraged, have greater
market share or product availability in a given market, and have greater
financial resources and pricing flexibility than the Company.
CONCENTRATION OF OWNERSHIP
The Investor Group beneficially owns in the aggregate approximately 90% of
the outstanding Holdings Common Stock. Holdings in turn owns 100% of the
outstanding voting securities of the Company. As a result, the Investor Group
has the ability to control the Company's management, policies and financing
decisions, to elect a majority of the members of the Company's Board of
Directors and to control the vote on all matters coming before the stockholders
of the Company. See "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Transactions--Investor Stockholders Agreement."
LACK OF PUBLIC MARKET FOR THE NOTES
Prior to the Exchange Offer, there has been no public market for the
Existing Notes. The Company currently does not intend to list the New Notes on
any securities exchange or to seek approval for quotation through any automated
quotation system and no active public market for the New Notes is currently
anticipated. There can be no assurance that an active public market for the New
Notes will develop, or if developed, will continue.
Although the Initial Purchasers have acted as market makers with respect to
the Existing Notes and have informed the Company that they currently intend to
make a market in the New Notes, they are not obligated to do so and any such
market making may be discontinued at any time without notice. Accordingly, there
can be no assurance as to the development or liquidity of any market for the New
Notes.
ADVERSE CONSEQUENCES OF FAILURE TO ADHERE TO EXCHANGE OFFER PROCEDURES
Issuance of the New Notes in exchange for Existing Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Exchange Agent of
such Existing Notes, a properly completed and
18
<PAGE>
duly executed Letter of Transmittal and all other required documents. Therefore,
holders of Existing Notes desiring to tender such Existing Notes in exchange for
New Notes should allow sufficient time to ensure timely delivery. Neither the
Company nor the Exchange Agent is under any duty to give notification of defects
or irregularities with respect to the tenders of Existing Notes for exchange.
Existing Notes that are not tendered or are tendered but not accepted will,
following the consummation of the Exchange Offer, continue to be subject to the
existing restrictions upon transfer thereof and, upon consummation of the
Exchange Offer certain registration rights under the Registration Rights
Agreements will terminate.
RECEIPT OF RESTRICTED SECURITIES UNDER CERTAIN CIRCUMSTANCES
Any holder of Existing Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the New Notes may be deemed to
have received restricted securities and, if so, will be required to comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer--Consequences of
Failure to Exchange; Resales of New Notes."
ADVERSE EFFECT ON MARKET FOR EXISTING NOTES
To the extent that Existing Notes are tendered and accepted in the Exchange
Offer, the trading market for the untendered and tendered but unaccepted
Existing Notes could be adversely affected. See "The Exchange Offer."
19
<PAGE>
USE OF PROCEEDS
No proceeds will be received by the Company from the Exchange Offer. The net
proceeds of the offering of the Existing Notes ($387.8 million), together with
borrowings under the New Credit Facility and the net proceeds from the Common
Stock Issuance, were used to fund the Recapitalization. As part of the
Recapitalization, the Company transferred $181.3 million to Holdings to effect
the Common Stock Repurchase and Holdings Tender Offer and to pay certain fees
and expenses. See "The Recapitalization."
CAPITALIZATION
The following sets forth the capitalization of the Company as of March 31,
1997 and as adjusted to reflect the offering of the Existing Notes and the other
transactions contemplated by the Recapitalization. This table should be read in
conjunction with "Use of Proceeds," "Selected Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
-----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
---------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT
New Credit Facility (1).............................................. $ -- $ 109,100(2)
Notes................................................................ -- 400,000
Existing Credit Facility............................................. 110,262 --
Senior Secured Notes................................................. 165,000 340
---------- -----------
Total long-term debt (3)........................................... 275,262 509,440
STOCKHOLDER'S EQUITY (DEFICIT)
Common stock and additional paid-in capital.......................... 56,877 56,877
Retained earnings (deficit).......................................... 15,024 (177,459)
---------- -----------
Total stockholder's equity (deficit)............................... 71,901 (120,582)
---------- -----------
Total capitalization............................................. $ 347,163 $ 388,858
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) As part of the Recapitalization, the Company entered into the New Credit
Facility which will enable it to obtain revolving credit loans and the
issuance of letters of credit. The New Credit Facility provides for a total
line of revolving credit of up to $300,000 subject to the satisfaction of
certain requirements (including a borrowing base test). The Promissory Notes
are supported by a stand-by letter of credit in the amount of $22.7 million
issued on behalf of the Company for the benefit of the holders of the
Promissory Notes. See "Description of the New Credit Facility."
(2) Includes approximately $2.8 million the Company expects to borrow within the
next sixty days to fund expenses related to the Recapitalization.
(3) Does not include $3,500 aggregate principal amount of long-term debt related
to discontinued manufacturing operations.
20
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following tables summarize certain selected historical financial data
which should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Financial Statements
appearing elsewhere in this Prospectus. The selected historical financial data
set forth below for the fiscal years ended December 31, 1992, 1993, 1994, 1995
and 1996 and as of the end of each of such periods have been derived from the
audited financial statements of the Company. The selected historical financial
data presented below for the three month periods ended March 31, 1996 and 1997
have been prepared on the same basis as the audited Financial Statements
included elsewhere herein and, in the opinion of the Company, include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the information set forth therein. Operating results for the
three months ended March 31, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED
DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993(1) 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Leasing........................................ $72,744 $73,384 $79,342 $96,498 $116,769 $26,515 $31,239
Sales of new units............................. 27,709 18,501 22,290 23,126 28,042 6,009 8,545
Delivery and installation...................... 28,369 24,237 26,511 28,162 32,767 6,503 8,173
Other.......................................... 3,712 3,011 5,832 10,734 17,564 3,617 4,759
--------- --------- --------- --------- --------- --------- ---------
Total revenues............................. 132,534 119,133 133,975 158,520 195,142 42,644 52,716
--------- --------- --------- --------- --------- --------- ---------
Cost of sales and services:
Leasing:
Depreciation and amortization.............. 12,516 13,131 18,804 23,417 30,588 7,071 7,942
Other direct leasing costs................. 19,082 20,913 20,578 23,103 26,647 5,998 7,039
Sales of new units............................. 24,355 15,967 19,436 19,273 23,043 5,040 7,198
Delivery and installation...................... 23,495 20,874 21,569 22,048 25,247 5,121 6,125
Other.......................................... 1,197 1,372 1,547 2,626 3,974 647 1,243
--------- --------- --------- --------- --------- --------- ---------
Total cost of sales and services........... 80,645 72,257 81,934 90,467 109,499 23,877 29,547
--------- --------- --------- --------- --------- --------- ---------
Gross profit:
Leasing........................................ 41,146 39,340 39,960 49,978 59,534 13,446 16,258
Sales of new units............................. 3,354 2,534 2,854 3,853 4,999 969 1,347
Delivery and installation...................... 4,874 3,363 4,942 6,114 7,520 1,382 2,048
Other.......................................... 2,515 1,639 4,285 8,108 13,590 2,970 3,516
--------- --------- --------- --------- --------- --------- ---------
Total gross profit......................... 51,889 46,876 52,041 68,053 85,643 18,767 23,169
--------- --------- --------- --------- --------- --------- ---------
Selling, general and administrative expenses....... 28,237 24,264 29,303 36,295 42,260 10,864 12,118
Other depreciation and amortization................ 1,319 1,377 1,349 1,851 2,411 555 612
Interest........................................... 21,330 21,530 18,705 22,485 25,797 6,263 6,747
Restructuring costs (2)............................ 1,921 6,082 912 -- -- -- --
Income tax expense (benefit)....................... (336) (2,536) 700 2,863 5,980 418 1,424
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) from continuing operations before
extraordinary item (3)........................... (582) (3,841) 1,072 4,559 9,195 667 2,268
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss)................................ ($4,825) ($7,307) $1,072 $4,559 $9,195 $667 $2,268
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Ratio of earnings to fixed charges (4)............. N/A N/A 1.1x 1.3x 1.6x 1.2x 1.5x
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED
DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1992 1993(1) 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA (5)......................................... $35,226 $35,743 $42,067 $56,550 $75,371 $15,249 $19,268
EBITDA margin (5).................................. 26.6% 30.0% 31.4% 35.7% 38.6% 35.8% 36.6%
Utilization rate (6)............................... 80.0 81.1 82.9 81.1 85.5 82.0 85.8
Lease fleet units (end of period).................. 24,960 25,499 33,017 37,386 40,662 37,440 42,585
Net capital expenditures for lease fleet (7)....... $8,826 $12,497 $55,397 $64,443 $62,564 $5,599 $17,752
Non-lease fleet capital expenditures............... 898 727 3,341 6,871 10,284 1,464 2,703
Number of branches................................. 29 30 36 49 55 51 60
BALANCE SHEET DATA (at period end):
Lease equipment, net............................... $209,388 $246,550 $283,181 $324,207 $356,183 $322,735 $365,993
Total assets....................................... 263,287 295,882 335,633 383,679 428,697 383,036 442,424
Total debt (8)..................................... 191,019 176,408 206,346 242,695 268,753 238,338 275,262
Stockholder's equity............................... 17,585 56,877 57,949 62,508 69,633 62,575 71,901
</TABLE>
- ------------------------
(1) On December 16, 1993, Holdings purchased all of the issued and outstanding
stock of Scotsman. The acquisition was accounted for under the purchase
method of accounting by Holdings, and the Company restated its balance sheet
to "push down" the effects of the purchase accounting adjustments.
(2) Restructuring costs for 1992 consist primarily of costs relating to the
disposal of its manufacturing operations. Restructuring costs for 1993
consist primarily of costs incurred in connection with the acquisition of
Scotsman by Holdings in December 1993 and costs relating to the
discontinuation of its modular structures business. Restructuring costs in
1994 consist primarily of costs related to the discontinuation of its
modular structures business.
(3) Effective December 31, 1992, the Company adopted a plan of disposition of
its manufacturing operation. The results of operations for the Company's
manufacturing activities are presented as a discontinued operation.
(4) The ratio of earnings to fixed charges is computed by dividing fixed charges
into earnings from continuing operations before income taxes and
extraordinary items plus fixed charges. Fixed charges include interest,
expensed or capitalized, including amortization of deferred financing costs
and debt discount and the estimated interest component of rent expense.
Earnings were not sufficient to cover fixed charges by $918 in 1992 and
$6,377 in 1993. However, the Company's earnings for the purposes of
calculating this ratio included non-cash charges for depreciation and
amortization of $13,835 in 1992 and $14,508 in 1993.
(5) EBITDA represents net earnings from continuing operations before
extraordinary items and before deducting income taxes, interest,
restructuring costs, the non-cash portion of deferred compensation, and
depreciation and amortization and, in 1992, before including the benefit
from the non-recurring settlement of a sales tax assessment of $942. EBITDA
and EBITDA margin data, which are not measures of financial performance
under generally accepted accounting principles, are presented because such
data are used by certain investors to determine the Company's ability to
meet historical debt service requirements. Such data should not be
considered as an alternative to net earnings as an indicator of the
Company's operating performance or as an alternative to cash flows as
measures of liquidity.
(6) Utilization rate is defined as units on rent divided by the total units in
the Company's rental equipment fleet. Units on rent and total units are
calculated based on the average of the number of such units at the end of
each month during the applicable period.
(7) Net capital expenditures for lease fleet represents purchases, asset
acquisitions and other capitalized costs of units, reduced by the book
values of sold, previously leased units which were $7,810, $8,381, $6,425,
$7,653 and $9,713 in 1992, 1993, 1994, 1995, and 1996, respectively, and
were $2,075 and $2,566 in the three months ended March 31, 1996 and 1997,
respectively. In 1994, net capital expenditures includes $16,648 of lease
fleet additions related to the acquisition of Mobile Field Office Company.
(8) Does not include aggregate principal amount of long-term debt related to
discontinued manufacturing operations of $4,526, $4,471, $4,405, $4,331,
$3,500 in 1992, 1993, 1994, 1995 and 1996, respectively, and $4,311 and
$3,500 in the three months ended March 31, 1996 and 1997, respectively.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION REGARDING THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANY FOR THE THREE FISCAL YEARS ENDED DECEMBER 31, 1996 AND
THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 SHOULD BE READ IN CONJUNCTION
WITH THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS INCLUDED ELSEWHERE
IN THIS PROSPECTUS. CERTAIN STATEMENTS IN "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" ARE FORWARD-LOOKING
STATEMENTS. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS."
GENERAL
The Company derives its revenues and earnings from the leasing and sale of
mobile office and storage units, delivery and installation of those units and
the provision of other ancillary products and services. Leasing operations,
which primarily comprise the leasing of mobile office units and the sale of
units from the Company's lease fleet, account for a majority of the Company's
revenues and gross profits. Used mobile office units are sold by the Company in
the ordinary course of its business at either fair market value or, to a lesser
extent pursuant to pre-established lease purchase options. The Company's cash
flow from leasing operations is favorably affected by the sale of used units
from the Company's lease fleet as the costs of such units generally have been
incurred in previous fiscal periods. Accordingly, the sale of used units results
in the availability of the total cash proceeds and the reporting of gross profit
on such sales.
New unit sales revenues are derived from the sale of new mobile offices,
similar to those units leased by the Company. Revenues from delivery and
installation result from activities related to the transportation and
installation of and site preparation for both leased and sold products. Other
revenues are derived from the sale of other products and services including:
rental of steps, furniture and ramps; sales of parts, supplies and security
systems; and charges for granting insurance waivers and for damage billings.
Although a portion of the Company's business is with customers in industries
that are cyclical in nature and subject to changes in general economic
conditions, management believes that certain characteristics of the mobile
office leasing industry and Scotsman's operating strategies should help to
mitigate the effects of economic downturns. These characteristics include (i)
the Company's typical lease terms which include contractual provisions requiring
customers to retain units on lease for, on average, 12 months, (ii) the
flexibility and low cost offered to Scotsman's customers by leasing which may be
an attractive alternative to capital purchases, (iii) the Company's ability to
redeploy units during regional recessions (for example, during 1995, in response
to an economic slowdown the Company moved over 300 units from its Northeast
region to the Midwest and Southeast regions) and (iv) the diversity of the
Company's industry segments and the geographic balance of the Company's
operations (historically during economic slowdowns, the construction industry,
which the Company believes represented 26% of its 1996 revenues, experiences
declines in utilization rates, while the other customer segments including
education are more stable).
23
<PAGE>
SUMMARY OF SELECTED OPERATING DATA
The following table sets forth, for the periods indicated, the Company's (i)
sources of revenues as a percentage of total revenues, (ii) gross profit margin
by sources of revenues, (iii) gross profit by sources of revenues as a
percentage of total gross profit, and (iv) selling, general and administrative
expenses and EBITDA as a percentage of total revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED
DECEMBER 31, MARCH 31,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
Revenues:
Leasing:
Rental............................................................. 53.2% 54.8% 53.5% 56.1% 53.2%
Sales of leased units.............................................. 6.0 6.1 6.3 6.1 6.1
--------- --------- --------- --------- ---------
Total leasing.................................................... 59.2 60.9 59.8 62.2 59.3
Sales of new units................................................... 16.6 14.6 14.4 14.1 16.2
Delivery and installation............................................ 19.8 17.7 16.8 15.2 15.5
Other................................................................ 4.4 6.8 9.0 8.5 9.0
--------- --------- --------- --------- ---------
Total revenues................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Gross profit margin (1):
Leasing:
Rental (2)......................................................... 53.8% 55.2% 54.5% 54.0% 55.7%
Sales of leased units.............................................. 20.1 21.4 21.2 20.1 20.3
--------- --------- --------- --------- ---------
Total leasing gross profit margin................................ 50.4 51.8 51.0 50.7 52.0
Sales of new units................................................... 12.8 16.7 17.8 16.1 15.8
Delivery and installation............................................ 18.6 21.7 22.9 21.3 25.1
Other................................................................ 73.5 75.5 77.4 82.1 73.9
--------- --------- --------- --------- ---------
Total gross profit margin........................................ 38.8% 42.9% 43.9% 44.0% 44.0%
Gross profit as a percentage of total gross profit:
Leasing:
Rental............................................................. 73.7% 70.3% 66.5% 68.9% 67.4%
Sales of leased units.............................................. 3.1 3.1 3.0 2.7 2.8
--------- --------- --------- --------- ---------
Total leasing.................................................... 76.8 73.4 69.5 71.6 70.2
Sales of new units................................................... 5.5 5.7 5.8 5.2 5.8
Delivery and installation............................................ 9.5 9.0 8.8 7.4 8.8
Other................................................................ 8.2 11.9 15.9 15.8 15.2
--------- --------- --------- --------- ---------
Total............................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
As a percentage of total revenues:
Selling, general and administrative expenses......................... 21.9% 22.9% 21.7% 25.5% 23.0%
EBITDA (3)........................................................... 31.4 35.7 38.6 35.8 36.6
</TABLE>
- ------------------------
(1) Gross profit margin represents gross profit as a percentage of the
applicable source of revenues.
(2) Rental gross profit margin includes rental gross profit after deducting
depreciation and amortization which represented 26.4%, 27.0%, 29.3%, 29.6%
and 28.3% in 1994, 1995, and 1996 and the three months ended March 31, 1996
and 1997, respectively.
(3) EBITDA represents net earnings before deducting income taxes, interest,
restructuring costs, the non-cash portion of deferred compensation and
depreciation and amortization. EBITDA data, which are not a measure of
financial performance under generally accepted accounting principles, are
presented because such data are used by certain investors to determine the
Company's ability to meet historical debt service requirements. Such data
should not be considered as an alternative to net income as an indicator of
the Company's operating performance or as an alternative to cash flows as a
measure of liquidity.
24
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1996. Revenues in the quarter ended March 31, 1997 were $52.7 million, a $10.1
million or 23.6% increase from revenues of $42.6 million in the same period of
1996. This increase resulted from a $4.7 million or 17.8% increase in leasing
revenue, a $2.5 million or 42.2% increase in new sales revenue, a $1.7 million
or 25.7% increase in revenue from delivery and installation and a $1.1 million
or 31.6% increase in other revenue. The increase in leasing revenue is
attributable to an increase in the average number of units in the fleet of 10.3%
to approximately 41,200 for the first quarter of 1997, and an increase in
average fleet utilization of approximately four percentage points to 86% and an
increase of approximately $6 in the average monthly rental rate. The increase in
new sales revenue is due to a large volume of classroom sales occurring in the
Western region during the first quarter. The increase in delivery and
installation revenue is due to the increase in leasing activity and new sales
activity described above. Other revenue increased as a result of increases in
the rental of steps, ramps and furniture as well as miscellaneous revenue
related to services provided for customer-owned units.
Gross profit for the quarter was $23.2 million, representing a $4.4 million
or 23.5% increase from the first quarter of 1996. This increase is primarily due
to an increase in leasing gross profit of $2.8 million or 20.9% and an increase
in gross profit from delivery and installation of $0.7 million or 48.2%. The
increase in leasing gross profit is due to the increases in leasing activity
described above as well as an increase in the leasing margins from 50.7% in the
first quarter of 1996 to 52.0% in the first quarter of 1997. Excluding
depreciation and amortization, leasing margins increased from 77.4% in 1996 to
77.5% in 1997. The increase in gross profit from delivery and installation is
due to the increase in leasing activity and new sales activity described above.
Selling, general and administrative ("SG&A") expenses increased by $1.3
million or 11.5% from the first quarter of 1996. This increase is a result of
the growth experienced by the Company, both in terms of the number of branches
and the size of the fleet. The Company's branch network has expanded from 51
branches at March 31, 1996 to 60 branches at March 31, 1997, while the fleet has
grown by approximately 3,900 units from March 31, 1996. Of the overall increase
in SG&A expenses, $0.7 million represents field related expenses, primarily
payroll expenses, incurred in connection with this branch expansion.
Interest expense increased by $0.5 million or 7.7% in the first quarter of
1997. This relatively minor increase was due to increases in the average balance
outstanding on the line of credit during the quarter of $29.8 million, as
compared to the first quarter of 1996, offset by a decrease in the average
effective interest rate from 8.2% to 8.0%.
1996 COMPARED WITH 1995. Revenues in 1996 were $195.1 million, a $36.6
million or 21.3% increase from revenues of $158.5 million in 1995. The increase
resulted from a $20.3 million or 21.0% increase in leasing revenue, a $4.9
million or 21.3% increase in new sales revenue, a $4.6 million or 16.4% increase
in delivery and installation revenue and a $6.8 million or 63.3% increase in
other revenue. The increase in leasing revenue is attributable to a 10% increase
in the average lease fleet to approximately 38,600 units, an increase in the
average fleet utilization of approximately four percentage points to 85% and an
increase of $10 in the average monthly rental rate. The increase in new sales
revenue is primarily due to the overall branch expansion that the Company has
experienced during 1995 and 1996. The increase in delivery and installation
revenue is attributable to the increases in the leasing and new unit sales
revenue described above. Other revenue increased as a result of increases in the
rental of steps, ramps and furniture as well as miscellaneous revenue related to
services provided for customer-owned units.
Gross profit in 1996 was $85.6 million, a $17.6 million or 25.8% increase
from fiscal 1995 gross profit of $68.1 million. This increase is primarily a
result of an increase in leasing gross profit of $9.6 million or 19.1% and gross
profit from other revenue of $5.5 million or 67.6%. The increase in gross profit
from leasing is a result of the increase in leasing revenue described above
while the leasing profit margins dropped slightly. This decline in leasing
profit margins is a result of the increases in depreciation and
25
<PAGE>
amortization expense during 1996. Excluding depreciation and amortization,
leasing margins increased from 76.1% for 1995 to 77.2% for 1996. The increase in
gross profit from other revenue is due to the increase in other revenue
described above.
SG&A expenses increased by $6.0 million or 16.4% from 1995, primarily due to
an increase in field related expenses. This increase is a result of the branch
expansion activity experienced by the Company during 1995 and 1996 and is
comprised of a $3.6 million increase in personnel expenses and a $0.7 million
increase in occupancy expenses.
Interest expense increased by 14.7% to $25.8 million in 1996 from $22.5
million in 1995 primarily as a result of the increase in the average balances
outstanding under the revolving line of credit. The increase is due to financing
the fleet expansion and growth experienced by the Company during 1996.
1995 COMPARED WITH 1994. Revenues in 1995 were $158.5 million, a $24.5
million, or 18.3% increase from revenues of $134.0 million in 1994. The increase
resulted primarily from a $17.2 million or 21.6% increase in leasing revenue and
a $4.9 million or 84.1% increase in other revenue. The increase in leasing
revenue is attributable to a 23.9% increase in the average lease fleet to
approximately 35,000 units, while average rental rates declined slightly due to
a change in the fleet mix and utilization dropped slightly. The increase in the
fleet reflects the acquisition activity by the Company during 1995 as well as
general fleet expansion. The increase in other revenue is due to the overall
increases in revenue enhancement programs, primarily the rental of steps, as
well as miscellaneous revenue related to services provided for customer-owned
units.
Gross profit in 1995 was $68.1 million, a $16.0 million or 30.8% increase
from 1994 gross profit of $52.0 million. This increase is primarily a result of
an increase in leasing gross profit of $10.0 million or 25.1% and gross profit
from other revenue which increased by $3.8 million or 89.2%. The increase in
gross profit from leasing is a result of the increase in leasing revenue
described above as well as an increase in the leasing profit margin to 51.8%
from 50.4% in 1994. Excluding depreciation and amortization, leasing margins
increased from 74.1% in 1994 to 76.1% in 1995. The increase in gross profit from
other revenue is due to the increase in other revenue described above.
SG&A expenses increased by $7.0 million, or 23.9% from 1994. This increase
is comprised of a $5.1 million increase in field related expenses, a $0.8
million increase in expenses related to the deferred compensation plan and a
$1.1 million increase in other SG&A expenses. The increase in field related
expenses is the result of lease fleet acquisitions and branch expansion activity
experienced by the Company during fiscal 1995 and is comprised primarily of a
$3.9 million increase in personnel expenses and a $0.9 million increase in
occupancy expenses.
Interest expense increased by 20.2% to $22.5 million in 1995 from $18.7
million in 1994 primarily as a result of the increase in the average balances
outstanding under the revolving line of credit during 1995. This increase is the
result of financing fleet expansion and acquisitions made by the Company.
LIQUIDITY AND CAPITAL RESOURCES
During 1994, 1995 and 1996 and the three months ended March 31, 1996 and
1997, the Company's principal sources of funds consisted of cash flow from
operating and financing sources. Cash flow from operating activities of $21.8
million in 1994, $33.9 million in 1995, $46.0 million in 1996, $11.2 million in
the three months ended March 31, 1996 and $13.3 million in the three months
ended March 31, 1997, was largely generated by its leasing operations which
included the rental and sale of units from the Company's lease fleet.
The Company believes that EBITDA provides the best indicator of its
financial performance and provides the best measure of its ability to meet
historical debt service requirements. EBITDA as defined by the Company
represents net earnings before deducting income taxes, interest, restructuring
costs, the non-cash portion of deferred compensation, and depreciation and
amortization. EBITDA as defined by the
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<PAGE>
Company does not represent cash flows from operations as defined by generally
accepted accounting principles and should not be considered as an alternative to
cash flow as a measure of liquidity, nor should it be considered as an
alternative to net income as an indicator of the Company's operating
performance. The Company's EBITDA increased by $18.8 million or 33.3% to $75.4
million in fiscal 1996 compared to $56.6 million in fiscal 1995. The Company's
EBITDA increased by $4.1 million or 26.4% to $19.3 million in the first three
months of 1997 compared to $15.2 million in the same period of 1996. This
increase in EBITDA is a result of increased leasing activity resulting from the
overall increase in the number of units in the fleet, improved utilization and
new unit sales activity, partially offset by increased selling, general and
administrative expenses to support the increased activities during fiscal 1996
and the first three months of 1997.
Cash flow used in investing activities was $46.7 million in fiscal 1994,
$68.0 million in fiscal 1995 and $70.0 million in fiscal 1996 and was $6.3
million and $19.8 million in the three months ended March 31, 1996 and 1997,
respectively. The Company's primary capital expenditures are for the
discretionary purchase of new units for its lease fleet and units purchased
through acquisition. The Company seeks to maintain its lease fleet in good
condition at all times and generally increases the size of its lease fleet only
in those local or regional markets experiencing economic growth and established
unit demand. During 1994, 1995 and 1996 and in the three months ended March 31,
1996 and 1997, the Company significantly increased its net capital expenditures
through purchases of new units for the rental fleet, capital improvements and
betterments for existing units and the acquisition of existing rental fleets.
The expenditures increased the size of the rental fleet by approximately 8,000
units during 1994, 4,000 units during 1995, 3,000 units during 1996 and
approximately 1,900 units during the first quarter of 1997. This increased
activity was in response to increased customer demand and the implementation of
the Company's fleet acquisition strategy. The following table sets forth the
Company's investment in its lease fleet for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED
DECEMBER 31, MARCH 31,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Gross capital expenditures for lease fleet:
Acquisitions........................................................... $ 21.2 $ 25.0 $3.1 $ -- $5.7
New units and betterments.............................................. 40.6 47.1 69.2 7.7 14.6
--------- --------- --------- --- ---------
61.8 72.1 72.3 7.7 20.3
Book value of sold, used units........................................... (6.4) (7.7) (9.7) (2.1) (2.6)
--------- --------- --------- --- ---------
Net capital expenditures for lease fleet................................. $ 55.4 $ 64.4 $ 62.6 $ 5.6 $ 17.7
--------- --------- --------- --- ---------
--------- --------- --------- --- ---------
</TABLE>
The Company believes it can manage its capital requirements for its lease
fleet, and thus its cash flow, through the careful monitoring of its lease fleet
additions. During fiscal 1994, 1995 and 1996, selling prices for used units sold
in the ordinary course of its business (excluding units sold pursuant to
purchase options) averaged approximately 102%, 101% and 97%, respectively, of
total capitalized cost of the unit and a 20% premium to the net book value. Such
costs include the cost of the unit as well as costs of significant improvements
made to the unit. See further explanation below and note 1 of Notes to Financial
Statements. Historically, the Company has recognized net gains on the sale of
used units. For a more detailed description of the capital requirements of the
Company's lease fleet, see "Business--Fleet Purchases."
The Company's maintenance and refurbishment program is designed to maintain
the value of lease fleet units and realize rental rates and operating cash flows
from older units comparable to those from newer units. The sale of used units
helps preserve the overall quality of the Company's lease fleet and enhances
cash flow. Generally, costs of improvements and betterments aggregating less
than $1,000 per
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<PAGE>
unit are expensed as incurred. Expenditures greater than $1,000 that
significantly extend the economic useful life of a unit or that materially alter
a unit's composition are capitalized. The Company estimates that the current
annual capital expenditures necessary (net of replacement costs) that are
required to maintain its lease fleet and facilities at their current size and
condition is approximately $20 million.
Other capital expenditures of $1.3 million, $6.9 million, $10.3 million,
$1.5 million and $2.7 million in 1994, 1995 and 1996 and the three months ended
March 31, 1996 and March 31, 1997, respectively, consist of those capital
expenditures for items not directly related to the lease fleet such as branch or
headquarters equipment, leasehold improvements and management information
systems.
Cash provided by financing activities was $24.2 million in 1994, $33.8
million in 1995, $23.9 million in 1996 and $6.5 million in the three months
ended March 31, 1997. Cash flow was generated primarily from borrowings of
long-term debt, net of repayments thereon, and, in 1996, offset by the dividends
paid to Holdings. Cash used in financing activities of $5.0 million in the three
months ended March 31, 1996 was primarily for the repayment of borrowings under
the Prior Credit Facility.
The Company's Prior Credit Facility provided for a total line of credit up
to an aggregate principal amount of $140.0 million at any time outstanding.
Approximately $110.3 million was outstanding under the Prior Credit Facility at
March 31, 1997. Upon consummation of the Recapitalization, all indebtedness
under the Prior Credit Facility was repaid and the Prior Credit Facility was
terminated.
To finance the Recapitalization, the Company and Holdings used the net
proceeds from the Common Stock Issuance and the offering of the Existing Notes
and borrowings under the New Credit Facility. In the Recapitalization, the
Company transferred approximately $181.3 million to Holdings to fund the
Holdings Tender Offer and the Common Stock Repurchase and to pay certain fees
and expenses, and in January 1998, will transfer approximately $22.7 million
(including interest of $0.9 million) to fund the repayment of the Promissory
Notes issued in the Recapitalization. As of May 31, 1997, the total indebtedness
of the Company was $497.6 million. As of March 31, 1997, on a pro forma basis
after giving effect to the Recapitalization, the Company's stockholder's equity
would have decreased by $192.5 million from $71.9 million to a deficit of $120.6
million (before giving effect to the dividend to Holdings to fund the repayment
of the Promissory Notes upon their maturity).
The Company intends to fund its future working capital expenditures, fleet
purchases, acquisitions and expansion costs and debt service through cash flows
generated from operations and borrowings under the New Credit Facility. The New
Credit Facility will enable the Company to obtain revolving credit loans and the
issuance of letters of credit. The New Credit Facility provides for a line of
credit of up to $300 million subject to the satisfaction of certain requirements
(including a borrowing base test). Borrowings under the New Credit Facility were
used to make payments in the Recapitalization and may be used for working
capital, acquisitions and general corporate purposes. At the Company's option,
the revolving credit loans may be maintained as (a) Base Rate Loans which will
bear interest at the higher of (i) 1/2 of 1% in excess of the Federal Reserve
reported certificate of deposit rate and (ii) the prime rate of the Agent (as
defined herein), plus 1% or (b) Eurodollar Loans which will bear interest at the
Eurodollar Rate as determined by the Agent plus 2.25%. Beginning in 1998, the
applicable margin used to calculate such interest rates may be reduced if the
Company satisfies certain leverage ratios. The New Credit Facility has a five
year term. The New Credit Facility is guaranteed by Holdings (and certain of the
Company's subsidiaries) and is secured by a first priority security interest in
substantially all the assets of the Company, Holdings and such subsidiaries. The
New Credit Facility contains certain covenants including restrictions against
mergers, acquisitions, and disposition of assets, voluntary prepayments of debt,
financial covenants and certain other covenants. As of May 31, 1997, the total
outstanding indebtedness under the New Credit Facility was approximately $97.3
million. As described above, the Company will transfer approximately $22.7
million to Holdings to fund the repayment of the Promissory Notes upon their
maturity. The Company intends to borrow such funds under the New Credit
Facility. See "Description of the New Credit Facility."
