FILED PURSUANT TO RULE 424(B)(1)
REGISTRATION NO. 333-64870
PROSPECTUS
Issuer: United Rentals (North America), Inc.
Guarantors: United Rentals, Inc., our parent company, and, subject to
limited exceptions, our current and future domestic
subsidiaries.
Offer to Exchange: $450,000,000 of 10 3/4% Senior Notes Due 2008, Series B,
guaranteed on a senior unsecured basis by the guarantors and
registered under the Securities Act of 1933.
for
$450,000,000 of 10 3/4% Senior Notes Due 2008, Series A,
guaranteed on a senior unsecured basis by the guarantors.
Expiration Date: The exchange offer will remain open for acceptance for 30
days and will expire at 5:00 p.m. New York City time on
November 15, 2001, subject to our right to extend the
expiration date for up to 60 days. If we elect to extend the
expiration date, the expiration date will in no event be
later than January 14, 2002.
We previously issued $450,000,000 aggregate principal amount of our 10 3/4%
Senior Notes due 2008. These securities were not registered under the
Securities Act of 1933. We are now offering you the opportunity to exchange
these unregistered notes for an equivalent amount of registered notes. The
registered notes will be identical in all material respects to the unregistered
notes, except for certain differences relating to transfer restrictions and
registration rights.
We will pay interest on the notes each April 15 and October 15. The first
interest payment will be made on October 15, 2001. We may redeem the notes on
or after April 15, 2005. Prior to April 15, 2004, we may redeem up to 35% of
the notes from the proceeds of equity offerings. There is no sinking fund for
the notes.
Our obligations under the notes, including full and prompt payment of
principal and interest when due, will be fully and unconditionally guaranteed
on a senior unsecured basis by our parent company, United Rentals, Inc., and,
subject to limited exceptions, our current and future domestic subsidiaries.
Our foreign subsidiaries will not be guarantors.
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INVESTING IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD
CONSIDER IN CONNECTION WITH THIS EXCHANGE OFFER AND AN INVESTMENT IN THE NOTES.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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The date of this prospectus is October 15, 2001.
TABLE OF CONTENTS
Page
----
Cautionary Notice Regarding Forward Looking Statements.. 1
Where You Can Find More Information..................... 1
Incorporation by Reference.............................. 1
Prospectus Summary...................................... 2
Risk Factors............................................ 12
Background to the Issuance of the Notes................. 18
The Exchange Offer...................................... 20
Material United States Federal Income Tax Considerations 27
Registration Rights Agreement........................... 28
Use of Proceeds......................................... 30
Selected Consolidated Financial Information............. 31
Description of the Notes................................ 34
Plan of Distribution.................................... 72
Legal Matters........................................... 73
Experts................................................. 73
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We have not authorized anyone to give any information about this exchange
offer that is not included in this prospectus. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the
registered notes in any place where, or to any person to whom, it is illegal to
do so. Use of this prospectus does not imply in any way that the information in
this prospectus, and our business affairs generally, have not changed since the
date of this prospectus.
-----------------
This prospectus incorporates important business and financial information
about us that is not included in or delivered with this prospectus. This
information is available without charge to you upon written or oral request. If
you would like a copy of any of this information, please submit your request to
United Rentals (North America), Inc., Attention: Corporate Secretary, Five
Greenwich Office Park, Greenwich, Connecticut 06830, telephone number: (203)
622-3131.
IN ORDER TO OBTAIN TIMELY DELIVERY OF ANY INFORMATION YOU MAY REQUEST, YOU
MUST SUBMIT YOUR REQUEST NO LATER THAN NOVEMBER 8, 2001, WHICH IS FIVE BUSINESS
DAYS BEFORE THE DATE THE EXCHANGE OFFER EXPIRES.
i
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in, or incorporated by reference in, this
prospectus are forward-looking in nature. Such statements can be identified by
the use of forward-looking terminology such as "believe," "expect," "may,"
"will," "should," "seek," "on-track," "plan," "intend," or "anticipate" or the
negative thereof or comparable terminology, or by discussions of strategy. You
are cautioned that our business and operations are subject to a variety of
risks and uncertainties and, consequently, our actual results may materially
differ from those projected by any forward-looking statements. Certain of such
risks and uncertainties are discussed below under "Risk Factors." We make no
commitment to revise or update any forward-looking statements in order to
reflect events or circumstances after the date any such statement is made.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements, and other information with the SEC. Such
reports, proxy statements, and other information can be read and copied at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the Public
Reference Room. The SEC maintains an internet site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC, including our company.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the documents that we file
with the SEC. This means that we can disclose important information to you by
referring you to those documents. Any information we incorporate in this manner
is considered part of this prospectus; however, to the extent that there are
any inconsistencies between information presented in this prospectus and
information contained in incorporated documents filed with the SEC before the
date of this prospectus, the information in this prospectus shall be deemed to
supersede the earlier information. Any information we file with the SEC after
the date of this prospectus and until this exchange offer is completed will
automatically update and supersede the information contained in this
prospectus.
We incorporate by reference the following documents that we or our parent
company have filed with the SEC and any filings that we will make with the SEC
in the future under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 during the period from July 10, 2001 (the date of the
initial filing of the registration statement of which this prospectus forms a
part) until this exchange offer is completed:
. Our Annual Report on Form 10-K for the year ended December 31, 2000, as
amended by Amendment No. 1 on Form 10-K/A filed on October 9, 2001;
. The following Quarterly Reports on Form 10-Q filed by us: (1) Report for the
quarter ended March 31, 2001, and (2) Report for the quarter ended June 30,
2001, as amended by Amendment No. 1 on Form 10-Q/A filed on October 9, 2001;
. The following Current Reports on Form 8-K filed by us: (1) Report filed on
January 2, 2001, (2) Report filed on March 2, 2001, (2) Report filed on
April 16, 2001, (4) Report filed on May 1, 2001 and (5) Report filed on July
27, 2001; and
. The Current Report on Form 8-K filed by United Rentals, Inc. on October 5,
2001.
We will provide without charge, upon written or oral request, a copy of any
or all of the documents which are incorporated by reference into this
prospectus. Requests should be directed to: United Rentals (North America),
Inc., Attention: Corporate Secretary, Five Greenwich Office Park, Greenwich,
Connecticut 06830, telephone number: (203) 622-3131.
1
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and the financial statements and related notes that we incorporate
by reference into this prospectus.
Unless otherwise indicated, (i) the term "URI" refers to United Rentals
(North America), Inc., the issuer of the notes, (ii) the term "Holdings" refer
to United Rentals, Inc., the parent of URI and a guarantor of the notes, and
(iii) the terms "United Rentals," "we," "us," "our company" or "the company"
refer to Holdings and its subsidiaries.
The Company
United Rentals is the largest equipment rental company in North America with
more than 740 locations in 47 states, seven Canadian provinces and Mexico. We
offer for rent over 600 different types of equipment to customers that include
construction and industrial companies, manufacturers, utilities,
municipalities, homeowners and others. In 2000, we served more than 1.2 million
customers, completed over 8.4 million rental transactions and generated
revenues and net income of $2.9 billion and $176.4 million, respectively.
We have the largest fleet of rental equipment in the world, with over
500,000 units having an original purchase price of approximately $3.6 billion.
Our fleet includes:
. General construction and industrial equipment, such as backhoes,
skid-steer loaders, forklifts, earth moving equipment, material handling
equipment, compressors, pumps and generators;
. Aerial work platforms, such as scissor lifts and boom lifts;
. General tools and light equipment, such as power washers, water pumps,
heaters and hand tools;
. Traffic control equipment, such as barricades, cones, warning lights,
message boards and pavement marking systems;
. Trench safety equipment for below ground work, such as trench shields,
aluminum hydraulic shoring systems, slide rails, crossing plates,
construction lasers and line testing equipment; and
. Special event equipment, such as large tents, light towers and power units
used for sporting, corporate and other events.
In addition to renting equipment, we sell used rental equipment, act as a
dealer for new equipment and sell related merchandise, parts and service.
Competitive Advantages
We believe that we benefit from the following competitive advantages:
Large and Diverse Rental Fleet. Our rental fleet is the largest and most
comprehensive in the industry.
Significant Purchasing Power. We purchase large amounts of equipment,
merchandise and other items, which enables us to negotiate favorable pricing,
warranty and other terms with our vendors.
Operating Efficiencies. We generally group our branches into clusters of 10
to 30 locations that are in the same geographic area. All equipment within a
cluster can be accessed and marketed by each branch within the cluster, which
increases equipment utilization. We reduce costs by consolidating functions
that are common to all our branches, such as payroll, accounts payable and
credit and collection, into 22 credit offices and three service centers.
Information Technology Systems. Our information technology systems
facilitate our ability to make rapid and informed decisions, respond quickly to
changing market conditions, and share equipment among branches.
2
Geographic and Customer Diversity. We have more than 740 branches in 47
states, seven Canadian provinces and Mexico and serve customers that range from
Fortune 500 companies to small companies and homeowners. In 2000, we served
more than 1.2 million customers and our top ten customers accounted for
approximately 2% of our revenues.
National Account Program. Our National Account sales force is dedicated to
establishing and expanding relationships with larger companies, particularly
those with a national or multi-regional presence. We offer our National Account
customers the benefits of a consistent level of service across North America
and a single point of contact for all their equipment needs.
Risk Management and Safety Programs. We place great emphasis on risk
reduction and safety and believe that we have one of the most comprehensive
risk management and safety programs in the industry.
Experienced Senior Management. Our senior management team is comprised of
executives with proven track records. Our management team includes Bradley S.
Jacobs, John N. Milne and Michael J. Nolan, who together with others founded
our company in September 1997, and Wayland R. Hicks who joined them shortly
thereafter. Messrs. Jacobs, Milne and Nolan previously served as senior
executives at United Waste Systems, Inc., a company that was founded by Mr.
Jacobs in 1989 and sold in August 1997. At the time of sale, it was the sixth
largest provider of integrated, non-hazardous solid waste management services
in the United States. Mr. Hicks previously held senior executive positions at
Xerox Corporation, where he worked for 28 years, including Executive Vice
President, Corporate Operations and Executive Vice President, Corporate
Marketing and Customer Support Operations.
Strong and Motivated Branch Management. We believe that our managers are
among the most knowledgeable and experienced in the industry, and we empower
them--within budgetary guidelines--to make day-to-day decisions concerning
branch matters. Senior management closely tracks branch, district and regional
performance with extensive systems and controls. The compensation of branch
managers and other personnel is linked to their branch's financial performance
and return on assets.
Strategy
We intend to generate further growth and increase our market share by:
. actively managing the composition and size of our fleet to meet
customer needs and respond to local demand;
. promoting equipment sharing and cross-marketing of equipment
specialties;
. focusing on providing outstanding customer service and support;
. marketing our services to National Account customers that can benefit
from our ability to provide a broad selection of equipment and a
consistently high level of service throughout North America;
. training our sales force and branch personnel in value-added sales
techniques;
. continuing to selectively open new branches; and
. continuing to selectively make acquisitions, with our principal focus
being on those that have the potential to be immediately accretive to
earnings.
3
Recent Development
On September 25, 2001, we issued a press release in which we announced a
revised forecast for the third and fourth quarters of 2001. The revised
forecast projects that (1) for the third quarter of 2001, revenues will range
between $790 and $810 million and earnings per share will range between $0.62
and $0.67 and (2) for the fourth quarter of 2001, revenues will range between
$700 million and $730 million and earnings per share will range between $0.32
and $0.37. The revised forecast is lower than earlier estimates. The principal
reason for this revision is that the slowing economy continues to impact our
business, particularly in the western states.
4
Background to Issuance of the Notes
In April 2001, we issued $450 million aggregate principal amount of our
10 3/4% Senior Notes Due 2008. At the same time, we obtained a new senior
secured credit facility comprised of a $750 million term loan and a $750
million revolving credit facility. We used proceeds from the notes and the new
secured credit facility to refinance an aggregate of $1,695.7 million of
indebtedness and other obligations that were outstanding under our old
revolving credit facility, certain term loans and a synthetic lease. See
"Background to the Issuance of the Notes."
The Exchange Offer
The Exchange Offer.......... The 10 3/4% Senior Notes Due 2008 that we issued
as described above were not registered under the
Securities Act of 1933. At the time we issued
these notes, we entered into a registration
rights agreement which obligated us to offer to
exchange the unregistered notes for registered
notes. In order to satisfy this obligation, we
are now offering you the opportunity to exchange
your unregistered notes for an equivalent amount
of registered notes. The notes may be exchanged
only in multiples of $1,000.
Required Representations.... In order to participate in this exchange offer,
you will be required to make certain
representations in a letter of transmittal,
including that:
. you are not affiliated with us;
. you are not a broker-dealer that purchased your
notes directly from us;
. you will acquire the registered notes in the
ordinary course of business;
. either (a) you have not agreed with anyone to
distribute the notes or (b) you have not agreed
with us or our affiliates to distribute the
notes and you are a broker-dealer that
purchased unregistered notes for your own
account as part of market-making or trading
activities; and
. if you are holding the notes as nominee for a
beneficial owner, that the beneficial owner has
made the respresentations set forth above.
Resale of the Registered
Notes..................... We believe that the registered notes acquired in
this exchange offer may be freely traded without
compliance with the provisions of the Securities
Act of 1933 that call for registration and
delivery of a prospectus, except as described in
the following paragraph.
If you are a broker-dealer that purchased
unregistered notes for your own account as part
of market-making or trading activities, you must
deliver a prospectus when you sell registered
notes. We have agreed in the registration rights
agreement to allow you to use this prospectus for
such purpose during the 90-day period following
consummation of the exchange offer (subject to
limitations under certain circumstances). We may
be required to extend this 90-day period under
certain circumstances described herein.
5
If you are a broker-dealer, you will be required
to confirm that you will comply with the
prospectus delivery requirements described above.
Accrued Interest on the
Unregistered Original
Notes..................... Any interest that is accrued on an unregistered
original note that is exchanged will be payable
instead on the new registered note received in
the exchange.
Procedures for Exchanging
Notes..................... In order to exchange notes in this exchange
offer, you must, prior to 5:00 p.m. on the
expiration date:
. deliver the notes to the exchange agent using
the book-entry procedures described herein; and
. agree to be bound by the terms of the
accompanying letter of transmittal in
accordance with the procedures described
herein.
The procedures mentioned above are described
under the heading "The Exchange Offer--Procedures
for Tendering."
Expiration Date............. 5:00 p.m., New York City time, on November 15,
2001, unless the exchange offer is extended.
Exchange Date............... We will notify the exchange agent of the date of
acceptance of the notes for exchange.
Withdrawal Rights........... If you tender your notes for exchange in this
exchange offer and later wish to withdraw them,
you may do so at any time prior to 5:00 p.m., New
York City time, on the day this exchange offer
expires. The procedures for effecting a
withdrawal are described under the heading "The
Exchange Offer--Withdrawal of Tenders."
Acceptance of Original Notes
and Delivery of Registered
Notes..................... We will accept any unregistered original notes
that are properly tendered for exchange prior to
5:00 p.m., New York City time, on the day this
exchange offer expires. The registered notes will
be delivered promptly after expiration of this
exchange offer.
Exchange Offer Conditions... This exchange offer is subject to certain
customary conditions concerning, among other
things, changes to existing law and governmental
approvals. We may waive these conditions.
Tax Consequences............ The exchange of notes in the exchange offer
should not be a taxable event for federal income
tax purposes.
Use of Proceeds............. We will not receive any cash proceeds from this
exchange offer.
Exchange Agent.............. The Bank of New York is serving as the exchange
agent. Their address and telephone number are
provided under the heading "The Exchange
Offer--Exchange Agent."
6
Effect on Holders of
Unregistered Original
Notes..................... Any unregistered original notes that remain
outstanding after this exchange offer will
continue to be subject to transfer restrictions.
These restrictions provide that notes that are
not registered under the Securities Act of 1933
may not be offered or sold, except in a
transaction that is exempt from or not subject to
the registration requirements of such Act. After
this exchange offer, holders of unregistered
original notes will not have any further right to
have their notes exchanged for registered notes
(subject to certain limited exceptions described
under the heading "Registration Rights
Agreement.") As a result, any market for
unregistered original notes that are not
exchanged could be adversely affected by the
conclusion of this exchange offer.
7
Summary of Terms of the Registered Notes
This exchange offer applies to $450 million aggregate principal amount of
the original unregistered notes. The terms of the registered notes will be
essentially the same as the original unregistered notes, except that (1) the
registered notes will not be subject to the restrictions on transfer that apply
to the unregistered original notes, and (2) the registration rights relating to
the original unregistered notes are different than those relating to the
registered notes. The registered notes issued in this exchange offer will
evidence the same debt as the original unregistered notes and both series of
notes will be entitled to the benefits of the same indenture and treated as a
single class of debt securities. Unless otherwise indicated, all references in
the summary below to the "notes" refer to both the original unregistered notes
and the registered notes to be issued in this exchange offer.
Issuer...................... United Rentals (North America), Inc.
Notes Offered............... $450 million aggregate principal amount of 10
3/4% Senior Notes Due 2008 which have been
registered under the Securities Act of 1933.
Maturity.................... April 15, 2008.
Interest Payment Dates...... Each April 15 and October 15, commencing October
15, 2001.
Optional Redemption......... We may redeem some or all of the notes at our
option at any time on or after April 15, 2005, at
the redemption prices listed under "Description
of the Notes--Optional Redemption."
In addition, on or before April 15, 2004, we may,
at our option, use the net proceeds from one or
more public equity offerings to redeem up to 35%
of the aggregate principal amount of the notes
originally issued, at a redemption price of
110.75% of the principal amount thereof, plus
accrued but unpaid interest. See "Description of
the Notes--Optional Redemption."
Guarantees.................. URI's parent and, subject to limited exceptions,
URI's current and future United States
subsidiaries have fully and unconditionally
guaranteed on a senior unsecured basis, jointly
and severally, the full and prompt performance of
URI's obligations under the notes. If an event of
default occurs with respect to the notes, these
guarantees may be immediately enforced, subject
to any grace period to which URI is otherwise
entitled. The guarantees are not secured by any
collateral. URI's foreign subsidiaries are not
guarantors.
Ranking..................... The effective ranking of the notes and guarantees
is as follows:
. the notes rank equally with any other senior
unsecured indebtedness of URI, and each
guarantee ranks equally with any other senior
unsecured indebtedness of the guarantor;
. the notes are senior to all unsecured
subordinated indebtedness of URI, and each
guarantee is senior to all unsecured
subordinated indebtedness of the guarantor;
. the notes are effectively junior to all secured
indebtedness of URI to the extent of the value
of the collateral, and each guarantee is
effectively junior to all secured indebtedness
of the guarantor to the extent of the value of
the collateral; and
. the notes are effectively junior to all
indebtedness and other obligations, including
trade payables, of all our non-guarantor
subsidiaries.
8
On June 30, 2001, (1) URI and the guarantors had
outstanding an aggregate of $1,327.7 million of
secured indebtedness that is effectively senior
to the notes (comprised of $1,295.0 million of
secured indebtedness of URI and $32.7 million of
secured indebtedness of the guarantors), (2)
neither URI nor any guarantor had outstanding any
unsecured indebtedness that ranks senior to the
notes, (3) the non-guarantor subsidiaries had
outstanding an aggregate of $52.6 million of
indebtedness and other obligations that are
effectively senior to the notes, (4) neither URI
nor any guarantor had outstanding and unsecured
indebtedness that ranks equally with the notes
and (5) URI and the guarantors had outstanding an
aggregate of $982.1 million of subordinated
indebtedness that ranks junior to the notes.
The Indenture governing the notes permits URI and
the guarantors to incur additional indebtedness,
including indebtedness that ranks senior or equal
to the notes, subject to certain exceptions.
Change of Control........... If we experience specific kinds of change of
control events, we must offer to repurchase the
notes at a price of 101% of the principal amount
thereof, plus accrued but unpaid interest, if
any, to the date of the repurchase. See
"Description of the Notes--Change of Control."
Certain Covenants........... The Indenture governing the notes contains
certain covenants, including limitations on (i)
indebtedness, (ii) restricted payments, (iii)
liens, (iv) the disposition of proceeds of asset
sales, (v) issuance of preferred stock of
Restricted Subsidiaries (as defined herein), (vi)
transactions with affiliates, (vii) dividend and
other payment restrictions affecting Restricted
Subsidiaries, (viii) designations of Unrestricted
Subsidiaries (as defined herein), (ix) additional
subsidiary guarantees and (x) mergers,
consolidations or sales of substantially all our
assets. These covenants are subject to important
exceptions and qualifications. See "Description
of the Notes--Certain Covenants" and
"--Consolidation, Merger and Sale of Assets,
Etc."
Absence of Public Market.... The registered notes that will be issued in this
exchange offer are new securities for which there
is currently no established trading market. We do
not intend to apply for listing of the registered
notes on any securities exchange or for quotation
of such notes through the Nasdaq National Market.
Accordingly, we cannot provide you with any
assurance as to the development or liquidity of
any market for the notes. If a market for the
registered notes develops, the notes could trade
at a discount from their principal amount.
Although the original unregistered notes are
currently eligible for trading in the Private
Offerings, Resale and Trading through Automated
Linkages ("PORTAL") market of the National
Association of Securities Dealers, Inc., the
registered notes will not be eligible for trading
through PORTAL.
9
Risk Factors
See "Risk Factors" beginning on page 12 for a discussion of certain factors
you should carefully consider in connection with this exchange offer and an
investment in the notes.
Summary Consolidated Financial Information
The tables below present selected consolidated financial information for our
company. You should read this information together with the information set
forth under "Selected Consolidated Financial Information" and the consolidated
financial statements of our company and the related notes which are
incorporated by reference herein.
Certain of our acquisitions were accounted for as purchases and certain
acquisitions were accounted for as poolings-of-interests, including our
September 1998 merger with U.S. Rentals, Inc. For further information
concerning the accounting for these acquisitions, see (1) note 3 to our audited
consolidated financial statements of our company incorporated by reference
herein, and (2) note 2 to the unaudited consolidated financial statements of
our company incorporated by reference herein.
Our previously outstanding Series A Perpetual Convertible Preferred Stock
and Series B Perpetual Convertible Preferred Stock were exchanged for Series C
Perpetual Convertible Preferred Stock and Series D Perpetual Convertible
Preferred Stock, respectively. This exchange was effected subsequent to June
30, 2001. The balance sheet data under the heading "Pro Forma" adjusts the
historical balance sheet data to give effect to the exchange, as if it had
occurred on June 30, 2001.
