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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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Commission File Number 1-12804
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mobile mini, inc.
(Exact name of registrant as specific in its charter)
Delaware 86-0748362
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1834 West 3rd Street
Tempe, Arizona 85281
(Address of principal executive offices)
(602) 894-6311
(Registrant's telephone number, including area code)
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----------- ------------
As of August 11, 1997, there were outstanding 6,739,324 shares of the
issuer's common stock, par value $.01.
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<PAGE>
MOBILE MINI, INC.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED JUNE 30, 1997
TABLE OF CONTENTS PAGE
NUMBER
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
June 30, 1997 (unaudited) and December 31, 1996
Consolidated Statements of Operations 4
Three Months and Six Months ended June 30, 1997 and
June 30, 1996 (unaudited)
Consolidated Statements of Cash Flows 5
Six Months Ended June 30, 1997 and June 30, 1996
(unaudited)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II.
OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 10
SIGNATURES 11
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOBILE MINI, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS June 30, 1997 December 31, 1996
(Unaudited)
-------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 486,443 $ 736,543
Receivables, net 6,317,555 4,631,854
Inventories 7,411,453 4,998,382
Prepaid and other 571,754 742,984
----------- -----------
Total current assets 14,787,205 11,109,763
CONTAINER LEASE FLEET, net 39,144,436 34,313,193
PROPERTY, PLANT AND EQUIPMENT, net 17,827,040 17,696,046
OTHER ASSETS, net 1,458,650 1,697,199
----------- -----------
Total assets $73,217,331 $64,816,201
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,180,063 $ 2,557,329
Accrued compensation 445,265 674,818
Other accrued liabilities 1,929,720 1,517,295
Current portion of long-term debt 1,494,925 1,378,829
Current portion of obligations under capital leases 1,993,239 1,352,279
----------- -----------
Total current liabilities 9,043,212 7,480,550
LINE OF CREDIT 33,776,461 26,406,035
LONG-TERM DEBT, less current portion 5,101,700 5,623,948
OBLIGATIONS UNDER CAPITAL LEASES, less current portion 4,086,298 5,387,067
DEFERRED INCOME TAXES 4,278,040 3,709,500
----------- -----------
Total liabilities 56,285,711 48,607,100
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock; $.01 par value, 17,000,000 shares authorized,
6,739,324 issued and outstanding at June 30, 1997 and
December 31, 1996 67,393 67,393
Additional paid-in capital 14,338,873 14,338,873
Retained earnings 2,525,354 1,802,835
----------- -----------
Total stockholders' equity 16,931,620 16,209,101
----------- -----------
Total liabilities and stockholders' equity $73,217,331 $64,816,201
=========== ===========
</TABLE>
See the accompanying notes to these consolidated balance sheets.
3
<PAGE>
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Container and other sales $ 6,196,750 $ 5,745,611 $ 10,739,381 $ 10,661,443
Leasing 4,106,333 3,171,376 8,005,281 6,342,676
Other 1,890,712 1,374,928 3,098,589 2,196,711
------------ ------------ ------------ ------------
12,193,795 10,291,915 21,843,251 19,200,830
COSTS AND EXPENSES:
Cost of container and other sales 4,564,586 5,119,910 8,010,356 9,045,348
Leasing, selling and general expenses 5,010,835 3,214,535 9,292,185 7,088,898
Depreciation and amortization 529,709 380,136 1,001,876 748,415
------------ ------------ ------------ ------------
Income from operations 2,088,665 1,577,334 3,538,834 2,318,169
OTHER INCOME (EXPENSE):
Interest income and other -- -- -- 4,000
Interest expense (1,158,744) (1,001,059) (2,248,623) (1,949,408)
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME
TAXES AND EXTRAORDINARY ITEM 929,921 576,275 1,290,211 372,761
PROVISION FOR INCOME TAXES 409,164 253,561 567,692 164,015
------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 520,757 322,714 722,519 208,746
EXTRAORDINARY ITEM (Note C) -- -- -- (410,354)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 520,757 $ 322,714 $ 722,519 $ (201,608)
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE OF COMMON
STOCK AND COMMON STOCK EQUIVALENT:
INCOME BEFORE EXTRAORDINARY ITEM $ 0.08 $ 0.05 $ 0.11 $ 0.03
EXTRAORDINARY ITEM -- -- -- (0.06)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 0.08 $ 0.05 $ 0.11 $ (0.03)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES
OUTSTANDING 6,755,517 6,739,324 6,743,391 6,735,841
------------ ------------ ------------ ------------
</TABLE>
See the accompanying notes to these consolidated statements
4
<PAGE>
MOBILE MINI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
---- ----
<S> <C> <C>
Net income (loss) $ 722,519 $ (201,608)
Adjustments to reconcile income to net cash used in operating
activities:
Extraordinary loss on early debt retirement -- 410,354
Amortization of deferred costs on credit agreement 245,921 151,407
Depreciation and amortization 1,001,876 748,415
Loss (gain) on disposal of property, plant and equipment 54,118 (2,164)
Changes in assets and liabilities:
Decrease (increase) in receivables, net (1,685,701) 334,376
Increase in inventories (2,367,519) (1,322,909)
Decrease (increase) in prepaids and other 171,230 (95,126)
Decrease (increase) in other assets (7,372) 255,720
(Decrease) increase in accounts payable 622,734 (2,126,774)
Increase in accrued liabilities 182,872 243,145
(Decrease) increase in deferred income taxes 568,540 (190,186)
------------ ------------
Net cash used in operating activities (490,782) (1,795,350)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net sales (purchases) of container lease fleet (5,147,114) 73,900
Net purchases of property, plant, and equipment (916,669) (1,288,384)
------------ ------------
Net cash used in investing activities (6,063,783) (1,214,484)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 7,370,426 14,280,279
Proceeds from issuance of long-term debt 314,265 6,635,069
Deferred financing costs -- (2,114,411)
Principal payments and penalties on early debt
extinguishment -- (14,405,879)
Principal payments on long-term debt (720,417) (799,446)
Principal payments on capital lease obligations (659,809) (1,311,457)
Additional paid in capital -- (21,069)
------------ ------------
Net cash provided by financing activities 6,304,465 2,263,086
------------ ------------
NET DECREASE IN CASH (250,100) (746,748)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 736,543 1,430,651
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 486,443 $ 683,903
============ ============
</TABLE>
See the accompanying notes to these consolidated statements.
5
<PAGE>
MOBILE MINI, INC. AND SUBSIDIARIES - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations, and
cash flows for all periods presented have been made. The results of operations
for the six month period ended June 30, 1997 are not necessarily indicative of
the operating results that may be expected for the entire year ending December
31, 1997. These financial statements should be read in conjunction with the
Company's December 31, 1996 financial statements and accompanying notes thereto.
Certain amounts in the 1996 financial statements have been reclassified to
conform with the 1997 financial statement presentation.
NOTE B - Earnings (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common share equivalents assumed
outstanding during the periods. Fully diluted earnings per common share is
considered equal to primary earnings per share in all periods presented.
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128).
SFAS No. 128 is effective for fiscal years ending after December 15, 1997, and
when adopted, will require restatement of prior periods earnings per share. The
effect of this statement is not significant on any period presented.
NOTE C - The Company entered into a credit agreement (the "Credit Agreement") in
March, 1996 with BT Commercial Corporation, as Agent for a group of lenders (the
"Lenders"). Under the terms of the Credit Agreement, the Lenders provided the
Company with a $35.0 million revolving line of credit and a $6.0 million term
loan. In July, 1997, the revolving line of credit was increased to $40.0
million. Borrowings under the Credit Agreement are secured by substantially all
of the Company's assets.
In connection with the closing of the Credit Agreement, the Company repaid
long-term debt and obligations under capital leases totaling $14.1 million. As a
result, costs previously deferred related to this indebtedness and prepayment
penalties resulted in an extraordinary charge to earnings in 1996, of
approximately $410,000 after the benefit of income taxes.
NOTE D - Inventories are stated at the lower of cost or market, with cost being
determined under the specific identification method. Market is the lower of
replacement cost or net realizable value. Inventories consisted of the following
at:
June 30, 1997 December 31, 1996
------------- -----------------
Raw material and supplies $3,707,719 $3,547,487
Work-in-process 1,335,426 288,986
Finished containers 2,368,308 1,161,909
---------- ----------
$7,411,453 $4,998,382
========== ==========
NOTE E - In July 1997, the Company completed a private placement of $3 million
of 12% senior subordinated notes (the "Bridge Notes") and warrants to purchase
50,000 shares of Mobile Mini, Inc. common stock at $5.00 per share. The Bridge
Notes are due the earlier of July 2002, or on the refinancing of the Bridge
Notes on substantially similar terms. The proceeds received by the Company will
be allocated between the Bridge Notes and the warrants based on the respective
fair values of each instrument. The resulting discount increases the effective
interest rate of the Bridge Notes and will be amortized to interest expense over
the life of the debt.
NOTE F - The Company's publicly traded warrants issued in connection with the
Company's initial public offering have been extended six months to expire on
February 17, 1998.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to
Three Months Ended June 30, 1996
Revenues for the quarter ended June 30, 1997 were $12,194,000 which
represents an 18.5% increase over revenues of $10,292,000 for the quarter ended
June 30, 1996. Revenues from the sales of the Company's products increased 7.9%
while the revenues from the leasing of portable storage containers and office
units increased 29.5%. Revenues from the Company's trucking and other related
leasing activities increased 37.5%. The increase in lease and lease related
revenues resulted from an increase in the average container rental rate yielding
3.0%, and a 22.3% increase in the average number of containers on lease and an
increase in other income, including trucking service income and loss limitation
waiver income.
Cost of container and other sales as a percentage of container and
other sales for the quarter ended June 30, 1997 was 73.7% compared to 89.1% for
the same quarter in 1996. This decrease primarily resulted from an increase in
sales of the Company's higher margin telecommunication shelters and the
discontinuation of the modular building line, which produced lower margins
during fiscal 1996.
Leasing, selling and general expenses were 41.1% of total revenue in
the quarter ended June 30, 1997 compared to 31.2% in the quarter ended June 30,
1996. The increase is primarily related to additional operating costs to support
the increased leasing operations. These additional costs included higher
maintenance costs associated with a larger trucking fleet, additional equipment
to maintain, service and transport a larger container lease fleet, in addition
to increased personnel costs and related benefits to support the growth of the
leasing operations.
Interest expense was 9.5% of revenues during the second quarter of 1997
compared to 9.7% of revenues during the quarter ended June 30, 1996. Interest
expense increased $150,000 primarily due to the growth in the Company's leasing
operations and the related borrowings to finance that growth.
Depreciation and amortization increased from 3.7% of revenues for the
three months ended June 30, 1996 to 4.3% for the three months ended June 30,
1997. This is related to the increase in the Company's lease fleet and the
acquisition of additional equipment at the Company's various locations.
The Company posted a 61.4% increase in net income to $521,000, or $0.08
per share for the quarter ended June 30, 1997 compared to net income of $323,000
or $0.05 per share during the same period in the prior year. This increase is
primarily a result of increased revenues and the higher profit margins on sales
partially offset by higher administrative costs. The Company's effective tax
rate remained unchanged at 44%.
7
<PAGE>
Six Months Ended June 30, 1997 Compared to
Six Months Ended June 30, 1996
Revenues for the six months ended June 30, 1997 were $21,843,000 which
represents a 13.8% increase over revenues of $19,201,000 for the six months
ended June 30, 1996. Revenues from the sales of the Company's products increased
0.7%, while the revenues from the leasing of portable storage and from the
Company's trucking and other related leasing activities increased 30% and
represented 50.8% of total revenue compared to 44.5% for the same period in
1996. This increase in lease and lease related revenues primarily is a result of
a 20% increase in the average number of containers on lease, an increase in the
average container rental rate, yielding 3.1%, and an increase in other income,
including trucking services income and loss limitation waiver income.
Cost of container and other sales as a percentage of container and
other sales for the six months ended June 30, 1997 was 74.6% compared to 84.8%
for the same period in 1996. This decrease primarily resulted from an increase
in sales of the Company's higher margin telecommunication shelters, and the
discontinuation of the Company's modular building line, which produced lower
margins during fiscal 1996.
Leasing, selling and general expenses were 42.5% of total revenue for
the six months ended June 30, 1997 compared to 36.9% in the six months ended
June 30, 1996. The increase is primarily related to additional operating costs
to support the increased leasing operations. These additional costs included
higher maintenance costs associated with a larger trucking fleet, additional
equipment to maintain, service and transport a larger container lease fleet, and
increased personnel costs and related benefits to support the growth of the
leasing operations.
Interest expense was 10.3% of revenues during the six months ended June
30, 1997 compared to 10.2% of revenues during the six months ended June 30,
1996. This increase is related to financing the Company's growth in its
container lease fleet and equipment which permitted the Company to substantially
increase its leasing revenue. This increase is partially offset by a 1.9%
decrease in the Company's weighted average borrowing rate as a result of lower
interest rates under the Credit Agreement (including the effect of amortization
of additional debt issuance costs in connection with the Company's Credit
Agreement).
Depreciation and amortization increased from 3.9% of revenues for the
six month period ended June 30, 1996 to 4.6% for the six month period ended June
30, 1997. This increase is related to the increase in the Company's lease fleet
and the acquisition of additional equipment at the Company's various locations.
The Company posted a net income of $723,000, or $0.11 per share for the
six months ended June 30, 1997 compared to net income before extraordinary item
of $209,000 or $0.03 per share during the prior year. This increase is primarily
a result of increased revenues and the higher profit margins on sales partially
offset by higher administrative costs. The Company's effective tax rate remained
unchanged at 44%. During the quarter ended March 31, 1996, the Company prepaid
certain debt and capital leases in connection with entering into a new credit
agreement. The Company recognized an extraordinary charge to earnings of
$410,000 or $.06 per share, net of the benefit for income taxes, as a result of
this early extinguishment of debt.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's business plan is to continue to increase the size of its
container lease fleet and related property, plant and equipment. The Company
will require additional financings to sustain such growth. New financing over
the past year was primarily funded through the Company's Credit Agreement, which
includes a revolving line of credit (the "Revolving Line") with permitted
borrowings based on the level of the Company's inventories, receivables and the
container lease fleet.
In July 1997, the Company issued $3 million of 12% senior subordinated
notes (the "Bridge Notes") with warrants to purchase 50,000 shares of the
Company's common stock at $5.00 per share. The Bridge Notes are due the earlier
of July 2002, or on the refinancing of the Bridge Notes through a private
placement or public offering on substantially similar terms. Proceeds of the
Bridge Notes were initially used to reduce the Revolving Line.
Simultaneously with the issuance of the Bridge Notes, the Company's
lenders increased the Revolving Line by an additional $5 million to $40 million.
As of June 30, 1997, the Company had borrowings outstanding of
$33,776,000 under the Revolving Line and $1,217,000 of additional borrowing was
available under that line. As a result of the increase in the Revolving Line and
the issuance of the Bridge Notes, additional borrowing availability had
increased to $3,722,000 on August 8, 1997.
During the six months ended June 30, 1997 the Company utilized cash
from operations of $491,000. Cash was invested in higher inventory levels and
higher outstanding receivables which were partially offset by an increase in
accounts payable, accrued liabilities and deferred taxes.
The Company invested $6,064,000 in its container lease fleet and other
equipment during the six months ended June 30, 1997. This amount is net of
$1,034,000 in sales of containers from the lease fleet.
Cash flow from financing activities provided $6,304,000 for the six
months ended June 30, 1997. This financing was utilized to fund the increase in
the lease fleet, related equipment, and inventory levels, which was partially
offset by principal payments on long-term debt and capitalized leases.
The Company believes that its current capitalization, together with the
increased borrowings available under the Credit Agreement, will be sufficient to
maintain its current level of operations and permit controlled growth. However,
should demand for the Company's products exceed current expectation, the Company
would be required to secure additional financing through debt or equity
offerings, additional borrowings or a combination of these sources. However,
there is no assurance that any such financing will be obtained or obtained on
terms acceptable to the Company.
The Statement regarding the Company's ability to meet its obligations
and capital needs during the next 12 months is a forward-looking statement. The
occurrence of one or more unanticipated events, however, including a decrease in
cash flow generated from operations, a material increase in the borrowing rates
under the Credit Agreement (which rates are based on the prime rate or the
Eurodollar rates in effect from time to time), a material increase or decrease
in prevailing market prices for used containers, or a change in general economic
conditions resulting in decreased demand for the Company's products, could cause
actual results to differ materially from anticipated results and have a material
adverse effect on the Company's ability to meet its obligations and capital
needs. More detailed discussion of factors which may affect the Company's
financial performance and results of operations are set forth in the Company's
annual report on Form 10-K for the fiscal year ended December 31, 1996 and its
other filings with the Securities and Exchange Commission ("SEC"), and such
discussions are incorporated herein by reference. The Company's filing with the
SEC may be accessed at the SEC's World Wide Web site at http://www.sec.gov.
EFFECTS OF INFLATION
The results of operations of the Company for the periods discussed have
not been significantly affected by inflation.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Description
10.1 Amendment No. 3 to Credit Agreement dated as of March 31,
1997, by and among the Registrant, each financial institution
a party thereto, and BT Commercial Corporation, as Agent.
10.2 Amendment No. 4 to Credit Agreement dated as of July 31, 1997,
by and among the Registrant, each financial institution a
party thereto, and BT Commercial Corporation, as Agent
10.3 Senior Subordinated Promissory Note dated July 31, 1997, by
the Registrant to Arizona Land Income Corporation
10.4 Pledge Agreement dated as of July 31, 1997, by and between the
Registrant and Arizona Land Income Corporation
10.5 Stock Purchase Warrant dated July 31, 1997
11 Computation of Earning per Share for the Three Month and Six
Month Period Ended June 30, 1997 and 1996
27 Selected Financial Data
(b) Reports on Form 8-K: none
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOBILE MINI, INC.
(Registrant)
Dated: 8/13/97 /s/ Larry Trachtenberg
----------- ---------------------------
Larry Trachtenberg
Chief Financial Officer &
Executive Vice President
11
AMENDMENT NUMBER THREE
TO
CREDIT AGREEMENT
This AMENDMENT NUMBER THREE TO CREDIT AGREEMENT (this "Amendment"),
dated as of March 31, 1997, is entered into by and among MOBILE MINI, INC., a
Delaware corporation (the "Borrower"), each financial institution a party to the
Credit Agreement (collectively, the "Lenders"), and BT COMMERCIAL CORPORATION
acting as agent for the Lenders (the "Agent"), in light of the following facts:
R E C I T A L S
A. The parties hereto have previously entered into that certain Credit
Agreement, dated as of March 28, 1996, as amended by that certain Amendment
Number One to Credit Agreement, dated as of November __, 1996, and as further
amended by that certain Amendment Number Two to Credit Agreement, dated as of
March 24, 1997 (as amended, the "Agreement").