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<PAGE>
The Company believes it will have, for the next 12 months, sufficient
liquidity under the New Credit Facility and from cash generated from operations
to meet its expected obligations as they arise.
SEASONALITY
Although demand from certain of the Company's customers is somewhat
seasonal, the Company's operations as a whole are not seasonal to any
significant extent.
INFLATION
The Company believes that inflation has not had a material effect on its
results of operations. However, an inflationary environment could materially
increase interest rates on the Company's floating rate debt and the replacement
cost of units in the Company's lease fleet. The price of used units sold by the
Company could also increase in such an environment. The Company's standard 12
month lease term generally provides for annual rental rate escalation at the
inflation rate as determined by the Consumer Price Index after the end of the
initial lease term. In addition, the Company may seek to limit its exposure to
interest rate fluctuations by utilizing certain hedging mechanisms, although it
is under no obligation to do so.
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<PAGE>
THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $400.0 million
aggregate principal amount of New Notes for a like aggregate principal amount of
Existing Notes properly tendered on or prior to the Expiration Date and not
withdrawn as permitted pursuant to the procedures described below. The Exchange
Offer is being made with respect to all of the Existing Notes: the total
aggregate principal amount of Existing Notes and New Notes will in no event
exceed $400.0 million.
The Existing Notes were issued on May 22, 1997. An aggregate of $300 million
aggregate principal amount of the Existing Notes were sold to the Initial
Purchasers and then re-offered at a price of 100%. The remaining $100.0 million
aggregate principal amount of Existing Notes were sold directly to the Direct
Purchaser at a price of 97.75%. The Direct Purchaser agreed with the Initial
Purchasers that it will not sell, transfer or otherwise dispose of or transfer
any of the Existing Notes (except for the Exchange Offer) purchased by it for a
period of 90 days from the offering of the Existing Notes without the consent of
BT Securities Corporation. The Direct Purchaser, Oak Hill Securities Fund, L.P.,
is a Delaware limited partnership that acquires and actively manages a diverse
portfolio of investments principally in leveraged companies. Certain principals
of the general partner of the Direct Purchaser and Oak Hill Advisors, Inc., the
adviser of the Direct Purchaser, have business relationships with Keystone and
Keystone has an equity investment in the Direct Purchaser. The Company paid a
$750,000 fee to Oak Hill Advisors, Inc. for financial advisory services rendered
in connection with the transaction.
This Prospectus, together with the Letter of Transmittal, is first being
sent on or about , 1997 to all holders of Existing Notes known to the
Company. The Company's obligation to accept Existing Notes for exchange pursuant
to the Exchange Offer is subject to certain conditions as set forth under "--
Conditions to the Exchange Offer" below.
PURPOSE OF THE EXCHANGE OFFER
The Existing Notes were issued by the Company on May 22, 1997 in
transactions exempt from the registration requirements of the Securities Act.
Accordingly, the Existing Notes may not be reoffered, resold, or otherwise
transferred in the United States unless so registered or unless an applicable
exemption from the registration and prospectus delivery requirements of the
Securities Act is available.
In connection with the issuance and sale of the Existing Notes, the Company,
the Guarantor and the Subordinated Guarantor entered into two separate
Registration Rights Agreements, each dated as of May 22, 1997 (the "Registration
Rights Agreements"), which require the Company, the Guarantor and the
Subordinated Guarantor to (x) file on or before July 6, 1997 (45 days after the
date of issuance of the Existing Notes) a registration statement relating to the
Exchange Offer (the "Exchange Offer Registration Statement") and (y) use their
respective best efforts to cause the Exchange Offer Registration Statement to
become effective on or before October 19, 1997 (150 days after the date of
issuance of the Existing Notes). The Company, the Guarantor and the Subordinated
Guarantor will keep the Exchange Offer open for not less than 30 days (or
longer, if required by applicable law) after the date notice of the Exchange
Offer is mailed to the holders of the Existing Notes. In the event that (i) the
Exchange Offer Registration Statement or a shelf registration statement relating
to resales of the Existing Notes (the "Shelf Registration Statement") is not
filed by July 6, 1997, (ii) the Exchange Offer is not consummated nor the Shelf
Registration Statement is declared effective by October 19, 1997, or (iii) after
November 18, 1997, and after either the Exchange Offer Registration Statement or
the Shelf Registration Statement is declared effective, such Registration
Statement thereafter ceases to be effective or usable (subject to certain
exceptions) in connection with resales of Notes or in accordance with and during
the periods specified in the Registration Statement (each, a "Failure to
Register"), additional interest will accrue on the Notes at
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<PAGE>
the rate of 0.5% per annum from and including the date on which any Failure to
Register shall occur but excluding the date on which all Failures to Register
have been cured. The Exchange Offer is being made by the Company, the Guarantor
and the Subordinated Guarantor to satisfy their obligations with respect to the
Registration Rights Agreements.
Based on no-action letters issued by the staff of the Commission to third
parties in unrelated transactions, the Company believes that the New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases Notes from the Company
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holders' business and such holders have no arrangement or understanding
with any person to participate in the distribution of such New Notes and are not
participating in, and do not intend to participate in, the distribution of such
New Notes. Any holder of Existing Notes who tenders in the Exchange Offer for
the purpose of participating in a distribution of the New Notes may be deemed to
have received restricted securities and, if so, will be required to comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Thus, any New Notes acquired by
such holders will not be freely transferable except in compliance with the
Securities Act. See "--Consequences of Failure to Exchange; Resale of New
Notes."
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 P.M., New York City time, on ,
1997 unless the Company, in its sole discretion, has extended the period of time
for which the Exchange Offer is open (such date, as it may be extended, is
referred to herein as the "Expiration Date"). The Expiration Date will be at
least 20 business days after the commencement of the Exchange Offer in
accordance with Rule 14e-1(a) under the Exchange Act. The Company expressly
reserves the right, at any time or from time to time, to extend the period of
time during which the Exchange Offer is open and thereby delay acceptance for
exchange of any Existing Notes, by giving oral notice (promptly confirmed in
writing) or written notice to The Bank of New York (the "Exchange Agent") and by
giving written notice of such extension to the holders thereof no later than
9:00 A.M. New York City time, on the next business day after the previously
scheduled Expiration Date. During any such extension, all Existing Notes
previously tendered will remain subject to the Exchange Offer unless properly
withdrawn.
In addition, the Company expressly reserves the right to terminate or amend
the Exchange Offer and not to accept for exchange any Existing Notes not
theretofore accepted for exchange upon the occurrence of any of the events
specified below under "--Conditions to the Exchange Offer." If any such
termination or amendment occurs, the Company will notify the Exchange Agent and
will either issue a press release or give oral or written notice to the holders
of the Existing Notes as promptly as practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York State law to be closed, and consists of the time period
from 12:01 A.M. through 12:00 midnight, New York City time.
PROCEDURES FOR TENDERING EXISTING NOTES
The tender to the Company of Existing Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
A holder of Existing Notes may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Letter of Transmittal shall be
31
<PAGE>
deemed to include a facsimile thereof) and delivering the same, together with
the certificate or certificates representing the Existing Notes being tendered
and any required signature guarantees, to the Exchange Agent at its address set
forth below on or prior to the Expiration Date (or complying with the procedure
for book-entry transfer described below) or (ii) complying with the guaranteed
delivery procedures described below.
THE METHOD OF DELIVERY OF EXISTING NOTES, LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO INSURE TIMELY DELIVERY. NO EXISTING NOTES OR LETTERS OF TRANSMITTAL
SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Existing Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Existing Notes
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a clearing agency, an insured
credit union, a savings association or a commercial bank or trust company having
an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Existing Notes are registered in the name of a person other
than a signer of the Letter of Transmittal, the Existing Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the Existing Notes by causing
DTC to transfer such Existing Notes into the Exchange Agent's account in
accordance with DTC's procedures for such transfer. In connection with a
book-entry transfer, a Letter of Transmittal need not be transmitted to the
Exchange Agent, provided that the book-entry transfer procedure must be complied
with prior to 5:00 p.m., New York City time, on the Expiration Date.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Existing Note to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below on or prior to the Expiration Date a letter,
telegram or facsimile transmission from an Eligible Institution setting forth
the name and address of the tendering holder, the names in which the Existing
Notes are registered and, if possible, the certificate numbers of the Existing
Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three business days after the Expiration Date the
Existing Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Existing Notes into the Exchange Agent's account at the
book-entry transfer facility), will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Existing Notes being tendered by the
above-described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), the Company may, at its
option, reject the tender. Copies of a Notice of Guaranteed Delivery which may
be used by Eligible Institutions for the purposes described in this paragraph
are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Existing Notes (or a confirmation of book-entry transfer of
such Existing Notes into the Exchange Agent's account at the book-entry transfer
32
<PAGE>
facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) from an Eligible Institution is received by the Exchange Agent.
Issuances of New Notes in exchange for Existing Notes tendered pursuant to a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an Eligible Institution will be made only
against deposit of the Letter of Transmittal (and any other required documents)
and the tendered Existing Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Existing Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Existing Notes not properly tendered or to not accept
any particular Existing Notes which acceptance might, in the judgment of the
company or its counsel, be unlawful. The Company also reserves the absolute
right to waive any defects or irregularities or conditions of the Exchange Offer
as to any particular Existing Notes either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender Existing Notes in the Exchange Offer). The interpretation of the terms
and conditions of the Exchange Offer as to any particular Existing Notes either
before or after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Existing Notes for exchange must be cured within such reasonable period of time
as the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Existing Notes for exchange, nor
shall any of them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Existing Notes, such Existing Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders appear on the
Existing Notes.
If the Letter of Transmittal or any Existing Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted.
By tendering, each holder will represent to the Company, the Guarantor and
the Subordinated Guarantor in the Letter of Transmittal that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being acquired
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the holder, that neither the holder nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such New Notes, that neither the holder nor any such
other person is participating in or intends to participate in the distribution
of such New Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the Company,
the Guarantor and the Subordinated Guarantor.
Each broker-dealer that receives new Notes for its own account in exchange
for Existing Notes, where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
WITHDRAWAL RIGHTS
Tenders of Existing Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent prior to the Expiration Date at its address
set forth below. Any such notice of withdrawal must (i) specify the name of
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the person having tendered the Existing Notes to be withdrawn (the "Depositor"),
(ii) identify the Existing Notes to be withdrawn (including the certificate
number or numbers and principal amount of such Existing Notes), (iii) be signed
by the holder in the same manner as the original signature on the Letter of
Transmittal by which such Existing Notes were tendered or as otherwise described
above (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee under the Indenture
register the transfer such Existing Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Existing
Notes are to be registered, if different from that of the depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company in its sole discretion, which
determination will be final and binding on all parties. Any Existing Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Existing Notes which have been tendered for
exchange and which are properly withdrawn will be returned to the holder thereof
without cost to such holder as soon as practicable after such withdrawal.
Properly withdrawn Existing Notes may be retendered by following one of the
procedures described under "--Procedures for Tendering Existing Notes" above at
any time on or prior to the Expiration Date.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Existing Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Existing Notes. See "--Conditions to the Exchange Offer" below. For the purposes
of the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Existing Notes for exchange when, as and if the Company has given oral
and written notice thereof to the Exchange Agent.
For each Existing Note accepted for exchange, the holder of such Existing
Note will receive a New Note having a principal amount equal to that of the
surrendered Existing Note.
In all cases, issuance of New Notes for Existing Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Existing Notes or a timely
Book-Entry Confirmation of such Existing Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility, a properly completed and duly executed
Letter of Transmittal and all other required documents. If any tendered Existing
Notes are not accepted for any reason set forth in the terms and conditions of
the Exchange Offer or if Existing Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
Existing Notes will be returned without expense to the tendering holder thereof
(or, in case of Existing Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described below, such non-exchanged Existing Notes will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration of the Exchange Offer.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Existing Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Existing Notes for exchange or the exchange of the
New Notes for such Existing Notes any of the following events shall occur:
(i) any injunction, order or decree shall have been issued by any court
or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer, or
(ii) the Exchange Offer shall violate any applicable law or any
applicable interpretation of the staff of the Commission.
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The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time from
time to time in its reasonable judgment. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, neither the Company will accept for exchange any Existing Notes
tendered, and no New Notes will be issued in exchange for any such Existing
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the indenture under the Trust Indenture Act of 1939
(the "Trust Indenture Act"). In any such event the Company, the Guarantor and
the Subordinated Guarantor are required to use every reasonable effort to obtain
the withdrawal of any stop order at the earliest possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes being tendered for exchange.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below. Requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND DELIVERY: BY OVERNIGHT MAIL OR COURIER:
The Bank of New York The Bank of New York The Bank of New York
101 Barclay Street-7E 101 Barclay Street 101 Barclay Street-7E
New York, NY 10286 Corporate Trust and New York, NY 10286
Attn:Reorganization Department Agency Services Window Attn:Reorganization Department
Shilpa Privedi Ground Level Shilpa Privedi
New York, NY 10286
Attn: Shilpa Privedi
For information, call
Ph: (212) 815-5789
Fax: (212) 815-6339
</TABLE>
DELIVERY OF THE EXISTING NOTES, LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payment to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred by the Company in connection with the Exchange
Offer will be paid by the Company.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of
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which information is given herein. The Exchange Offer is not being made to (nor
will tenders be accepted from or on behalf of) holders of Existing Notes in any
jurisdiction in which the making of the Exchange Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction.
TRANSFER TAXES
Holders who tender their Existing Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith except that holders who
instruct the Company to register New Notes in the name of, or request that
Existing Notes not tendered or not accepted in the Exchange Offer be returned
to, a person other than the registered tendering holder will be responsible for
the payment of any applicable transfer tax thereon.
ACCOUNTING TREATMENT
The New Notes will be recorded at the carrying value of the Existing Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of New Notes for Existing Notes. Expenses incurred in
connection with the issuance of the New Notes will be amortized over the term of
the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES
Holders of Existing Notes who do not exchange their Existing Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Existing Notes as set forth in the legend
thereon as a consequence of the issuance of the Existing Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
Existing Notes not exchanged pursuant to the Exchange Offer will continue to
remain outstanding in accordance with their terms. In general, the Existing
Notes may not be altered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company, the Guarantor
and the Subordinated Guarantor do not currently anticipate that they will
register the Existing Notes under the Securities Act. However, in the event that
the Company, the Guarantor and the Subordinated Guarantor determine that the
Exchange Offer is not available or may not be consummated as soon as practicable
after the last date the Exchange Offer is open because it would violate
applicable law or the applicable interpretations of the staff of the Commission,
or if for any other reason the Exchange Offer is not consummated by November 18,
1997, or if the Initial Purchasers so request with respect to the Existing Notes
not eligible to be exchanged for New Notes in the Exchange Offer and held by
them following consummation of the Exchange Offer, or if any holder of Notes is
not eligible to participate in the Exchange Offer or does not receive freely
tradeable New Notes in exchange for Existing Notes in the Exchange Offer, then,
in each case, the Company, the Guarantor and the Subordinated Guarantor will at
their sole expense, (a) as promptly as practicable, use all reasonable efforts
to prepare and file the Shelf Registration Statement, (b) use all reasonable
efforts to cause the Shelf Registration Statement to be declared effective under
the Securities Act and (c) use all reasonable efforts to keep effective the
Shelf Registration Statement until the earlier of two years after the Issue Date
or such time as all of the applicable Notes have been sold thereunder. The
Company will, in the event that a Shelf Registration Statement is filed, provide
to each Holder copies of the prospectus that is a part of the Shelf Registration
Statement, notify each such Holder when the Shelf Registration for the Notes has
become effective and take certain other actions as are required to permit
unrestricted resales of the Notes. A Holder that sells such Notes pursuant to
the Shelf Registration Statement will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
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<PAGE>
provisions of the Registration Rights Agreements that are applicable to such a
Holder (including certain indemnification rights and obligations).
Based on certain no-action letters issued by the staff of the Commission to
third parties in unrelated transactions, the Company believes that New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases Notes from the Company
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holders' business and such holders have no arrangement or understanding
with any person to participate in the distribution of such New Notes and are not
participating in, and do not intend to participate in, the distribution of such
New Notes. If any holder has any arrangement or understanding with respect to
the distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holders (i) could not rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. A broker-dealer who holds Existing Notes that were acquired
for its own account as a result of market making or other trading activities may
be deemed to be an "underwriter" within the meaning of the Securities Act and
must, therefore, deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of New Notes. Each such broker-dealer that
receives New Notes for its own account in exchange for Existing Notes, where
such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge in the
Letter of Transmittal that it will deliver a prospectus in connection with any
resale of such New Notes. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreements and subject to certain
specified limitations therein, to register or qualify the New Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Notes reasonably requests in writing.
Participation in the Exchange Offer is voluntary, and holders of Existing
Notes should carefully consider whether to participate. Holders of the Existing
Notes are urged to consult their financial and tax advisors in making their own
decision on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Existing Notes pursuant to the terms of, this Exchange Offer,
the Company, the Guarantor and the Subordinated Guarantor will have fulfilled a
covenant contained in the Registration Rights Agreements. Holders of Existing
Notes who do not tender their Existing Notes in the Exchange Offer will continue
to hold such Existing Notes and will be entitled to all the rights, and
limitations applicable thereto, under the Indenture, except for any such rights
under the Registration Rights Agreements that by their terms terminate or cease
to have further effectiveness as a result of the making of this Exchange Offer.
See "Description of Exchange Notes." All untendered Existing Notes will continue
to be subject to the restriction on transfer set forth in the Indenture. To the
extent that Existing Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered Existing Notes could be adversely affected.
The Company may in the future seek to acquire untendered Existing Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Company has no present plan to acquire any Existing
Notes which are not tendered in the Exchange Offer.
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BUSINESS
GENERAL
Founded in 1946, Scotsman is the second largest lessor of mobile office
units in the United States with over 42,500 units leased through 60 branch
offices in 33 states. The Company's mobile office units provide high quality,
cost-effective relocatable space solutions to over 12,500 customers in 450
industries including construction, education, healthcare and retail. In recent
years, Scotsman's leasing operations have generated recurring revenues due to
high levels of repeat business and average lease periods of approximately 19
months. In addition to its core leasing operations, Scotsman sells new and
previously leased mobile office units and provides delivery, installation and
other ancillary products and services. For the twelve months ended March 31,
1997, Scotsman generated revenues and EBITDA of $205.2 million and $79.4
million, respectively.
The Company's fleet is generally comprised of standardized, versatile
products that can be configured to meet a wide variety of customer needs. The
units are fitted with axles and hitches and are towed to various locations. Most
units are wood frame construction, contain materials used in conventional
buildings, and are equipped with air conditioning and heating, electrical
outlets and, where necessary, plumbing facilities. Mobile office units are
durable and have estimated useful life of 20 years. The average age of the
Company's fleet is approximately 8 years. From January 1, 1994 to December 31,
1996, the Company was able to sell used units in the ordinary course of its
business (excluding units sold pursuant to purchase options) at an average of
more than 95% of their total capitalized costs and a 20% premium to net book
value. Capitalized costs include the costs of units as well as the costs of
significant improvements made to the units. The net book value of the lease
fleet as of March 31, 1997 was $366.0 million.
Based on its experience, management believes that the mobile office industry
(excluding manufacturing operations) exceeds $2.0 billion and has grown
significantly in recent years. This growth has been primarily driven by
population shifts, demographic trends, economic expansion, and the increased
demand for outsourcing space needs (for example, school expansion programs,
construction starts, recreation and entertainment activities). By outsourcing
their space needs, the Company's customers are able to achieve flexibility,
preserve capital for core operations, and convert fixed costs into variable
costs.
From 1993 to 1996, the Company increased revenues at a CAGR of 17.9% to
$195.1 million. Over the same period, EBITDA grew at a CAGR of 28.2% to $75.4
million, lease fleet units grew by 59.0% to 40,662 units and the average annual
utilization rate of its lease fleet increased from 81.1% to 85.5%. The Company
has achieved this growth by expanding its lease fleet through factory purchases
and acquisitions, expanding its branch network, increasing ancillary high margin
services and product lines and improving fleet management.
The Company has its principal executive offices located at 8211 Town Center
Drive, Baltimore, Maryland 21236. The telephone number of the Company's
executive offices is (410) 931-6000.
COMPETITIVE STRENGTHS
The Company attributes its success in the mobile office industry to the
following competitive strengths:
MARKET LEADERSHIP. The Company is one of two national operators competing
in the highly fragmented mobile office industry and believes its lease fleet is
more than three times larger than that of its next largest competitor. The
Company is the first or second largest provider of leased fleet units in most of
its regional markets.
NATIONAL PRESENCE AND CUSTOMER DIVERSITY. The Company's national presence
provides it with the benefits of (i) customer and geographic diversification,
(ii) less sensitivity to regional economic downturns, (iii) the ability to
redeploy units within its branch network to optimize utilization levels, respond
to
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regional economic downturns and reduce the need for new unit purchases and (iv)
economies of scale. The Company has over 12,500 customers, the largest of which
accounted for only 2.3% of 1996 revenues.
EFFECTIVE FLEET MANAGEMENT. The Company's lease fleet is actively managed
to maximize customer satisfaction, optimize fleet utilization and improve fleet
quality and flexibility. Scotsman's proprietary management information system
provides comprehensive fleet statistics and lease information that allows the
Company to effectively monitor and allocate its units throughout its branch
network. Effective fleet management has helped to improve the average annual
utilization rate from 81.1% in 1993 to 85.5% in 1996.
Scotsman has undertaken a number of fleet management initiatives designed to
improve operations and increase profitability, including: (i) standardization of
products, (ii) quality improvement, (iii) redeployment and (iv) fleet pruning.
These initiatives are outlined in more detail below:
- EMPHASIS ON STANDARDIZATION OF PRODUCTS. The Company has shifted its fleet
composition to more standardized products through a combination of new
fleet purchasing guidelines and the conversion of non-standard units into
more standard configurations. Product standardization allows Scotsman to
easily modify its structures to meet specific customer needs and thus
increase utilization. Conversions of existing units from non-standard to
standardized units can be completed, on average, at less than the cost of
purchasing new units. Overall, the Company believes that the majority of
its fleet is comprised of standardized, highly versatile products.
- FLEET QUALITY. Because the Company believes that rental rates are based
upon physical condition rather than age, Scotsman monitors its fleet on a
regular basis and has improved the quality of its products over the past
three years through refurbishment of units in poor condition or through
targeted sales programs. Units classified as "unrentable" have been
reduced to less than 1.0% of the total fleet at December 31, 1996. This
reduction increased the Company's total rentable fleet, resulting in
increased utilization.
- PORTABILITY OF FLEET AND FLEET REDEPLOYMENT. The Company capitalizes on
its nationwide franchise and inventory management systems by actively
redeploying excess fleet to areas of higher customer demand. The
portability and standardized nature of the units allow them to be
relocated to surrounding areas at relatively low cost and with immediate
potential for leasing at higher rental rates, thus allowing the Company to
minimize capital expenditures for new fleet purchases. For example, during
1995, in response to an economic slowdown, the Company was able to shift
over 300 units from its Northeast region to the Midwest and Southeast
regions. As part of its fleet purchasing and conversion activities,
Scotsman generally has its units built or converted to meet industrialized
building codes for use in several surrounding states, thus allowing them
to be redeployed as necessary.
- FLEET PRUNING. From time to time, the Company will sell excess or idle
units from its fleet. Pruning activities allow the Company to manage fleet
quality and composition.
DEDICATED MARKETING AND CUSTOMER SERVICE. Through extensive marketing and
customer service programs, the Company focuses on maintaining and expanding
long-term customer relationships. Scotsman is the only industry operator that
maintains its own full-service national support staff to prepare units for lease
and maintain units while on lease. As a result of this extensive customer
service, Scotsman's leasing operations have generated recurring revenues due to
high levels of repeat business.
PROVEN TRACK RECORD. Since 1993, the current management team has
substantially increased the Company's utilization rate of its fleet, increased
the size of its fleet by approximately 17,100 units or 67%, doubled the size of
its branch network and completed 15 strategic acquisitions. As a result of these
and other factors, since 1993, EBITDA has increased at a CAGR of 28.2% to $75.4
million in 1996. Seven of the top eight executive officers of the Company
(including the President, Chief Financial Officer and the
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Northern and Southern Division Managers) retained all of their common stock and
stock options in Holdings (a total of $10.9 million at the Common Stock
Repurchase price) as part of the Recapitalization. This represents a significant
economic commitment and participation in the continued success of the Company.
BUSINESS AND GROWTH STRATEGY
Management's business and growth strategy includes the following:
FLEET AND BRANCH EXPANSION. The Company plans to continue to capitalize on
the industry's favorable growth trends by increasing customer penetration and
fleet size in existing markets. In addition, the Company plans to open branches
in new markets where positive business fundamentals exist. From January 1, 1994
to March 31, 1997, the Company increased its number of branches from 30 to 60
and the number of units from approximately 25,500 to 42,500. The Company has
opened five branches in the first three months of 1997 and plans to continue
expanding its network.
SELECTIVE FLEET ACQUISITIONS. To complement its fleet and branch expansion,
the Company plans to capitalize on the industry's fragmentation and expand its
geographic coverage by making selective acquisitions of mobile offices and
storage product lease fleets. From January 1, 1994 to March 31, 1997, Scotsman
made 15 acquisitions of approximately 10,500 units for a total purchase price of
$55.0 million. These units have accounted for approximately 30% of the value of
the Company's total fleet purchases during that period.
The Company has generally been able to acquire units at less than the cost
of new factory purchased units. Typically, there is a low cost of integrating
acquired fleets and acquired units have existing leases that generate immediate
revenues and EBITDA. In addition, the Company has historically been able to
improve the financial operating performance, utilization and growth rates of
acquired fleets.
ANCILLARY PRODUCTS AND SERVICES. The Company continues to identify new
applications for its existing products, diversify into new product offerings and
deliver ancillary products and services to leverage the Company's existing
branch network. For example, in 1996, the Company began focusing on the market
for storage product units, which are used for secured storage space. Since
January 1, 1996, the Company has completed four acquisitions totaling
approximately 2,050 storage units. Ancillary products and services include the
rental of steps, ramps and furniture.
EDUCATION MARKET TRENDS. The Company believes that the education market
accounted for approximately 19% of 1996 revenues and offers growth opportunities
as a result of the following: (i) an increase in state and local initiatives
governing maximum class sizes, (ii) state and local governmental pressures to
decrease spending and find cost-effective ways to expand classroom capacity, and
(iii) increased interstate and intrastate migrations necessitating rapid
expansion of education space. For example, California has mandated a statewide
classroom size reduction initiative to lower class sizes to 20 students from an
average of approximately 29 in kindergarden through third grade, which the
Company believes will increase demand for mobile office units for classrooms in
California.
RECESSION RESISTANCE
Although a portion of the Company's business is with customers in industries
that are cyclical in nature and subject to changes in general economic
conditions, management believes that certain characteristics of the mobile
office leasing industry and Scotsman's operating strategies should help to
mitigate the effects of economic downturns. These characteristics include (i)
the Company's typical lease terms which include contractual provisions requiring
customers to retain units on lease for, on average, 12 months, (ii) the
flexibility and low cost offered to Scotsman's customers by leasing which may be
an attractive alternative to capital purchases, (iii) the Company's ability to
redeploy units during regional recessions (for example, during 1995, in response
to an economic slowdown the Company moved over 300 units from its
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Northeast region to the Midwest and Southeast regions) and (iv) the diversity of
the Company's industry segments and the geographic balance of the Company's
operations (historically during economic slowdowns, the Company has observed
that the construction industry, which the Company believes represents 26% of its
1996 revenues, experiences declines in utilization rates, while the other
customer segments including education are more stable). The Company estimates
that the current annual capital expenditures (net of replacement costs) required
to maintain its lease fleet and facilities at their current size and condition
is approximately $20 million.
PRODUCTS
The Company's products can be used to meet a variety of customer needs.
Sample applications include classrooms, sales offices and special events
headquarters. The Company's mobile office fleet ranges from single-unit
facilities to section modular structures which combine mobile offices into one
structure for applications that require more space. Units typically range in
size from 8 to 14 feet in width and 16 to 70 feet in length and are generally
constructed using a steel frame and undercarriage with an exterior of wood or
aluminum. The units are fitted with axles and hitches and are towed to various
locations. Most units are wood frame construction, contain materials used in
conventional buildings, and are equipped with air conditioning and heating,
electrical outlets and, where necessary, plumbing facilities. Mobile office
units are extremely durable and have an estimated economic useful life of 20
years. During 1996, the average purchase price for new mobile office units was
$10,750 and the average unit was leased for approximately $280 per month,
although rates vary depending upon size, product type and features. Products are
leased on a short-term basis with average contractual terms of 12 months.
However, most customers retain the product for a longer period as evidenced by
an average existing lease term of 19 months at March 31, 1997.
The Company's specific product offerings are described below:
MOBILE OFFICES. Mobile offices are the most functional and versatile units
in the Company's lease fleet. Units typically have "open interiors" which can be
modified using movable partitions. Mobile offices currently comprise
approximately one half of the Company's lease fleet and commonly include tile
floors, air conditioning/heating units, partitions and, if requested, toilet
facilities.
SECTION MODULARS. Section modulars are two or more units combined into one
structure. Interiors are customized to match the customer needs. Among its many
uses, section modulars have been used as hospital diagnostic annexes, special
events headquarters and golf pro shops.
CLASSROOMS. Classroom units are standard units adapted specifically for use
by school systems or universities. Classroom units usually feature chalkboards
and teaching aids, air conditioning/heating units, windows along side-walls and,
if requested, toilet facilities.
SALES OFFICES. Sales offices are marketed to businesses that require site
located space for sales presentations. Exteriors are typically wood-sided with
some models offering recessed front entries. The Company's "Executive Line"
sales offices are larger, more expensive versions of the standard sales office
with more amenities.
STORAGE PRODUCTS. Storage products are windowless and are typically used
for secure storage space. There are generally two types: ground-level entry
storage containers and storage trailers with axles and wheels. The basic storage
unit features a roll-up or swing door at one end. Units are made of heavy
exterior metals for security and water tightness.
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BRANCH NETWORK
As a key element to its market leadership strategy, the Company maintains a
network of 60 branch offices throughout 33 states. The Company opened five of
these branches in the first three months of 1997. This network enables the
Company to increase its product availability and customer service within its
regional and local markets. Customers benefit because they are provided with (i)
improved service availability, (ii) reduced time to occupancy, (iii) better
access to sales representatives; (iv) the ability to inspect units prior to
rental; and (v) lower freight costs which are typically paid by the customer.
The Company benefits because it is able to spread regional overhead and
marketing costs over a larger lease base, redeploy units within its branch
network to optimize utilization, discourage potential competitors by providing
ample local supply and offer profitable short-term leases which would not be
profitable without a local market presence.
Management believes geographic diversification of the Company's branch
network spreads economic and operating risk. In 1996, the Southeast, Northeast,
Western and Midwest regions accounted for 30%, 27%, 27% and 16% of the Company's
revenues, respectively.
Each branch is indirectly supervised by one of four regional managers (these
managers average 15 years of industry experience and 11 years with the Company)
and generally headed by a branch manager. Management believes it is important to
encourage employees to achieve revenue and profit levels and to provide a high
level of service to Scotsman's customers. Approximately 40% of the regional
managers' compensation is based upon the financial performance of their branches
and approximately 40% of branch managers' compensation is tied to budgeted
EBITDA levels. Sales representatives' compensation is commission driven and
based on the gross profits of new business.
OPERATIONS
LEASING. Leasing revenue is a function of average monthly rental rate,
fleet size and utilization. The Company monitors fleet utilization at each
branch. In 1996, average fleet utilization by region ranged from 82.0% to 88.8%
and for the Company was 85.5%. While the Company adjusts its pricing to respond
to local competition in its markets, it believes that it generally achieves a
rental rate equal to or above that of its competitors because of the quality of
its products and its high level of customer service. Based upon its 1996 average
utilization rate and fleet size, the Company estimates that a $1.00 change in
the average monthly rental rates would result in a $0.4 million impact on
EBITDA. Management estimates that a one percentage point decrease in overall
Company utilization rates would have reduced 1996 EBITDA by $1.1 million.
As part of its leasing operations, the Company sells used mobile office
units from its lease fleet either at fair market value or to a lesser extent
pursuant to pre-established lease purchase options included in the terms of its
lease agreements. Due in part to an active fleet maintenance program, the
Company's units maintain a significant percentage of their original value.