Six Months Ended
Year Ended December 31, June 30,
-------------------------- -----------------
1998 1999 2000 2000 2001
------ ------ ------ ------ ------
(dollars in millions, except per share data)
Income statement data:
Total revenues............................................ $1,220 $2,234 $2,919 $1,309 $1,387
Gross profit.............................................. 423 825 1,089 478 489
Restructuring charge...................................... 29
Operating income.......................................... 145 409 548 226 185
Interest expense.......................................... 64 140 229 106 115
Preferred dividends of a subsidiary trust................. 8 20 20 10 10
Income before provision for income taxes and extraordinary
item.................................................... 78 242 301 110 53
Extraordinary items, net(1)............................... 21 11
Net income(2)............................................. 13 143 176 65 17
Basic earnings per share before extraordinary item........ $ 0.53 $ 2.00 $ 2.48 $ 0.90 $ 0.40
Diluted earnings per share before extraordinary item...... $ 0.48 $ 1.53 $ 1.89 $ 0.70 $ 0.31
Basic earnings per share(2)............................... $ 0.20 $ 2.00 $ 2.48 $ 0.90 $ 0.24
Diluted earnings per share(2)............................. $ 0.18 $ 1.53 $ 1.89 $ .070 $ 0.18
Other financial data:.....................................
Ratio of earnings to fixed charges(3)..................... 2.1x 2.5x 2.1x 1.9x 1.4x
10
As of June 30, 2001
---------------------
Historical Pro Forma
---------- ---------
(dollars in millions)
Balance sheet data:
Cash and cash equivalents..................................... $ 36 $ 36
Rental equipment, net......................................... 1,851 1,851
Goodwill, net(4).............................................. 2,200 2,200
Total assets.................................................. 5,315 5,315
Total debt.................................................... 2,760 2,760
Company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust............................ 300 300
Series A and B preferred stock(5)............................. 431
Stockholders' equity.......................................... 1,110 1,541
--------
(1) We recorded an extraordinary item (net of income taxes) of $21.3 million in
1998 and an extraordinary item (net of income taxes) of $11.3 million in
2001. Such charge in 1998 resulted from the early extinguishment of certain
debt and primarily reflected prepayment penalties on certain debt of U.S.
Rentals. Such charge in 2001 resulted from the refinancing of certain debt
and primarily reflected the write-off of deferred financing fees.
(2) Our earnings during 1998 were impacted by merger-related expenses of $47.2
million ($33.2 million net of taxes or $0.45 per diluted share), a $4.8
million ($0.07 per diluted share) charge to recognize deferred tax
liabilities of a company acquired in a pooling-of-interests transaction and
an extraordinary item (net of income taxes) of $21.3 million ($0.03 per
diluted share). Our earnings during 1999 were impacted by $18.2 million
($10.8 million net of taxes or $0.12 per diluted share) of expenses related
to a terminated tender offer. Our earnings during 2001 were impacted by a
restructuring charge of $28.9 million ($19.2 million net of taxes or $0.20
per diluted share), a $7.8 million ($5.2 million net of taxes or $0.06 per
diluted share) charge relating to refinancing costs of a synthetic lease
and an extraordinary item (net of income taxes) of $11.3 million ($0.13 per
diluted share).
(3) For purposes of determining the ratio of earnings to fixed charges, (i)
earnings consist of income before income taxes and extraordinary items plus
fixed charges and (ii) fixed charges consist of interest expense,
amortization of debt issuance costs, and the estimated interest portion of
rental expense.
(4) Goodwill is defined as the excess of cost over the fair value of
identifiable net assets of businesses acquired and is amortized on a
straight-line basis over forty years.
(5) We issued series A and B perpetual convertible preferred stock in 1999 and
included such preferred in stockholders' equity. In July 2001, the SEC
issued guidance to all public companies as to when redeemable preferred
stock may be classified as stockholders' equity. Under this guidance, the
series A and B preferred would not be included in stockholders' equity
because this stock would be subject to mandatory redemption on a hostile
change of control. On September 28, 2001, we entered into an agreement
effecting the exchange of new series C and D perpetual convertible
preferred for the series A and B preferred. The series C and D preferred
stock is not subject to mandatory redemption on a hostile change of
control, and will be included in stockholders' equity under the recent SEC
guidance. The effect of the foregoing is that our perpetual convertible
preferred stock is included in stockholders' equity as of September 28,
2001 and thereafter, but is classified outside of stockholders' equity for
earlier dates. In all other respects, the financial statements remain
unchanged, including total assets and liabilities, revenues, operating
income, net income and earnings per share.
11
RISK FACTORS
You should carefully consider the following factors and the other
information in this prospectus in connection with this exchange offer and an
investment in the notes.
Our substantial indebtedness will require us to devote a substantial portion of
our cash flow to debt service and could, among other things, constrain our
ability to obtain additional financing and make it more difficult for us to
cope with a downturn in our business.
We have a substantial amount of indebtedness. Specifically, on June 30,
2001, our total indebtedness was approximately $2,759.7 million (of which
approximately $1,327.7 million was secured indebtedness). All of this
indebtedness was incurred by our wholly owned subsidiary United Rentals (North
America), Inc. Our other domestic subsidiaries have guaranteed a significant
amount of this indebtedness. Specifically, as of June 30, 2001, our other
domestic subsidiaries had guaranteed approximately $2,738.5 million of this
indebtedness.
Our substantial indebtedness has the potential to affect us adversely in a
number of ways. For example, it will or could:
. require us to devote a substantial portion of our cash flow to debt
service, reducing the funds available for other purposes;
. constrain our ability to obtain additional financing, particularly since
substantially all of our assets are subject to security interests relating
to existing indebtedness; or
. make it difficult for us to cope with a downturn in our business or a
decrease in our cash flow.
Furthermore, if we are unable to service our indebtedness and fund our
business, we will be forced to adopt an alternative strategy that may include:
. reducing or delaying capital expenditures;
. limiting our growth;
. seeking additional capital;
. selling assets; or
. restructuring or refinancing our indebtedness.
We cannot assure you that any of these strategies could be effected on
favorable terms or at all.
An increase in market interest rates would increase our interest expense and
our debt service obligations because some of our debt bears interest at
variable rates.
A portion of our indebtedness bears interest at variable rates that are
linked to changing market interest rates. As a result, an increase in market
interest rates would increase our interest expense and our debt service
obligations. On June 30, 2001, we had $1,295.0 million of variable rate
indebtedness.
Although the notes are referred to as "senior notes," they are effectively
subordinated to our secured indebtedness and all obligations of our
non-guarantor subsidiaries.
The notes are unsecured obligations of URI and are guaranteed by (1) URI's
parent and (2) subject to limited exceptions, URI's current and future domestic
subsidiaries. The notes are not guaranteed by URI's foreign subsidiaries. As a
result of this structure, the notes are effectively subordinated to (1) all
secured indebtedness of URI and each guarantor, to the extent of the value of
the collateral, and (2) all indebtedness and other obligations, including trade
payables, of our non-guarantor subsidiaries. The effect of this subordination
is that, in the event of a bankruptcy, liquidation, dissolution, reorganization
or similar proceeding involving us or a subsidiary, the assets of the affected
entity could not be used to pay you until after:
. all secured claims against the affected entity have been fully paid; and
. if the affected entity is a non-guarantor subsidiary, all other claims
against that subsidiary, including trade payables, have been fully paid.
On June 30, 2001, (1) URI and the guarantors had outstanding an aggregate of
$1,327.7 million of secured indebtedness that is effectively senior to the
notes and (2) the non-guarantor subsidiaries had outstanding an
12
aggregate of $52.6 million of indebtedness and other obligations that are
effectively senior to the notes. We may incur additional secured indebtedness.
URI has a holding company structure and will depend on distributions from its
subsidiaries in order to pay the notes and certain provisions of law or
contractual restrictions could limit distributions from its subsidiaries.
URI derives substantially all its operating income from, and holds
substantially all its assets through, its subsidiaries. The effect of this
structure is that URI will depend on the earnings of its subsidiaries, and the
payment or other distribution to URI of these earnings, in order to meet its
obligations under the notes and other outstanding debt. Provisions of law, such
as those requiring that dividends be only paid from surplus, could limit the
ability of URI's subsidiaries to make payments or other distributions to URI.
Furthermore, these subsidiaries could agree to contractual restrictions on
their ability to make distributions.
We may be unable to repurchase the notes as required upon a change of control.
If we experience a change of control, we will be required to make an offer
to purchase all outstanding notes at 101% of their principal amount plus
accrued and unpaid interest, if any, to the date of repurchase. However, we may
be unable to do so because:
. we might not have enough available funds, particularly since a change of
control could cause part or all of our other indebtedness to become due;
and
. the agreements governing our credit facility and other secured
indebtedness would prohibit us from repurchasing the notes, unless we were
able to obtain a waiver or refinance such indebtedness.
A guarantee could be voided if the guarantor fraudulently transferred the
guarantee at the time it incurred the indebtedness, which could result in the
noteholders being able to rely on only URI to satisfy claims.
Under U.S. bankruptcy law and comparable provisions of state fraudulent
transfer laws, a guarantee can be voided, or claims under a guarantee may be
subordinated to all other debts of that guarantor if, among other things, the
guarantor, at the time it incurred the indebtedness evidenced by its guarantee:
. intended to hinder, delay or defraud any present or future creditor or
received less than reasonably equivalent value or fair consideration for
the incurrence of the guarantee,
. was insolvent or rendered insolvent by reason of such incurrence;
. was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay those debts as they mature.
In addition, any payment by that guarantor under a guarantee could be voided
and required to be returned to the guarantor or to a fund for the benefit of
the creditors of the guarantor.
The measures of insolvency for purposes of fraudulent transfer laws vary
depending upon the governing law. Generally a guarantor would be considered
insolvent if:
. the sum of its debts, including contingent liabilities, was greater than
the fair saleable value of all of its assets;
. the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
. it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that the parent guarantee and the subsidiary
guarantees were incurred for proper purposes and in good faith and that the
parent guarantor and each subsidiary guarantor, after giving effect to its
guarantee of the notes, will not be
13
insolvent, have unreasonably small capital for the business in which it is
engaged or have incurred debts beyond our ability to pay those debts as they
mature. We cannot be certain, however, that a court would agree with our
conclusions in this regard.
Restrictive covenants could adversely affect our business by limiting our
flexibility.
We are subject to various restrictive financial and operating covenants
under the agreements governing our indebtedness. These covenants limit or
prohibit, among other things, our ability to incur indebtedness, make
prepayments of certain indebtedness, make investments, create liens, make
acquisitions, sell assets and engage in mergers and acquisitions. These
covenants could adversely affect our business by significantly limiting our
operating and financial flexibility.
If we are unable to obtain additional capital as required, we may be unable to
fund the capital outlays required for the success of our business, including
those relating to purchasing equipment, making acquisitions, opening new rental
locations and refinancing existing indebtedness.
If the cash that we generate from our business, together with cash that we
may borrow under our credit facility, is not sufficient to fund our capital
requirements, we will require additional debt and/or equity financing. We
cannot, however, be certain that any additional financing will be available or,
if available, will be available on terms that are satisfactory to us. If we are
unable to obtain sufficient additional capital in the future, we may be unable
to fund the capital outlays required for the success of our business, including
those relating to purchasing equipment, making acquisitions, opening new rental
locations and refinancing existing indebtedness.
Decreases in construction and industrial activities could adversely affect our
revenues and operating results by decreasing the demand for our equipment or
the prices that we can charge. For example, the current slow-down in the
economy has caused construction and industrial activity to decrease and, as a
result, we recently lowered our revenue and earnings forecast.
Our equipment is principally used in connection with construction and
industrial activities. Consequently, decreases in construction or industrial
activity may lead to a decrease in the demand for our equipment or the prices
that we can charge. Any such decrease could adversely affect our revenues and
operating results. For example, the current slow-down in the economy has caused
construction and industrial activity to decrease, particularly in the western
states, which required us to lower our revenue and earnings forecast for the
third and fourth quarters of 2001.
We have identified below certain factors that may cause a further downturn
in construction and industrial activity, either temporarily or long-term:
. a continuation or a worsening of the recent slow-down of the economy;
. an increase in interest rates; or
. adverse weather conditions which may temporarily affect a particular
region.
In addition, demand for our equipment may not reach projected levels in the
event that funding for highway and other construction projects under government
programs, such as the Transportation Equity Act for the 21st Century ("TEA-21")
or the Aviation Investment and Reform Act for the 21st Century ("AIR-21"), does
not reach expected levels.
If we lose any member of our senior management team and are unable to find a
suitable replacement, we may not have the depth of senior management resources
required to efficiently manage our business and execute our growth strategy.
Our success is highly dependent on the experience and skills of our senior
management team. If we lose the services of any member of this team and are
unable to find a suitable replacement, we may not have the depth of senior
management resources required to efficiently manage our business and execute
our growth strategy. We do not maintain "key man" life insurance with respect
to members of senior management.
14
Our industry is highly competitive, and competitive pressures could lead to a
decrease in our market share or in the prices that we can charge.
The equipment rental industry is highly fragmented and competitive. Our
competitors primarily include small, independent businesses with one or two
rental locations, regional competitors which operate in one or more states,
public companies or divisions of public companies, and equipment vendors and
dealers who both sell and rent equipment directly to customers. We may in the
future encounter increased competition from our existing competitors or from
new companies. In addition, equipment manufacturers may commence or increase
their existing efforts relating to renting and selling equipment directly to
our customers or potential customers. Competitive pressures could adversely
affect our revenues and operating results by decreasing our market share or
depressing the prices that we can charge.
Our operating results may fluctuate which could affect the trading value of the
notes.
We expect that our revenues and operating results may fluctuate from quarter
to quarter or over the longer term due to a number of factors, including:
. seasonal rental patterns of our customers, with rental activity tending to
be lower in the winter;
. our recent acquisition of businesses that specialize in providing
specialty traffic control services, which tend to operate at a loss during
the first quarter;
. the timing of expenditures for new equipment and the disposition of used
equipment;
. changes in demand for our equipment or the prices therefor due to changes
in economic conditions, competition or other factors;
. changes in the interest rates applicable to our floating rate debt;
. if we determine that a potential acquisition will not be consummated, the
need to charge against earnings any expenditures relating to such
transaction (such as financing commitment fees, merger and acquisition
advisory fees and professional fees) previously capitalized; and
. the possible need, from time to time, to take other write-offs or special
charges due to a variety of occurrences, such as store consolidations or
closings or the refinancing of existing indebtedness.
Fluctuations in our operating results could adversely affect the trading
value of the notes.
We have made acquisitions, which entails certain risks. We cannot guarantee
that we will realize the expected benefits from our acquisitions or that our
existing operations will not be harmed as a result of acquisitions.
We have grown in part through acquisitions and may continue to do so. The
making of acquisitions entails certain risks, including:
. unrecorded liabilities of acquired companies that we fail to discover
during our due diligence investigations;
. difficulty in assimilating the operations and personnel of the acquired
company with our existing operations;
. loss of key employees of the acquired company; and
. difficulty maintaining uniform standards, controls, procedures and
policies.
We cannot guarantee that we will realize the expected benefits from our
acquisitions or that our existing operations will not be harmed as a result of
acquisitions.
15
Goodwill related to acquisitions represents a substantial portion of our total
assets. If the fair value of the goodwill should drop below the recorded value,
we would be required to write off the excess goodwill, which could adversely
affect our operating results.
At June 30, 2001, we had on our balance sheet net goodwill in the amount of
$2.2 billion, which represents approximately 41.4% of our total assets at such
date. This goodwill is an intangible asset and represents the excess of the
purchase price that we paid for acquired businesses over the estimated fair
market value of the net assets of those businesses. If the fair value of the
goodwill, determined in accordance with applicable accounting standards, were
to fall below the recorded value shown on the balance sheet, we would be
required to write off the excess goodwill. Any write-off would be treated as an
expense and would adversely affect our operating results.
Disruptions in our information technology systems could adversely affect our
operating results by limiting our capacity to effectively monitor and control
our operations.
Our information technology systems facilitate our ability to monitor and
control our operations and adjust to changing market conditions. Any
disruptions in these systems or the failure of these systems to operate as
expected could, depending on the magnitude of the problem, adversely affect our
operating results by limiting our capacity to effectively monitor and control
our operations and adjust to changing market conditions.
We are exposed to various possible claims relating to our business, and our
insurance may not fully protect us.
We are exposed to various possible claims relating to our business. These
possible claims include those relating to (1) personal injury or death caused
by equipment rented or sold by us, (2) motor vehicle accidents involving our
delivery and service personnel and (3) employment related claims. We carry a
broad range of insurance for the protection of our assets and operations.
However, such insurance may not fully protect us for a number of reasons,
including:
. our coverage is subject to a deductible of $1.0 million and limited to a
maximum of $98.0 million per occurrence;
. we do not maintain coverage for environmental liability (other than
legally required fuel storage tank coverage), since we believe that the
cost for such coverage is high relative to the benefit that it provides;
and
. certain types of claims, such as claims for punitive damages or for
damages arising from intentional misconduct, which are often alleged in
third party lawsuits, might not be covered by our insurance.
If we are found liable for any significant claims that are not covered by
insurance, our operating results could be adversely affected. We cannot be
certain that insurance will continue to be available to us on economically
reasonable terms, if at all.
We are subject to numerous environmental and safety regulations. If we are
required to incur compliance or remediation costs that are not currently
anticipated our operating results could be hurt.
Our operations are subject to numerous laws governing environmental
protection and occupational health and safety matters. These laws regulate such
issues as wastewater, stormwater, solid and hazardous wastes and materials, and
air quality. Under these laws, we may be liable for, among other things, (1)
the costs of investigating and remediating contamination at our sites as well
as sites to which we sent hazardous wastes for disposal or treatment regardless
of fault and (2) fines and penalties for non-compliance. Our operations
generally do not raise significant environmental risks, but we use hazardous
materials to clean and maintain equipment, and dispose of solid and hazardous
waste and wastewater from equipment washing, and store and dispense petroleum
products from underground and above-ground storage tanks located at certain of
our locations.
Based on the conditions currently known to us, we do not believe that any
pending or likely remediation and compliance costs will have a material adverse
effect on our business. We cannot be certain, however, as to the potential
financial impact on our business if new adverse environmental conditions are
discovered or
16
environmental and safety requirements become more stringent. If we are required
to incur environmental compliance or remediation costs that are not currently
anticipated by us, our business could be adversely affected depending on the
magnitude of the cost.
Labor disputes could disrupt our ability to serve our customers or lead to
higher labor costs.
We have approximately 1,207 employees that are represented by unions and
covered by collective bargaining agreements. If we should experience a
prolonged labor dispute involving a significant number of our employees, our
ability to serve our customers could be adversely affected. Furthermore, our
labor costs could increase as a result of the settlement of actual or
threatened labor disputes.
Our operations outside the United States are subject to the risks normally
associated with international operations which could adversely affect our
operating results.
Our operations outside the United States are subject to the risks normally
associated with international operations. These include (1) the need to convert
currencies, which could result in a gain or loss depending on fluctuations in
exchange rates, (2) the need to comply with foreign laws and (3) the
possibility of political or economic instability in foreign countries.
We cannot guarantee that there will be a trading market for the notes.
We cannot guarantee that there will be an active trading market for the
notes because there currently is no trading market for the notes, and we do not
intend to list the notes on any exchange.
If an active trading market does not develop or is not maintained, the
market price and liquidity of the notes may be adversely affected.
The trading price of the notes may be volatile.
The trading price of the notes could be subject to significant fluctuation
in response to, among other factors, changes in our operating results, interest
rates, the market for noninvestment grade securities, general economic
conditions, and securities analysts' recommendations regarding our securities.
Original notes that are not exchanged will have restrictions on their transfer
and could be subject to a reduction in market value.
Any unregistered original notes that remain outstanding after this exchange
offer will continue to be subject to restrictions on their transfer. After this
exchange offer, holders of unregistered original notes will not (with limited
exceptions) have any further rights to have their notes exchanged for
registered notes. Any market for unregistered original notes that are not
exchanged could be adversely affected by the conclusion of this exchange offer.
Holders must comply with the exchange procedure.
Issuance of registered notes in exchange for unregistered original notes
will only occur upon completion of the procedure described in this prospectus
under the heading "The Exchange Offer--Procedures for Tendering." Therefore,
holders of unregistered original notes who wish to exchange them for registered
notes should allow sufficient time for timely completion of the exchange
procedure. We are not obligated to notify you of any failure to follow the
proper procedure.
Broker-dealers may be required to deliver a prospectus.
A broker-dealer that purchased unregistered original notes for its own
account as part of market-making or trading activities, must deliver a
prospectus when it sells registered notes. Our obligation to make this
prospectus available to broker-dealers is limited. Consequently, we cannot
guarantee that a proper prospectus will be available to broker-dealers wishing
to resell their registered notes.
Holders will be required to make certain representations.
In order to participate in the exchange offer, you will be required to make
certain representations in a letter of transmittal as described herein. If any
of these representations are falsely made, the notes received in exchange for
your unregistered original notes may be restricted, meaning that they would not
be freely tradable.
17
BACKGROUND TO THE ISSUANCE OF THE NOTES
General
The issuance of the notes was part of a refinancing transaction that we
completed on April 20, 2001. This transaction involved the refinancing of
$1,695.7 million of our indebtedness and other obligations. The principal
purpose of this refinancing was to extend the maturities of our indebtedness.
In order to effect this refinancing, we:
. issued $450.0 million of the notes;
. obtained a new senior secured credit facility comprised of a $750 million
term loan and a $750 million revolving credit facility;
. made an initial draw under the new revolving credit facility in the amount
of $525.0 million; and
. used the proceeds from the notes, the new term loan and the initial draw
under the new revolving credit facility to (i) permanently repay the
outstanding balance under our old revolving credit facility ($476.0
million); (ii) repay outstanding term loans ($1,188.5 million) and (iii)
repay an outstanding synthetic lease ($31.2 million).
We paid approximately $24.5 million of fees in connection with the
refinancing.
Additional Information Concerning the New Credit Facility and Term Loan
Set forth below is additional information concerning the new revolving
credit facility and term loan that we obtained in connection with the
refinancing described above. For further information, see our Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2001, which is
incorporated by reference herein, under the caption "Item 2--Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Information Concerning Recent
Financing Transactions."
