-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IV+YSRmHOQK7jMTjL7KL1Pi4aRIUUP99Rcyzd/6pa/h4uZ5xzY5XRn7diFiLt7fH SUBNnzet1Sr/cp/gztUafQ== 0000950130-99-004864.txt : 19990817 0000950130-99-004864.hdr.sgml : 19990817 ACCESSION NUMBER: 0000950130-99-004864 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED RENTALS NORTH AMERICA INC CENTRAL INDEX KEY: 0001047166 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 061493538 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13663 FILM NUMBER: 99692614 BUSINESS ADDRESS: STREET 1: FOUR GREENWICH OFFICE PARK CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2036223131 MAIL ADDRESS: STREET 1: FOUR GREENWICH OFFICE PARK CITY: GREENWICH STATE: CT ZIP: 06830 FORMER COMPANY: FORMER CONFORMED NAME: UNITED RENTALS INC DATE OF NAME CHANGE: 19971020 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED RENTALS INC /DE CENTRAL INDEX KEY: 0001067701 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 061522496 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14387 FILM NUMBER: 99692615 BUSINESS ADDRESS: STREET 1: FOUR GREENWICH OFFICE PARK CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2036223131 MAIL ADDRESS: STREET 1: FOUR GREENWICH OFFICE PARK CITY: GREENWICH STATE: CT ZIP: 06830 10-Q 1 FORM 10 Q - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-14387 United Rentals, Inc. Commission File No. 1-13663 United Rentals (North America), Inc. (Exact names of registrants as specified in their charters) Delaware 06-1522496 Delaware 06-1493538 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Nos.) Four Greenwich Office Park, Greenwich, Connecticut 06830 (Address of principal executive offices) (Zip Code)
(203) 622-3131 (Registrants' telephone number, including area code) Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. X Yes No As of August 6, 1999, there were 72,047,671 shares of the United Rentals, Inc. common stock, $.01 par value outstanding. There is no market for the common stock of United Rentals (North America), Inc., all outstanding shares of which are owned by United Rentals, Inc. This combined Form 10-Q is separately filed by (i) United Rentals, Inc. and (ii) United Rentals (North America), Inc. (which is a wholly owned subsidiary of United Rentals, Inc.). United Rentals (North America), Inc. meets the conditions set forth in general instruction H(1) (a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format permitted by such instruction. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED RENTALS, INC. UNITED RENTALS (NORTH AMERICA), INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999 INDEX
Page ---- PART I FINANCIAL INFORMATION Item 1 Unaudited Consolidated Financial Statements United Rentals, Inc. Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998 (unaudited).................................. 5 United Rentals, Inc. Consolidated Statements of Operations for the Six and Three Months Ended June 30, 1999 and 1998 (unaudited).................................................... 6 United Rentals, Inc. Consolidated Statement of Stockholders' Equity for the Six Months Ended June 30, 1999 (unaudited)...... 7 United Rentals, Inc. Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998 (unaudited)........ 8 United Rentals (North America), Inc. Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998 (unaudited).............................. 9 United Rentals (North America), Inc. Consolidated Statements of Operations for the Six and Three Months Ended June 30, 1999 and 1998 (unaudited).. 10 United Rentals (North America), Inc. Consolidated Statement of Stockholder's Equity for the Six Months Ended June 30, 1999 (unaudited).................................................... 11 United Rentals (North America), Inc. Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998 (unaudited)............ 12 Notes to Unaudited Consolidated Financial Statements............ 13 Management's Discussion and Analysis of Financial Condition and Item 2 Results of Operations.......................................... 25 Item 3 Quantitative and Qualitative Disclosures about Market Risk...... 36 PART II OTHER INFORMATION Item 1 Legal Proceedings............................................... 36 Item 2 Changes in Securities and Use of Proceeds....................... 36 Item 4 Submission of Matters to a Vote of Security Holders............. 37 Item 6 Exhibits and Reports on Form 8-K................................ 37 Signatures...................................................... 39
Certain of the statements contained in this Report are forward looking in nature. Such statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" 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 these factors are discussed in Item 2 of Part I of this Report under the caption "--Factors that May Influence Future Results and Accuracy of Forward-Looking Statements." 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. UNITED RENTALS United Rentals is the largest equipment rental company in North America with 637 branch locations in 43 states, six Canadian provinces and Mexico. We offer for rent over 600 different types of equipment on a daily, weekly or monthly basis and serve customers that include construction industry participants, industrial companies and homeowners. We also sell used rental equipment, act as a dealer for many types of new equipment, and sell related merchandise and parts. In the past year, we have served over one million customers. We have one of the most comprehensive and newest equipment rental fleets in the industry. The types of rental equipment that we offer include a broad range of light to heavy construction and industrial equipment, such as backhoes, aerial lifts, skid-steer loaders, forklifts, compressors, pumps and generators, as well as a variety of smaller tools and equipment. Our equipment fleet has an original purchase price of approximately $2.5 billion and a weighted average age of approximately 25 months (based on original purchase price). We began operations in October 1997 and have grown through a combination of internal growth, acquisitions and the opening of new rental locations. We have an ongoing acquisition program and have completed 153 acquisitions through July 27, 1999, including our merger with U.S. Rentals, Inc. ("U.S. Rentals") in September 1998. At the time of the merger, U.S. Rentals was the second largest equipment rental company in the United States based on 1997 rental revenues. COMPETITIVE ADVANTAGES We believe that we benefit from the following competitive advantages: Full Range of Rental Equipment. We have the largest and most comprehensive equipment rental fleet in the industry, which enables us to: . attract customers by providing the benefit of "one-stop" shopping; . serve a diverse customer base, which reduces our dependence on any particular customer or group of customers; . serve large customers that require assurance that substantial quantities of different types of equipment will be available as required on a continuing basis; . minimize lost sales due to equipment being unavailable; and . serve attractive specialty equipment rental markets, such as trench shoring, traffic safety and portable tanks. Operating Efficiencies. We generally group our branches into clusters of 10 to 30 locations that are in the same area. Our management information system enables each branch to track equipment at any other branch and to access all available equipment within a cluster. We believe that our cluster strategy produces significant operating efficiencies by enabling us to: . market the equipment within a cluster through multiple branches, rather than a single branch, which increases our equipment utilization rate; . cross-market the equipment specialties of different branches within each cluster, which increases revenues without increasing marketing expenses; 1 . reduce costs by centralizing common functions such as payroll, credit and collection, and certain equipment delivery into 22 regional service centers; and . consolidate overlapping operations to better serve our customers. In the second quarter of 1999, approximately 8.5% of our rental revenue was attributable to equipment sharing among branches. Significant Purchasing Power. We have significant purchasing power because of our volume purchases. As a result, we can generally buy new equipment and related merchandise and parts at prices that are significantly lower than prices paid by smaller companies. We can also buy many other products and services--such as insurance, telephone and fuel--at attractive rates. Information Technology Systems. We have modern information technology systems which facilitate decision-making and enable us to respond to changing market conditions. These systems provide management with a wide range of operating and financial data, including reports on inventory, receivables, customers, vendors, fleet utilization and price and sales trends. These systems are designed to enable branch personnel to search for needed equipment throughout a geographic region, determine its closest location and arrange for delivery to a customer's work site. These systems include software developed by our Wynne Systems subsidiary, which is the leading provider of proprietary software for use by equipment rental companies in managing and operating multiple branch locations. We have an in-house staff of specialists that supports our information technology systems and extends the systems to new locations. Customer Diversity. Our customer base is highly diversified and ranges from Fortune 100 companies to small contractors and homeowners. We estimate that our top ten customers accounted for approximately 4% of our revenues during 1998 (on a pro forma basis as if the acquisitions that we completed in 1998 and 1999 had been completed at the beginning of 1998). Geographic Diversity. We have branches in 43 states, six Canadian provinces and Mexico. We believe that our geographic diversity should reduce the impact that fluctuations in regional economic conditions have on our overall financial performance. Our geographic diversity and large network of branch locations also give us the ability to serve national accounts and access used equipment re-sale markets across the country. Experienced Senior Management. Our senior management combines executives who have extensive operating experience in the equipment rental industry with executives who have proven track records in other industries. Our senior management includes former officers of United Waste Systems, Inc., which was a publicly-traded solid waste management company that successfully executed a growth strategy combining a disciplined acquisition program, the integration and optimization of acquired facilities, and internal growth. Our senior management also includes former executives of U.S. Rentals who have extensive experience in the equipment rental industry. Strong and Motivated Branch Management. Each of our branches has a full-time branch manager who is supervised by one of our 50 district managers and eight regional vice presidents. We believe that our branch and district managers, who average over 20 years of experience in the equipment rental industry, are among the most knowledgeable and experienced in the industry. We encourage entrepreneurship at the branch level by giving branch managers a high degree of autonomy relating to day-to-day operations. For example, each branch manager is empowered to make decisions--within budgetary guidelines-- concerning staffing, pricing and equipment purchasing. We also promote entrepreneurship at the branch level, as well as equipment sharing among branches, through our profit sharing program which directly ties the compensation of branch personnel to their branch's financial performance and equipment utilization rates. We balance the autonomy that we grant branch managers with systems through which senior management closely tracks branch performance. We also share information across branches so that each branch can measure its operating performance relative to other branches and benefit from the best practices developed throughout our organization. 