During the period fiscal from 1993 to 1996, the Company was able to sell used
units in the ordinary course of business (excluding units sold pursuant to
purchase options) for an average between 97% and 102% of their total capitalized
cost and a 20% premium to net book value. Such costs include the cost of the
units as well as costs of significant improvements made to the unit. However, no
assurance can be given that such percentages would have been realized from the
sale of the entire lease fleet or will be realized in the future.
NEW UNIT SALES. New unit sales include sales of newly-manufactured mobile
office units. The Company does not generally purchase new units for resale until
it has obtained firm purchase orders (which are generally non-cancelable) for
such units. New mobile units are generally purchased more heavily in the late
spring and summer months due to seasonal classroom and construction market
requirements.
DELIVERY AND INSTALLATION. The Company provides delivery, site-work,
installation and other services to its customers as part of its leasing and
sales operations. Revenues from delivery, site-work and
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installation result from the transportation of units to a customer's location,
site-work required prior to installation and installation of the mobile units
which have been leased or sold. Typically units are placed on temporary
foundations constructed by Scotsman service technicians, and service personnel
will also generally install the Company's ancillary products. The Company also
derives revenues from the tear-down of units and removal once a lease expires.
OTHER. The Company also derives revenue from the sale of other products and
services, including: rental of steps, furniture and ramps; sales of parts,
supplies and security systems; and charges for granting insurance waivers (i.e.,
charging a fee to customers who do not provide their own insurance certificate)
and for damage billings.
FLEET PURCHASES
The Company closely monitors fleet purchases to manage capital expenditures
and inventory levels. Generally, fleet purchases are controlled by regional and
corporate lease fleet managers, and must pass the Company's fleet purchasing
policy guidelines (which include ensuring that utilization rates and unrentable
units levels are acceptable, that redeployment, refurbishment and conversion
options have been evaluated, and that specific return on investment criteria
have been met). Scotsman purchases its units through approximately 30
third-party suppliers (most suppliers have only one factory, which generally
serves a market within 300 to 400 miles), with no significant dependence on any
supplier. The top three suppliers of units during the twelve months ended
December 31, 1996 represented approximately 26% of all purchases. The Company
believes that it has an excellent working relationship with its suppliers.
The Company believes that its fleet purchases are flexible and can be
adjusted to match business needs and prevailing economic conditions. Scotsman is
not "locked in" to long-term purchase contracts with manufacturers, and can
modify its new fleet purchases and acquisition activities to meet customer
demand. New fleet purchases are the result of the Company's growth and branch
expansion initiatives. The Company supplements its new fleet purchases with
acquisitions. Although the timing and amount of acquisitions are difficult to
predict, management considers its acquisition strategy to be opportunistic and
will adjust its fleet spending patterns as fleet acquisition opportunities
become available.
MARKETING
In addition to opening new branches, the Company uses a number of marketing
tools to generate new business and customers. By maintaining a detailed and
updated customer and prospect tracking system, marketing and sales personnel
generally can identify when a particular customer or prospect typically utilizes
the Company's products and may contact such customer or prospect regarding their
future needs.
Through its marketing and sales efforts, the Company has successfully
expanded the uses for its products. For example, since 1993, the number of
industries (as measured by SIC code) that lease or purchase the Company's
products has increased from 360 to 450. Additionally, Scotsman expects to
continue to increase its penetration of other industries that would benefit from
the usage of the Company's products. See "--Customer Base."
Developing new customers is an integral part of the sales process and is
monitored through the use of quarterly goals for each employee with sales
responsibility. In addition to its prospect tracking data bases, Scotsman
conducts direct mail campaigns (over 700,000 informational brochures were mailed
in 1996) and is a heavy user of print advertising, including the yellow pages
and customer trade publications. The Company has developed a toll-free telephone
number network so that customers can call and speak to a sales representative in
the branch location nearest the site where the call was placed. In addition, the
Company participates in numerous regional and national trade shows, and Scotsman
sales personnel joins local trade groups and associations. The Company also
designs marketing campaigns targeted at specific market niches.
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During 1996, the Company began developing national accounts. To date, the
Company has established 50 national accounts and continues to pursue other
national account relationships. The relationships are coordinated by a national
account manager and serviced by the branch network. Due to its broad geographic
capabilities, this program allows the Company to further differentiate itself
from many of its "mom-and-pop" competitors by providing consistent service on a
national basis.
CUSTOMER BASE
The Company's customer base is comprised of approximately 12,500 companies
which operate in approximately 450 diverse industries, a significant increase
over 1993 levels of 7,700 customers in 360 industries. The Company believes that
the construction and education industries accounted for approximately 26% and
19% of 1996 total revenues and that no other industry accounted for more than
10% of 1996 total revenues. During 1996 no single customer accounted for more
than 2.3% of the Company's total revenues and its top ten customers accounted
for approximately 6.6% of total revenues. The Company's customer base as
categorized by SIC Code and as a percentage of total revenues for 1996 is
estimated as follows:
CONSTRUCTION: The Company provides office and storage space to a broad
array of contractors associated with both residential and nonresidential
buildings, commercial offices and warehouses; highway, street, bridge and
tunnel contractors; water, sewer, communication and power line contractors;
and special construction trades, including glass, glazing and demolition.
The Company believes its construction customer base is characterized by a
wide variety of contractors, who are associated with original construction
as well as capital improvements in the commercial, institutional,
residential and municipal arenas.
EDUCATION: Rapid and unpredictable shifts in population within states
often necessitate quick expansion of educational facilities particularly in
elementary and secondary schools. State and local governmental budgetary
pressures have made mobile offices, especially multi-sectional offices, a
convenient and cost-effective way to expand classroom, laboratory and
library capacity. The Company's quality products are well suited for
educational institutions which demand a high level of maintenance and
service support.
PROFESSIONAL SERVICES: Customers in this category include professionals
from a broad array of industry sectors including engineering, architectural,
accounting, legal, insurance and sales.
HEALTH CARE: Health care customers are frequent users of multi-sectional
facilities as administrative offices, waiting rooms, MRI and other
diagnostic annexes adjacent to existing hospitals.
UTILITIES: Mobile offices have traditionally been leased to utilities
involved in electrical service, natural gas distribution and production, and
other energy-related services. Units are used as meeting rooms, reception
and visitor centers, security offices and, during periods of utility plant
reconstruction, as facilities to house the operations staff.
GOVERNMENT: Governmental users consist of federal, state and local
public sector organizations such as the United States Environmental
Protection Agency and state highway administrations. The Company has enjoyed
particular success in focused niches such as prisons and jails, courthouses,
national security buildings and NASA facilities. The Company's strategy of
concentrated regional focus has been particularly helpful in obtaining
business from local governmental customers.
CHEMICAL AND PHARMACEUTICAL: Chemical and pharmaceutical companies have
been long-time users of temporary office space. Mobile offices are
particularly well suited for laboratory usage where space is needed for the
duration of a specific project or for an off-site or isolated laboratory.
COMMERCIAL/INDUSTRIAL AND OTHER: The Commercial/Industrial and Other
segment includes a variety of industries and product uses which help
diversify the Company's revenue stream. Common examples include:
entertainment, recreation, transportation terminals, recycling, retail and
fast food
44
<PAGE>
establishments, metal processing and refining and disaster relief. Although
there are a number of different industries in this category, the Company
believes that no single industry included in this segment was material to it
in 1996.
The Company continually seeks to expand its user base and the applications
for its products. Other industries offering potential increasing sources of
revenue for the Company include childcare and care for the elderly. There is
also potential for a wider number of commercial applications for the Company's
products. For example, the Company is marketing its mobile office products to
companies for use as designated smoking facilities and to the agricultural
industry for use as weigh stations.
MANAGEMENT INFORMATION SYSTEMS
The Company utilizes a proprietary management information system which
substantially differentiates Scotsman from the majority of its competitors.
Scotsman's information system is instrumental to its lease fleet management and
targeted marketing efforts and allows management to monitor operations at its
branches on a daily, weekly, and monthly basis. Lease fleet information is input
daily at the branch level and verified through a monthly physical inventory by
branch personnel. This provides management with on-line access to utilization,
lease fleet unit levels, and rental revenues by branch or geographic region.
This information, among other data, is reviewed in weekly reports by management.
In addition, an electronic file for each unit showing its lease history and
current location/status is maintained in the information system. Branch
salespeople utilize the information system to obtain information regarding
potential and current customers as well as unit availability. The information
data base tracks individual units by serial number and includes complete cost,
condition and other financial and specific unit information.
In 1994, the Company initiated a 4-year $7 million upgrade plan to improve
its information systems of which approximately $3.7 million had been spent as of
December 31, 1996. The initiatives funded by this plan will increase operating
efficiencies and access to management information as these needs grow with the
expansion of the business.
MOTOR VEHICLE REGULATIONS
A portion of the Company's units is subject to regulation in certain states
under motor vehicle and similar registration and certificate of title statutes.
The Company believes that it has complied in all material respects with all
motor vehicle registration and similar certificate of title statutes in states
where such statutes clearly apply to mobile office units. The Company has not
taken actions under such statutes in states where it has determined that such
statutes do not apply to mobile office units. However, in certain states, the
applicability of such statutes to the Company's mobile office units is not clear
beyond doubt. Due to the difficulty, expense and burden of complying with all
possible motor vehicle and certificate of title requirements in such states, the
Company does not take action to comply with every possible motor vehicle and
similar registration and certificate of title requirement in such jurisdictions.
If additional registration and related requirements are deemed to be necessary
in such states or if the laws in such states or other states were to change to
require the Company to comply with such requirements, the Company could be
subject to additional costs, fees and taxes as well as administrative burdens in
order to comply with such statutes or requirements. The Company does not believe
the effect of such compliance will be material to its business and financial
condition.
COMPETITION
Although the Company's competition varies significantly by market, the
mobile office industry, in general, is highly competitive. The Company competes
primarily in terms of product availability, customer service and price. The
Company believes that its reputation for customer service and its ability to
offer a wide selection of units suitable for many varied uses at competitive
prices allow it to compete effectively. However, certain of the Company's
competitors, such as GE Capital Modular Space, are less leveraged,
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<PAGE>
have greater market share or product availability in a given market and have
greater financial resources and pricing flexibility than the Company.
PROPERTIES
The Company leases approximately 72% of its 60 branch locations and owns the
balance as well as its headquarters in Baltimore, Maryland. Management believes
that none of the Company's leased facilities, individually, is material to the
operations of the Company.
LEGAL PROCEEDINGS
The Company is involved in certain legal actions arising in the ordinary
course of business. The Company believes that none of these actions, either
individually or in the aggregate, will have a material adverse effect on the
Company's business, results of operations or financial condition.
EMPLOYEES
As of March 31, 1997, the Company had 617 employees. None of the Company's
employees are covered by a collective bargaining agreement. Management believes
its relationship with its employees is good. The Company has never experienced
any material labor disruption and is unaware of any efforts or plans to organize
its employees.
THE GUARANTORS
The Company acquired the Guarantor in 1994. As of April 30, 1997, the
Guarantor transferred substantially all of its assets, consisting primarily of
mobile office units, to the Company and ceased operations which were limited to
leasing its mobile office units to the Company under a master lease. The
operations of the Guarantor are currently limited to issuing the Guarantee. The
Subordinated Guarantor is a newly-created special purpose Delaware limited
liability company formed to hold certain existing and future Rental Equipment
(as defined in "Description of the Notes--Certain Definitions") as to which the
Company has not, due to the difficulties in establishing the status thereof
under applicable law and the expenses and administrative burden of discerning
the requirements of each such jurisdiction's certificate of title or similar
statute, taken all possible steps which might be necessary to perfect beyond
doubt the first priority lien thereon intended to secure the Company's
obligations under the New Credit Facility. At March 31, 1997, on a pro forma
basis after giving effect to the Recapitalization, the assets of the
Subordinated Guarantor would have included approximately 30,000 of the Company's
units and represented approximately 58% of the total consolidated assets of the
Company. Under the Subordinated Guarantor's operating agreement, the executive
committee of the Subordinated Guarantor is required, for so long as any
indebtedness remains outstanding under the New Credit Facility, to included at
least one "special executive" who has no interest in or special relationship
with Holdings or its subsidiaries, and the affirmative vote of the "special
executive" is required, among other things, to authorize the filing of a
bankruptcy petition with respect to the Subordinated Guarantor or the making of
any other act of bankruptcy by the Subordinated Guarantor.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Company's directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Barry P. Gossett.............................. 57 Director and Chairman of the Board
Gerard E. Holthaus............................ 47 President and Chief Executive Officer, Director
James N. Alexander............................ 37 Director
Daniel L. Doctoroff........................... 38 Director
Michael F. Finley............................. 35 Director
Robert B. Henske.............................. 35 Director
James L. Singleton............................ 41 Director
David P. Spalding............................. 42 Director
J. Collier Beall.............................. 49 Senior Vice President and Southern Division Manager
Joseph F. Donegan............................. 46 Senior Vice President and Northern Division Manager
Gerard E. Keefe............................... 40 Senior Vice President and Chief Financial Officer
James D. Funk................................. 50 Vice President and Midwestern Regional Manager
Katherine K. Giannelli........................ 36 Vice President and Controller
Robert W. Hansen.............................. 40 Vice President and Western Regional Manager
William C. LeBuhn............................. 34 Vice President--Human Resources
John B. Ross.................................. 48 Vice President and Corporate Counsel
William J. Wyatt.............................. 57 Vice President--Marketing and Sales Support
</TABLE>
Mr. Gossett has been Chairman of the Board since April 1997. He formerly
served as Chairman and Chief Executive Officer from October 1995 to April 1997.
Prior to this, he served as President and Chief Executive Officer of the Company
from 1990 to October 1995. Mr. Gossett has been a director and employee of the
Company or its predecessor for over twenty-five years. Before joining the
Company, Mr. Gossett was a partner at Buchanan and Company, a Washington, D.C.
accounting firm. Mr. Gossett was one of the founders of the Modular Building
Institute, an industry trade group which represents member companies.
Mr. Holthaus has been President and Chief Executive Officer of the Company
since April 1997. He has been with the Company since June 1994, and served as
President and Chief Operating Officer from October 1995 to April 1997 and was
Executive Vice President and Chief Financial Officer prior thereto. He has
served as a director since June 1994. Before joining the Company, Mr. Holthaus
served as Senior Vice President of MNC Financial, Inc. from April 1988 to June
1994. From 1971 to 1988, Mr. Holthaus was associated with the accounting firm of
Ernst & Young (Baltimore), where he served as a partner from 1982 to 1988.
Mr. Alexander was elected as a director of the Company in May 1997. Mr.
Alexander has been a Vice President of Keystone and a Principal of Arbor
Investors, L.L.C. since August 1995. Prior to joining Keystone, he worked at
Goldman, Sachs & Co. where he was a Vice President in the Fixed Income Division
from August 1993 to July 1995. He serves on the Boards of Directors of FW
Strategic Partners, L.P. and Pipeline Power Partners, L.P. and on the Board of
Advisors of FEP Capital Holdings, L.P.
Mr. Doctoroff was elected as a director of the Company in May 1997. Mr.
Doctoroff has been a Vice President of Keystone since October 1992, a Managing
Director of Oak Hill Partners, Inc. and its predecessor, which provides
investment advisory services to Acadia Partners, L.P. ("Acadia"), since August
1987, Vice President and Director of Acadia MGP, Inc., a corporate general
partner of Acadia since March 1992 and a managing partner of Insurance Partners
Advisors, L.P., which provides investment advisory services to Insurance
Partners, L.P., since February 1994. Mr. Doctoroff is also a director of Bell &
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Howell Holdings Company, CapStar Hotel Company, Specialty Foods Corporation and
Kemper Corporation.
Mr. Finley was elected as a director of the Company in May 1997. Mr. Finley
has been a Principal of Cypress since its formation in April 1994. Prior to
joining Cypress, he was a Vice President in the Merchant Banking Group at Lehman
Brothers Inc. from 1989 to 1994.
Mr. Henske was elected as a director of the Company in May 1997. From
January 1997 to the present, Mr. Henske has been a Vice President of Keystone
and a Principal at Arbor Investors, L.L.C. From January 1996 to December 1996,
he was Executive Vice President and Chief Financial Officer of American Savings
Bank, F.A., a federally-chartered thrift. From 1986 to January 1996, he was a
partner and held various other positions with Bain & Company, a management
consulting firm.
Mr. Singleton was elected as a director of the Company in May 1997. Mr.
Singleton has been a Vice Chairman of Cypress since its formation in April 1994.
Prior to joining Cypress, he was a Managing Director in the Merchant Banking
Group at Lehman Brothers Inc. Mr. Singleton is also a director of Able Body
Corporation, L.P. Thebault Company and Cinemark USA, Inc.
Mr. Spalding was elected as a director of the Company in May 1997. Mr.
Spalding has been Vice Chairman of Cypress since it formation in April 1994.
Prior to joining Cypress, he was a Managing Director in the Merchant Banking
Group at Lehman Brothers Inc. from February 1991 to April 1994. Previously, he
held the position of Senior Vice President of Lehman Brothers Inc. from
September 1988 to February 1991. From April 1987 to September 1988, he was
Senior Vice President of General Electric Capital Corporation Corporate Finance
Group, Inc. Prior to 1987 he was a Vice President of The First National Bank of
Chicago. Mr. Spalding is also a director of Lear Corporation and AMTROL Inc.
Mr. Beall has been Senior Vice President and Southern Division Manager of
the Company since September 1996 and was the Southeastern Region Manager prior
thereto. Mr. Beall's responsibilities include the implementation of corporate
policies, attainment of branch profitability, fleet utilization management and
development of personnel. Prior to joining the Company in 1977, Mr. Beall was a
Regional Manager for Modular Sales and Leasing Company based in Georgia.
Mr. Donegan has been Senior Vice President and Northern Division Manager of
the Company since September 1996 and served as the Northeast Region Manager
prior thereto. Mr. Donegan's responsibilities include the implementation of
region profitability, fleet utilization and development of personnel. Mr.
Donegan has over 20 years of experience within the industry. From 1991 through
May 1994, Mr. Donegan held similar positions with Space Master Buildings,
Kullman Industries and Bennett Mobile Offices.
Mr. Keefe has been Senior Vice President and Chief Financial Officer of the
Company since April 1997. He formerly served as Vice President, Fleet and
Finance, with responsibilities including overall fleet management and
purchasing, treasury functions, pricing and budgeting from February 1995 to
April 1997. Prior to joining the Company, Mr. Keefe was with The Ryland Group, a
national homebuilder headquartered in Columbia, Maryland, from 1993 to 1995.
From 1991 to 1993, he was a management consultant serving the management,
distribution and financial services industries, and from 1977 to 1991, he was
with Ernst & Young, (Baltimore), most recently as a Senior Manager.
Mr. Funk has been Vice President and Midwestern Regional Manager of the
Company since 1986. Mr. Funk's responsibilities include the implementation of
corporate policies, attainment of branch profitability, fleet utilization
management and development of personnel in his region. Prior to joining the
Company in 1986, Mr. Funk was a branch manager for IISCOM, a distributor of
computer products based in Florida.
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<PAGE>
Ms. Giannelli has been Vice President and Controller of the Company with
responsibilities for the Company's accounting department including regulatory
reporting since 1990. Prior to joining the Company, Ms. Giannelli was a Senior
Manager of KPMG Peat Marwick in Baltimore, Maryland where she had been employed
from 1982 to 1990.
Mr. Hansen has been Vice President and Western Regional Manager with
responsibility for Sales and Operations in the 13 Western States since 1994. His
duties include attainment of branch profitability, fleet management, development
of personnel and implementation of corporate policy in his region. Prior to
joining the Company in 1983, Mr. Hansen was General Manager of Duracite Mfg., a
cabinetwork and construction firm in the San Francisco Bay Area.
Mr. LeBuhn has been Vice President of Human Resources since January 1994.
Mr. LeBuhn's responsibilities include the management of human resources related
programs. Prior to joining the Company, Mr. LeBuhn was Human Resources Manager
for Sherwin-Williams Eastern Division from 1992 to January 1994 and Director of
Human Resources for Consolidated International Insurance Group, Inc. from 1985
to 1992.
Mr. Ross has been Corporate Counsel for the Company since February 1995.
Prior to joining Scotsman, Mr. Ross was Corporate Counsel for MNC Leasing
Corporation from 1983 to 1991 and Special Assets Counsel for MNC Financial, Inc.
from 1991 to 1993. Prior to joining MNC Leasing Corporation, he was engaged in
the private practice of law in both North Carolina and Maryland.
Mr. Wyatt has been Vice President, Marketing and Sales Support since 1994.
He was Director of Sales and Marketing for the Mobile Offices Division from 1990
to 1994 and was National Sales Manager of Williams from 1988 to 1990. Before
joining Scotsman, Mr. Wyatt operated W.J. Wyatt and Company, Inc., a consulting
firm providing sales development, market planning, convention and meeting
management and publishing services.
Each director of the Company is currently also a director of Holdings and
the Guarantor. Messrs. Holthaus, Keefe, and Ross and Ms. Giannelli are officers
of Holdings in the same capacities as they are at the Company. Messrs. Holthaus
and Keefe are officers of the Guarantor in the same capacities as they are at
the Company. Ms. Giannelli is the Controller of the Guarantor.
COMPENSATION OF DIRECTORS
No director of the Company or the Guarantor receives any fee for attendance
at Board of Directors meetings or meetings of Committees of the Board of
Directors. Executive officers of the Company and the Guarantor are elected by
the Board of Directors and serve at the discretion of the Board of Directors.
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EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for the last three completed years of those persons who were, at
December 31, 1996, the five highest paid officers of the Company:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1) COMPENSATION(2)
- -------------------------------------------------- --------- ---------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Barry P. Gossett(3)............................... 1996 $ 225,000 $ 51,000 -- $ 20,374
Chairman and Chief Executive Officer 1995 205,770 51,000 -- 18,066
1994 200,000 52,000 -- 3,287
Gerard E. Holthaus(4)............................. 1996 $ 200,000 $ 50,500 27,000 $ 15,422
President and Chief Operating Officer 1995 180,769 50,500 7,800 12,968
1994 78,327 50,000 -- 8,297
J. Collier Beall.................................. 1996 $ 216,881 $ 20,000 10,000 $ 9,825
Senior Vice President and Southern Division 1995 171,390 28,000 2,300 7,200
Manager 1994 155,901 23,750 -- 7,200
Joseph F. Donegan................................. 1996 $ 200,557 $ 20,000 10,000 $ 9,625
Senior Vice President and Northern Division 1995 148,635 25,000 1,950 8,138
Manager 1994 54,609 15,000 -- 3,600
James D. Funk..................................... 1996 $ 147,357 $ 20,000 7,000 $ 9,144
Vice President and Midwestern Regional Manager 1995 158,338 20,000 1,950 7,875
1994 166,018 21,875 -- 7,450
</TABLE>
- ------------------------
(1) Represents options granted to purchase shares of Holdings pursuant to the
Scotsman Holdings, Inc. 1994 Employee Stock Option Plan.
(2) Represents disability insurance premium, key man life insurance premium, car
allowance or lease amounts and employer match under the 401(k) Plan.
(3) Mr. Gossett has been Chairman of the Board since April 1997. He formerly
served as Chairman and Chief Executive Officer.
(4) Mr. Holthaus became President and Chief Executive Officer of the Company in
April 1997.
SCOTSMAN HOLDINGS, INC. 1994 EMPLOYEE STOCK OPTION PLAN
In March 1995, a stock option plan was adopted for certain key employees. In
March 1995, options for 38,200 shares of Holdings were granted to members of
management of the Company at an exercise price of $13.78 per share. Additional
options were granted in March 1996 for 115,050 shares at an exercise price of
$28.80 per share and in February 1997 for 107,530 shares at an exercise price of
$55.18 per share. The options are exercisable for a period of 10 years from date
of grant and became fully vested upon consummation of the Recapitalization.
Under the terms of the Recapitalization Agreement, members of management had the
option of (i) retaining their common stock and options in Holdings or (ii)
surrendering their shares for $91.50 per share and their options for the
difference of $91.50 per share and the exercise price per share of such option.
Seven of the top nine executive officers (including the President and Chief
Executive Officer, Chief Financial Officer and the Northern and Southern
Division Managers) retained all of their common stock and stock options in
Holdings as part of the Recapitalization.
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LONG TERM INCENTIVE PLAN
The Company adopted a long term incentive plan (the "Incentive Compensation
Plan"). Under the terms of the Incentive Compensation Plan which was terminated
upon the consummation of the Recapitalization, certain management employees have
been or would have been entitled to receive, for each of fiscal years 1994
through 1998, cash compensation if certain targets are or were met. In February
1997, $400,000 was paid to approximately 40 management employees based upon the
Company's 1996 operating performance. Upon consummation of the Recapitalization,
$6.2 million of deferred compensation was paid to, or deferred by, certain
management employees under the Incentive Compensation Plan (including all
executive officers of the Company) and such plan was terminated. The Company
expects to adopt a new option program and annual bonus plan, although the terms
of such plan have not been finalized.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No director or executive officer of the Company was or is a director or
executive officer of any corporation, other than Holdings, that has a director
or executive officer who is also a director of the Company or a member of a
committee of the Board of Directors. During 1996, no officers or employees of
the Company, other than Messrs. Gossett and Holthaus, participated in
deliberations of the Company's Board of Directors concerning executive officer
compensation.
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CERTAIN TRANSACTIONS
THE RECAPITALIZATION
Holdings, Odyssey, certain other existing stockholders of Holdings, certain
partnerships affiliated with Cypress and Scotsman Partners, L.P., a limited
partnership whose direct and indirect partners include Keystone and Strategic
Partners ("Scotsman Partners"), are parties to the Recapitalization Agreement.
Pursuant to the Recapitalization Agreement, Holdings (i) repurchased 3,210,679
shares of outstanding Holdings Common Stock from Odyssey and certain other
existing stockholders (including management) for an aggregate of approximately
$293.8 million (or a price of $91.50 per share) in cash and approximately $21.8
million of Promissory Notes and (ii) issued 1,475,410 shares of Holdings Common
Stock to the Investor Group for an aggregate of approximately $135.0 million (or
a price of $91.50 per share) in cash. The Promissory Notes are supported by a
stand-by letter of credit in the amount of $22.7 million issued on behalf of the
Company for the benefit of the holders of the Promissory Notes. Mr. Gossett sold
183,000 shares of Holdings Common Stock in the Common Stock Repurchase. After
giving effect to the Common Stock Repurchase and the Common Stock Issuance, on a
primary basis, (i) the Investor Group (including certain partnerships affiliated
with Cypress, Scotsman Partners and BT Investment Partners, Inc. ("BTIP") and
(ii) Odyssey and certain other stockholders of Holdings (including members of
senior management) own approximately 90% and 10%, respectively, of the Holdings
Common Stock.
Under the Recapitalization Agreement, the holders of options to purchase
shares of Holdings Common Stock (including the executive officers of the
Company) had the option of either receiving a cash payment or continuing their
investment in Holdings. Seven of the top nine executive officers of the Company
(including the President and Chief Executive Officer, Chief Financial Officer
and the Northern and Southern Division Managers) retained all of their Holdings
Common Stock and stock options in Holdings following the Recapitalization. See
"Management--Long Term Incentive Plan" for a description of certain other
amounts that were paid to, or deferred by, the executive officers of the Company
upon the consummation of the Recapitalization.
The Recapitalization included (i) the Common Stock Repurchase, (ii) the
Common Stock Issuance, (iii) a tender offer and related consent solicitation for
the Holdings Notes for aggregate consideration of $1,073.60 per $1,000 principal
amount of the Holdings Notes plus accrued and unpaid interest from March 1,
1997, (iv) a tender offer and related consent solicitation for the Senior
Secured Notes for a purchase price equal to $1,048.30 per $1,000 amount of the
Senior Secured Notes plus accrued and unpaid interest, (v) the refinancing of
all outstanding indebtedness under the Existing Credit Facility with the New
Credit Facility, (vi) the Offering and (vii) the use of the proceeds from the
Common Stock Issuance, the New Credit Facility and the Offering to finance the
transactions described above. In connection with the Recapitalization on May 22,
1997, (i) Holdings completed the tender offer for the Holdings Notes and
accepted for payment all its outstanding Holdings Notes (approximately $29.3
million prior to acceptance), (ii) the Company completed the tender offer for
its Senior Secured Notes and accepted for payment approximately 99.8% of its
outstanding Senior Secured Notes (approximately $165 million prior to
acceptance) and (iii) the Company borrowed an aggregate of $109.1 million under
the New Credit Facility (including approximately $2.8 million the Company
expects to borrow within the next sixty days to fund expenses related to the
Recapitalization). As part of the Recapitalization, the Subordinated Guarantor
was created to acquire and hold certain Rental Equipment primarily in cases
where such Rental Equipment is not evidenced by certificates of title. The
Company transferred approximately $181.3 million to Holdings, its parent
corporation, to partially fund the Recapitalization. See "Use of Proceeds." The
goals of the Recapitalization were to fund the Common Stock Repurchase, to
eliminate all of the indebtedness of Holdings, to refinance the indebtedness of
Scotsman and to provide Scotsman with an expanded bank credit facility to fund
future business opportunities. As part of the Recapitalization, members of the
Investor Group and their affiliates received fees of approximately $4 million in
the aggregate and reimbursement of expenses.
52
<PAGE>
Each existing stockholder of Holdings had the option, subject to certain
conditions, to receive either cash or Promissory Notes in exchange for their
Holdings Common Stock in the Common Stock Repurchase. The Promissory Notes
mature on January 15, 1998 and bear interest at a fixed rate based on forward
LIBOR. To fund the Promissory Notes upon their maturity, the Company will
transfer sufficient funds to Holdings in the form of a dividend. The Company
currently expects to borrow such funds under the New Credit Facility.
Approximately $21.8 million aggregate principal amount of the Promissory Notes
were issued.
STOCKHOLDERS' AGREEMENT
The Investor Group, certain management stockholders of Holdings (the
"Management Stockholders") and Holdings are parties to a Second Amended and
Restated Management Stockholders' and Optionholders' Agreement (the
"Stockholders' Agreement"), which amends and restates the previous agreement
among Odyssey, the Management Stockholders and Holdings, and which contains
certain rights and restrictions with respect to the transfer of each Management
Stockholder's shares of Holdings Common Stock. The Stockholders' Agreement
prohibits the transfer of shares of Holdings Common Stock by each Management
Stockholder (other than sales required in connection with the disposition of all
shares of Holdings Common Stock owned by the Investor Group and their
affiliates) until the earlier of fifteen months after an initial public offering
of the equity of Holdings or the day after the Investor Group and their
affiliates have disposed of more than 33 1/3% of the aggregate shares of
Holdings Common Stock originally acquired by the Investor Group, and thereafter,
the aggregate number of shares which may be transferred by each Management
Stockholder in any calendar year (other than certain required sales) may not
exceed 25% of the number of shares acquired by such Management Stockholder at
the time of Odyssey's acquisition of Holdings plus the number of any shares
acquired pursuant to the exercise of stock purchase options. In addition, the
Stockholders' Agreement restricts the transfer of shares of Holdings Common
Stock by each Management Stockholder for a period of five years from the date of
purchase of such shares, except certain permitted transfers and transfers
pursuant to an effective registration statement or in accordance with Rule 144
under the Securities Act. Upon the expiration of such five-year period, subject
to the foregoing restrictions, each Management Stockholder may transfer his
shares after giving the Investor Group and Holdings, respectively, a right of
first refusal to purchase such shares.
Each Management Stockholder has the right (and in limited circumstances the
obligation) to sell his shares in connection with certain dispositions of shares
by the Investor Group and the right to cause his shares to be included in
certain registrations of Holdings Common Stock on behalf of the Investor Group.
Each Management Stockholder has granted to the Investor Group an irrevocable
proxy that permits the Investor Group to vote his shares. In addition, upon
termination of any Management Stockholder's employment, Holdings may elect to
require such Management Stockholder to sell to Holdings all of his shares.
The previous Stockholders' Agreement among Odyssey, certain management
stockholders of Holdings and the Company, which contained certain rights and
restrictions with respect to the transfer of such management stockholders'
shares of Holdings Common Stock, was superseded and replaced in its entirety by
the new Stockholders' Agreement.