New Revolving Credit Facility. Our new revolving credit facility enables us
to borrow up to $750 million on a revolving basis. Borrowings under this
facility will until October 20, 2001, accrue interest, at our option, at either
(A) the ABR Rate (which is equal to the greater of (i) the Federal Funds Rate
plus 0.5% or (ii) the Chase Manhattan Bank's prime rate) plus a margin of 1.00%
or (B) an adjusted LIBOR rate plus a margin of 2.0%. From and after October 20,
2001, the above interest rate margins will be adjusted quarterly based on our
funded debt to cash flow ratio, up to maximum margins of 1.75% and 2.75%, for
revolving loans based on the ABR rate and the adjusted LIBOR rate,
respectively, and down to minimum margins of 0.75% and 1.75%, for revolving
loans based on the ABR rate and the adjusted LIBOR rate, respectively. The
revolving credit facility will mature and terminate on October 20, 2006. The
amount outstanding under the facility was $525.0 million as of April 20, 2001,
and $259.5 million as of September 30, 2001. The weighted average interest rate
applicable to the outstanding borrowing under the credit facility was 6.58%, as
of April 20, 2001, and 5.13% as of September 30, 2001.
New term loan. The new term loan accrues interest, at our option, at either
(a) the ABR rate (which is equal to the greater of (i) the Federal Funds Rate
plus 0.5% or (ii) the Chase Manhattan Bank's prime rate) plus a margin of 2.0%,
or (b) an adjusted LIBOR rate plus a margin of 3.0%. The original amount of
this loan was $750.0 million. We are required to repay the principal of the
loan in installments, over six and one-half years, as follows: (i) on June 30,
2001 and on the last day of each calendar quarter thereafter up to and
including September 30, 2006, we must repay $1.9 million and (ii) on the last
day of each calendar quarter through June 30, 2007 and on August 31, 2007, we
must repay $177.2 million. The outstanding amount of this loan was $748.1
million as of September 30, 2001. The interest rate applicable to this loan was
7.55%, as of April 20, 2001, and 5.96% as of September 30, 2001.
18
Additional Information Concerning the Indebtedness and Other Obligations
Refinanced
Set forth below is additional information concerning the indebtedness and
other obligations refinanced in connection with the refinancing described
above. For further information, see our Annual Report on Form 10-K for the year
ended December 31, 2000, which is incorporated by reference herein, under the
caption "Item 7--Management's Discussion and Analysis of Financial Condition
and Results of Operations--Certain Information Concerning the Credit Facility
and Other Indebtedness."
Old Revolving Credit Facility. We repaid $476.0 million of outstanding
indebtedness under our old revolving credit facility as part of the
refinancing. This credit facility enabled us to borrow up to $827.5 million on
a revolving basis. Borrowings under this facility accrued interest at a
floating rate (as described in our Report on Form 10-K referred to above). As
of April 20, 2001, the weighted average interest rate applicable to the
outstanding borrowings under this facility was 6.39%. The agreement governing
the old credit facility provided that (1) the aggregate commitment under the
facility would be reduced by $20.7 million on the last day of each calendar
quarter, beginning September 30, 2001 and continuing through June 30, 2003, and
(2) the facility would terminate on September 26, 2003, at which time all
outstanding indebtedness under the facility would be due.
Old Term Loans. We repaid $1,188.5 million of existing term loans as part of
the refinancing. These consisted of (i) $245.6 million outstanding under a term
loan denominated as "Term Loan B," (ii) $744.4 million outstanding under a term
loan denominated as "Term Loan C" and (iii) $198.5 million outstanding under a
term loan denominated as "Term Loan D." These loans accrued interest at a
floating rate (as described in our Report on Form 10-K referred to above). As
of April 20, 2001, the interest rate applicable to the Term Loan B was 7.3%,
the interest rate applicable to the Term Loan C was 7.58% and the interest rate
applicable to the Term Loan D was 7.55%. The agreement governing the Term Loan
B provided that the loan would mature in June 2005 and that, prior to maturity,
quarterly installments of $0.6 million were due. The agreement governing the
Term Loan C provided that the loan would mature in June 2006 and that, prior to
maturity, quarterly installments of $1.9 million were due. The agreement
governing the Term Loan D provided that the loan would mature in June 2006 and
that, prior to maturity, quarterly installments of $0.5 million were due.
Synthetic Lease. We paid $31.2 million of obligations under a synthetic
lease as part of the refinancing. These obligations would have otherwise have
been payable over two years.
19
THE EXCHANGE OFFER
The following summary of certain terms of this exchange offer ("the Exchange
Offer") is qualified in its entirety by reference to the full text of the
documents underlying the Exchange Offer, including the Letter of Transmittal
and the Registration Rights Agreement, copies of which are filed as exhibits to
the registration statement of which this prospectus is a part.
Participation in the Exchange Offer is voluntary, and holders of
unregistered original notes (the "Original Notes") should carefully consider
whether to accept. Holders of Original Notes are urged to consult their
financial and tax advisors in making their decision on what action to take.
Purpose of the Exchange Offer; Effect on Holders of Original Notes
The Exchange Offer is being made in order to satisfy certain of URI's
obligations under a Registration Rights Agreement entered into in connection
with the issuance of the Original Notes (the "Registration Rights Agreement").
See "Registration Rights Agreement." Holders of the Original Notes who do not
tender their Original Notes in the Exchange Offer will continue to hold such
Original Notes and will be entitled to all the rights and will be subject to
all the limitations applicable thereto under the indenture governing the notes
(the "Indenture"). All Original Notes that remain outstanding upon consummation
of the Exchange Offer will continue to be subject to the restrictions on
transfer provided for in the Original Notes and the Indenture. In general, the
Original Notes may not be offered or sold unless registered under the
Securities Act of 1933 (the "Securities Act"), except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act. To the extent that the Original Notes are tendered and accepted
in the Exchange Offer, the trading market for untendered Original Notes could
be adversely affected.
Required Representations
In connection with any tender of Original Notes pursuant to the Exchange
Offer, the Book-Entry Holder (as defined below) of such Original Notes will be
required to make certain representations in the Letter of Transmittal,
including that (i) it is not affiliate of URI, (ii) it is not a broker-dealer
that purchased such Original Notes directly from URI, (iii) any registered
notes that it acquires in the Exchange Offer (the "Exchange Notes") will be
acquired by it in the ordinary course of its business and (iv) it has no
arrangement with any person to participate in the distribution of the Exchange
Notes; provided, however, that if the Book-Entry Holder is a broker-dealer that
wishes to tender Original Notes that were acquired by it for its own account as
a result of market-making activities or other trading activities, it may
represent, in lieu of the representation set forth in clause (iv), that it has
no arrangement or understanding with URI, or any affiliate of URI, to
participate in the distribution of the Exchange Notes. In addition, a
Book-Entry Holder that holds any Original Notes as nominee will be required to
confirm that the beneficial owner for which it is holding such Original Notes
has made the representations provided for in the preceding sentence.
The term "Book-Entry Holder" with respect to any notes means the participant
in the system of The Depository Trust Company ("DTC") that is listed as the
holder of such notes in the records maintained by DTC.
Resale of Exchange Notes
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, URI believes that (except as provided in the following two paragraphs)
the Exchange Notes issued pursuant to the Exchange Offer may be offered for
resale, resold or otherwise transferred by any holder thereof (other than an
affiliate of URI) without compliance with the registration and prospectus
delivery provisions of the Securities Act (subject to the representations set
forth under "--Required Representations" being made and being accurate).
Any broker-dealer that receives Exchange Notes in exchange for Original
Notes that were acquired by it for its own account as a result of market-making
activities or other trading activities, must deliver a prospectus
20
meeting the requirements of the Securities Act in connection with any resales
by it of any such Exchange Notes. This prospectus, as it may be amended or
supplemented from time to time, may, if permitted by URI, be used by a
broker-dealer in order to satisfy such prospectus delivery requirements. URI
has agreed in the Registration Rights Agreement that, for a period of 90 days
following consummation of the Exchange Offer (subject to extension under
certain circumstances described under "Plan of Distribution"), it will make
this prospectus available to any broker-dealer for use in connection with any
such resale (subject to limitations on the use of this prospectus under certain
circumstances). Each broker-dealer that participates in the Exchange Offer will
be required to confirm that it will comply with the prospectus delivery
requirements described above. A broker-dealer that delivers a prospectus in
connection with the resale of any Exchange Notes will be subject to certain of
the civil liability provisions under the Securities Act. See "Plan of
Distribution."
In the event that any of the required representations set forth under
"--Required Representations" is not true with respect to a holder that receives
Exchange Notes pursuant to the Exchange Offer, the Exchange Notes received by
such holder may be deemed to be restricted securities and, if so, such Exchange
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
The conclusions set forth in the preceding three paragraphs are based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties. URI does not intend to seek its own no-action letter
with respect to the Exchange Offer and there is no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as it has in such no-action letters to third parties.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying Letter of Transmittal, URI will accept for exchange all
Original Notes properly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date (as defined herein). URI will issue $1,000
principal amount of Exchange Notes in exchange for each $1,000 principal amount
of outstanding Original Notes accepted in the Exchange Offer. Holders may
tender some or all of their Original Notes pursuant to the Exchange Offer in
denominations of $1,000 and integral multiples thereof. The Exchange Offer is
not conditioned upon any minimum aggregate principal amount of Original Notes
being tendered.
The terms of the Exchange Notes will be the same in all material respects as
the Original Notes except that (i) the Exchange Notes will be registered under
the Securities Act, and, therefore, will not bear legends restricting the
transfer thereof and (ii) certain of the registration rights, under the
Registration Rights Agreement, relating to the Exchange Notes are different
than those relating to the Original Notes and, therefore, the defaults under
the Registration Rights Agreement that may require URI to pay additional
interest will be different for the Exchange Notes and the Original Notes. See
"Registration Rights Agreement." The Exchange Notes will evidence the same debt
as the Original Notes and both series of notes will be entitled to the benefits
of the Indenture and treated as a single class of debt securities.
In connection with the issuance of the Original Notes, URI arranged for the
Original Notes to be issued and transferable in book-entry form through the
facilities of DTC, acting as depositary. The Exchange Notes will also be
issuable and transferable in book-entry form through DTC. See "Description of
the Notes--Book Entry; Delivery and Form."
URI shall be deemed to have accepted validly tendered Original Notes when,
as and if URI has given oral (promptly confirmed in writing) or written notice
thereof to the Exchange Agent (as defined herein). The Exchange Agent will act
as agent for URI for the purposes of receiving the Exchange Notes from URI and
delivering Exchange Notes to tendering holders of Original Notes. URI's
obligation to accept Original Notes for exchange pursuant to the Exchange Offer
is subject to certain customary conditions as set forth under "--Conditions."
21
If any tendered Original Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein, such
unaccepted Original Notes will be returned, without expense, to the tendering
holder thereof as promptly as practicable after the Expiration Date.
Holders of Original Notes who tender pursuant to the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Original Notes pursuant to the Exchange Offer. URI will pay all
such charges and expenses, other than certain applicable taxes, in connection
with the Exchange Offer. See "--Solicitation of Tenders; Fees and Expenses."
Holders of notes do not have appraisal or dissenters' rights under the
Delaware General Corporation Law or under the Indenture in connection with the
Exchange Offer. URI intends to conduct the Exchange Offer in accordance with
the applicable requirements of Regulation 14E under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
NEITHER THE BOARD OF DIRECTORS OF URI NOR URI MAKES ANY RECOMMENDATION TO
HOLDERS OF ORIGINAL NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL
OR ANY PORTION OF THEIR ORIGINAL NOTES PURSUANT TO THE EXCHANGE OFFER.
MOREOVER, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS
OF ORIGINAL NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO
THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF ORIGINAL NOTES TO
TENDER, AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND
CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION
AND REQUIREMENTS.
Expiration Date; Extensions; Amendments
The Exchange Offer will remain open for acceptance for a period of not less
than 30 days after the date notice of the Exchange Offer is mailed to holders
of the Original Notes (or longer if required by applicable law). The Expiration
Date will be 5:00 p.m., New York City time, on November 15, 2001, unless URI,
in its sole discretion, extends the Exchange Offer, in which case the
Expiration Date will be the latest business day to which the Exchange Offer is
extended. In order to extend the Expiration Date, URI will notify the Exchange
Agent of any extension by oral (promptly confirmed in writing) or written
notice and will notify the record holders by means of a press release or other
public announcement, prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. During any such
extension, all Original Notes previously tendered and not withdrawn as herein
provided will remain subject to the Exchange Offer and may be accepted for
exchange by URI on the Expiration Date.
Interest on the Exchange Notes
Interest on the notes is payable semi-annually on April 15 and October 15 of
each year, commencing October 15, 2001, at the rate of 10 3/4% per annum. The
Exchange Notes will bear interest from and including the last interest payment
date on the Original Notes (or, if none has yet occurred, the date of issuance
of such Original Notes).
Procedures for Tendering
Only a Book-Entry Holder of Original Notes may tender such Original Notes
pursuant to the Exchange Offer. To tender any Original Notes pursuant to the
Exchange Offer, the Book-Entry Holder of such Original Notes must make
book-entry delivery of such Original Notes by causing DTC to transfer such
Original Notes to the account of the Exchange Agent at DTC in accordance with
DTC's Automated Tender Offer Program ("ATOP") prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) DTC must
22
deliver an Agent's Message (as defined below) prior to 5:00 p.m., New York City
time, on the Expiration Date, indicating that DTC has received from such
Book-Entry Holder an express acknowledgment that such Book-Entry Holder has
received and agrees to be bound by the terms of the Letter of Transmittal or
(ii) such Book-Entry Holder must complete, sign and date the Letter of
Transmittal or a facsimile thereof, in accordance with the instructions
contained herein and therein, and deliver such Letter of Transmittal, or such
facsimile, and any other required documentation to the Exchange Agent at the
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming part of the book-entry confirmation
relating to a book-entry transfer of Original Notes through ATOP, which states
that DTC has received an express acknowledgment from the DTC participant that
is tendering the Original Notes which are the subject of such book entry
confirmation, that such DTC participant has received and agrees to be bound by
the terms of the Letter of Transmittal.
The tender by a holder of Original Notes and the acceptance thereof by URI
will constitute an agreement between such holder and URI in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER.
INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR
HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL SHOULD BE SENT TO URI OR DTC.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Original Notes and withdrawal of tendered
Original Notes will be determined by URI in its sole discretion, which
determination will be final and binding. URI reserves the absolute right to
reject any and all Original Notes not properly tendered or any Original Notes
URI's acceptance of which would, in the opinion of counsel for URI, be
unlawful. URI also reserves the right to waive any irregularities or conditions
of tender as to particular Original Notes. URI's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Original Notes must be
cured within such time as URI shall determine. Neither URI, the Exchange Agent
nor any other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Original Notes, nor shall any of them
incur any liability for failure to give such notification. Tenders of Original
Notes will not be deemed to have been made until such irregularities have been
cured or waived. Any Original Notes received by the Exchange Agent that are not
properly tendered or the tender of which is otherwise rejected by URI and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the Book-Entry Holder that tendered such
Original Notes (by crediting an account maintained at DTC designated by such
Book-Entry Holder) as soon as practicable following the Expiration Date.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Original Notes pursuant to the Exchange Offer, the
Book-Entry Holder that tendered such Original Notes must, prior to 5:00 p.m.,
New York City time, on the Expiration Date, either (i) withdraw such tender in
accordance with the appropriate procedures of the ATOP system or (ii) deliver
to the Exchange Agent a written or facsimile transmission notice of withdrawal
at the address set forth herein. Any such notice of withdrawal must contain the
name and number of the Book-Entry Holder, the amount of Original Notes to which
such withdrawal relates, the account at DTC to be credited with the withdrawn
Original Notes
23
and the signature of the Book-Entry Holder. All questions as to the validity,
form and eligibility (including time of receipt) of such withdrawal notices
will be determined by URI in its sole discretion, whose determination will be
final and binding on all parties. Any Original Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer,
and no Exchange Notes will be issued with respect thereto unless the Original
Notes so withdrawn are validly retendered. Any Original Notes which have been
tendered but which are withdrawn will be returned by the Exchange Agent to the
Book-Entry Holder that tendered such Original Notes (by crediting an account
maintained at DTC designated by such Book-Entry Holder) as soon as practicable
after withdrawal. Properly withdrawn Original Notes may be retendered at any
time prior to the Expiration Date by following the procedures described under
"--Procedures for Tendering."
Conditions
Notwithstanding any other term of the Exchange Offer, URI shall not be
required to accept for exchange, or to exchange Exchange Notes for, any
Original Notes, and may terminate or amend the Exchange Offer as provided
herein before the acceptance of such Original Notes, if:
(a)any action or proceeding is instituted or threatened in any court or by
or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Exchange Offer
which, in the sole judgment of URI, might impair the ability of URI to
proceed with the Exchange Offer; or
(b)any law, statute, rule, regulation or interpretation by the Staff of the
Commission is proposed, adopted or enacted, which, in the reasonable
judgment of URI, might materially impair the ability of URI to proceed
with the Exchange Offer; or
(c)there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law, statute, rule
or regulation) which, in the sole judgment of URI, might materially
impair the ability of URI to proceed with the Exchange Offer.
If URI determines in its reasonable judgment that any of the conditions set
forth above are not satisfied, URI may (i) terminate the Exchange Offer and
refuse to accept any Original Notes and return all tendered Original Notes to
the tendering holders, (ii) extend the Exchange Offer and retain all Original
Notes tendered prior to the expiration of the Exchange Offer subject, however,
to the rights of holders to withdraw such Original Notes (see "--Withdrawals of
Tenders") or (iii) waive such unsatisfied conditions with respect to the
Exchange Offer and accept all properly tendered Original Notes which have not
been withdrawn. Moreover, regardless of whether any of such conditions has
occurred, URI may amend the Exchange Offer in any manner which, in its good
faith judgment, is advantageous to holders of the Original Notes.
The foregoing conditions are for the sole benefit of URI and may be asserted
by URI regardless of the circumstances giving rise to any such condition or may
be waived by URI in whole or in part at any time and from time to time in its
sole discretion. The failure by URI at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. If a waiver constitutes a material change in the Exchange
Offer, URI will disclose such change by means of a supplement to this
prospectus that will be distributed to each Book-Entry Holder, and URI will
extend the Exchange Offer for a period of five to ten business days, depending
upon the significance of the waiver and the manner of disclosure to the
Book-Entry Holders, if the Exchange Offer would otherwise expire during such
period. Any determination by URI concerning the events described above will be
final and binding upon all parties.
In addition, URI will not accept for exchange any Original Notes tendered,
and no Exchange Notes will be issued in exchange for any such Original Notes,
if at such time any stop order shall be threatened or in effect with respect to
the registration statement of which this prospectus is a part or if the
Indenture is not qualified under the Trust Indenture Act of 1939, as amended.
URI is required to use every reasonable effort to obtain the withdrawal of any
such stop order at the earliest possible time.
24
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
The Exchange Offer is not conditioned upon any minimum principal amount of
Original Notes being tendered for exchange.
Exchange Agent
The Bank of New York, the Trustee under the Indenture, has been appointed as
Exchange Agent for the Exchange Offer. In such capacity, the Exchange Agent has
no fiduciary duties to the holders of the notes and will be acting solely on
the basis of directions of URI. All executed Letters of Transmittal must be
delivered to the Exchange Agent at the applicable address set forth below.
Questions and requests for assistance and requests for additional copies of
this prospectus or the Letter of Transmittal should be directed to the Exchange
Agent addressed as follows:
By Mail: By Facsimile Transmission: By Overnight or Hand
(registered or certified (for Eligible Institutions only) Delivery:
recommended) The Bank of New York The Bank of New York
The Bank of New York (914) 773-5015 20 Broad Street
20 Broad Street or One Lower Level
One Lower Level (914) 773-5040 New York, New York 10286
New York, New York 10286 Attention: Santino Ginocchietti Attention: Frank Driscoll
Attention: Frank Driscoll Confirm by Telephone:
(914) 773-8445
or
(914) 773-5735
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OR FACSIMILE NUMBER
OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Solicitation of Tenders; Fees and Expenses
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by URI. The principal solicitation for tenders pursuant to the Exchange
Offer is being made by mail; however, additional solicitations may be made by
telegraph, facsimile, telephone or in person by officers and regular employees
of URI and its affiliates.
URI has not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. URI will, however, pay the
Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith and pay other expenses of the Exchange Offer, including
fees and expenses of the Trustee, filing fees, and URI's accounting and legal
fees and printing and distribution expenses. URI may also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this prospectus, Letters of
Transmittal and related documents to the beneficial owners of the Original
Notes and in handling or forwarding tenders for exchange.
URI will pay all transfer taxes, if any, applicable to the exchange of
Original Notes pursuant to the Exchange Offer. If, however, Exchange Notes or
Original Notes for principal amounts not tendered or accepted for exchange are
to be delivered to, or are to be registered or issued in the name of, any
person other than the Book-Entry Holder of the Original Notes tendered, or if a
transfer tax is imposed for any reason other than the exchange of Original
Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether
25
imposed on the Book-Entry Holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
Accounting Treatment
The Exchange Notes will be recorded at the same carrying value as the
Original Notes for which they are exchanged, which is the aggregate principal
amount of the Original Notes, as reflected in URI's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized in connection with the Exchange Offer. The cost of the Exchange
Offer will be deferred and amortized over the term of the Exchange Notes.
Other
URI may in the future seek to acquire untendered Original Notes, to the
extent permitted by applicable law, in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. URI has no
present plans to acquire any Original Notes that are not tendered in the
Exchange Offer.
26
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
considerations relating to the exchange of Original Notes for Exchange Notes in
the Exchange Offer. It does not contain a complete analysis of all the
potential tax considerations relating thereto. This summary is limited to
holders of Original Notes who hold the Original Notes as "capital assets" (in
general, assets held for investment). Special situations, such as the
following, are not addressed:
. tax consequences to holders who may be subject to special tax treatment,
such as tax-exempt entities, dealers in securities or currencies,
financial institutions, insurance companies, regulated investment
companies, traders in securities that elect to use a mark-to-market
method of accounting for their securities holdings or corporations that
accumulate earnings to avoid U.S. federal income tax;
. tax consequences to persons holding notes as part of a hedging,
integrated, constructive sale or conversion transaction or a straddle or
other risk reduction transaction;
. tax consequences to holders whose "functional currency" is not the U.S.
dollar;
. tax consequences to persons who hold notes through a partnership or
similar pass-through entity;
. tax consequences to holders who have ceased to be United States citizens
or to be taxed as resident aliens;
. alternative minimum tax consequences, if any; or
. any state, local or foreign tax consequences.
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended, existing and proposed Treasury regulations
promulgated thereunder, and rulings, judicial decisions and administrative
interpretations thereunder, as of the date hereof. Those authorities may be
changed, perhaps retroactively, so as to result in U.S. federal income tax
consequences different from those discussed below.
Consequences of Tendering Notes
The exchange of Original Notes for Exchange Notes in the Exchange Offer
should not constitute a taxable exchange for federal income tax purposes.
Accordingly, the Exchange Offer should have no federal income tax consequences
to you. Your tax basis and holding period in the Exchange Notes should be the
same as your Original Notes.