B. The parties hereto desire to amend the Agreement in accordance with
the terms of this Amendment.
A G R E E M E N T
NOW THEREFORE, the parties hereto agree as follows:
1. Defined Terms. All initially capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Agreement.
2. Amendment to Section 8.7. Section 8.7 of the Agreement is
hereby amended by deleting such Section in its entirety and replacing it with
the following:
"8.7 Minimum Utilization Rates. The Borrower shall
maintain minimum utilization rates for each fiscal quarter, calculated at the
end of each such quarter as the average amount during such quarter, and
calculated as:
(a) (i) the number of units of Borrower's Eligible
Container Fleet Inventory which is then subject to valid, current rental or
lease agreements between Borrower and the renters or lessees thereof, divided by
the aggregate number of units of Borrower's Eligible Container Fleet Inventory,
of not less than eighty-three percent (83%) for the first quarter of the fiscal
year ending December 31, 1997 and eighty-five percent (85%) for each other
quarter; and
<PAGE>
(b) (i) the number of units of Borrower's Eligible
Container Fleet Inventory which is then subject to valid, current rental or
lease agreements between Borrower and the renters or lessees thereof, divided by
(ii) sum of (A) the number of units of Borrower's Eligible Container Fleet
Inventory, and (B) the number of units of Borrower's Eligible Container
Inventory Held For Sale plus the number of units of Borrower's Eligible Primary
Raw Materials Inventory consisting of unrefurbished ISO units, of not less than
seventy-nine percent (79%) for the first quarter of the fiscal year ending
December 31, 1997 and eighty percent (80%) for each other quarter; provided,
that for the purposes of calculation of compliance with this Section 8.7(b), the
aggregate of the number of units of Eligible Container Inventory Held For Sale
plus the number of units of Borrower's Eligible Primary Raw Materials Inventory
consisting of unrefurbished ISO units, as a percentage of the sum of clauses (A)
and (B) above, shall not exceed five percent (5%)."
3. Conditions Precedent. The effectiveness of this Amendment is
subject to and conditioned upon the fulfillment of each and all of the following
conditions precedent:
(a) BTCC shall have received this Amendment duly executed
by Borrower and Majority Lenders; and
(b) BTCC shall have received an affirmation letter duly
executed by each guarantor under the Guaranties, indicating the consent by each
such guarantor to the execution and delivery by Borrower of this Amendment.
4. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which
when so executed and delivered shall be deemed to be an original. All such
counterparts, taken together, shall constitute but one and the same Amendment.
5. Reaffirmation of the Agreement. Except as specifically amended
by this Amendment, the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed at Los Angeles, California as of the date first hereinabove written.
MOBILE MINI, INC.,
a Delaware corporation
By:
-------------------------------
Larry Trachtenberg,
Chief Financial Officer
2
<PAGE>
BT COMMERCIAL CORPORATION,
a Delaware corporation,
individually and as Agent
By:
-------------------------------
Title:
---------------------------
NATIONSBANK OF TEXAS, N.A.
By:
-------------------------------
Title:
---------------------------
DEUTSCHE FINANCIAL SERVICES
CORPORATION
By:
-------------------------------
Title:
---------------------------
3
<PAGE>
CONSENT OF GUARANTORS
Each of the undersigned, as a guarantor of the obligations of MOBILE
MINI, INC., a Delaware corporation ("Borrower"), arising out of that certain
Credit Agreement, dated as of March 28, 1996, as amended by that certain
Amendment Number One to Credit Agreement, dated as of November __, 1996, and as
further amended by that certain Amendment Number Two to Credit Agreement, dated
as of March 24, 1997 (as amended, the "Agreement"), among BT Commercial
Corporation, a Delaware corporation ("Agent") and the lenders party thereto
("Lenders"), on the one hand, and Borrower, on the other, hereby acknowledges
receipt of a copy of that certain Amendment Number Three to Credit Agreement,
dated as of March 31, 1997, among Agent, Lenders and Borrower, consents to the
terms contained therein, and agrees that the Continuing Guaranty executed by
each of the undersigned shall remain in full force and effect as a continuing
guaranty of the obligations of Borrower owing to Agent and Lenders under the
Agreement.
Although Agent has informed us of the matters set forth above, and we
have acknowledged same, we understand and agree that Agent has no duty under the
Agreement, the Guaranty or any other agreement between us to so notify us or to
seek an acknowledgment, and nothing contained herein is intended to or shall
create such a duty as to any advances or transactions hereafter.
IN WITNESS WHEREOF, each of the undersigned has caused this Consent of
Guarantors to be duly executed by their respective authorized officers as of
March 31, 1997.
MOBILE MINI I, INC.,
an Arizona corporation
By
-------------------------------
Title
----------------------------
DELIVERY DESIGN SYSTEMS, INC.,
an Arizona corporation
By
-------------------------------
Title
----------------------------
4
AMENDMENT NUMBER FOUR
TO
CREDIT AGREEMENT
This AMENDMENT NUMBER FOUR TO CREDIT AGREEMENT (this "Amendment"),
dated as of July 30, 1997, is entered into by and among MOBILE MINI, INC., a
Delaware corporation (the "Borrower"), each financial institution a party to the
Credit Agreement (collectively, the "Lenders"), and BT COMMERCIAL CORPORATION
acting as agent for the Lenders ("BTCC"), in light of the following facts:
R E C I T A L S
A. The parties hereto have previously entered into that certain Credit
Agreement, dated as of March 28, 1996, as amended by that certain Amendment
Number One to Credit Agreement, dated as of November __, 1996, that certain
Amendment Number Two to Credit Agreement, dated as of March 24, 1997, and that
certain Amendment Number Three to Credit Agreement, dated as of March 31, 1997
(as amended, the "Agreement").
B. Borrower has sold or will sell an aggregate amount of Six Million
Dollars ($6,000,000), which amount shall be net of any subordinated bridge loan
proceeds, if such bridge loans are repaid in full, of subordinated, unsecured
notes (the "Subordinated Debt") pursuant to the $3,000,000 Senior Subordinated
Promissory Note, dated July 30, 1997, (the "Bridge Note") by and between
Borrower and Arizona Land Income Corporation ("ALIC") and certain other
substantially similar subordinated notes by and between Borrower and ALIC (the
"Subsequent Financing"). The Bridge Loan will be paid in full upon consummation
of the Subsequent Financing.
C. The parties hereto desire to amend the Agreement in accordance with
the terms of this Amendment.
A G R E E M E N T
NOW, THEREFORE, the parties hereto agree as follows:
1. Defined Terms. All initially capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Agreement.
2. Amendment to Section 2.2. Section 2.2(a) of the Agreement is hereby
amended by deleting the phrase "which shall not exceed $35,000,000" from such
Section and replacing it with the phrase "which shall not exceed $40,000,000".
3. Amendment of Annex I. Annex I of the Agreement is hereby amended by
deleting the amount of the Revolving Credit Commitment for each Lender and
replacing such amounts as follows:
<PAGE>
================================================================================
Lender Revolving Credit Commitment ($)
================================================================================
BT Commercial Corporation 13,333,333.34
- --------------------------------------------------------------------------------
Nationsbank of Texas, N.A. 13,333,333.33
- --------------------------------------------------------------------------------
Deutsche Financial Services Corporation 13,333,333.33
================================================================================
4. Subordinated Debt.
(a) BTCC consents to Borrower's sale of the Bridge Note to
ALIC, and such sale shall not constitute an Event of Default under the
Agreement.
(b) The Subordinated Debt shall not exceed Six Million Dollars
($6,000,000). In the event the Subordinated Debt exceeds Six Million Dollars
($6,000,000), such occurrence shall constitute an Event of Default under the
Agreement.
(c) With regard to Section 8.8 of the Agreement only,
Borrower's sale of the Subordinated Debt to ALIC shall be treated as a sale of
equity securities, and Borrower shall be subject to the terms and conditions of
Section 8.8 as a result thereof. In addition, with regard to the Subordinated
Debt and its treatment as an equity security under Section 8.8 only, during the
term of this Agreement and so long as there is no continuing Event of Default,
Borrower may carry forward and add to the next year's Capital Expenditure
limitation amount the unused portion of the limitation amount for the prior
year, up to a maximum of one hundred percent (100%) of the prior year's
limitation.
(d) In connection with the Subordinated Debt, the Collateral
under the Agreement shall exclude the Reserve Account (as that term is defined
in the Bridge Note and as that term is defined in any other Subordinated Debt so
long as such definition is substantially similar to the definition of Reserve
Account under the Bridge Note) provided, however, the funds in the Reserve
Account shall not exceed $375,000 at any time.
5. Amendment to Section 1.1. Section 1.1 is amended by inserting the
following in the definition of "Consolidated Tangible Net Worth" between
"Lenders" and the period at the end of the first and only sentence of the
Section:
"provided, however, that the Subordinated Debt and any
proceeds thereof shall be excluded from the calculation of
Consolidated Tangible Net Worth herein."
6. Amendment to Section 8.9(a). Section 8.9(a) of the Agreement is
hereby amended by inserting before the semicolon the following:
", and Indebtedness under the Subordinated Debt".
2
<PAGE>
7. Amendment to Section 8.4. Section 8.4 is amended by deleting the
Ratios for the four quarters of 1998 and replacing such Ratios as set forth
below:
================================================================================
For Quarters Ended Ratio
- --------------------------------------------------------------------------------
3/31/98 2.00:1.0
- --------------------------------------------------------------------------------
6/30/98 2.00:1.0
- --------------------------------------------------------------------------------
9/30/98 2.20:1.0
- --------------------------------------------------------------------------------
12/31/98 2.35:1.0
================================================================================
8. Amendment to Section 8.7. Section 8.7 of the Agreement is hereby
amended by deleting such Section in its entirety and replacing it with the
following:
"8.7 Minimum Utilization Rates. The Borrower shall
maintain minimum utilization rates for each fiscal quarter, calculated at the
end of each such quarter as the average amount during such quarter, and
calculated as:
(a) (i) the number of units of Borrower's Eligible
Container Fleet Inventory which is then subject to valid, current rental or
lease agreements between Borrower and the renters or lessees thereof, divided by
the aggregate number of units of Borrower's Eligible Container Fleet Inventory,
of not less than eighty-three percent (83%) for the second quarter of the fiscal
year ending December 31, 1997 and eighty-five percent (85%) for each other
quarter; and
(b) (i) the number of units of Borrower's Eligible
Container Fleet Inventory which is then subject to valid, current rental or
lease agreements between Borrower and the renters or lessees thereof, divided by
(ii) sum of (A) the number of units of Borrower's Eligible Container Fleet
Inventory, and (B) the number of units of Borrower's Eligible Container
Inventory Held For Sale plus the number of units of Borrower's Eligible Primary
Raw Materials Inventory consisting of unrefurbished ISO units, of not less than
seventy-eight percent (78%) for the second quarter of the fiscal year ending
December 31, 1997 and eighty percent (80%) for each other quarter; provided,
that for the purposes of calculation of compliance with this Section 8.7(b), the
aggregate of the number of units of Eligible Container Inventory Held For Sale
plus the number of units of Borrower's Eligible Primary Raw Materials Inventory
consisting of unrefurbished ISO units, as a percentage of the sum of clauses (A)
and (B) above, shall not exceed five percent (5%)."
9. Amendment to Section 8.10. Section 8.10 of the Agreement is hereby
amended by adding to such Section the following subparagraph:
" (k) Deposits or pledges to support Borrower's interest
payment obligations under the Subordinated Debt pursuant to
the terms of such Subordinated Debt, so long as such deposit
or pledge relates to an amount
3
<PAGE>
which does not exceed the amount equal to one six-month period
of interest on the principal balance of the Subordinated
Debt."
10. Guaranties of the Subordinated Debt. Notwithstanding Section 8.11
of the Agreement, the Material Subsidiaries may guarantee the Subordinated Debt
but such guaranties shall be subordinate to any guaranties or obligations by the
Material Subsidiaries in favor of the Lenders.
11. Conditions Precedent. The effectiveness of this Amendment is
subject to and conditioned upon the fulfillment of each and all of the following
conditions precedent:
(a) BTCC shall have received this Amendment duly executed by
Borrower and Majority Lenders;
(b) BTCC shall have received an affirmation letter duly
executed by each guarantor under the Guaranties, indicating the consent by each
such guarantor to the execution and delivery by Borrower of this Amendment;
(c) BTCC shall have received payment for all fees in
connection with this Amendment from Borrower;
(d) BTCC shall have received executed replacement revolving
promissory notes for each lender under the Agreement in form and substance
satisfactory to BTCC pursuant to the amendments to the Agreement under Sections
2 and 3 herein;
(e) BTCC shall have approved of the terms and conditions of
the Subordinated Debt (such approval not to be unreasonably withheld), and such
Subordinated Debt shall provide, among other things, subordination terms
acceptable to BTCC in its reasonable business judgment; and
(f) BTCC shall have received executed modifications or other
necessary documents and such title insurance as BTCC shall require, either by
endorsement to the policy of title insurance, or by a new policy of title
insurance, insuring such deed(s) of trust or mortgages and that the lien(s)
created thereby continue to be first priority lien, all in form and substance
satisfactory to BTCC in its sole and absolute discretion, and subject to such
exceptions as are approved by BTCC.
12. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which
when so executed and delivered shall be deemed to be an original. All such
counterparts, taken together, shall constitute but one and the same Amendment.
4
<PAGE>
13. Reaffirmation of the Agreement. Except as specifically amended by
this Amendment, the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed at Los Angeles, California as of the date first hereinabove written.
MOBILE MINI, INC.,
a Delaware corporation
By:
------------------------------
Larry Trachtenberg,
Chief Financial Officer
BT COMMERCIAL CORPORATION,
a Delaware corporation,
individually and as agent
By:
------------------------------
Title:
---------------------------
NATIONSBANK OF TEXAS, N.A.
By:
------------------------------
Title:
--------------------------
DEUTSCHE FINANCIAL SERVICES
CORPORATION
By:
------------------------------
Title:
--------------------------
5
<PAGE>
CONSENT OF GUARANTORS
Each of the undersigned, as a guarantor of the obligations of MOBILE
MINI, INC., a Delaware corporation ("Borrower"), arising out of that certain
Credit Agreement, dated as of March 28, 1996, as amended by that certain
Amendment Number One to Credit Agreement, dated as of November __, 1996, that
certain Amendment Number Two to Credit Agreement, dated as of March 24, 1997,
and that certain Amendment Number Three to Credit Agreement, dated as of March
31, 1997 (as amended, the "Agreement"), among BT Commercial Corporation, a
Delaware corporation ("Agent") and the lenders party thereto ("Lenders"), on the
one hand, and Borrower, on the other hand, hereby acknowledges receipt of a copy
of that certain Amendment Number Four to Credit Agreement, dated as of July
[__],1997, among Agent, Lenders and Borrower, consents to the terms contained
therein, and agrees that the Continuing Guaranty executed by each of the
undersigned shall remain in full force and effect as a continuing guaranty of
the obligations of Borrower owing to Agent and Lenders under the Agreement.
Although Agent has informed us of the matters set forth above, and we
have acknowledged same, we understand and agree that Agent has no duty under the
Agreement, the Continuing Guaranty or any other agreement between us to so
notify us or to seek an acknowledgment, and nothing contained herein is intended
to or shall create such a duty as to any advances or transactions hereafter.
IN WITNESS WHEREOF, each of the undersigned has caused this Consent of
Guarantors to be duly executed by its respective authorized officers as of July
30, 1997.
MOBILE MINI I, INC.,
an Arizona corporation
By
------------------------------
Title
----------------------------
DELIVERY DESIGN SYSTEMS, INC.,
an Arizona corporation
By
------------------------------
Title
----------------------------
6
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT AND SUCH
LAWS, OR PURSUANT TO AN AVAILABLE EXEMPTION THEREFROM. THIS LEGEND SHALL BE
ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.
MOBILE MINI, INC.
SENIOR SUBORDINATED PROMISSORY NOTE
$3,000,000 Phoenix, Arizona
July 31, 1997
FOR VALUE RECEIVED, the undersigned, MOBILE MINI, INC., a Delaware
corporation (the "Company"), hereby promises to pay to ARIZONA LAND INCOME
CORPORATION or its successors or assigns (the "Holder") the principal sum of
THREE MILLION DOLLARS ($3,000,000) (or so much thereof as shall not have been
prepaid) on the earlier of the closing of one or more Financing Transactions (as
defined in Section 1(b) below) the net proceeds of which shall equal at least
$3,000,000 in the aggregate or July 31, 2002 (the "Maturity Date"), with
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid principal hereof at the rate of twelve percent (12%) per annum from
the date hereof, payable semi-annually in arrears on the first day of April and
November of each year, commencing November 1, 1997 until said principal shall
have been paid in full and to pay interest (so computed) at the rate of two
percent (2%) per month (the "Default Rate") on any unpaid principal and, to the
extent permitted by applicable law, on any overdue interest during the
continuation of an Event of Default, until the same shall be paid. Payments of
principal and interest shall be made in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
1. Prepayment.
----------
(a) The principal amount of this Note may be prepaid by the Company,
in whole or in part, without penalty, at any time.
(b) In the event, at any time, of the consummation by the Company of
the currently contemplated private placement or public offering of Senior
Subordinated Notes in which Peacock, Hislop, Staley & Given, Inc. is to act as
placement agent, the terms of which Senior Subordinated Notes are anticipated to
be substantially similar to the terms of this Note (a "Financing Transaction"),
the Company shall, contemporaneously with the consummation of the Financing
Transaction, prepay all or a portion of the outstanding principal amount of this
Note; provided, that any such prepayment arising as a result of a Financing
Transaction
<PAGE>
shall be subject to the prior consent of the lenders under the Senior Credit
Agreement (such consent not to be unreasonably withheld so long as the terms of
such Financing Transaction are substantially the same as the terms of this
Note). Each such prepayment shall be in an amount not less than the net proceeds
received by the Company as a result of the applicable Financing Transaction (up
to the amount of principal and interest outstanding under this Note).