INVESTOR STOCKHOLDERS AGREEMENT
Upon consummation of the Recapitalization, Holdings, certain partnerships
affiliated with Cypress (the "Cypress Stockholders") and Scotsman Partners
(collectively, including their permitted transferees, the "Investor
Stockholders") and Odyssey, Barry Gossett, BTIP and certain other stockholders
(including their permitted transferees and the Investor Stockholders, the
"Stockholders") entered into an investor stockholders agreement (the "Investor
Stockholders Agreement").
Under the terms of the Investor Stockholders Agreement, unless otherwise
agreed by the Investor Stockholders, the board of directors of Holdings will
consist of eight directors: three persons nominated by the Cypress Stockholders,
three persons nominated by Scotsman Partners, the Chairman of the Board and
53
<PAGE>
the President of Holdings. Each of the Investor Stockholders agree to vote (or
cause their affiliates to vote) in favor of the persons nominated under the
Investor Stockholders Agreement and to vote (or cause their affiliates to vote)
to remove and replace each other's nominees in accordance with appropriate
instructions. If the Holdings Common Stock held by either the Cypress
Stockholders or Scotsman Partners is reduced to an amount less than 20% of the
outstanding Holdings Common Stock but 5% or more of the outstanding Holdings
Common Stock, the Cypress Stockholders or Scotsman Partners, as the case may be,
will be entitled to designate one director. Each of the Cypress Stockholders or
Scotsman Partners will lose the right to designate one director when the Cypress
Stockholders or Scotsman Partners, as the case may be, no longer holds at least
5% of the outstanding Holdings Common Stock.
Without the approval of a majority of the directors designated by each of
the Cypress Stockholders and Scotsman Partners, respectively, Holdings will not
take certain actions (including mergers, consolidations, sales of all or
substantially all assets, electing or removing the Chairman or President of
Holdings, issuing securities, incurring certain indebtedness, making certain
acquisitions, approving operating and capital budgets and other major
transactions).
Under the Investor Stockholders Agreement, prior to the consummation of an
initial public offering of Holdings Common Stock (an "IPO"), each Stockholder
will have the right to acquire shares of Holdings Common Stock in connection
with certain new issuances of Holdings Common Stock, on the same terms and
conditions, for the amount necessary to allow the participating Stockholder to
maintain its percentage holding of the outstanding Holdings Common Stock.
The Investor Stockholders Agreement will contain provisions limiting the
ability of Stockholders to transfer their shares in certain circumstances. Among
other provisions, the Investor Stockholders Agreement will include (i) rights of
first offer in favor of the Investor Stockholders with respect to proposed
transfers of shares to a third party and (ii) tag-along rights in favor of each
Stockholder pursuant to which a selling Stockholder would be required to permit
the other Stockholders to participate on a proportional basis in a transfer of
shares to a third party. Also, if the Investor Stockholders determine to sell
shares to a third party, in certain circumstances the Investor Stockholders will
have the right to require the other Stockholders to sell their shares to such
third party.
Under the Investor Stockholders Agreement, the Stockholders will have the
right to require the Company to register their shares of Holdings Common Stock
under the Securities Act in certain circumstances, including upon the demand of
certain of the Stockholders.
The Investor Stockholders Agreement (other than the registration rights
provisions) will terminate (unless earlier terminated as specified in the
Investor Stockholders Agreement) upon the earlier of (i) 10 years from the
closing date and (ii) completion of an IPO.
EMPLOYEE LOANS
On July 27, 1994, the Company loaned Mr. Holthaus $100,000 in connection
with the purchase of Holdings' common stock pursuant to a subscription agreement
between Mr. Holthaus and Holdings dated June 1994. Interest accrued under the
loan at a rate of 6.5%, corresponding to the Adjusted Federal Interest Rate. The
loan was payable in annual principal payments of $25,000 plus accrued interest
beginning January 1995. The loan was repaid in 1996.
ODYSSEY INVESTORS MANAGEMENT AGREEMENT
The Company and Odyssey Investors, Inc. ("Odyssey Investors"), a wholly
owned subsidiary of Odyssey Partners, entered into a management agreement (the
"Management Agreement"), dated as of December 16, 1993, which provided that the
Company pay to Odyssey Investors an annual fee of up to $250,000 in
consideration of certain management, consulting, and financial advisory services
rendered by Odyssey Investors. The terms of the Management Agreement were not
the result of arms' length bargaining and were not reviewed as to fairness by
any independent party and no determination was made as to whether the terms of
the Management Agreement were as favorable as those which might have been
obtained from unaffiliated parties. The Company incurred expense of $250,000 for
these services in 1994, 1995 and 1996. The Management Agreement terminated upon
the Recapitalization.
54
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
All of the issued and outstanding shares of common stock of the Company are
owned by Holdings. The following table sets forth certain information regarding
the beneficial ownership of the Holdings Common Stock by (i) all persons owning
of record or beneficially to the knowledge of the Company 5% or more of the
issued and outstanding Holdings Common Stock, (ii) each director individually,
(iii) each executive officer named in the Summary Compensation Table, and (iv)
all executive officers and directors as a group. The Company is the beneficial
owner of 100% of the Guarantor's common stock and the Subordinated Guarantor's
limited liability company interests.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE
NAME COMMON STOCK OWNED
- ----------------------------------------------------------------------------------- ---------------- -----------
<S> <C> <C>
Cypress Merchant Banking Partners L.P.(1)(2)(3)
c/o The Cypress Group L.L.C.
65 East 55th Street
New York, NY 10022............................................................... 675,401 41.18%
Cypress Offshore Partners L.P.(1)(2)(3)
Bank of Bermuda (Cayman) Limited
P.O. Box 513 G.T.
Third Floor
British American Tower
George Town, Grand Cayman
Cayman Islands, B.W.I............................................................ 34,982 2.13
Scotsman Partners, L.P.(2)(3)(4)
201 Main Street
Fort Worth, TX 76102............................................................. 710,383 43.31
Odyssey Partners, L.P.(3)(5)
31 West 52nd Street
New York, NY 10019............................................................... 96,741 5.90
James N. Alexander(6).............................................................. -- --
Daniel L. Doctoroff(6)............................................................. -- --
Michael F. Finley(7)............................................................... -- --
Robert B. Henske(6)................................................................ -- --
James L. Singleton(7).............................................................. -- --
David P. Spalding(7)............................................................... -- --
Barry P. Gossett(3)(8)(9).......................................................... 41,469 2.53
Gerard E. Holthaus(8)(9)........................................................... 74,030(10) 4.51
J. Collier Beall(8)(9)............................................................. 23,800(10) 1.45
Joseph F. Donegan(8)(9)............................................................ 23,150(10) 1.41
All executive officers and directors as a group.................................... 250,074(10) 15.25
</TABLE>
55
<PAGE>
(1) Cypress Merchant Banking Partners L.P. and Cypress Offshore Partners L.P.
are controlled by The Cypress Group L.L.C. or affiliates thereof. Certain
executives of The Cypress Group L.L.C., including Messrs. Jeffrey P. Hughes,
James L. Singleton, David P. Spalding and James A. Stern, may be deemed to
share beneficial ownership of the shares shown as beneficially owned by
Cypress Merchant Banking Partners L.P. and Cypress Offshore Partners L.P.
Each of such individuals disclaims beneficial ownership of such shares.
(2) Does not include shares beneficially owned by Mr. Gossett and members of
management, as to which the Investor Group has an irrevocable proxy.
(3) Under the Investor Stockholders Agreement, the Cypress Stockholders and
Scotsman Partners have agreed to vote their shares for certain nominees for
director and other matters and the Cypress Stockholders, Scotsman Partners,
Odyssey and Mr. Gossett have agree to restrict the transfer of their shares
subject to certain exceptions. See "Certain Transactions--Investor
Stockholders Agreement."
(4) The shares of Holdings Common Stock beneficially owned by Scotsman Partners
may be deemed to be owned by J. Taylor Crandall, Group 31, Inc. ("Group 31")
and Arbor Scotsman, L.P. ("AS"). Mr. Crandall is the sole stockholder of
Group 31, which is the general partner of AS, which, in turn, is the general
partner of Scotsman Partners. Group 31 and AS disclaim such beneficial
ownership. The address of Mr. Crandall, Group 31 and AS is the same as
Scotsman Partners. Mr. Crandall is the Chief Financial Officer of Keystone.
(5) The shares of common stock beneficially owned by Odyssey may be deemed to
be beneficially owned by the general partners of Odyssey: Stephen Berger,
Brian Wruble, Leon Levy, Jack Nash and Joshua Nash (collectively, the
"General Partners"), who will share voting and investing control over such
shares. The General Partners disclaim such beneficial ownership. The address
of each of the General Partners is the address of Odyssey.
(6) Such person's address is c/o Scotsman Partners, L.P.
(7) Such person's address is c/o Cypress Merchant Banking Partners L.P.
(8) Such person's address is the address of the Company's principal executive
offices.
(9) Each member of management is a party to the Stockholders' Agreement whereby
he or she has agreed to limit the transferability of his or her shares. See
"Certain Transactions--Stockholders' Agreement."
(10) Includes 61,330, 22,300 and 21,950 and 186,430 shares held as options by
Messrs. Holthaus, Beall and Donegan and all executive officers as a group,
respectively, that vested upon the consummation of the Recapitalization.
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<PAGE>
DESCRIPTION OF THE NEW CREDIT FACILITY
GENERAL
As part of the Recapitalization, the Company entered into the New Credit
Facility with a syndicate of banks, as lenders, and BT Commercial Corporation
("BTCC"), as agent (the "Agent"). The New Credit Facility allows the Company to
obtain revolving credit loans and issue letters of credit for the account of the
Company from time to time to make payments in connection with the
Recapitalization and for working capital, acquisitions and general corporate
purposes. The New Credit Facility provides for a total line of revolving credit
of up to $300 million subject to the satisfaction of certain requirements
(including a borrowing base test). At the Company's option, the revolving credit
loans may be maintained as (a) Base Rate Loans (as defined in the New Credit
Facility) which will bear interest at the higher of (x) 1/2 of 1% in excess of
the Federal Reserve reported certificate of deposit rate and (y) the prime rate
of the Agent, plus 1% or (b) Eurodollar Loans (as defined in the New Credit
Facility) which will bear interest at the Eurodollar Rate (as defined in the New
Credit Facility) as determined by the Agent plus 2.25%. Beginning in 1998, the
applicable margin used to calculate such interest rates may be reduced if the
Company satisfies certain leverage ratios. The Company paid certain fees with
respect to the New Credit Facility. The New Credit Facility will have a term of
five years, unless terminated sooner upon an event of default (to be defined in
the New Credit Facility), and outstanding revolving credit loans will be payable
on such date or such earlier date as may be accelerated following the occurrence
of any event of default. As of May 31, 1997, the outstanding indebtedness under
the New Credit Facility was $97.3 million.
The obligations under the New Credit Facility are guaranteed by Holdings and
certain of the Company's subsidiaries (the "Credit Agreement Guarantors"). The
obligations under the New Credit Facility are be secured by a first priority
lien (subject to permitted encumbrances) on substantially all of the Company's
and each Credit Agreement Guarantor's property and on all of the capital stock
of the Company and certain of its subsidiaries, and all proceeds thereof. The
Notes will be effectively subordinated to the obligations under the New Credit
Facility to the extent of the value of the assets securing the New Credit
Facility. Upon consummation of the Exchange Offer, the Guarantor and the
Subordinated Guarantor will be the only Credit Agreement Guarantors.
The Subordinated Guarantor is a newly-created special purpose limited
liability company formed to hold certain existing and future Rental Equipment as
to which the Company has not, due to the difficulties in establishing the status
thereof under applicable law and the expenses and administrative burden of
discerning the requirements of each such jurisdiction's certificate of title or
similar statute, taken all possible steps which might be necessary to perfect
beyond doubt the first priority lien thereon intended to secure the Company's
obligations under the New Credit Facility. At March 31, 1997, on a pro forma
basis, after giving pro forma effect to the Recapitalization, the assets of the
Subordinated Guarantor would have included approximately 30,000 of the Company's
units and represented approximately 58% of the total consolidated assets of the
Company.
CERTAIN COVENANTS
The New Credit Facility contains various covenants that restrict the Company
from taking various actions and that require that the Company achieve and
maintain certain financial covenants. The New Credit Facility includes covenants
relating to minimum interest coverage ratio, minimum utilization, and
limitations on capital expenditures, indebtedness, mergers, acquisitions,
disposition of assets, change in business activities, and certain corporate
activities. The New Credit Facility also prohibits the Company from prepaying
the Notes and to prohibit certain changes in control of the Company or Holdings.
EVENTS OF DEFAULT
The New Credit Facility contains events of default, including nonpayment of
principal, interest or fees, violation of covenants, inaccuracy of
representations or warranties in any material respect, cross default and cross
acceleration to certain other indebtedness, bankruptcy, ERISA, environmental
matters, material judgments and material liabilities and change of control.
57
<PAGE>
DESCRIPTION OF THE NOTES
Except as otherwise indicated, the following description relates both to the
Existing Notes issued in the Offering and the New Notes to be issued in exchange
for Existing Notes in connection with the Exchange Offer. The form and terms of
the New Notes are the same as the form and terms of the Existing Notes, except
that the New Notes have been registered under the Securities Act and therefore
will not bear legends restricting the transfer thereof.
GENERAL
The Existing Notes were, and the New Notes will be, issued under an
Indenture, dated as of May 15, 1997 (the "Indenture"), among Williams Scotsman
Inc., as issuer (the "Issuer"), Mobile Field Office Company, as guarantor (the
"Guarantor"), Willscot Equipment, LLC, as subordinated guarantor (the
"Subordinated Guarantor") and The Bank of New York, as Trustee (the "Trustee").
The following is a summary of certain provisions of the Indenture, the
Notes, the Guarantees and the Subordinated Guarantee, copies of which will be
made available to prospective investors upon request. The following summaries of
certain provisions of the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by references to, all the
provisions of the Indenture, including the definitions of certain terms therein
and those terms made a part thereof by the Trust Indenture Act of 1939, as
amended (the "TIA"). Principal of, premium, if any, and interest on the Notes
will be payable, and the Notes may be exchanged or transferred, at the office or
agency of the Issuer in the Borough of Manhattan, The City of New York (which
initially shall be the corporate trust office of the Trustee, at 101 Barclay
Street, New York, New York 10286).
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
shall be made for any registration of transfer or exchange of Notes, but the
Issuer may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
PRINCIPAL, MATURITY AND INTEREST
The Notes (and the Exchange Notes) are limited in aggregate principal amount
to $550 million, of which $400 million was issued in the offering of the
Existing Notes and will mature on June 1, 2007. Additional amounts may be issued
in one or more series from time to time, subject to the limitations set forth
under "--Certain Covenants--Limitation on Indebtedness." The Notes will bear
interest at the rate per annum of 9 7/8% from May 22, 1997 (the "Issue Date"),
or from the most recent date to which interest has been paid or provided for,
payable semiannually to Holders of record at the close of business on the May 15
or November 15 immediately preceding the interest payment date on June 1 and
December 1 of each year, commencing December 1, 1997. Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
The interest rate on the Notes is subject to increase in certain
circumstances if the registration statement for the Existing Notes is not
declared effective on a timely basis or if certain other conditions are not
satisfied, all as further described in "The Exchange Offer."
The Notes will not be entitled to the benefit of any mandatory sinking fund.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Issuer prior to June 1, 2002. Thereafter, the
Notes will be redeemable, at the Issuer's option, in whole or in part, at any
time or from time to time, upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each Holder's registered address, at the
following redemption prices (expressed in percentages of the principal amount
thereof), plus accrued and unpaid interest to the redemption date (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant
58
<PAGE>
interest payment date), if redeemed during the 12-month period commencing on
June 1 of the years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- -------------------------- ----------------
<S> <C>
2002...................... 104.938%
2003...................... 102.469
2004 and thereafter....... 100.000
</TABLE>
In addition, at any time and from time to time on or prior to June 1, 2000,
the Issuer may, at its option, redeem in the aggregate up to 40% of the $400
million original principal amount of the Notes with the proceeds of one or more
Public Equity Offerings (provided that if the Public Equity Offering is a public
offering of any class of common stock of Holdings or another issuer, a portion
of the Net Cash Proceeds thereof equal to the amount required to redeem any such
Notes is contributed to the equity capital of the Issuer), at a redemption price
(expressed as a percentage of principal amount) of 109.875% plus accrued and
unpaid interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date); PROVIDED, HOWEVER, that at least 60% of the $400 million
aggregate principal amount of the Notes originally issued must remain
outstanding after each such redemption.
At any time on or prior to June 1, 2002, the Notes may also be redeemed as a
whole but not in part at the option of the Issuer upon the occurrence of a
Change of Control, upon not less than 30 nor more than 60 days prior notice
(exercisable no later than 30 days after such Change of Control) such Change of
Control mailed by first-class mail to each Holder's registered address, at a
redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and accrued interest to the redemption date (subject
to the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date).
"Applicable Premium" means, with respect to a Note at any redemption date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at June 1, 2002 plus (2) all required interest payments due on such Note through
June 1, 2002, computed using a discount rate equal to the Treasury Rate plus 100
basis points, over (B) the principal amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the redemption date to June 1, 2002; PROVIDED, HOWEVER, that if the
period from the redemption date to June 1, 2002 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the period from the redemption date to June 1, 2002 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in principal amount or less shall be redeemed in
part; PROVIDED, HOWEVER, that any redemption pursuant to the second paragraph of
this section shall be PRO RATA among recordholders. If any Note is to be
redeemed in part only, the notice of redemption relating to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes that
are redeemed by the Issuer or that are purchased by the Issuer pursuant to an
"Exceeds Proceeds Offer" as described under "--Certain Covenants--Limitation on
Sales of Assets and Subsidiary Stock" and pursuant to a Change of Control Offer
as described under "--
59
<PAGE>
Certain Covenants--Change of Control" or that are otherwise acquired by the
Issuer will be surrendered to the Trustee for cancellation.
MANDATORY REDEMPTION OR OFFER TO PURCHASE
Except as set forth below under "--Certain Covenants--Limitation on Sales of
Assets and Subsidiary Stock" and "--Certain Covenants--Change of Control," the
Issuer will not be required to make any mandatory redemption or repurchase with
respect to the Notes.
RANKING
The Notes are general unsecured obligations of the Issuer. The Notes rank on
a parity in right of payment with all existing and future unsubordinated
Indebtedness of the Issuer and senior in right of payment to all future
subordinated Indebtedness of the Issuer.
The Notes are effectively subordinated to all secured Indebtedness of the
Issuer (including all Indebtedness outstanding under the Credit Agreement) to
the extent of the value of the assets securing such Indebtedness and to all
Subordinated Guarantor Senior Indebtedness of the Subordinated Guarantor and to
all Indebtedness of the other Subsidiaries of the Issuer (other than the
Guarantors). The Guarantees are effectively subordinated to all existing and
future secured Indebtedness of the related Guarantor (including all Indebtedness
outstanding under the Credit Agreement and guaranteed by the Guarantors) to the
extent of the value of the assets securing such Indebtedness. The Subordinated
Guarantee is a general unsecured obligation of the Subordinated Guarantor and is
subordinated in right of payment to all existing and future Subordinated
Guarantor Senior Indebtedness of the Subordinated Guarantor (including the
Subordinated Guarantor's guarantee on a senior secured basis of all obligations
of the Issuer under or in respect of the New Credit Facility (and refinancings
thereof). At March 31, 1997, on a pro forma basis, after giving effect to the
Recapitalization, the assets of the Subordinated Guarantor would have included
approximately 30,000 of the Company's units and represented approximately 58% of
the total consolidated assets of the Company.
As of May 31, 1997, the Company had approximately $497.6 million of
Indebtedness outstanding (including approximately $97.3 million of Secured
Indebtedness outstanding under the New Credit Facility). All of the outstanding
Indebtedness under the New Credit Facility is guaranteed by the Guarantors and
the Subordinated Guarantor on a secured basis. The New Credit Facility provides
for a total line of revolving credit of up to $300 million subject to the
satisfaction of certain requirements (including a borrowing base test).
Although the Indenture contains limitations on the amount of additional
Indebtedness that the Issuer may incur, under certain circumstances the amount
of such Indebtedness could be substantial and, in any case, such Indebtedness
may be secured. Although the Indenture limits the incurrence of Indebtedness and
the issuance of preferred stock of certain of the Issuer's subsidiaries, such
limitation is subject to a number of significant qualifications. Moreover, the
Indenture does not impose any limitation on the incurrence by such subsidiaries
of liabilities that are not considered Indebtedness under the Indenture. See
"--Certain Covenants--Limitation on Indebtedness."
GUARANTEES OF THE NOTES
The Indenture provides that each Guarantor will unconditionally guarantee on
a senior basis jointly and severally to each Holder, all of the Issuer's
obligations under the Notes, including its obligations to pay principal,
premium, if any, and interest with respect to the Notes. The obligations of each
Guarantor are limited to the maximum amount which, after giving effect to all
other contingent and fixed liabilities of such Guarantor and after giving effect
to any collections from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indenture, will result in the
obligations of such Guarantor under the applicable Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law. Each
Guarantor that makes a payment or distribution under a Guarantee shall be
entitled to a
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contribution from each other Guarantor in an amount PRO RATA, based on the net
assets of each Guarantor determined in accordance with GAAP. Except as provided
in "--Certain Covenants" below, the Issuer is not restricted from selling or
otherwise disposing of any of the Guarantors. The Guarantors will also be
jointly and severally guaranteeing all obligations of the Issuer under the
Credit Agreement, and each Guarantor will be granting a security interest in all
or substantially all of its assets to secure its respective guarantee of the
obligations of the Issuer under the Credit Agreement.
The Guarantors include (i) Mobile Field Office Company, (ii) any Significant
Subsidiary, whether formed or acquired after the Issue Date, and (iii) any
Subsidiary, whether formed or acquired after the Issue Date, that guarantees any
Indebtedness outstanding under the Credit Agreement; PROVIDED, HOWEVER, that any
Subsidiary acquired after the Issue Date which is prohibited from entering into
a Guarantee pursuant to restrictions contained in any debt instrument or other
agreement in existence at the time such Subsidiary was so acquired and not
entered into in anticipation or contemplation of such acquisition shall not be
required to become a Guarantor so long as any such restriction is in existence
and to the extent of any such restriction; PROVIDED, FURTHER, that if any
Guarantor is released from its guarantee of all outstanding Indebtedness of the
Issuer under the Credit Agreement, such Guarantor shall be automatically
released from its obligations as Guarantor and, from and after such date, such
Guarantor shall cease to constitute a Guarantor; AND PROVIDED, FURTHER, that the
Subordinated Guarantor shall not be a Guarantor except to the extent permitted
below. Notwithstanding the foregoing, any Subsidiary that is a Securization
Subsidiary or is an Unrestricted Subsidiary and that, in each case, does not
guarantee any indebtedness under the Credit Agreement shall not be required to
become a Guarantor. Mobile Field Office Company is the only Guarantor. If
permitted by the holders of the then outstanding Subordinated Guarantor Senior
Indebtedness, the Subordinated Guarantor may notify the Trustee that it desires
to become a Guarantor. In such case, the subordination provisions with respect
to the Subordinated Guarantee shall cease to apply and the guarantee of the
Subordinated Guarantee shall be amended to have terms substantially equivalent
to those of a Guarantee.
The Indenture provides that if the Notes thereunder are defeased in
accordance with the terms of the Indenture, or if all or substantially all of
the assets of any Guarantor or all of the Capital Stock of any Guarantor is sold
(including by stock sale or issuance or otherwise) by the Issuer in a
transaction constituting an Asset Disposition, and if (x) the Net Available Cash
from such Asset Disposition is used in accordance with the covenant described
under "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock"
or (y) the Issuer delivers to the Trustee an Officers' Certificate to the effect
that the Net Available Cash from such Asset Disposition shall be used in
accordance with the covenant described under "--Certain Covenants--Limitations
on Sales of Assets and Subsidiary Stock" and within the time limits specified by
such covenant, then such Guarantor (in the event of a sale or other disposition
of all of the Capital Stock of such Guarantor) or the person acquiring such
assets (in the event of a sale or other disposition of all or substantially all
of the assets of such Guarantor) shall be released and discharged of its
Guarantee obligations in respect of the Indenture and the Notes issued
thereunder (including, without limitation, the provisions applicable to
Guarantors described in "--Certain Covenants--Merger and Consolidation").
The Guarantees are general unsecured obligations of each Guarantor. The
Guarantees rank on a parity in right of payment with all existing and future
unsubordinated Indebtedness of the Guarantor and senior in right of payment to
all future subordinated indebtedness of the Guarantor. The obligations of each
Guarantor under a Guarantee are effectively subordinated to all Secured
Indebtedness of the Guarantor (including all Indebtedness outstanding under the
Credit Agreement and guaranteed by such Guarantor) to the extent of the value of
the assets securing such Indebtedness.
SUBORDINATED GUARANTEE OF THE NOTES
The Indenture provides that the Subordinated Guarantor will unconditionally
guarantee to each holder, subject to the subordination provisions described
below, the full and prompt performance of the Issuer's obligations under the
Indenture and the Notes, including the payment of principal of, premium, if
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any, and interest on the Notes. The obligations of the Subordinated Guarantor
are limited to the maximum amount (after giving effect to its guarantee of the
New Credit Facility) which will result in the obligations of the Subordinated
Guarantor under the Subordinated Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under federal or state law. The Subordinated
Guarantor also guarantees on a senior basis all obligations of the Issuer under
the Credit Agreement and grants a security interest in all or substantially all
of its assets to secure such guarantee of the obligations of the Issuer under
the Credit Agreement. See "Description of New Credit Facility."
The Indenture provides that if the Notes thereunder are defeased in
accordance with the terms of the Indenture, or if all or substantially all of
the assets of the Subordinated Guarantor or all of the Capital Stock of the
Subordinated Guarantor is sold (including by stock sale or issuance or
otherwise) by the Issuer in a transaction constituting an Asset Disposition, and
if (x) the Net Available Cash from such Asset Disposition is used in accordance
with the covenant described under "--Certain Covenants--Limitation on Sales of
Assets and Subsidiary Stock" or (y) the Issuer delivers to the Trustee an
Officers' Certificate to the effect that the Net Available Cash from such Asset
Disposition shall be used in accordance with the covenant described under
"--Certain Covenants--Limitations on Sales of Assets and Subsidiary Stock" and
within the time limits specified by such covenant, then the Subordinated
Guarantor (in the event of a sale or other disposition of all of the Capital
Stock of the Subordinated Guarantor) or the person acquiring such assets (in the
event of a sale or other disposition of all or substantially all of the assets
of the Subordinated Guarantor) shall be released and discharged of its
Subordinated Guarantee obligations in respect of the Indenture and the Notes
issued thereunder (including, without limitation, the provisions applicable to
the Subordinated Guarantor described in "Certain Covenants--Merger and
Consolidation").
The payment by the Subordinated Guarantor of all obligations on the
Subordinated Guarantee is subordinated in right of payment to the prior payment
in full, in cash or cash equivalents, of all obligations on Subordinated
Guarantor Senior Indebtedness. Upon any payment or distribution of assets of the
Subordinated Guarantor to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors or marshaling of
assets of the Subordinated Guarantor, or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Subordinated
Guarantor or its property, whether voluntary or involuntary, all obligations
with respect to all Subordinated Guarantor Senior Indebtedness shall first be
paid in full, in cash or cash equivalents, before any payment or distribution of
any kind of character, whether in cash, property, or securities is made on
account of any obligations on the Subordinated Guarantee or for the acquisition
of all or any part of the Subordinated Guarantee for cash or property or
otherwise; and until all such obligations with respect to all Subordinated
Guarantor Senior Indebtedness are paid in full, in cash or cash equivalents, any
distribution to which the holders of the Subordinated Guarantee would be
entitled but for the subordination provisions will be made to the holders of
Subordinated Guarantor Senior Indebtedness as their interests may appear. If (i)
any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal of,
interest on, or other amounts due and owing on, any Subordinated Guarantor
Senior Indebtedness or (ii) any default occurs and is continuing with respect to
any Subordinated Guarantor Senior Indebtedness resulting in the acceleration of
the maturity of all or any portion of such Subordinated Guarantor Senior
Indebtedness, no payment shall be made by or on behalf of the Subordinated
Guarantor or any of its Subsidiaries or any other person on its or their behalf
with respect to any obligations on the Subordinated Guarantee or to acquire all
or any part of the obligations covered by the Subordinated Guarantee for cash or
property or otherwise; PROVIDED, HOWEVER, that, except to the extent provided in
the second succeeding paragraph, the forgoing provisions shall not restrict the
Issuer from making payments of principal, premium or interest on or with respect
to the Notes (including, without limitation, by redemption, repurchase or other
acquisition). In addition, if any other event of default occurs and is
continuing (or if such an event of default would occur upon any payment with
respect to the Subordinated Guarantee) with respect to the Subordinated
Guarantor Senior Indebtedness, as such event of default is defined in the
instrument creating or evidencing or guaranteeing such Subordinated Guarantor
Senior Indebtedness permitting the holders of such Subordinated Guarantor
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Senior Indebtedness then outstanding, or their Representative, to accelerate the
maturity thereof (or the obligations guaranteed thereby) and if the respective
Representative for the Subordinated Guarantor Senior Indebtedness gives written
notice of the event of default to the Trustee (a "Default Notice"), then, unless
and until the date, if any, on which all Subordinated Guarantor Senior
Indebtedness to which such event of default relates is paid in full in cash or
cash equivalents or the Representative for the respective Subordinated Guarantor
Senior Indebtedness gives notice that all events of default have been cured or
waived or have ceased to exist or the Trustee receives written notice from the
Representative for the respective Subordinated Guarantor Senior Indebtedness
terminating the Blockage Period (as defined below), during the 179 days after
the delivery of such Default Notice (the "Blockage Period"), none of the
Subordinated Guarantor or any of its Subsidiaries or any other person on its or
their behalf shall (x) make any payment with respect to any obligations
evidenced by the Subordinated Guarantee or (y) acquire all or any part of the
obligations covered by the Subordinated Guarantee for cash or property or
otherwise. Notwithstanding anything herein to the contrary, in no event will a
Blockage Period extend beyond 179 days from the date of the commencement
thereof. Only one such Blockage Period may be commenced within any 360
consecutive days; PROVIDED, HOWEVER, that, except to the extent provided in the
second succeeding paragraph, the forgoing provisions shall not restrict the
Issuer from making payments of principal, premium or interest on or with respect
to the Notes (including, without limitation, by redemption, repurchase or other
acquisition). No event of default which existed or was continuing (it being
acknowledged that (x) any action of the Issuer, the Subordinated Guarantor or
any of their respective Subsidiaries occurring subsequent to delivery of a
Default Notice that would give rise to any event of default pursuant to any
provision under which an event of default previously existed (or was continuing
at the time of delivery of such Default Notice) and (y) any breach of a
financial covenant for a period ended after the date of the commencement of a
Blockage Period, in each case shall constitute a new event of default for this
purpose) on the date of the commencement of any Blockage Period with respect to
the Subordinated Guarantor Senior Indebtedness shall be, or be made, the basis
for the commencement of a second Blockage Period by the Representative of the
Subordinated Guarantor Senior Indebtedness whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days.
By reason of such subordination, in the event of the insolvency of the
Subordinated Guarantor, creditors of the Subordinated Guarantor who are not
holders of Subordinated Guarantor Senior Indebtedness, including the holders of
the Subordinated Guarantee, may recover less, ratably, than holders of
Subordinated Guarantor Senior Indebtedness.
The Indenture also provides that the Noteholders will acknowledge and agree,
on behalf of themselves and all their successors and assigns as Noteholders,
that the claims of the Noteholders against the Subordinated Guarantor, and
against the assets from time to time held by the Subordinated Guarantor
(including, without limitation, all units, leases and proceeds therefrom at any
time transferred to the Subordinated Guarantor), are limited to the claims
expressly provided pursuant to the Subordinated Guarantee. To induce the lenders
pursuant to the Credit Agreement (and pursuant to any Hedging Obligations from
time to time entered into) to make the extensions of credit to the Issuer, the
Noteholders will agree, on their behalf and on behalf of all their successors
and assigns, that in no event (whether pursuant to a proceeding under the
Bankruptcy Code or otherwise), shall they (or any representative on their behalf
including the Trustee) assert that the assets of the Subordinated Guarantor
should be substantively consolidated or otherwise combined with the assets of
the Issuer, Holdings or any of their other Subsidiaries, or otherwise returned
(whether under claims of fraudulent conveyance or otherwise) to any such person.