The preceding discussion of certain U.S. federal income tax considerations
is for general information only and is not tax advice. Accordingly, each
investor should consult its own tax advisor as to particular tax consequences
to it of exchanging Original Notes for Exchange Notes, including the
applicability and effect of any state, local or foreign tax laws, and of any
proposed changes in applicable laws.
27
REGISTRATION RIGHTS AGREEMENT
In connection with the issuance of the Original Notes on April 20, 2001, URI
entered into a Registration Rights Agreement (the "Registration Rights
Agreement") with the initial purchasers of the Original Notes. Set forth below
is a summary of certain provisions of the Registration Rights Agreement. Such
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the registration statement
of which this prospectus forms a part.
We agreed pursuant to the Registration Rights Agreement that we would,
subject to certain exceptions:
(1) within 90 days after the issue date of the Original Notes, file a
registration statement (the "Exchange Offer Registration Statement") with
the SEC with respect to a registered offer (the "Exchange Offer") to
exchange the Original Notes for new notes of URI (the "Exchange Notes")
having terms substantially identical in all material respects to the
Original Notes (except that the Exchange Notes will not contain terms with
respect to transfer restrictions and will have different registration
rights);
(2) use our best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 150 days
after the issue date of the Original Notes;
(3) as soon as practicable after the effectiveness of the Exchange Offer
Registration Statement (the "Effectiveness Date"), offer the Exchange Notes
in exchange for surrender of the Original Notes; and
(4) keep the Exchange Offer open for not less than 30 days (or longer if
required by applicable law) after the date notice of the Exchange Offer is
mailed to the holders of the notes.
The Exchange Offer being made hereby is intended to satisfy our obligations
under the Registration Rights Agreement described in the preceding paragraph.
In the event that:
(1) applicable interpretations of the staff of the SEC do not permit us
to effect the Exchange Offer; or
(2) for any other reason we do not consummate the Exchange Offer within
180 days of the issue date of the Original Notes; or
(3) an initial purchaser of the Original Notes shall notify us following
consummation of the Exchange Offer that notes held by it are not eligible to
be exchanged for Exchange Notes in the Exchange Offer; or
(4) certain holders are prohibited by law or SEC policy from
participating in the Exchange Offer or may not resell the Exchange Notes
acquired by them in the Exchange Offer to the public without delivering a
prospectus;
then, we will, subject to certain exceptions,
(1) use our best efforts to file a shelf registration statement (the
"Shelf Registration Statement") covering resales of the notes or the
Exchange Notes, as the case may be, on or prior to the 90th day after such
filing obligation arises;
(2) use our best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act on or prior to the 150th
calendar day after such filing obligation arises; provided, however, that if
the obligation to file the Shelf Registration Statement arises because the
Exchange Offer has not been consummated within 180 days after the issue date
of the Original Notes, then we will use our best efforts to file the Shelf
Registration Statement on or prior to the 30th day after such filing
obligation arises; and
(3) keep the Shelf Registration Statement effective until the earliest
of:
(A) the time when the notes covered by the Shelf Registration
Statement can be sold pursuant to Rule 144 without any limitations under
clauses (c), (e), (f) and (h) of Rule 144;
28
(B) two years from the effective date of the Shelf Registration
Statement; and
(C) the date on which all notes registered thereunder are disposed of
in accordance therewith.
We will, in the event that a Shelf Registration Statement is filed, among
other things, provide to each holder for whom such Shelf Registration Statement
was filed copies of the prospectus which is a part of the Shelf Registration
Statement, notify each holder when the Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Original Notes or the Exchange Notes, as the case may be. A
holder selling such Original Notes or Exchange Notes pursuant to the Shelf
Registration Statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such
holder (including certain indemnification obligations).
If any of the following events occur (each such event a "Registration
Default"), we will pay additional cash interest on the applicable Original
Notes or Exchange Notes, subject to certain exceptions, from and including the
date on which any such Registration Default shall occur to but excluding the
date on which all Registration Defaults have been cured:
(1) we fail to file any of the registration statements required by the
Registration Rights Agreement on or prior to the date specified for such
filing;
(2) any of such registration statements is not declared effective by the
SEC on or prior to the date specified for such effectiveness;
(3) the Exchange Offer is required to be consummated under the
Registration Rights Agreement and is not consummated within 180 days after
the issue date of the Original Notes;
(4) the Shelf Registration Statement is declared effective but
thereafter, during the period for which we are required to maintain the
effectiveness of such registration statement, it ceases to be effective or
usable in connection with the resale of the Original Notes or the Exchange
Notes, as the case may be, covered by such registration statement for a
period of 60 days, whether or not consecutive; or
(5) the Exchange Offer Registration Statement is declared effective but
thereafter, during the period in which we are required to make this
prospectus available for use by broker-dealers (as described under "Plan of
Distribution"), it ceases to be effective (or we restrict the use of the
prospectus included therein) for a period of 60 days, whether or not
consecutive.
Notwithstanding the foregoing, any Registration Default specified in clause
(1), (2) or (3) of the preceding sentence that relates to the Exchange Offer
Registration Statement or the Exchange Offer shall be deemed cured at such time
as the Shelf Registration Statement is declared effective by the SEC.
If a Registration Default exists, the interest rate on the Specified Notes
(as defined below) will increase by 0.25% per annum, with respect to the first
90 day period (or portion thereof) while a Registration Default is continuing
immediately following the occurrence of such Registration Default. Such
interest rate will increase by an additional 0.25% per annum at the beginning
of each subsequent 90-day period (or portion thereof) while a Registration
Default is continuing until all Registration Defaults have been cured, up to a
maximum rate of additional interest of 1.00% per annum. Following the cure of
all Registration Defaults, the accrual of additional interest on the Specified
Notes will terminate and the interest rate will revert to the original rate.
The Indenture provides that additional interest as aforesaid will constitute
liquidated damages and will be the exclusive monetary remedy available to
holders of the notes in respect of any Registration Default. Since this
registration statement was not declared effective by the SEC by the date
specified for effectiveness, we expect that the interest rate on the notes will
increase by 0.25% for a period of less than 30 days. This increase will not
materially affect us in any manner.
"Specified Notes" means the Original Notes (and not the Exchange Notes);
provided, however, that, if the Registration Default relates solely to a Shelf
Registration Statement, then (i) if such Shelf Registration Statement is
required to cover both Original Notes and Exchange Notes, "Specified Notes"
shall mean both the Original
29
Notes and Exchange Notes and (ii) if such Shelf Registration Statement is
required to cover only Exchange Notes, "Specified Notes" shall mean only the
Exchange Notes; provided further, however, that, if the Registration Default
relates to an Exchange Offer Registration Statement that is unavailable for use
during the period in which we are required to make this prospectus available
for use by broker-dealers (as described under "Plan of Distribution"),
"Specified Notes" shall mean the Exchange Notes.
All references in the Indenture, in any context, to any interest or other
amount payable on or with respect to the notes shall be deemed to include any
additional interest pursuant to the Registration Rights Agreement.
USE OF PROCEEDS
URI will not receive any cash proceeds from the issuance of the Exchange
Notes. In consideration for issuing the Exchange Notes as contemplated in this
prospectus, URI will receive in exchange Original Notes in like principal
amount, which will be cancelled. As such, this Exchange Offer will not result
in any increase or decrease in indebtedness of URI.
30
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The tables below present selected financial information for our company. You
should read this information together with the information set forth in the
consolidated financial statements and the related notes which are included in
the financial statements of our company incorporated by reference herein.
The balance sheet data presented below as of December 31, 2000, and 1999 and
the income statement data for the years ended December 31, 2000, 1999 and 1998
are derived from our audited consolidated financial statements which are
incorporated by reference herein. The balance sheet data presented below as of
December 31, 1998, 1997 and 1996 and the income statement data for the years
ended December 31, 1997 and 1996 are derived from audited consolidated
financial statements of our company which are not incorporated by reference in
this prospectus. The balance sheet data presented below as of June 30, 2001 and
the income statement data for the six-month periods ended June 30, 2001 and
2000 are derived from our unaudited consolidated financial statements which are
incorporated by reference herein.
Certain of our acquisitions were accounted for as purchases and certain
acquisitions were accounted for as poolings-of-interests, including our
September 1998 merger with U.S. Rentals, Inc. For further information
concerning the accounting for these acquisitions, see (1) note 3 to the audited
consolidated financial statements of our company incorporated by reference
herein and (2) note 2 to the unaudited consolidated financial statements of our
company incorporated by reference herein.
Our previously oustanding Series A Perpetual Convertible Preferred Stock and
Series B Perpetual Convertible Preferred Stock were exchanged for Series C
Perpetual Convertible Preferred Stock and Series D Perpetual Convertible
Preferred Stock, respectively. This exchange was effected subsequent to June
30, 2001. The balance sheet data under the heading "Pro Forma" adjusts the
historical balance sheet data to give effect to the exchange, as if it had
occurred on June 30, 2001.
31
Selected Consolidated Financial Information
Six Months
Ended
Year Ended December 31, June 30,
------------------------------------ -------------
1996 1997 1998 1999 2000 2000 2001
----- ----- ------ ------ ------ ------ ------
(dollars in millions, except per share data)
Income statement data:
Total revenues.................................................... $ 354 $ 490 $1,220 $2,234 $2,919 $1,309 $1,387
Total cost of operations.......................................... 241 341 797 1,409 1,830 831 898
----- ----- ------ ------ ------ ------ ------
Gross profit...................................................... 113 149 423 825 1,089 478 489
Selling, general and administrative expenses...................... 55 71 196 353 454 211 222
Merger-related expenses........................................... 47
Restructuring charge 29
Non-rental depreciation and amortization.......................... 9 13 35 63 87 41 53
Termination cost of deferred compensation......................... 20
----- ----- ------ ------ ------ ------ ------
Operating income.................................................. 49 45 145 409 548 226 185
Interest expense.................................................. 11 12 64 140 229 106 115
Preferred dividends of a subsidiary trust......................... 8 20 20 10 10
Other (income) expense, net....................................... (2) (5) 7 (2) 7
----- ----- ------ ------ ------ ------ ------
Income before provision for income taxes and extraordinary items.. 38 35 78 242 301 110 53
Provision for income taxes........................................ 30 44 99 125 45 25
----- ----- ------ ------ ------ ------ ------
Income before extraordinary items................................. 38 5 34 143 176 65 28
Extraordinary items, net(1)....................................... 1 21 11
----- ----- ------ ------ ------ ------ ------
Net income(2)..................................................... $ 38 $ 4 $ 13 $ 143 $ 176 $ 65 $ 17
===== ===== ====== ====== ====== ====== ======
Pro forma provision for income taxes before extraordinary items(3) $ 15 14 $ 44
Pro forma income before extraordinary items(2).................... 23 21 34
Basic earnings per share before extraordinary items............... $1.67 $0.12 $ 0.53 $ 2.00 $ 2.48 $ 0.90 $ 0.40
Diluted earnings per share before extraordinary items............. $1.67 $0.11 $ 0.48 $ 1.53 $ 1.89 $ 0.70 $ 0.31
Basic earnings per share(2)....................................... $1.67 $0.08 $ 0.20 $ 2.00 $ 2.48 $ 0.90 $ 0.24
Diluted earnings per share(2)..................................... $1.67 $0.08 $ 0.18 $ 1.53 $ 1.89 $ 0.70 $ 0.18
Other financial data:
Ratio of earnings to fixed charges (4)............................ 4.0x 3.4x 2.1x 2.5x 2.1x 1.9x 1.4x
As of December 31, As of June 30, 2001
------------------------------ -------------------
Pro
1996 1997 1998 1999 2000 Historical Forma
---- ---- ------ ------ ------ ---------- ------
(dollars in millions)
Balance sheet data:
Cash and cash equivalents..................................... $ 3 $ 72 $ 20 $ 24 $ 34 $ 36 $ 36
Rental equipment, net......................................... 235 461 1,143 1,660 1,733 1,851 1,851
Goodwill, net(5).............................................. 1 74 922 1,853 2,216 2,200 2,200
Total assets.................................................. 381 826 2,635 4,498 5,124 5,315 5,315
Total debt.................................................... 214 265 1,315 2,266 2,675 2,760 2,760
Company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust............................. 300 300 300 300 300
Series A and B preferred stock(6)............................. 431 431 431
Stockholders' equity.......................................... 105 446 726 967 1,115 1,110 1,541
--------
(1)The charge in 1997 resulted from the prepayment of debt by U.S. Rentals. The
charge in 1998 resulted from the early extinguishment of certain debt and
primarily reflected prepayment penalties on certain debt of U.S. Rentals.
The charge in 2001 resulted from the refinancing of certain debt and
primarily reflected the write-off of deferred financing fees.
(2)Our earnings during 1997 were impacted by $20.3 million ($0.40 per diluted
share) of expenses related to the terminations of certain deferred
compensation expenses in connection with U.S. Rentals' initial public
offering, a $7.5 million ($0.15 per diluted share) charge to recognize
deferred tax liabilities of U.S. Rentals and an extraordinary item (net of
income taxes) of $1.5 million ($0.03 per diluted share). Our earnings during
1998 were impacted by merger-related expenses of $47.2 million ($33.2
million net of taxes or $0.45
32
per diluted share), a $4.8 million ($0.07 per diluted share) charge to
recognize deferred tax liabilities of a company acquired in a
pooling-of-interests transaction and an extraordinary item (net of income
taxes) of $21.3 million ($0.30 per diluted share). Our earnings during 1999
were impacted by $18.2 million ($10.8 million net of taxes or $0.12 per
diluted shares) of expenses related to a terminated tender offer. Our
earnings during 2001 were impacted by a restructuring charge of $28.9
million ($19.2 million net of taxes or $0.20 per diluted share), a $7.8
million ($5.2 million net of taxes or $0.06 per diluted share) charge,
recorded in other expense, relating to refinancing costs of a synthetic
lease, and an extraordinary item (net of income taxes) of $11.3 million
($0.13 per diluted share).
(3)U.S. Rentals was taxed as a Subchapter S Corporation until its initial
public offering in February 1997, and another company that we acquired in a
pooling-of-interests transaction was taxed as a Subchapter S Corporation
until being acquired by us in 1998. In general, the income or loss of a
Subchapter S Corporation is passed through to its owners rather than being
subjected to taxes at the entity level. Pro forma provision for income taxes
before extraordinary items and pro forma income before extraordinary items
reflects a provision for income taxes as if all such companies were liable
for federal and state income taxes as taxable corporate entities for all
periods presented.
(4)For purposes of determining the ratio of earnings to fixed charges. (i)
earnings consist of income before income taxes and extraordinary items plus
fixed charges and (ii) fixed charges consist of interest expense,
amortization of debt issuance costs, and the estimated interest portion of
rental expense.
(5)Goodwill is defind as the excess of cost over the fair value of identifiable
net assets of businesses acquired and is amortized on a straight-line basis
over forty years.
(6)We issued series A and B perpetual convertible preferred stock in 1999 and
included such preferred in stockholders' equity. In July 2001, the SEC
issued guidance to all public companies as to when redeemable preferred
stock may be classified as stockholders' equity. Under this guidance, the
series A and B preferred would not be included in stockholders' equity
because this stock would be subject to mandatory redemption on a hostile
change of control. On September 28, 2001, we entered into an agreement
effecting the exchange of new series C and D perpetual convertible preferred
for the series A and B preferred. The series C and D preferred stock is not
subject to mandatory redemption on a hostile change of control, and will be
included in stockholders' equity under the recent SEC guidance. The effect
of the foregoing is that our perpetual convertible preferred stock is
included in stockholders' equity as of September 28, 2001 and thereafter,
but is classified outside of stockholders' equity for earlier dates. In all
other respects, the financial statements remain unchanged, including total
assets and liabilities, revenues, operating income, net income and earnings
per share.
33
DESCRIPTION OF THE NOTES
The Exchange Notes offered hereby will be issued, and the Original Notes
were issued, under an Indenture dated as of April 20, 2001 (the "Indenture"),
among URI, the Guarantors and The Bank of New York, as trustee (the "Trustee"),
a copy of which has been filed as an exhibit to the registration statement of
which this prospectus forms a part. References to the notes include both the
Original Notes and the Exchange Notes. Upon the effectiveness of the
registration statement of which this prospectus is a part, the Indenture will
be subject to and governed by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
The following summary of the material provisions of the Indenture and the
notes does not purport to be complete and is subject to, and qualified in its
entirety by, reference to the provisions of the Indenture and the notes,
including the definitions of certain terms contained therein and those terms
made part of the Indenture by reference to the Trust Indenture Act. The
definition of certain capitalized terms used in the following summary are set
forth below under "--Certain Definitions." All references to "we", "our", "us"
or "the Company" in the following summary refer exclusively to URI, and not to
any of its subsidiaries or Holdings.
Original Notes and Exchange Notes Will Represent Same Debt
The Exchange Notes will be issued solely in exchange for an equal principal
amount of Original Notes pursuant to the Exchange Offer. The Exchange Notes
will evidence the same debt as the Original Notes and both series of notes will
be entitled to the benefits of the Indenture and treated as a single class of
debt securities. The terms of the Exchange Notes will be the same in all
material respects as the Original Notes except that (i) the Exchange Notes will
be registered under the Securities Act, and therefore, will not bear legends
restricting the transfer thereof and (ii) certain of the registration rights,
under the Registration Rights Agreement, relating to the Exchange Notes are
different than those relating to the Original Notes. See "Registration Rights
Agreement."
If the Exchange Offer is consummated, holders of Original Notes who do not
exchange their Original Notes for Exchange Notes will vote together with
holders of the Exchange Notes for all relevant purposes under the Indenture.
Accordingly, all references herein to specified percentages in aggregate
principal amount of the outstanding notes shall be deemed to mean, at any time
after the Exchange Offer is consummated, such percentages in aggregate
principal amount of the Original Notes and the Exchange Notes then outstanding.
Brief Description of the Notes
The notes:
. are unsecured senior obligations of the Company;
. are senior in right of payment to any Subordinated Indebtedness of the
Company; and
. are guaranteed on a senior unsecured basis by Holdings and each Subsidiary
Guarantor.
Maturity, Interest and Principal
The Company issued the notes initially in an aggregate principal amount of
$450 million. The notes will mature on April 15, 2008. Subject to our
compliance with the covenant described under the subheading "--Certain
Covenants--Limitation on Indebtedness", we are permitted to issue more notes
under the Indenture (the "Additional Notes"). The notes and the Additional
Notes, if any, will be treated as a single class for all purposes of the
Indenture, including waivers, amendments, redemptions and offers to purchase.
Unless the context otherwise requires, for all purposes of the Indenture and
this "Description of the Notes," references to the notes include any Additional
Notes actually issued. Interest on the notes accrues at the rate of 10.75% per
annum
34
and is payable semiannually in arrears on each April 15 and October 15,
commencing October 15, 2001, to the holders of record of notes at the close of
business on the April 1 and October 1, respectively, immediately preceding such
interest payment date. Interest on the notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
Issue Date. Interest will be computed on the basis of a 360-day year
constituted of twelve 30-day months.
The notes are issued only in registered form without coupons, in
denominations of $1,000 and integral multiples thereof. Principal of, premium,
if any, and interest on the notes is payable, and the notes are transferable,
at the principal corporate trust office or agency of the Trustee in the City of
New York maintained for such purposes. In addition, interest may be paid at the
option of the Company by check mailed to the person entitled thereto as shown
on the security register. No service charge will be made for any transfer,
exchange or redemption of notes, except in certain circumstances for any tax or
other governmental charge that may be imposed in connection therewith.
The notes are expected to trade in the Same-Day Funds Settlement System of
The Depository Trust Company ("DTC") until maturity, and secondary market
trading activity for the notes will therefore settle in same day funds.
Optional Redemption
Optional Redemption. The notes will be redeemable at our option, in whole or
in part, at any time on or after April 15, 2005, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued
and unpaid interest, if any, to the redemption date, if redeemed during the
12-month period beginning April 15 of the years indicated below:
Redemption
Year Price
---- ----------
2005 105.3750%
2006 102.6875%
2007 100.0000%
In addition, at any time, or from time to time, on or prior to April 15,
2004, we may, at our option, use the net cash proceeds of one or more Public
Equity Offerings (as defined below) to redeem up to an aggregate of 35% of the
principal amount of the notes (which includes Additional Notes, if any), at a
redemption price equal to 110.75% of the principal amount of the notes, plus
accrued and unpaid interest, if any, thereon to the redemption date; provided,
however, that at least 65% of the aggregate principal amount of notes (which
includes Additional Notes, if any) remains outstanding immediately after the
occurrence of such redemption. In order to effect the foregoing redemption with
the proceeds of any Public Equity Offering we shall send a redemption notice to
the Trustee not later than 90 days after the consummation of any such Public
Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Common Stock pursuant to a registration
statement filed with the Commission in accordance with the Securities Act, the
net cash proceeds of which are contributed to the Company as common equity
capital.
Selection and Notice. In the event that less than all of the notes are to
be redeemed at any time, selection of such notes for redemption will be made by
the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the notes are listed or, if the notes are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate (subject to
the rules of DTC); provided, however, that notes shall only be redeemable in
principal amounts of $1,000 or an integral multiple of $1,000. Notice of
redemption shall be mailed by first-class mail at least 30 but not more than 60
days before the redemption date to each holder of notes to be redeemed at its
registered address. If any note is to be redeemed in part only, the notice of
redemption that relates to such note shall state the portion of the principal
amount thereof to be redeemed. A new note in a principal amount equal to the
unredeemed
35
portion thereof will be issued in the name of the holder thereof upon surrender
for cancellation of the original note. On and after the redemption date,
interest will cease to accrue on notes or portions thereof called for
redemption, unless we default in the payment of the redemption price.
Sinking Fund
The notes are not entitled to the benefit of any mandatory sinking fund.
Ranking
Senior Indebtedness versus Notes
The indebtedness evidenced by these notes and the guarantees thereof is
unsecured and ranks pari passu in right of payment to the Senior Indebtedness
of the Company and the Guarantors, as the case may be.
As of June 30, 2001, the Senior Indebtedness of the Company and the
Guarantors was approximately $1,756.4 million, including $1,306.4 million of
secured indebtedness.
Virtually all of the Senior Indebtedness of the Guarantors consists of their
respective guarantees of Senior Indebtedness of the Company under the Credit
Agreement and with respect to the notes. Secured debt and other secured
obligations of the Company (including obligations with respect to the Credit
Agreement) are effectively senior to the notes to the extent of the value of
the assets securing such debt or other obligations.
Senior Subordinated Indebtedness versus Notes
The indebtedness evidenced by the notes and the guarantees thereof ranks
senior in right of payment to the Senior Subordinated Indebtedness of the
Company and the Guarantors, as the case may be.