(c) In the event that a Change in Control Refinancing shall occur, or
the Company enters into a letter of intent with respect to a transaction or
series of transactions that could reasonably be expected to result in a Change
in Control Refinancing, or any written agreement is executed which, when fully
performed by the parties thereto, would result in a Change of Control
Refinancing, the Company will, within five (5) Business Days of the occurrence
of any such event (or, in the case of any such event the consummation or
finalization of which would involve any action of the Company, at least thirty
(30) days prior to such consummation), give written notice of such Change in
Control Refinancing to each holder of this Note by facsimile transmission and
overnight courier of national reputation. In the event of a Change in Control
Refinancing, such written notice shall contain, and such written notice shall
constitute, an irrevocable offer to prepay all, but not less than all, of the
principal amount of the Note, at one-hundred one percent (101%) of the
outstanding principal amount, together with interest accrued through the date of
prepayment and any other amounts due hereunder, on a date specified in such
notice (the "Control Prepayment Date") that is not less than thirty (30) days
and not more than sixty (60) days after the date of such notice. If the Control
Prepayment Date shall not be specified in such notice, the Control Prepayment
Date shall be the thirtieth (30th) day after the date of such holder's receipt
of such notice. In no event will the Company take any action to consummate or
finalize any transaction which gives rise to a Change in Control Refinancing
unless contemporaneously with such action the Company prepays the Note as
required by this Section 1(c). Notwithstanding the foregoing, in no event shall
the Company be obligated to make any prepayment pursuant to this Section 1(c)
unless and until the closing of the transactions contemplated which gives rise
to the Change in Control Refinancing to which such offered prepayment relates.
For purposes hereof, "Change in Control Refinancing" shall mean the refinancing,
refunding or restructuring of the Company's credit facility which is the subject
of that certain Credit Agreement dated as of March 28, 1996 (as amended,
supplement or modified from time to time, and including any restatements,
renewals, refundings or refinancings thereof, the "Senior Credit Agreement") by
and among the Company, the financial institutions party thereto, and BT
Commercial Corporation, as agent, upon the occurrence of any of the following:
(i) Richard E. Bunger, persons directly or indirectly controlled by Richard E.
Bunger, and members of the Company's management shall cease to have record and
beneficial ownership of at least twenty percent (20%) of the Company's
outstanding capital stock entitled to vote on all matters submitted to the
stockholders of the Company; (ii) other than members of the Company's
management, any "person" (as such terms is used in subsections 13(d) and 14(d)
of the Securities and Exchange Act of 1934, as amended (the "Exchange Act")) on
and after the date hereof is or becomes a "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the combined voting power
of the Company's then-outstanding securities; or (iii) the existing directors
for any reason cease to constitute at least seventy-five percent (75%) of the
2
<PAGE>
Company's board of directors. For purposes of clause (iii) of the preceding
sentence, "existing directors" means individuals constituting the Company's
board of directors on the date hereof, and any subsequent director whose
election to the Company's board of directors or nomination for election by the
Company's shareholders was approved by at least seventy-five percent (75%) of
the directors then in office which directors either were directors on the date
hereof or whose election or nomination for election was previously so approved.
2. Use of Proceeds; Reserve Account
--------------------------------
(a) The Company shall use a portion of the net proceeds of the
issuance of this Note to establish an interest reserve escrow account (the
"Reserve Account") and shall use the remaining net proceeds of the issuance of
this Note for one or more of the following purposes: capital expenditures by the
Company, working capital, and/or general corporate purposes.
(b) The Reserve Account shall be an escrow account established at a
bank or other financial institution reasonably acceptable to the Holder. The
Company shall, upon issuance of this Note, deposit into the Reserve Account, and
shall maintain in the Reserve Account at all times while this Note is
outstanding, an amount equal to six months' interest on this Note based on the
amount outstanding hereunder from time to time. Without limiting any other
legal, equitable or contractual remedies that may available to the holder of
this Note, if the Company shall fail to make any payment of interest to the
Holder as and when due under the terms of this Note, funds on deposit in the
Reserve Account shall be used to make such interest payment. In the event that
any funds are used to make any interest payment, or if the amount on deposit in
the Reserve Account shall at any time be less than six months' interest based on
the amount outstanding hereunder at such time, the Company shall immediately
deposit into the Reserve Account cash in such amount as shall be necessary to
increase the amount on deposit in the Reserve Account to an amount equal to six
months' interest on this Note; provided, that the Company shall not make any
deposits into the Reserve Account during any period in which the Company shall
be in default in the payment of any principal of, or interest on, any Senior
Debt after the same shall have become due and payable, whether at maturity, at a
date fixed for prepayment, by declaration of acceleration or otherwise, or
during any period in which a Blockage Notice under Section 12(d) shall be in
effect. The parties shall execute a security agreement (the "Reserve Account
Security Agreement"), which shall be in form and substance acceptable to the
Holder, pursuant to which all funds on deposit in the Reserve Account from time
to time will be pledged as security for all obligations of the Company under
this Note. The Company agrees to take all action and execute all documents and
instruments reasonably requested by the Holder from time to time in order to
perfect and maintain the Holder's security interest in the Reserve Account.
3. Representations and Warranties of the Company
---------------------------------------------
To induce the Holder to make the loan evidenced by this Note, the Company
hereby warrants and represents the accuracy of the following statements as of
the date of this Note:
3
<PAGE>
(a) The Company previously has provided the Holder with true and
accurate copies of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "Latest 10-K") and the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1997 (the "Latest 10-Q"). Since
the date of the most recent financial statements set forth in the Latest 10-Q,
there has been no change in the business operations, profits, financial
condition, properties or business prospects of the Company, except changes that,
in the aggregate, could not reasonably be expected to have a material adverse
effect on the business, condition (financial or otherwise), prospects,
properties or results of operations of the Company and its subsidiaries taken as
a whole (a "Material Adverse Effect").
(b) The Company has good title to all of the property reflected in the
most recent balance sheet set forth in the Latest 10-Q and to all of the
property purported to have been acquired by the Company after said date (except
as sold or otherwise disposed of in the ordinary course of business), except for
such failures to have good title as are immaterial to such balance sheet and
that, in the aggregate for all such failures, could not reasonably be expected
to have a Material Adverse Effect.
(c) All leases necessary for the conduct of the business of the
Company are valid and subsisting and are in full force and effect, except for
such failures to be valid and subsisting that, in the aggregate for all such
failures, could not reasonably be expected to have a Material Adverse Effect.
(d) The Company owns, possesses or has the right to use all of the
licenses, permits, franchises, patents, copyrights, trademarks, service marks
and trade names necessary for the present and currently planned future conduct
of its business, without any known conflict with the rights of others, except
for such failures to own, possess, or have the right to use, that, in the
aggregate for all such failures, could not reasonably be expected to have a
Material Adverse Effect.
(e) All tax returns required to be filed by or on behalf of the
Company or any other person with which the Company files or has filed a
consolidated return in any jurisdiction have been filed on a timely basis, and
all taxes, assessments, fees and other governmental charges upon the Company or
upon any of its properties, income or franchises, that are due and payable have
been paid, except for such tax returns and such tax payments that, in the
aggregate for all such tax returns and payments, could not reasonably be
expected to have a Material Adverse Effect. The provision for taxes shown on the
unaudited balance sheet of the Company as of March 31, 1997 is adequate for all
open years and for the Company's current fiscal period.
(f) Except as described in the Latest 10-K or the Latest 10-Q:
(i) there are no proceedings, actions or investigations pending
or, to the knowledge of the Company, threatened against or affecting the
Company in any court or before any governmental authority or arbitration
board or tribunal that, in the
4
<PAGE>
aggregate for all such proceedings, actions and investigations, could
reasonably be expected to have a Material Adverse Effect; and
(ii) the Company is not in default with respect to any judgment,
order, writ, injunction or decree of any court, governmental
authority, arbitration board or tribunal that, in the aggregate for
all such defaults, could reasonably be expected to have a Material
Adverse Effect.
(g) Neither the Latest 10-K, nor the Latest 10-Q, nor any statement
furnished by or on behalf of the Company to the Holder in connection with the
negotiation or the closing of the issuance of this Note contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained therein or herein not misleading. There is no fact known to
the Company (other than matters of a general economic nature) that has had or
could at present reasonably be expected to have a Material Adverse Effect and
that has not been disclosed in such Latest 10-K, Latest 10-Q or other written
statements furnished to the Holder in connection with the negotiation or the
closing of the issuance of this Note.
(h) The Company:
(i) is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation,
(ii) has all corporate power and authority necessary to own and
operate its properties and to carry on its business as now conducted and as
presently proposed to be conducted,
(iii) has all licenses, certificates, permits, franchises and
other governmental authorizations necessary to own and operate its
properties and to carry on its business as now conducted and as presently
proposed to be conducted, except where the failure to have such licenses,
certificates, permits, franchises and other governmental authorizations, in
the aggregate for all such failures, could not reasonably be expected to
have a Material Adverse Effect, and
(iv) has duly qualified or has been duly licensed, and is
authorized to do business and is in good standing, as a foreign
corporation, in each state in the United States of America and in each
other jurisdiction where the failure to be so qualified or licensed and
authorized and in good standing, in the aggregate for all such failures,
could reasonably be expected to have a Material Adverse Effect.
(i) The Company is not in violation in any respect of any term of any
charter instrument or bylaw. The Company is not in violation in any respect of
any term in any agreement or other instrument to which it is a party or by which
it or any of its property may be bound except for such violations that, in the
aggregate for all such violations, could not reasonably be expected to have a
Material Adverse Effect.
5
<PAGE>
(j) The Company:
(i) is not a party to any contract or agreement, or subject to
any charter or other corporate restriction that, in the aggregate for
all such contracts, agreements, charters and corporate restrictions,
is reasonably likely to have a Material Adverse Effect; and
(ii) is not a party to any contract or agreement that prohibits
the issuance and sale of this Note or the performance of the Company
of its obligations under this Note or the Warrant to Purchase Common
Stock dated the date hereof and issued to the Holder (the "Warrant").
(k) The Company is not in violation of any law, ordinance,
governmental rule or regulation to which it is subject, except for such
violations that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(l) Each of the issuance, sale and delivery of this Note by the
Company and compliance by the Company with all of the provisions of this Note:
(i) is within the corporate powers of the Company; and
(ii) is legal and does not conflict with, result in any breach of
any of the provisions of, constitute a default under, or result in the
creation of any lien upon any property of the Company under the
provisions of,
(A) any agreement, charter instrument, bylaw or other
instrument to which the Company is a party or by which the
Company or any of its property may be bound, or
(B) any order, judgment, decree, or ruling of any court,
arbitrator or governmental authority applicable to the Company.
(m) This Note has been duly authorized by all necessary action on the
part of the Company, has been executed and delivered by duly authorized officers
of the Company, and constitutes a legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, except that the
enforceability hereof may be:
(i) limited by applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium or other similar laws affecting the
enforceability of creditors' rights generally; and
(ii) subject to the availability of equitable remedies.
6
<PAGE>
(n) As of the date hereof, after giving effect to the consummation of
the transactions contemplated by this Note and the Warrant and the payment of
all fees, costs and expenses payable by the Company with respect to the
transactions contemplated thereby, the Company is Solvent. For purposes hereof,
"Solvent" means that (a) the fair saleable value of the assets of such person is
in excess of the total amount of the present value of its liabilities (including
for purposes of this definition all liabilities (including loss reserves as
determined by the Company), whether or not reflected on a balance sheet prepared
in accordance with generally accepted accounting principles and whether direct
or indirect, fixed or contingent, secured or unsecured, disputed or undisputed),
(b) such person is able to pay its debts or obligations in the ordinary course
as they mature and (c) such person does not have unreasonably small capital to
carry out its business as conducted and as proposed to be conducted.
(o) Other than a placement fee in the amount of five percent (5%) of
the original principal amount of this Note which is payable to Peacock, Hislop,
Staley & Given, Inc., no broker's or finder's fee or commission was, is or will
be payable by the Company with respect to any of the transactions contemplated
by this Note or the Warrant or for any other services rendered to the Company
ancillary to such transactions. The Company hereby agrees to indemnify and
defend the Holder against and agrees that it will hold the Holder harmless from
any claim, demand or liability for broker's or finder's fees or commissions
alleged to have been incurred by the Company in connection with any of the
transactions contemplated by this Note or the Warrant and any expenses
(including, without limitation, attorneys' fees and expenses) arising in
connection with any such claim, demand or liability.
4. Covenants of the Company
------------------------
The Company covenants and agrees that, so long as this Note shall be
outstanding and until the obligations incurred hereunder, whether or not
matured, are paid in full, the Company will:
(a) Within forty-five (45) days after the end of each fiscal quarter
(other than the last fiscal quarter of each fiscal year), provide to the Holder
copies of the unaudited financial statements of the Company consisting of a
consolidated balance sheet of the Company and its subsidiaries as of the end of
such quarter and a consolidated statement of income and a consolidated statement
of cash flows of the Company and its subsidiaries for such quarter and for the
portion of the fiscal year through such quarter, all in reasonable detail and
certified (subject to normal year-end audit adjustments) on behalf of the
Company by an officer of the Company as having been prepared in accordance with
generally acceptable accounting principles consistently applied.
(b) Within ninety (90) days after the end of each fiscal year, provide
to the Holder copies of the audited financial statements of the Company
consisting of a consolidated balance sheet and statement of stockholders' equity
of the Company and its subsidiaries as of the end of such fiscal year and a
consolidated statement of income and a consolidated statement of cash flows of
the Company and its subsidiaries for such fiscal year, setting forth in
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<PAGE>
comparative form the corresponding figures for the preceding fiscal year,
certified without qualification as to scope of audit by independent public
accountants of recognized national standing selected by the Company.
(c) Promptly upon any officer of the Company obtaining knowledge
thereof, provide to the Holder written notice of any action, suit, proceeding or
investigation pending or threatened against or affecting the Company or any
subsidiary of the Company or any of its or their respective properties before
any court, governmental agency or regulatory authority (whether federal, state
or local) which could reasonably be expected to have a Material Adverse Effect.
(d) Promptly upon their distribution, provide to the Holder copies of
all financial statements, reports, notices and proxy statements sent by the
Borrower to its security holders generally and all regular and periodic reports,
registration statements and other filings (and all amendments and supplements
thereto) filed by the Borrower from time to time with the Securities and
Exchange Commission or with any national securities exchange on which any of the
Company's securities are listed, and copies of all press releases and other
statements made available generally by the Company to the public concerning
material developments in the business of the Company.
(e) Provide to the Holder such other information respecting the
properties, business affairs, financial condition and/or operations of the
Company and any subsidiary of the Company as the Holder may from time to time
reasonably request.
(f) Promptly pay and discharge all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or upon its income and
profits, or upon any of its property, before the same shall become in default,
as well as all lawful claims for labor, materials and supplies which, if unpaid,
might become a lien or charge upon such property or any part thereof; provided,
however, that the Company shall not be required to pay and discharge any such
tax, assessment, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings and the Company shall set
aside on its books adequate reserves with respect to any such tax, assessment,
charge, levy or claim so contested.
(g) Do or cause to be done all things reasonably necessary to preserve
and keep in full force and effect its corporate existence, rights and franchises
and comply with all laws applicable to the Company, except where the failure to
company would not have a material adverse effect on the Company.
(h) At all times reasonably maintain, preserve, protect and keep its
property used in the conduct of its business in good repair, working order and
condition, and from time to time make all needful and proper repairs, renewals,
replacements, betterments and improvements thereof as shall be reasonably
required in the conduct of its businesses.
8
<PAGE>
(i) Carry on and conduct its business, and cause each of its
subsidiaries to carry on and conduct its business, in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted and to do all things necessary to remain, and cause each of its
subsidiaries to remain, duly incorporated, validly existing and in good standing
as a domestic corporation in its jurisdiction of incorporation and maintain, and
cause each of its subsidiaries to maintain, its qualification as a foreign
corporation in each jurisdiction where the conduct of its business makes such
qualification necessary, except where the failure to maintain such qualification
could not reasonably be expected to have a Material Adverse Effect.
(j) Comply, and cause each of its subsidiaries to comply, in all
material respects with all laws, rules, regulations and governmental orders
(whether foreign, federal, state or local) having applicability to any of them
or to the business or business at any time conducted by any of them.
(k) Maintain, and cause each of its subsidiaries to maintain, with
financially sound and reputable insurance companies insurance on all their
property in such amounts and covering such risks as is consistent with sound
business practice, and furnish to the Holder upon request full information as to
the insurance carried.
(l) Comply, and cause each of its subsidiaries to comply, with all
laws, rules, regulations, orders, writs, judgments, injunctions, decrees or
awards to which it may be subject and obtain all licenses, certificates,
permits, franchises and other governmental authorizations necessary to the
ownership of its properties and the conduct of its business, the failure to
comply with which or obtain which could reasonably be expected to have a
Material Adverse Effect.
(m) At all times keep true and correct books, records and accounts for
itself and each subsidiary pursuant to a system of accounting established and
administered in accordance with generally accepted accounting principles,
consistently applied.
(n) Deliver to the Holder:
(i) promptly, but in any event within three (3) Business Days of
becoming aware of the existence of any condition or event which constitutes
a Default or an Event of Default, a written notice specifying the nature
and period of existence thereof and what action the Company is taking or
proposes to take with respect thereto; and
(ii) prompt notice in writing of any other development, financial
or otherwise, relating specifically to the Company or any of its
subsidiaries which could reasonably be expected to have a Material Adverse
Effect.
(o) Upon at least two (2) Business Days' prior notice, permit the
Holder, by its representatives and agents, to inspect during normal business
hours any of the property,
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<PAGE>
corporate books and financial records of the Company and each subsidiary, to
examine and make copies of the books of accounts and other financial records of
the Company and each subsidiary, and to discuss the affairs, finances and
accounts of the Company and each subsidiary with, and to be advised as to the
same by, their respective officers, employees and independent public accountants
(and by this provision the Company authorizes said accountants to discuss the
finances and affairs of the Company and its subsidiaries).
(p) At all times comply, and cause each of its subsidiaries to comply,
in all material respects with all applicable environmental laws and regulations,
and promptly take any and all necessary remedial actions in response to the
presence, storage, use, disposal, transportation or release of any hazardous
materials on, under or about any real property owned, or, to the extent
permitted by the property owner, leased or operated by the Company or any of its
subsidiaries. In the event that the Company or any subsidiary undertakes any
remedial action with respect to any hazardous material on, under or about any
real property, the Company or such subsidiary shall conduct and complete such
remedial action in compliance in all material respects with all applicable
environmental laws and regulations and in accordance with the policies, orders
and directives of all federal, state and local governmental authorities.
(q) Provide the Holder with prompt written notice of any amendment or
modification of the Senior Credit Agreement or any other document, instrument or
agreement governing or relating to any Senior Debt, or any waiver of any term or
provision thereof. Each such notice shall be accompanied by a description of the
proposed amendment, modification or waiver and a brief explanation of the
principal reasons for such amendment, modification or waiver.
(r) Provide prompt written notice to the lenders under the Senior
Credit Agreement and to the Holder if the Company shall make or propose to make
any payment of interest hereunder using funds on deposit in the Reserve Account.
(s) Use its best efforts to cause all payments of interest hereunder
to be made utilizing cash generated by the Company's operations prior to using
funds on deposit in the Reserve Account to make all or any portion of any such
payment.