Furthermore, in the event that pursuant to any proceeding pursuant to the
Bankruptcy Code or otherwise the assets (or any of the assets) of the
Subordinated Guarantor are substantively consolidated or otherwise combined in a
similar fashion with the assets of the Issuer, Holdings or any other of their
Subsidiaries, or otherwise returned to any such person, then, as between the
Noteholders (and their successors and assigns) and the lenders pursuant to the
Credit Agreement (and pursuant to any Hedging Obligations from time to time
entered into); the Noteholders agree that all distributions received
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by them (and their successors and assigns) to the extent attributable to the
assets, or representing any proceeds from any disposition of assets, which were
held by the Subordinated Guarantor prior to any such consolidation, combination
or return of assets shall be treated by the Noteholders as if received pursuant
to the Subordinated Guarantee and shall be fully subject to the subordination
provisions with respect thereto in the Indenture.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Permitted Business; (ii) Indebtedness of a
Person engaged in a Permitted Business if such Indebtedness is acquired in
connection with the acquisition of the Permitted Business (other than
Indebtedness Incurred to provide all or a portion of the funds or credit support
utilized to consummate the acquisition); (iii) the Capital Stock of a Person
that becomes a Restricted Subsidiary as a result of the acquisition of such
Capital Stock by the Issuer or another Restricted Subsidiary; or (iv) Capital
Stock constituting a minority interest in any Person that at such time is a
Restricted Subsidiary PROVIDED, HOWEVER, that any such Restricted Subsidiary
described in clauses (iii) or (iv) above is primarily engaged in a Permitted
Business.
"Adjusted Consolidated Assets" means at any time the total amount of assets
of the Issuer and its consolidated Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), after deducting
therefrom all current liabilities of the Issuer and its consolidated Restricted
Subsidiaries (excluding intercompany items, the current portion of long-term
debt and Indebtedness outstanding under the Credit Agreement), all as set forth
on the consolidated balance sheet of the Issuer and its consolidated Restricted
Subsidiaries as of the end of the most recent fiscal quarter for which financial
statements are available prior to the date of determination.
"Affiliate" means, with respect to any specified Person, any other Person,
directly or indirectly, controlling or controlled, by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of the provisions described under "--Certain Covenants--
Limitation on Restricted Payments," "--Certain Covenants--Limitation on
Affiliate Transactions" and "--Certain Covenants--Limitations on Sales of Assets
and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Issuer or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or other dispositions) by the Issuer
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Issuer or a
Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of the Issuer or any Restricted Subsidiary or (iii) any
other assets of the Issuer or any Restricted Subsidiary outside of the ordinary
course of business of the Issuer or such Restricted Subsidiary (other than, in
the case of (i), (ii) and (iii) above, (v) a disposition by a Restricted
Subsidiary to the Issuer by the Issuer or a Restricted Subsidiary to a Wholly
Owned Subsidiary, (w) for purposes of the covenant described under "-- Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition that constitutes a Restricted Payment permitted by the covenant
described under "--Certain Covenants--Limitation on Restricted Payments", (x) a
disposition of assets with a fair market value of less than $1,000,000, (y) any
Permitted Units Financing and (z) any Scheduled Asset Disposition).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the
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total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Issuer or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day other than a Saturday, Sunday or legal holiday
on which commercial banks in New York, New York are authorized to close.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following events:
(i) prior to the first Public Equity Offering, the Permitted Holders in the
aggregate cease to be the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, of a majority in the
aggregate of the total voting power of the Voting Stock of the Issuer, whether
as a result of issuance of securities of the Issuer, any merger, consolidation,
liquidation or dissolution of the Issuer, any direct or indirect transfer of
securities or otherwise (for purposes of this clause (i) and clause (ii) below,
the Permitted Holders shall be deemed to beneficially own any Voting Stock of a
partnership, limited liability company or corporation (the "specified
corporation") held by any other partnership, limited liability company or
corporation (the "parent corporation") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly, in the aggregate a
majority of the voting power of the Voting Stock of the parent corporation);
(ii) on or after the first Public Equity Offering, any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or
more Permitted Holders, is or becomes the beneficial owner (as defined in clause
(i) above, except that for purposes of this clause (ii) such person shall be
deemed to have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of the Issuer; PROVIDED, HOWEVER, that the
Permitted Holders beneficially own (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting power of
the Voting Stock of the Issuer than such other person and do not have the right
or ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors (for the purposes of this clause
(ii), such other person shall be deemed to beneficially own any Voting Stock of
a specified corporation held by a parent corporation, if such other person is
the beneficial owner (as defined in this clause (ii)), directly or indirectly,
of more than 35% of the voting power of the Voting Stock of such parent
corporation and the Permitted Holders beneficially own (as defined in clause (i)
above), directly or indirectly, in the aggregate a lesser percentage of the
voting power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or designate
for election a majority of the board of directors of such parent corporation);
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(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with any
new directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Issuer was approved by a vote of 66 2/3% of
the directors of the Issuer then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors then in office; or
(iv) the merger or consolidation of the Issuer with or into another Person
or the merger or consolidation of another Person with or into the Issuer, or the
sale of all or substantially all the assets of the Issuer to another Person
(other than a Person that is controlled by the Permitted Holders in the
aggregate), and, in the case of any such merger or consolidation, the securities
of the Issuer that are outstanding immediately prior to such transaction and
which represent 100% of the aggregate voting power of the Voting Stock of the
Issuer are changed into or exchanged for cash, securities or property, unless
pursuant to such transaction such securities are changed into or exchanged for,
in addition to any other consideration, securities of the surviving corporation
that represent, immediately after such transaction, at least a majority of the
aggregate voting power of the Voting Stock of the surviving corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which financial statements are available
prior to the date of such determination to (ii) Consolidated Interest Expense
for such four fiscal quarters; PROVIDED, HOWEVER, that (1) if the Issuer or any
Restricted Subsidiary has Incurred any Indebtedness since the beginning of such
period that remains outstanding or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or
both, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as if
such Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period (except that, in making such
computation, the amount of Indebtedness under any revolving credit facility
outstanding on the date of such calculation shall be computed based on (A) the
average daily balance of such Indebtedness (and any Indebtedness under a
revolving credit facility replaced by such Indebtedness) during such four fiscal
quarters or such shorter period when such facility and any replaced facility was
outstanding or (B) if such facility was created after the end of such four
fiscal quarters, the average daily balance of such Indebtedness (and any
Indebtedness under a revolving credit facility replaced by such Indebtedness)
during the period from the date of creation of such facility to the date of the
calculation), (2) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid, repurchased,
defeased or otherwise discharged (in each case other than Indebtedness Incurred
under any revolving credit facility unless such Indebtedness has been
permanently repaid and has not been replaced) on the date of the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and
Consolidated Interest Expense for such period shall be calculated on a pro forma
basis as if such discharge had occurred on the first day of such period and as
if the Company or such Restricted Subsidiary has not earned the interest income
actually earned during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise discharge such
Indebtedness, (3) if since the beginning of such period the Issuer or any
Restricted Subsidiary shall have made any Asset Disposition (other than sales or
lease of Rental Equipment in the ordinary course of the business of the Issuer
and its Restricted Subsidiaries), the EBITDA for such period shall be reduced by
an amount equal to the EBITDA (if positive) directly attributable to the assets
which are the subject of such Asset Disposition for such period, or increased by
an amount equal to the EBITDA (if negative), directly attributable thereto for
such period, and Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense directly attributable to
any Indebtedness of the Issuer or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Issuer and its
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continuing Restricted Subsidiaries in connection with such Asset Disposition for
such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Issuer and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (4) if since the beginning of such period the Issuer or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction requiring a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a business or
a division or a line of business thereof, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto (including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period and (5) if since the
beginning of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into the Issuer or any Restricted Subsidiary
since the beginning of such period) shall have made any Asset Disposition, any
Investment or acquisition of assets that would have required an adjustment
pursuant to clause (3) or (4) above if made by the Issuer or a Restricted
Subsidiary during such period, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto as if such
Asset Disposition, Investment or acquisition occurred on the first day of such
period. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be determined in good faith by a responsible financial or accounting Officer of
the Issuer. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest of such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Issuer and its consolidated Restricted Subsidiaries, net of any
interest income of the Issuer and its consolidated Restricted Subsidiaries for
such period, as determined in accordance with GAAP, PLUS, to the extent not
included in such total interest expense, and to the extent incurred by the
Issuer or its Restricted Subsidiaries, without duplication, (i) interest expense
attributable to capital leases and the interest expense attributable to leases
constituting part of a Sale/Leaseback Transaction, (ii) amortization of debt
discount, (iii) capitalized interest, (iv) commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing, (v) net costs associated with Hedging Obligations (including
amortization of fees), (vi) Preferred Stock dividends in respect of all
Preferred Stock (other than pay in kind dividends or accretions to liquidation
value of Preferred Stock that is not Disqualified Stock) held by Persons other
than the Issuer or a Wholly Owned Subsidiary, (vii) interest incurred in
connection with Investments in discontinued operations, (viii) interest accruing
on any Indebtedness of any other Person to the extent such Indebtedness is
guaranteed by (or secured by the assets of) the Issuer or any Restricted
Subsidiary, (ix) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or trust to
pay interest or fees to any Person (other than the Issuer) in connection with
Indebtedness Incurred by such plan or trust and (x) interest-equivalent costs
associated with any Permitted Units Financing, whether accounted for as interest
expense or loss on the sale of Units and Related Assets and LESS, to the extent
included in such total interest expense, the amortization during such period of
capitalized financing costs associated with the Recapitalization and financing
thereof.
"Consolidated Net Income" means, for any period, the net income of the
Issuer and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall
not be included in such Consolidated Net Income:
(i) any net income of any Person (other than the Issuer) if such Person is
not a Restricted Subsidiary, except that (A) subject to the exclusion contained
in clause (iv) below, the Issuer's equity in the net income of any such Person
for such period shall be included in such Consolidated Net Income up to the
aggregate
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amount of cash actually distributed by such Person during such period to the
Issuer or a Restricted Subsidiary as a dividend or other distribution (subject,
in the case of a dividend or other distribution paid to a Restricted Subsidiary,
to the limitations contained in clause (iii) below) and (B) the Issuer's equity
in a net loss of any such Person for such period shall be included in
determining such Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by the Issuer or a
Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Restricted Subsidiary, directly
or indirectly, to the Issuer, except that (A) subject to the exclusion contained
in clause (iv) below, the Issuer's equity in the net income of any such
Restricted Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash that could have been distributed by
such Restricted Subsidiary during such period to the Issuer or another
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution paid to another Restricted Subsidiary, to
the limitation contained in this clause) and (B) the Issuer's equity in a net
loss of any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income;
(iv) any gain (or loss) realized upon the sale or other disposition of any
assets of the Issuer or its consolidated Subsidiaries (including pursuant to any
sale-and-leaseback arrangement) which is not sold or otherwise disposed of in
the ordinary course of business and any gain (or loss) realized upon the sale or
other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described
under "--Certain Covenants--Limitation on Restricted Payments" only, there shall
be excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets (including any sale of an Investment) to
the Issuer or a Restricted Subsidiary to the extent such dividends, repayments
or transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Issuer and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Issuer for which financial statements are available, as
(i) the par or stated value of all outstanding Capital Stock of the Issuer plus
(ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit
and (B) any amounts attributable to Disqualified Stock.
"Credit Agreement" means, collectively, the Credit Agreement dated as of May
22, 1997, among Holdings, the Issuer, the Lenders, BT Commercial Corporation as
agent, and Bankers Trust Company, as Issuing Bank (including any guarantee
agreements and related security documents), in each case as such agreements or
documents may be amended (including any amendment, restatement or restructuring
thereof), supplemented or otherwise modified or replaced from time to time,
including any agreement extending the maturity of, refunding, refinancing,
increasing the amount available under or replacing such agreement or document or
any successor or replacement agreement or document and whether by the same or
any other agent, lender or group of lenders.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
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"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable at the option of the holder thereof, in whole or in part, in
each case on or prior to the 123rd day following the Stated Maturity of the
Notes; PROVIDED, HOWEVER, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" and "--Certain
Covenants--Change of Control."
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense, plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Issuer and its consolidated Restricted Subsidiaries, (b) depreciation expense of
the Issuer and its consolidated Restricted Subsidiaries, (c) amortization
expense of the Issuer and its consolidated Restricted Subsidiaries (excluding
amortization expense attributable to a prepaid cash item that was paid in a
prior period), (d) all other non-cash charges of the Issuer and its consolidated
Restricted Subsidiaries (excluding any such non-cash charge to the extent that
it represents an accrual of or reserve for cash expenditures in any future
period), (e) income attributable to discontinued operations and (f) any cash
charges (including from the write-up of assets) or write-offs associated with
the transactions contemplated by the Recapitalization and the financing thereof.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and non-cash charges of, a
Restricted Subsidiary shall be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same proportion) that the net income of
such Restricted Subsidiary was included in calculating Consolidated Net Income
and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Issuer by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its stockholders.
"Eligible Accounts Receivable" has the meaning specified in the Credit
Agreement.
"Eligible Rental Equipment" has the meaning specified in the Credit
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
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"guarantee" means any obligation, contingent or otherwise, of any Person,
directly or indirectly, guaranteeing any Indebtedness or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
take-or-pay or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); PROVIDED,
HOWEVER, that the term "guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "guarantee" used as a
verb has a corresponding meaning.
"Guarantee" means the guarantee of the Notes by the Guarantors.
"Guarantor" means, individually and collectively, (i) Mobile Field Office
Company, (ii) each Significant Subsidiary, whether formed or acquired after the
Issue Date, and (iii) any Subsidiary, whether formed or acquired after the Issue
Date, that guarantees any Indebtedness outstanding under the Credit Agreement;
PROVIDED, HOWEVER, that any Subsidiary acquired after the Issue Date which is
prohibited from entering into a Guarantee pursuant to restrictions contained in
any debt instrument in existence at the time such Subsidiary was so acquired and
not entered into in anticipation or contemplation of such acquisition shall not
be required to become a Guarantor so long as any such restriction is in
existence and to the extent of any such restriction; PROVIDED, FURTHER, that if
any Guarantor is released from its guarantee of the outstanding Indebtedness of
the Issuer under the Credit Agreement and the pledge by it, directly or
indirectly, of any of its assets as security for such Indebtedness at a time
when no Default or Event of Default has occurred and is continuing, such
Guarantor shall be automatically released from its obligations as a Guarantor
and, from and after such date, such Guarantor shall cease to constitute a
Guarantor; AND PROVIDED, FURTHER, that the Subordinated Guarantor shall not be a
Guarantor except to the extent permitted below. Notwithstanding the foregoing,
any Subsidiary that is a Securitization Subsidiary or is designated an
Unrestricted Subsidiary and that, in each case, does not guarantee or so pledge
any of its assets as security for any Indebtedness under the Credit Agreement
shall not be required to become a Guarantor. If permitted by the holders of the
then outstanding Subordinated Guarantor Senior Indebtedness, the Subordinated
Guarantor may notify the Trustee that it desires to become a Guarantor. In such
case, the subordination provisions with respect to the Subordinated Guarantee
shall cease to apply and the guarantee of the Subordinated Guarantee shall be
amended to have terms substantially equivalent to those of a Guarantee.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
on the Registrar's books.
"Holdings" means Scotsman Holdings, Inc. and its successors.
"Incur" means issue, assume, guarantee, incur or otherwise become liable for
Indebtedness or Capital Stock; PROVIDED, HOWEVER, that any Indebtedness or
Capital Stock of a Person existing at the time such Person becomes a Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Subsidiary at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. The accretion
of principal of a non-interest bearing or other discount security shall not be
deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication),
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(i) the principal of and premium (if any) in respect of (A) indebtedness of
such Person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person and all Attributable Debt
in respect of Sale/ Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction (other
than obligations with respect to letters of credit securing obligations (other
than obligations described in clauses (i) through (iii) above) entered into in
the ordinary course of business of such Person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the 30th day following payment on the letter of
credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of such Person, the liquidation preference with
respect to, any Preferred Stock (but excluding, in each case, any accrued
dividends);
(vi) all obligations of the type referred to in clauses (i) through (v) of
other Persons and all dividends of other Persons for the payment of which, in
either case, such Person is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including by means of any guarantee;
(vii) all obligations of the type referred to in clauses (i) through (vi) of
other Persons secured by any Lien on any property or asset of such Person
(whether or not such obligation is assumed by such Person), the amount of such
obligation being deemed to be the lesser of the value of such property or assets
or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; PROVIDED,
HOWEVER, that the amount outstanding at any time of any Indebtedness Incurred
with original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed to
protect the Issuer or any Restricted Subsidiary against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance (other than
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of the lender), loan or other
extensions of credit (including by way of guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under "-- Certain Covenants--Limitation on Restricted
Payments," (i) "Investment" shall include the portion (proportionate to the
Issuer's equity interest in such Subsidiary) of the fair market value of the net
assets of any Subsidiary of the Issuer at the time that such Subsidiary is
designated an Unrestricted Subsidiary;
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PROVIDED, HOWEVER, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Issuer shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary equal to an amount (if positive)
equal to (x) the Issuer's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Issuer's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Issuer" means Williams Scotsman, Inc. and its successors.
"Lenders" has the meaning specified in the Credit Agreement.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form) in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred (including, without
limitation, all broker's and finder's fees and expenses, all investment banking
fees and expenses, employee severance and termination costs, and trade payable
and similar liabilities solely related to the assets sold or otherwise disposed
of and required to be paid by the seller as a result thereof), and all Federal,
state, provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (ii) all
relocation expenses relating to any Rental Equipment incurred as a result
thereof, (iii) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of any
Lien upon or other security agreement of any kind with respect to such assets,
or which must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law be, repaid out of the proceeds from such
Asset Disposition, (iv) all distributions and other payments required to be made
to minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Disposition and (v) the deduction of appropriate amounts provided by
the seller as a reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such Asset Disposition
and retained by the Issuer or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Permitted Business" means (i) all or any part of the business of selling
and leasing mobile offices and modular structures or any other equipment sold or
leased to a similar customer base, (ii) any other business conducted by the
Company or its Restricted Subsidiaries on the Issue Date and (iii) any business
or services related, ancillary or complementary to such businesses.
"Permitted Holders" means (i) The Cypress Group L.L.C., Cypress Merchant
Banking Partners L.P., Cypress Offshore Partners L.P., Keystone, Inc., FW
Strategic Partners, L.P., Scotsman Partners, L.P. and any Person who on the
Issue Date is an Affiliate of any of the foregoing, (ii) any Person who is a
member of the senior management of the Issuer or Holdings and a stockholder of
Holdings on the Issue Date and
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(iii) an affiliate of BT Securities Corporation, Odyssey and any Person who is
an Affiliate on the Issue Date of either of them.
"Permitted Investment" means an Investment by the Issuer or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon the making
of such Investment, become a Restricted Subsidiary; (ii) another Person if as a
result of such Investment such other Person is merged or consolidated with or
into, or transfers or conveys all or substantially all its assets to, the Issuer
or a Restricted Subsidiary; PROVIDED, HOWEVER, that such Person's primary
business is a Permitted Business; (iii) Temporary Cash Investments; (iv)
Investments existing on the Issue Date; (v) receivables owing to the Issuer or
any Restricted Subsidiary if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
PROVIDED, HOWEVER, that such trade terms may include such concessionary trade
terms as the Issuer or any such Restricted Subsidiary deems reasonable under the
circumstances; (vi) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vii) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Issuer or such Restricted Subsidiary;
(viii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Issuer or any Restricted
Subsidiary or in satisfaction of judgments; (ix) Investments made in connection
with any Asset Disposition or other sale, lease, transfer or other disposition
permitted under the Indenture; (x) Investments made in Holdings by the Issuer,
the proceeds of which enable Holdings to fund the transactions contemplated by
the Recapitalization (including the payment of fees and expenses), to pay
interest and principal on the Promissory Notes and to pay interest on and to
repurchase, redeem, defease or pay on maturity any Holdings Notes (including any
accrued interest, principal and premium, if any, thereon) (to the extent not
repurchased as part of the Recapitalization); and (xi) additional Investments in
an aggregate amount which, together with all other Investments made pursuant to
this clause that are then outstanding, does not exceed $20.0 million.
"Permitted Liens" means (a) Liens of the Issuer and its Restricted
Subsidiaries securing Indebtedness of the Issuer or any of its Restricted
Subsidiaries Incurred under the Credit Agreement to the extent permitted to be
Incurred under clause (b)(1) or (b)(14) of the description of the "Limitation on
Indebtedness" covenant below; (b) Liens in favor of the Issuer or its
Wholly-Owned Restricted Subsidiaries; (c) Liens on property of a person existing
at the time such person becomes a Restricted Subsidiary of the Issuer or is
merged into or consolidated with the Issuer or any Restricted Subsidiary of the
Issuer; PROVIDED that such Liens were not incurred in connection with, or in
contemplation of, such merger or consolidation and such Liens do not extend to
or cover any property other than such property, improvements thereon and any
proceeds therefrom; (d) Liens of the Issuer securing Indebtedness of the Issuer
incurred under clause (b)(2) or (b)(8) of the description of the "Limitation on
Indebtedness" covenant below; (e) Liens of the Issuer and its Restricted
Subsidiaries securing Indebtedness of the Issuer or any of its Restricted
Subsidiaries (including under a Sale/Leaseback Transaction) permitted to be
Incurred under clause (b)(9), (b)(11) or (b)(12) of the description of the
"Limitation on Indebtedness" covenant below so long as the Capital Stock,
property (real or personal) or equipment to which such Lien attaches solely
consists of the Capital Stock, property or equipment which is the subject of
such acquisition, purchase, lease, improvement, Sale/Leaseback Transaction and
additions and improvements thereto (and the proceeds therefrom); (f) Liens on
property existing at the time of acquisition thereof by the Issuer or any
Restricted Subsidiary of the Issuer; PROVIDED that such Liens were not incurred
in connection with, or in contemplation of, such acquisition and such Liens do
not extend to or cover any property other than such property, additions and
improvements thereon and any proceeds therefrom; (g) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory obligations,
surety or appeal bonds, government contracts, performance and return of money
bonds or other obligations of a like nature incurred in the ordinary course of
business; (h) Liens existing on the Issue Date (including, without limitation,
Liens securing the Senior Secured Notes) and any additional Liens created under
the terms of the agreements relating to such Liens existing on the Issue Date;
(i) Liens for taxes, assessments or
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governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings; PROVIDED that any reserve or
other appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (j) Liens incurred in the ordinary course of business
of the Issuer or any Restricted Subsidiary with respect to obligations that do
not exceed $20.0 million in the aggregate at any one time outstanding and that
(1) are not incurred in connection with or in contemplation of the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (2) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of the business by the Issuer or such Restricted Subsidiary; (k)
statutory Liens of landlords and warehousemen's, carrier's, mechanics',
suppliers', materialmen's, repairmen's or other like Liens (including
contractual landlords' liens) arising in the ordinary course of business of the
Issuer and its Restricted Subsidiaries; (l) Liens incurred or deposits made in
the ordinary course of business of the Issuer and its Restricted Subsidiaries in
connection with workers' compensation, unemployment insurance and other types of
social security; (m) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Issuer or any of
its Restricted Subsidiaries; (n) Liens securing reimbursement obligations with
respect to letters of credit permitted under the covenant entitled "Limitation
on Indebtedness" which encumber only cash and marketable securities and
documents and other property relating to such letters of credit and the products
and proceeds thereof; (o) judgment and attachment Liens not giving rise to an
Event of Default; (p) any interest or title of a lessor in the property subject
to any Capital Lease Obligation permitted under the covenant entitled
"Limitation on Indebtedness"; (q) Liens encumbering the residual interest of the
Issuer or any of its Restricted Subsidiaries under any lease of mobile office
units, modular structures or similar equipment to third parties (i) that is
accounted for as a sale of such units, structures or equipment and (ii) the
interest in which lease is sold to a third party financing source on a
non-recourse basis; (r) leases or subleases of mobile office units, modular
structures or similar equipment granted to others in the ordinary course of
business and consistent with the past practice of the Issuer and its Restricted
Subsidiaries and any other lease or sublease not interfering in any material
respect with the business of the Issuer and its Restricted Subsidiaries; (s)
Liens on cash and cash equivalents posted as margin pursuant to any Hedging
Obligations permitted under the covenant entitled "Limitation on Indebtedness";
(t) Liens securing Refinancing Indebtedness to the extent such Liens do not
extend to or cover any property of the Issuer not previously subjected to Liens
relating to the Indebtedness being refinanced; (u) Liens to secure Indebtedness
incurred in a developmental financing provided by a governmental entity which is
on terms more favorable than those available (at the time of such financing)
from third party sources; PROVIDED that such Liens do not cover any property
other than the property subject to such financing, any additions and
improvements thereon and the proceeds therefrom; (v) Liens on pledges of the
capital stock of any Unrestricted Subsidiary securing any Indebtedness of such
Unrestricted Subsidiary; or (w) Liens on Units and Related Assets securing
Indebtedness or otherwise permitted to be incurred in each case, with a
Permitted Units Financing.
"Permitted Secured Indebtedness" means Indebtedness of the Issuer or any
Restricted Subsidiary permitted to be incurred or outstanding under the
Indenture which is secured by a Permitted Lien.
"Permitted Units Financing" means a transaction or series of transactions
(including amendments, supplements, extensions, renewals, replacements,
refinancings or modifications thereof) pursuant to which a Securitization
Subsidiary purchases Units and Related Assets from the Issuer or any Restricted
Subsidiary and finances such Units and Related Assets through the issuance of
indebtedness or equity interests or through the sale of the Units and Related
Assets or a fractional undivided interest in the Units and Related Assets;
PROVIDED that (i) the Board of Directors shall have determined in good faith
that such Permitted Units Financing is economically fair and reasonable to the
Issuer and the Securitization Subsidiary; (ii) all sales of Units and Related
Assets to or by the Securitization Subsidiary are made at fair market value (as
determined in good faith by the Board of Directors of the Issuer); (iii) the
financing terms, covenants, termination events and other provisions thereof
shall be market terms (as determined in
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good faith by the Board of Directors of the Issuer); (iv) no portion of the
Indebtedness of a Securitization Subsidiary is guaranteed by or is recourse to
the Issuer or any Restricted Subsidiary (other than (i) recourse of customary
representations, warranties, covenants and indemnities relating solely to title,
use or condition of the Units and Related Assets subject thereto and the Capital
Stock of the Securitization Subsidiary and (ii) as permitted under clause
(b)(10)(B) of the description of the "Limitation on Indebtedness" covenant
below) and (v) neither the Issuer nor any Restricted Subsidiary has any
obligation to maintain or preserve the Securitization Subsidiary's financial
condition.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock or common equity of the Issuer, Holdings or any other Person that
directly or indirectly owns 100% of the common stock of the Issuer pursuant to
an effective registration statement under the Securities Act.
"Recapitalization Agreement" means the Recapitalization Agreement dated as
of April 11, 1997 among Holdings, Cypress Merchant Banking Partners L.P.,
Cypress Offshore Partners L.P., Keystone, Inc., FW Strategic Partners, L.P.,
Odyssey Partners, L.P. and certain other stockholders of Holdings, as the same
may from time to time be amended, modified or supplemented.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Issuer or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; PROVIDED FURTHER,
HOWEVER, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Issuer or (y) Indebtedness of the
Issuer or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Rental Equipment" means all mobile office units or other equipment held for
rental (or at the time being rented) or sale by the Issuer and its Restricted
Subsidiaries in the ordinary course of business.
"Representative" means, for any issue of Subordinated Guarantor Senior
Indebtedness, the agent, trustee or similar representative for the holders of
the respective issue of such Indebtedness or, in the absence of any such
representative, the holders of a majority of the outstanding amount of such
Subordinated Guarantor Senior Indebtedness.
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"Restricted Payment" with respect to any Person means (i) the declaration or
payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any such payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Issuer or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Issuer or Holdings held by
any Person or of any Capital Stock of a Restricted Subsidiary held by any
Affiliate of the Issuer (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Issuer that is not Disqualified Stock), (iii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Indebtedness (other than the purchase, repurchase or
other acquisition of Subordinated Indebtedness purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) or (iv) the making
of any Investment (other than a Permitted Investment) in any Person.
"Restricted Subsidiary" means any Subsidiary of the Issuer that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Issuer or a Restricted Subsidiary
transfers such property to a Person and the Issuer or a Restricted Subsidiary
leases it from such Person.
"Scheduled Asset Dispositions" means an Asset Disposition of any of the real
property and any equipment located at sites in Berlin, N.J., North East,
Maryland and Lawrenceville, Georgia on the Issue Date.
"Scotsman" means the Issuer.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Issuer or a Restricted
Subsidiary secured by a Lien.
"Securitization Subsidiary" means a Subsidiary (all the Voting Stock (other
than directors' qualifying shares) of which is owned by the Issuer or one or
more Wholly Owned Subsidiaries) which is established for the limited purpose of
acquiring and financing Units and Related Assets and engaging in activities
ancillary thereto; provided, however, that the Subordinated Guarantor shall not
be a Securitization Subsidiary.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Issuer within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Subordinated Guarantor Senior Indebtedness" means (i) all Indebtedness of
the Subordinated Guarantor Incurred pursuant to the Credit Agreement (whether
Incurred pursuant to clause (b) (1) or (b) (14) or Incurred pursuant to clause
(b) (7) in respect of Indebtedness Incurred pursuant to clause (b) (1) or (b)
(14) as described below under "--Certain Covenants--Limitation on
Indebtedness"), and all Indebtedness under any guarantee by the Subordinated
Guarantor of Indebtedness described above incurred by the Issuer or any
Guarantor, and all expenses, fees, reimbursements, indemnities, unpaid drawings,
interest (including interest at the contract rate accruing on or after the
filing of any petition in bankruptcy or reorganization relating to the Issuer or
the Subordinated Guarantor whether or not a claim for post-filing interest is
allowed in such proceeding) and other amounts owing in respect thereof and (ii)
all Indebtedness of the Subordinated Guarantor incurred pursuant to clause
(b)(2) or (b)(8) or incurred
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pursuant to clause (b)(7) in respect of Indebtedness incurred pursuant to clause
(b)(2) or (b)(8) as described below under "--Certain Covenants-- Limitation on
Indebtedness", and all Indebtedness under any guarantee thereof by the
Subordinated Guarantor, and all expenses, fees, reimbursements, indemnities and
other amounts owing with respect thereto; provided, that Subordinated Guarantor
Senior Indebtedness will not be deemed to include (a) any Indebtedness,
guarantee or obligation of the Subordinated Guarantor which is expressly
subordinate or junior by its terms in any respect to any other Indebtedness,
guarantee or obligations of the Subordinated Guarantor or (b) that portion of
any Indebtedness incurred in violation of the "Limitation of Indebtedness"
covenant; provided, further, that clause (b) of the immediately preceding
proviso shall not apply to any Indebtedness which the respective lenders
believed, at the time of the extension thereof, was permitted to be incurred in
accordance with the "Limitation of Indebtedness" covenant so long as the Issuer
or its respective Subsidiary which was the direct obligor thereon represented,
at the time of such extension of credit, that such extension did not violate the
provisions of the Indenture.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Guarantee" means the subordinated guarantee of the Notes by
the Subordinated Guarantor.
"Subordinated Guarantor" means Willscot Equipment, LLC.
"Subordinated Indebtedness" means any Indebtedness of the Issuer or any
Guarantor (whether outstanding on the Issue Date or thereafter Incurred), as the
case may be, which is subordinate or junior in right of payment to the Notes or
the Guarantor's Guarantee, as the case may be, pursuant to a written agreement
to that effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Tax Sharing Agreement" means any tax sharing agreement between the Issuer
and Holdings or any other Person with which the Issuer is required to, or is
permitted to, file a consolidated tax return or with which the Issuer is or
could be part of a consolidated group for tax purposes.