As of June 30, 2001, the Senior Subordinated Indebtedness of the Company and
the Guarantors was approximately $951.4 million.
All of the Senior Subordinated Indebtedness of the Guarantors consists of
their respective guarantees of Senior Subordinated Indebtedness of the Company
with respect to the 91/2% Notes, 8.80% Notes, 91/4% Notes and 9% Notes.
Liabilities of Subsidiaries versus Notes
A substantial portion of our operations are conducted through our
subsidiaries. Claims of creditors of such subsidiaries that are not Subsidiary
Guarantors, including trade creditors and creditors holding indebtedness or
guarantees issued by such subsidiaries, and claims of preferred stockholders of
such subsidiaries generally will have priority with respect to the assets and
earnings of such subsidiaries over the claims of our creditors, including
holders of the notes. Accordingly, the notes are effectively subordinated to
creditors (including trade creditors) and preferred stockholders, if any, of
our subsidiaries that are not Subsidiary Guarantors.
At June 30, 2001, the total liabilities of our subsidiaries that are not
Subsidiary Guarantors were approximately $52.6 million, including trade
payables. Although the Indenture limits the incurrence of Indebtedness and
preferred stock of certain of our subsidiaries, such limitation is subject to a
number of significant qualifications. Moreover, the Indenture does not impose
any limitation on the incurrence by such subsidiaries of liabilities that are
not considered Indebtedness under the Indenture. See "--Certain Covenants
--Limitation on Indebtedness."
Guarantees
Holdings and the Subsidiary Guarantors have fully and unconditionally
guaranteed, on a senior unsecured basis, jointly and severally, to each holder
and the Trustee, the full and prompt performance of the Company's
36
obligations under the Indenture and the notes, including the payment of
principal of and interest on the notes. Subject to limited exceptions, the
Subsidiary Guarantors are the current and future United States subsidiaries of
the Company.
The obligations of each Subsidiary Guarantor are limited to the maximum
amount which, after giving effect to all other contingent and fixed liabilities
of such Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its guarantee or
pursuant to its contribution obligations under the Indenture, will result in
the obligations of such Subsidiary Guarantor under the guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. See "Risk Factors--A guarantee could be voided if the guarantor
fraudulently transferred the guarantee at the time it incurred the
indebtedness, which could result in the noteholders being able to rely on only
URI to satisfy claims."
Each Subsidiary Guarantor that makes a payment under its guarantee will be
entitled to a contribution from each other Guarantor in an amount equal to such
other Guarantor's pro rata portion of such payment based on the respective net
assets of all the Guarantors at the time of such payment determined in
accordance with GAAP (for purposes hereof, Holdings' net assets shall be those
of all its consolidated Subsidiaries other than the Subsidiary Guarantors),
provided, however, that during a Default, such right of contribution shall be
suspended until the payment in full of all guaranteed obligations under the
Indenture.
The guarantee of a Subsidiary Guarantor will be released:
(1) upon the sale or other disposition (including by way of consolidation
or merger) of such Subsidiary Guarantor other than to the Company or a
Restricted Subsidiary of the Company and as permitted by the Indenture;
(2) upon the sale or disposition of all or substantially all the assets
of such Subsidiary Guarantor other than to the Company or a Restricted
Subsidiary of the Company and as permitted by the Indenture;
(3) upon defeasance or covenant defeasance; or
(4) if the Company properly designates any Restricted Subsidiary that is
a Subsidiary Guarantor as an Unrestricted Subsidiary.
Change of Control
Upon the occurrence of a Change of Control, we shall be obligated to make an
offer to purchase (a "Change of Control Offer"), on a business day (the "Change
of Control Purchase Date") not more than 60 nor less than 30 days following the
occurrence of the Change of Control, all of the then outstanding notes tendered
at a purchase price in cash (the "Change of Control Purchase Price") equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
thereon to the Change of Control Purchase Date. We shall be required to
purchase all notes tendered pursuant to the Change of Control Offer and not
withdrawn. The Change of Control Offer is required to remain open for at least
20 business days.
In order to effect such Change of Control Offer, we shall, not later than
the 30th day after the Change of Control, mail to each holder of notes notice
of the Change of Control Offer, which notice shall govern the terms of the
Change of Control Offer and shall state, among other things, the procedures
that holders of notes must follow to accept the Change of Control Offer.
If a Change of Control Offer is made, there can be no assurance that we will
have available funds sufficient to pay the Change of Control Purchase Price for
all of the notes that might be delivered by holders of notes seeking to accept
the Change of Control Offer. In addition, there can be no assurance that our
debt instruments will permit such offer to be made. The Credit Agreement
prohibits us, subject to certain exceptions, from purchasing any notes prior to
the repayment of all principal (including letter of credit disbursements),
interest and
37
fees, and the expiration or termination of all letters of credit and
commitments, under the Credit Agreement. In order to make a Change of Control
Offer at a time when we are prohibited from purchasing notes, we would be
required to refinance the Credit Agreement or seek a waiver from the lenders
thereunder, and the occurrence of a Change of Control is also an event of
default under the Credit Agreement and would entitle the lenders to accelerate
all amounts owing thereunder. Failure to make a Change of Control Offer, even
if prohibited by our debt instruments, also would constitute a default under
the Indenture. Pursuant to the indentures governing the 91/2% Notes, the 8.80%
Notes, the 91/4% Notes and the 9% Notes, we are also required to make an offer
to repurchase the 91/2% Notes, the 8.80% Notes, the 91/4% Notes and the 9%
Notes upon a Change of Control, and our failure to make such an offer is an
event of default under those indentures. See "Risk Factors--We may be unable to
repurchase the notes as required upon a change of control." We shall not be
required to make a Change of Control Offer upon a Change of Control if a third
party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements applicable to a Change of Control
Offer made by the Company and purchases all notes validly tendered and not
withdrawn under such Change of Control Offer.
The Change of Control purchase feature of the notes may in certain
circumstances make more difficult or discourage a sale or takeover of our
company and, thus, the removal of incumbent management. The Change of Control
purchase feature is a result of negotiations between us and the initial
purchasers of the Original Notes. We have no present intention to engage in a
transaction involving a Change of Control, although it is possible that we
could decide to do so in the future. Subject to the limitations discussed
below, we could, in the future, enter into certain transactions, including
acquisitions, refinancings or other recapitalizations, that would not
constitute a Change of Control under the Indenture, but that could increase the
amount of indebtedness outstanding at such time or otherwise affect our capital
structure or credit ratings. The Indenture contains restrictions on our ability
to incur additional Indebtedness, as described under "--Certain
Covenants--Limitation on Indebtedness", "--Limitation on Liens" and
"--Limitation on Sale/Leaseback Transactions." Such restrictions can only be
waived with the consent of the holders of a majority in principal amount of the
notes then outstanding. Except for the limitations contained in such covenants,
however, the Indenture does not contain any covenants or provisions that may
afford holders of the notes protection in the event of a highly leveraged
transaction. The definition of "Change of Control" excludes certain
transactions by Permitted Holders, including a direct or indirect sale, lease,
exchange or other transfer of all or substantially all of the assets of the
Company to Permitted Holders.
The use of the term "all or substantially all" in provisions of the
Indenture such as clause (b) of the definition of "Change of Control" and under
"--Consolidation, Merger, Sale of Assets, Etc." has no clearly established
meaning under New York law (which governs the Indenture) and has been the
subject of limited judicial interpretation in only a few jurisdictions.
Accordingly, there may be a degree of uncertainty in ascertaining whether any
particular transaction would involve a disposition of "all or substantially
all" of the assets of a person, which uncertainty should be considered by
prospective purchasers of notes.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder, to the extent such laws or
regulations are applicable, in the event that a Change of Control occurs and
the Company is required to purchase notes as described above.
Future indebtedness that we may incur may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require the repurchase of such indebtedness upon a Change of Control. Moreover,
the exercise by the holders of their right to require us to repurchase the
notes could cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on us.
Certain Covenants
The Indenture contains the following covenants, among others:
Limitation on Indebtedness. The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or in any manner become directly or indirectly
38
liable, contingently or otherwise (in each case, to "incur"), for the payment
of any Indebtedness (including any Acquired Indebtedness) other than Permitted
Indebtedness; provided, however, that (i) the Company and any Subsidiary
Guarantor will be permitted to incur Indebtedness (including Acquired
Indebtedness), and (ii) a Restricted Subsidiary will be permitted to incur
Acquired Indebtedness, if in each case the Consolidated Fixed Charge Coverage
Ratio of the Company is at least 2:1, after giving pro forma effect to:
(1) the incurrence of such Indebtedness and (if applicable) the
application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness were incurred at the beginning of the
four full fiscal quarters immediately preceding such incurrence, taken as
one period;
(2) the incurrence, repayment or retirement of any other Indebtedness by
the Company and its Restricted Subsidiaries since the first day of such
four-quarter period as if such Indebtedness was incurred, repaid or retired
at the beginning of such four-quarter period (except that, in making such
computation, the amount of Indebtedness under any revolving credit facility
shall be computed based upon the average daily balance of such Indebtedness
during such four-quarter period); and
(3) any Asset Sale or Asset Acquisition occurring since the first day of
such four-quarter period (including to the date of calculation) as if such
acquisition or disposition occurred at the beginning of such four-quarter
period.
Limitation on Restricted Payments. The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or payment
on or in respect of Capital Stock of the Company or any of its Restricted
Subsidiaries or make any payment to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company or any of its Restricted
Subsidiaries (other than dividends or distributions payable solely in
Capital Stock of the Company (other than Redeemable Capital Stock) or in
options, warrants or other rights to purchase Capital Stock of the Company
(other than Redeemable Capital Stock)) (other than the declaration or
payment of dividends or other distributions to the extent declared or paid
to the Company or any Restricted Subsidiary);
(b) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of the Company or any of its Restricted Subsidiaries or
any options, warrants, or other rights to purchase any such Capital Stock
(other than any such securities owned by the Company or a Restricted
Subsidiary);
(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any such
Subordinated Indebtedness owned by the Company or a Restricted Subsidiary);
or
(d) make any Investment (other than any Permitted Investment) in any
person,
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, after
giving effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the Fair Market Value of the
asset(s) proposed to be transferred by the Company or such Restricted
Subsidiary, as the case may be, pursuant to such Restricted Payment):
(A) no Default or Event of Default shall have occurred and be continuing;
(B) immediately after giving effect to such Restricted Payment, the
Company would be able to incur $1.00 of additional Indebtedness, (other than
Permitted Indebtedness) (assuming a market rate of interest with respect to
such additional Indebtedness); and
(C) the aggregate amount of all Restricted Payments declared or made from
and after May 22, 1998 would not exceed the sum of:
(1) 50% of the aggregate Consolidated Net Income of the Company
accrued on a cumulative basis during the period (treated as one
accounting period) beginning on May 22, 1998 and ending on
39
the last day of the fiscal quarter of the Company immediately preceding
the date of such proposed Restricted Payment (or, if such aggregate
cumulative Consolidated Net Income of the Company for such period shall
be a deficit, minus 100% of such deficit);
(2) the aggregate net cash proceeds received by the Company as
capital contributions to the Company after May 22, 1998 and which
constitute shareholders' equity of the Company in accordance with GAAP;
(3) the aggregate net cash proceeds received by the Company from the
issuance or sale of Capital Stock (excluding Redeemable Capital Stock of
the Company) of the Company to any person (other than an issuance or
sale to a Subsidiary of the Company and other than an issuance or sale
to an employee stock ownership plan or to a trust established by the
Company or any of its Subsidiaries for the benefit of their employees)
after May 22, 1998;
(4) the aggregate net cash proceeds received by the Company from any
person (other than a Subsidiary of the Company) upon the exercise of any
options, warrants or rights to purchase shares of Capital Stock (other
than Redeemable Capital Stock) of the Company after May 22, 1998;
(5) the aggregate net cash proceeds received after May 22, 1998 by
the Company from any person (other than a Subsidiary of the Company) for
debt securities that have been converted or exchanged into or for
Capital Stock of the Company (other than Redeemable Capital Stock) (to
the extent such debt securities were originally sold for cash) plus the
aggregate amount of cash received by the Company (other than from a
Subsidiary of the Company) in connection with such conversion or
exchange;
(6) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment after May 22, 1998, an amount equal to
the lesser of the return of capital with respect to such Investment and
the initial amount of such Investment, in either case, less the cost of
the disposition of such Investment; and
(7) so long as the Designation thereof was treated as a Restricted
Payment made after May 22, 1998, with respect to any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after
the Issue Date in accordance with "--Limitation on Designations of
Unrestricted Subsidiaries" below, the Fair Market Value of the Company's
interest in such Subsidiary, provided, however, that such amount shall
not in any case exceed the Designation Amount with respect to such
Restricted Subsidiary upon its Designation, minus the Designation Amount
(measured as of the date of Designation) with respect to any Restricted
Subsidiary of the Company which has been designated as an Unrestricted
Subsidiary after May 22, 1998 in accordance with "--Limitations on
Designations of Unrestricted Subsidiaries" below.
For purposes of the preceding clause (C)(4), the value of the aggregate net
proceeds received by the Company upon the issuance of Capital Stock upon the
exercise of options, warrants or rights will be the net cash proceeds received
upon the issuance of such options, warrants or rights plus the incremental
amount received by the Company upon the exercise thereof.
None of the foregoing provisions will prohibit, so long, in the case of
clauses (ii), (iii), (v), (vi), (vii), (viii), (ix) and (xi) below, as there is
no Default or Event of Default continuing:
(i) the payment of any dividend or distribution within 60 days after the
date of its declaration, if at the date of declaration such payment would be
permitted by the first paragraph of this covenant;
(ii) the redemption, repurchase or other acquisition or retirement of any
shares of any class of Capital Stock of the Company in exchange for, or out
of the net cash proceeds of, a substantially concurrent issue and sale of
other shares of Capital Stock of the Company (other than Redeemable Capital
Stock of the Company) to any person (other than to a Subsidiary of the
Company); provided, however, that such net cash proceeds are excluded from
clause (C) of the first paragraph of this covenant;
40
(iii) any redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness by exchange for, or out of the net cash proceeds
of, a substantially concurrent issue and sale of:
(1) Capital Stock (other than Redeemable Capital Stock of the
Company) of the Company to any person (other than to a Subsidiary of the
Company); provided, however, that any such net cash proceeds are
excluded from clause (C) of the first paragraph of this covenant; or
(2) Indebtedness of the Company so long as such Indebtedness is
Subordinated Indebtedness which:
(x) has no scheduled principal payment prior to the 91st day after
the Maturity Date;
(y) has an Average Life to Stated Maturity greater than the
remaining Average Life to Stated Maturity of the notes; and
(z) is subordinated to the notes in the same manner and to the
same extent as the Subordinated Indebtedness so purchased, exchanged,
redeemed, acquired or retired;
(iv) Investments constituting Restricted Payments made as a result of the
receipt of non-cash consideration from any Asset Sale or other sale of
assets or property made pursuant to and in compliance with the Indenture;
(v) payments to purchase Capital Stock of the Company or Holdings from
officers of the Company or Holdings, pursuant to agreements in effect as of
the Issue Date, in an amount not to exceed $15 million in the aggregate;
(vi) payments (other than those covered by clause (v)) to purchase
Capital Stock of the Company or Holdings from management or employees of the
Company or any of its Subsidiaries, or their authorized representatives,
upon the death, disability or termination of employment of such employees,
in aggregate amounts under this clause not to exceed $1 million in any
fiscal year of the Company;
(vii) payments to Holdings in an amount sufficient to permit it to make
scheduled payments of interest on its 61/2% Convertible Subordinated
Debentures due August 1, 2028, issued to United Rentals Trust I;
(viii) upon the occurrence of a Change of Control and within 60 days
after the completion of the offer to repurchase the notes pursuant to the
covenant described under "--Change of Control" above (including the purchase
of the notes tendered), any purchase or redemption of Subordinated
Indebtedness or any Capital Stock of Holdings, the Company or any Restricted
Subsidiaries required pursuant to the terms thereof as a result of such
Change of Control at a purchase or redemption price not to exceed 101% of
the outstanding principal amount or liquidation amount thereof, plus accrued
and unpaid interest or dividends (if any); provided, however, that at the
time of such purchase or redemption no Default shall have occurred and be
continuing (or would result therefrom);
(ix) upon the occurrence of an Asset Sale and within 60 days after the
completion of an Asset Sale Offer to repurchase the Notes pursuant to the
covenant described under "--Certain Covenants--Disposition of Proceeds of
Asset Sales" below (including the purchase of the notes tendered), any
purchase or redemption of Subordinated Indebtedness or any Capital Stock of
Holdings, the Company or any Restricted Subsidiaries required pursuant to
the terms thereof as a result of such Asset Sale at a purchase or redemption
price not to exceed 100% of the outstanding principal amount or liquidation
amount thereof, plus accrued and unpaid interest or dividends (if any);
provided, however, that at the time of such purchase or redemption no
Default shall have occurred and be continuing (or would result therefrom);
(x) payments to Holdings in an amount sufficient to enable Holdings to
pay:
(1) its taxes, legal, accounting, payroll, benefits and corporate
overhead expenses (including SEC, stock exchange and transfer agency
fees and expenses), and expenses of United Rentals Trust I payable by
Holdings pursuant to the terms of the trust agreement governing such
trust;
41
(2) trade, lease, payroll, benefits and other obligations in respect
of goods to be delivered to, services (including management and
consulting services) performed for and properties used by, the Company
and its Restricted Subsidiaries;
(3) the purchase price for Investments in other persons, provided,
however, that promptly following such Investment either:
(x) such other person either becomes a Restricted Subsidiary or is
merged or consolidated with, or transfers or conveys all or
substantially all of its assets to, the Company or a Restricted
Subsidiary; or
(y) such Investment would otherwise be permitted under the
Indenture if made by the Company and such Investment is contributed
or transferred by Holdings to the Company or a Restricted Subsidiary;
and
(4) reasonable and customary incidental expenses as determined in
good faith by the Board of Directors of Holdings;
(xi) cash payments in lieu of the issuance of fractional shares in
connection with the exercise of any warrants, options or other securities
convertible into or exchangeable for Capital Stock of Holdings, the Company
or any of its Restricted Subsidiaries;
(xii) the deemed repurchase of Capital Stock on the cashless exercise of
stock options;
(xiii) the payment of any dividend or distribution by a Restricted
Subsidiary to the holders of its Capital Stock on a pro rata basis; and
(xiv) any Investment made in a Special Purpose Vehicle in connection with
a Securitization Transaction, which Investment consists of the assets
described in the definition of "Equipment Securitization Transaction" or
"Receivables Securitization Transaction."
Any payments made pursuant to clauses (i), (v), (vi), (vii), (viii) or (ix) of
this paragraph shall be taken into account in calculating the amount of
Restricted Payments made in accordance with this covenant.
Limitation on Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien
(the "Initial Lien") of any kind against or upon any of its property or assets,
or any proceeds therefrom, unless the notes are equally and ratably secured
(except that Liens securing Subordinated Indebtedness shall be expressly
subordinate to Liens securing the notes to the same extent such Subordinated
Indebtedness is subordinate to the notes), except for Permitted Liens. Any Lien
created for the benefit of the Holders of the notes pursuant to the preceding
sentence shall provide by its terms that such Lien shall be automatically and
unconditionally released and discharged upon the release and discharge of the
Initial Lien.
Limitation on Sale/Leaseback Transactions. The Company will not, and will
not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with respect to any property unless:
(1) the Company or such Restricted Subsidiary would be entitled to:
(A) Incur Indebtedness in an amount equal to the Attributable Debt
with respect to such Sale/Leaseback Transaction pursuant to the covenant
described under "--Limitation on Indebtedness;" and
(B) create a Lien on such property securing such Attributable Debt
without equally and ratably securing the Notes pursuant to the covenant
described under "--Limitation on Liens;"
(2) the net proceeds received by the Company or any Restricted Subsidiary
in connection with such Sale/Leaseback Transaction are at least equal to the
fair value (as determined by the Board of Directors) of such property; and
42
(3) the Company applies the proceeds of such transaction in compliance
with the covenant described under "--Dispositions of Proceeds of Asset
Sales."
Notwithstanding clauses 1(B), 2 and 3 above, the Company and the Restricted
Subsidiaries may enter into Sale/Leaseback Transactions with respect to rental
fleet equipment.
Disposition of Proceeds of Asset Sales. The Company will not, and will not
permit any of its Restricted Subsidiaries to, make any Asset Sale unless:
(a) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the shares or assets sold or otherwise disposed of; and
(b) at least 75% of such consideration consists of cash or Cash
Equivalents or Replacement Assets (as defined below); provided, however,
that the amount of any liabilities (as shown on the most recent balance
sheet of the Company or such Restricted Subsidiary) of the Company or such
Restricted Subsidiary that are assumed by the transferee of such assets and
any securities, notes or other obligations received by the Company or such
Restricted Subsidiary from such transferee that are converted within 30 days
into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents
received) shall be deemed to be cash for the purposes of this provision;
provided further, that the 75% limitation referred to in clause (b) will not
apply to any Asset Sale in which the cash or Cash Equivalent portion of the
consideration received therefrom, determined in accordance with the
foregoing provision, is equal to or greater than what the after-tax proceeds
would have been had such Asset Sale complied with the aforementioned 75%
limitation.
To the extent that the Net Cash Proceeds of any Asset Sale are not required
to be applied to repay, and permanently reduce the commitments under, Senior
Indebtedness of the Company or any Restricted Subsidiary, or are not so
applied, the Company or such Restricted Subsidiary, as the case may be, may
apply the Net Cash Proceeds from such Asset Sale, within 360 days of such Asset
Sale, to an investment in properties and assets that replace the properties and
assets that were the subject of such Asset Sale or in properties and assets
that are used or useful in the business of the Company and its Restricted
Subsidiaries conducted at such time or in businesses reasonably related thereto
or in Capital Stock of a person, the principal portion of whose assets consist
of such property or assets (collectively, "Replacement Assets"). Any Net Cash
Proceeds from any Asset Sale that are neither used to repay, and permanently
reduce the commitments under, Senior Indebtedness nor invested in Replacement
Assets within such 360-day period constitute "Excess Proceeds" subject to
disposition as provided below.