2 Professional Acquisition Team. Our 25-person acquisition team is engaged in identifying and evaluating acquisition candidates and executing our acquisition program. The core of this group consists of seasoned acquisition professionals--most of whom were members of the acquisition team at United Waste Systems, where they completed over 200 acquisitions. The team also includes former owners of businesses that we acquired, who have extensive industry experience and contacts with potential acquisition candidates. GROWTH STRATEGY Our plan for future growth includes the following key elements: Continue Strong Internal Growth. We are seeking to sustain our strong internal growth by: . increasing the cross-marketing of our equipment specialties at different locations; . increasing our advertising and marketing--which become increasingly cost-effective as we grow because the benefits are spread over a larger number of branches; . expanding our national accounts program--which dedicates a portion of our sales force to establishing and expanding relationships with large customers that have a national or multi-regional presence; . increasing our rentals to industrial companies by developing a comprehensive marketing program specifically aimed at this sector; and . expanding and modernizing our equipment fleet. Execute Disciplined Acquisition Program. We intend to continue our disciplined acquisition program. We generally seek to acquire multiple locations within the regions that we enter, with the goal of creating clusters of locations that can share various resources, including equipment, marketing resources, back office functions and certain equipment delivery. We are seeking to acquire companies of varying sizes, including relatively large companies to serve as platforms for new regional clusters and smaller companies to complement existing or anticipated locations. In considering whether to buy a company, we evaluate a number of factors, including purchase price, anticipated impact on earnings, the quality of the target's rental equipment and management, the opportunities to improve operating margins and increase internal growth at the target, the economic prospects of the region in which the target is located, the potential for additional acquisitions in the region, and the competitive landscape in the target's markets. Open New Rental Locations. Because most of the businesses that we acquired grew through developing start-up rental locations, many of our managers have substantial experience in this area. We intend to leverage this experience by selectively opening new rental locations in attractive markets where there are no suitable acquisition targets available or where the economics of a start-up location are more attractive than buying an existing business. Increase Cost Savings. We work to reduce costs by efficiently integrating new and existing operations, eliminating duplicative costs, centralizing common functions, consolidating locations that serve the same areas, and using our purchasing power to negotiate discounts from suppliers. Continue to Emphasize Management Systems and Controls. We intend to further strengthen our management systems and controls, which currently include: . an audit group that is responsible for ensuring that we have adequate financial, operating, and management information controls throughout our organization; . a team of regional and district controllers that monitors each branch for compliance with financial and accounting procedures established at corporate headquarters; and . a risk management and safety department that is responsible for: (1) developing and implementing safety programs and procedures, (2) developing our customer and employee training programs and (3) investigating and managing any claims that may be asserted against us. 3 INDUSTRY BACKGROUND Industry Size and Growth We estimate that the U.S. equipment rental industry generates annual revenues in excess of $20 billion. The combined equipment rental revenues of the 100 largest equipment rental companies have increased at an estimated compound annual rate of approximately 25.2% from 1993 through 1998 (based upon revenues, reported by the Rental Equipment Register, an industry trade publication). In addition to reflecting general economic growth, we believe that the growth in the equipment rental industry reflects the following trends: Recognition of Advantages of Renting. Equipment users are increasingly recognizing the many advantages that equipment rental may offer compared with ownership. They recognize that by renting they can: . avoid the large capital investment required for equipment purchases; . reduce storage and maintenance costs; . supplement owned equipment thereby increasing the range and number of jobs that can be worked on; . access a broad selection of equipment and select the equipment best suited for each particular job; . obtain equipment as needed and minimize the costs associated with idle equipment; and . access the latest technology without investing in new equipment. These advantages frequently allow equipment users to reduce their overall costs by renting rather than buying equipment. Increase in Rentals by Contractors. There has been a fundamental shift in the way contractors meet their equipment needs. While contractors have historically used rental equipment on a temporary basis--to provide for peak period capacity, meet specific job requirements or replace broken equipment--many contractors are now also using rental equipment on an ongoing basis to meet their long-term equipment requirements. Although growth in the equipment rental industry has to date been largely driven by the increase in rentals by the construction industry, we believe that other equipment users may increasingly contribute to future industry growth. For example, many industrial companies require equipment for operating, repairing, maintaining and upgrading their facilities, and renting this equipment will often be more cost-effective than purchasing because typically this equipment is not used full-time. We believe that the cost and other advantages of renting, together with the general trend toward the corporate outsourcing of non-core competencies, may increasingly lead industrial companies to rent equipment. We also believe that these same considerations may lead other equipment users--such as municipalities, government agencies and utilities--to increasingly rent equipment. Because the penetration of these markets by the equipment rental industry is very low in comparison to its penetration of the construction market, we believe there is significant potential for additional growth in these markets. Industry Fragmentation The equipment rental industry is highly fragmented. It consists of a small number of multi-location regional or national operators and a large number of relatively small, independent businesses that serve discrete local markets. This fragmentation is reflected in the following data: . in 1998, there were only 12 equipment rental companies that had equipment rental revenues in excess of $100 million and approximately 100 equipment rental companies that had equipment rental revenues between $5 million and $100 million (based upon rental revenues for 1998 as provided by the Rental Equipment Register, an industry trade publication); . we estimate that there are more than 20,000 companies with annual equipment rental revenues of less than $5 million; and . we estimate that the 100 largest equipment rental companies combined have less than a 25% share of the market. We believe that the fragmented nature of the industry presents substantial consolidation and growth opportunities for companies with access to capital and the ability to implement a disciplined acquisition program. We also believe that our management team's extensive experience in acquiring and effectively integrating acquisition targets should enable us to capitalize on these opportunities. 4 UNITED RENTALS, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, December 31, 1999 1998 ---------------- ------------------ (In thousands, except share data) ASSETS Cash and cash equivalents................ $ 19,828 $ 20,410 Accounts receivable, net of allowance for doubtful accounts of $44,781 in 1999 and $41,201 in 1998......................... 355,592 233,282 Inventory................................ 149,267 70,994 Prepaid expenses and other assets........ 114,357 59,395 Rental equipment, net.................... 1,626,494 1,143,006 Property and equipment, net.............. 244,677 185,511 Intangible assets, net of accumulated amortization of $30,249 in 1999 and $14,520 in 1998......................... 1,381,739 922,065 ---------------- ---------------- $ 3,891,954 $ 2,634,663 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable....................... $ 249,221 $ 121,940 Debt................................... 1,947,876 1,314,574 Deferred income taxes.................. 63,674 43,560 Accrued expenses and other liabilities........................... 189,441 128,359 ---------------- ---------------- Total liabilities.................... 2,450,212 1,608,433 Commitments and contingencies Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust...................... 300,000 300,000 Stockholders' equity: Preferred stock--$.01 par value, 5,000,000 shares authorized:.......... Series A perpetual convertible preferred stock--$300,000 liquidation preference, 300,000 shares issued and outstanding in 1999.................. 3 Common stock--$.01 par value, 500,000,000 shares authorized in 1999 and 1998, 71,580,118 in 1999 and 68,427,999 in 1998 shares issued and outstanding........................... 716 684 Additional paid-in capital............. 1,062,404 689,018 Retained earnings...................... 78,920 36,809 Accumulated other comprehensive income................................ (301) (281) ---------------- ---------------- Total stockholders' equity........... 1,141,742 726,230 ---------------- ---------------- $ 3,891,954 $ 2,634,663 ================ ================
The accompanying notes are an integral part of these consolidated financial statements. 5 UNITED RENTALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Six Months Ended Three Months Ended June 30, June 30, ----------------- ------------------- 1999 1998 1999 1998 -------- -------- --------- --------- (In thousands, except per share data) Revenues: Equipment rentals.................... $643,302 $309,683 $ 354,917 $ 183,072 Sales of rental equipment............ 87,194 43,223 51,251 27,175 Sales of new equipment, merchandise and other revenues.................. 165,475 72,282 97,494 43,800 -------- -------- --------- --------- Total revenues........................ 895,971 425,188 503,662 254,047 Cost of revenues: Cost of equipment rentals, excluding depreciation........................ 279,146 143,934 153,327 80,738 Depreciation of rental equipment..... 124,067 67,017 64,954 37,737 Cost of rental equipment sales....... 49,919 22,559 29,077 14,545 Cost of new equipment and merchandise sales and other operating costs..... 124,784 56,345 72,240 33,605 -------- -------- --------- --------- Total cost of revenues................ 577,916 289,855 319,598 166,625 -------- -------- --------- --------- Gross profit.......................... 318,055 135,333 184,064 87,422 Selling, general and administrative expenses............................. 149,861 68,351 84,601 42,197 Non-rental depreciation .............. 10,791 9,351 5,598 4,868 Amortization.......................... 15,729 3,141 8,752 2,128 -------- -------- --------- --------- Operating income...................... 141,674 54,490 85,113 38,229 Interest expense...................... 51,306 15,245 26,933 9,458 Preferred dividends of a subsidiary trust................................ 9,750 4,875 Other (income) expense, net........... 9,224 (4,232) 9,430 (3,436) -------- -------- --------- --------- Income before provision for income taxes................................ 71,394 43,477 43,875 32,207 Provision for income taxes............ 29,283 16,458 17,989 11,892 -------- -------- --------- --------- Net income............................ $ 42,111 $ 27,019 $ 25,886 $ 20,315 ======== ======== ========= ========= Basic earnings per share.............. $ 0.60 $ 0.43 $ 0.36 $ 0.31 ======== ======== ========= ========= Diluted earnings per share............ $ 0.46 $ 0.39 $ 0.28 $ 0.28 ======== ======== ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 6 UNITED RENTALS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
Series A Perpetual Convertible Preferred Stock Common Stock --------------------- ----------------- Accumulated Additional Other Number Number Paid-in Retained Comprehensive Comprehensive of Shares Amount of Shares Amount Capital Earnings Income Income ------------ --------- ---------- ------ ---------- -------- ------------- ------------- (In thousands, except share data) Balance, December 31, 1998................... 68,427,999 $684 $ 689,018 $36,809 $(281) Comprehensive income: Net income............. 42,111 $42,111 Other comprehensive income: Foreign currency translation adjustments........... (20) (20) ------- Comprehensive income.... $42,091 ======= Issuance of Series A perpetual convertible preferred stock........ 300,000 $ 3 286,997 Issuance of common stock.................. 2,279,319 23 65,175 Exercise of common stock options................ 872,800 9 21,214 ------------ -------- ---------- ---- ---------- ------- ----- Balance, June 30, 1999.. 300,000 $ 3 71,580,118 $716 $1,062,404 $78,920 $(301) ============ ======== ========== ==== ========== ======= =====
The accompanying notes are an integral part of these consolidated financial statements. 7 UNITED RENTALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, --------------------- 1999 1998 ---------- --------- (In thousands) Cash Flows From Operating Activities: Net income............................................. $ 42,111 $ 27,019 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization......................... 150,587 79,509 Amortization of original issue discount and deferred financing fees....................................... 1,894 Gain on sale of rental equipment...................... (37,275) (20,664) Gain on sale of business.............................. (3,644) Deferred income taxes................................. 18,808 8,279 Changes in operating assets and liabilities: Accounts receivable................................... (62,203) (21,254) Inventory............................................. (37,858) (3,040) Prepaid expenses and other assets..................... (47,143) (3,090) Accounts payable...................................... 97,856 27,862 Accrued expenses and other liabilities................ 46,720 (2,519) ---------- --------- Net cash provided by operating activities......... 173,497 88,458 Cash Flows From Investing Activities: Purchases of rental equipment.......................... (390,693) (259,158) Purchases of property and equipment.................... (52,805) (36,574) Proceeds from sale of rental equipment................. 87,194 43,223 In-process acquisition costs........................... (1,644) (3,495) Payments of contingent purchase price.................. (1,118) (2,255) Purchases of other companies........................... (587,561) (378,878) ---------- --------- Net cash used in investing activities............. (946,627) (637,137) Cash Flows From Financing Activities: Proceeds from the issuance of common stock, net of issuance costs........................................ 65,198 206,555 Proceeds from the issuance of Series A Preferred, net of issuance costs..................................... 287,000 Proceeds from debt..................................... 1,284,166 890,463 Payments of debt....................................... (876,660) (583,584) Payment of debt financing costs........................ (4,657) (8,115) Proceeds from the exercise of common stock options..... 17,501 521 Distribution to stockholders........................... (1,244) ---------- --------- Net cash provided by financing activities......... 772,548 504,596 ---------- --------- Net decrease in cash and cash equivalents.............. (582) (44,083) Cash and cash equivalents at beginning of period....... 20,410 72,411 ---------- --------- Cash and cash equivalents at end of period............. $ 19,828 $ 28,328 ========== ========= Supplemental disclosure of cash flow information: Cash paid for interest................................. $ 39,605 $ 8,184 Cash paid for income taxes............................. $ 11,461 $ 9,126 Supplemental disclosure of non-cash investing and financing activities: The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired.......................... $ 869,523 $ 691,069 Liabilities assumed................................... (272,567) (264,656) Less: Amounts paid in common stock and warrants........... (47,535) Amounts paid through issuance of debt............... (9,395) ---------- --------- Net cash paid..................................... $ 587,561 $ 378,878 ========== =========