5. Financial Covenants
-------------------
(a) Subject to normal year-end and closing audit adjustments for
calculations or determinations made in accordance with generally accepted
accounting principles, consistently applied for all relevant periods:
(i) The Company shall at all times while this Note is outstanding
maintain a Tangible Net Worth of not less than the amount set forth in the
table below for the applicable fiscal year of the Company:
Fiscal Year ending Minimum Tangible
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December 31, Net Worth
------------ ---------
1997 $12,000,000
1998 $13,500,000
1999 and thereafter $15,000,000
For purposes hereof, "Tangible Net Worth" means, as of any date, the total
of: consolidated assets of the Company and its subsidiaries, minus their
consolidated liabilities, minus (A) patents, copyrights, trademarks, trade
names, franchises, licenses, customer and subscription lists, goodwill and
other similar intangibles (excluding net reorganization value), (B)
leasehold improvements, (C) organization expenses, (D) obligations due to
the Company from affiliates (including any officer, director or shareholder
thereof) and (E) security deposits and prepaid costs and expenses and other
deferred assets.
(ii) The Company shall at all times while this Note is
outstanding maintain a Total Funded Indebtedness Ratio of not greater than
the ratio set forth in the table below for the applicable fiscal year of
the Company:
Fiscal Year ending Maximum Total Funded
December 31, Indebtedness Ratio
------------ ------------------
1997 0.8 to 1
1998 0.79 to 1
1999 and thereafter 0.78 to 1
For purposes hereof, "Total Funded Indebtedness Ratio" means, as of any
date, a ratio, the numerator of which shall be an amount equal to the total
consolidated indebtedness of the Company and its subsidiaries (whether
secured, unsecured, assumed, or otherwise) which has a scheduled maturity
date of more than one (1) year from the date of determination, including
any capitalized lease obligations and guaranteed indebtedness of any other
person ("Total Consolidated Indebtedness"), and the denominator of which
shall be the sum of Total Consolidated Indebtedness plus total
stockholders' equity of the Company and its subsidiaries at such date
determined in accordance with generally accepted accounting principles on a
consolidated basis (excluding treasury stock and excluding the effects of
any foreign currency translation adjustments).
(iii) The Company shall at all times while this Note is
outstanding maintain a Senior Funded Indebtedness Ratio of not greater than
the ratio set forth in the table below for the applicable fiscal year of
the Company:
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Fiscal Year ending Maximum Senior Funded
December 31, Indebtedness Ratio
------------ ------------------
1997 0.74 to 1
1998 0.73 to 1
1999 and thereafter 0.72 to 1
For purposes hereof, "Senior Funded Indebtedness Ratio" means, as of any
date, a ratio, the numerator of which shall be an amount equal to the total
outstanding Senior Debt of the Company and its subsidiaries which has a
scheduled maturity date of more than one (1) year from the date of
determination, and the denominator of which shall be the sum of Total
Consolidated Indebtedness plus total stockholders' equity of the Company
and its subsidiaries at such date determined in accordance with generally
accepted accounting principles on a consolidated basis (excluding treasury
stock and excluding the effects of any foreign currency translation
adjustments).
(b) Without limiting any other provision of this Note, and without
prejudice to any other remedies which the Holder may have in respect of a
Default or Event of Default hereunder, during such time as the Company shall
fail to comply fully with each of the financial covenants set forth in
subsection (a) above, the Company agrees that it will not, and will not permit
any subsidiary to:
(i) incur any indebtedness (whether secured, unsecured, funded,
unfunded, assumed, or otherwise), including any capitalized lease
obligations and guaranteed indebtedness of any other person; provided, that
this provision shall not prohibit the Company from issuing preferred stock
or other equity securities; and provided, further, that this provision
shall not prohibit the Company from borrowing under the Senior Credit
Agreement so long as the total indebtedness outstanding under the Senior
Credit Agreement, at all times during the period in which the Company fails
to comply with the provisions of subsection (a) above, does not exceed the
total amount outstanding under the Senior Credit Agreement as of the
initial date that the Company shall have failed to comply with the
provisions of subsection (a) above.
(ii) enter into a transaction (including, without limitation, the
purchase or sale of any property or service) with, or make any payment or
transfer to, any director, officer or other affiliate (including without
limitation any holder of five percent (5%) or more of any class of the
Company's equity securities) except in the ordinary course of business and
pursuant to the reasonable requirements of the Company's or such
subsidiary's business and upon fair and reasonable terms no less favorable
to the Company or such subsidiary than the Company or such subsidiary would
obtain in a comparable arms-length transaction, or
(iii) engage in or consummate any transaction or series of
transactions that would otherwise be permitted under Section 6(c) of this
Note.
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<PAGE>
6. Negative Covenants
------------------
(a) The Company shall not, nor shall it permit any subsidiary to,
permit any amendment or modification to be made to its certificate or articles
of incorporation or by-laws which is materially adverse to the interests of the
Holder as the holder of this Note (provided that the Company shall notify the
Holder of any other amendment or modification thereto as soon as practicable
thereafter). The parties acknowledge and agree that any such amendments or
modifications that are described in the Company's Registration Statement on Form
S-2 as filed with the Securities and Exchange Commission on July 2, 1997 shall
not be subject to the provisions of this section 6(a).
(b) The Company shall not, nor shall it permit any subsidiary to,
enter into any indenture, agreement, instrument or other arrangement which, (i)
directly or indirectly prohibits or restrains, or has the effect of prohibiting
or restraining, or imposes materially adverse conditions upon, the incurrence
and maintenance of the indebtedness evidenced by this Note, or the execution and
delivery of any Subsidiary Guarantee pursuant to the provisions of Section 9 or
any provision of any Subsidiary Guarantee or (ii) contains any provision which
would be violated or breached by the Company's or any subsidiary's performance
of any of its obligations under this Note or any other document, instrument or
agreement related to the transactions contemplated hereby.
(c) The Company will not, nor will it permit any subsidiary to, merge
or consolidate with (except that a subsidiary may merge into the Company or any
wholly-owned subsidiary of the Company), or acquire a majority of the voting
shares of any other entity unless the primary business conducted by such entity
is substantially similar to, or is otherwise in the same line of business as,
the business of the Company and its subsidiaries as presently conducted.
(d) The Company will not, nor will it permit any subsidiary to, lease,
sell or otherwise transfer any property, to any other person or entity except
for (i) sales and leases of inventory in the ordinary course of business, (ii)
leases, sales, transfers or other dispositions of property that, together with
all other property of the Company and its subsidiaries previously leased, sold
or transferred (other than inventory sold or leased in the ordinary course of
business) as permitted by this Section 6(d)(ii) since the date hereof do not
constitute a substantial portion of the property of the Company and its
subsidiaries, and (iii) sales, transfers and other dispositions of property that
is unrelated to the Company's primary business of designing and manufacturing,
and selling and leasing for its own account, portable storage containers.
(e) The Company will not and will not permit any of its subsidiaries
to (a) file or consent to the filing of any consolidated, combined or unitary
income tax return with any person or entity other than the Company and its
subsidiaries or (b) enter into any tax sharing agreement or similar arrangement.
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<PAGE>
(f) The Company will not, and will not permit any person or entity
acting on its behalf to, offer this Note or any part hereof or any similar
securities for issue or sale to, or solicit any offer to acquire any of the same
from, any person or entity so as to bring the issuance and sale of this Note
within the provisions of Section 5 of the Securities Act.
7. Events of Default.
(a) An "Event of Default" shall exist if any of the following occurs and is
continuing:
(i) the Company shall fail to make any payment of principal or
interest on this Note on or before the date such payment is due (provided,
that the Company shall not be deemed to have failed to make an interest
payment if such payment is made with funds on deposit in the Reserve
Account), or the Company shall fail to pay any other amount due hereunder
(other than principal or interest) within ten (10) days of receipt of
written notice from the Holder;
(ii) the Company shall fail to deposit into the Reserve Account
on or before the date that is six (6) months after the date of any
disbursement therefrom any amount necessary to cause the amount on deposit
in the Reserve Account at such time to equal six (6) months' interest under
this Note, based on the principal amount outstanding under this Note at
such time;
(iii) the Company or any subsidiary shall fail to comply with any
other provision hereof, and such failure continues for more than thirty
(30) days after the earlier of the date upon which (i) the Company or such
subsidiary shall have become aware of such failure or (ii) written notice
of such failure shall first have been given to the Company or such
subsidiary by the Holder;
(iv) any warranty, representation or other statement by or on
behalf of the Company or any subsidiary contained herein or in any
instrument furnished in compliance herewith or in reference hereto shall
have been false or misleading in any material respect when made;
(v) any event shall occur or any condition shall exist in respect
of the indebtedness of the Company under the Senior Credit Agreement or
under any agreement securing or relating to such indebtedness, that
immediately or with any one or more of the passage of time or the giving of
notice:
(A) causes such indebtedness, or a portion thereof, to
become due prior to its stated maturity or prior to its regularly
scheduled date or dates of payment; or
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<PAGE>
(B) causes any one or more of the holders thereof or a
trustee therefor to require the Company or any subsidiary to
repurchase such indebtedness from the holders thereof;
(vi) a receiver, liquidator, custodian or trustee of the Company
or any subsidiary, or of all or any substantial part of the property of
either, shall be appointed by court order and such order remains in effect
for more than sixty (60) days, or an order for relief shall be entered with
respect to the Company or any subsidiary, or the Company or any subsidiary
shall be adjudicated a bankrupt or insolvent, or all or any substantial
part of the property of the Company or any subsidiary shall be sequestered
by court order and such order shall remain in effect for more than sixty
(60) days;
(vii) a petition shall be filed against the Company or any
subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and shall not be dismissed within sixty
(60) days after such filing;
(viii) the Company or any subsidiary shall file a petition in
voluntary bankruptcy or seeking relief under any provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, or shall consent to the filing of any petition against
it under any such law;
(ix) the Company or a subsidiary shall make an assignment for the
benefit of its creditors, or admit in writing its inability, or fail, to
pay its debts generally as they become due, or shall consent to the
appointment of a receiver, liquidator or trustee of the Company or a
subsidiary or of all or a substantial part of its property;
(x) a final, non-appealable judgment or judgments in the
aggregate for the payment of money in excess of Two-Hundred Fifty Thousand
Dollars ($250,000) is or are outstanding against one or more of the Company
and the subsidiaries and any one of such judgments shall have been
outstanding for more than sixty (60) days from the date of its entry and
shall not have been discharged in full or stayed;
(xi) the Reserve Account Security Agreement shall fail to remain
in full force or effect or any action shall be taken to discontinue or to
assert the invalidity of the Reserve Account Security Agreement, or the
Company or any subsidiary shall fail to comply with any of the terms and
provisions of the Reserve Account Security Agreement, or the Company denies
the enforceability of the Reserve Account Security Agreement or gives
notice (written or otherwise) to such effect; or
(xii) any Subsidiary Guarantee shall fail to remain in full force
or effect or any action shall be taken to discontinue or to assert the
invalidity or
15
<PAGE>
unenforceability of any Subsidiary Guarantee, or any subsidiary shall fail
to comply with any of the terms or provisions of a Subsidiary Guarantee, or
any subsidiary denies that it has any further liability under a Subsidiary
Guarantee or gives notice (written or otherwise) to such effect.
(b) If any Event of Default specified in Section 7(a)(i) shall exist,
this Note shall automatically become immediately due and payable together with
interest accrued thereon, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived.
(c) If any Event of Default other than those specified in Section
7(a)(i) shall exist and the indebtedness of the Company under the Senior Credit
Agreement shall have been declared due and payable prior to its stated maturity
or prior to its regularly scheduled date or dates of payment pursuant to Section
9.2(a) thereof (or any successor section having similar effect), the holder or
holders of this Note may exercise any right, power or remedy permitted to such
holder or holders by law, and shall have, in particular, without limiting the
generality of the foregoing, the right to declare the entire principal of, and
all interest accrued on, the Note then outstanding to be, and such Note shall
thereupon become, forthwith due and payable, without any further presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived, and the Company shall forthwith pay to the holder or holders of this
Note the entire principal of, and interest accrued on, such Note, subject to the
provisions of Section 12 hereof.
(d) No course of dealing on the part of any holder of the Note nor any
delay or failure on the part of any holder of the Note to exercise any right
shall operate as a waiver of such right or otherwise prejudice such holder's
rights, powers and remedies.
8. Default Rate of Interest
------------------------
Upon the occurrence and during the continuation of an Event of
Default, all outstanding principal, interest and other amounts due hereunder
shall bear interest at the Default Rate.
9. Subsidiary Guarantees
---------------------
The Company shall cause each subsidiary which may from time to time
account for five percent (5%) or more of the Company's consolidated net revenues
or consolidated net assets (a "Material Subsidiary") to execute a guarantee
agreement (a "Subsidiary Guarantee") pursuant to which such subsidiary shall
agree to unconditionally guarantee the full payment and performance as and when
due of all obligations under this Note. Each Subsidiary Guarantee shall be
substantially in the form attached hereto as Exhibit A and shall otherwise be
reasonably acceptable in form and substance to the Holder.
10. Opinion of Company Counsel
--------------------------
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<PAGE>
Upon the closing of the transactions contemplated by this Note, the
Company's legal counsel, Bryan Cave LLP, shall provide a legal opinion,
addressed to the Holder, substantially in the form attached hereto as Exhibit B.
This Section 10 shall constitute direction by the Company to such counsel to
deliver such closing opinion to the Holder.
11. Payment of Fees
---------------
The Company shall pay all reasonable fees, expenses and costs incurred
by the Holder in connection with the issuance of this Note and the Warrant and
the negotiation an documentation of the transactions contemplated hereby and
thereby (including, without limitation, reasonable fees and expenses of Squire,
Sanders & Dempsey L.L.P., special counsel to the Holder).
12. Subordination of Note
---------------------
(a) This Note evidences subordinated debt (all obligations hereunder,
whether principal, interest or otherwise, "Subordinated Debt") and shall be
subordinate and junior in right of payment to all Senior Debt to the extent
provided in this Section 12 and nothing in this Section 12 shall be construed as
a limit on the extent of the secured claim of the Senior Debt lenders. For
purposes hereof, "Senior Debt" means and includes all obligations, liabilities
and indebtedness of the Company now or hereafter existing, whether fixed or
contingent, and whether for principal, interest, fees, expenses, indemnification
or otherwise, which by its terms is senior in right of payment to the
Subordinated Debt (including, without limitation, indebtedness under the Senior
Credit Agreement) and senior in right of payment to any other indebtedness of
the Company which by its terms ranks pari passu with the Subordinated Debt.
(b) The Senior Debt shall continue to be Senior Debt and entitled to
the benefits of these subordination provisions irrespective of any amendment,
modification or waiver of any term of the Senior Debt, any extension or renewal
of the Senior Debt, any refinancing or refunding of the Senior Debt or the
granting or release of any collateral or security securing the repayment of the
Senior Debt.
(c) In the event the Company shall default in the payment of any
principal of, or interest on, any Senior Debt when the same becomes due and
payable, whether at maturity, at a date fixed for prepayment, by declaration of
acceleration or otherwise, then, unless and until such default shall have been
cured or waived or shall have ceased to exist, no direct or indirect payment (in
cash, property or securities or by set-off or otherwise) shall be made or agreed
to be made on account of any Subordinated Debt, or as a sinking fund for any
Subordinated Debt, or in respect of any redemption, retirement, purchase,
prepayment or other acquisition of any Subordinated Debt (including without
limitation any deposit by the Company into the Reserve Account); provided, that
payments from the Reserve Account in accordance with Section 2 shall be
permitted.
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<PAGE>
(d) Upon the occurrence of any Default (as defined in the Senior
Credit Agreement), then, unless and until such Default shall have been cured or
waived in writing or shall have ceased to exist, no direct or indirect payment
(in cash, property or securities or by set-off or otherwise) shall be made or
agreed to be made on account of any Subordinated Debt, or as a sinking fund for
any Subordinated Debt, or in respect of any redemption, retirement, purchase,
prepayment or other acquisition of any Subordinated Debt (including without
limitation any deposit by the Company into the Reserve Account) during any
period of one-hundred eighty (180) days after the time a notice of such Default
shall have been given to the Company by the holders of Senior Debt or the agent
therefor stating that such notice is a "Blockage Notice" given pursuant to this
Section 12(d), other than payments from the Reserve Account in accordance with
Section 2. Only one such period of up to one-hundred eighty (180) days may be
commenced within any three-hundred sixty (360) day period; provided, that if the
Default which is the subject of a Blockage Notice shall have been cured or
waived in writing or shall have ceased to exist within ninety (90) days after
such Blockage Notice shall have been given, then one (1) additional Blockage
Notice may be given, covering a period of up to one-hundred eighty (180) days,
during such three-hundred sixty (360) day period. No Blockage Notice shall be
given with respect to a Default which existed and was known to the holders of
the Senior Debt or the agent therefor at the time the most recent Blockage
Notice was given (unless such Default has been cured or waived in writing for a
period in the interim equal to the greater of (i) thirty (30) days, or (ii) the
number of days from the date of such cure or waiver through and including the
date of the next scheduled payment of interest under this Note). In the event
that the holders of Senior Debt or the agent therefor shall deliver any Blockage
Notice pursuant to this Section 12(d), any payment of principal, interest or
other amounts that, but for such Blockage Notice, would have been payable by the
Company to the holder of any Subordinated Debt during the period covered by such
Blockage Notice shall be immediately due and payable in full upon the expiration
of the period covered by such Blockage Notice.
(e) In the event of
(i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding which
relates to the Company or its property,
(ii) any proceeding for the liquidation, dissolution or other
winding-up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings,
(iii) any assignment by the Company for the benefit of creditors,
or
(iv) any other marshaling of the assets of the Company,
then and in any such event:
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(A) all Senior Debt shall first be paid in full, in cash, before
any payment or distribution, whether in cash, securities or other property
(other than payments from the Reserve Account in accordance with Section
2), shall be made to any holder of any Subordinated Debt on account of any
Subordinated Debt;
(B) any payment or distribution, whether in cash, securities or
other property (other than securities of the Company or any other
corporation provided for by a plan or reorganization or readjustment the
payment of which is subordinated, at least to the extent of the
Subordinated Debt as provided in this Section 12(e), to the payment of all
Senior Debt at the time outstanding and to any Securities issued to the
holders of Senior Debt in respect of the Senior Debt under any such plan or
reorganization or readjustment), that would otherwise (but for this Section
12(e)) be payable or deliverable in respect of Subordinated Debt, shall be
paid or delivered directly to the holders of Senior Debt in accordance with
the priorities then existing among such holders of Senior Debt until all
Senior Debt shall have been paid in full, in cash; and
(C) if any holder of Subordinated Debt fails to file a claim or
proof of debt in respect of such Subordinated Debt in such proceedings at
least thirty (30) business days prior to the latest date permitted by rule
of law or court order for such filing, then the holders of Senior Debt
shall be authorized (but not obligated) to file such claim or proof on
behalf of such holder of Subordinated Debt. Each holder of the Subordinated
Debt agrees that, while it shall retain the right to vote its claim and
otherwise act in any bankruptcy, insolvency or similar proceeding related
to the Company, such holder will not take any act or vote in any way so as
to contest the enforceability of the subordination provisions set forth
herein.