"Temporary Cash Investments" means any of the following:
(i) any investment in direct obligations of the United States of America
or any agency thereof or obligations guaranteed by the United States of
America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within one year of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000
(or the foreign currency equivalent thereof) and has outstanding debt which
is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker-dealer or mutual fund distributor,
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(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) investments in commercial paper, maturing not more than one year
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Issuer) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors Service,
Inc. or "A-1" (or higher) according to Standard and Poor's Ratings Group,
and
(v) investments in securities with maturities of one year or less from
the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"Units and Related Assets" means mobile office units, modular structures or
other equipment leased or sold to a similar customer base, leases, general
intangibles and other similar assets, in each case relating to such mobile
office units, modular structures or other equipment, related contractual rights,
guarantees, insurance proceeds, collections, other related assets and proceeds
of all of the foregoing.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Issuer that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary; provided, however, that the Subordinated Guarantor
shall not be, or be designated as, an Unrestricted Subsidiary. The Board of
Directors may designate any Subsidiary of the Issuer (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, the Issuer or any other
Subsidiary of the Issuer that is not a Subsidiary of the Subsidiary to be so
designated; PROVIDED, HOWEVER, that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments." The Board of Directors may designate any Unrestricted Subsidiary
(other than a Guarantor) to be a Restricted Subsidiary; PROVIDED, HOWEVER, that
immediately after giving effect to such designation (x) the Issuer could Incur
$1.00 of additional Indebtedness under paragraph (a) of the covenant described
under "--Certain Covenants--Limitation on Indebtedness" and (y) no Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be by the Issuer to the Trustee by promptly filing with the Trustee a copy
of the board resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the Issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Issuer
or one or more Wholly Owned Subsidiaries.
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CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS. (a) The Issuer shall not, and shall not permit
its Restricted Subsidiaries to, Incur, directly or indirectly, any Indebtedness;
PROVIDED, HOWEVER, that the Issuer may Incur Indebtedness if, on the date of
such Incurrence and after giving effect thereto, the Consolidated Coverage Ratio
exceeds 2.0 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), the Issuer and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness of the Issuer Incurred pursuant to the Credit
Agreement; PROVIDED, HOWEVER, that, after giving effect to any such
Incurrence, the aggregate principal amount of such Indebtedness then
outstanding does not exceed the greater of $300 million or the sum of (i)
75% of the net book value of Eligible Rental Equipment of the Issuer and its
Restricted Subsidiaries and (ii) 85% of the book value of the Eligible
Accounts Receivable of the Issuer and its Restricted Subsidiaries (less (i)
the amount of net proceeds which have been received in connection with a
Permitted Units Financing permitted under clause (b)(13)(i) of this covenant
(provided that such reduction shall apply only to the extent of any
outstanding balance on such financing and for so long as such Permitted
Units Financing is in effect) and (ii) the amount of any outstanding
Attributable Debt incurred under clause (b)(12) of this covenant);
(2) Indebtedness of the Issuer Incurred pursuant to an Interest Rate
Agreement or Currency Agreement entered into with any of the Lenders
directly related to (as determined in good faith by the Issuer) Indebtedness
Incurred pursuant to the Credit Agreement;
(3) Indebtedness owed to and held by the Issuer or a Wholly Owned
Subsidiary; PROVIDED, HOWEVER, that any subsequent issuance or transfer of
any Capital Stock which results in any such Wholly Owned Subsidiary ceasing
to be a Wholly Owned Subsidiary, or any subsequent transfer of such
Indebtedness (other than to the Issuer or another Wholly Owned Subsidiary)
shall be deemed, in each case, to constitute the Incurrence of such
Indebtedness by the issuer thereof;
(4) the Notes and the Exchange Notes and the Guarantees thereof;
(5) Indebtedness outstanding on the Issue Date (other than Indebtedness
described in clause (b)(1), (2), (3) and (4) of this covenant);
(6) Indebtedness or Preferred Stock of a Restricted Subsidiary Incurred
and outstanding on or prior to the date on which such Restricted Subsidiary
was acquired by the Issuer (other than Indebtedness or Preferred Stock
Incurred in connection with, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Issuer); PROVIDED, HOWEVER,
that on the date of such acquisition and after giving effect thereto, the
Issuer would have been able to Incur at least $1.00 of additional
Indebtedness pursuant to clause (a) above;
(7) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to clause (a) or pursuant to clause (b)(2), (4), (5), (6), (8) or
(12) or this clause (b)(7); PROVIDED, HOWEVER, that to the extent such
Refinancing Indebtedness directly or indirectly Refinances Indebtedness or
Preferred Stock of a Restricted Subsidiary described in clause (b)(6), such
Refinancing Indebtedness shall be Incurred only by such Restricted
Subsidiary;
(8) Hedging Obligations consisting of Interest Rate Agreements directly
related (as determined in good faith by the Issuer) to Indebtedness
permitted to be Incurred by the Issuer and its Restricted
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Subsidiaries pursuant to the Indenture and Currency Agreements Incurred in
the ordinary course of business;
(9) Indebtedness (including Capitalized Lease Obligations) of the Issuer
or any Restricted Subsidiary financing the purchase, lease or improvement of
property (real or personal) or equipment (whether through the direct
purchase of assets or the Capital Stock of any Person owning such assets),
in each case Incurred no more than 180 days after such purchase, lease or
improvement of such property, and any Refinancing Indebtedness in respect of
such Indebtedness; PROVIDED, HOWEVER, that at the time of the Incurrence of
such Indebtedness and after giving effect thereto, the aggregate principal
amount of all Indebtedness Incurred pursuant to this clause (b)(9) and then
outstanding shall not exceed the greater of $40 million and 10% of Adjusted
Consolidated Assets;
(10)(A) Any guarantee by the Issuer of Indebtedness of any Restricted
Subsidiary (other than the Subordinated Guarantor) so long as the Incurrence
of such Indebtedness Incurred by such Restricted Subsidiary is permitted
under the terms of the Indenture and any guarantee by any Restricted
Subsidiary of Indebtedness of the Issuer Incurred pursuant to clause (a) or
clause (b)(1), (2), (4), (5), (8), (9), (11), (12) or (14) or clause (b)(7)
in respect of Indebtedness of the Issuer Incurred pursuant to clause (b)(1),
(2), (4), (5) ,(8) or (12) or (B) any guarantee of the Issuer or a
Restricted Subsidary of Indebtedness of an Unrestricted Subsidiary or a
Securization Subsidiary provided that such guarantee is recourse only to the
Capital Stock of such Unrestricted Subsidiary or Securization Subsidiary
(and the proceeds therefrom);
(11) Indebtedness of the Issuer or any Guarantor Incurred in connection
with the acquisition of a Permitted Business and any Refinancing
Indebtedness in respect of such Indebtedness; PROVIDED, HOWEVER, that the
aggregate amount of Indebtedness Incurred pursuant to this clause (b)(11)
and then outstanding shall not exceed $10 million;
(12) Attributable Debt in respect of a Sale/Leaseback Transaction
entered into by the Issuer or any Restricted Subsidiary on or before
December 31, 1998 in respect of Rental Equipment; PROVIDED, HOWEVER, that at
the time of the incurrence of such Attributable Debt and after giving effect
thereto, the aggregate principal amount of all Attributable Debt incurred
pursuant to this clause (12) and then outstanding shall not exceed $50
million; and
(13) Indebtedness of a Securitization Subsidiary pursuant to a Permitted
Units Financing, provided that after giving effect to the Incurrence
thereof, either (i) the amount of net proceeds to be received in such
Permitted Units Financing and any net proceeds for all previous Permitted
Units Financing (only to the extent of any outstanding balance on such
financing and for so long as any such Permitted Units Financings is in
effect) does not exceed the greater of $300 million or the sum of (A) 75% of
the net book value of Eligible Rental Equipment of the Issuer and its
Restructed Subsidiaries and (B) 85% of the book value of the Eligible
Accounts Receivable of the Issuer and its Restructured Subsidiaries or (ii)
the Issuer could Incur at least $1.00 of Indebtedness under clause (a) of
this covenant;
(14) Indebtedness of the Issuer, any Guarantor or the Subordinated
Guarantor (which may be but need not be issued pursuant to the Credit
Agreement) in an aggregate principal amount which, together with all other
Indebtedness of the Issuer, any Guarantor or the Subordinated Guarantor
outstanding on the date of such Incurrence (other than Indebtedness
permitted by clauses (b)(1) through (13) above or paragraph (a)) does not
exceed $50 million.
(c) For purposes of determining compliance with the foregoing covenant, (i)
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described above (including subclauses of different
types of Indebtedness in clause (b) above), the Issuer, in its sole discretion,
will classify such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of the above clauses (or subclauses)
and (ii) an item of Indebtedness may be
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divided and classified in more than one of the types of Indebtedness described
above (including subclauses of different types of Indebtedness in clause (b)
above).
(d) Notwithstanding paragraphs (a) and (b) above, the Issuer shall not Incur
(i) any Indebtedness if such Indebtedness is subordinate or junior in ranking in
any respect to any Indebtedness, unless such Indebtedness is expressly
subordinated in right of payment to the Notes and the Exchange Notes or (ii) any
Secured Indebtedness (other than Permitted Secured Indebtedness) unless
contemporaneously therewith effective provision is made to secure the Notes
equally and ratably with such Secured Indebtedness for so long as such Secured
Indebtedness is secured by a Lien.
(e) Notwithstanding paragraphs (a) and (b) above, a Guarantor shall not
Incur (i) any Indebtedness if such Indebtedness is subordinate or junior in
ranking in any respect to any Indebtedness of such Guarantor, unless such
Indebtedness is expressly subordinated in right of payment to such Guarantor's
Guarantee of the Notes and the Exchange Notes or (ii) any Secured Indebtedness
(other than Permitted Secured Indebtedness) unless contemporaneously therewith
effective provision is made to secure such Guarantor's Guarantee of the Notes
equally and ratably with such Secured Indebtedness for so long as such Secured
Indebtedness is secured by a Lien.
(f) Notwithstanding paragraphs (a) and (b) above, the Subordinated Guarantor
shall not incur (i) any Indebtedness if such Indebtedness is expressly by its
terms subordinate or junior in right of payment to any Indebtedness of the
Subordinated Guarantor and senior in respect of payment to the Subordinated
Guarantee; or (ii) any Indebtedness other than Subordinated Guarantor Senior
Indebtedness and Indebtedness permitted to be Incurred by a Restricted
Subsidiary pursuant to paragraph (b) above.
LIENS. The Indenture provides that neither the Issuer nor any of its
Restricted Subsidiaries may directly or indirectly create, incur, assume or
suffer to exist any Lien on any asset of the Issuer or any Restricted Subsidiary
whether now owned or hereafter acquired, or on any income or profits therefrom
or assign or otherwise convey any right to receive income or profits therefrom
except, in each case, Permitted Liens.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Issuer shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to, make a Restricted
Payment if at the time the Issuer or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); (2) the Issuer is not able to Incur an additional $1.00
of Indebtedness pursuant to paragraph (a) of the covenant described under
"--Limitation on Indebtedness"; or (3) the aggregate amount of such Restricted
Payment and all other Restricted Payments since the Issue Date would exceed the
sum of:
(A) 50% of the Consolidated Net Income accrued during the period (treated as
one accounting period) from the beginning of the fiscal quarter immediately
following the fiscal quarter during which the Notes are originally issued to the
end of the most recent fiscal quarter for which financial statements are
available prior to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Issuer from the issuance
or sale of its Capital Stock (other than Disqualified Stock) and the aggregate
cash received by the Issuer as a capital contribution from its shareholders, in
each case subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Issuer and other than an issuance or sale to an employee stock
ownership plan or to a trust established by the Issuer or any of its
Subsidiaries for the benefit of its employees);
(C) the amount by which Indebtedness of the Issuer is reduced on the
Issuer's balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Issuer) subsequent to the Issue Date, of any Indebtedness of
the Issuer for Capital Stock (other than Disqualified Stock) of the Issuer (less
the amount
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of any cash, or the fair value of any other property (other than such Capital
Stock), distributed by the Issuer upon such conversion or exchange);
(D) an amount equal to the sum of (i) the net reduction in Investments in
any Person resulting from dividends, repayments of loans or advances or other
transfers of assets (including any sale of such Investment), in each case to the
Issuer or any Restricted Subsidiary, and (ii) the portion (proportionate to the
Issuer's equity interest in such Subsidiary) of the fair market value of the net
assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; PROVIDED, HOWEVER, that the foregoing sum
shall not exceed, in the case of any Person (including any Unrestricted
Subsidiary), the amount of Investments previously made in such Person (and
treated as a Restricted Payment) by the Issuer and the Restricted Subsidiaries;
and
(E) $15 million.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) (x) any Restricted Payment made on the Issue Date to fund the
transactions contemplated by the Recapitalization (including fees and expenses),
(y) any Restricted Payment made to fund Holdings' payment of interest and
principal on the Promissory Notes, and to fund interest on, and the redemption,
repurchase, defeasance or payment upon maturity of the Holdings Notes after the
Issue Date (including any accrued interest, principal and premium thereon) and
(z) any other Restricted Payment made by exchange for, or out of the proceeds of
the substantially concurrent sale of, or capital contribution in respect of,
Capital Stock of the Issuer (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary of the Issuer or an employee stock
ownership plan or to a trust established by the Issuer or any of its
Subsidiaries for the benefit of its employees); PROVIDED, HOWEVER, that (A) each
such Restricted Payment described in clauses (x), (y) and (z) shall be excluded
in the calculation of the amount of Restricted Payments and (B) if applicable,
the Net Cash Proceeds of each such sale shall be excluded from the calculation
of amounts under clause (3)(B) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value of Subordinated Indebtedness made by exchange for, or
out of the proceeds of the substantially concurrent sale of, Subordinated
Indebtedness or Capital Stock of the Issuer which is permitted to be Incurred
pursuant to the covenant described under "--Limitation on Indebtedness";
PROVIDED, HOWEVER, that such purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value shall be excluded from the calculation
of the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration thereof if
at such date of declaration such dividend would have complied with this
covenant; PROVIDED, HOWEVER, that such dividend shall be included in the
calculation of the amount of Restricted Payments;
(iv) the repurchase of shares of, or options to purchase shares of, common
stock of Holdings, the Issuer or any of their respective Subsidiaries from
employees, former employees, directors or former directors of Holdings, the
Issuer or any of its Subsidiaries (or permitted transferees of such employees,
former employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments thereto)
approved by the board of directors of Holdings or the Issuer under which such
individuals purchase or sell, or are granted the option to purchase or sell,
shares of such common stock (or any Restricted Payment made to Holdings solely
to fund at the time made such payments); PROVIDED, HOWEVER, that the aggregate
amount of such repurchases or Restricted Payments shall not exceed $2,000,000 in
any calendar year; PROVIDED, FURTHER, HOWEVER, that such repurchases or
Restricted Payments shall be excluded from the calculation of the amount of
Restricted Payments;
(v) following the initial Public Equity Offering, dividends or Common Stock
buybacks by Holdings, the Issuer or another issuer in an aggregate amount in any
year not to exceed 6% of the aggregate Net Cash Proceeds received by the Issuer
in connection with such initial Public Equity Offering and any
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subsequent Public Equity Offering (or any Restricted Payment made to Holdings or
such other issuer solely to fund at the time made such payments);; PROVIDED,
HOWEVER, that at the time of payment of such dividends, no other Default shall
have occurred and be continuing (or result therefrom); PROVIDED, FURTHER,
HOWEVER, that such dividends or common stock buybacks shall be included in the
calculation of the amount of Restricted Payments;
(vi) repurchases of Capital Stock deemed to occur upon exercise of stock
options if such Capital Stock represents a portion of the exercise price of such
options; PROVIDED, HOWEVER, that such repurchase shall be excluded from the
calculation of the amount of Restricted Payments;
(vii) any payment by the Issuer to Holdings pursuant to the Tax Sharing
Agreement; PROVIDED, HOWEVER, that the amount of any such payment shall not
exceed the amount of taxes that the Issuer would have been liable for on a
stand-alone basis; PROVIDED, FURTHER, HOWEVER, that such dividends shall be
excluded in the calculation of the amount of Restricted Payments; and
(viii) dividends to Holdings to the extent required to pay for general
corporate and overhead expenses incurred by Holdings; PROVIDED, HOWEVER, that
such dividends shall not exceed $1,000,000 in any calendar year; PROVIDED,
FURTHER, HOWEVER that such dividends shall be excluded from the calculation of
the amount of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Issuer shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary (a) to pay dividends or make any other distributions on its Capital
Stock to the Issuer or a Restricted Subsidiary or pay any Indebtedness owed to
the Issuer, (b) to make any loans or advances to the Issuer or (c) to transfer
any of its property or assets to the Issuer, except:
(i) any encumbrance or restriction pursuant to an agreement in effect at or
entered into on the Issue Date (including the Credit Agreement and related
security documents and the Senior Secured Notes and any related agreements);
(ii) any encumbrance or restriction with respect to a Restricted Subsidiary
pursuant to an agreement relating to any Indebtedness Incurred by such
Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by the Issuer (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Issuer) and outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement effecting a
Refinancing of Indebtedness Incurred pursuant to an agreement referred to in
clause (i) or (ii) of this covenant or this clause (iii) or contained in any
amendment to an agreement referred to in clause (i) or (ii) of this covenant or
this clause (iii); PROVIDED, HOWEVER, that the encumbrances and restrictions
with respect to such Restricted Subsidiary contained in any such refinancing
agreement or amendment are no less favorable to the Noteholders than
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in such agreements;
(iv) any such encumbrance or restriction consisting of customary
non-assignment or subletting provisions in leases governing leasehold interests
to the extent such provisions restrict the transfer of the lease or the property
leased thereunder;
(v) in the case of clause (c) above, restrictions contained in security
agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the
extent such restrictions restrict the transfer of the property subject to such
security agreements or mortgages;
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(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or any assets of such Restricted Subsidiary
pending the closing of such sale or disposition;
(vii) any encumbrance or restriction pursuant to an agreement entered into
after the Issue Date governing Indebtedness incurred by a Restricted Subsidiary
in compliance with the covenant described under "Limitation on Indebtedness";
PROVIDED, HOWEVER, that the encumbrances and restrictions with respect to any
Restricted Subsidiary contained in any such agreement are no less favorable to
the Holders of the Notes than encumbrances and restrictions with respect to such
Restricted Subsidiary in the Credit Agreement on the Issue Date;
(viii) any encumbrance or restriction pursuant to an agreement with a
governmental entity providing for developmental financing on terms which are
more favorable (at the time such agreement is entered into) than those available
from third party financing sources;
(ix) with respect to a Securitization Subsidiary, an agreement relating to
Indebtedness of a Securitization Subsidiary which is permitted under
"--Limitation on Indebtedness" above or pursuant to an agreement relating to a
Permitted Units Financing by a Securitization Subsidiary; or
(x) the Indenture.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) In the event and to
the extent that the Net Available Cash received by the Issuer or any Restricted
Subsidiary from one or more Asset Dispositions occurring on or after the Issue
Date in any period of 12 consecutive months exceeds the greater of $40 million
or 10% of Adjusted Consolidated Assets as of the beginning of such 12-month
period, then the Issuer shall (i) no later than 360 days after the date such Net
Available Cash so received exceeds such $40 million or 10% of Adjusted
Consolidated Assets (A) apply an amount equal to such excess Net Available Cash
to repay any Indebtedness (other than Subordinated Indebtedness) of the Issuer
or of any Restricted Subsidiary, in each case owing to a Person other than the
Issuer or any Affiliate of the Issuer, or (B) invest or commit to invest an
equal amount, or the amount not so applied pursuant to clause (A), in Additional
Assets; PROVIDED, HOWEVER, that in the case of any commitment to invest, such
investment must be made within six months thereafter, and any amount not so
invested shall be treated as Excess Proceeds (as defined below); and (ii) apply
such excess Net Available Cash (to the extent not applied pursuant to clause
(i)) as provided in the following paragraphs of the covenant described
hereunder. The amount of such excess Net Available Cash required to be applied
during the applicable period and not applied as so required by the end of such
period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as defined
below) totals at least $20 million, the Issuer must, not later than the
fifteenth Business Day of such month, make an offer (an "Excess Proceeds Offer")
to purchase from the Holders on a pro rata basis an aggregate principal amount
of Notes equal to the Excess Proceeds (rounded down to the nearest multiple of
$1,000) on such date, at a purchase price equal to 100% of the principal amount
of such Notes, plus, in each case, accrued interest (if any) to the date of
purchase (the "Excess Proceeds Payment").
The Issuer will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
thereunder in the event that such Excess Proceeds are received by the Issuer
under the covenant described hereunder and the Issuer is required to repurchase
Notes as described above. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of the covenant described
hereunder, the Issuer shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
covenant described hereunder by virtue thereof.
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(b) In the event of the transfer of substantially all (but not all) the
property and assets of the Issuer as an entirety to a Person in a transaction
permitted by the covenant described under "--Merger and Consolidation," the
Successor Issuer (as defined therein) shall be deemed to have sold the
properties and assets of the Issuer not so transferred for purposes of the
covenant described hereunder, and shall comply with the provisions of the
covenant described hereunder with respect to such deemed sale as if it were an
Asset Disposition, and the Successor Company shall be deemed to have received
Net Available Cash in an amount equal to the fair market value (as determined in
good faith by the Board of Directors) of the properties and assets not so
transferred or sold.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Issuer shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of the Issuer (an "Affiliate Transaction") unless the terms thereof
(1) are no less favorable to the Issuer or such Restricted Subsidiary than those
that could be obtained at the time of such transaction in arm's-length dealings
with a Person who is not such an Affiliate, (2) if such Affiliate Transaction
involves an amount in excess of $5.0 million, (i) are set forth in writing and
(ii) have been approved by a majority of the members of the Board of Directors
having no personal stake in such Affiliate Transaction and (3) if such Affiliate
Transaction involves an amount in excess of $10.0 million, have been determined
by a nationally recognized accounting or investment banking firm (an
"Independent Financial Advisor") to be fair, from a financial standpoint, to the
Issuer and its Restricted Subsidiaries. Notwithstanding clause (2)(ii) above, in
the event that there are less than two members of the Board of Directors not
having a personal stake in any Affiliate Transaction, such Affiliate Transaction
shall be permitted to exist so long as an Independent Financial Advisor has
determined the terms of such Affiliate Transaction to be fair, from a financial
standpoint, to the Issuer and its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i) any
Restricted Payment permitted to be made pursuant to the covenant described under
"--Limitation on Restricted Payments" or a Permitted Investment in Holdings as
described in clause (x) of such definition, (ii) any issuance of securities, or
other payments, benefits, awards or grants in cash, securities or otherwise,
pursuant to, or the funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors, (iii) the grant of stock
options or similar rights to employees and directors of the Issuer pursuant to
plans approved by the Board of Directors, (iv) loans or advances to employees in
the ordinary course of business in accordance with the past practices of the
Issuer or its Restricted Subsidiaries, but in any event not to exceed $2.5
million in the aggregate outstanding at any one time, (v) the payment of
reasonable fees to directors of the Issuer and its Restricted Subsidiaries who
are not employees of the Issuer or its Restricted Subsidiaries, (vi) any Tax
Sharing Agreement; PROVIDED, HOWEVER, that the aggregate amount payable by the
Issuer pursuant thereto shall not exceed the amount of taxes that the Issuer
would have been liable for on a stand-alone basis, (vii) indemnification
agreements with, and the payment of fees and indemnities to, directors, officers
and employees of the Issuer and its Restricted Subsidiaries, in each case in the
ordinary course of business, (viii) any employment, noncompetition or
confidentiality agreement entered into by the Issuer and its Restricted
Subsidiaries with its employees in the ordinary course of business, (ix) the
payment by the Issuer of fees, expenses and other amounts to the Permitted
Holders and their respective Affiliates in connection with the Recapitalization,
(x) payments by the Issuer or any of its Restricted Subsidiaries to the
Permitted Holders (described in clause (i) of such defintion) and their
Affiliates made pursuant to any financial advisory, financing, underwriting or
placement agreement, or in respect of other investment banking activities, in
each case as determined by the Board of Directors in good faith, (xi) any
Affiliate Transaction between the Issuer and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries, (xii) any Affiliate Transaction between the
Issuer and a Restricted Subsidiary or between Restricted Subsidiaries, in each
and approved by the Board of Directors in good faith, (xiii) execution, delivery
and performance by Holdings, the Issuer and any Subsidiary or Holdings or the
Issuer of the Recapitalization Agreement as in effect on the Issuer Date, (xiv)
the pledge of any Capital Stock of Unrestricted Subsidiaries to support the
Indebtedness thereof and (xv) transactions in connection with a
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Permitted Units Financing (as to which the Board approval requirements, in the
definition of Permitted Units Financing will apply).
CHANGE OF CONTROL. (a) Upon a Change of Control, if either (i) the Issuer
does not redeem the Notes as described in "Optional Redemption" or (ii) such
Change of Control occurs after June 1, 2002, the Issuer will be required to make
an offer to repurchase the Notes at a purchase price equal to 101% of the
principal amount thereof together with accrued and unpaid interest, if any, to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest on the relevant interest payment date),
in accordance with the terms contemplated in paragraph (b) below.
(b) Within 30 days following any Change of Control (unless the Issuer has
mailed a redemption notice with respect to all the outstanding Notes in
connection with such Change of Control), the Issuer shall mail or cause to be
mailed a notice to each Holder with a copy to the Trustee stating: (1) that a
Change of Control has occurred and that such Holder has the right to require the
Issuer to purchase such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of Holders of record on the relevant
record date to receive interest on the relevant interest payment date); (2) the
circumstances and relevant facts regarding such Change of Control; (3) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (4) the instructions determined by the
Issuer, consistent with the covenant described hereunder, that a Holder must
follow in order to have its Notes purchased.
(c) The Issuer shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Issuer shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Issuer and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Issuer would decide to do so in the future. Subject to the limitations
discussed below, the Issuer could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of Indebtedness outstanding at such time or otherwise
affect the Issuer's capital structure or credit ratings. Restrictions on the
ability of the Issuer to incur additional Indebtedness are contained in the
covenant described under "--Limitation on Indebtedness." Such restrictions can
only be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding. Except for the limitations contained in such
covenants, however, the Indenture will not contain any covenants or provisions
that may afford Holders of the Notes protection in the event of a highly
leveraged transaction.
Future indebtedness of the Issuer may contain prohibitions on the occurrence
of certain events that would constitute a Change of Control or require such
indebtedness to be repurchased upon a Change of Control. Moreover, the exercise
by the holders of their right to require the Issuer to repurchase the Notes
could cause a default under such indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on the Issuer.
Finally, the Issuer's ability to pay cash to the holders of Notes following the
occurrence of a Change of Control may be limited by the Issuer's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases.
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The provisions under the Indenture relative to the Issuer's obligation to
make an offer to repurchase the Notes as a result of a Change of Control may be
waived or modified with the written consent of the holders of a majority in
principal amount of the Notes.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Issuer shall not sell or otherwise dispose of any Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to the Issuer or a Wholly Owned Subsidiary or to
any director of a Restricted Subsidiary to the extent required as director's
qualifying shares, (ii) if, immediately after giving effect to such issuance,
sale or other disposition, neither the Issuer nor any of its Restricted
Subsidiaries owns any Capital Stock of such Restricted Subsidiary or (iii) if,
immediately after giving effect to such issuance, sale or other disposition,
such Restricted Subsidiary would no longer constitute a Restricted Subsidiary
and any Investment in such Person remaining after giving effect thereto would
have been permitted to be made under the covenant described under "--Limitation
on Restricted Payments" if made on the date of such issuance, sale or other
disposition or (iv) any sale of Capital Stock in connection with a Permitted
Units Financing.
MERGER AND CONSOLIDATION. The Issuer shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all its assets to, any Person (including
Holdings), unless: (i) the resulting, surviving or transferee Person (the
"Successor Issuer") shall be a Person organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia and
the Successor Issuer (if not the Issuer) shall expressly assume, by an indenture
supplemental thereto, executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, all the obligations of the Issuer under the Notes
and the Indenture; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor Issuer or
any Subsidiary as a result of such transaction as having been Incurred by such
Successor Issuer or such Subsidiary at the time of such transaction), no Default
shall have occurred and be continuing, (iii) immediately after giving effect to
such transaction, the Successor Issuer would be able to Incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Indebtedness"; (iv) immediately after giving effect to such
transaction, the Successor Company shall have Consolidated Net Worth in an
amount that is not less than the Consolidated Net Worth of the Issuer prior to
such transaction; and (v) the Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture. Notwithstanding clause (iii) above, a Wholly-Owned
Subsidiary (other than the Subordinated Guarantor) may be consolidated with or
merged into the Issuer and the Issuer may consolidate with or merge with or into
(A) another Person, if such Person is a single purpose corporation that has not
conducted any business or Incurred any Indebtedness or other liabilities and
such transaction is being consummated solely to change the state of
incorporation of the Issuer and (B) Holdings; PROVIDED, HOWEVER, that, in the
case of clause (B), (x) Holdings shall not have owned any assets other than the
Capital Stock of the Issuer (and other immaterial assets incidental to its
ownership of such Capital Stock) or conducted any business other than owning the
Capital Stock of the Issuer, (y) Holdings shall not have any Indebtedness or
other liabilities (other than ordinary course liabilities incidental to its
ownership of the Capital Stock of the Issuer) and (z) immediately after giving
effect to such consolidation or merger, the Successor Company shall have a pro
forma Consolidated Coverage Ratio that is not less than Consolidated Coverage
Ratio of the Issuer immediately prior to such consolidation or merger; AND,
PROVIDED FURTHER, that the Subordinated Guarantor may be consolidated with, may
be merged into or may transfer all or substantially all its assets to the Issuer
with the consent of the holders of all Subordinated Guarantor Senior
Indebtedness outstanding (in which case, if such consent has been given, the
Subordinated Guarantee (including, the subordination provisions described above)
shall terminate and be extinguished).
The Successor Company shall be the successor to the Issuer and shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under the Indenture, but the predecessor
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Company in the case of a conveyance, transfer or lease shall not be released
from the obligation to pay the principal of and interest on the Notes.
Each Guarantor shall not and the Issuer shall not permit any Guarantor to
consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or a series of transactions, all or substantially all its assets to,
any Person other than the Issuer or any other Guarantor, unless: (i) the
resulting, surviving or transferee Person (the "Successor Guarantor") shall be a
Person organized and existing under the laws of the United States of America,
any State thereof or the District of Columbia and the Successor Guarantor (if
not the Issuer) shall expressly assume, by an indenture supplemental thereto,
executed and delivered to the Trustee, in form reasonably satisfactory to the
Trustee, all the obligations of the Guarantor on the Guarantee and in the
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; and (iii) immediately
after giving effect to such transaction, and the use of any proceeds therefrom
on a pro forma basis, the Issuer could satisfy the provisions of clauses (iii)
and (iv) of the first paragraph of this Section.
Except as provided above, the Issuer shall not permit the Subordinated
Guarantor, and the Subordinated Guarantor shall not, consolidate with or merge
into or with, or convey, transfer or lease, in any transaction or a series of
related transactions, all or substantially all of its assets to any Person;
PROVIDED that the Subordinated Guarantor may be consolidated with, merged with
or into, or transfer all or substantially all its assets to, any Guarantor with
the consent of the holders of all Subordinated Guarantor Senior Indebtedness
outstanding (in which case, if such consent has been given, the subordination
provisions described above) with respect to the Subordinated Guarantee shall
terminate and be extinguished. Notwithstanding the above provisions, the
Subordinated Guarantor may lease any or all of its assets to the Company or any
Wholly Owned Subsidiary of the Company at any time.
SEC REPORTS. Notwithstanding that the Issuer may not be, or may not be
required to remain, subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, the Issuer shall file or continue to file with the SEC and
provide the Trustee and any Noteholder (upon the request of such Noteholder)
with such annual reports and such information, documents and other reports as
are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a
U.S. corporation subject to such Sections, such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections.
ACTIVITIES OF THE ISSUER AND ITS RESTRICTED SUBSIDIARIES. The Issuer shall
not, and shall not permit any Restricted Subsidiary to, engage in any business
other than developing, owning, engaging in and dealing with a Permitted
Business.
ADDITIONAL GUARANTEES. The Issuer will cause each Subsidiary which becomes
a Guarantor after the Issue Date (i) to execute and deliver to the Trustee a
supplemental indenture, in form reasonably satisfactory to the Trustee, pursuant
to which such Subsidiary shall unconditionally guarantee all of the Issuer's
obligations under the Notes and the Indenture on the terms set forth in the
Indenture and (ii) to deliver to the Trustee an opinion of counsel that such
supplemental indenture has been duly authorized, executed and delivered by such
Subsidiary and constitutes a legal, valid binding and enforceable obligation of
such Subsidiary. Thereafter, such Subsidiary shall be a Guarantor for all
purposes of this Indenture until it ceases to be such pursuant to the definition
of Guarantor contained herein.