The accompanying notes are an integral part of these consolidated financial statements. 8 UNITED RENTALS (NORTH AMERICA), INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, December 31, 1999 1998 ---------- ------------ (In thousands, except share data) ASSETS Cash and cash equivalents............................ $ 37,309 $ 20,410 Accounts receivable, net of allowance for doubtful accounts of $44,781 in 1999 and $41,201 in 1998..... 355,592 233,282 Inventory............................................ 149,267 70,994 Prepaid expenses and other assets.................... 89,275 43,176 Rental equipment, net................................ 1,626,494 1,143,006 Property and equipment, net.......................... 206,506 170,537 Intangible assets, net of accumulated amortization of $30,249 in 1999 and $14,520 in 1998................. 1,381,739 922,065 ---------- ---------- $3,846,182 $2,603,470 ========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities: Accounts payable................................... $ 215,148 $ 108,426 Debt............................................... 1,947,876 1,314,574 Deferred income taxes.............................. 63,674 43,560 Accrued expenses and other liabilities............. 189,114 115,558 ---------- ---------- Total liabilities................................ 2,415,812 1,582,118 Commitments and contingencies Stockholder's equity: Common stock--$0.01 par value, 3,000 shares authorized, 1,000 shares issued and outstanding... Additional paid-in capital......................... 1,354,044 984,345 Retained earnings.................................. 76,627 37,288 Accumulated other comprehensive income............. (301) (281) ---------- ---------- Total stockholder's equity....................... 1,430,370 1,021,352 ---------- ---------- $3,846,182 $2,603,470 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 9 UNITED RENTALS (NORTH AMERICA), INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Six Months Ended Three Months Ended June 30, June 30, ---------------- ------------------- 1999 1998 1999 1998 -------- -------- --------- --------- (In thousands) Revenues: Equipment rentals.................... $643,302 $309,683 $ 354,917 $ 183,072 Sales of rental equipment............ 87,194 43,223 51,251 27,175 Sales of new equipment, merchandise and other revenues.................. 165,475 72,282 97,494 43,800 -------- -------- --------- --------- Total revenues........................ 895,971 425,188 503,662 254,047 Cost of revenues: Cost of equipment rentals, excluding depreciation........................ 279,146 143,934 153,327 80,738 Depreciation of rental equipment..... 124,067 67,017 64,954 37,737 Cost of rental equipment sales....... 49,919 22,559 29,077 14,545 Cost of new equipment and merchandise sales and other operating costs..... 124,784 56,345 72,240 33,605 -------- -------- --------- --------- Total cost of revenues................ 577,916 289,855 319,598 166,625 -------- -------- --------- --------- Gross profit.......................... 318,055 135,333 184,064 87,422 Selling, general and administrative expenses............................. 149,861 68,351 84,601 42,197 Non-rental depreciation............... 9,128 9,351 4,459 4,868 Amortization.......................... 15,729 3,141 8,752 2,128 -------- -------- --------- --------- Operating income...................... 143,337 54,490 86,252 38,229 Interest expense...................... 51,306 15,245 26,933 9,458 Other (income) expense, net........... 8,982 (4,232) 9,328 (3,436) -------- -------- --------- --------- Income before provision for income taxes................................ 83,049 43,477 49,991 32,207 Provision for income taxes............ 33,960 16,458 20,451 11,892 -------- -------- --------- --------- Net income............................ $ 49,089 $ 27,019 $ 29,540 $ 20,315 ======== ======== ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 10 UNITED RENTALS (NORTH AMERICA), INC. CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (Unaudited)
Common Stock ---------------- Additional Accumulated Number Paid-In Retained Comprehensive Other Comprehensive of Shares Amount Capital Earnings Income Income --------- ------ ---------- -------- ------------- ------------------- (In thousands, except share data) Balance, December 31, 1998................... 1,000 $ 984,345 $37,288 $(281) Comprehensive income: Net income............. 49,089 $49,089 Other comprehensive income: Foreign currency translation adjustments.......... (20) (20) ------- Comprehensive income.... $49,069 ======= Contributed capital from parent................. 369,699 Dividend distribution to parent................. (9,750) ----- --- ---------- ------- ----- Balance, June 30, 1999.. 1,000 $1,354,044 $76,627 $(301) ===== === ========== ======= =====
The accompanying notes are an integral part of these consolidated financial statements. 11 UNITED RENTALS (NORTH AMERICA), INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, ---------------------- 1999 1998 ---------- ---------- (In thousands) Cash Flows From Operating Activities: Net income............................................ $ 49,089 $ 27,019 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................ 148,924 79,509 Amortization of original issue discount and deferred financing fees...................................... 1,894 Gain on sale of rental equipment..................... (37,275) (20,664) Gain on sale of business............................. (3,644) Deferred income taxes................................ 18,808 8,279 Changes in operating assets and liabilities: Accounts receivable.................................. (62,203) (21,254) Inventory............................................ (37,858) (3,040) Prepaid expenses and other assets.................... (38,280) (3,090) Accounts payable..................................... 77,297 27,862 Accrued expenses and other liabilities............... 55,472 (2,519) ---------- ---------- Net cash provided by operating activities.......... 175,868 88,458 Cash Flows From Investing Activities: Purchases of rental equipment......................... (390,693) (259,158) Purchases of property and equipment................... (27,945) (36,574) Proceeds from sale of rental equipment................ 87,194 43,223 In-process acquisition costs.......................... (1,644) (3,495) Payments of contingent purchase price................. (1,118) (2,255) Purchases of other companies.......................... (587,561) (378,878) ---------- ---------- Net cash used in investing activities.............. (921,767) (637,137) Cash Flows From Financing Activities: Proceeds from debt.................................... 1,284,166 890,463 Payments of debt...................................... (876,660) (583,584) Payment of debt financing costs....................... (4,657) (8,115) Capital contributions by parent....................... 369,699 207,076 Dividend distributions to parent...................... (9,750) (1,244) ---------- ---------- Net cash provided by financing activities.......... 762,798 504,596 ---------- ---------- Net increase (decrease) in cash and cash equivalents.. 16,899 (44,083) Cash and cash equivalents at beginning of period...... 20,410 72,411 ---------- ---------- Cash and cash equivalents at end of period............ $ 37,309 $ 28,328 ========== ========== Supplemental disclosure of cash flow information: Cash paid for interest................................ $ 39,605 $ 8,184 Cash paid for income taxes............................ $ 11,461 $ 9,126 Supplemental disclosure of non-cash investing and financing activities: The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired......................... $ 869,523 $ 691,069 Liabilities assumed.................................. (272,567) (264,656) Less: Amounts paid in common stock and warrants.......... (47,535) Amounts paid through issuance of debt.............. (9,395) ---------- ---------- Net cash paid.................................... $ 587,561 $ 378,878 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 12 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation General United Rentals, Inc., is principally a holding company ("Holdings") and conducts its operations primarily through its wholly owned subsidiary United Rentals (North America), Inc. ("URI") and subsidiaries of URI. URI was incorporated in August 1997, initially capitalized in September 1997 and commenced equipment rental operations in October 1997. Holdings was incorporated in July 1998 and became the parent of URI on August 5, 1998, pursuant to the reorganization of the legal structure of URI. Prior to such reorganization, the name of URI was United Rentals, Inc. References herein to "United Rentals" or the "Company" refer to Holdings and its subsidiaries, with respect to periods following the reorganization, and to URI and its subsidiaries, with respect to periods prior to the reorganization. Separate footnote information is not presented for the financial statements of URI and subsidiaries as that information is substantially equivalent to that presented below. Earnings per share data is not provided for the operating results of URI and its subsidiaries as they are wholly owned subsidiaries of Holdings. The Company's consolidated statement of operations for the six and three month periods ended June 30, 1998 and statement of cash flows for the six month period ended June 30, 1998, have been restated to include the accounts of certain acquisitions completed in 1998 that were accounted for as poolings- of-interests (See Note 2). The Consolidated Financial Statements of the Company included herein are unaudited and, in the opinion of management, such financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results of the interim periods presented. Interim financial statements do not require all disclosures normally presented in year-end financial statements, and, accordingly, certain disclosures have been omitted. Results of operations for the six and three month periods ended June 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. The Consolidated Financial Statements included herein should be read in conjunction with the Company's Consolidated Financial Statements and related Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. Impact of Recently Issued Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes a new model for accounting for derivatives and hedging activities. The Company is required to adopt SFAS No. 133 beginning January 1, 2001. The adoption of SFAS No. 133 is not expected to have a material effect on the Company's consolidated financial position or results of operations. 2.Acquisitions Acquisitions Accounted for as Poolings-of-Interests On August 24, 1998, the Company issued 2,744,368 shares of its common stock for all of the outstanding shares of common stock of Rental Tools and Equipment Co. ("Rental Tools"). This transaction was accounted for as a pooling-of-interests and, accordingly, the consolidated statement of operations for the six and three month periods ended June 30, 1998 and statement of cash flows for the six month period ended June 30, 1998 were restated to include the accounts of Rental Tools. On September 24, 1998, the Company issued 1,456,997 shares of its common stock for all of the outstanding shares of common stock of Wynne Systems, Inc. This transaction was accounted for as a pooling-of-interests; however, this transaction was not material to the Company's consolidated operations and financial position and, therefore, the Company's financial statements have not been restated for this transaction but have been combined beginning July 1, 1998. 13 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) On September 29, 1998, a merger (the "Merger") of United Rentals, Inc. and U.S. Rentals, Inc. ("U.S. Rentals") was completed. The Merger was effected by having a wholly owned subsidiary of United Rentals, Inc. merge with and into U.S. Rentals. Following the Merger, United Rentals, Inc. contributed the capital stock of U.S. Rentals to URI, a wholly owned subsidiary of United Rentals, Inc. Pursuant to the Merger, each outstanding share of common stock of U.S. Rentals was converted into the right to receive 0.9625 of a share of common stock of United Rentals, Inc. An aggregate of approximately 29.6 million shares of United Rentals, Inc. common stock were issued in the Merger in exchange for the outstanding shares of U.S. Rentals common stock. The Merger was accounted for as a pooling-of-interests and, accordingly, the consolidated statement of operations for the six and three month periods ended June 30, 1998 and statement of cash flows for the six month period ended June 30, 1998 were restated to include the accounts of U.S. Rentals. Acquisitions Accounted for as Purchases During the six months ended June 30, 1999, the Company completed 57 acquisitions that were accounted for as purchases. The results of operations of the businesses acquired in these acquisitions have been included in the Company's results of operations from their respective acquisition dates. The aggregate initial consideration paid by the Company for such acquisitions that were accounted for as purchases was $579.4 million and consisted of approximately $570.0 million in cash and $9.4 million in seller notes. In addition, the Company repaid or assumed outstanding indebtedness of the companies acquired in such acquisitions in the aggregate amount of $221.2 million. The Company also agreed in connection with three of such acquisitions to pay additional amounts to the former owners based upon specified future revenues and/or new store openings. Such amounts are limited to a specified maximum amount which varies from $100,000 to $200,000, with the average being $133,000. The purchase prices for such acquisitions have been allocated to the assets acquired and liabilities assumed based on their respective fair values at their respective acquisition dates. However, the Company has not completed its valuation of all of its purchases and, accordingly, the purchase price allocations are subject to change when additional information concerning asset and liability valuations are completed. The following table summarizes, on an unaudited pro forma basis, the results of operations of the Company for the six months ended June 30, 1999 and 1998 as though (i) each acquisition summarized above which was consummated during the six months ended June 30, 1999, was made on January 1, 1999, in the case of the results for the six months ended June 30, 1999, and (ii) each acquisition which was consummated during the period January 1, 1998 to June 30, 1999 as described above and in Note 3 to the Notes to Consolidated Financial Statements included in the Company's 1998 Annual Report on Form 10-K was made on January 1, 1998 in the case of the results for the six months ended June 30, 1998 (in thousands, except per share data):