(f) In the event that any Subordinated Debt shall be declared due and
payable as the result of the occurrence of any one or more defaults in respect
thereof, under circumstances when the terms of Section 12(e) of this Note do not
prohibit payment on Subordinated Debt, no direct or indirect payment (in cash,
securities, other property or by set-off or otherwise) shall be made or agreed
to be made on account of any Subordinated Debt, or as a sinking fund for any
Subordinated Debt, or in respect of any redemption, retirement, purchase,
prepayment or other acquisition of any Subordinated Debt, unless and until all
Senior Debt shall have been paid in full, in cash, or such declaration and its
consequences shall have been rescinded and all such defaults shall have been
remedied or waived in writing or shall have ceased to exist.
(g) In the event that
(i) any payment or distribution shall be paid to or collected or
received by any holders of Subordinated Debt in contravention of any of the
terms of this Section 12 and prior to the payment in full, in cash, of the
Senior Debt at the time outstanding, and
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(ii) any holder of such Senior Debt shall have notified such
holders of Subordinated Debt, within ninety (90) days of any such payment
or distribution, of the facts by reason of which such collection or receipt
so contravenes this Section 12,
then and in any such event such holders of Subordinated Debt will deliver such
payment or distribution, to the extent necessary to pay all such Senior Debt in
full, in cash, to the holders of such Senior Debt and, until so delivered, the
same shall be held in trust by such holders of Subordinated Debt as the property
of the holders of such Senior Debt. If after any amount is delivered to the
holders of Senior Debt pursuant to this Section 12(g) and (i) the holders of
Subordinated Debt shall be required by an order or judgment of a court of
competent jurisdiction to disgorge a payment (the "Avoided Payment") received by
them and so paid over (in whole or in part) to the holders of Senior Debt, or
(ii) the outstanding Senior Debt shall thereafter be paid in full, in cash,
without giving effect to such delivery made pursuant to this Section 12(g),
then, in either case, the holders of Senior Debt shall return to such holders of
Subordinated Debt an amount equal to the amount delivered to such holders of
Senior Debt pursuant to this Section 12(g), so long as (in the case of the
immediately preceding clause (ii) only) after the return of such amount the
Senior Debt shall remain paid in full, in cash. For purposes of clause (i) of
the immediately preceding sentence, if less than all of the Avoided Payment was
paid over to the holders of Senior Debt and the holders of Subordinated Debt are
able to satisfy their obligations under such order or judgment in whole or in
part from the portion of the Avoided Payment not so paid over to the holders of
the Senior Debt, the holders of Senior Debt shall not be required to return any
portion of the Avoided Payment in excess of the amount actually required by the
holders of the Subordinated Debt to satisfy their obligations.
(h) Upon the payment in full, in cash, of all Senior Debt, the holders
of Subordinated Debt shall be subrogated to all rights of any holder of Senior
Debt to receive any further payments or distributions applicable to the Senior
Debt until the Subordinated Debt shall have been paid in full, and such payments
or distributions received by the holders of Subordinated Debt by reason of such
subrogation, of cash, securities or other property that otherwise would be paid
or distributed to the holders of Senior Debt, shall, as between the Company and
its creditors other than the holders of Senior Debt, on the one hand, and the
holders of Subordinated Debt, on the other hand, be deemed to be a payment by
the Company on account of Senior Debt, and not on account of Subordinated Debt.
13. Miscellaneous
-------------
(a) The titles of the Sections of this Note appear as a matter of
convenience only, do not constitute a part hereof and shall not affect the
construction hereof. The words "herein," "hereof," "hereunder" and "hereto"
refer to this Note as a whole and not to any particular Section or other
subdivision. References to Sections are, unless otherwise specified, references
to Sections of this Note. References to Exhibits are, unless otherwise
specified, references to Exhibits attached to this Note.
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(b) Each covenant contained herein shall be construed (absent an
express contrary provision herein) as being independent of each other covenant
contained herein, and compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with one or more
other covenants.
(c) THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF ARIZONA (WITHOUT REGARD TO PROVISIONS
THEREOF RELATING TO CONFLICT OF LAWS).
(d) All warranties, representations, certifications and covenants made
by the Company herein or in any certificate or other instrument delivered by it
or on its behalf hereunder at or prior to the closing of the transactions
contemplated hereby shall be considered to have been relied upon by the Holder
and shall survive the delivery of this Note regardless of any investigation made
by the Holder or on its behalf. All statements in any certificate or other
instrument delivered by or on behalf of the Company pursuant to the terms hereof
shall constitute warranties and representations by the Company hereunder. All
payment obligations of the Company hereunder (including, without limitation,
reimbursement obligations in respect of costs, expenses and fees of or incurred
by the holder of the Note) other than the obligation to pay the principal of and
interest on this Note, shall survive the payment or prepayment of the Note and
such interest and the termination hereof.
(e) This Note shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto except that the Company
shall not have the right to assign its rights or obligations hereunder. The
provisions hereof are intended to be for the benefit of all holders, from time
to time, of this Note, and shall be enforceable by any such holder. This Note
shall not be deemed to confer any right or benefit upon any person other than
the parties hereto and their successors and permitted assigns.
(f) This Note may be amended, and the observance of any term hereof
may be waived, with (and only with) the written consent of the Company and the
Holder.
(g) The Company shall pay when billed the reasonable costs and
expenses (including reasonable attorneys' fees expenses) incurred by the holder
of this Note in connection with the consideration, negotiation, preparation or
execution of any amendments, waivers, consents, standstill agreements and other
similar agreements with respect hereto (whether or not any such amendments,
waivers, consents, standstill agreements or other similar agreements are
executed). At any time when the Company and the holder of this Note are
conducting restructuring or workout negotiations in respect hereof, or an Event
of Default exists, the Company shall pay when billed the reasonable costs and
expenses (including reasonable attorneys' fees and expenses and the fees of
other professional advisors) incurred by the holder of this Note in connection
with inspections made pursuant to this Note and in connection with the
assessment, analysis or enforcement of any rights or remedies that are or may be
available to the holder of this Note. If the Company shall fail to pay when due
any principal of, or interest on, this Note, the Company shall pay to the Holder
of this Note, to the
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extent permitted by law, such amounts as shall be sufficient to cover the costs
and expenses, including but not limited to reasonable attorneys' fees and
expenses incurred by such holder in collecting any sums due on this Note.
(h) The Company agrees to indemnify the Holder of this Note, and its
directors, officers and employees, against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefor whether or not the any holder
of this Note is a party thereto) which any of them may pay or incur arising out
of or relating to this Note, the Warrant, transactions contemplated hereby or
thereby or the direct or indirect application or proposed application of the
proceeds of the Notes, except to the extent that they arise out of the gross
negligence or willful misconduct of the party seeking indemnification. The
obligations of the Company under this Section 13(h) shall survive the payment
and satisfaction of this Note and shall continue to be the liability, obligation
and indemnification of the Company, binding upon the Company.
(i) The Company shall pay all amounts payable with respect to this
Note (without any presentment of such Note and without any notation of such
payment being made thereon) by crediting, by federal funds bank wire transfer,
the account of the holder thereof in any bank in the United States of America as
may be designated in writing by such holder, or in such other manner as may be
reasonably directed or to such other address in the United States of America as
may be reasonably designated in writing by such holder. If any payment due on,
or with respect to, this Note shall fall due on a day other than a business day,
then such payment shall be made on the first business day following the day on
which such payment shall have so fallen due; provided that if all or any portion
of such payment shall consist of a payment of interest, for purposes of
calculating such interest, such payment shall be deemed to have been originally
due on such first following business day, such interest shall accrue and be
payable to (but not including) the actual date of payment, and the amount of the
next succeeding interest payment shall be adjusted accordingly. If any payment
is to be made on the first business day following the day on which the same
shall have fallen due and is not so paid on such first business day, interest
shall accrue thereon (to the extent permitted by applicable law) at the Default
Rate from (in each case) the originally scheduled day of its payment.
(j) This Note constitutes the final written expression of all of the
terms hereof and is a complete and exclusive statement of those terms.
(k) Two or more duplicate originals hereof may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument. This Note may be executed in one or more
counterparts and shall be effective when each party hereto shall have executed a
counterpart hereof (whether or not the other parties hereto shall have signed
that same counterpart), and each set of counterparts that, collectively, show
execution by each party hereto shall constitute one duplicate original.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed by its officer thereunto duly authorized as of this ___ day of July,
1997.
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MOBILE MINI, INC.
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
ARIZONA LAND INCOME CORPORATION
By: __________________________
Name: ________________________
Title: _______________________
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EXHIBIT A
[FORM OF SUBSIDIARY GUARANTEE]
SUBORDINATED GUARANTEE (as amended from time to time, this "Guarantee")
dated as of __________, 199__, by (the "Guarantor"), a ____________ corporation,
in favor of ARIZONA LAND INCOME CORPORATION (together with its successors and
assigns, the "Lender").
WITNESSETH:
WHEREAS, Mobile Mini, Inc., a Delaware corporation (together with its
successors, assigns and transferees, the "Company"), has delivered to the Lender
that certain and the Lender have entered into that certain Senior Subordinated
Promissory Note dated July 31, 1997 (as amended, modified, waived or restated
from time to time, the "Note"); and
WHEREAS, the Company, pursuant to the Note, has agreed to cause the
Guarantor to guaranty the payment and performance of all obligations of the
Company arising under, or in respect of, the Note and all other documents
executed in connection therewith, as hereinafter provided; and
WHEREAS, the Guarantor will, as a [wholly-owned] subsidiary of the Company,
derive substantial benefits from the loan made by the Lender to the Company as
evidenced by the Note; and
WHEREAS, the Guarantor is willing to execute this Guarantee in order to
induce the Lender to make such loan;
NOW THEREFORE, in order to induce the Lender to make the loan which is
evidenced by the Note and in consideration of the premises and mutual agreements
set forth herein, and other good and valuable consideration to the Guarantor
paid (the receipt and sufficiency of which are hereby acknowledged), the
Guarantor hereby agrees with the Lender as follows:
1. Definitions.
Terms used herein and not otherwise defined herein shall have the
respective meanings given to such terms in the Note.
2. Guaranteed Obligations.
The Guarantor hereby irrevocably and unconditionally guaranties to the
Lender and to the holders from time to time of the Note, as and for its own
debt, until final and indefeasible payment has been made, the due and punctual
payment of the principal of, and interest on, the
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Note at any time outstanding, and the due and punctual payment of all amounts
payable, and all other indebtedness owing, by the Company under the Note and any
the other documents, instruments or agreements executed in connection therewith
(all such obligations so Guaranteed are herein collectively referred to as the
"Guaranteed Obligations"), in each case when and as the same shall become due
and payable, whether at maturity, pursuant to mandatory or optional prepayment,
by acceleration or otherwise, all in accordance with the terms and provisions
thereof; it being the intent of each Guarantor that the guaranty set forth
herein shall be a guaranty of payment and not a guaranty of collection.
3. Performance under this Guarantee.
In the event the Company fails to pay when due any payment of principal or
interest on the Note, the Guarantor shall, upon demand of the holder of the Note
to whom such payment is due, but subject to Section 14 hereof, immediately pay
to such holder the entire amount of the Guaranteed Obligations due to such
holder at such time.
4. Waivers.
To the fullest extent permitted by law, the Guarantor does hereby waive:
(a) notice of acceptance of this Guarantee;
(b) notice of any purchase of the Note or the creation, existence or
acquisition of any of the Guaranteed Obligations;
(c) notice of the amount of the Guaranteed Obligations, subject,
however, to the Guarantor's right to make inquiry of the holder of the Note
to ascertain the amount of the Guaranteed Obligations at any reasonable
time;
(d) notice of adverse change in the financial condition of the
Company, any other guarantor of the Note or any other fact that might
increase the Guarantor's risk hereunder;
(e) notice of presentment for payment, demand, protest, and notice
thereof as to the Note or any other instrument;
(f) notice of any Event of Default;
(g) all other notices (except if such notice is specifically otherwise
required to be given to the Guarantor under this Guarantee) and demands to
which the Guarantor might otherwise be entitled;
(h) the right by statute or otherwise to require any holder of the
Note to institute suit against the Company or to exhaust the rights and
remedies of any holder of the Note against the Company or any other
guarantor of the Note, the Guarantor
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being bound to the payment of each and all Guaranteed Obligations, whether
now existing or hereafter accruing, as fully as if such Guaranteed
Obligations were directly owed by the Guarantor;
(i) any defense arising by reason of any disability or other defense
(other than the defense that the Guaranteed Obligations shall have been
fully and finally performed and indefeasibly paid) of the Company or by
reason of the cessation from any cause whatsoever of the liability of the
Company in respect of the Guaranteed Obligations;
(j) any stay (except in connection with a pending appeal), valuation,
appraisal, redemption or extension law now or at any time hereafter in
force which, but for this waiver, might be applicable to any sale made
under any judgment, order or decree based on the Note as well as any
redemption in respect of any such judgment, order or decree; and Guarantor
covenants that it will not at any time insist upon or plead, or in any
manner claim or take the benefit or advantage of such law; and
(k) any claim of any nature arising out of any right of indemnity,
contribution, reimbursement or any similar right, or any claim of
subrogation arising, in respect of any payment made under this Guarantee or
in connection with this Guarantee, against the Company or the estate of the
Company, in each case if, and for so long as, the Company is the subject of
any proceeding brought under Title 11 of the United States Code, or any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, and further agrees that it will not file any claims
against the Company or the estate of the Company in the course of such
proceeding in respect of the rights referred to in this clause (k), and
further agrees that any of the holders of the Note may specifically enforce
the provisions of this clause (k).
Until all of the Guaranteed Obligations shall have been indefeasibly paid in
full, the Guarantor shall have no right of subrogation, reimbursement, or
indemnity whatsoever in respect thereof and no right of recourse to or with
respect to any assets or property of the Company. Nothing shall discharge or
satisfy the obligations of the Guarantor hereunder except the full and final
performance and indefeasible payment of the Guaranteed Obligations.
5. Releases.
The Guarantor consents and agrees that, without notice to or by the
Guarantor and without affecting or impairing the obligations of the Guarantor
hereunder, each holder of the Note and/or any agent acting on behalf of the
holders of the Note, in the manner provided in the Note, by action or inaction,
may
(a) compromise or settle, extend the period of duration or the time
for the payment of, or may refuse to, or otherwise not, enforce, or may, by
action or inaction,
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release all or any one or more parties to, the Note or any related
document, instrument or agreement,
(b) grant other indulgences to the Company in respect thereof,
(c) amend or modify in any manner and at any time (or from time to
time) any one or more of the Note or any related document, instrument or
agreement,
(d) release or substitute any one or more of the endorsers or
guarantors of the Guaranteed Obligations, whether parties hereto or not,
and
(e) exchange, enforce, waive, or release, by action or inaction, any
security for the Guaranteed Obligations or any other guaranty of the Note.
6. Marshaling; Return of Payments.
The Guarantor consents and agrees:
(a) that neither the holders of the Note nor any agent therefor shall
be under any obligation to marshal any assets in favor of the Guarantor, or
against or in payment of any or all of the Guaranteed Obligations, and
(b) that, to the extent the Company makes a payment or payments to any
holder of the Note, which payment or payments or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set
aside, or required, for any of the foregoing reasons or for any other
reason, to be repaid or paid over to a custodian, trustee, receiver, or any
other party under any (i) bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law, whether now or hereinafter in effect, of any jurisdiction,
(ii) common law, or (iii) equitable cause, then to the extent of such
payment or repayment, the obligation or part thereof intended to be
satisfied thereby shall be revived and continued in full force and effect
as if said payment or payments had not been made and the Guarantor shall be
primarily liable for such obligation.
7. Liability.
The Guarantor agrees that its liability in respect of this Guarantee shall
be immediate and shall not be contingent upon the exercise or enforcement by any
holder of the Note and/or any agent therefor of whatever remedies such Person
may have against the Company or any other guarantor or the enforcement of any
lien or the realization upon any security such person may at any time possess.
8. Primary Obligations.
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<PAGE>
This Guarantee is a primary and original obligation of the Guarantor and is
an absolute, unconditional, continuing, and irrevocable guaranty of payment and
shall remain in full force and effect without respect to future changes in
conditions, including change of law or any invalidity or irregularity with
respect to the issuance of any obligations (including, without limitation, the
Note) of the Company to any holder of the Note, or with respect to the execution
and delivery of any agreement (including, without limitation, the Note) by the
Company for the benefit of any holder of the Note and/or any agent therefor.
9. No Election.
No election to proceed in one form of action or proceeding, or against any
party, or on any obligation, shall constitute a waiver by any holder of the Note
and/or any agent for the holders of the Note of its right to proceed in any
other form of action or proceeding or against other parties unless such holder
and/or such agent has expressly waived such right in writing. Specifically, but
without limiting the generality of the foregoing, no action or proceeding by any
holder of the Note and/or any agent for the holders of the Note shall serve to
diminish the liability of the Guarantor hereunder except to the extent that such
holder of the Note or such agent finally and unconditionally shall have realized
payment by such action or proceeding, notwithstanding the effect of any such
action or proceeding upon the Guarantor's right of subrogation against the
Company.
10. Delay or Omission; No Waiver.
No course of dealing on the part of any holder of the Note or any agent
therefor and no delay or failure on the part of any such Person to exercise any
right under this Guarantee shall impair such right or operate as a waiver of
such right or otherwise prejudice such person's rights, powers and remedies
hereunder. Every right and remedy given by this Guarantee or by law to any
holder of the Note may be exercised from time to time as often as may be deemed
expedient by such person.
11. Restoration of Rights and Remedies.
If any holder of the Note or any agent therefor shall have instituted any
proceeding to enforce any right or remedy under this Guarantee and such
proceeding shall have been discontinued or abandoned for any reason, or shall
have been determined adversely to such holder, then and in every such case such
holder and the Guarantor shall, except as may be limited or affected by any
determination in such proceeding, be restored to their respective former
positions hereunder, and thereafter the rights and remedies of such holder of
the Note shall continue as though no such proceeding had been instituted.
12. Representations of the Guarantor.
(a) Information. The Guarantor is
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<PAGE>
(i) fully aware of the financial condition of the Company and delivers
this Guarantee based solely upon its own independent investigation thereof
and in no part upon any representation or statement of any holder of the
Note with respect thereto, and
(ii) in a position to obtain, and hereby assumes full responsibility
for obtaining, any additional information concerning the financial
condition of the Company as it may deem material to its obligations
hereunder, and the Guarantor is not relying upon, nor expecting, such
holder to furnish it any information in any holder of the Note's or any
other party's possession concerning the financial condition of the Company.