When the aggregate amount of Excess Proceeds equals or exceeds $10 million,
the Company shall make an offer to purchase (an "Asset Sale Offer"), from all
holders of the notes, an aggregate principal amount of notes equal to such
Excess Proceeds, at a price in cash equal to 100% of the outstanding principal
amount thereof plus accrued and unpaid interest, if any, to the purchase date
(the "Asset Sale Offer Price"). To the extent that the aggregate principal
amount of notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company may use such deficiency for general corporate
purposes. The notes shall be purchased by the Company, at the option of the
holder thereof, in whole or in part in integral multiples of $1,000, on a date
that is not earlier than 30 days and not later than 60 days from the date the
notice is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act. If the
aggregate principal amount of notes validly tendered and not withdrawn by
holders thereof exceeds the Excess Proceeds, notes to be purchased will be
selected on a pro rata basis.
Notwithstanding the foregoing, if the Company is required to commence an
Asset Sale Offer at any time when securities of the Company ranking pari passu
in right of payment with the notes are outstanding and the terms of such
securities provide that a similar offer must be made with respect to such other
securities, then the Asset Sale Offer for the notes shall be made concurrently
with such other offers and securities of each issue will be accepted on a pro
rata basis in proportion to the aggregate principal amount of securities of
each issue which
43
the holders thereof elect to have purchased. Any Asset Sale Offer will be made
only to the extent permitted under, and subject to prior compliance with, the
terms of agreements governing Senior Indebtedness. Upon completion of such
Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder, to the extent such laws and
regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to purchase notes as described above.
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any Restricted Subsidiary to issue any Preferred Stock other than
Preferred Stock issued to the Company or a Wholly Owned Restricted Subsidiary.
The Company will not sell, transfer or otherwise dispose of Preferred Stock
issued by a Restricted Subsidiary of the Company or permit a Restricted
Subsidiary to sell, transfer or otherwise dispose of Preferred Stock issued by
a Restricted Subsidiary, other than to the Company or a Wholly Owned Restricted
Subsidiary. Notwithstanding the foregoing, nothing in such covenant will
prohibit Preferred Stock (other than Redeemable Capital Stock) issued by a
person prior to the time:
(A) such person becomes a Restricted Subsidiary of the Company;
(B) such person merges with or into a Restricted Subsidiary of the
Company; or
(C) a Restricted Subsidiary of the Company merges with or into such
person;
provided, however, that such Preferred Stock was not issued or incurred by such
person in anticipation of a transaction contemplated by subclause (A), (B), or
(C) above.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into any transaction or series of related transactions (including, without
limitation, the sale, transfer, disposition, purchase, exchange or lease of
assets, property or services) with, or for the benefit of, any of its
Affiliates (other than Restricted Subsidiaries), except:
(a) on terms that are no less favorable to the Company or such
Subsidiary, as the case may be, than those which could have been obtained in
a comparable transaction at such time from persons who are not Affiliates of
the Company;
(b) with respect to a transaction or series of related transactions
involving aggregate payments or value equal to or greater than $2 million,
the Company shall have delivered an officer's certificate to the Trustee
certifying that such transaction or transactions comply with the preceding
clause (a); and
(c) with respect to a transaction or series of related transactions
involving aggregate payments or value equal to or greater than $5 million,
such transaction or transactions shall have been approved by a majority of
the Disinterested Members of the Board of Directors of the Company.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to:
(i) transactions with or among the Company and the Restricted
Subsidiaries;
(ii) customary directors' fees, indemnification and similar arrangements,
consulting fees, employee salaries, bonuses or employment agreements,
compensation or employee benefit arrangements and incentive arrangements
with any officer, director or employee of the Company or any Restricted
Subsidiary entered into in the ordinary course of business;
(iii) any dividends, payments or investments made in compliance with
"--Limitation on Restricted Payments" above;
(iv) loans and advances to officers, directors and employees of the
Company or any Restricted Subsidiary for travel, entertainment, moving and
other relocation expenses, in each case made in the ordinary course of
business;
44
(v) the incurrence of intercompany Indebtedness which constitutes
Permitted Indebtedness;
(vi) transactions pursuant to agreements in effect on the Issue Date;
(vii) the purchase of equipment for its Fair Market Value from Terex
Corporation or its Affiliates in the ordinary course of business of each of
Terex Corporation and the Company;
(viii) any sale, conveyance or other transfer of assets customarily
transferred in a Securitization Transaction to a Special Purpose Vehicle;
(ix) transactions with customers, clients, suppliers, joint venture
partners, joint ventures, including their members or partners, or purchasers
or sellers of goods or services, in each case in the ordinary course of
business, including pursuant to joint venture agreements, and otherwise in
compliance with the terms of the Indenture which are, in the aggregate
(taking into account all the costs and benefits associated with such
transactions), materially no less favorable to the Company or the applicable
Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or that Restricted Subsidiary with an
unrelated person or entity, in the good faith determination of the Company's
board of directors or our senior management, or are on terms at least as
favorable as might reasonably have been obtained at such time from an
unaffiliated party; and
(x) transactions described in or permitted by clauses (vii) and (x) of
the last paragraph under the caption "--Limitation on Restricted Payments."
Limitation on Dividends and other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to:
(a) pay dividends, in cash or otherwise, or make any other distributions
on or in respect of its Capital Stock or any other interest or participation
in, or measured by, its profits;
(b) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary of the Company;
(c) make loans or advances to the Company or any other Restricted
Subsidiary of the Company;
(d) transfer any of its properties or assets to the Company or any other
Restricted Subsidiary of the Company; or
(e) guarantee any Indebtedness of the Company or any other Restricted
Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by reason of:
(i) applicable law or any applicable rule, regulation or order;
(ii) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of the Company or any Restricted Subsidiary
of the Company;
(iii) customary restrictions on transfers of property subject to a Lien
permitted under the Indenture;
(iv) the Credit Agreement as in effect on the Issue Date;
(v) any agreement or other instrument of a person acquired by the Company
or any Restricted Subsidiary of the Company in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any person, or the properties or assets of
any person, other than the person, or the property or assets of the person,
so acquired;
(vi) an agreement entered into for the sale or disposition of Capital
Stock or assets of a Restricted Subsidiary or an agreement entered into for
the sale of specified assets (in either case, so long as such encumbrance or
restriction, by its terms, terminates on the earlier of the termination of
such agreement or the consummation of such agreement and so long as such
restriction applies only to the Capital Stock or assets to be sold);
45
(vii) any agreement in effect on the Issue Date;
(viii) the Indenture and the guarantees thereunder;
(ix) the indentures governing the 91/2% Notes, the 8.80% Notes, the 91/4%
Notes and the 9% Notes;
(x) joint venture agreements and other similar agreements entered into
in the ordinary course of business that prohibit actions of the type
described in clauses (a), (c), (d) and (e) above;
(xi) any agreement entered into with respect to a Special Purpose Vehicle
in connection with a Securitization Transaction, containing customary
restrictions required by the institutional sponsor or arranger of such
Securitization Transaction in similar types of documents relating to the
purchase of similar assets in connection with the financing thereof;
(xii) restrictions relating to Foreign Subsidiaries contained in
Indebtedness Incurred pursuant to clause (k) of the definition of "Permitted
Indebtedness;" and
(xiii) any agreement that amends, extends, refinances, renews or replaces
any agreement described in the foregoing clauses, provided, however, that
the terms and conditions of any such agreement are not materially less
favorable, taken as a whole, to the holders of the notes with respect to
such dividend and payment restrictions than those under or pursuant to the
agreement amended, extended, refinanced, renewed or replaced.
Limitation on Designations of Unrestricted Subsidiaries. The Company may
designate after the Issue Date any Restricted Subsidiary as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(i) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(ii) the Company would be permitted to make an Investment (other than a
Permitted Investment, except a Permitted Investment covered by clause (xii)
of the definition thereof) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
"--Limitation on Restricted Payments" above in an amount (the "Designation
Amount") equal to the Fair Market Value of the Company's interest in such
Subsidiary on such date calculated in accordance with GAAP; and
(iii) the Company would be permitted under the Indenture to incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the covenant described under "--Limitation on Indebtedness" at the time of
such Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
"--Limitation on Restricted Payments" for all purposes of the Indenture in the
Designation Amount.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, at any time:
(x) provide credit support for or subject any of its property or assets
(other than the Capital Stock of any Unrestricted Subsidiary) to the
satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including
any undertaking, agreement or instrument evidencing such Indebtedness);
(y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary; or
(z) be directly or indirectly liable for any Indebtedness which provides
that the holder thereof may (upon notice, lapse of time or both) declare a
default thereon or cause the payment thereof to be accelerated or payable
prior to its final scheduled maturity upon the occurrence of a default with
respect to any Indebtedness of any Unrestricted Subsidiary (including any
right to take enforcement action against such Unrestricted Subsidiary),
except any non-recourse guarantee given solely to support the pledge by the
Company or any Restricted Subsidiary of the Capital Stock of an Unrestricted
Subsidiary.
46
All Subsidiaries of Unrestricted Subsidiaries shall automatically be deemed
to be Unrestricted Subsidiaries.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(i) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at such
time, have been permitted to be incurred for all purposes of the Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
Additional Subsidiary Guarantees. The Company will cause each United States
Restricted Subsidiary that guarantees any Indebtedness of the Company or any
other Restricted Subsidiary to at the same time execute and deliver to the
Trustee a Guaranty Agreement pursuant to which such Restricted Subsidiary will
guarantee payment of the notes on the same terms and conditions as those set
forth in the Indenture. This covenant shall not apply to any of the Company's
Subsidiaries that have been properly designated as an Unrestricted Subsidiary
or as a Special Purpose Vehicle.
Reporting Requirements. For so long as the notes are outstanding, whether or
not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, or
any successor provision thereto, the Company shall file with the SEC (if
permitted by SEC practice and applicable law and regulations) the annual
reports, quarterly reports and other documents which the Company would have
been required to file with the SEC pursuant to such Section 13(a) or 15(d) or
any successor provision thereto if the Company were so subject, such documents
to be filed with the SEC on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file such
documents if the Company were so subject. If, notwithstanding the preceding
sentence, filing such documents by the Company with the SEC is not permitted by
SEC practice or applicable law or regulations, the Company shall transmit (or
cause to be transmitted) by mail to all holders of notes, as their names and
addresses appear in the note register, copies of such documents within 15 days
after the Required Filing Date. In addition, for so long as any notes remain
outstanding, the Company will furnish to the holders of notes and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act,
and, to any beneficial holder of notes, if not obtainable from the SEC,
information of the type that would be filed with the SEC pursuant to the
foregoing provisions upon the request of any such holder.
Consolidation, Merger, Sale of Assets, Etc.
The Company will not, in any transaction or series of transactions, merge or
consolidate with or into, or sell, assign, convey, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets as an entirety
to, any person or persons, and the Company will not permit any of its
Restricted Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Company or the Company and its Restricted Subsidiaries, taken as a whole, to
any other person or persons, unless at the time and after giving effect
thereto:
(a) either:
(i) if the transaction or transactions is a merger or consolidation,
the Company or such Restricted Subsidiary, as the case may be, shall be
the surviving person of such merger or consolidation; or
(ii) the person formed by such consolidation or into which the
Company, or such Restricted Subsidiary, as the case may be, is merged or
to which the properties and assets of the Company or such
47
Restricted Subsidiary, as the case may be, substantially as an entirety,
are transferred (any such surviving person or transferee person being
the "Surviving Entity") shall be a corporation organized and existing
under the laws of the United States of America, any state thereof or the
District of Columbia and shall expressly assume by a supplemental
indenture executed and delivered to the Trustee, in form satisfactory to
the Trustee, all the obligations of the Company or such Restricted
Subsidiary, as the case may be, under the notes, the Indenture and the
Registration Rights Agreement, and in each case, the Indenture shall
remain in full force and effect;
(b) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Default or Event
of Default shall have occurred and be continuing; and
(c) except in the case of any merger of the Company with any wholly owned
Subsidiary of the Company or any merger of Subsidiary Guarantors (and, in
each case, no other persons), the Company or the Surviving Entity, as the
case may be, after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) (assuming a
market rate of interest with respect to such additional Indebtedness).
In connection with any consolidation, merger, transfer, lease, assignment or
other disposition contemplated hereby, the Company shall deliver, or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, transfer, lease, assignment or other
disposition and the supplemental indenture in respect thereof comply with the
requirements under the Indenture.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties
and assets of the Company in accordance with the immediately preceding
paragraphs, the successor person formed by such consolidation or into which the
Company or a Restricted Subsidiary, as the case may be, is merged or the
successor person to which such sale, assignment, conveyance, transfer, lease or
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of the Company under the notes, the Indenture and/or the
Registration Rights Agreement, as the case may be, with the same effect as if
such successor had been named as the Company in the notes, the Indenture and/or
in the Registration Rights Agreement, as the case may be and, except in the
case of a lease, the Company or such Restricted Subsidiary shall be released
and discharged from its obligations thereunder.
The Indenture provides that for all purposes of the Indenture and the notes
(including the provision of this covenant and the covenants described in
"--Certain Covenants--Limitation on Indebtedness," "--Limitation on Restricted
Payments," and "--Limitation on Liens"), Subsidiaries of any surviving person
shall, upon such transaction or series of related transactions, become
Restricted Subsidiaries unless and until designated Unrestricted Subsidiaries
pursuant to and in accordance with "--Limitation on Designations of
Unrestricted Subsidiaries" and all Indebtedness, and all Liens on property or
assets, of the Company and the Restricted Subsidiaries in existence immediately
after such transaction or series of related transactions will be deemed to have
been incurred upon such transaction or series of related transactions.
Events of Default
The following are "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any, when
due and payable, on any of the Notes (at Stated Maturity, upon optional
redemption, required purchase or otherwise); or
48
(ii) default in the payment of an installment of interest on any of the
notes, when due and payable, for 30 days; or
(iii) default in the performance, or breach, of any covenant or agreement
of the Company under the Indenture (other than a default in the performance
or breach of a covenant or agreement which is specifically dealt with in
clauses (i), (ii) or (iv)) and such default or breach shall continue for a
period of 30 days after written notice has been given, by certified mail:
(x) to the Company by the Trustee; or
(y) to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding notes; or
(iv) (a) there shall be a default in the performance or breach of the
provisions of "--Consolidation, Merger and Sale of Assets, Etc.;"
(b) the Company shall have failed to make or consummate an Asset Sale
Offer in accordance with the provisions of the Indenture described under
"--Certain Covenants--Dispositions of Proceeds of Asset Sales;" or
(c) the Company shall have failed to make or consummate a Change of
Control Offer in accordance with the provisions of the Indenture
described under "--Change of Control;" or
(v) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Company or any Restricted Subsidiary of the Company then has outstanding
Indebtedness in excess of $15 million, individually or in the aggregate, and
either:
(a) such Indebtedness is already due and payable in full; or
(b) such default or defaults have resulted in the acceleration of the
maturity of such Indebtedness; or
(vi) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of money
in excess of $15 million, either individually or in the aggregate, shall be
entered against the Company or any Restricted Subsidiary of the Company or
any of their respective properties and shall not be discharged and there
shall have been a period of 60 days after the date on which any period for
appeal has expired and during which a stay of enforcement of such judgment,
order or decree, shall not be in effect; or
(vii) the entry of a decree or order by a court having jurisdiction in
the premises (A) for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under the Federal Bankruptcy
Code or any other federal, state or foreign bankruptcy, insolvency,
reorganization or similar law, or (B) adjudging the Company or any
Significant Subsidiary bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or
any Significant Subsidiary under the Federal Bankruptcy Code or any other
similar federal, state or foreign law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
the Company or any Significant Subsidiary or of any substantial part of any
of their properties, or ordering the winding up or liquidation of any of
their affairs, and the continuance of any such decree or order unstayed and
in effect for a period of 60 consecutive days; or
(viii) the institution by the Company or any Significant Subsidiary of a
voluntary case or proceeding under the Federal Bankruptcy Code or any other
similar federal, state or foreign law or any other case or proceedings to be
adjudicated a bankrupt or insolvent, or the consent by the Company or any
Significant Subsidiary to the entry of a decree or order for relief in
respect of the Company or any Significant Subsidiary in any involuntary case
or proceeding under the Federal Bankruptcy Code or any other similar
federal, state or foreign law or to the institution of bankruptcy or
insolvency proceedings against the
49
Company or any Significant Subsidiary, or the filing by the Company or any
Significant Subsidiary of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Code or any other
similar federal, state or foreign law, or the consent by it to the filing of
any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or other
similar official) of any of the Company or any Significant Subsidiary or of
any substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due or the taking of
corporate action by the Company or any Significant Subsidiary in furtherance
of any such action; or
(ix) any of the guarantees of the notes ceases to be in full force and
effect or any of such guarantees is declared to be null and void and
unenforceable or any of such guarantees is found to be invalid or any of the
Guarantors denies its liability under its guarantee (other than by reason of
release of a Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than those covered by clause (vii) or (viii)
above with respect to the Company) shall occur and be continuing, the Trustee,
by notice to the Company, or the holders of at least 25% in aggregate principal
amount of the notes then outstanding, by notice to the Trustee and the Company,
may declare the principal of, premium, if any, and accrued and unpaid interest,
if any, on all of the outstanding notes due and payable immediately. If an
Event of Default specified in clause (vii) or (viii) above with respect to the
Company occurs and is continuing, then the principal of, premium, if any, and
accrued and unpaid interest, if any, on all the outstanding notes shall ipso
facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holder of notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the
outstanding notes, by written notice to the Company and the Trustee, may
rescind such declaration if:
(a) the Company has paid or deposited with the Trustee a sum sufficient
to pay
(i) all sums paid or advanced by the Trustee under the Indenture and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
(ii) all overdue interest on all notes;
(iii) the principal of and premium, if any, on any notes which have
become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the notes; and
(iv) to the extent that payment of such interest is lawful, interest
upon overdue interest and overdue principal at the rate borne by the
Notes which has become due otherwise than by such declaration of
acceleration;
(b) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction; and
(c) all Events of Default, other than the non-payment of principal of,
premium, if any, and interest on the notes that has become due solely by
such declaration of acceleration, have been cured or waived.
The holders of not less than a majority in aggregate principal amount of the
outstanding notes may on behalf of the holders of all the notes waive any past
defaults under the Indenture, except a default in the payment of the principal
of, premium, if any, or interest on any note, or in respect of a covenant or
provision which under the Indenture cannot be modified or amended without the
consent of the holder of each note outstanding.
No holder of any of the notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the notes and the Indenture, the Trustee has
failed to institute such proceeding within 45 days after receipt of such notice
and the Trustee, within such 45 day period, has not received directions
inconsistent with
50
such written request by holders of a majority in aggregate principal amount of
the outstanding notes. Such limitations do not apply, however, to a suit
instituted by a holder of a note for the enforcement of the payment of the
principal of, premium, if any, or interest on such note on or after the
respective due dates expressed in such note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders unless such holders shall have offered to the Trustee security or
indemnity satisfactory to it. Subject to certain provisions concerning the
rights of the Trustee, the holders of a majority in aggregate principal amount
of the outstanding notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee under the Indenture.
If a Default or an Event of Default occurs and is continuing and is known to
the Trustee, the Trustee shall mail to each holder of the notes notice of the
Default or Event of Default within 90 days after obtaining knowledge thereof.
Except in the case of a Default or an Event of Default in payment of principal
of, premium, if any, or interest on any notes, the Trustee may withhold the
notice to the holders of such notes if its board of directors, the executive
committee or a committee of its directors or trust officers in good faith
determines that withholding the notice is in the interest of the noteholders.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company of its obligations under the Indenture and as to
any default in such performance. The Company is also required to notify the
Trustee within five days of any event which is, or after notice or lapse of
time or both would become, an Event of Default.
No Liability For Certain Persons
No director, officer, employee or stockholder of Holdings or the Company,
nor any director, officer or employee of any Guarantor, as such, will have any
liability for any obligations of the Company or any Guarantor under the notes,
the guarantees thereof or the Indenture based on or by reason of such
obligations or their creation. Each holder by accepting a note waives and
releases all such liability. The foregoing waiver and release are an integral
part of the consideration for the issuance of the notes. Such waiver may not be
effective to waive liabilities under the federal securities laws.
Defeasance or Covenant Defeasance of Indenture
The Company may, at its option and at any time, terminate the obligations of
the Company with respect to the outstanding notes ("defeasance") to the extent
set forth below. Such defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
notes, except for:
(i) the rights of holders of outstanding notes to receive payment in
respect of the principal of, premium, if any, and interest on such notes
when such payments are due;
(ii) the Company's obligations to issue temporary notes, register the
transfer or exchange of any notes, replace mutilated, destroyed, lost or
stolen notes and maintain an office or agency for payments in respect of the
notes;
(iii) the rights, powers, trusts, duties and immunities of the Trustee;
and
(iv) the defeasance provisions of the Indenture.
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In addition, the Company may, at its option and at any time, elect to terminate
the obligations of the Company with respect to certain covenants that are set
forth in the Indenture, some of which are described under "--Change of Control"
and "--Certain Covenants" above, and any subsequent failure to comply with such
obligations shall not constitute a Default or an Event of Default with respect
to the notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance:
(i) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the holders of the notes, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding notes to
redemption or maturity (except lost, stolen or destroyed notes which have
been replaced or paid);
(ii) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that the holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred (in the case of defeasance, such opinion must refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable
federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a default under the
Indenture caused by the incurrence of Indebtedness to make such deposit);
(iv) such defeasance or covenant defeasance shall not cause the Trustee
to have a conflicting interest with respect to any securities of the
Company;
(v) such defeasance or covenant defeasance shall not result in a breach
or violation of, or constitute a default under, any material agreement or
instrument to which the Company is a party or by which it is bound (other
than a default under the Indenture caused by the incurrence of Indebtedness
to make such deposit);
(vi) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(vii) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the
intent of preferring the holders of the notes over the other creditors of
the Company with the intent of hindering, delaying or defrauding creditors
of the Company or others;
(viii) no event or condition shall exist that would prevent the Company
from making payments of the principal of, premium, if any, and interest on
the notes on the date of such deposit or at any time ending on the 91st day
after the date of such deposit; and
(ix) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent under the Indenture to either defeasance or covenant defeasance,
as the case may be, have been complied with.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the Indenture) as to all outstanding notes
when:
(i) either:
(a) all the notes theretofore authenticated and delivered (except
lost, stolen or destroyed notes which have been replaced or repaid and
notes for whose payment money has theretofore been
52
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation; or
(b) all notes not theretofore delivered to the Trustee for
cancellation (except lost, stolen or destroyed notes which have been
replaced or paid) have become due and payable or will become due and
payable within one year under arrangements acceptable to the Trustee,
and the Company has irrevocably deposited or caused to be deposited with
the Trustee funds in an amount sufficient to pay and discharge the
entire Indebtedness on the notes not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and
interest on the notes to the date of deposit together with irrevocable
instructions from the Company directing the Trustee to apply such funds
to the payment thereof at maturity or redemption, as the case may be;
(ii) the Company has paid all other sums payable under the Indenture by
the Company; and
(iii) the Company has delivered to the Trustee an officers' certificate
and an opinion of counsel stating that all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture have
been complied with.