Six Months Ended June 30, ------------------- 1999 1998 ---------- -------- Revenues.............................................. $1,090,959 $937,008 Net income............................................ 44,566 28,753 Basic earnings per share.............................. $ 0.63 $ 0.45 Diluted earnings per share............................ $ 0.48 $ 0.41
The unaudited pro forma results are based upon certain assumptions and estimates, which are subject to change. These results are not necessarily indicative of the actual results of operations that might have occurred, nor are they necessarily indicative of expected results in the future. 14 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 3. Revolving Credit Facility URI obtained a credit facility (the "Credit Facility") dated as of September 29, 1998, with a group of financial institutions. The Credit Facility enables URI to borrow up to $772.5 million on a revolving basis and permits a Canadian subsidiary of URI to directly borrow up to $40 million under the Credit Facility (provided that the aggregate borrowings of URI and the Canadian subsidiary do not exceed $772.5 million). The Credit Facility terminates on September 26, 2003, at which time all outstanding indebtedness is due. The amount of indebtedness outstanding under the Credit Facility was $694.4 million at June 30, 1999. 4.Senior Subordinated Notes On March 23, 1999, URI issued $250 million aggregate principal amount of 9% Senior Subordinated Notes which are due April 1, 2009. URI used approximately $102.0 million of the net proceeds from the sale of such notes to repay all of the then outstanding indebtedness under the Credit Facility and used the balance of such net proceeds from this offering for acquisitions, capital expenditures and general corporate purposes. 5. Series A Perpetual Convertible Preferred Stock On January 7, 1999, Holdings sold 300,000 shares of its Series A Perpetual Convertible Preferred Stock ("Series A Preferred"). The net proceeds from the sale of the Series A Preferred were approximately $287.0 million. Holdings contributed such net proceeds to URI and URI used such net proceeds to repay all of the then outstanding indebtedness under the Credit Facility. The Series A Preferred is convertible into 12,000,000 shares of Holdings common stock at $25 per share based upon the liquidation preference of $1,000 per share of Series A Preferred, subject to adjustment. 6. Series B Perpetual Convertible Preferred Stock On June 28, 1999, Holdings signed a definitive agreement to sell 100,000 shares of its Series B Perpetual Convertible Preferred Stock ("Series B Preferred"). The closing of this transaction is subject to the satisfaction of certain closing conditions. The net proceeds from the sale of the Series B Preferred is expected to be approximately $96.0 million. The shares of Series B Preferred to be issued in this transaction will be convertible into 3,333,334 shares of Holding's common stock at $30 per share based upon a liquidation preference of $1,000 per share of Series B Preferred, subject to adjustment. 7. Common Stock On March 9, 1999, Holdings completed a public offering of 2,290,000 shares of common stock. The net proceeds to the Company from this offering were approximately $64.8 million (after deducting underwriting discounts and offering expenses). Holdings contributed such net proceeds to URI and URI used such net proceeds to repay outstanding indebtedness under the Credit Facility. 15 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 8. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
Three Months Six Months Ended Ended June 30, June 30, --------------- --------------- 1999 1998 1999 1998 ------- ------- ------- ------- Numerator: Net income............................. $42,111 $27,019 $25,886 $20,315 ======= ======= ======= ======= Denominator: Denominator for basic earnings per share weighted-average shares......... 70,304 62,321 71,570 66,061 Effect of dilutive securities: Employee stock options............... 5,296 2,021 4,511 5,976 Warrants............................. 4,325 4,219 4,211 1,706 Series A Preferred................... 12,000 12,000 ------- ------- ------- ------- Denominator for diluted earnings per share--adjusted weighted-average shares................................ 91,925 68,561 92,292 73,743 ======= ======= ======= ======= Basic earnings per share................. $ 0.60 $ 0.43 $ 0.36 $ 0.31 ======= ======= ======= ======= Diluted earnings per share............... $ 0.46 $ 0.39 $ 0.28 $ 0.28 ======= ======= ======= =======
16 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 9. Condensed Consolidating Financial Information Of Guarantor Subsidiaries Certain indebtedness of URI is guaranteed by URI's United States subsidiaries (the "guarantor subsidiaries") but is not guaranteed by URI's foreign subsidiaries (the "non-guarantor subsidiaries"). The guarantor subsidiaries are all wholly owned and the guarantees are made on a joint and several basis and are full and unconditional (subject to subordination provisions and subject to a standard limitation which provides that the maximum amount guaranteed by each guarantor will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent conveyance laws). All expenses incurred by URI have been charged by URI to its guarantor and non guarantor subsidiaries. Separate consolidated financial statements of the guarantor subsidiaries have not been presented because management has determined that such information would not be material to investors. However, condensed consolidating financial information as of June 30, 1999 and December 31, 1998 and for the six and three months ended June 30, 1999 and 1998, are presented. The condensed consolidating financial information of URI and its subsidiaries are as follows: CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 1999 ---------------------------------------------------------------- Non- Guarantor Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total ---------- ------------ ------------ ------------ ------------ (In thousands) ASSETS Cash and cash equiva- lents.................. $ 7,710 $ 25,429 $ 4,170 $ 37,309 Accounts receivable, net.................... 332,684 22,908 355,592 Intercompany receivable (payable).............. 1,344,359 (1,192,904) (151,455) Inventory............... 137,926 11,341 149,267 Prepaid expenses and other assets........... 32,707 48,292 8,276 89,275 Rental equipment, net... 1,542,711 83,783 1,626,494 Property and equipment, net.................... 199,785 6,721 206,506 Investment in subsidiar- ies.................... 2,021,220 $(2,021,220) Intangible assets, net.. 1,285,957 95,782 $1,381,739 ---------- ----------- --------- ----------- ---------- $3,405,996 $ 2,379,880 $ 81,526 $(2,021,220) $3,846,182 ========== =========== ========= =========== ========== LIABILITIES AND STOCK- HOLDER'S EQUITY Liabilities: Accounts payable....... $ 192,226 $ 22,922 $ 215,148 Debt................... $1,906,126 38,147 3,603 1,947,876 Deferred income tax- es.................... 62,883 791 63,674 Accrued expenses and other liabilities..... 88,622 96,661 3,831 189,114 ---------- ----------- --------- ----------- ---------- Total liabilities.... 1,994,748 389,917 31,147 2,415,812 Commitments and contin- gencies Stockholder's equity: Common stock............ Additional paid-in capi- tal.................... 1,334,621 1,908,910 45,356 (1,934,843) 1,354,044 Retained earnings....... 76,627 81,053 5,324 (86,377) 76,627 Accumulated other com- prehensive income...... (301) (301) ---------- ----------- --------- ----------- ---------- Total stockholder's equity.............. 1,411,248 1,989,963 50,379 (2,021,220) 1,430,370 ---------- ----------- --------- ----------- ---------- $3,405,996 $ 2,379,880 $ 81,526 $(2,021,220) $3,846,182 ========== =========== ========= =========== ==========
17 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 1998 --------------------------------------------------------------- Non- Guarantor Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total ---------- ------------ ------------ ------------ ------------ (In thousands) Assets Cash and cash equiva- lents.................. $ 1,774 $ 16,257 $ 2,379 $ 20,410 Accounts receivable, net.................... 218,285 14,997 233,282 Intercompany receivable (payable).............. 898,641 (820,958) (77,683) Inventory............... 65,401 5,593 70,994 Prepaid expenses and other assets........... 30,963 10,816 1,397 43,176 Rental equipment, net... 1,099,539 43,467 1,143,006 Property and equipment, net.................... 165,803 4,734 170,537 Investment in subsidiar- ies.................... 1,390,706 $(1,390,706) Intangible assets, net.. 29 867,061 54,975 922,065 ---------- ---------- ------- ----------- ---------- $2,322,113 $1,622,204 $49,859 $(1,390,706) $2,603,470 ========== ========== ======= =========== ========== Liabilities And Stock- holder's Equity Liabilities: Accounts payable....... $ 3,250 $ 98,680 $ 6,496 $ 108,426 Debt................... 1,286,118 23,976 4,480 1,314,574 Deferred income tax- es.................... 43,560 43,560 Accrued expenses and other liabilities..... 30,535 82,112 2,911 115,558 ---------- ---------- ------- ----------- ---------- Total liabilities.... 1,319,903 248,328 13,887 1,582,118 Commitments and contin- gencies Stockholder's equity: Common stock........... Additional paid-in capital................ 964,922 1,338,576 34,265 $(1,353,418) 984,345 Retained earnings...... 37,288 35,300 1,988 (37,288) 37,288 Accumulated other com- prehensive income...... (281) (281) ---------- ---------- ------- ----------- ---------- Total stockholder's equity.............. 1,002,210 1,373,876 35,972 (1,390,706) 1,021,352 ---------- ---------- ------- ----------- ---------- $2,322,113 $1,622,204 $49,859 $(1,390,706) $2,603,470 ========== ========== ======= =========== ==========
18 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999 ------------------------------------------------------------ Non- Guarantor Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total --- ------------ ------------ ------------ ------------ (In thousands) Revenues: Equipment rentals..... $608,996 $ 34,306 $643,302 Sales of rental equip- ment................. 80,587 6,607 87,194 Sales of new equip- ment, merchandise and other revenues....... 151,564 13,911 165,475 -------- -------- -------- -------- -------- Total revenues.......... 841,147 54,824 895,971 Cost of revenues: Cost of equipment rentals, excluding depreciation......... 261,940 17,206 279,146 Depreciation of rental equipment............ 117,854 6,213 124,067 Cost of rental equip- ment sales........... 45,995 3,924 49,919 Cost of new equipment and merchandise sales and other operating costs................ 114,069 10,715 124,784 -------- -------- -------- -------- -------- Total cost of revenues.. 539,858 38,058 577,916 -------- -------- -------- -------- -------- Gross profit............ 301,289 16,766 318,055 Selling, general and ad- ministrative expenses............... 140,476 9,385 149,861 Non-rental depreciation and amortization....... 23,358 1,499 24,857 -------- -------- -------- -------- -------- Operating income........ 137,455 5,882 143,337 Interest expense........ 51,153 153 51,306 Other (income) expense, net.................... 9,407 (425) 8,982 -------- -------- -------- -------- -------- Income before provision for income taxes ...... 76,895 6,154 83,049 Provision for income taxes.................. 31,142 2,818 33,960 -------- -------- -------- -------- -------- Income before equity in net earnings of subsidiaries........ 45,753 3,336 $(49,089) Equity in net earnings of subsidiaries........ $ 49,089 49,089 -------- -------- -------- -------- -------- Net income.............. $ 49,089 $ 45,753 $ 3,336 $(49,089) $ 49,089 ======== ======== ======== ======== ========
19 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998 ----------------------------------------------------------- Non- Guarantor Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total --- ------------ ------------ ------------ ------------ (In thousands) Revenues: Equipment rentals..... $301,965 $7,718 $309,683 Sales of rental equip- ment................. 41,602 1,621 43,223 Sales of new equip- ment, merchandise and other revenues....... 67,060 5,222 72,282 ------- -------- ------ -------- -------- Total revenues.......... 410,627 14,561 425,188 Cost of revenues: Cost of equipment rentals, excluding depreciation......... 140,695 3,239 143,934 Depreciation of rental equipment............ 65,767 1,250 67,017 Cost of rental equip- ment sales........... 21,521 1,038 22,559 Cost of new equipment and merchandise sales and other operating costs................ 51,778 4,567 56,345 ------- -------- ------ -------- -------- Total cost of revenues.. 279,761 10,094 289,855 ------- -------- ------ -------- -------- Gross profit............ 130,866 4,467 135,333 Selling, general and ad- ministrative expenses............... 66,372 1,979 68,351 Non-rental depreciation and amortization....... 12,241 251 12,492 ------- -------- ------ -------- -------- Operating income........ 52,253 2,237 54,490 Interest expense........ 15,149 96 15,245 Other (income) expense, net.................... (4,212) (20) (4,232) ------- -------- ------ -------- -------- Income before provision for income taxes .......... 41,316 2,161 43,477 Provision for income taxes.................. 15,477 981 16,458 ------- -------- ------ -------- -------- Income before equity in net earnings of subsid- iaries................. 25,839 1,180 $(27,019) Equity in net earnings of subsidiaries........ $27,019 27,019 ------- -------- ------ -------- -------- Net income.............. $27,019 $ 25,839 $1,180 $(27,019) $ 27,019 ======= ======== ====== ======== ========