(b) Financial Condition. The Guarantor warrants and represents to the
Lender that, as of the Closing Date:
(i) the Fair Market Value of the assets of the Guarantor, taken as a
whole, exceeds its liabilities (after giving effect to the execution and
delivery of this Guarantee) taken as a whole;
(ii) the Guarantor is meeting its liabilities as they mature and has
sufficient capital to conduct its business;
(iii) the Guarantor is entering into this Guarantee without actual
intent to hinder, delay or defraud either present or future creditors; and
(iv) there are not now pending any material court or administrative
proceedings or undischarged judgments against the Guarantor, and no federal
or state tax liens have been filed or threatened against the Guarantor, nor
is the Guarantor in default or claimed default under any agreement for
borrowed money.
13. Miscellaneous.
(a) Expenses. The Guarantor will reimburse each holder of the Note for all
reasonable out-of-pocket costs of collection or enforcement (including, without
limitation, attorneys' fees and expenses) incurred in enforcing the obligations
of the Guarantor under this Guarantee.
(b) Amendments. This Guarantee may, from time to time and at any time, be
amended by, and only by, an instrument or instruments in writing executed by the
Guarantor and the holders of the Note at the time outstanding.
(c) Successors and Assigns. All covenants, agreements, representations and
warranties made herein and in certificates delivered in connection herewith by
or on behalf of the Guarantor shall bind the successors and assigns of the
Guarantor, whether so expressed or
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<PAGE>
not, and all such covenants, agreements, representations and warranties shall
inure to the benefit of all holders from time to time of the Note.
(e) Governing Law. THIS GUARANTEE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ARIZONA (WITHOUT REGARD TO ANY
CONFLICTS OF LAWS PRINCIPLES). THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ARIZONA STATE COURT
IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTEE AND THE
GUARANTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT.
(f) Headings, etc. Any headings or captions preceding the text of the
several sections hereof are intended solely for convenience of reference and
shall not constitute a part of this Guarantee nor shall they affect its meaning,
construction or effect. Each covenant contained in this Guarantee shall be
construed (absent an express contrary provision therein) as being independent of
each and every other covenant contained herein and compliance with any one
covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any and all other covenants.
14. Subordination of this Guarantee.
The Guaranteed Obligations are subordinate and junior in right of payment
to any and all (a) indebtedness and contingent obligations of the Guarantor
owing to the holders of Senior Debt in respect of the Senior Debt and (b)
indebtedness or securities of the Guarantor payable to the Company or any of its
subsidiaries and pledged as collateral security for the repayment of Senior
Debt, in each case, to the same extent and on the same terms as the Subordinated
Debt is subordinated to the Senior Debt pursuant to Section 12 of the Note. The
subordination provisions contained in Section 12 of the Note are hereby
incorporated in their entirety herein by this reference thereto.
15. Liability of the Guarantor.
It is understood that while the amount of the Guaranteed Obligations
guaranteed hereby is not limited, if in any action or proceeding involving any
state, federal or foreign bankruptcy, insolvency or other law affecting the
rights of creditors generally, this Guarantee would be held or determined to be
void, invalid or unenforceable on account of the amount of the aggregate
liability under this Guarantee with respect to the Guarantor, then,
notwithstanding any other provision of this Guarantee to the contrary, the
aggregate amount of such liability shall, with respect to the Guarantor, without
any further action of the Lender or any other Person, be automatically limited
and reduced with respect to the Guarantor to the highest amount which is valid
and enforceable as determined in such action or proceeding.
[Remainder of page intentionally blank. Next page is signature page.]
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IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be executed
and delivered as of the date first hereinabove mentioned.
[_______________________]
By: ____________________
Name: __________________
Title: _________________
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EXHIBIT B
[Form of Opinion of Counsel for the Company]
July 31, 1997
Arizona Land Income Corporation
2999 North 44th Street, Suite 100
Phoenix, Arizona 85018
Ladies and Gentlemen:
Reference is made to that certain Senior Subordinated Promissory Note
dated July 31, 1997 (the "Note"), made by Mobile Mini, Inc. a Delaware
corporation (the "Company), in favor of Arizona Land Income Corporation (the
"Lender"). Capitalized terms used herein and not defined herein have the
meanings specified by the Note.
We have acted as counsel to the Company in connection with the
transactions contemplated by Note. In acting as such counsel, we have examined:
(a) the Note;
(b) the Stock Purchase Warrant dated as of July 31, 1997 issued by the
Company to the Lender in connection with the transactions contemplated by
the Note (the "Warrant"); and
(c) such other documents, instruments and agreements relating to the
transactions contemplated by the Note and the Warrant as we have deemed
relevant in connection with this opinion.
The Note and the Warrant are herein collectively referred to as the Transaction
Documents.
We have relied on certificates of, or communications from, public
officials as to the matters covered therein. We have relied upon the accuracy of
representations and warranties of the Company in the Transaction Documents as to
factual matters underlying the opinions expressed herein. In our examination, we
have assumed the genuineness of all signatures of all parties (other than
signatures on behalf of the Company), the authenticity of all documents
submitted to us as originals and the conformity to the appropriate authentic
original documents of all documents submitted to us as certified, confirmed or
photostatic copies. We have further
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assumed the due authorization, execution and delivery of the Transaction
Documents by, or on behalf of, all parties thereto, other than the Company. To
the extent that the obligations of the Company may be dependent upon such
matters, we assume that (a) all parties to the Transaction Documents (other than
the Company) are duly organized, validly existing and in good standing under the
laws of the jurisdiction in which such parties are organized, (b) that such
parties (other than the Company) have all requisite governmental certificates of
authority, licenses, permits, consents and qualifications to engage in the
transactions covered by this opinion and (c) that each document executed by such
parties (other than the Company) has been duly executed by its officer or
officers and that each such document is its legal, valid, binding and
enforceable obligation.
Based upon the foregoing, and in reliance thereon and subject to the
assumptions, limitations, qualifications and exceptions hereinafter set forth,
we are of the following opinions:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, is duly qualified
and in good standing as a foreign corporation in each state where the failure to
be so qualified would have a Material Adverse Effect and has all requisite
corporate power and authority to execute and deliver the Transaction Documents
and consummate the transactions contemplated thereby.
2. The Company has the requisite corporate power and authority to
execute, deliver and issue the Transaction Documents and to perform its
obligations thereunder in accordance with the terms thereof.
3. Each of the Transaction Documents has been duly authorized by all
necessary corporate action on the part of the Company (no action on the part of
the stockholders of the Company being required in respect thereof), has been
executed and delivered by one or more duly authorized officers of the Company
and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms except as such
enforceability may be limited by the effect of (i) applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent conveyance or
other similar laws, statutes, or rules of general application relating to, or
affecting, the enforcement of creditors' rights, and (ii) general equitable
principles, regardless of whether considered in a proceeding at law or in
equity.
4. The shares of Common Stock issuable upon exercise of the Warrant
have been duly and validly reserved and, when issued in accordance with the
terms of the Warrant, will be duly and validly issued, fully paid and
nonassessable.
5. The issuance of the shares of Common Stock issuable upon exercise
of the Warrant, the execution, delivery and issuance of the Transaction
Documents by the Company and the performance by the Company of its obligations
thereunder and the consummation of the transactions contemplated thereby do not
and will not (a) violate any provision of any applicable law, rule or regulation
(including, without limitation, laws with respect to the maximum allowable rate
of interest), or of any order, writ, judgment, decree, determination or award
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known to us, which is presently in effect having applicability to the Company,
(b) conflict with or result in a breach of, or constitute a default under, any
indenture, loan or credit agreement or other material agreement or instrument
known to us to which the Company is a party or by which the Company or any of
its property is bound, or (c) result in or require the creation or imposition of
any material lien upon or with respect to any of the properties now owned or
hereafter acquired by the Company.
6. All required consents, approvals and authorizations, and all
designations, declarations, filings, registrations, qualifications and
recordations required on the part of the Company in connection with the issuance
of the shares of Common Stock issuable upon exercise of the Warrant, the
execution, delivery and issuance of the Transaction Documents, the use of the
proceeds thereof and the consummation of the transactions contemplated thereby
have been obtained.
7. To our knowledge, there is no action, suit, proceeding,
governmental investigation or arbitration pending or threatened against the
Company or any material property thereof before any court or arbitrator or any
governmental or administrative body, agency or official which challenges the
validity, or seeks to enjoin the performance of, any of the Transaction
Documents, the consummation of any of the transactions contemplated thereby the
issuance of the shares of Common Stock issuable upon exercise of the Warrant or
which could reasonably be expected to have a Material Adverse Effect.
8. The Note is not required to be registered under the Securities Act
of 1933, as amended, and the Company is not required to qualify an indenture
with respect to the Note under the Trust Indenture Act of 1939, as amended.
9. The offer, sale and issuance of the Warrant in conformity with the
terms thereof constitute transactions exempt from the registration requirements
of Section 5 of the Securities Act of 1933, as amended, and from the
registration and qualification requirements of applicable state securities laws,
and, under such federal and state laws as they presently exist, the issuance of
the shares of Common Stock issuable upon exercise of the Warrant would be exempt
from such registration and qualification requirements.
10. The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, and the Company is not a
"holding company" or an "affiliate" of a "holding company," or a "subsidiary
company" of a "holding company," or a "public utility" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
3
<PAGE>
This opinion is limited to the laws and regulations of the United
States of America, the State of Arizona and the General Corporation Law of the
State of Delaware, in each case as in effect on the date of this letter. We
assume no obligation to advise you of any changes in the foregoing laws
subsequent to the delivery of this opinion.
Very truly yours,
4
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Agreement"), dated as of the 31st day of July,
1997, is entered into by and between MOBILE MINI, INC., a Delaware corporation
(the "Company"), and ARIZONA LAND INCOME CORPORATION, an Arizona corporation
(the "Lender").
RECITALS:
--------
A. The Company and the Lender have entered into a financing
transaction pursuant to which the Company has executed that certain Senior
Subordinated Promissory Note dated July 31, 1997 (the "Note") in favor of the
Lender. All capitalized terms used as defined terms in this Agreement, unless
otherwise expressly provided herein, shall have the meaning set forth in the
Note.
B. Pursuant to the Note, the Company has agreed to establish an
interest reserve account (the "Reserve Account") and to grant to the Lender a
security interest in such Reserve Account to secure all obligations of the
Company arising under the Note in accordance with the terms of this Agreement.
AGREEMENTS:
----------
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the Company and the Lender agree as follows:
I. Security Interest. The Company hereby pledges and grants to the Lender and
its successors and assigns a security interest in all of the Company's right,
title and interest in and to all of the following: (i) the Reserve Account which
has been established at Bank One Arizona, N.A. (the "Bank"), as further
identified on Exhibit A attached hereto, and (ii) any and all funds of the
Company deposited therein and any earnings therefrom (collectively,
"Collateral"); provided, that so long as no Event of Default shall have occurred
and be continuing, the Company shall be entitled to retain for its own account
any interest earned on the Reserve Account. Without limiting the foregoing
pledge and grant of security interest, and regardless of whether an Event of
Default (as defined in the Note) shall have occurred and be continuing, so long
as the Note is outstanding, the Company shall be permitted to use any funds
constituting the Collateral only to pay interest under the Note as set forth
therein. The Company shall promptly provide notice of the foregoing pledge and
security interest to the Bank, in such form as is reasonably acceptable to the
Lender, and shall obtain the acknowledgement of the Bank of the terms thereof.
II. Indebtedness Secured.
--------------------
<PAGE>
A. Description of Indebtedness. This Agreement is made for the purpose of
securing the following:
1. payment of the principal amount of the Note, together with unpaid
interest, and any extension, modification, substitution or renewal thereof; and
2. performance of any and all other obligations of the Company arising
under the Note.
B. Pledge Obligations. The term "Pledge Obligations" as used herein shall
mean, collectively, the monetary, performance and other obligations at any time
secured hereby.
III. Representations and Warranties. The Company represents and warrants and, so
long as any Pledge Obligations remain unpaid or unperformed, shall continuously
represent and warrant that: (i) each instrument or document constituting or
evidencing ownership of the Collateral is genuine and is in all respects what it
purports to be; (ii) the Company is the owner of the Collateral free of all
security interests or other encumbrances other than those granted pursuant to
this Agreement in favor of the Lender, and no effective financing statement
covering the Collateral has been filed or recorded in any public office other
than those filed or recorded pursuant to this Agreement in favor of the Lender;
(iii) the Company is authorized to enter into this Agreement; and (iv) the
security interest granted to the Lender pursuant to this Agreement with respect
to all amounts held in the Reserve Account is a first and prior security
interest in such Collateral.
IV. Affirmative Covenants. So long as any Pledge Obligations remain unpaid, the
Company will defend the Collateral against the claims and demands of all other
parties, will keep the Collateral free from all security interests or other
encumbrances other than the Lender's, and will not sell, transfer, assign,
deliver or otherwise dispose of any of the Collateral or any interest therein
other than in accordance with the terms of the Note without the prior written
consent of the Lender.
V. Remedies. In the event of any Event of Default under the Note arising as a
result of the Company's failure to pay when due any interest thereunder and the
Company's failure to cure such default within ten (10) days after receipt of
written notice thereof (stating that a failure to cure such default will result
in the application of the Collateral to the payment of obligations under the
Note), the Lender shall have the right to apply all or any part of the
Collateral to payment of interest due under the Note. After such application and
provided the obligations of the Company hereunder have been fully satisfied, the
Lender shall hold the balance of the Collateral (if any) for disposal by the
Company or such other person as is entitled thereto by law. The Company shall
remain liable for any and all of its obligations hereunder or under the Note in
excess of any amount so applied.
VI. Miscellaneous.
-------------
2
<PAGE>
A. Waivers. No waiver by the Lender of any of its rights or remedies
hereunder or otherwise shall be considered a waiver of any other or subsequent
right or remedy of the Lender; no delay or omission in the exercise or
enforcement by the Lender of any rights or remedies shall ever be construed as a
waiver of any right or remedy of the Lender; and no exercise or enforcement of
any such right or remedy shall ever be held to exhaust any right or remedy of
the Lender.
B. Preservation of Security Interest. The Lender shall have no
obligation to take, and the Company shall have the sole responsibility for
taking, any and all steps to preserve the Lender's rights against any and all
other parties with respect to the Collateral.
C. Binding Effect, Assignment and Entire Agreement. This Agreement
shall inure to the benefit of, and shall be binding upon, the respective
successors and assigns of the parties hereto. The Company has no right to assign
any of its rights or obligations hereunder without the prior written consent of
the Lender. This Agreement, and the documents executed and delivered pursuant
hereto, constitute the entire agreement between the parties, and may be amended
or modified only by a writing signed on behalf of each party.
D. Governing Law. This Agreement and the transaction evidenced hereby
shall be governed by the laws of the State of Arizona (without reference to the
provisions thereof relating to conflicts of laws).
E. Notice. Whenever it is provided herein that notice, demand,
request, consent, approval or other communication shall or may be given to, or
served upon, any of the parties, or whenever any of the parties hereto desires
to give or serve upon the other any notice, demand, request, consent, approval
or other communication with respect hereto, each such notice, demand, request,
consent, approval or other communication shall be in writing and shall be
effective for any purpose only if given or served by (a) certified or registered
U.S. Mail, postage prepaid, return receipt required, (b) personal delivery with
a signed receipt or (c) a recognized national courier service, addressed as
follows:
If to the Company: MOBILE MINI, INC.
1834 West Third Street
Tempe, Arizona 85281
Attn: Lawrence Trachtenberg
If to the Lender: ARIZONA LAND INCOME CORPORATION
2999 North 44th Street, Suite 100
Phoenix, Arizona 85018
Attn: Tom Hislop
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<PAGE>
Any such notice may be given, in the manner provided in this Section, on either
party's behalf by its attorneys designated by such party by notice hereunder.
Every notice given hereunder shall be effective on the date actually received,
as indicated on the receipt therefor or on the date delivery thereof is refused
by the recipient thereof. Any party hereto may by notice delivered to the other
parties, change its address for purposes of this Agreement.
F. Expenses. The Company shall pay all costs and expenses incurred by the
Lender in enforcing this Agreement and in realizing upon the Collateral,
including, without limitation, if the Lender retains counsel for any such
purpose, its reasonable attorneys' fees and expenses actually incurred.
G. Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original but all of which together shall constitute one and
the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
"the Company" MOBILE MINI, INC.
a Delaware corporation
By:________________________________
Name:______________________________
Title:_____________________________
"the Lender" ARIZONA LAND INCOME CORPORATION, an
Arizona corporation
By:________________________________
Name:______________________________
Title:_____________________________
4
<PAGE>
Exhibit A
RESERVE ACCOUNT
Account No. 4003-8927 at
Bank One
ABA # 1221-00024
44 West Broadway Road
Tempe, AZ 85285
<PAGE>
Exhibit B
NOTICE OF PLEDGE
(see attached)
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED UNLESS
REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR IN
THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY PURSUANT TO AN EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS.
STOCK PURCHASE WARRANT
----------------------
Company: Mobile Mini, Inc., a Delaware corporation
Number of Shares: 50,000
Class of Stock: Common Stock
Initial Exercise Price: $5.00 per share
Issued as of: July 31, 1997
Expiration Date: As described in Section 1
FOR VALUE RECEIVED, the adequacy and receipt of which are hereby
acknowledged, MOBIL MINI, INC., a Delaware corporation, hereby certifies that
ARIZONA LAND INCOME CORPORATION, an Arizona corporation, and its successors and
assigns, are entitled to purchase from the Company at any time and from time to
time on and after the date that is 180 days subsequent to the date hereof until
5:00 p.m. Arizona local time on the Expiration Date at an initial Exercise Price
(as described in Section 1), fully paid and nonassessable shares of Common Stock
of the Company, on the terms and conditions hereinafter set forth. The number of
such shares of Common Stock and the Exercise Price are subject to adjustment as
provided in the Warrant.
1. Certain Definitions. As used in this Warrant, the following terms have
the following definitions:
"Additional Shares of Common Stock" means all shares of Common Stock
issued or issuable by the Company after the date of this Warrant, other than
shares of Common Stock issuable (a) upon the exercise of warrants issued or sold
in connection with the Company's 1994 initial public offering, (b) upon the
exercise of options issued pursuant to the Company's stock option plans in
effect from time to time so long as the exercise price is not less than the Fair
Value of the Common Stock on the date such options are granted, and (c) pursuant
to the
<PAGE>
exercise of warrants issued in connection with a Financing Transaction as
described in Section 1(b) of the Note.