Amendments and Waivers
From time to time, the Company, when authorized by a resolution of its Board
of Directors, and the Trustee may, without the consent of the holders of any
outstanding notes, amend, waive or supplement the Indenture or the notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act, or making any change that does not
adversely affect the rights of any holder of notes. Other amendments and
modifications of the Indenture or the notes may be made by the Company and the
Trustee with the consent of the holders of not less than a majority of the
aggregate principal amount of the outstanding notes; provided, however, that no
such modification or amendment may, without the consent of the holder of each
outstanding note affected thereby:
(i) reduce the principal amount of, extend the fixed maturity of or alter
the redemption provisions of, the notes;
(ii) change the currency in which any notes or any premium or the
interest thereon is payable;
(iii) reduce the percentage in principal amount of outstanding notes that
must consent to an amendment, supplement or waiver or consent to take any
action under the Indenture or the notes;
(iv) impair the right to institute suit for the enforcement of any
payment on or with respect to the notes;
(v) waive a default in payment with respect to the notes;
(vi) amend, change or modify the obligation of the Company to make and
consummate a Change of Control Offer in the event of a Change of Control or
make and consummate the offer with respect to any Asset Sale or modify any
of the provisions or definitions with respect thereto;
(vii) reduce or change the rate or time for payment of interest on the
notes; or
(viii) modify or change any provision of the Indenture affecting the
ranking of the notes in a manner adverse to the holders of the notes.
The Trustee
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred
and is continuing, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
53
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. The Trustee is permitted to engage
in other transactions; provided, however, that if it acquires any conflicting
interest (as defined in such Act) it must eliminate such conflict or resign.
Governing Law
The Indenture and the notes are governed by the laws of the State of New
York, without regard to the principles of conflicts of law.
Book-Entry, Delivery and Form
The Original Notes were issued, and the Exchange Notes will be initially
issued, in the form of one or more global notes (the "Global Notes"). Each
Global Note is deposited with, or on behalf of, DTC and registered in the name
of DTC or its nominee. Except as set forth below, the Global Note may be
transferred, in whole and not in part, only to DTC or another nominee of DTC.
You may hold your beneficial interests in the Global Note directly through DTC
if you have an account with DTC or indirectly through organizations which have
accounts with DTC.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and "a clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of institutions that have accounts with DTC ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. DTC's participants include securities
brokers and dealers (which may include the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's book-entry system is also available to others such as banks, brokers,
dealers and trust companies (collectively, the "indirect participants") that
clear through or maintain a custodial relationship with a participant, whether
directly or indirectly.
The Company expects that pursuant to procedures established by DTC, upon the
deposit of the Global Note with DTC, DTC will credit, on its book-entry
registration and transfer system, the principal amount of notes represented by
such Global Note to the accounts of participants. Ownership of beneficial
interests in the Global Note will be limited to participants or persons that
may hold interests through participants. Ownership of beneficial interests in
the Global Note will be shown on, and the transfer of those ownership interests
will be effected only through, records maintained by DTC (with respect to
participants' interests), the participants and the indirect participants (with
respect to the owners of beneficial interests in the Global Note other than
participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Note.
So long as DTC, or its nominee, is the registered holder and owner of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole legal owner and holder of any related notes evidenced by the Global Note
for all purposes of such notes and the Indenture. Except as set forth below, as
an owner of a beneficial interest in the Global Note, you will not be entitled
to have the notes represented by the Global Note registered in your name, will
not receive or be entitled to receive physical delivery of certificated notes
and will not be considered to be the owner or holder of any notes under the
Global Note. We understand that under existing industry practice, in the event
an owner of a beneficial interest in the Global Note desires to take any action
that DTC, as the holder of the Global Note, is entitled to take, DTC would
authorize the participants to take such action, and the participants would
authorize beneficial owners owning through such participants to take such
action or would otherwise act upon the instructions of beneficial owners owning
through them.
54
We will make payments of principal of, premium, if any, and interest on
notes represented by the Global Note registered in the name of and held by DTC
or its nominee to DTC or its nominee, as the case may be, as the registered
owner and holder of the Global Note.
We expect that DTC or its nominee, upon receipt of any payment of principal
of, premium, if any, or interest on the Global Note will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Note as shown on the records of
DTC or its nominee. We also expect that payments by participants or indirect
participants to owners of beneficial interests in the Global Note held through
such participants or indirect participants will be governed by standing
instructions and customary practices and will be the responsibility of such
participants or indirect participants. We will not have any responsibility or
liability for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in the Global Note for any note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests or for any other aspect of the relationship
between DTC and its participants or indirect participants or the relationship
between such participants or indirect participants and the owners of beneficial
interests in the Global Note owning through such participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Trustee nor the Company
will have any responsibility or liability for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
Certificated Notes
Subject to certain conditions, the notes represented by the Global Note are
exchangeable for certificated notes in definitive form of like tenor in
denominations of $1,000 and integral multiples thereof if:
(1) DTC notifies us that it is unwilling or unable to continue as
depository for the Global Note or DTC ceases to be a clearing agency
registered under the Exchange Act and, in either case, we are unable to
locate a qualified successor within 90 days;
(2) we in our discretion at any time determine not to have all the notes
represented by the Global Note; or
(3) a default entitling the holders of the notes to accelerate the
maturity thereof has occurred and is continuing.
Any note that is exchangeable as above is exchangeable for certificated
notes issuable in authorized denominations and registered in such names as DTC
shall direct. Subject to the foregoing, the Global Note is not exchangeable,
except for a Global Note of the same aggregate denomination to be registered in
the name of DTC or its nominee.
Certain Definitions
"8.80% Notes" means the $205 million aggregate principal amount of 8.80%
Senior Subordinated Notes due 2008 issued by the Company under the indenture,
dated as of August 12, 1998, among the Company, as issuer, its United States
subsidiaries, as guarantors, and State Street Bank and Trust Company, as
trustee.
"9% Notes" means the $250 million aggregate principal amount of 9% Senior
Subordinated Notes due 2009 issued by the Company under the indenture dated as
of March 23, 1999, among the Company, as issuer, its United States
subsidiaries, as guarantors, and The Bank of New York, as trustee.
"91/4% Notes" means the $300 million aggregate principal amount of 91/4%
Senior Subordinated Notes due 2009 issued by the Company under the indenture,
dated as of December 15, 1998, among the Company, as issuer, its United States
subsidiaries, as guarantors, and State Street Bank and Trust Company, as
trustee.
55
"91/2% Notes" means the $200 million aggregate principal amount of 91/2%
Senior Subordinated Notes due 2008 issued by the Company under the indenture,
dated as of May 22, 1998, among the Company, as issuer, its United States
subsidiaries, as guarantors, and State Street Bank and Trust Company, as
trustee.
"Acquired Indebtedness" means Indebtedness of a person:
(a) assumed in connection with an Asset Acquisition from such person; or
(b) existing at the time such person becomes a Subsidiary of any other
person and not incurred in connection with, or in contemplation of, such
Asset Acquisition or such person becoming a Subsidiary.
"Affiliate" means, with respect to any specified person:
(i) any other person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified person;
(ii) any other person that owns, directly or indirectly, 10% or more of
such specified person's Capital Stock; or
(iii) any officer or director of:
(A) any such specified person;
(B) any Subsidiary of such specified person; or
(C) any person described in clauses (i) or (ii) above.
"Asset Acquisition" means:
(a) an Investment by the Company or any Restricted Subsidiary of the
Company in any other person pursuant to which such person shall become a
Restricted Subsidiary of the Company or any Restricted Subsidiary of the
Company, or shall be merged with or into the Company or any Restricted
Subsidiary of the Company; or
(b) the acquisition by the Company or any Restricted Subsidiary of the
Company of the assets of any person which constitute all or substantially
all of the assets of such person, any division or line of business of such
person or any other properties or assets of such person other than in the
ordinary course of business.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition by the Company or any Restricted Subsidiary of the Company to any
person other than the Company or a Restricted Subsidiary of the Company, of:
(a) any Capital Stock of any Restricted Subsidiary of the Company;
(b) all or substantially all of the properties and assets of any division
or line of business of the Company or any Restricted Subsidiary of the
Company; or
(c) any other properties or assets of the Company or any Restricted
Subsidiary of the Company,
(other than, in the case of clauses (a), (b) or (c) above,
(i) sales of obsolete, damaged or used equipment or other equipment
or inventory sales in the ordinary course of business;
(ii) sales of assets in one or a series of related transactions for
an aggregate consideration of less than $1 million; and
(iii) for purposes of the covenant described under "--Certain
Covenants--Disposition of Proceeds of Asset Sales" only, (x) a
disposition that constitutes a Restricted Payment permitted by the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments" or a Permitted Investment, (y) a disposition of all or
substantially all the assets of the Company in accordance with the
56
covenant described under "--Consolidation, Merger, Sale of Assets, Etc."
and (z) any sale, issuance, conveyance, transfer, lease or other
disposition of properties or assets in connection with a Securitization
Transaction).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended); provided, however, that if such Sale/Leaseback Transaction results
in a Capitalized Lease Obligation, the amount of Indebtedness represented
thereby will be determined in accordance with the definition of "Capitalized
Lease Obligation."
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing:
(i) the sum of the products of:
(a) the number of years from such date to the date or dates of each
successive scheduled principal payment (including, without limitation,
any sinking fund requirements) of such Indebtedness; and
(b) the amount of each such principal payment; by
(ii) the sum of all such principal payments.
"Board of Directors" means the board of directors of a company or its
equivalent, including managers of a limited liability company, general partners
of a partnership or trustees of a business trust, or any duly authorized
committee thereof.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock or equity participations, and any rights (other
than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock and, including, without
limitation, with respect to partnerships, limited liability companies or
business trusts, ownership interests (whether general or limited) and any other
interest or participation that confers on a person the right to receive a share
of the profits and losses of, or distributions of assets of, such partnerships,
limited liability companies or business trusts.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of the Indenture, the
amount of such obligation at any date shall be the capitalized amount thereof
at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year after
such time, issued or guaranteed by the United States Government or any
agency thereof;
(b) commercial paper, maturing not more than one year from the date of
issue, or corporate demand notes, in each case rated at least A-1 by
Standard & Poor's Ratings Group or P-1 by Moody's Investors Service, Inc.;
(c) any certificate of deposit (or time deposits represented by such
certificates of deposit) or bankers acceptance, maturing not more than one
year after such time, or overnight Federal Funds transactions that are
issued or sold by a commercial banking institution that is a member of the
Federal Reserve System and has a combined capital and surplus and undivided
profits of not less than $500 million;
(d) any repurchase agreement entered into with any commercial banking
institution of the stature referred to in clause (c) which:
(i) is secured by a fully perfected security interest in any
obligation of the type described in any of clauses (a) through (c); and
57
(ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of such
commercial banking institution thereunder;
(e) investments in short term asset management accounts managed by any
bank party to the Credit Agreement which are invested in indebtedness of any
state or municipality of the United States or of the District of Columbia
and which are rated under one of the two highest ratings then obtainable
from Standard & Poor's Ratings Group or by Moody's Investors Service, Inc.
or investments of the types described in clauses (a) through (d) above; and
(f) investments in funds investing primarily in investments of the types
described in clauses (a) through (e) above.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), excluding Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the Company or
Holdings; provided, however, that a "Change of Control" shall not be deemed
to have occurred under this subclause (a) unless the Permitted Holders do
not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors of the
Company or Holdings;
(b) the Company or Holdings consolidates with, or merges with or into,
another person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any person, or any
person consolidates with, or merges with or into, the Company (or Holdings),
in any such event pursuant to a transaction in which the outstanding Voting
Stock of the Company or Holdings is converted into or exchanged for cash,
securities or other property, other than any such transaction where:
(i) the outstanding Voting Stock of the Company or Holdings is
converted into or exchanged for Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation; and
(ii) immediately after such transaction no "person" or "group" (as
such terms are used in Section 13(d) and 14(d) of the Exchange Act),
excluding Permitted Holders, is the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall
be deemed to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly,
of more than 50% of the total Voting Stock of the surviving or
transferee corporation;
(c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
or Holdings (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the
Company or Holdings was approved by a vote of 66 2/3% of the directors then
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the
Company or Holdings then in office; or
(d) the Company is liquidated or dissolved or adopts a plan of
liquidation.
"Common Stock" means the common stock, par value $.01 per share, of
Holdings.
"Company" means United Rentals (North America), Inc., a Delaware
corporation.
"Consolidated Cash Flow Available for Fixed Charges" means, with respect to
any person for any period:
(i) the sum of, without duplication, the amounts for such period, taken
as a single accounting period, of:
(a) Consolidated Net Income;
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(b) Consolidated Non-cash Charges;
(c) Consolidated Interest Expense;
(d) Consolidated Income Tax Expense (other than income tax expense
(either positive or negative) attributable to extraordinary gains or
losses);
(e) one-third of Consolidated Rental Payments; and
(f) if any Asset Sale or Asset Acquisition shall have occurred since
the first day of any four quarter period for which "Consolidated Cash
Flow Available for Fixed Charges" is being calculated (including to the
date of calculation):
(A) the cost of any compensation, remuneration or other benefit
paid or provided to any employee, consultant, Affiliate or equity
owner of the entity involved in any such Asset Acquisition to the
extent such costs are eliminated or reduced (or public announcement
has been made of the intent to eliminate or reduce such costs) prior
to the date of such calculation and not replaced; and
(B) the amount of any reduction in general, administrative or
overhead costs of the entity involved in any such Asset Acquisition
or Asset Sale, to the extent such amounts under clauses (A) and (B)
would be permitted to be eliminated in a pro forma income statement
prepared in accordance with Rule 11-02 of Regulation S-X, less:
(ii) (x) non-cash items increasing Consolidated Net Income; and
(y) all cash payments during such period relating to non-cash charges
that were added back in determining Consolidated Cash Flow Available for
Fixed Charges in the most recent Four Quarter Period.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such person for the four full fiscal quarters, treated as
one period, for which financial information in respect thereof is available
immediately preceding the date of the transaction (the "Transaction Date")
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio (such four full fiscal quarter period being referred to herein as the
"Four Quarter Period") to the aggregate amount of Consolidated Fixed Charges of
such person for the Four Quarter Period. In calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio:"
(i) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal
to the rate of interest on such Indebtedness in effect on the Transaction
Date; and
(ii) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of
a prime or similar rate, a eurocurrency interbank offered rate, or other
rates, then the interest rate in effect on the Transaction Date will be
deemed to have been in effect during the Four Quarter Period.
If such person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third person, the above clause shall give effect
to the incurrence of such guaranteed Indebtedness as if such person or such
Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the sum of, without duplication, the amounts for such period of:
(i) Consolidated Interest Expense;
(ii) the aggregate amount of dividends and other distributions paid or
accrued during such period in respect of Redeemable Capital Stock of such
person and its Restricted Subsidiaries on a consolidated basis; and
59
(iii) one-third of Consolidated Rental Payments.
"Consolidated Income Tax Expense" means, with respect to any person for any
period, the provision for federal, state, local and foreign income taxes of
such person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of:
(i) the interest expense of such person and its Restricted Subsidiaries
for such period as determined on a consolidated basis in accordance with
GAAP, including, without limitation:
(a) any amortization of debt discount;
(b) the net cost under Interest Rate Protection Obligations
(including any amortization of discounts);
(c) the interest portion of any deferred payment obligation;
(d) all commissions, discounts and other fees and charges owed with
respect to letters of credit, bankers' acceptance financing or similar
facilities; and
(e) all accrued interest; and
(ii) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such person and its
Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person, for any period,
the consolidated net income (or loss) of such person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted,
to the extent included in calculating such net income, by excluding, without
duplication:
(i) all extraordinary gains or losses (net of fees and expenses relating
to the transaction giving rise thereto);
(ii) the portion of net income of such person and its Restricted
Subsidiaries allocable to minority interests in unconsolidated persons or to
Investments in Unrestricted Subsidiaries to the extent that cash dividends
or distributions have not actually been received by such person or one of
its Restricted Subsidiaries;
(iii) net income (or loss) of any person combined with such person or one
of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination;
(iv) gains or losses in respect of any Asset Sales by such person or one
of its Restricted Subsidiaries (net of fees and expenses relating to the
transaction giving rise thereto), on an after-tax basis;
(v) the net income of any Restricted Subsidiary of such person to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is not at the time permitted, directly
or indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Restricted Subsidiary or its stockholders;
and
(vi) any gain or loss realized as a result of the cumulative effect of a
change in accounting principles.
"Consolidated Non-cash Charges" means, with respect to any person for any
period, the aggregate depreciation, amortization (including amortization of
goodwill and other intangibles) and other non-cash expenses of such person and
its Restricted Subsidiaries reducing Consolidated Net Income of such person and
its Restricted Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP (excluding any such charges constituting an
extraordinary item or loss).
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"Consolidated Rental Payments" of any person means, for any period, the
aggregate rental obligations of such person and its Restricted Subsidiaries
(not including taxes, insurance, maintenance and similar expenses that the
lessee is obligated to pay under the terms of the relevant leases), determined
on a consolidated basis in accordance with GAAP, payable in respect of such
period (net of income from subleases thereof, not including taxes, insurance,
maintenance and similar expenses that the sublessee is obligated to pay under
the terms of such sublease), whether or not such obligations are reflected as
liabilities or commitments on a consolidated balance sheet of such person and
its Restricted Subsidiaries or in the notes thereto, excluding, however, in any
event:
(i) that portion of Consolidated Interest Expense of such person
representing payments by such person or any of its Restricted Subsidiaries
in respect of Capitalized Lease Obligations (net of payments to such person
or any of its Restricted Subsidiaries under subleases qualifying as
capitalized lease subleases to the extent that such payments would be
deducted in determining Consolidated Interest Expense); and
(ii) the aggregate amount of amortization of obligations of such person
and its Restricted Subsidiaries in respect of such Capitalized Lease
Obligations for such period (net of payments to such person or any of its
Restricted Subsidiaries and subleases qualifying as capitalized lease
subleases to the extent that such payments could be deducted in determining
such amortization amount).
"control" when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Credit Agreement" means the Amended and Restated Credit Agreement dated as
of April 20, 2001 by and among Holdings, the Company, a Canadian subsidiary of
the Company, the lenders referred to therein, The Chase Manhattan Bank, as
Administrative Agent, The Chase Manhattan Bank of Canada, as Canadian
Administrative Agent, and Bank of America, N.A., as Syndication Agent, together
with the related documents thereto (including the term loans and revolving
loans thereunder, any guarantees and any security documents), as amended,
extended, renewed, restated, supplemented or otherwise modified (in whole or in
part, and without limitation as to amount, terms, conditions, covenants and
other provisions) from time to time, and any agreement (and related documents)
governing Indebtedness incurred to refinance or replace, in whole or in part,
the borrowings and commitments at any time outstanding or permitted to be
outstanding under such Credit Agreement or a successor Credit Agreement,
whether by the same or any other lender or group of lenders and whether to the
same borrower or different borrowers.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Member of the Board of Directors of the Company" means, with
respect to any transaction or series of transactions, a member of the Board of
Directors of the Company other than a member who has any material direct or
indirect financial interest in or with respect to such transaction or series of
transactions or is an Affiliate, or an officer, director or an employee of any
person (other than the Company or Holdings) who has any direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Equipment Securitization Transaction" means any sale, assignment, pledge or
other transfer (a) by the Company or any Subsidiary of the Company of rental
fleet equipment, (b) by any ES Special Purpose Vehicle of leases or rental
agreements between the Company and/or any Subsidiary of the Company, as lessee,
on the one hand, and such ES Special Purpose Vehicle, as lessor, on the other
hand, relating to such rental fleet equipment and lease receivables arising
under such leases and rental agreements and (c) by the Company or any
Subsidiary of the Company of any interest in any of the foregoing, together in
each case with (i) any and all proceeds thereof (including all collections
relating thereto, all payments and other rights under insurance policies or
warranties relating thereto, all disposition proceeds received upon a sale
thereof, and all rights under manufacturers' repurchase programs or guaranteed
depreciation programs relating thereto), (ii) any collection or deposit account
relating thereto and (iii) any collateral, guarantees, credit enhancement or
other property or claims supporting or securing payment on, or otherwise
relating to, any such leases, rental agreements or lease receivables.
61
"ES Special Purpose Vehicle" means a trust, bankruptcy remote entity or
other special purpose entity which is a Subsidiary of the Company (or, if not a
Subsidiary of the Company, the common equity of which is wholly owned, directly
or indirectly, by the Company) and which is formed for the purpose of, and
engages in no material business other than, acting as a lessor, issuer or
depositor in an Equipment Securitization Transaction (and, in connection
therewith, owning the rental fleet equipment, leases, rental agreements, lease
receivables, rights to payment and other interests, rights and assets described
in the definition of Equipment Securitization Transaction, and pledging or
transferring any of the foregoing or interests therein).
"Event of Default" has the meaning set forth under "--Events of Default"
herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction. Fair Market Value shall be determined
by the Board of Directors of the Company in good faith.
"Foreign Subsidiary" means any Restricted Subsidiary not created or
organized in the United States or any state thereof or the District of Columbia
and that conducts substantially all its operations outside of the United
States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable at the date of
the Indenture.
"guarantee" means, as applied to any obligation:
(i) a guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, in any
manner, of any part or all of such obligation; and
(ii) an agreement, direct or indirect, contingent or otherwise, the
practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of nonperformance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts available to be drawn down under letters of credit of another
person.
The term "guarantee" used as a verb has a corresponding meaning.
"Guarantor" means Holdings and each Subsidiary Guarantor.
"Guaranty Agreement" means a supplemental indenture, in a form satisfactory
to the Trustee, pursuant to which a Subsidiary Guarantor guarantees the
Company's obligations with respect to the notes on the terms provided for in
the Indenture.
"Holdings" means United Rentals, Inc., a Delaware corporation.