20 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 1999 ------------------------------------------------------------ Non- Guarantor Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total --- ------------ ------------ ------------ ------------ (In thousands) Revenues: Equipment rentals..... $333,959 $ 20,958 $354,917 Sales of rental equip- ment................. 47,323 3,928 51,251 Sales of new equip- ment, merchandise and other revenues....... 88,719 8,775 97,494 -------- -------- -------- --------- -------- Total revenues.......... 470,001 33,661 503,662 Cost of revenues: Cost of equipment rentals, excluding depreciation......... 143,310 10,017 153,327 Depreciation of rental equipment............ 61,514 3,440 64,954 Cost of rental equip- ment sales........... 26,466 2,611 29,077 Cost of new equipment and merchandise sales and other operating costs................ 65,200 7,040 72,240 -------- -------- -------- --------- -------- Total cost of revenues.. 296,490 23,108 319,598 -------- -------- -------- --------- -------- Gross profit............ 173,511 10,553 184,064 Selling, general and ad- ministrative expenses............... 79,093 5,508 84,601 Non-rental depreciation and amortization....... 12,355 856 13,211 -------- -------- -------- --------- -------- Operating income........ 82,063 4,189 86,252 Interest expense........ 26,875 58 26,933 Other (income) expense, net.................... 9,548 (220) 9,328 -------- -------- -------- --------- -------- Income before provision for income taxes ...... 45,640 4,351 49,991 Provision for income taxes.................. 18,484 1,967 20,451 -------- -------- -------- --------- -------- Income before equity in net earnings of subsidiaries........ 27,156 2,384 $ (29,540) Equity in net earnings of subsidiaries........ $ 29,540 29,540 -------- -------- -------- --------- -------- Net income.............. $ 29,540 $ 27,156 $ 2,384 $ (29,540) $ 29,540 ======== ======== ======== ========= ========
21 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 1998 ----------------------------------------------------------- Non- Guarantor Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total --- ------------ ------------ ------------ ------------ (In thousands) Revenues: Equipment rentals..... $177,260 $5,452 $183,072 Sales of rental equip- ment................. 26,068 1,107 27,175 Sales of new equip- ment, merchandise and other revenues....... 40,107 3,693 43,800 ------- -------- ------ -------- -------- Total revenues.......... 243,795 10,252 254,047 Cost of revenues: Cost of equipment rentals, excluding depreciation......... 78,875 1,863 80,738 Depreciation of rental equipment............ 37,066 671 37,737 Cost of rental equip- ment sales........... 13,915 630 14,545 Cost of new equipment and merchandise sales and other operating costs................ 30,366 3,239 33,605 ------- -------- ------ -------- -------- Total cost of revenues.. 160,222 6,403 166,625 ------- -------- ------ -------- -------- Gross profit............ 83,573 3,849 87,422 Selling, general and ad- ministrative expenses............... 40,904 1,293 42,197 Non-rental depreciation and amortization....... 6,822 174 6,996 ------- -------- ------ -------- -------- Operating income........ 35,847 2,382 38,229 Interest expense........ 9,408 50 9,458 Other (income) expense, net.................... (3,417) (19) (3,436) ------- -------- ------ -------- -------- Income before provision for income taxes .......... 29,856 2,351 32,207 Provision for income taxes.................. 10,834 1,058 11,892 ------- -------- ------ -------- -------- Income before equity in net earnings of subsidiaries........... 19,022 1,293 $(20,315) Equity in net earnings of subsidiaries........ $20,315 20,315 ------- -------- ------ -------- -------- Net income.............. $20,315 $ 19,022 $1,293 $(20,315) $ 20,315 ======= ======== ====== ======== ========
22 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Six Months Ended June 30, 1999 ----------------------------------------------------------------- Guarantor Non-guarantor URI Subsidiaries Subsidiaries Eliminations Consolidated ---------- ------------- ------------- ------------ ------------ (In thousands) Net cash provided by (used in) operating activities............. $ (169,301) $ 305,759 $39,410 $ 175,868 Cash flows from investing activities: Purchase of rental equipment............. (349,243) (41,450) (390,693) Purchase of property and equipment......... (26,287) (1,658) (27,945) Proceeds from sales of rental equipment...... 80,587 6,607 87,194 In-process acquisition costs................. (1,644) (1,644) Payment of contingent purchase price........ (1,118) (1,118) Purchase of other companies............. (587,561) (587,561) ---------- --------- -------- ------ ---------- Net cash used in investing activities.......... (587,561) (296,587) (37,619) (921,767) Cash flows from financing activities: Proceeds from debt..... 1,284,166 1,284,166 Payments of debt....... (876,660) (876,660) Payment of debt financing costs....... (4,657) (4,657) Capital contribution by parent............. 369,699 369,699 Dividend distribution to parent............. (9,750) (9,750) ---------- --------- -------- ------ ---------- Net cash provided by financing activities.......... 762,798 762,798 Net increase in cash and cash equivalents........... 5,936 9,172 1,791 16,899 Cash and cash equivalents at beginning of period... 1,774 16,257 2,379 20,410 ---------- --------- -------- ------ ---------- Cash and cash equivalents at end of period................ $ 7,710 $ 25,429 $ 4,170 $ 37,309 ========== ========= ======== ====== ========== Supplemental disclosure of cash flow information: Cash paid during the period: Interest............. $ 21,099 $ 18,353 $ 153 $ 39,605 Income taxes......... $ 10,139 $ 1,322 $ 11,461 Supplemental disclosure of non-cash investing and financing activities: The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired.............. $ 869,523 $ 869,523 Liabilities assumed.... (272,567) (272,567) Less: Amounts paid through issuance of debt.... (9,395) (9,395) ---------- --------- -------- ------ ---------- Net cash paid...... $ 587,561 $ 587,561 ========== ========= ======== ====== ==========
23 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Six Months Ended June 30, 1998 ---------------------------------------------------------------- Guarantor Non-guarantor URI Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------- ------------- ------------ ------------ (In thousands) Net cash provided by (used in) operating activities............. $ (37,512) $ 123,388 $ 2,582 $ 88,458 Cash flows from investing activities: Purchase of rental equipment............. (255,307) (3,851) (259,158) Purchase of property and equipment......... (35,042) (1,532) (36,574) Proceeds from sales of rental equipment...... 41,602 1,621 43,223 In-process acquisition costs................. (3,495) (3,495) Payments of contingent purchase price........ (1,055) (1,200) (2,255) Purchase of other companies............. (369,534) (9,344) (378,878) --------- --------- ------- ------- --------- Net cash used in investing activities.......... (369,534) (262,641) (4,962) (637,137) Cash flows from financing activities: Proceeds from debt..... 613,796 266,687 9,980 890,463 Payments of debt....... (467,399) (108,585) (7,600) (583,584) Payment of debt financing costs....... (8,115) (8,115) Capital contribution by parent............. 207,076 207,076 Dividend distribution to parent............. (1,244) (1,244) --------- --------- ------- ------- --------- Net cash provided by financing activities.......... 345,358 156,858 2,380 504,596 Net increase (decrease) in cash and cash equivalents........... (61,688) 17,605 (44,083) Cash and cash equivalents at beginning of period... 68,608 3,803 72,411 --------- --------- ------- ------- --------- Cash and cash equivalents at end of period................ $ 6,920 $ 21,408 $ 28,328 ========= ========= ======= ======= ========= Supplemental disclosure of cash flow information: Cash paid during the period: Interest............. $ 5,641 $ 2,476 $ 67 $ 8,184 Income taxes......... $ 7,434 $ 1,692 $ 9,126 Supplemental disclosure of non-cash investing and financing activities: The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired.............. $ 681,725 $ 9,344 $ 691,069 Liabilities assumed.... (264,656) (264,656) Less: Amounts paid in common stock and warrants............ (47,535) (47,535) --------- --------- ------- ------- --------- Net cash paid...... $ 369,534 $ 9,344 $ 378,878 ========= ========= ======= ======= =========
10. Subsequent Events Completed Acquisitions Subsequent to June 30, 1999 (through July 27, 1999), the Company completed the acquisitions of six equipment rental companies. The aggregate consideration paid by the Company for these acquisitions was $17.0 million in cash. In addition, the Company repaid or assumed outstanding indebtedness of the companies acquired in such acquisitions in the aggregate amount of $2.7 million. The Company funded the consideration for these acquisitions with borrowings under the Company's Credit Facility. Series B Perpetual Convertible Preferred Stock On July 16, 1999, Holdings signed a definitive agreement to sell an aggregate of 50,000 additional shares of its Series B Preferred. The closing of this transaction is subject to certain closing conditions. The net proceeds from the sale of the Series B Preferred to be issued in this transaction is expected to be approximately $48.0 24 million. The Series B Preferred to be issued in this transaction will be convertible into 1,666,667 shares of Holdings common stock at $30.00 per share based upon a liquidation preference of $1,000 per share of Series B Preferred, subject to adjustment. Term Loan In July and August 1999, URI obtained, in aggregate, a $450 million term loan from a group of financial institutions (the "Term Loan C"). The Term Loan C matures in July 2006. URI used the net proceeds from the Term Loan C to repay a portion of the outstanding indebtedness under the Credit Facility. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion reviews the Company's operations for the six and three months ended June 30, 1999 and 1998 and should be read in conjunction with the Unaudited Consolidated Financial Statements and related Notes thereto of the Company included herein and the Consolidated Financial Statements and related Notes thereto included in the Company's 1998 Annual Report on Form 10- K. Introduction The Company commenced equipment rental operations in October 1997 and has completed 153 acquisitions (through July 27, 1999), including a merger with U.S. Rentals (the "U.S. Rentals Merger") which was completed in September 1998. Three of the acquisitions completed by the Company (including the U.S. Rentals Merger) were accounted for as "poolings-of-interests," and the Company's financial statements have been restated to include the accounts of two of the companies acquired in such transactions (but were not restated for one that was not material, which has been combined with the Company effective July 1, 1998). See Note 2 to the Notes to the Unaudited Consolidated Financial Statements of the Company included elsewhere herein. The other 150 acquisitions completed by the Company were accounted for as "purchases". The results of operations of the businesses acquired in these acquisitions are included in the Company's financial statements only from their respective dates of acquisition. In view of the fact that the Company's operating results for 1999 and 1998 were impacted by acquisitions that were accounted for as purchases, the Company believes that the results of its operations for such periods are not directly comparable. United Rentals, Inc. ("Holdings") is principally a holding company and primarily conducts its operations through its wholly owned subsidiary, United Rentals (North America), Inc. ("URI"), and subsidiaries of URI. General The Company primarily derives revenues from the following sources: (i) equipment rental (including additional fees that may be charged for equipment delivery, fuel, repair of rental equipment, and damage waivers), (ii) the sale of rental equipment, (iii) the sale of new equipment and (iv) the sale of related merchandise and parts. Cost of operations consists primarily of depreciation costs associated with rental equipment, the cost of repairing and maintaining rental equipment, the cost of rental and new equipment sold, personnel costs, occupancy costs and supplies. The Company records rental equipment expenditures at cost and depreciates equipment using the straight-line method over the estimated useful life (which ranges from 2 to 10 years), after giving effect to an estimated salvage value of 0% to 10% of cost. Selling, general and administrative expenses primarily include sales commissions, advertising and marketing expenses, management salaries, and clerical and administrative overhead. 