"Common Stock" means the Company's Common Stock, par value $0.01 per
share, and includes any common stock of the Company of any class or classes
resulting from any reclassification or reclassifications thereof which is not
limited to a fixed sum or percentage of par value in respect of the rights of
the holders thereof to participate in dividends and in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Company.
"Company" means MOBILE MINI, INC., a Delaware corporation.
"Convertible Securities" means evidence of indebtedness, shares of
stock or other securities which are at any time directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
"Current Market Price" of a share of Common Stock or of any other
security as of a relevant date means: (i) the Fair Value thereof as determined
in accordance with clause (ii) of the definition of Fair Value with respect to
Common Stock or any other security that is not listed on a national securities
exchange or traded on the over-the-counter market or quoted on NASDAQ, and (ii)
the closing price on such date (excluding any trades which are not bona fide
arm's length transactions) with respect to Common Stock or any other security
that is listed on a national securities exchange or traded on the
over-the-counter market or quoted on NASDAQ. The closing price for each day
shall be (i) the last sale price of shares of Common Stock or such other
security on such date or, if no such sale takes place on such date, the average
of the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which the
same are then listed or admitted to trading, or (ii) if no shares of Common
Stock or if no securities of the same class as such other security are then
listed or admitted to trading on any national securities exchange, the average
of the reported closing bid and asked prices thereof on such date in the
over-the-counter market as shown by the National Association of Securities
Dealers automated quotation system or, if no shares of Common Stock or if no
securities of the same class as such other security are then quoted in such
system, as published by the National Quotation Bureau, Incorporated or any
similar successor organization, and in either case as reported by any member
firm of the New York Stock Exchange selected by the Warrantholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Period" means the period commencing on the date that is 180
days subsequent to the date hereof and ending at 5:00 p.m. Arizona local time on
the Expiration Date.
"Exercise Price" means initially Five Dollars ($5.00) per share,
subject to adjustment as provided in this Warrant.
2
<PAGE>
"Expiration Date" means the date that is five (5) years after the date
hereof.
"Fair Value" means: (i) with respect to a share of Common Stock or any
other security, the Current Market Price thereof, and (ii) with respect to any
other property, assets, business or entity, an amount determined in good faith
by the board of Directors of the Company.
"Indemnified Party" and "Indemnifying Party" have the meanings set
forth in Section 11(e)(iii).
"Lender" means ARIZONA LAND INCOME CORPORATION, an Arizona
corporation, and its successors and assigns.
"Note" means that certain Senior Subordinated Promissory Note dated
July 31, 1997 by the Company in favor of the Lender (as amended, restated,
supplemented or otherwise modified from time to time).
"Registrable Stock" means: (i) all Warrant Shares which are issuable
to the Warrantholders pursuant to the Warrants, whether or not the Warrants have
in fact been exercised and whether or not such Warrant Shares have in fact been
issued, (ii) all Warrant Shares acquired by the Warrantholders pursuant to the
Warrants, and (iii) any shares of Common Stock, whether or not such shares of
Common Stock have in fact been issued, and stocks or other securities of the
Company issued upon conversion of, in a stock split or reclassification of, or a
stock dividend or other distribution on, or in substitution or exchange for, or
otherwise in connection with, such Warrant Shares or in a merger or
consolidation involving the Company or its assets; provided, however, that the
foregoing securities shall not be considered Registrable Stock if they were
previously registered pursuant to Section 11 hereunder or if they are
transferable without registration pursuant to Rule 144(k) under the Securities
Act. For purposes of Section 11, a Warrantholder of record shall be treated as
the record holder of the related Warrant Shares and other securities issuable
pursuant to the Warrants.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Warrant(s)" means this Warrant and any warrants issued in exchange or
replacement of this Warrant or upon transfer hereof.
"Warrantholder(s)" means Lender and its successors and assigns.
"Warrant Shares" means shares of Common Stock issuable to
Warrantholders pursuant to the Warrants.
3
<PAGE>
2. Exercise of Warrant.
(a) Method of Exercise. This Warrant may be exercised, in whole or in
part, at any time and from time to time during the Exercise Period by written
notice to the Company (accompanied by physical surrender of this Warrant) and
upon payment to the Company of the Exercise Price (subject to adjustment as
provided herein) for the shares of Common Stock in respect of which the Warrant
is exercised.
(b) Mandatory Exercise. Commencing two (2) years following the date of
issuance of this Warrant, if the closing price of the Company's common stock
(excluding any trades that are not bona fide arm's length transactions) shall
thereafter exceed $8.75 per share (as adjusted to reflect any stock split,
reverse stock split, stock dividend or other changes in the capitalization of
the Company from time to time and excluding any trades which are not bona fide
arm's length transactions) during each trading day of any period of not less
than twenty (20) consecutive trading days (a "Measurement Period"), the Company
shall have the option of requiring the Warrantholders to exercise this Warrant
in whole or, at the Company's election, in part. If the Company elects to
require the Warrantholders to so exercise this Warrant, the Company shall
provide the Warrantholders with written notice thereof within five (5) trading
days following the end of the relevant Measurement Period, and the
Warrantholders thereafter shall, in accordance with the terms hereof, exercise
this Warrant or portion thereof as to which such notice relates within ninety
(90) days following receipt of such notice.
3. Form of Payout of Exercise Price. Anything contained herein to the
contrary notwithstanding, at the option of the Warrantholders, the Exercise
Price may be paid in any one or a combination of the following forms: (a) by
wire transfer to the Company, (b) by a certified or cashier's check to the
Company, (c) by the cancellation of any indebtedness owed by the Company and/or
any subsidiaries of the Company to the Warrantholder, and/or (d) by the
surrender to the Company of this Warrant, Warrant Shares, and/or the Note (or a
portion thereof), valued at par, having a Fair Value equal to the Exercise
Price.
4. Cashless Exercise. In lieu of exercising this Warrant as specified in
Sections 2 and 3 above, the Warrantholders may from time to time at the
Warrantholders' option convert this Warrant, in whole or in part, into a number
of shares of Common Stock of the Company determined by dividing (A) the
aggregate Fair Value of such shares or other securities otherwise issuable upon
exercise of this Warrant minus the aggregate Exercise Price of such shares by
(B) the Fair Value of one such share.
5. Certificates for Warrant Shares; New Warrant. The Company agrees that
the Warrant Shares shall be deemed to have been issued to the Warrantholders as
the record owners of such Warrant Shares as of the close of business on the date
on which payment for such Warrant Shares has been made (or deemed to be made by
cashless exercise) in accordance with the terms of this Warrant. Certificates
for the Warrant Shares shall be delivered to
4
<PAGE>
Warrantholders within a reasonable time, not exceeding ten (10) days, after this
Warrant has been exercised. A new Warrant representing the number of shares, if
any, with respect to which this Warrant remains exercisable also shall be issued
to the Warrantholders within such time so long as this Warrant has been
surrendered to the Company at the time of exercise.
6. Adjustment of Exercise Price, Number of Shares and Nature of Securities
Issuable Upon Exercise of Warrants.
(a) Exercise Price; Adjustment of Number of Shares. The Exercise Price
shall be subject to adjustment from time to time as hereinafter provided. Upon
each adjustment of the Exercise Price, the Warrantholders shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, a
number of shares determined by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(b) Adjustment of Exercise Price Upon Issuance of Common Stock. In the
event that the Company shall at any time issue or sell any Additional Shares of
Common Stock or Convertible Securities, or declare any dividend or authorize any
other distribution upon any class of stock of the Company payable in Additional
Shares of Common Stock or Convertible Securities, and the Company shall receive
consideration in respect of such issuance, sale, dividend or distribution in an
amount less than the Fair Value of the securities so issued or sold or the
securities with respect to which such dividend or distribution relates, then, in
each such event, the Exercise Price in effect immediately prior to such
issuance, sale, dividend or distribution shall be reduced to a number which
shall be calculated by dividing (A) an amount equal to the sum of (1) the number
of shares of Common Stock outstanding immediately prior to such issuance, sale,
dividend or distribution, multiplied by the then existing Exercise Price plus
(2) the aggregate consideration, if any, received by the Company upon such
issuance, sale, dividend or distribution, by (B) the total number of shares of
Common Stock outstanding immediately after such issuance, sale, dividend or
distribution. In case at any time on or after the date hereof, the Company shall
declare any dividend, or authorize any other distribution, upon any stock of the
Company of any class, payable in Additional Shares of Common Stock or by the
issuance of Convertible Securities, such declaration or distribution shall be
deemed to have been issued or sold (as of the record date) without
consideration. For purposes of this Section 6, the number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this Section 6.
(c) Reorganization, Reclassification, Consolidation, Merger or Sale.
If any capital reorganization or reclassification of the capital stock of the
Company, or any or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of
5
<PAGE>
Common Stock shall be entitled to receive cash, stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the Warrantholders shall thereafter
have the right to purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant upon exercise of this Warrant and in lieu
of the shares of the Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such cash, shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of Common
Stock equal to the number of shares of such Common Stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
and in any such case appropriate provision shall be made with respect to the
rights and interests of the Warrantholders to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Exercise Price
and of the number of shares purchasable and receivable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock securities or assets thereafter deliverable upon the exercise
hereof.
(d) Company to Prevent Dilution. In case at any time or from time to
time conditions arise by reason of action taken by the Company which are not
adequately covered by the provisions of this Section 6, and which might
materially and adversely effect the exercise rights of the Warrantholders under
this Warrant, the Board of Directors of the Company shall, cause an appropriate
adjustment to the Exercise Price and the number of shares purchasable upon
exercise of the Warrants, so as to preserve, without dilution, the exercise
rights of the Warrantholders.
(e) Stock Splits and Reverse Splits. In case at any time the Company
shall subdivide its outstanding shares of Common Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced and the number of shares of Common Stock purchasable
pursuant to this Warrant immediately prior to such subdivision shall be
proportionately increased, and conversely, in case at any time the Company shall
combine its outstanding shares of Common Stock into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares of Common Stock purchasable
upon the exercise of this Warrant immediately prior to such combination shall be
proportionately reduced.
(f) Dissolution, Liquidation and Wind-Up. In case the Company shall,
at any time prior to the expiration of this Warrant, dissolve, liquidate or wind
up its affairs, the Warrantholders shall be entitled, upon the exercise of this
Warrant, to receive, in lieu of the shares of Common Stock of the Company which
such Warrantholders would have been entitled to receive, the same kind and
amount of assets as would have been issued, distributed or paid to such
Warrantholders upon any such dissolution, liquidation or winding up with respect
to such shares of Common Stock of the Company, had such Warrantholders been the
holders of record of the Warrant Shares receivable upon the exercise of this
Warrant on the record date for the
6
<PAGE>
determination of those persons entitled to receive any such liquidating
distribution. After any such dissolution, liquidation or winding up which shall
result in any cash distribution in excess of the Exercise Price provided for by
this Warrant, the Warrantholders may, at each such Warrantholder's option,
exercise the same without making payment of the Exercise Price, and in such case
the Company shall, upon the distribution to said Warrantholders, consider that
said Exercise Price has been paid in full to it and in making settlement to said
Warrantholders, shall deduct from the amount payable to such Warrantholders an
amount equal to such Exercise Price.
(g) Adjustment Certificate. In each case of an adjustment in the
number of shares of Common Stock or other stock, securities or property
receivable on the exercise of the warrants, the Board of Directors of the
Company and the Company's Chief Financial Officer shall compute such adjustment
in accordance with the terms of this Warrant and prepare and duly execute and
deliver to the Warrantholders a certificate setting forth such adjustment and
showing in detail the facts upon which such adjustment is based.
7. Special Agreements of the Company.
(a) Reservation of Shares. The Company covenants and agrees that all
Warrant Shares will, upon issuance, be validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder, and from
all taxes, liens and charges with respect to the issue thereof. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant.
(b) Avoidance of Certain Actions. The Company will not, by amendment
of its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, issue or sale of securities or otherwise, avoid
or take any action which would have the effect of avoiding the observance or
performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in carrying out all of the
provisions of this Warrant and in taking all of such actions as may be necessary
or appropriate in order to protect the rights of the Warrantholders against
dilution or other impairment of their rights hereunder.
(c) Listing on Securities Exchanges; Registration. If, and so long as,
any class of the Company's Common Stock shall be listed on any national
securities exchange (as defined in the Exchange Act), the Company will, at its
expense, obtain and maintain the approval for listing upon official notice of
issuance of all Warrant Shares and maintain the listing of Warrant Shares after
their issuance; and the Company will so list on such national securities
exchange, and will maintain such listing of, any other securities that at any
time are issuable upon exercise of this Warrant if and at the time any
securities of the same class shall be listed on such national securities
exchange by the Company.
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<PAGE>
(d) Information Rights. So long as the Warrantholders hold this
Warrant or any of the Warrant Shares, the Company shall deliver to the
Warrantholders (i) promptly after mailing, copies of all communications to the
shareholders of the Company, and (ii) within two (2) business days after filing
with the SEC, all filings made by the Company under the Securities Act or the
Exchange Act.
(e) Compliance with Law. The Company shall comply with all applicable
laws, rules and regulations of the United States and of all states,
municipalities and agencies of any other jurisdiction applicable to the Company
and shall do all things necessary to preserve, renew and keep in full force and
effect and in good standing its corporate existence and authority necessary to
continue its business.
8. Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. With respect to any
fraction of a share called for upon exercise hereof, such fraction shall be
rounded to the nearest whole share. A fraction of one-half shall be rounded up
to the next highest integer.
9. Notices of Stock Dividends, Subscriptions, Reclassifications,
Consolidations, Mergers, etc. If at any time: (i) the Company shall declare a
cash or stock dividend (or an increase in the then existing dividend rate), or
declare a dividend on Common Stock payable otherwise than in cash out of its net
earnings after taxes for the prior fiscal year, or (ii) the Company shall
authorize the granting to the holders of Common Stock of rights to subscribe for
or purchase any shares of capital stock of any class or of any other rights; or
(iii) there shall be any capital reorganization, or reclassification, or
redemption of the capital stock of the Company, or consolidation or merger of
the Company with, or sale of all or substantially all of its assets to, another
corporation or firm; or (iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company, then the Company shall
give to the Warrantholders at the addresses of such Warrantholders as shown on
the books of the Company, at least twenty (20) days prior to the applicable
record date hereinafter specified, a written notice summarizing such action or
event and stating the record date for any such dividend or rights (or, if a
record date is not to be selected, the date as of which the holders of Common
Stock of record entitled to such dividend or rights are to be determined), the
date on which any such reorganization, reclassification, consolidation, merger,
sale of assets, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected the holders of Common Stock
of record shall be entitled to effect any exchange of their shares of Common
Stock for cash (or cash equivalent), securities or other property deliverable
upon any such reorganization, reclassification, consolidation, merger, sale of
assets, dissolution, liquidation or winding up.
10. Registered Holder, Transfer of Warrants or Warrant Shares.
(a) Maintenance of Registration Books; Ownership of this Warrant. The
Company shall keep at its principal office a register in which the Company shall
provide for the registration, transfer and exchange of this Warrant. The Company
shall not at any time, except
8
<PAGE>
upon the dissolution, liquidation or winding-up of the Company, close such
register so as to result in preventing or delaying the exercise or transfer of
this Warrant.
(b) Exchange and Replacement. To the extent permissible under any
applicable securities laws, this Warrant is exchangeable upon surrender hereof
by the registered holder to the Company at its principal office for new Warrants
of like tenor and date representing in the aggregate the right to purchase the
number of shares purchasable hereunder, each of such new Warrants to represent
the right to purchase such number of shares as shall be designated by said
registered holder at the time of surrender. This Warrant and all rights
hereunder are transferable in whole or in part upon the books of the Company by
the registered holder hereof in person or by duly authorized attorney, and new
Warrants shall be made and delivered by the Company, of the same tenor and date
as this Warrant but registered in the name of the transferee(s), upon surrender
of this Warrant, duly endorsed, to said office of the Company. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and upon surrender and cancellation
of this Warrant, if mutilated, the Company will make and deliver a new Warrant
of like tenor, in lieu of this Warrant, without requiring the posting of any
bond or the giving of any other security. This Warrant shall be promptly
canceled by the Company upon the surrender hereof in connection with any
exchange, transfer or replacement. The Company shall pay all expenses, taxes and
other charges payable in connection with the preparation, execution and delivery
of Warrants pursuant to this Section 10.
(c) Warrants and Warrant Shares Not Registered. The holder of this
Warrant, by accepting this Warrant, represents and acknowledges that this
Warrant and the Warrant Shares are not being registered under the Securities Act
on the grounds that the issuance of this Warrant and the offering and sale of
such Warrant Shares are exempt from registration under Section 4(2) of the
Securities Act as not involving any public offering.
11. Registration.
(a) Incidental Registration. Each time the Company shall determine to
file a registration statement under the Securities Act (other than on Form S-8
or Form S-4) in connection with the proposed offer and sale for money of any of
its equity securities by it or by any of its security holders, the Company will
give written notice of its determination to all holders of Registrable Stock.
Upon the written request of a holder of any Registrable Stock delivered to the
Company within fifteen (15) days following the Company's notice, the Company
will cause all such Registrable Stock, the holders of which have so requested
registration thereof, to be included in such registration statement, all to the
extent requisite to permit the sale or other disposition by the prospective
seller or sellers of the Registrable Stock to be so registered in accordance
with the terms of the proposed offering. If the registration statement is to
cover an underwritten distribution, the Company shall use its best efforts to
cause the Registrable Stock requested for inclusion pursuant to this Section
11(a) to be included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. If, in
9
<PAGE>
the good faith judgment of the managing underwriter of such public offering, the
inclusion of all of the Registrable Stock requested to be registered would
materially and adversely affect the successful marketing of the other shares
proposed to be offered, then the amount of the Registrable Stock to be included
in the offering shall be reduced and the Registrable Stock and the other shares
to be offered (excluding shares to be offered by or for the account of the
Company) shall participate in such offering as follows: the Registrable Stock to
be included in such offering and the other shares of Common Stock to be included
in such offering shall each be reduced pro rata in proportion to the number of
shares of Common Stock proposed to be included in such offering by each holder
of such shares.
(b) Form S-3 Registration. If the Company becomes eligible to use Form
S-3 under the Securities Act or a comparable successor form, the Company shall
use its reasonable efforts to continue to qualify at all times for registration
on Form S-3 or such successor form. The holders of Registrable Stock shall have
a one-time right to request and have effected a registration of shares of
Registrable Stock on Form S-3 or such successor form for a public offering of
shares of Registrable Stock. Such request shall be in writing and shall state
the number of shares of Registrable Stock to be disposed of and the intended
method of disposition. In addition, the Company shall not be obligated to file
and effect a registration statement during the ninety (90) day period following
the end of its fiscal year. The Company may postpone the filing of the
registration statement required hereunder for a reasonable period of time, not
to exceed 90 days during any twelve month period, if the Company has been
advised by legal counsel that such filing would require the disclosure of a
material transaction or other matter and the Company determines reasonably and
in good faith that such disclosure would have a material adverse effect on the
Company. The Company shall give notice to all holders of Registrable Stock of
the receipt of a request for registration pursuant to this Section 11(b) and
shall provide a reasonable opportunity for such holders to participate in the
registration.