"Indebtedness" means, with respect to any person, without duplication:
(a) all liabilities of such person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and
other accrued current liabilities incurred in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such person in connection with any letters of credit, banker's
acceptance or other similar credit transaction;
62
(b) all obligations of such person evidenced by bonds, notes, debentures
or other similar instruments;
(c) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
person (even if the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of
such property), but excluding trade accounts payable arising in the ordinary
course of business;
(d) all Capitalized Lease Obligations of such person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such person;
(e) all Indebtedness referred to in the preceding clauses of other
persons and all dividends of other persons, the payment of which is secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon property
(including, without limitation, accounts and contract rights) owned by such
person, even though such person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to
be the lesser of the value of such property or asset or the amount of the
obligation so secured);
(f) all guarantees of Indebtedness referred to in this definition by such
person;
(g) all Redeemable Capital Stock of such person valued at the greater of
its voluntary or involuntary maximum fixed repurchase price plus accrued
dividends;
(h) all obligations under or in respect of Interest Rate Protection
Obligations of such person, and
(i) any amendment, supplement, modification, deferral, renewal,
extension, refinancing or refunding of any liability of the types referred
to in clauses (a) through (h) above;
provided, however, that Indebtedness shall not include:
(x) any holdback or escrow of the purchase price of property, services,
businesses or assets or
(y) any contingent payment obligations incurred in connection with the
acquisition of assets or businesses, which are contingent on the performance
of the assets or businesses so acquired.
For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be approved in good faith by the board of
directors of the issuer of such Redeemable Capital Stock. In the case of
Indebtedness of other persons, the payment of which is secured by a Lien on
property owned by a person as referred to in clause (e) above, the amount of
the Indebtedness of such person attributable to such Lien at any date shall be
the lesser of the Fair Market Value at such date of any asset subject to such
Lien and the amount of the Indebtedness secured.
"Interest Rate Protection Agreement" means, with respect to any person, any
arrangement with any other person whereby, directly or indirectly, such person
is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Interest Rate Protection Obligations" means the obligations of any person
pursuant to any Interest Rate Protection Agreements.
"Investment" means, with respect to any person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of indebtedness
issued by, any other person.
"Issue Date" means April 20, 2001.
63
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A person shall be deemed to own subject to a Lien any property which such
person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Maturity Date" means April 15, 2008.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary of the Company) net
of:
(i) brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers,
recording fees, transfer fees and appraisers' fees) related to such Asset
Sale;
(ii) provisions for all taxes payable as a result of such Asset Sale;
(iii) amounts required to be paid to any person (other than the Company
or any Restricted Subsidiary of the Company) owning a beneficial interest in
the assets subject to the Asset Sale;
(iv) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject of such
Asset Sale; and
(v) appropriate amounts to be provided by the Company or any Restricted
Subsidiary of the Company, as the case may be, as a reserve required in
accordance with GAAP against any liabilities associated with such Asset Sale
and retained by the Company or any Restricted Subsidiary of the Company, as
the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related
to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an
officers' certificate delivered to the Trustee.
"Permitted Holder" means:
(i) Holdings; and
(ii) Bradley S. Jacobs, John N. Milne, Michael J. Nolan and their
respective Affiliates, and trusts established for the benefit of a Permitted
Holder or members of his immediate family.
"Permitted Indebtedness" means, without duplication:
(a) Indebtedness of the Company and the Guarantors related to the notes
issued on the Issue Date and the Exchange Notes related thereto and the
guarantees of those notes (other than any Additional Notes);
(b) Indebtedness incurred by the Company and Restricted Subsidiaries
pursuant to the Credit Agreement; provided, however, that, immediately after
giving effect to any such incurrence, the aggregate principal amount of all
Indebtedness incurred under this clause (b) and then outstanding does not
exceed the greater of (A) $1.5 billion and (B) 100% of Tangible Assets,
less, in either case, any amounts permanently repaid or commitments
permanently reduced in accordance with the covenant described under
"--Certain Covenants--Dispositions of Proceeds of Asset Sales;"
(c) Indebtedness of the Company or any Restricted Subsidiary outstanding
on the Issue Date, including the 91/2% Notes, the 8.80% Notes, the 91/4%
Notes, the 9% Notes and the respective guarantees thereof;
(d) Indebtedness of the Company or any Restricted Subsidiary of the
Company incurred in respect of performance bonds, bankers' acceptances and
letters of credit in the ordinary course of business, including Indebtedness
evidenced by letters of credit issued in the ordinary course of business
consistent with past
64
practice to support the insurance or self-insurance obligations of the
Company or any of its Restricted Subsidiaries (including to secure workers'
compensation and other similar insurance coverages), in the aggregate amount
not to exceed $10 million at any time; but excluding letters of credit
issued in respect of or to secure money borrowed;
(e) (i) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company; and (ii) Interest Rate Protection Obligations
of any Restricted Subsidiary covering Permitted Indebtedness of such
Restricted Subsidiary; provided, however, that, in the case of either clause
(i) or (ii):
(x) any Indebtedness to which any such Interest Rate Protection
Obligations correspond bears interest at fluctuating interest rates
and is otherwise permitted to be incurred under "--Certain
Covenants--Limitation on Indebtedness;" and
(y) the notional principal amount of any such Interest Rate
Protection Obligations that exceeds the principal amount of the
Indebtedness to which such Interest Rate Protection Obligations
relate shall not constitute Permitted Indebtedness;
(f) Indebtedness of a Restricted Subsidiary owed to and held by the
Company or another Restricted Subsidiary, except that:
(i) any transfer of such Indebtedness by the Company or a Restricted
Subsidiary (other than to the Company or another Restricted Subsidiary);
and
(ii) the sale, transfer or other disposition by the Company or any
Restricted Subsidiary of the Company of Capital Stock of a Restricted
Subsidiary (other than to the Company or a Restricted Subsidiary) which
is owed Indebtedness of another Restricted Subsidiary shall, in each
case, be an incurrence of Indebtedness by such Restricted Subsidiary
subject to the other provisions of the Indenture;
(g) Indebtedness of the Company owed to and held by a Restricted
Subsidiary which is unsecured and subordinated in right of payment to the
payment and performance of the obligations of the Company under the
Indenture and the notes, except that:
(i) any transfer of such Indebtedness by the Company or a Restricted
Subsidiary (other than to another Restricted Subsidiary); and
(ii) the sale, transfer or other disposition by the Company or any
Restricted Subsidiary of the Company (other than to the Company or a
Restricted Subsidiary) of Capital Stock of a Restricted Subsidiary which
is owed Indebtedness of the Company shall, in each case, be an
incurrence of Indebtedness by the Company, subject to the other
provisions of the Indenture;
(h) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in
the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within five business days of incurrence;
(i) Indebtedness of the Company or any Restricted Subsidiary under
equipment purchase or lines of credit or for Capitalized Lease Obligations
not to exceed $100 million in aggregate principal amount outstanding at any
time;
(j) (i) Indebtedness of the Company the proceeds of which are used solely
to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the Company or any of its Restricted Subsidiaries; and
(ii) Indebtedness of any Restricted Subsidiary of the Company the
proceeds of which are used solely to refinance (whether by amendment,
renewal, extension or refunding) Indebtedness of such Restricted
Subsidiary; provided, however, that:
(x) the principal amount of Indebtedness incurred pursuant to this
clause (j) (or, if such Indebtedness provides for an amount less than
the principal amount thereof to be due and payable
65
upon a declaration of acceleration of the maturity thereof, the
original issue price of such Indebtedness) shall not exceed the sum
of the principal amount of Indebtedness so refinanced, plus the
amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of such Indebtedness or the amount
of any premium reasonably determined by the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated purchase, plus the amount of expenses in connection
therewith; and
(y) in the case of Indebtedness incurred by the Company pursuant
to this clause (j) to refinance Subordinated Indebtedness, such
Indebtedness;
(A) has no scheduled principal payment prior to the 91st day
after the Maturity Date;
(B) has an Average Life to Stated Maturity greater than the
remaining Average Life to Stated Maturity of the notes; and
(C) is subordinated to the notes in the same manner and to the
same extent that the Subordinated Indebtedness being refinanced
is subordinated to the notes;
(k) Indebtedness of a Foreign Subsidiary incurred to finance the working
capital of such Foreign Subsidiary;
(l) Indebtedness arising from agreements of the Company or any Restricted
Subsidiary providing for indemnification, adjustment or holdback of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the acquisition or disposition of any business, assets or a
Subsidiary, other than guarantees of Indebtedness incurred by any person
acquiring all or any portion of such business, assets or Subsidiary for the
purpose of financing such acquisition;
(m) Indebtedness of a Special Purpose Vehicle that is not recourse to the
Company or any of its Restricted Subsidiaries (other than with respect to
Standard Securitization Undertakings) in connection with a Securitization
Transaction; provided, however, that in the event such Special Purpose
Vehicle ceases to qualify as a Special Purpose Vehicle or such Indebtedness
ceases to be non-recourse to the Company or any of its Restricted
Subsidiaries, such Indebtedness will be deemed, in each case, to be incurred
at such time; provided further, however, that Indebtedness incurred under
this paragraph (m) with respect to Equipment Securitization Transactions
shall not exceed 15% of Tangible Assets after giving effect to such
Equipment Securitization Transaction;
(n) guarantees by the Company or a Restricted Subsidiary of Indebtedness
that was permitted to be incurred by the Company or any Restricted
Subsidiary under the Indenture; and
(o) Indebtedness of the Company or any Restricted Subsidiary, in addition
to that described in clauses (a) through (n) of this definition, in an
aggregate principal amount outstanding at any time not to exceed $50
million.
"Permitted Investments" means any of the following:
(i) Investments in the Company or in a Restricted Subsidiary;
(ii) Investments in another person, if as a result of such Investment:
(A) such other person becomes a Restricted Subsidiary; or
(B) such other person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets, to the
Company or a Restricted Subsidiary;
(iii) Investments representing Capital Stock or obligations issued to the
Company or any of its Restricted Subsidiaries in settlement of claims
against any other person by reason of a composition or readjustment of debt
or a reorganization of any debtor of the Company or such Restricted
Subsidiary;
(iv) Investments in Interest Rate Protection Agreements on commercially
reasonable terms entered into by the Company or any of its Subsidiaries in
the ordinary course of business in connection with the
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operations of the business of the Company or its Restricted Subsidiaries to
hedge against fluctuations in interest rates on its outstanding
Indebtedness;
(v) Investments in the notes;
(vi) Investments in Cash Equivalents;
(vii) Investments acquired by the Company or any Restricted Subsidiary in
connection with an Asset Sale permitted under "--Certain
Covenants--Disposition of Proceeds of Asset Sales" to the extent such
Investments are non-cash proceeds as permitted under such covenant;
(viii) advances to employees or officers of the Company in the ordinary
course of business and additional loans to employees or officers, in an
aggregate amount at any time outstanding not to exceed $10 million;
(ix) any Investment to the extent that the consideration therefor is
Capital Stock (other than Redeemable Capital Stock) of the Company;
(x) guarantees (including guarantees of the notes) of Indebtedness
permitted to be incurred under the "--Limitation on Indebtedness" covenant;
(xi) any acquisition of assets solely in exchange for the issuance of
Capital Stock (other than Redeemable Capital Stock) of Holdings or the
Company; and
(xii) other Investments not to exceed $20 million at any time
outstanding.
"Permitted Liens" means the following types of Liens:
(a) any Lien existing as of the date of the Indenture;
(b) Liens securing Indebtedness permitted under the provisions described
in clauses (b) and (k) under the definition of "Permitted Indebtedness;"
(c) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with, or in contemplation of) the incurrence of such
Indebtedness by the Company or any Restricted Subsidiary, if such Lien does
not attach to any property or assets of the Company or any Restricted
Subsidiary other than the property or assets subject to the Lien prior to
such incurrence;
(d) Liens in favor of the Company or a Restricted Subsidiary;
(e) Liens on and pledges of the assets or Capital Stock of any
Unrestricted Subsidiary securing any Indebtedness of such Unrestricted
Subsidiary;
(f) Liens for taxes, assessments or governmental charges or claims
either:
(i) not delinquent; or
(ii) thereafter payable without penalty or contested in good faith by
appropriate proceedings and as to which the Company or its Restricted
Subsidiaries shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(g) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(h) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance
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and return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(i) judgment Liens not giving rise to an Event of Default so long as such
Lien is adequately bonded and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(j) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company or
any of its Restricted Subsidiaries;
(k) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(l) Liens securing Indebtedness incurred to finance the construction,
purchase or lease of, or repairs, improvements or additions to, property,
plant or equipment of the Company or any Restricted Subsidiary; provided,
however, that the Lien may not extend to any other property owned by the
Company or any Restricted Subsidiary at the time the Lien is incurred (other
than assets and property affixed or appurtenant thereto), and the
Indebtedness (other than any interest thereon) secured by the Lien may not
be incurred more than 180 days after the later of the acquisition,
completion of construction, repair, improvement, addition or commencement of
full operation of the property subject to the Lien;
(m) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(n) Liens securing refinancing Indebtedness permitted under clause (j) of
the definition of "Permitted Indebtedness," provided such Liens do not
exceed the Liens replaced in connection with such refinanced Indebtedness;
(o) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(p) Liens securing Interest Rate Protection Obligations which Interest
Rate Protection Obligations relate to Indebtedness that is secured by Liens
otherwise permitted under this Indenture;
(q) customary Liens on assets of a Special Purpose Vehicle arising in
connection with a Securitization Transaction;
(r) Liens created in favor of the Trustee for the notes as provided in
the Indenture; and
(s) Liens incurred by the Company or any Restricted Subsidiary with
respect to obligations that do not exceed $25 million at any time
outstanding.
"person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock," as applied to any person, means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such person, over shares
of Capital Stock of any other class of such person.
"Receivables Securitization Transaction" means any sale, assignment or other
transfer by the Company or any Subsidiary of the Company of accounts
receivable, lease receivables or other payment obligations owing to
68
the Company or such Subsidiary of the Company or any interest in any of the
foregoing, together in each case with any collections and other proceeds
thereof, any collection or deposit account related thereto, and any collateral,
guarantees or other property or claims supporting or securing payment by the
obligor thereon of, or otherwise related to, or subject to leases giving rise
to, any such receivables.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is or upon the happening of an
event or passage of time would be, required to be redeemed prior to the
Maturity Date or is redeemable at the option of the holder thereof at any time
prior to the Maturity Date, or is convertible into or exchangeable for debt
securities at any time prior to the Maturity Date; provided, however, that
Capital Stock will not constitute Redeemable Capital Stock solely because the
holders thereof have the right to require the Company to repurchase or redeem
such Capital Stock upon the occurrence of a "change of control" or an "asset
sale."
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary or a Special Purpose Vehicle.
"RS Special PurposeVehicle" means a trust, bankruptcy remote entity or other
special purpose entity which is a Subsidiary of the Company (or, if not a
Subsidiary of the Company, the common equity of which is wholly owned, directly
or indirectly, by the Company) and which is formed for the purpose of, and
engages in no material business other than, acting as an issuer or a depositor
in a Receivables Securitization Transaction (and, in connection therewith,
owning accounts receivable, lease receivables, other rights to payment, leases
and related assets and pledging or transferring any of the foregoing or
interests therein).
"Sale/Leaseback Transaction" means an arrangement relating to property owned
by the Company or a Restricted Subsidiary on the Issue Date or thereafter
acquired by the Company or a Restricted Subsidiary whereby the Company or a
Restricted Subsidiary transfers such property to a person and the Company or a
Restricted Subsidiary leases it from such person.
"Securitization Transaction" means an Equipment Securitization Transaction
or a Receivables Securitization Transaction.
"Senior Indebtedness" means with respect to any person:
(1) Indebtedness of such person, whether outstanding on the Issue Date or
thereafter created, incurred or assumed; and
(2) accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to
such person whether or not post-filing interest is allowed in such
proceeding) in respect of (A) indebtedness of such person for money borrowed
and (B) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such person is responsible or liable,
unless, in the case of clauses (1) and (2), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
expressly provided that such obligations are subordinate in right of payment to
the notes or the guarantee of such person, as the case may be.
Without limiting the generality of the foregoing, "Senior Indebtedness"
shall include the principal of, premium, if any, and interest on all
obligations of every nature of any person from time to time owed to the lenders
under the Credit Agreement, including, without limitation, principal of and
interest on, any loans and letter of credit disbursements outstanding, and all
fees, indemnities and expenses payable, under the Credit Agreement.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include:
(a) any Indebtedness of such person (and any accrued and unpaid interest
in respect thereof) that is subordinate or junior in any respect to any
other Indebtedness or other obligation of such person;
69
(b) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without recourse
to such person;
(c) Indebtedness which is represented by Redeemable Capital Stock;
(d) any accounts payable or other liability to trade creditors arising in
the ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities);
(e) Indebtedness of or amounts owed by such person for compensation to
employees or for services rendered to such person;
(f) any liability for federal, state, local or other taxes owed or owing
by such person;
(g) Indebtedness of such person to a Subsidiary or any other Affiliate or
any of such Affiliate's Subsidiaries; and
(h) that portion of any Indebtedness which is incurred in violation of
the Indenture.
"Senior Subordinated Indebtedness" means the 91/2% Notes, 8.80% Notes, 91/4%
Notes and 9% Notes, guarantees thereof and any other Indebtedness of the
Company that specifically provides that such Indebtedness is to rank junior to
the notes in right of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of the Company which is not
Senior Indebtedness of the Company.
"Significant Subsidiary" of any person means a Restricted Subsidiary of such
person which would be a significant subsidiary of such person as determined in
accordance with the definition in Rule 1-02(w) of Article 1 of Regulation S-X
promulgated by the Commission and as in effect on the date of the Indenture.
"Special Purpose Vehicle" means an ES Special Purpose Vehicle or an RS
Special Purpose Vehicle.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any of its Restricted
Subsidiaries that are reasonably customary in a Securitization Transaction.
"Stated Maturity" means, when used with respect to any note or any
installment of interest thereon, the date specified in such note as the fixed
date on which the principal of such note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means, with respect to a person, Indebtedness of
such person (whether incurred on the Issue Date or thereafter incurred) which
is subordinate or junior in right of payment to the notes or a guarantee of
such person, as the case may be, pursuant to a written agreement to that
effect.
"Subsidiary" means, with respect to any person:
(i) a corporation a majority of whose Voting Stock is at the time,
directly or indirectly, owned by such person, by one or more Subsidiaries of
such person or by such person and one or more Subsidiaries thereof; and
(ii) any other person (other than a corporation), including, without
limitation, a partnership, limited liability company, business trust or
joint venture, in which such person, one or more Subsidiaries thereof or
such person and one or more Subsidiaries thereof, directly or indirectly, at
the date of determination thereof, has at least majority ownership interest
entitled to vote in the election of directors, managers or trustees thereof
(or other person performing similar functions).
For purposes of this definition, any directors' qualifying shares or
investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
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"Subsidiary Guarantors" means the current United States Restricted
Subsidiaries as shown in the Indenture.
"Tangible Assets" means all assets of the Company and its Restricted
Subsidiaries, excluding all Intangible Assets and any assets subject to a
Securitization Transaction. For purposes of the foregoing, "Intangible Assets"
means goodwill, patents, trade names, trade marks, copyrights, franchises,
experimental expense, organization expenses and any other assets properly
classified as intangible assets in accordance with GAAP.
"Unrestricted Subsidiary" means each Subsidiary of the Company designated as
such pursuant to and in compliance with the covenant described under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries" and each
Subsidiary of such Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
any person (irrespective of whether or not, at the time, stock of any other
class or classes shall have, or might have, voting power by reason of the
happening of any contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of the
Company of which 100% of the outstanding Capital Stock is owned by the Company
or another Wholly Owned Restricted Subsidiary of the Company. For purposes of
this definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
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PLAN OF DISTRIBUTION
Any broker-dealer (a "Participating Broker-Dealer") that, pursuant to the
Exchange Offer, receives Exchange Notes in exchange for Original Notes that
were acquired by it for its own account as a result of market-making activities
or other trading activities, will be required to deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales by it of
any such Exchange Notes. Each Participating Broker-Dealer will be required to
acknowledge in the Letter of Transmittal that it will comply with such
prospectus delivery requirement in connection with any resale of Exchange
Notes. The Letter of Transmittal states that by making such acknowledgment a
Participating Dealer will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
Based on interpretations by the Staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that this
prospectus, as it may be amended or supplemented from time to time, may, if
permitted by the Company, be used by Participating Broker-Dealers in order to
satisfy the prospectus delivery requirements applicable to Participating
Broker-Dealers in connection with the resale of Exchange Notes as described
above. The Company has agreed in the Registration Rights Agreement that it will
use its best efforts to make this prospectus available to each Participating
Broker-Dealer for use in connection with any resales of such Exchange Notes
(subject to the limitations on the use of this prospectus under certain
circumstances specified in the Registration Rights Agreement). The obligation
of the Company to make this prospectus available as aforesaid will commence on
the day that the Exchange Offer is consummated and continue in effect for a
90-day period (the "Broker Prospectus Period"); provided, however, that, if for
any day during such period the Company restricts the use of such prospectus,
the Broker Prospectus Period shall be extended on a day-for-day basis.
Any sale of Exchange Notes by Participating Broker-Dealers will be for their
own account, and the Company will not receive any proceeds of such sales.
Participating Broker-Dealers may from time to time sell Exchange Notes that
were received by them in the Exchange Offer in one or more transactions in the
over-the-counter market, in privately negotiated transactions, through the
writing of options on the Exchange Notes or otherwise, and such sales may be
made at the market price prevailing at the time of sale, a price related to
such prevailing market price or a negotiated price. Such sales of Exchange
Notes may be made directly to purchasers or, alternatively, may be offered from
time to time through agents, brokers, dealers or underwriters, who may receive
compensation in the form of concessions or commissions from the Participating
Broker-Dealers or purchasers of the Exchange Notes (which compensation may be
in excess of customary commissions). Any agents, brokers or dealers that
participate in the distribution of the Exchange Notes may be deemed to be
underwriters and any commissions received by them and any profit on the resale
of such Exchange Notes sold by them might be deemed to be underwriting
discounts and commissions under the Securities Act.
During the Broker Prospectus Period, the Company will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any Participating Broker-Dealer that requests such documents
(subject to the limitations on the use of this prospectus under certain
circumstances specified in the Registration Rights Agreement). Any such
requests should be directed to United Rentals (North America), Inc., Attention:
Corporate Secretary, Five Greenwich Office Park, Greenwich, Connecticut 06830,
telephone: (203) 622-3131.
The Company has agreed in the Registration Rights Agreement to indemnify
each Participating Broker-Dealer that resells Exchange Notes pursuant to this
prospectus, and their officers, directors and controlling persons, against
certain liabilities in connection with the offer and sale of the Exchange
Notes, including liabilities under the Securities Act.
72
LEGAL MATTERS
The validity of the notes and the guarantees will be passed upon for us by
Weil, Gotshal & Manges LLP, and Ehrenreich Eilenberg & Krause LLP.
EXPERTS
The consolidated financial statements of United Rentals, Inc. at December
31, 2000 and 1999, and for each of the three years in the period ended December
31, 2000, incorporated by reference in this prospectus, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon,
and are incorporated by reference in reliance upon such report, given on their
authority as experts in accounting and auditing.
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