25 Non-rental depreciation and amortization includes (i) depreciation expense associated with equipment that is not offered for rent (such as vehicles, computers and office equipment) and amortization expense associated with leasehold improvements and (ii) the amortization of intangible assets. The Company's intangible assets include non-compete agreements and goodwill, which represents the excess of the purchase price of acquired companies over the estimated fair market value of the net assets acquired. Results of Operations Six Months Ended June 30, 1999 and 1998 Revenues. Total revenues for the six months ended June 30, 1999 were $896.0 million, representing an increase of 110.7% over total revenues of $425.2 million for the six months ended June 30, 1998. The Company's revenues in the first six months of 1999 and 1998 were attributable to: (i) equipment rental ($643.3 million, or 71.8% of revenues, in the first six months of 1999 compared to $309.7 million, or 72.8% of revenues, in the first six months of 1998), (ii) sales of rental equipment ($87.2 million, or 9.7% of revenues, in the first six months of 1999 compared to $43.2 million, or 10.2% of revenues, in the first six months of 1998) and (iii) sales of new equipment, merchandise and other revenues ($165.5 million, or 18.5% of revenues, in the first six months of 1999 compared to $72.3 million, or 17.0% of revenues, in the first six months of 1998). The 110.7% increase in total revenues in the first six months of 1999 reflected (i) increased revenues at locations open more than one year (which accounted for approximately 23.8 percentage points) and (ii) new rental locations acquired through acquisitions and the opening of start-up locations (which accounted for approximately 86.9 percentage points). The increase in revenues at locations open more than one year primarily reflected (a) an increase in the volume of rental transactions, (b) an expansion of the product lines offered by the Company for sale, (c) an increase in the sale of related merchandise and parts which was driven by the increase in equipment rental and sales transactions and (d) an increase in the sale of used equipment in order to maintain the quality of the Company's rental fleet. Gross Profit. Gross profit increased to $318.1 million in the first six months of 1999 from $135.3 million in the first six months of 1998. This increase in gross profit was primarily attributable to the increase in revenues described above. The Company's gross profit margin by source of revenue in the first six months of 1999 and 1998 was: (i) equipment rental (37.3% in the first six months of 1999 and 31.9% in the first six months of 1998), (ii) sales of rental equipment (42.7% in the first six months of 1999 and 47.8% in the first six months of 1998) and (iii) sales of new equipment, merchandise and other revenues (24.6% in the first six months of 1999 and 22.0% in the first six months of 1998). The increase in the gross profit margin from rental revenues in the first six months of 1999 was primarily attributable to greater equipment utilization rates and to economies of scale. The decrease in the gross profit margin from the sales of rental equipment in the first six months of 1999 primarily reflected a shift in mix towards more late-model used equipment, which generally generates lower gross profit margins than somewhat older equipment. The increase in the gross profit margin from sales of new equipment, merchandise and other revenue in the first six months of 1999 primarily reflected the benefits of greater purchasing power and a shift in the sales mix to higher margin items. Selling, General and Administrative Expenses. Selling, general and administrative expenses ("SG&A") were $149.9 million, or 16.7% of total revenues, during the first six months of 1999 and $68.4 million, or 16.1% of total revenues, during the first six months of 1998. The increase in SG&A as a percentage of revenues in the first six months of 1999 principally reflected an $8.3 million charge primarily due to professional fees incurred in connection with the Company's terminated tender offer and consent and proxy solicitation for Rental Service Corporation, ("RSC"), which offset certain economies of scale related to the increase in revenues described above. Non-rental Depreciation. Non-rental depreciation was $10.8 million, or 1.2% of total revenues, in the first six months of 1999 and $9.4 million, or 2.2% of total revenues, in the first six months of 1998. Non-rental depreciation primarily consists of depreciation expense attributable to equipment not offered for rent and to rental 26 facility locations. The decrease in non-rental depreciation as a percentage of sales in 1999 primarily reflected economies of scale related to the increase in revenues described above. Amortization. Amortization was $15.7 million, or 1.8% of total revenues, during the first six months of 1999, and $3.1 million, or 0.7% of total revenues, during the first six months of 1998. The increase in amortization in 1999 primarily reflected the amortization of goodwill attributable to the acquisitions completed subsequent to June 30, 1998. Interest Expense. Interest expense increased to $51.3 million in the first six months of 1999 from $15.2 million in the first six months of 1998. This increase primarily reflected the fact that the Company's indebtedness significantly increased in 1999, principally to fund acquisitions. Preferred Dividends of a Subsidiary Trust. During the first six months of 1999, preferred dividends of a subsidiary trust of Holdings were $9.8 million. These dividends relate to preferred securities issued in August 1998 by such subsidiary trust. Other (Income) Expense. Other expense was $9.2 million in the first six months of 1999 compared with $4.2 million in other income in the first six months of 1998. The increase in other expense in the first six months of 1999 primarily reflected a $10.0 million charge that was principally due to commitment fees incurred in connection with a $2.0 billion financing commitment that was cancelled upon the termination of the Company's tender offer for RSC. Income Taxes. Income taxes increased to $29.3 million, or an effective rate of 41.0%, in the first six months of 1999 from $16.5 million, or an effective rate of 37.9%, in the first six months of 1998. The lower effective tax rate in the first six months of 1998 primarily reflected the fact that a business that the Company acquired in 1998 in a transaction that was accounted for as a pooling-of-interests was taxed as a Subchapter S Corporation for federal and state tax purposes prior to being acquired. Three Months Ended June 30, 1999 and 1998 Revenues. Total revenues for the three months ended June 30, 1999 were $503.7 million, representing an increase of 98.3% over total revenues of $254.0 million for the three months ended June 30, 1998. The Company's revenues in the three months ended June 30, 1999 and 1998 were attributable to: (i) equipment rental ($354.9 million, or 70.5% of revenues, in the three months ended June 30, 1999 compared to $183.1 million, or 72.1% of revenues, in the three months ended June 30, 1998), (ii) sales of rental equipment ($51.3 million, or 10.2% of revenues, in the three months ended June 30, 1999 compared to $27.2 million, or 10.7% of revenues, in the three months ended June 30, 1998) and (iii) sales of new equipment, merchandise and other revenues ($97.5 million, or 19.3% of revenues, in the three months ended June 30, 1999 compared to $43.8 million, or 17.2% of revenues, in the three months ended June 30, 1998). The 98.3% increase in total revenues in the three months ended June 30, 1999 reflected (i) increased revenues at locations open more than one year (which accounted for approximately 22.2 percentage points) and (ii) new rental locations acquired through acquisitions and the opening of start-up locations (which accounted for approximately 76.1 percentage points). The increase in revenues at locations open more than one year primarily reflected (a) an increase in the volume of rental transactions, (b) an expansion of the product lines offered by the Company for sale, (c) an increase in the sale of related merchandise and parts which was driven by the increase in equipment rental and sales transactions and (d) an increase in the sale of used equipment in order to maintain the quality of the Company's rental fleet. Gross Profit. Gross profit increased to $184.1 million in the three months ended June 30, 1999 from $87.4 million in the three months ended June 30, 1998. This increase in gross profit was primarily attributable to the 27 increase in revenues described above. The Company's gross profit margin by source of revenue in the three months ended June 30, 1999 and 1998 was: (i) equipment rental (38.5% in the three months ended June 30, 1999 and 35.3% in the three months ended June 30, 1998), (ii) sales of rental equipment (43.3% in the three months ended June 30, 1999 and 46.5% in the three months ended June 30, 1998) and (iii) sales of new equipment, merchandise and other revenues (25.9% in the three months ended June 30, 1999 and 23.3% in the three months ended June 30, 1998). The increase in the gross profit margin from rental revenues in the three months ended June 30, 1999 was primarily attributable to greater equipment utilization rates and to economies of scale. The decrease in the gross profit margin from the sales of rental equipment in the three months ended June 30, 1999 primarily reflected a shift in mix towards more late-model used equipment, which generally generates lower gross profit margins than somewhat older equipment. The increase in the gross profit margin from sales of new equipment, merchandise and other revenue in the three months ended June 30, 1999 primarily reflected the benefits of greater purchasing power and a shift in the sales mix to higher margin items. Selling, General and Administrative Expenses. Selling, general and administrative expenses ("SG&A") were $84.6 million, or 16.8% of total revenues, during the three months ended June 30, 1999 and $42.2 million, or 16.6% of total revenues, during the three months ended June 30, 1998. The increase in SG&A as a percentage of revenues in the three months ended June 30, 1999, principally reflected an $8.3 million charge primarily due to professional fees incurred in connection with the Company's terminated tender offer and consent and proxy solicitation for RSC, which offset certain economies of scale related to the increase in revenues. Non-rental Depreciation. Non-rental depreciation was $5.6 million, or 1.1% of total revenues, in the three months ended June 30, 1999 and $4.9 million, or 1.9% of total revenues, in the three months ended June 30, 1998. Non-rental depreciation primarily consists of depreciation expense attributable to equipment not offered for rent and to rental facility locations. The decrease in non-rental depreciation as a percentage of sales in 1999 primarily reflected economies of scale related to the increase in revenues described above. Amortization. Amortization was $8.8 million, or 1.7% of total revenues, during the three months ended June 30, 1999, and $2.1 million, or 0.8% of total revenues, during the three months ended June 30, 1998. The increase in amortization in 1999 primarily reflected the amortization of goodwill attributable to the acquisitions completed subsequent to June 30, 1998. Interest Expense. Interest expense increased to $26.9 million in the three months ended June 30, 1999 from $9.5 million in the three months ended June 30, 1998. This increase primarily reflected the fact that the Company's indebtedness significantly increased in 1999, principally to fund acquisitions. Preferred Dividends of a Subsidiary Trust. During the three months ended June 30, 1999, preferred dividends of a subsidiary trust of Holdings were $4.9 million. These dividends relate to preferred securities issued in August 1998 by such subsidiary trust. Other (Income) Expense. Other expense was $9.4 million in the three months ended June 30, 1999 compared with $3.4 million in other income in the three months ended June 30, 1998. The increase in other expense in the three months ended June 30, 1999, primarily reflected a $10.0 million charge principally due to commitment fees incurred in connection with a $2.0 billion financing commitment that was cancelled upon the termination of the Company's tender offer for RSC. Income Taxes. Income taxes increased to $18.0 million, or an effective rate of 41.0%, in the three months ended June 30, 1999 from $11.9 million, or an effective rate of 36.9%, in the three months ended June 30, 1998. The lower effective tax rate in the three months ended June 30, 1998 primarily reflected the fact that a business that the Company acquired in 1998 in a transaction that was accounted for as a pooling-of-interests was taxed as a Subchapter S Corporation for federal and state tax purposes prior to being acquired. 28 Liquidity and Capital Resources Recent Financings Set forth below is certain information concerning certain financing transactions entered into by the Company during 1999. Series A Perpetual Convertible Preferred Stock. In January 1999, Holdings sold 300,000 shares of its Series A Perpetual Convertible Preferred Stock ("Series A Preferred") to Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P. (collectively "Apollo"). The net proceeds from the sale of the Series A Preferred were approximately $287.0 million (after deducting issuance fees and expenses). Common Stock. In March 1999, Holdings completed a public offering of 2,290,000 shares of its common stock. The net proceeds to the Company from this offering were approximately $64.8 million (after deducting underwriting discounts and offering expenses). 