ACTIVITIES OF SUBORDINATED GUARANTOR. The Issuer shall not permit the
Subordinated Guarantor to, and the Subordinated Guarantor shall not: (i) engage
in any activity other than acquiring, owning, holding, managing, marketing,
maintaining, leasing, selling or disposing of Rental Equipment and activities
directly incidental thereto (including leasing such Rental Equipment to the
Company or any of its Subsidiaries) or (ii) incur any Indebtedness other than
Indebtedness incurred in compliance with the covenant described under
"--Limitations on Indebtedness".
Neither the Issuer nor any of the Restricted Subsidiaries will sell,
transfer or otherwise convey to the Subordinated Guarantor any of its or their
respective assets other than Rental Equipment (and related
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leases) which Rental Equipment, at the time of transfer, (x) is not evidenced by
a certificate of title under applicable motor vehicle registration, certificate
of title and other applicable state laws or (y) if evidenced by a certificate of
title as described in preceding clause (x), where counsel to the Issuer is
unable to conclude that the notation of a security interest thereon (or another
similar procedure) is effective under applicable state law to create a fully
perfected security interest therein.
All Rental Equipment (and related leases) sold, transferred or otherwise
conveyed by the Issuer or any of the Restricted Subsidiaries to the Subordinated
Guarantor shall be transferred, sold or otherwise conveyed only by way of a
capital contribution to the common equity of the Subordinated Guarantor.
The Subordinated Guarantor is not permitted to have any Subsidiaries.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise
(including the failure to make a payment to purchase Notes tendered pursuant to
Change of Control or an Excess Proceeds Payment), (iii) the failure by the
Issuer to comply with its obligations under "--Certain Covenants--Merger and
Consolidation" above, (iv) the failure by the Issuer to comply for 30 days after
notice with any of its obligations in the covenants described above under
"--Certain Covenants" under "-- Limitation on Indebtedness," "--Limitation on
Restrictions on Distributions from Restricted Subsidiaries," "--Limitation on
Restricted Payments," "Limitation on Sales of Assets and Subsidiary Stock"
(other than a failure to purchase Notes), "--Limitation on Affiliate
Transactions," "--Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries," "--Change of Control" (other than a failure to
purchase Notes), "--SEC Reports," or "--Activities of Subordinated Guarantor",
(v) the failure by the Issuer to comply for 60 days after notice with its other
agreements contained in the Indenture, (vi) Indebtedness of the Issuer or any
Significant Subsidiary is not paid within any applicable grace period after
final maturity or is accelerated by the holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $25.0
million (the "cross acceleration provision"), (vii)(a) certain events of
bankruptcy, insolvency or reorganization of the Issuer or (b) certain events of
bankruptcy, insolvency or reorganization of a Significant Subsidiary (the
"bankruptcy provisions"), (viii) any judgment or decree for the payment of money
in excess of $25.0 million (net of applicable insurance coverage provided that
the insurance carriers have acknowledged coverage) is rendered against the
Issuer or any Significant Subsidiary, remains outstanding for a period of 60
days following such judgment and is not discharged, waived or stayed within 10
days after notice or an enforcement proceeding is commenced upon such judgment
or decree (the "judgment default provision"), or (ix) any of the Guarantees or
the Subordinated Guarantee ceases to be in full force and effect or any of the
Guarantees or the Subordinated Guarantee is declared to be null and void and
unenforceable or any of the Guarantees or the Subordinated Guarantee is found to
be invalid, in each case by a court of competent jurisdiction in a final
non-appealable judgment, or any of the Guarantors or the Subordinated Guarantor
denies its liability under its Guarantee or the Subordinated Guarantee (other
than by reason of release of a Guarantor or the Subordinated Guarantor in
accordance with the terms of the Indenture). However, a default under clauses
(iv), (v) and (viii) will not constitute an Event of Default until the Trustee
or the holders of 25% in principal amount of the outstanding Notes notify the
Issuer of the default and the Issuer does not cure such default within the time
specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Issuer occurs and is continuing,
the principal of and interest on all the Notes will IPSO FACTO become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any holders of the Notes. Under certain circumstances, the
holders of a majority in principal amount of the outstanding Notes may rescind
any such acceleration with respect to the Notes and its consequences.
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Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Notes unless
such holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no holder of a Note
may pursue any remedy with respect to the Indenture or the Notes unless (i) such
holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy, (iii) such holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other holder of a Note or that would involve the Trustee in personal
liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its trust officers determines that
withholding notice is not opposed to the interest of the holders of the Notes.
In addition, the Issuer is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Issuer
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Issuer is taking or proposes to take in respect
thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the holders of a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Notes) and any past default or compliance with any provisions may also be
waived with the consent of the holders of a majority in principal amount of the
Notes then outstanding. However, without the consent of each holder of an
outstanding Note affected thereby, no amendment may, among other things, (i)
reduce the amount of Notes whose holders must consent to an amendment, (ii)
reduce the rate of or extend the time for payment of interest on any Note, (iii)
reduce the principal of or extend the Stated Maturity of any Note, (iv) reduce
the premium payable upon the redemption of any Note or change the time at which
any Note may be redeemed as described under "--Optional Redemption" above, (v)
make any Note payable in money other than that stated in the Note, (vi) impair
the right of any holder of the Notes to receive payment of principal of and
interest on such holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
holder's Notes, (vii) make any change in the amendment provisions which require
each holder's consent or in the waiver provisions, or (viii) release any
Guarantor or the Subordinated Guarantor from any of its obligations under its
Guarantee or Subordinated Guarantee, as the case may be, or the Indenture
otherwise then in accordance with the terms of the Indenture.
Without the consent of any holder of the Notes, the Issuer, the Guarantors,
the Subordinated Guarantor and the Trustee may amend the Indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by a
successor issuer or guarantor of the obligations of the Issuer, the Guarantor or
the Subordinated Guarantor under the Indenture, to provide for uncertificated
Notes in addition to or in place of certificated Notes (provided that the
uncertificated Notes are issued in registered
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form for purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to add
guarantees with respect to the Notes or to provide for the release of the
Subordinated Guarantee as described in the definition of Guarantor, to secure
the Notes, to add to the covenants of the Issuer, Guarantors or the Subordinated
Guarantor for the benefit of the holders of the Notes or to surrender any right
or power conferred upon the Issuer, Guarantors or the Subordinated Guarantor, to
make any change that does not adversely affect the rights of any holder of the
Notes or to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the Trust Indenture Act.
The consent of the holders of the Notes is not necessary under the Indenture
to approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Issuer is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
The Issuer may require payment of a sum sufficient to cover any tax, assessment
or other governmental charge payable in connection with certain transfers and
exchanges.
DEFEASANCE
The Issuer may, at its option and at any time may elect to have its
obligations and the obligations of the Guarantors and the Subordinated Guarantor
discharged with respect to the Notes and the Indenture ("legal defeasance"),
except for certain obligations, including those respecting the defeasance trust
and obligations to register the transfer or exchange of the Notes, to replace
mutilated, destroyed, lost or stolen Notes and to maintain a registrar and
paying agent in respect of the Notes. The Issuer at any time may terminate its
obligations under the covenants described under "--Certain Covenants" (other
than the covenant described under "--Merger and Consolidation"), the operation
of the cross acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the Subordinated Guarantor and the judgment default
provision described under "--Defaults" above, the Events of Default specified in
clause (iv) under "--Defaults" above and the limitations contained in clauses
(iii), (iv) and (z) in the first paragraph and clause (iii) of the third
paragraph under "--Certain Covenants--Merger and Consolidation" above ("covenant
defeasance").
The Issuer may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Issuer exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Issuer exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "--Defaults" above or because of the
failure of the Issuer to comply with clause (iii) or (iv) under "--Certain
Covenants--Merger and Consolidation" above.
In order to exercise either defeasance option, the Issuer must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not
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occurred (and, in the case of legal defeasance only, (i) such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law and (ii) such Opinion of Counsel shall not be
required to be delivered if such legal defeasance occurs within one year of the
Stated Maturity of the Notes or the earliest possible optional redemption date
for the Notes (June 1, 2002).
CONCERNING THE TRUSTEE
The Bank of New York is to be the Trustee under the Indenture and has been
appointed by the Issuer as Registrar and Paying Agent with regard to the Notes.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the New Notes will be issued in the form of one
or more registered notes in global form without coupons (each a "Global Note").
Each Global Note will be deposited with, or on behalf of, The Depository Trust
Company (the "Depository") and registered in the name of Cede & Co., as nominee
of the Depository, or will remain in the custody of the Trustee pursuant to the
FAST Balance Certificate Agreement between the Depository and the Trustee.
The Depository has advised the Company that it is (i) a limited purpose
trust company organized undee the laws of the State of New York, (ii) a member
of the Federal Reserve System, (iii) a "clearing corporation" within the meaning
of the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency"
registered pursuant to Section 17A of the Exchange Act. The Depository was
created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to the
accounts of its Participants, thereby eliminating the need for physical transfer
and delivery of certificates. The Depository's Participants include securities
brokers and dealers (including the Initial Purchasers), banks and trust
companies, clearing corporations and certain other organizations. Access to the
Depository's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect Participants") that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly.
The Company expects that pursuant to procedures established by the
Depository (i) upon deposit of the Global Notes, the Depository will credit the
accounts of Participants with an interest in the Global Note and (ii) ownership
of the New Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depository (with respect to the
Interest of Participants), the Participants and the Indirect Participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own and that security interests in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer New Notes to
pledge the New Notes as collateral will be limited to such extent.
So long as the Depository or its nominee is the registered owner of a Global
Note, the Depository or such nominee, as the case may be, will be considered the
sole owner or Holder of the New Notes represented by the Global Note for all
purposes under the Indenture. Except as provided below, owners of
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beneficial interests in a Global Note will not be entitled to have New Notes
represented by such Global Note registered in their names, will not receive or
be entitled to receive physical delivery of Certificated Securities, and will
not be considered the owners or Holders thereof under the Indenture for any
purpose, including with respect to the giving of any directions, instruction or
approval to the Trustee thereunder. As a result, the ability of a person having
a beneficial interest in New Notes represented by a Global Note to pledge such
interest to persons or entities that do not participate in the Depository's
system or to otherwise take action with respect to such interest, may be
affected by the lack of a physical certificate evidencing such interest.
Accordingly, each Person owning a beneficial interest in a Global Note must
rely on the procedures of the Depository and, if such Person is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such Person owns its interest, to exercise any rights of a Holder
under the indenture or such Global Note. The Company, the Guarantor and the
Subordinated Guarantor understand that under existing industry practice, in the
event the Company requests any action of Holders or a Person that is an owner of
a beneficial interest in a Global Note desires to take any action that the
Depository, as the Holder of such Global Note, is entitled to take, the
Depository would authorize the Participants to take such action and the
Participant would authorize Persons owning through such Participants to take
such action or would otherwise act upon the instruction of such Persons. Neither
the Company, the Guarantor and the Subordinated Guarantor, nor the Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of Notes by the Depository, or for maintaining,
supervising or reviewing any records of the Depository relating to such Notes.
Payments with respect to the principal of, premium, if any, and interest on
any New Notes represented by a Global Note registered in the name of the
Depository or its nominee on the applicable record date will be payable by the
Trustee to or at the direction of the Depository or its nominee in its capacity
as the registered Holder of the Global Note representing such New Notes under
the Indenture. Under the terms of the Indenture, the Company, the Guarantor and
the Subordinated Guarantor and the Trustee may treat the persons in whose names
the New Notes, including the Global Notes, are registered as the owners thereof
for the purpose of receiving such payment and for any and all other purposes
whatsoever. Consequently, neither the Company, the Guarantor and the
Subordinated Guarantor nor the Trustee has or will have any responsibility or
liability for the payment of such amounts to beneficial owners of New Notes
(including principal, premium, if any, and interest), or to immediately credit
the accounts of the relevant Participants with such payment, in amounts
proportionate to their respective holdings in principal amount of beneficial
interest in the Global Note as shown on the records of the Depository. Payments
by the Participants and the Indirect Participants to the beneficial owners of
Notes will be governed by standing instructions and customary practice and will
be the responsibility of the Participants of the Indirect Participants.
GOVERNING LAW
The Indenture provides that it, the Notes and the Guarantees will be
governed by, and construed in accordance with, the laws of the State of New York
without giving effect to applicable principles of conflicts of law to the extent
that the application of the law of another jurisdiction would be required
thereby.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain of the anticipated federal income tax
consequences of an exchange of Existing Notes for New Notes and of the purchase,
ownership, and disposition of the New Notes is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the final, temporary,
and proposed regulations promulgated thereunder, and administrative rulings and
judicial decisions now in effect, all of which are subject to change (possibly
with retroactive effect) or different interpretations. This summary does not
purport to deal with all aspects of federal income taxation that may be relevant
to a particular investor, nor any tax consequences arising under the laws of any
state, locality, or foreign jurisdiction, and it is not intended to be
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations, foreign
persons, persons that hold New Notes as part of a straddle or conversion
transaction, or holders subject to the alternative minimum tax, may be subject
to special rules. In addition, the summary is limited to persons that will hold
the New Notes as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the Code. ALL INVESTORS ARE ADVISED TO
CONSULT THEIR OWN TAX ADVISERS REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN
TAX CONSEQUENCES OF THE EXCHANGE AND THE OWNERSHIP AND DISPOSITION OF NEW NOTES.
TAXATION OF HOLDERS ON EXCHANGE
Although the matter is not free from doubt, an exchange of Existing Notes
for New Notes should not be a taxable event to holders of Existing Notes and
holders should not recognize any taxable gain or loss as a result of such an
exchange. Accordingly, a holder would have the same adjusted basis and holding
period in the New Notes as it had in the Existing Notes immediately before the
exchange. Further, the tax consequences of ownership and disposition of any New
Notes should be the same as the tax consequences of ownership and disposition of
Existing Notes.
MARKET DISCOUNT
If a holder purchases a Note for an amount that is less than its principal
amount, the amount of the difference will be treated as "market discount" for
federal income tax purposes, unless such difference is less than a specified de
minimis amount. Under the market discount rules, a holder will be required to
treat any principal payment on, or any gain on the sale, exchange, retirement or
other disposition of, a Note as ordinary income to the extent of the market
discount which has not previously been included in income and is treated as
having accrued on such a Note at the time of such payment or disposition. In
addition, the holder may be required to defer, until the maturity of the Note or
its earlier disposition in a taxable transaction, the deduction of all or a
portion of the interest expense on any indebtedness incurred or continued to
purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the holder
elects to accrue on a constant interest method. A holder of a Note may elect to
include market discount in income currently as it accrues (on either a ratable
or constant interest method), in which case the rule described above regarding
deferral of interest deductions will not apply. This election to include market
discount in income currently, once made, applies to all market discount
obligations acquired on or after the first taxable year to which the election
applies and may not be revoked without the consent to the Internal Revenue
Service (the "IRS").
AMORTIZABLE BOND PREMIUM
A holder that purchases a Note for an amount in excess of the sum of its
principal amount will be considered to have purchased the Note at a "premium." A
holder generally may elect to amortize the premium over the remaining term of
the Note on a constant yield method. The amount amortized in any year will be
treated as a reduction of the holder's interest income from the Note. Bond
premium on a Note
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held by a holder that does not make such an election will decrease the gain or
increase the loss otherwise recognized on disposition of the Note. The election
to amortize premium on a constant yield method once made applies to all debt
obligations held or subsequently acquired by the electing holder on or after the
first day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A holder's tax basis in a Note will, in general, be the holder's cost
therefor, increased by market discount previously included in income by the
holder and reduced by any amortized premium. Upon the sale, exchange or
retirement of a Note, a holder will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange or retirement
(less any accrued interest, which will be taxable as such) and the adjusted tax
basis of the Note. Except as described above with respect to market discount,
such gain or loss will be capital gain or loss and will be long-term capital
gain or loss if at the time of sale, exchange or retirement the Note has been
held for more than one year. Under current law, long-term capital gains of
individuals are, under certain circumstances, taxed at lower rates than items of
ordinary income. The deductibility of capital losses is subject to limitations.
BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on Notes and to the proceeds of
sale of a Note made to holders other than certain exempt recipients (such as
corporations). A 31% backup withholding tax will apply to such payments if the
holder fails to provide a taxpayer identification number or certification of
foreign or other exempt status or fails to report in full dividend and interest
income.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
THE FOREGOING SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES TO
HOLDERS DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO A PARTICULAR HOLDER OF NOTES IN LIGHT OF HIS PARTICULAR
CIRCUMSTANCES AND INCOME TAX SITUATION. EACH HOLDER OF NOTES SHOULD CONSULT SUCH
HOLDER'S TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE
OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, OR SUBSEQUENT VERSIONS THEREOF.
ERISA CONSIDERATIONS
Sections 406 and 407 of the Employee Reitrement Income Security Act of 1974,
as amended ("ERISA"), and Section 4975 of the Code prohibit certain employee
benefit plans, individual retirement accounts, individual retirement annuities,
and employee annuity plans ("Plans") from engaging in certain transactions with
persons who, with respect to such Plan, are "parties in interest" under ERISA or
"disqualified persons" under the Code. A violation of these "prohibited
transactions" rules may generate excise taxes under the Code and other
liabilities under ERISA for such persons. Possible violations of the prohibited
transaction rules occur if the Notes are purchased with the assets of any Plan
if the Company or any of its affiliates is a party in interest or disqualified
person with respect to such Plan, unless such acquisition is subject to a
statutory or administrative exemption.
The foregoing discussion is general in nature and is not intended to be
all-inclusive. Any fiduciary of a Plan considering the purchase of the Notes
should consult its legal advisors regarding the consequences of such purchases
under ERISA and the Code. If the Plan is not subject to ERISA, the fiduciary
should consult its legal advisors regarding the consequences of any state law or
Code considerations.
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PLAN OF DISTRIBUTION
Based on certain no action letters issued by the staff of the commission to
third parties in unrelated transactions, the Company believes that New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any holder who is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or (ii) any broker-dealer that purchases Notes from the Company to resell
pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other
available exemption) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of the holder's business and such holders have
no arrangement or understanding with any person to participate in a distribution
of such New Notes and are not participating in, and do not intend to participate
in, the distribution of such New Notes. In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes may not
be offered or sold unless they have been registered or qualified for sale in
such jurisdiction or an exemption from registration or qualification is
available and complied with. The Company has agreed, pursuant to the
Registration Rights Agreement and subject to certain specified limitations
therein, to register to qualify the New Notes for offer or sale under the
securities or blue sky laws of such jurisdictions as any holder of the Notes
reasonably request in writing.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Existing Notes
where such Existing Notes were acquired as a result of market-making activities
or other trading activities. The Company, Guarantor and Subordinated Guarantor
have agreed that, for a period of 120 days after the Expiration Date, they will
make this Prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale.
The Company, the Guarantor and the Subordinated Guarantor will not receive
any proceeds from any sale of New Notes by broker-dealers. New Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market in
negotiated transactions, through the writing of options on the New Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such New Notes.
Any broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 120 days after the close of the Exchange Offer the Company,
the Guarantor and the Subordinated Guarantor will promptly send additional
copies of this Prospectus and any amendment or supplement to this Prospectus to
any broker-dealer that requests such documents in the Letter of Transmittal. The
Company, the Guarantor and the Subordinated Guarantor have agreed to pay all
expenses incident to the Exchange Offer other than commissions or concessions of
any brokers or dealers and will indemnify the holders of the Existing Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
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INDEPENDENT AUDITORS
The financial statements of the Company as of December 31, 1995 and 1996 and
for the years then ended, included in the Prospectus, have been audited by Ernst
& Young LLP, independent auditors, as stated in their report appearing herein.
The financial statements of the Company for the year ended December 31, 1994,
included in the Prospectus, have been audited by KPMG Peat Marwick LLP,
independent auditors, as stated in their report appearing herein.
LEGAL MATTERS
The validity of the New Notes, the Guarantees and the Subordinated Guarantee
offered hereby will be passed upon for the Company, the Guarantor and the
Subordinated Guarantor by Paul, Weiss, Rifkind, Wharton & Garrison, New York,
New York. Certain matters with respect to the laws of New Jersey and Maryland
will be passed upon for the Company and the Guarantor by Piper & Marbury L.L.P.,
Baltimore, Maryland.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under "Prospectus Summary," "The Recapitalization," "Use
of Proceeds," "Selected Historical Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business" and
elsewhere in this Prospectus constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, levels of
activity, performance or achievements of the Company, or industry results, to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: substantial leverage and ability
to service debt; changing market trends in the mobile office industry; general
economic and business conditions including a prolonged or substantial recession;
the ability of the Company to implement its business and growth strategy and
maintain and enhance its competitive strengths; the ability to finance fleet and
branch expansion, locate and finance acquisitions, and integrate recently
acquired businesses into the Company; the ability of the Company to obtain
financing for general corporate purposes; competition; availability of key
personnel; industry over capacity; and changes in, or the failure to comply
with, government regulations. See "Risk Factors." As a result of the foregoing
and other factors, no assurance can be given as to future results, levels of
activity and achievements and neither the Company nor any other person assumes
responsibility for the accuracy and completeness of these forward-looking
statements.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Reports of Independent Auditors............................................................................ F-2
Consolidated Balance Sheets at December 31, 1995, 1996 and
March 31, 1997 (unaudited)............................................................................... F-4
Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and 1996 and for the
three months ended March 31, 1997 and 1996 (unaudited)................................................... F-5
Consolidated Statements of Changes in Stockholder's Equity for the years ended December 31, 1994, 1995 and
1996 and for the three months ended March 31, 1997 (unaudited)........................................... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and for the
three months ended March 31, 1996 and 1997 (unaudited)................................................... F-7
Notes to Consolidated Financial Statements................................................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.)
We have audited the accompanying consolidated balance sheets of Williams
Scotsman, Inc. (formerly The Scotsman Group, Inc.) and subsidiary as of December
31, 1995 and 1996, and the related consolidated statements of operations,
stockholder's equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1995 and 1996 consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Williams Scotsman, Inc. (formerly The Scotsman Group, Inc.) and subsidiary as of
December 31, 1995 and 1996, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Baltimore, Maryland
January 24, 1997,
except for Note 10, as
to which the date is
May 22, 1997
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.):
We have audited the accompanying consolidated statements of operations,
changes in stockholder's equity and cash flows of Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and subsidiary (Scotsman) for the year ended
December 31, 1994. These consolidated financial statements are the
responsibility of Scotsman's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Williams Scotsman, Inc. (formerly The Scotsman Group, Inc.) and
subsidiary for the year ended December 31, 1994 in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Baltimore, Maryland
March 10, 1995
F-3
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- MARCH 31,
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash, and temporary investments of $263 in 1995, $13 in 1996 and $13 at
March 31, 1997............................................................ $ 679 $ 351 $ 312
Trade accounts receivable, net of allowance for doubtful accounts of $447 in
1995, $258 in 1996 and $467 at March 31, 1997 (Note 3).................... 17,372 23,145 24,412
Prepaid expenses and other current assets................................... 7,048 9,295 10,751
Rental equipment, net of accumulated depreciation of $40,162 in 1995,
$67,520 in 1996 and $75,874 at March 31, 1997 (Note 3).................... 324,207 356,183 365,993
Property, plant and equipment, net (Notes 2 & 3)............................ 21,088 29,032 31,140
Deferred financing costs, net............................................... 7,830 5,494 4,886
Other assets................................................................ 5,455 5,197 4,930
---------- ---------- -----------
$ 383,679 $ 428,697 $ 442,424
---------- ---------- -----------
---------- ---------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable............................................................ $ 6,667 $ 9,826 $ 7,736
Accrued expenses............................................................ 8,114 8,924 14,225
Rents billed in advance..................................................... 9,809 10,621 10,699
Long-term debt (Note 3)..................................................... 242,695 268,753 275,262
Deferred compensation (Note 7).............................................. 1,900 3,300 3,575
Deferred income taxes (Note 5).............................................. 51,986 57,640 59,026
---------- ---------- -----------
Total liabilities......................................................... 321,171 359,064 370,523
---------- ---------- -----------
Stockholder's equity:
Common stock, $.01 par value. Authorized 10,000,000 shares; issued and
outstanding 3,320,000 shares............................................ 33 33 33
Additional paid-in capital................................................ 56,844 56,844 56,844
Retained earnings......................................................... 5,631 12,756 15,024
---------- ---------- -----------
Total stockholder's equity.................................................. 62,508 69,633 71,901
---------- ---------- -----------
$ 383,679 $ 428,697 $ 442,424
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
---------- ---------- ---------- --------- ---------
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Leasing................................................ $ 79,342 $ 96,498 $ 116,769 $ 26,515 $ 31,239
Sales of new units..................................... 22,290 23,126 28,042 6,009 8,545
Delivery and installation.............................. 26,511 28,162 32,767 6,503 8,173
Other.................................................. 5,832 10,734 17,564 3,617 4,759
---------- ---------- ---------- --------- ---------
Total revenues................................... 133,975 158,520 195,142 42,644 52,716
---------- ---------- ---------- --------- ---------
COST OF SALES AND SERVICES
Leasing:
Depreciation and amortization........................ 18,804 23,417 30,588 7,071 7,942
Other direct leasing costs........................... 20,578 23,103 26,647 5,998 7,039
Sales of new units..................................... 19,436 19,273 23,043 5,040 7,198
Delivery and installation.............................. 21,569 22,048 25,247 5,121 6,125
Other.................................................. 1,547 2,626 3,974 647 1,243
---------- ---------- ---------- --------- ---------
Total cost of sales and services................. 81,934 90,467 109,499 23,877 29,547
---------- ---------- ---------- --------- ---------
Gross profit..................................... 52,041 68,053 85,643 18,767 23,169
---------- ---------- ---------- --------- ---------
Selling, general and administrative expenses........... 30,215 36,295 42,260 10,864 12,118
Other depreciation and amortization.................... 1,349 1,851 2,411 555 612
Interest, including amortization of deferred financing
costs of $1,439, $1,601, $2,449, $606 and $633....... 18,705 22,485 25,797 6,263 6,747
---------- ---------- ---------- --------- ---------
Total operating expenses......................... 50,269 60,631 70,468 17,682 19,477
---------- ---------- ---------- --------- ---------
Income before income taxes....................... 1,772 7,422 15,175 1,085 3,692
Income tax expense (Note 5)............................ 700 2,863 5,980 418 1,424
---------- ---------- ---------- --------- ---------
Net income....................................... $ 1,072 $ 4,559 $ 9,195 $ 667 $ 2,268
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
Net income per common share...................... $ 0.32 $ 1.37 $ 2.77 $ .20 $ .68
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------ PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
----------- ----------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Balance at December 31, 1993............................. 3,320 $ 33 $ 56,844 $ -- $ 56,877
Net income............................................... -- -- -- 1,072 1,072
----- --- ------- --------- ---------
Balance at December 31, 1994............................. 3,320 33 56,844 1,072 57,949
Net income............................................... -- -- -- 4,559 4,559
----- --- ------- --------- ---------
Balance at December 31, 1995............................. 3,320 33 56,844 5,631 62,508
Dividends--$.62 per share................................ -- -- -- (2,070) (2,070)
Net income............................................... -- -- -- 9,195 9,195
----- --- ------- --------- ---------
Balance at December 31, 1996............................. 3,320 33 56,844 12,756 69,633
----- --- ------- --------- ---------
Net income (unaudited)................................... -- -- -- 2,268 2,268
----- --- ------- --------- ---------
Balance at March 31, 1997 (unaudited).................... 3,320 $ 33 $ 56,844 $ 15,024 $ 71,901
----- --- ------- --------- ---------
----- --- ------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
----------- ----------- ----------- ---------- ----------
<CAPTION>
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................ $ 1,072 $ 4,559 $ 9,195 $ 667 $ 2,268
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 21,592 26,869 35,448 8,232 9,188
Provision for bad debts......................... 1,207 1,509 2,209 424 680
Deferred income tax expense..................... 600 2,763 5,654 393 1,386
Provision for deferred compensation............. 525 1,375 1,400 275 275
Gain on sale of rental equipment................ (1,620) (2,080) (2,618) (521) (655)
Increase in net trade accounts receivable....... (2,072) (4) (7,982) (1,370) (1,947)
Other........................................... 513 (1,087) 2,721 3,085 2,082
----------- ----------- ----------- ---------- ----------
Net cash provided by operating activities... 21,817 33,904 46,027 11,185 13,277
----------- ----------- ----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption of certificates of deposit............. 1,267 1,255 250 250 --
Rental equipment additions........................ (45,174) (72,096) (72,277) (7,674) (20,318)
Proceeds from sales of rental equipment........... 8,045 9,733 12,331 2,596 3,221
Purchase of property, plant and equipment, net.... (1,286) (6,871) (10,284) (1,464) (2,703)
Net assets of business acquired, including rental
equipment of $16,648 (Note 1)................... (9,538) -- -- -- --
----------- ----------- ----------- ---------- ----------
Net cash used in investing activities....... $ (46,686) $ (67,979) $ (69,980) $ (6,292) $ (19,800)
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt...................... $ 173,401 $ 204,389 $ 219,420 $ 38,903 $ 59,824
Repayment of long-term debt....................... (148,968) (168,040) (193,362) (43,260) (53,315)
Increase in deferred financing costs.............. (281) (2,555) (113) -- (25)
Cash dividends paid............................... -- -- (2,070) (600) --
----------- ----------- ----------- ---------- ----------
Net cash provided by (used in) financing
activities...................................... 24,152 33,794 23,875 (4,957) 6,484
----------- ----------- ----------- ---------- ----------
Net decrease in cash........................ (717) (281) (78) (64) (39)
Cash at beginning of period....................... 1,414 697 416 416 338
----------- ----------- ----------- ---------- ----------
Cash at end of period............................. $ 697 $ 416 $ 338 $ 352 $ 299
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
Supplemental cash flow information:
Cash paid for (received from) income taxes...... $ (453) $ (5) $ 110 $ 61 $ 93
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
Cash paid for interest.......................... $ 17,086 $ 21,068 $ 23,888 $ 1,789 $ 2,197
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. ORGANIZATION AND BASIS OF PRESENTATION
Williams Scotsman, Inc. (the Company) is a wholly-owned subsidiary of
Scotsman Holdings, Inc. (Holdings), a corporation which was organized in
November 1993 for the purpose of acquiring the Company. The Company changed its
name from The Scotsman Group, Inc. to Williams Scotsman, Inc. effective January
1, 1997.
The operations of the Company consist of the leasing and sale of mobile
offices and, to a lesser extent, modular structures (equipment) and their
delivery and installation. Leasing operations account for a majority of the
Company's revenues and gross profits and are primarily comprised of the leasing
of mobile office and storage units and the sale of units from the Company's
lease fleet.
1994 ACQUISITION
On September 14, 1994, the Company purchased all of the outstanding shares
of common stock of Mobile Holdings, Inc. (Mobile) for an aggregate cost of
$9,538. The acquisition, which was effective as of August 31, 1994, was
accounted for under the purchase method of accounting and, accordingly, the
total cost has been allocated to the assets acquired and liabilities assumed
based on their estimated fair values as follows:
<TABLE>
<S> <C>
Rental equipment................................................... $ 16,648
Property, plant and equipment...................................... 2,055
Long-term debt assumed............................................. (5,505)
Deferred income taxes recorded..................................... (4,313)
Other net liabilities assumed...................................... (702)
---------
Net assets acquired................................................ 8,183
---------
Excess of cost over net assets acquired (goodwill)................. 1,355
---------
Total cost......................................................... $ 9,538
---------
---------
</TABLE>
The long-term debt was repaid subsequent to the acquisition. A deferred
income tax liability was recorded for the tax effect of differences between the
bases of Mobile's assets and liabilities for tax and financial reporting
purposes.
Unaudited pro forma results of operations for the year ended December 31,
1994 assuming that the acquisition of Mobile had occurred on January 1, 1994,
are presented below:
<TABLE>
<S> <C>
Total revenue..................................................... $ 140,365
Net income........................................................ 1,242
Net income per share.............................................. $ 0.37
</TABLE>
The pro forma results include the historical accounts of the Company and the
historical accounts for the acquired business adjusted to reflect (1)
depreciation and amortization of the acquired identifiable tangible and
intangible assets based on the new cost basis of the acquisition, (2) interest
on acquisition financing and (3) the elimination of non-recurring expenses. The
pro forma results of operations are not necessarily indicative of actual results
which might have occurred had the operations and management teams of the Company
and the acquired company been combined in prior years.