(c) Registration Procedures. If and whenever the Company is required
by the provisions of Section 11(a) or 11(b) to effect the registration of
Registrable Stock under the Securities Act, the Company will, at its expense, as
expeditiously as possible:
(i) In accordance with the Securities Act and the rules and
regulations of the Commission, prepare and file with the Commission a
registration statement on the form of registration statement appropriate with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective until the securities covered by such
registration statement to become and remain effective until the securities
covered by such registration statement have been sold, and prepare and file with
the Commission such amendments to such registration statement and supplements to
the prospectus contained therein as may be necessary to keep such registration
statement effective and such registration statement and prospectus accurate and
complete until the securities covered by such registration statement have been
sold; provided, however, that in no event shall the Company be required to keep
any such registration statement effective for a period in excess of twelve (12)
months (plus the
10
<PAGE>
number of days, if any, during such twelve (12) month period that the
Warrantholders shall be restricted from selling shares pursuant to Section 11(e)
hereof);
(ii) If the offering is to be underwritten, in whole or in
part, enter into a written underwriting agreement with the holders of the
Registrable Stock participating in such offering and the underwriter in form and
substance reasonably satisfactory to the Company, the managing underwriter of
the public offering and the holders of the Registrable Stock participating in
such offering;
(iii) Furnish to the holders of securities participating in
such registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters and
holders may reasonably request in order to facilitate the public offering of
such securities;
(iv) Use its best efforts to register to qualify the
securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as such participating holders and
underwriters may reasonably request;
(v) Notify the holders participating in such registration,
promptly after it shall receive notice thereof, of the date and time when such
registration statement and each post-effective amendment thereto has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed;
(vi) Notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration statement or
prospectus or for additional information;
(vii) Prepare and promptly file with the Commission, and
promptly notify such holders of the filing of, such amendments or supplements to
such registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event has
occurred as the result of which any such prospectus or any other prospectus as
then in effect may include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(viii) In case any of such holders or any underwriter for
any such holders is required to deliver a prospectus at a time when the
prospectus then in circulation is not in compliance with the Securities Act or
the rules and regulations of the Commission, prepare promptly upon request such
amendments or supplements to such registration statement and such prospectus as
may be necessary in order for such prospectus to comply with the requirements of
the Securities Act and such rules and regulations;
11
<PAGE>
(ix) Advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or the
initiation or threatening of any proceedings for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(x) Prepare a prospectus supplement or post-effective
amendment to the registration statement or the related prospectus or any
document incorporated therein by reference or file any other required documents
so that, as thereafter delivered to the purchasers of the Registrable Stock, the
prospectus will not contain an untrue statement of material fact or omit to
state any material fact necessary to make the statements therein not misleading;
and
(xi) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available
to the Company's security holders earnings statements satisfying the provisions
of Section 11(a) of the Securities Act, no later than forty-five (45) days after
the end of any twelve (12) month period (or ninety (90) days, if such a period
is a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Stock is sold to underwriters in an underwritten offering, or, if
not sold to underwriters in such an offering, (ii) beginning with the first
month of the Company's first fiscal quarter commencing after the effective date
of a registration statement.
(d) Expense of Registration. All expenses incident to the Company's
performance of or compliance with this Warrant (excluding discounts, commissions
or fees of underwriters, selling brokers, dealer managers or similar securities
industry professionals relating to the distribution of the Registrable Stock or
legal expenses of any person other than the Company) shall be borne by the
Company. The selling holders shall bear any legal expenses incurred by them in
connection with any registration pursuant to this Section 11.
(e) Suspension of Offers and Sales. If, during the effectiveness of a
registration statement filed pursuant to this Section 11, an intervening event
shall have occurred which, in the opinion of the Company's counsel, makes the
prospectus included in such registration statement no longer comply with the
Securities Act, after notice from the Company containing such fact, the
Warrantholders shall make no further sales or other dispositions, or offers
therefor, of securities under such registration statement until it receives from
the Company copies of a new, amended or supplemented prospectus complying with
the Securities Act as soon as practicable after such notice. The Company shall
keep the Warrantholders fully informed of the status of its efforts, which shall
be prompt and diligent, to cause such new, amended or supplemented prospectus to
be available for use by such Warrantholders.
(f) Indemnification.
(i) The Company hereby agrees to indemnify each of the
holders of Registrable Stock against all claims, losses, damages and liabilities
(or actions in respect thereof)
12
<PAGE>
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, preliminary or final
prospectus, or other document incident to any such registration, qualification
or compliance (or in any related registration statement, notification or the
like) or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and to reimburse the holders of
Registrable Stock (including officers and directors of the same and controlling
persons) for any legal and any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action; provided, however, the Company will not be liable in any such case to
the extent that any such claim, loss, damage or liability arises out of or is
based on any untrue statement or omission based upon written information
furnished to the Company by Warrantholders specifically for use therein.
(ii) The Warrantholders severally and not jointly agree to
indemnify the Company and its officers and directors and each person, if any,
who controls any thereof within the meaning of Section 15 of the Securities Act
and their respective successors against all claims, losses, damages and
liabilities (or actions in respect hereof) arising out of or based on any untrue
statement of a material fact contained in any prospectus, offering circular or
other document incident to any registration, qualification or compliance
relating to securities purchased pursuant to the Warrants (or in any related
registration statement, notification or the like) or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading and will reimburse the
Company and each other person indemnified pursuant to this subsection (ii) for
any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage) liability or action;
provided, however, that this subsection (ii) shall apply only if (and only to
the extent that) such statement or omission was made in reliance upon written
information (including, without limitation, written negative responses to
inquiries) furnished to the Company by Warrantholders specifically for use in
such prospectus, or any such other document (or related registration statement,
notification or the like) or any amendment or supplement thereto.
(iii) Each party entitled to indemnification hereunder (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party (at such Indemnifying Party's expense) to assume
the defense of any claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be reasonably satisfactory to the Indemnified Party, and
the Indemnified Party may participate in such defense at such party's expense,
and provided further, that the omission by any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 11(f) except to the extent that the omission results in a
failure of actual notice to the Indemnifying Party and such Indemnifying Party,
in the defense of any
13
<PAGE>
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
(iv) If the indemnification provided for in this Section
11(f) is unavailable or insufficient to hold harmless an Indemnified Party in
respect of any losses, claims, damages, liabilities, expenses or actions in
respect thereof referred to herein, then the Indemnifying Party shall contribute
to the amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages, liabilities, expenses or actions in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand, and the Indemnified Party on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities, expenses or actions as well as any other relevant equitable
considerations, including the failure to give the notice required hereunder. The
relative fault of the Indemnifying Party and the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Indemnifying Party or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Warrantholders agree that it would
not be just and equitable if contributions pursuant to this Section 11(f) were
determined by pro rata allocation or by any other method of allocation which did
not take account of the equitable considerations referred to above. The amount
paid or payable to an Indemnified Party as a result of the losses, claims,
damages, liabilities or actions in respect thereof, referred to above, shall be
deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim. Notwithstanding the contribution provisions of this Section 11(f), in
no event shall the amount contributed by any seller of Registrable Stock exceed
the aggregate net offering proceeds received by such seller from the sale of
Registrable Stock to which such contribution or indemnification claim relates.
No person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation.
(v) The indemnification required by this Section 11(f) shall
be made by periodic payments during the course of the investigation or defense,
as and when bills are received or expenses incurred. Anything contained herein
to the contrary notwithstanding, the liability of any holder of Registrable
Stock under this Section 11(f) shall not exceed the amount of the net proceeds
actually received by such holder from the sale of its Registrable Stock pursuant
to the registration, qualification, notification or compliance in respect of
which such liability arose.
14
<PAGE>
(g) Reporting Requirements Under Exchange Act. The Company shall
maintain the registration of its Common Stock under Section 12 of the Exchange
Act and shall keep effective such registration and shall timely file such
information, documents and reports the Commission may require or prescribe under
Section 13 of the Exchange Act, or otherwise. Immediately upon becoming subject
to the reporting requirements of either Section 13 or 15(d) of the Exchange Act,
the Company shall forthwith upon request, furnish any holder of Registrable
Stock (i) a written statement by the Company that it has complied with such
reporting requirements, (ii) a copy of the most recent annual or quarterly
report of the Company, and (iii) such other reports and documents filed by the
Company with the Commission as such holder may reasonably request in availing
itself of an exemption for the sale of Registrable Stock without registration
under the Securities Act. The Company acknowledges and agrees that the purpose
of the requirements contained in this Section 11(g) is to enable any such holder
to comply with the current public information requirement a contained in Rule
144 under the Securities Act should such holder ever wish to dispose of any of
the securities of the Company acquired by it without registration under the
Securities Act in reliance upon Rule 144 (or any other similar exemptive
provision). In addition, the Company shall take such other measures and file
such other information, documents and reports as shall hereafter be required by
the Commission as a condition to the availability of Rule 144 and Rule 144A
under the Securities Act (or any similar exemptive provision hereafter in
effect).
(h) Stockholder Information. The Company may require each holder of
Registrable Stock as to which any registration is to be effected pursuant to
this Section 11 to furnish the Company such information with respect to such
holder and the distribution of such Registrable Stock as shall be required by
law or by the Commission in connection therewith.
12. Representation and Warranties of the Company. The Company hereby
represents and warrants to and covenants with Lender, each Warrantholder, and
each holder of Warrant Shares that:
(a) Organization and Capitalization of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. As of the date hereof, the authorized capital of the
Company consists of 17,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock, of which 6,739,324 shares of Common Stock and no shares of
Preferred Stock are issued and outstanding. The Company has, and at all times
during the Exercise Period will have, reserved for issuance pursuant to the
Warrants that number of shares of Common Stock that are issuable pursuant to the
Warrants. Except as otherwise described in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996 (as amended) or the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997
(collectively, the "SEC Reports"), no unissued shares of Common Stock are
reserved for any purpose other than for issuance upon the exercise of the
Warrants. As of the date hereof, except as otherwise described in the SEC
Reports or as disclosed to Lender in connection with the Company's proposed
offering of Senior Subordinated
15
<PAGE>
Notes, and except for stock options granted under the Company's employee stock
option plans subsequent to December 31, 1996 and warrants issued to the
underwriters in connection with the Company's 1994 initial public offering, the
Company has not issued or agreed to issue any stock purchase rights or
convertible securities (other than this Warrant), and there are no preemptive
rights in effect with respect to the issuance of any shares of Common Stock. All
the outstanding shares of Common Stock have been validly issued without
violation of any preemptive or similar rights, are fully paid and nonassessable
and have been issued in compliance with all federal and applicable state
securities laws.
(b) Authority. The Company has full corporate power and authority to
execute and deliver this Warrant, to issue the shares of Common Stock issuable
upon exercise of this Warrant, and to perform all of its obligations hereunder,
and the execution, delivery and performance hereof has been duly authorized by
all necessary corporate action on its part. This Warrant has been duly executed
on behalf of the Company and constitutes the legal, valid and binding obligation
of the Company enforceable in accordance with its terms.
(c) No Legal Bar. Neither the execution, delivery or performance of
this Warrant nor the issuance of the shares of Common Stock issuable upon
exercise of this Warrant will (a) conflict with or result in a violation of the
Certificate of Incorporation or By-Laws of the Company, (b) conflict with or
result in a violation of any law, statute, regulation, order or decree
applicable to the Company or any affiliate, (c) require any consent or
authorization or filing with, or other act by or in respect of any governmental
authority, or (d) result in a breach of, constitute a default under or
constitute an event creating rights of acceleration, termination or cancellation
under any mortgage, lease, contract, franchise, instrument or other agreement to
which the Company is a party or by which it is bound.
(d) Validity of Shares. When issued upon the exercise of this Warrant
as contemplated herein, the shares of Common Stock so issued will have been
validly issued and will be fully paid and nonassessable. On the date hereof, the
par value of the Common Stock is less than the Exercise Price per share of
Common Stock.
13. Representations and Warranties of the Warrantholder. The Warrantholder
hereby represents and warrants to and covenants with the Company that:
(a) Accredited Investor. The Warrantholder is an accredited investor
within the meaning of Rule 501(a) of Regulation D promulgated pursuant to the
Securities Act.
(b) Investment Intent. The Warrantholder acknowledges that the Warrant
has not been registered under the Securities Act. The Warrantholder is acquiring
the Warrant for investment purposes and not with a view to the public resale or
distribution thereof. The Warrantholder acknowledges that the Company will be
relying on the representations set forth in this Section 13 in establishing a
private placement exemption for the issuance of this Warrant.
16
<PAGE>
14. Miscellaneous Provisions.
(a) Governing Law. This Warrant shall be deemed to have been made in
the State of Arizona and the validity of this Warrant, the construction,
interpretation, and enforcement thereof, and the rights of the parties thereto
shall be determined under, governed by, and construed in accordance with the
internal laws of the State of Arizona, without regard to principles of conflicts
of law.
(b) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given when personally delivered to
the addressee or five (5) days after being mailed by certified mail, addressed
to the address below stated of the party to which notice is given, or to such
changed address as such party may have fixed by notice:
To the Company: MOBILE MINI, INC.
1834 West Third Street
Tempe, Arizona 85281
Attn: Lawrence Trachtenberg
To the Warrantholders ARIZONA LAND INCOME CORPORATION
Or holder of Warrant Shares: 2999 North 44th Street, Suite 100
Phoenix, Arizona 85018
Attn: Tom Hislop
provided, however, that any notice of change of address shall be effective only
upon receipt.
(c) Successors and Assigns. This Warrant shall be binding upon and
inure to the benefit of the Company, Lender, the Warrantholders and the holders
of Warrant Shares and the successors, assigns and transferees of the Company,
Lender, the Warrantholders and the holders of Warrant Shares.
(d) Attorneys' Fees. The Company agrees to pay, on demand, all
attorneys' fees (include attorneys' fees incurred pursuant to proceedings
arising under the Bankruptcy Code) and all other costs and expenses which may be
incurred by the Warrantholders and the holders of Warrant Shares in connection
with any amendment to this Warrant which may be requested by the Company and/or
in any action or proceeding in which the Company is not the prevailing party, if
such action or proceeding is in connection with, arising out of, or
consequential to the protection, assertion, or enforcement of rights under this
Warrant.
(e) Entire Agreement; Amendments and Waivers. This Warrant sets forth
the entire understanding of the parties with respect to the transactions
contemplated hereby. The
17
<PAGE>
failure of any party to seek redress for the violation or to insist upon the
strict performance of any term of this Warrant shall not constitute a waiver of
such term and such party shall be entitled to enforce such term without regard
to such forbearance. This Warrant may be amended, the Company may take any
action herein prohibited or omit to take action herein required to be performed
by it, and any breach of or compliance with any covenant, agreement, warranty or
representation may be waived, only if the Company has obtained the written
consent or written waiver of the majority in interest of the Warrantholders, and
then such consent or waiver shall be effective only in the specific instance and
for the specific purpose for which given.
(f) Severability. If any term of this Warrant as applied to any person
or to any circumstance is prohibited, void, invalid or unenforceable in any
jurisdiction, such term shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or invalidity without in any way affecting any other
term of this Warrant or affecting the validity or enforceability of this Warrant
or of such provision in any other jurisdiction.
(g) Headings. The headings in this Warrant are inserted only for
convenience of reference and shall not be used in the construction of any of its
terms.
(h) Transferability. This Warrant may be assigned, transferred or sold
by Warrantholder only in compliance with the provisions of applicable securities
laws and with the consent of Company which shall not be unreasonably withheld;
provided, however, that no consent of the Company shall be required for any
assignment or transfer of this Warrant to any direct or indirect subsidiary or
parent of the Warrantholders or to any of their officers or employees, or to any
entity in which Warrantholder has a 10% or greater ownership interest.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officers effective as of the date first set forth above.
MOBILE MINI, INC.,
a Delaware corporation
By:_________________________________________
Name:_______________________________________
Title:______________________________________
18
Exhibit 11
MOBILE MINI, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
--------------------------- ----------------------------
<S> <C> <C> <C> <C>
PRIMARY:
Common Shares outstanding, beginning of year 6,739,324 6,739,324 6,739,324 4,835,000
Effect of weighting shares:
Employee stock options 16,193 -- 4,067 --
Conversion of Series A preferred stock -- -- -- 1,900,841
----------- ----------- ----------- -----------
Weighted average number of common shares
and common share equivalents outstanding 6,755,517 6,739,324 6,743,391 6,735,841
=========== =========== =========== ===========
Net Income $ 520,757 $ 322,714 $ 722,519 $ (201,608)
=========== =========== =========== ===========
Net Income per common share and common
share equivalent (Note 1) $ 0.08 $ 0.05 $ 0.11 $ (0.03)
=========== =========== =========== ===========
FULLY DILUTED:
Common Shares outstanding, beginning of year 6,739,324 6,739,324 6,739,324 4,835,000
Effect of weighting shares:
Employee stock options 41,427 -- 21,634 --
Conversion of Series A preferred stock -- -- -- 1,900,841
----------- ----------- ----------- -----------
Weighted average number of common shares
and common share equivalents outstanding 6,780,751 6,739,324 6,760,958 6,735,841
=========== =========== =========== ===========
Net Income $ 520,757 $ 322,714 $ 722,519 $ (201,608)
=========== =========== =========== ===========
Net Income per common share and common
share equivalent (Note 1) $ 0.08 $ 0.05 $ 0.11 $ (0.03)
=========== =========== =========== ===========
</TABLE>
Note 1 - Net income per common share and common share equivalent is calculated
after the effect of an extraordinary item recorded during the quarter
ended March 31, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 486,443
<SECURITIES> 0
<RECEIVABLES> 6,830,995
<ALLOWANCES> 513,440
<INVENTORY> 7,411,453
<CURRENT-ASSETS> 14,787,205
<PP&E> 22,209,818
<DEPRECIATION> 4,382,778
<TOTAL-ASSETS> 73,217,331
<CURRENT-LIABILITIES> 9,043,212
<BONDS> 0
0
0
<COMMON> 67,393
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 73,217,331
<SALES> 10,739,381
<TOTAL-REVENUES> 21,843,251
<CGS> 8,010,356
<TOTAL-COSTS> 18,304,417
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,248,623
<INCOME-PRETAX> 1,290,211
<INCOME-TAX> 567,692
<INCOME-CONTINUING> 722,519
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 722,519
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