9% Senior Subordinated Notes. In March 1999, URI sold $250 million aggregate principal amount of 9% Senior Subordinated Notes Due 2009 ("9% Notes") for aggregate consideration of $245.0 million (after deducting the initial purchaser's discount and offering expenses). The 9% Notes are unsecured. URI may, at its option, redeem the 9% Notes on or after April 1, 2004 at specified redemption prices which range from 104.50% in 2004 to 100.00% in 2007 and thereafter. In addition, on or prior to April 1, 2002, URI may, at its option, use the proceeds of a public equity offering by Holdings to redeem up to 35% of the outstanding 9% Notes, at a redemption price of 109.00%. The indenture governing the 9% Notes contains certain restrictive covenants, including (i) limitations on additional indebtedness, (ii) limitations on restricted payments, (iii) limitations on liens, (iv) limitations on dividends and other payment restrictions, (v) limitations on preferred stock of certain subsidiaries, (vi) limitations on transactions with affiliates, (vii) limitations on the disposition of proceeds of asset sales and (viii) limitations on the ability of the Company to consolidate, merge or sell all or substantially all of its assets. Series B Perpetual Convertible Preferred Stock. The Company has entered into (i) a definitive agreement with Apollo which provides for the Company to sell to Apollo 100,000 shares of the Company's Series B Perpetual Convertible Preferred Stock ("Series B Preferred") and (ii) a definitive agreement with Chase Equity Associates, L.P. ("Chase") which provides for the Company to sell to Chase 50,000 shares of Series B Preferred. The closing of each of these transactions is subject to the satisfaction of certain closing conditions. The Company expects that it will receive net proceeds of $96 million from the transaction with Apollo and $48 million from the transaction with Chase. Each share of Series B Preferred will be convertible into 33 1/3 shares of the Company's Common Stock (representing a conversion price of $30 per share based on the liquidation preference of $30 per share of Series B Preferred), subject to adjustment. Term Loan. In July and August 1999, URI obtained in aggregate, a $450 million term loan from a group of financial institutions (the "Term Loan C"). The Term Loan C matures in June 2006. URI used the net proceeds from the Term Loan C to repay a portion of the outstanding indebtedness under the Company's revolving credit facility (the "Credit Facility"). Prior to maturity, quarterly installments of principal in the amount of $1,125,000 are due on the last day of each calendar quarter, commencing September 30, 2000. The amount due at maturity is $424,125,000. The Term Loan C accrues interest, at URI's option, at either (a) the Base Rate (which is equal to the greater of (i) the Federal Funds Rate plus 0.5% or (ii) Bank of America's referenced rate) plus a margin of 0.625% per annum, or (b) the Eurodollar Rate (which for borrowings by URI is equal to Bank of America's reserve adjusted eurodollar rate) plus a margin of 2.50% per annum. If at any time an event of default exists, the interest rate applicable to URI's existing term loan and the Term Loan C will increase by 2% per annum. The Term Loan C is secured pari passu with the Credit Facility and URI's existing term loan, and the agreement governing the Term Loan C contains restrictive covenants substantially similar to those provided by the Credit Facility and URI's existing term loan. 29 Sources and Uses of Cash During the first six months of 1999, the Company (i) generated cash from operations of approximately $173.5 million, (ii) generated cash from the sale of rental equipment of approximately $87.2 million, (iii) received net proceeds of $287.0 million from the sale of the Series A Preferred, (iv) received net proceeds of $65.2 million from the issuance of common stock and (v) received net proceeds of $245.0 million from the sale of the 9% Notes. The Company used cash during this period principally to (i) pay consideration for acquisitions (approximately $587.6 million), (ii) purchase rental equipment (approximately $390.7 million) and (iii) purchase other property and equipment (approximately $52.8 million). Certain Balance Sheet Changes The acquisitions and the equipment purchases made by the Company in the first six months of 1999 (and the financing of such acquisitions and purchases) were the principal reasons for the increase in the following items at June 30, 1999 compared with December 31, 1998: accounts receivable, inventory, prepaid expenses and other assets, rental equipment, property and equipment, intangible assets, accounts payable, debt and accrued expenses and other liabilities. The financing transactions completed by the Company during the first six months of 1999 were the principal reasons for (i) the decrease in cash and the increase in debt at June 30, 1999, compared with December 31, 1998 and (ii) the increase in additional paid-in capital at June 30, 1999, compared with December 31, 1998. Certain Information Concerning the Company's Credit Facility URI has a revolving credit facility (the "Credit Facility") that enables URI to borrow up to $772.5 million on a revolving basis and permits a Canadian subsidiary of URI to directly borrow up to $40.0 million under the Credit Facility (provided that the aggregate borrowings of URI and the Canadian subsidiary do not exceed $772.5 million). The Credit Facility terminates on September 26, 2003, at which time all outstanding indebtedness is due. As of August 12, 1999, there was $458.0 million of indebtedness outstanding under the Credit Facility (not including undrawn outstanding letters of credit in the amount of $3.8 million). Cash Requirements Related to Operations The Company's principal existing sources of cash are (i) borrowings available under the Credit Facility ($310.7 million available as of August 12, 1999), (ii) cash generated from operations and (iii) the net proceeds that the Company expects to receive from the sale of its Series B Preferred as described above. The Company expects that its principal needs for cash relating to its existing operations over the next 12 months will be to fund (i) operating activities and working capital, (ii) the purchase of rental equipment and inventory of items offered for sale and (iii) debt service. The Company plans to fund such cash requirements relating to its existing operations from its existing sources of cash described above. The Company estimates that equipment expenditures over the next 12 months will be approximately $550.0 million for the existing operations of the Company. These expenditures are comprised of approximately $310.0 million of expenditures to maintain the average age of the Company's rental fleet and $240.0 million of discretionary expenditures to increase the size of the Company's rental fleet. The Company expects that it will fund such expenditures from a combination of approximately $200.0 million of proceeds expected to be generated from the sale of used equipment, cash generated from operations and, if required, borrowings available under the Credit Facility. In addition, the Company expects that it will be required to make equipment expenditures in connection with new acquisitions. The Company cannot quantify at this time the amount of equipment expenditures that will be required in connection with new acquisitions. 30 Principal elements of the Company's strategy include continued expansion through a disciplined acquisition program and the opening of new rental locations. The Company expects to pay for future acquisitions using cash, capital stock, notes and/or assumption of indebtedness. To the extent that the Company's existing sources of cash described above are not sufficient to fund such future acquisitions, the Company will require additional financing and, consequently, the Company's indebtedness may increase as the Company implements its growth strategy. There can be no assurance, however, that any additional financing will be available or, if available, will be on terms satisfactory to the Company. Based upon the terms of the Company's currently outstanding indebtedness, the Company is scheduled to repay approximately $14.3 million during 1999. Relationship Between Holdings and URI Holdings is principally a holding company and primarily conducts its operations through its wholly owned subsidiary URI and subsidiaries of URI. Holdings provides certain services to URI in connection with its operations. These services principally include: (i) senior management services, (ii) finance related services and support, (iii) information technology systems and support and (iv) acquisition related services. In addition, Holdings leases certain equipment and real property that are made available for use by URI and its subsidiaries. URI has made, and expects to continue to make, certain payments to Holdings in respect of the services provided by Holdings to the Company. The expenses relating to URI's payments to Holdings are reflected on URI's financial statements as selling, general and administrative expenses. In addition, although not legally obligated to do so, URI has in the past, and expects that it will in the future, make distributions to Holdings to, among other things, enable Holdings to pay dividends on certain preferred securities (the "Trust Preferred Securities") that were issued by a subsidiary trust of Holdings in August 1998. The Trust Preferred Securities are the obligation of a subsidiary trust of Holdings and are not the obligation of URI. As a result, the dividends payable on these securities are reflected as an expense on the consolidated financial statements of Holdings, but are not reflected as an expense on the consolidated financial statements of URI. This is the principal reason why the net income reported on the consolidated financial statements of URI is higher than the net income reported on the consolidated financial statements of Holdings. Year 2000 Compliance The Company has been informed by its software vendors that the Company's recently installed information technology systems are year 2000 compliant. The Company has, therefore, not developed any contingency plans relating to year 2000 issues and has not budgeted any funds for year 2000 issues. Although the Company believes that its systems are year 2000 compliant, there can be no assurance that unanticipated year 2000 problems will not arise which, depending on the nature and magnitude of the problem, could have a material adverse effect on the Company's business and financial condition. Furthermore, year 2000 problems involving third parties may have a negative impact on the Company's customers or suppliers, the general economy or on the ability of businesses generally to receive essential services (such as telecommunications, banking services, etc.). Any such problem could have a material adverse effect on the Company's business and financial condition. The Company is unable at this time to assess the possible impact on its business of year 2000 problems involving any third party. Fluctuations in Operating Results The Company expects that its 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 the Company's customers (with rental activity tending to be lower in the winter); changes in general economic conditions in the Company's markets; the timing of acquisitions and the opening of start-up locations and related costs; the effect of the integration of acquired businesses and start-up locations; the timing of expenditures for new equipment and the disposition of used equipment; changes in demand for the Company's equipment or the prices therefor due to changes in economic conditions, competition or other factors. 31 The Company is continually involved in the investigation and evaluation of potential acquisitions. In accordance with generally accepted accounting principles, the Company capitalizes certain direct out-of-pocket expenditures (such as legal and accounting fees) relating to potential or pending acquisitions. Indirect acquisition costs, such as executive salaries, general corporate overhead, public affairs and other corporate services, are expensed as incurred. The Company's policy is to charge against earnings any capitalized expenditures relating to any potential or pending acquisition that the Company determines will not be consummated. There can be no assurance that the Company in future periods will not be required to incur a charge against earnings in accordance with such policy, which charge, depending upon the magnitude thereof, could adversely affect the Company's results of operations. The Company will be required to incur significant start-up expenses in connection with establishing each start-up location. Such expenses may include, among others, pre-opening expenses related to setting up the facility, and expenses in connection with training employees, installing information systems and marketing. The Company expects that, in general, start-up locations will initially operate at a loss or at less than normalized profit levels. Consequently, the opening of a start-up location may negatively impact the Company's margins until the location achieves normalized profitability. There may be a lag between the time that the Company purchases new equipment and begins to incur the related depreciation and interest expenses and the time that the equipment begins to generate revenues at normalized rates. As a result, the purchase of new equipment, particularly equipment purchased in connection with expanding and diversifying the Company's rental equipment, may periodically reduce margins. General Economic Conditions and Inflation The Company's operating results may be adversely affected by (i) changes in general economic conditions, including changes in construction and industrial activity, or increases in interest rates, or (ii) adverse weather conditions that may temporarily decrease construction and industrial activity in a particular geographic area. Although the Company cannot accurately anticipate the effect of inflation on its operations, the Company believes that inflation has not had, and is not likely in the foreseeable future to have, a material impact on its results of operations. Recently Issued Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes a new model for accounting for derivatives and hedging activities. The Company will adopt SFAS No. 133 beginning January 1, 2001. The adoption of SFAS No. 133 is not expected to have a material effect on the Company's consolidated financial position or results of operations. Factors that May Influence Future Results and Accuracy of Forward-Looking Statements Sensitivity to Changes in Construction and Industrial Activities Our equipment is principally used in connection with construction and industrial activities. Consequently, a downturn in construction or industrial activity may lead to a decrease in demand for our equipment, which could adversely affect our business. We have identified below certain of the factors which may cause such a downturn, either temporarily or long-term: .a general slow-down of the economy; .an increase in interest rates; or .adverse weather conditions which may temporarily affect a particular region. 