F-8
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (CONTINUED)
1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary. Significant intercompany accounts
and transactions have been eliminated in consolidation.
(A) USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
(B) LEASING OPERATIONS
Equipment is leased generally under operating leases and, occasionally, under
sales-type lease arrangements. Operating lease terms generally range from 3
months to 36 months, and contractually averaged approximately 12 months at
December 31, 1996. Rents billed in advance are initially deferred and
recognized as revenue over the term of the operating leases. Rental equipment
is depreciated by the straight-line method using an estimated economic useful
life of 10 to 20 years and an estimated residual value of either $1,000 or
20%. Costs of improvements and betterments are capitalized, whereas costs of
replacement items, repairs and maintenance are expensed as incurred. Costs
incurred for equipment to meet particular lease specifications are
capitalized and depreciated over the lease term. However, costs aggregating
less than $1,000 per unit are generally expensed as incurred.
(C) DEFERRED FINANCING COSTS
Costs of obtaining long-term debt are amortized over the term of the debt by
the interest method.
(D) PROPERTY, PLANT AND EQUIPMENT
Depreciation is computed by the straight-line method over estimated useful
lives ranging from 20 to 40 years for buildings and improvements and 3 to 12
years for furniture and equipment. Maintenance and repairs are charged to
expense as incurred.
(E) INCOME TAXES
Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date. The Company is included in the consolidated
federal income
F-9
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (CONTINUED)
1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
tax return of Holdings. Income taxes are included in the accompanying
financial statements on a separate return basis.
(F) EARNINGS PER SHARE
Earnings per share is computed based on weighted average number of common
shares outstanding of 3,320,000 shares for 1994, 1995, and 1996.
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1995 1996
---------- ----------
Land.................................................................. $ 5,018 $ 6,889
Buildings and improvements............................................ 11,052 12,820
Furniture and equipment............................................... 7,428 13,870
---------- ----------
23,498 33,579
Less accumulated depreciation......................................... 2,410 4,547
---------- ----------
Net property, plant and equipment..................................... $ 21,088 $ 29,032
---------- ----------
---------- ----------
</TABLE>
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1995 1996
---------- ----------
Borrowings under revolving credit facility............................ $ 77,695 $ 103,753
9.5% senior secured notes............................................. 165,000 165,000
---------- ----------
$ 242,695 $ 268,753
---------- ----------
---------- ----------
</TABLE>
The loan agreement for the revolving credit facility, as amended, provides
for a $120,000 revolving credit facility which matures December 16, 1997 and can
be extended for an additional year at the option of the Company. Interest is
payable at a rate of either prime plus .25% or LIBOR plus 2.50% at the option of
the Company. The weighted average interest rate was 8.18% at December 31, 1996.
Borrowings under the credit facility are secured by a first priority lien on and
security interest in the Company's rental equipment, accounts receivable and
property, plant and equipment. In addition to the restrictions and limitations
described under the note agreement, the credit facility loan agreement requires
compliance with certain financial covenants including maintenance of minimum net
worth, working capital, number of units in the lease fleet and fleet
utilization.
The 9.5% senior secured notes are due December 15, 2000 with interest
payable semi-annually on June 15 and December 15 of each year. On or after
December 15, 1997, the notes are redeemable at the
F-10
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (CONTINUED)
3. LONG-TERM DEBT (CONTINUED)
option of the Company, at redemption prices of 103.167% and 101.583% during the
12 month periods beginning December 15, 1997 and 1998, respectively, and 100%
thereafter (subject to price adjustment under certain events). Upon the
occurrence of a change of control, the holders of the notes have the right to
require the Company to repurchase the notes at a purchase price of 101%. The
notes are secured by a second priority lien on and security interest in the
collateral under the revolving credit facility loan agreement. The note
agreement limits or restricts the Company's ability to incur additional
indebtedness, issue preferred stock, make distributions of capital in an amount
not to exceed 50% of accumulated earnings, dispose of property, incur liens on
property and merge with or acquire other companies.
At December 31, 1995 and 1996, the fair value of long-term debt was
approximately $246,000 and $274,000, respectively, based on the quoted market
price of the senior secured notes and the book value of the revolving credit
facility, which is an adjustable rate note.
4. OBLIGATIONS OF PARENT COMPANY
On March 2, 1994, Holdings completed a private placement of 21,250
securities consisting of $21,250 principal amount of 11% Series A senior notes
due March 1, 2004 and 173,648 shares of Holdings common stock. The common stock
was assigned a value of $2,042 based on a per share price of $11.76. The
remaining proceeds of $19,208 were assigned to the notes. The discount on the
notes of $2,042 is being accreted over the maturity period. The proceeds of this
offering were used to retire unsecured convertible notes payable to a
stockholder of Holdings of $20,000. Interest on the 11% notes is payable
semi-annually in additional notes or cash through March 1, 1999, and payable in
cash thereafter. Holdings elected to pay all interest payments due under the
notes in additional notes payable aggregating $6,514. These notes bear interest
at 11% and are due March 1, 2004. On or after March 1, 1999, the notes are
redeemable at the option of Holdings at redemption prices of 104.125%, 102.750%
and 101.375%, during the twelve month periods beginning March 1, 1999, 2000 and
2001 respectively, and 100% thereafter. Upon the occurrence of a change in
control, the holders of the notes have the right to require Holdings to
repurchase the notes at a purchase price of 101%.
Effective, August 12, 1994, Holdings completed the registration of 11%
Series B notes. Such notes have been exchanged for all of the outstanding 11%
Series A senior notes. The form and terms of the Series B notes are identical to
the form and terms of the Series A notes except that the Series B notes have
been registered under the Securities Act of 1933, as amended, and do not bear
any legends restricting the transfer thereof.
The Holdings notes are not secured by the Company's assets or common stock
and the Company has no plans to assume or otherwise become liable with respect
to the notes.
F-11
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (CONTINUED)
5. INCOME TAXES
Deferred income taxes related to temporary differences between the tax bases
of assets and liabilities and the respective amounts reported in the financial
statements are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Cost basis in excess of tax basis of assets and accelerated tax
depreciation:
Rental equipment.................................................... $ 86,718 $ 94,050
Property, plant and equipment....................................... 983 983
--------- ---------
Total deferred tax liabilities.................................. 87,701 95,033
--------- ---------
Deferred tax assets:
Allowance for doubtful accounts......................................... 177 100
Rents billed in advance................................................. 2,759 3,317
Pre-acquisition separate company net operating loss carryovers.......... 26,273 25,816
Net operating loss carryovers........................................... 2,728 3,547
Alternative minimum tax credit carryovers............................... 1,296 1,465
Investment tax credit carryovers........................................ 860 860
Other................................................................... 1,622 2,288
--------- ---------
Total deferred tax assets....................................... 35,715 37,393
--------- ---------
Net deferred tax liabilities............................................ $ 51,986 $ 57,640
--------- ---------
--------- ---------
</TABLE>
In December 1993, Holdings purchased all of the issued and outstanding
shares of common stock of the Company. For financial statement purposes, the
acquisition was accounted for under the purchase method of accounting by
Holdings, and the Company restated its balance sheet to "push down" the effects
of the purchase accounting adjustments. In connection with the acquisition of
the Company, the tax bases of the assets and liabilities of the Company prior to
the acquisition are carried over and continue as the tax bases of the Company.
As a result, the Company recorded deferred income tax liabilities of $13,455
representing the tax effect of the differences between such tax bases and the
related amounts recorded as the cost of the acquisition for financial reporting
purposes.
At December 31, 1996, the Company had net operating loss carryovers
available for federal income tax purposes of approximately $76,120, including
pre-acquisition separate company loss carryovers available for federal income
tax purposes of approximately $67,315 and investment tax credit carryovers of
approximately $860. These carryovers expire at various dates from 2000 to 2009.
Also, alternative minimum tax credit carryovers of approximately $1,465 are
available without expiration limitations. The annual utilization of the
preacquisition net operating loss carryovers is subject to certain limitations
under the Internal Revenue Code.
F-12
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (CONTINUED)
5. INCOME TAXES (CONTINUED)
The income tax expense consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Current............................................................ $ 100 $ 100 $ 326
Deferred........................................................... 600 2,763 5,654
--------- --------- ---------
$ 700 $ 2,863 $ 5,980
--------- --------- ---------
--------- --------- ---------
Federal............................................................ $ 600 $ 2,453 $ 5,145
State.............................................................. 100 408 835
--------- --------- ---------
$ 700 $ 2,863 $ 5,980
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision for income taxes is reconciled to the amount computed by
applying the Federal corporate tax rate of 34% to income before income taxes as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Income tax at statutory rate....................................... $ 602 $ 2,524 $ 5,311
State income taxes, net of federal tax benefit..................... 66 308 543
Other.............................................................. 32 31 126
--------- --------- ---------
$ 700 $ 2,863 $ 5,980
--------- --------- ---------
--------- --------- ---------
</TABLE>
6. COMMITMENTS
The Company is obligated under noncancellable operating leases of certain
equipment, vehicles and parcels of land. At December 31, 1996 approximate future
minimum rental payments are as follows:
<TABLE>
<S> <C>
1997................................................................ $ 1,525
1998................................................................ 883
1999................................................................ 758
2000................................................................ 495
2001 and thereafter................................................. 126
---------
$ 3,787
---------
---------
</TABLE>
Rent expense was $2,288 in 1994, $2,605 in 1995 and $2,875 in 1996.
7. EMPLOYEE BENEFIT PLANS
The Company has adopted a defined contribution plan (the 401(k) Plan) which
is intended to satisfy the tax qualification requirements of Sections 401(a),
401(k), and 401(m) of the Internal Revenue Code of 1986 (the Code). The 401(k)
Plan covers substantially all employees and permits participants to contribute
the lessor of (i) 15% of their annual compensation from the Company and (ii) the
dollar limit described in
F-13
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (CONTINUED)
7. EMPLOYEE BENEFIT PLANS (CONTINUED)
Section 402(g) of the Code ($9,500 in 1996). All amounts under this salary
reduction feature are fully vested.
The 401(k) Plan has a "matching" contribution feature under which the
Company may contribute a percentage of the amount deferred by each participant.
The Plan also has a "profit sharing" feature, under which the Company may
contribute, at its discretion, an additional amount allocable to the accounts of
active participants meeting the aforementioned eligibility requirements.
Contributions by the Company to the 401(k) Plan were approximately $54 in
1994, $129 in 1995, and $243 in 1996.
The Company recorded $925, $1,775, and $1,800 of management incentive
compensation in 1994, 1995, and 1996 respectively, including deferred
compensation of $525 in 1994, $1,375 in 1995 and $1,400 in 1996, in connection
with the Incentive Compensation Plan (the Plan). The Plan covers approximately
40 management members of the Company. Under the terms of the Plan, incentive
compensation is payable annually to members of the Plan, based upon the Company
achieving certain earnings before interest, income taxes, provision for deferred
compensation, depreciation and amortization (EBITDA) targets. In addition, if
certain cumulative EBITDA targets are met over the five year period ending
December 31, 1998, additional compensation will be payable in 1999.
In March 1995, the Company adopted a stock option plan for certain key
employees. Under the plan, employees may be granted options to purchase up to a
total of 7.5% of Holdings' outstanding common stock. The options are granted
with an exercise price equal to the fair value of the shares as of the date of
grant. The options vest ratably over 5 years and expire 10 years from the date
of the grant. The Company accounts for stock option grants in accordance with
APB Opinion No. 25, "Accounting for Stock Issued to Employees", and,
accordingly, recognizes no compensation expense for the stock option grants.
Pro forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," and has been determined as if the Company had
accounted for its employee stock options under the minimum value method of that
Statement. The minimum value for these options was estimated at the date of
grant by calculating the excess of the fair value of the stock at the date of
grant over the present value of both the exercise price and the expected
dividend payments, each discounted at the risk free rate, over the expected
exercise life of the option. The following weighted average assumptions were
used for 1995 and 1996: risk-free interest rate of 6%; weighted average expected
life of the options of 5 years; and no dividends.
For purposes of pro forma disclosures, the estimated minimum value of the
options is amortized to expense over the options' vesting period. Note that the
effects of applying SFAS 123 for pro forma disclosure in the current year are
not necessarily representative of the effects on pro forma net income for future
years. The Company's pro forma information follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Pro forma net income....................................................... $ 4,543 $ 9,076
Pro forma earnings per share............................................... $ 1.37 $ 2.73
</TABLE>
F-14
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (CONTINUED)
7. EMPLOYEE BENEFIT PLANS (CONTINUED)
A summary of stock option activity and related information for the years
ended December 31 follows:
<TABLE>
<CAPTION>
1995 1996
---------------------- ------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Beginning balance....................................................... -- -- 38,200 $ 13.78
Granted................................................................. 38,200 $ 13.78 115,050 28.80
Exercised............................................................... -- -- -- --
Forfeited............................................................... -- -- (2,200) 20.61
--------- ----------- ----------- -----------
Ending balance.......................................................... 38,200 $ 13.78 151,050 $ 25.12
Exercisable at end of year.............................................. 7,640 $ 13.78 37,610 $ 22.89
Weighted average minimum value of options granted during year........... $ 3.48 $ 7.28
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 are $13.78
and $28.80. The weighted-average remaining contractual life of those options is
8.75 years.
8. RELATED PARTY TRANSACTIONS
In connection with the acquisition of the Company by Holdings, the Company
entered into a management agreement with a subsidiary of the principal
stockholder of Holdings. The agreement provides that the Company will pay an
annual fee of up to $250 in consideration for certain management, consulting and
financial advisory services. The Company incurred expenses of $250 for these
services in 1994, 1995 and 1996.
9. INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all the
information and footnotes required for complete financial statements. In the
opinion of management, all adjustments and reclassifications considered
necessary for a fair presentation have been included. Operating results for the
three-month period ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997. The
accompanying unaudited interim consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto for
the years ended December 31, 1995, and 1996.
10. SUBSEQUENT EVENTS
Pursuant to a recapitalization agreement, on May 22, 1997, Holdings (i)
repurchased 3,210,679 shares of its outstanding common stock for an aggregate of
approximately $293.8 million in cash and approximately $21.8 million in
promissory notes and (ii) issued 1,475,410 shares of common stock for an
aggregate of approximately $135.0 million (or a price of $91.50 per share) in
cash. In related transactions on the same
F-15
<PAGE>
WILLIAMS SCOTSMAN, INC.
(FORMERLY THE SCOTSMAN GROUP, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (CONTINUED)
10. SUBSEQUENT EVENTS (CONTINUED)
date, (i) Holdings purchased all of its outstanding Series B 11% Senior Notes
due 2004 ($29.2 million aggregate principal amount) for approximately $32.2
million, including accrued interest and fees, (ii) the Company purchased $164.7
million aggregate principal amount of its 9 1/2% Senior Secured Notes due 2000
for approximately $179.8 million, including accrued interest and fees and (iii),
the Company repaid all of its outstanding indebtedness ($119.0 million) under
its prior credit facility.
In connection with the recapitalization, (i) the Company accelerated $6.2
million of deferred compensation under its long term incentive plan, (ii) all
outstanding stock options under Holding's employee stock option plan vested and
became immediately exercisable and (iii) the Company paid $2.5 million to cancel
a portion of the outstanding stock options. Accordingly, in the second quarter
of 1997, the Company recognized $2.4 million in connection with the acceleration
of deferred compensation, $2.5 million in connection with the cancellation of
the stock options, and recognized an extraordinary loss on debt extinguishment
of $13.4 million.
In order to finance the recapitalization transaction, on May 22, 1997, the
Company issued $400 million in 9 7/8% Senior Notes due 2007 (the "Senior
Notes"). Additionally, the Company entered into a $300 million revolving bank
facility (the "New Credit Facility") and borrowed approximately $109.1 million
thereunder (including approximately $2.8 million the Company expects to borrow
within the next sixty days to fund expenses related to the recapitalization).
The Company's wholly-owned subsidiary, Mobile Field Office Company ("MFO") acts
as a full, unconditional (subject to certain bankruptcy limitations) and joint
and several guarantor of the Senior Notes. However, as of April 30, 1997
substantially all of MFO's assets, consisting primarily of mobile office units,
were transferred to the Company, and MFO ceased operations which were limited to
leasing its mobile office units to the Company. On May 22, 1997, the Company
formed a wholly-owned special purpose subsidiary, Willscot Equipment, LLC
("Willscot") and contributed approximately $268,987 in mobile office units to
Willscot. Willscot is a guarantor of the New Credit Facility and acts as a full,
unconditional (subject to certain bankruptcy limitations) and joint and several
subordinated guarantor of the Senior Notes. The operations of Willscot are
limited to the leasing of its mobile office units to the Company under a master
lease and issuing the guarantee.
F-16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN
THOSE TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF NOR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 15
Use of Proceeds........................................................... 20
Capitalization............................................................ 20
Selected Historical Financial Data........................................ 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 23
The Exchange Offer........................................................ 30
Business.................................................................. 38
Management................................................................ 47
Certain Transactions...................................................... 52
Security Ownership of Certain Beneficial Owners and Management............ 55
Description of the New Credit Facility.................................... 57
Description of the Notes.................................................. 58
Certain Federal Income Tax Considerations................................. 94
ERISA Considerations...................................................... 95
Plan of Distribution...................................................... 96
Independent Auditors...................................................... 97
Legal Matters............................................................. 97
Special Note Regarding Forward-Looking Statements......................... 97
Index to Consolidated Financial Statements................................ F-1
</TABLE>
----------------------------
PROSPECTUS
----------------------
$400,000,000
[LOGO]
WILLIAMS SCOTSMAN, INC.
OFFER TO EXCHANGE $400,000,000 OF ITS 9 7/8% SENIOR NOTES DUE 2007 WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT FOR $400,000,000 OF ITS OUTSTANDING
9 7/8% SENIOR NOTES DUE 2007
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Williams Scotsman, Inc. (the "Company") is a Maryland corporation. Section
2-418 of the Maryland General Corporation law contains detailed provisions on
indemnification of directors and officers of a Maryland corporation. In general,
indemnification is permitted against judgements, penalties, fines, settlements,
and reasonable expenses actually incurred in connection with a proceeding if a
director acted in good faith, reasonably believed his conduct to be in the best
interests of the corporation, and, in the case of a criminal proceeding, had no
reasonable cause to believe that his conduct was unlawful. In addition,
indemnification may, unless limited by the corporation's charter, be required
against reasonable expenses incurred by a director in connection with a
proceeding as to which is defense was successful, on the merits or otherwise.
Indemnification may be required under certain other circumstances as well, upon
application to a court of appropriate jurisdiction. Unless limited by a
corporation's charter, officers are required to be indemnified to the same
extent that directors are required to be indemnified. Additionally, officers are
permitted to be indemnified to the same extent that directors are permitted to
be indemnified.
The Company's Articles of Incorporation, as amended, provides in Article
EIGHT that the Corporation shall indemnify its directors and officers to the
full extent permitted by the Laws of the State of Maryland.
Mobile Field Office Company is a New Jersey corporation. Section 14A3-5 of
the New Jersey Business Corporation Act permits indemnification of officers and
directors under certain circumstances. In general, indemnification of
liabilities and expenses is permitted in connection with any proceeding
involving the officer or director if such officer or director acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and with respect to any criminal proceeding, such
officer or director had no reasonable cause to believe his conduct was unlawful.
Willscot Equipment, LLC (the "Subordinated Guarantor") is a Delaware limited
liability company. Section 18-108 of the Delaware Limited Liability Company Act
(the "LLCA") grants a Delaware limited liability company the power, subject to
such standards and restrictions, if any, as are set forth in its limited
liability company agreement to indemnify and hold harmless any member or manager
or other person from and against any and all claims and demands whatsoever.
Section 8.3 of the Subordinated Guarantor's limited liability company
agreement provides that the Subordinated Guarantor shall indemnify any member,
any executive committee member, any affiliate of the member or executive
committee member or any shareholders, partners, members, employees,
representatives or agents of the member or executive committee member or their
respective affiliates, any officer or any employee or agent of the Subordinated
Guarantor (each a "Covered Person") who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
brought by or against the Subordinated Guarantor or otherwise, whether civil,
criminal, administrative or investigative, including, without limitation, any
action by or in the right of the Subordinated Guarantor to procure a judgment in
its favor, by reason of the fact that such Covered Person is or was the member,
executive committee member, officer, employee or agent of the Subordinated
Guarantor, or that such Covered Person is or was serving at the request of the
Subordinated Guarantor as a partner, member, director, officer, trustee,
employee or agent of another person, against all expenses, including attorneys'
fees and disbursements, judgments, fines and amounts paid in settlement actually
and reasonably incurred by such Covered Person in connection with such action,
suit or proceeding. Notwithstanding the foregoing, no indemnification shall be
provided to or on behalf of any Covered Person if a judgment or other form of
adjudication adverse to such Covered Person establishes that his or her acts
constituted intentional misconduct or gross negligence.
II-1
<PAGE>
Pursuant to Section 7 of the registration rights agreements relating to the
Existing Notes, the holders of such securities have agreed to indemnify the
directors, officers and controlling persons of the registrant against certain
liabilities, costs and expenses that may be incurred in connection with the
registration of such securities, to the extent that such liabilities, costs and
expenses that may be incurred in connection with the registration of such
securities to the extent that such liabilities, costs and expenses arise from an
omission or untrue statement contained in information provided to the registrant
by the holders of such securities.
The Company's Directors' and Officers' Liability and Reimbursement Insurance
Policies are designed to reimburse the Company for any payments made by it
pursuant to the foregoing indemnification. The Purchase Agreements, dated as of
May 16, 1997, among the Company, the Guarantor and the Subordinated Guarantor
and the Initial Purchasers and among the Company, the Guarantor and the
Subordinated Guarantor and Oak Hill Securities Fund, L.P. ("OHSF"), contain
provisions by which the Initial Purchasers and OHSF agree to indemnify the
Company and its affiliates (including its officers, directors, employees, agents
and controlling persons) against certain liabilities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
2.1 Recapitalization Agreement, dated as of April 11, 1997. (Incorporated by reference to Exhibit 2 of
Form 8-K dated May 22, 1997.)
3.1 Certificate of Incorporation of the Company as amended. (Incorporated by reference to Exhibit 3(i) of
Form 8-K dated November 27, 1996.)
3.2 By-laws of the Company (Incorporated by reference to Exhibit 3.2 of Registration Statement on Form
S-1, Commission File No. 33-68444.)
3.3 Certificate of Incorporation of the Guarantor filed with the Secretary of State of New Jersey.*
3.4 By-laws of the Guarantor.*
3.5 Limited Liability Company Operating Agreement of the Subordinated Guarantor.*
4.1 Indenture dated as of May 15, 1997 among the Company, the Guarantor, the Subordinated Guarantor and
The Bank of New York, as trustee.*
4.2 Registration Rights Agreement, dated as of May 22, 1997, among the Company, the Guarantor, the
Subordinated Guarantor, BT Securities Corporation, Alex. Brown & Sons Incorporated and Donaldson,
Lufkin & Jenrette Securities Corporation.*
4.3 Registration Rights Agreement, dated as of May 22, 1997, among the Company, the Guarantor, the
Subordinated Guarantor, and Oak Hill Securities Fund, L.P.*
4.4 Specimen certificate of Existing Note.*
4.5 Specimen certificate of the New Note.*
4.6 Letter to Commission regarding long-term debt.*
5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison, regarding legality of the securities being
registered.*
5.2 Opinion of Piper & Marbury L.L.P., regarding legality of the securities being registered.*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.1 Credit Agreement, dated as of May 22, 1997, by and among, the Company, Scotsman Holdings, Inc.
("Holdings"), each of the financial institutions named therein, Bankers Trust Company, as issuing
bank and BT Commercial Corporation, as agent.*
10.3 Stockholder Agreement, dated as of May 22, 1997, among Scotsman Partners, L.P., Cypress Merchant
Banking Partners, L.P., Cypress Offshore Partners, L.P., Odyssey Partners, L.P., Barry Gossett, BT
Investment Partners, Inc. and certain other stockholders.*
10.4 Second Amended and Restated Management Stockholders' and Optionholders' Agreement, dated as of May
22, 1997, among Scotsman Partners, L.P., Cypress Merchant Banking Partners, L.P., Cypress Offshore
Partners, L.P., Odyssey Partners, L.P. and certain management stockholders of Holdings.*
10.5 Scotsman Holdings, Inc. Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 10.8 of
Registration Statement on Form S-1 of Scotsman Holdings, Inc., Commission File No. 33-68444.)
10.6 Scotsman Holdings, Inc. 1994 Employee Stock Option Plan. (Incorporated by reference to Exhibit 10.11
of the Company's Form 1994 10-K for the year ended December 31, 1994.)
12.1 Statement regarding computation of ratios.*
21.1 Subsidiaries of Registrant.*
23.1 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in their opinion filed as Exhibit 5.1)*
23.2 Consent of Piper & Marbury L.L.P. (included in their opinion filed as Exhibit 5.2)*
23.3 Consent of Ernst & Young LLP.*
23.4 Consent of KPMG Peat Marwick LLP.*
24.1 Powers of Attorney (included on signature pages).*
25.1 Statement of eligibility of Trustee.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.*
* To be filed by Amendment.
</TABLE>
(B) SCHEDULES
Schedule II - Valuation and Qualifying Accounts (Incorporated by reference
to Schedule II of the Company's Form 1996 10-K for the year
ended December 31, 1996.)
ITEM 22. UNDERTAKINGS
That insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officers or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling
II-3
<PAGE>
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matters has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to theplan of
distribution not previously disclosed in the registration statement or any
material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 12 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This include information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(5) To supply by means of a post-effective amendment all information
concerning the Exchange Offer that was not the subject of and included in
the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Baltimore, Maryland, on the 3rd day
of July, 1997.
WILLIAMS SCOTSMAN, INC.
BY: /S/ GERARD E. KEEFE
-----------------------------------------
Gerard E. Keefe
Senior Vice President and
Chief Financial Officer
We, the undersigned officers and directors of Williams Scotsman, Inc.,
hereby severally constitute Gerard E. Holthaus, Gerard E. Keefe and John B. Ross
and each of them singly, our true and lawful attorneys with full power to them,
and each of them singly, to sign for us and in our names in the capacities
indicated below, any and all amendments, including post-effective amendments, to
this Registration Statement, and generally do all such things in our name and
behalf in such capacities to enable Williams Scotsman, Inc. to comply with the
applicable provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, and we hereby ratify and
confirm our signatures as they may be signed by our said attorneys, or any of
them, to any and all such amendments.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ BARRY P. GOSSETT Chairman of the Board
- ------------------------------ July 3, 1997
Barry P. Gossett
/s/ GERARD E. HOLTHAUS Chief Executive Officer
- ------------------------------ (principal executive July 3, 1997
Gerard E. Holthaus officer) and Director
/s/ GERARD E. KEEFE
- ------------------------------ July 3, 1997
Gerard E. Keefe Senior Vice President and
Chief Financial Officer
(principal financial
officer)
/s/ JAMES N. ALEXANDER Director
- ------------------------------ July 3, 1997
James N. Alexander
/s/ DANIEL L. DOCTOROFF Director
- ------------------------------ July 3, 1997
Daniel L. Doctoroff
/s/ MICHAEL F. FINLEY Director
- ------------------------------ July 3, 1997
Michael F. Finley
/s/ ROBERT B. HENSKE Director
- ------------------------------ July 3, 1997
Robert B. Henske
/s/ JAMES L. SINGLETON Director
- ------------------------------ July 3, 1997
James L. Singleton
/s/ DAVID P. SPALDING Director
- ------------------------------ July 3, 1997
David P. Spalding
/s/ KATHERINE K. GIANNELLI Controller (principal
- ------------------------------ accounting officer) July 3, 1997
Katherine K. Giannelli
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Baltimore, Maryland, on the 3rd day
of July, 1997.
MOBILE FIELD OFFICE COMPANY
BY: /S/ GERARD E. KEEFE
-----------------------------------------
Gerard E. Keefe
Senior Vice President and
Chief Financial Officer
We, the undersigned officers and directors of Mobile Field Office Company,
hereby severally constitute Gerard E. Holthaus, Gerard E. Keefe and John B. Ross
and each of them singly, our true and lawful attorneys with full power to them,
and each of them singly, to sign for us and in our names in the capacities
indicated below, any and all amendments, including post-effective amendments, to
this Registration Statement, and generally do all such things in our name and
behalf in such capacities to enable Mobile Field Office Company to comply with
the applicable provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, and we hereby ratify and
confirm our signatures as they may be signed by our said attorneys, or any of
them, to any and all such amendments.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ BARRY P. GOSSETT Chairman of the Board July 3, 1997
- ------------------------------
Barry P. Gossett
/s/ GERARD E. HOLTHAUS President (principal July 3, 1997
- ------------------------------ executive officer) and
Gerard E. Holthaus Director
/s/ GERARD E. KEEFE Chief Financial Officer July 3, 1997
- ------------------------------ (principal financial
Gerard E. Keefe officer)
/s/ JAMES N. ALEXANDER Director July 3, 1997
- ------------------------------
James N. Alexander
/s/ DANIEL L. DOCTOROFF Director July 3, 1997
- ------------------------------
Daniel L. Doctoroff
/s/ MICHAEL F. FINLEY Director July 3, 1997
- ------------------------------
Michael F. Finley
/s/ ROBERT B. HENSKE Director July 3, 1997
- ------------------------------
Robert B. Henske
/s/ JAMES L. SINGLETON Director July 3, 1997
- ------------------------------
James L. Singleton
/s/ DAVID P. SPALDING Director July 3, 1997
- ------------------------------
David P. Spalding
/s/ KATHERINE K. GIANNELLI Controller (principal July 3, 1997
- ------------------------------ accounting officer)
Katherine K. Giannelli
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Baltimore, Maryland, on the 3rd day
of July, 1997.
<TABLE>
<S> <C> <C> <C> <C>
WILLSCOT EQUIPMENT, LLC
Williams
Scotsman,
By: Inc.,
its
Member
By:
<CAPTION>
/s/ GERALD E. KEEFE
---------------------------------------
Gerard E. Keefe
Senior Vice President and
Chief Financial Officer
</TABLE>
We, the undersigned officers and directors of Williams Scotsman, Inc.,
member of Willscot Equipment, LLC, hereby severally constitute Gerard E.
Holthaus, Gerard E. Keefe and John B. Ross and each of them singly, our true and
lawful attorneys with full power to them, and each of them singly, to sign for
us and in our names in the capacities indicated below, any and all amendments,
including post-effective amendments, to this Registration Statement, and
generally do all such things in our name and behalf in such capacities to enable
Willscot Equipment, LLC to comply with the applicable provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission, and we hereby ratify and confirm our signatures as they may
be signed by our said attorneys, or any of them, to any and all such amendments.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ BARRY P. GOSSETT Chairman of the Board of
- ------------------------------ Member of Registrant July 3, 1997
Barry P. Gossett
Chief Executive Officer
/s/ GERARD E. HOLTHAUS (principal executive
- ------------------------------ officer) and Director of July 3, 1997
Gerard E. Holthaus Member of Registrant
Senior Vice President and
/s/ GERALD E. KEEFE Chief Financial Officer
- ------------------------------ (principal financial July 3, 1997
Gerard E. Keefe officer) of Member of
Registrant
/s/ JAMES N. ALEXANDER Director of Member of
- ------------------------------ Registrant July 3, 1997
James N. Alexander
/s/ DANIEL L. DOCTOROFF Director of Member of
- ------------------------------ Registrant July 3, 1997
Daniel L. Doctoroff
/s/ MICHAEL F. FINLEY Director of Member of
- ------------------------------ Registrant July 3, 1997
Michael F. Finley
/s/ ROBERT B. HENSKE Director of Member of
- ------------------------------ Registrant July 3, 1997
Robert B. Henske
/s/ JAMES L. SINGLETON Director of Member of
- ------------------------------ Registrant July 3, 1997
James L. Singleton
/s/ DAVID P. SPALDING Director of Member of
- ------------------------------ Registrant July 3, 1997
David P. Spalding
/s/ KATHERINE K. GIANNELLI Controller (principal
- ------------------------------ accounting officer) of July 3, 1997
Katherine K. Giannelli Member of Registrant
II-7
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