32 Acquired Companies not Historically Operated as a Combined Business The businesses that we acquired have been in existence an average of 29 years and some have been in existence for more than 50 years. However, these businesses were not historically managed or operated as a single business. Although we believe that we can successfully manage and operate the acquired businesses as a single business, we cannot be certain of this. Limited Operating History We commenced equipment rental operations in October 1997 and have grown through a combination of internal growth and the acquisition of 153 companies (through July 27, 1999), including a merger in September 1998 with U.S. Rentals. Due to the relatively recent commencement of our operations, we have only a limited history upon which you can base an assessment of our business and prospects. Risks Relating to Growth Strategy Key elements of our growth strategy are to continue to expand through a combination of internal growth, a disciplined acquisition program and the opening of new rental locations. We have identified below some of the risks relating to our growth strategy: Availability of Acquisition Targets and Sites for Start-Up Locations. We may encounter substantial competition in our efforts to acquire additional rental companies and sites for start-up locations. Such competition could have the effect of increasing the prices that we will have to pay in order to acquire such businesses and sites. We cannot guarantee that any additional businesses or sites that we may wish to acquire will be available to us on terms that are acceptable to us. Need to Integrate New Operations. Our ability to realize the expected benefits from completed and future acquisitions depends, in large part, on our ability to integrate new operations with our existing operations in a timely and effective manner. Accordingly, we devote substantial efforts to the integration of new operations. We cannot, however, guarantee that these efforts will always be successful. In addition, under certain circumstances, these efforts could adversely affect our existing operations. Debt Covenants. Certain of the agreements governing our outstanding indebtedness provide that we may not make acquisitions unless certain financial conditions are satisfied or the consent of the lenders is obtained. Our ability to grow through acquisitions may be constrained as a result of these provisions. Certain Risks Related to Start-Up Locations. We expect that start-up locations may initially have a negative impact on our results of operations and margins for a number of reasons, including that (1) we will incur significant start-up expenses in connection with establishing each start-up location and (2) it will generally take some time following the commencement of operations for a start-up location to become profitable. Although we believe that start-ups can generate long-term growth, we cannot guarantee that any start-up location will become profitable within any specific time period, if at all. Dependence on Additional Capital to Finance Growth We will require substantial capital in order to execute our growth strategy. We will require capital for, among other purposes, completing acquisitions, establishing new rental locations, and acquiring rental equipment. 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, our ability to implement our growth strategy could be limited. 33 Possible Undiscovered Liabilities of Acquired Companies Prior to making an acquisition, we seek to assess the liabilities of the target company that we will become responsible for as a result of the acquisition. Nevertheless, we may fail to discover certain of such liabilities. We seek to reduce our risk relating to these possible hidden liabilities by generally obtaining the agreement of the seller to idemnify and reimburse us in the event that we discover any material hidden liabilities. However, this type of agreement, if obtained, may not fully protect us against hidden liabilities because (1) the seller's obligation to reimburse us is generally limited in duration and/or amount and (2) the seller may not have sufficient financial resources to reimburse us. Furthermore, when we acquire a public company (such as when we acquired U.S. Rentals) we generally do not obtain this type of agreement. Dependence on Management We are highly dependent upon our senior management team. Consequently, our business could be adversely affected in the event that we lose the services of any member of senior management. Furthermore, if we lose the services of certain members of senior management, it is an event of default under the agreements governing our credit facility and certain of our other indebtedness, unless we appoint replacement officers satisfactory to the lenders within 30 days. We do not maintain "key man" life insurance with respect to members of senior management. Competition 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, certain equipment manufacturers may commence (or increase their existing efforts relating to) renting and selling equipment directly to our customers. Fluctuations of Operating Results 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; . changes in general economic conditions in our markets, including changes in construction and industrial activities; . the timing of acquisitions, new location openings, and related expenditures; . the effect of the integration of acquired businesses and start-up locations; . 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; . the timing of expenditures for new equipment and the disposition of used equipment; and . changes in demand for our equipment or the prices therefor due to changes in economic conditions, competition or other factors. Liability and Insurance We are exposed to various possible claims relating to our business. These include claims 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 34 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 $0.5 million and limited to a maximum of $97 million per occurrence; . we do not maintain coverage for environmental liability, 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. We cannot be certain that insurance will continue to be available to us on economically reasonable terms, if at all. Environmental and Safety Regulations There are numerous federal, state and local laws and regulations governing environmental protection and occupational health and safety matters. These include laws and regulations that govern wastewater discharges, the use, treatment, storage and disposal of solid and hazardous wastes and materials, air quality and the remediation of contamination associated with the release of hazardous substances. Under these laws, an owner or lessee of real estate may be liable for, among other things, (1) the costs of removal or remediation of hazardous or toxic substances located on, in, or emanating from, the real estate, as well as related costs of investigation and property damage and substantial penalties, and (2) environmental contamination at facilities where its waste is or has been disposed. These laws often impose liability whether or not the owner or lessee knew of the presence of the hazardous or toxic substances and whether or not the owner or lessee was responsible for these substances. Our activities that are or may be affected by these laws include our use of hazardous materials to clean and maintain equipment and our disposal of solid and hazardous waste and wastewater from equipment washing. We also dispense petroleum products from underground and above-ground storage tanks located at certain rental locations, and at times we must remove or upgrade tanks to comply with applicable laws. Furthermore, we have acquired or lease certain locations which have or may have been contaminated by leakage from underground tanks or other sources and are in the process of assessing the nature of the required remediation. Based on the conditions currently known to us, we believe that any unreserved environmental remediation and compliance costs required with respect to those conditions will not have a material adverse effect on our business. However, we cannot be certain that we will not identify adverse environmental conditions that are not currently known to us, that all potential releases from underground storage tanks removed in the past have been identified, or that environmental and safety requirements will not become more stringent or be interpreted and applied more stringently in the future. 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. Risks Related to International Operations Our operations outside the United States are subject to risks normally associated with international operations. These include the need to convert currencies, which could result in a gain or loss depending on fluctuations in exchange rates, and the need to comply with foreign laws. Dependence on Information Technology Systems Our ability to monitor and control our operations depends to a large extent on the proper functioning of our recently-installed information technology systems. Any disruption in these systems or the failure of these systems to operate as expected could, depending on the magnitude and duration of the problem, adversely affect our business and our ability to implement our growth strategy. Year 2000 Issues Our software vendors have informed us that our recently-installed information technology systems are year 2000 compliant. We have, therefore, not developed any contingency plans relating to year 2000 issues and have 35 not budgeted any funds for year 2000 issues. Although we believe that our systems are year 2000 compliant, unanticipated year 2000 problems may arise which, depending on the nature and magnitude of the problem, could adversely affect our business. Furthermore, year 2000 problems involving third parties may have a negative impact on our customers or suppliers, the general economy or on the ability of businesses generally to receive essential services (such as telecommunications, banking services, etc.). Any such problem could adversely affect our business. We are unable at this time to assess the possible impact on our business of year 2000 problems involving any third party. Restrictive Covenants The agreements governing our existing long-term indebtedness contain, and future agreements governing our long-term indebtedness may also contain, certain restrictive financial and operating covenants which affect, and in many respects significantly 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 consolidations. These covenants may significantly limit our operating and financial flexibility. Item 3. Quantitative and Qualitative Disclosures about Market Risk Market risks relating to changes in interest rates and foreign currency exchanges rates were reported in Item 7A of the Company's Annual Report on Form 10-K for the year ended December 31, 1998. There has been no material change in these market risks since the end of the fiscal year 1998. PART II OTHER INFORMATION Item 1. Legal Proceedings Termination of Litigation Relating to Tender Offer On April 5, 1999, the Company, through its wholly owned subsidiary, UR Acquisition Corporation ("UR Acquisition"), commenced a tender offer to purchase all outstanding shares of common stock of Rental Service Corporation ("RSC"). On June 28, 1999, the Company terminated this tender offer. In connection with the tender offer, the Company became a party to three separate actions in Delaware, Connecticut and Florida (as previously reported in the Company's Report on Form 10-Q for the quarterly period ended March 31, 1999). Each of these actions has been dismissed and the Company is no longer involved in any litigation concerning the tender offer. General Litigation The Company and its subsidiaries are parties to various litigation matters, in most cases involving ordinary and routine claims incidental to the business of the Company. The ultimate legal and financial liability of the Company with respect to such pending litigation cannot be estimated with certainty but the Company believes, based on its examination of such matters, that such ultimate liability will not have a material effect on the business or financial condition of the Company. Item 2. Changes in Securities and Use of Proceeds Sale of Unregistered Securities Set forth below is certain information concerning sales by the Company of unregistered securities during the second quarter of 1999. The issuances by the Company of the securities sold in the transactions referenced below were not registered under the Securities Act of 1933, pursuant to the exemption contemplated by Section 4(2) thereof for transactions not involving a public offering. 1. In April 1999, the Company issued 1,584 shares of common stock to an executive officer pursuant to an employment agreement. 2. In May 1999, the Company issued, in connection with one acquisition, convertible notes in the aggregate principal amount of $5,000,000 which provide for a weighted average conversion price of $35.68 per share. 3. In May 1999, the Company issued, in connection with two acquisitions, 300,000 warrants which provide for a weighted average exercise price of $30.42 per share. 36 Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Stockholders was held on June 3, 1999. The holders of 65,262,231 common shares and 300,000 Series A Perpetual Convertible Preferred Shares were present either in person or by proxy. There were no broker non-votes at the meeting. The following three matters were voted on and approved at such meeting. 1. The election of three members to the Board of Directors by the holders of the Company's common stock.
For Withheld ---------- -------- Wayland R. Hicks............................... 64,557,932 704,299 John S. McKinney............................... 64,557,962 704,269 Gerald Tsai, Jr. .............................. 64,557,674 704,557 2. The election of two members to the Board of Directors by the holders of the Company's Series A Perpetual Convertible Preferred Stock. For Withheld ---------- -------- Leon D. Black.................................. 300,000 0 Michael S. Gross............................... 300,000 0 3. The ratification of the appointment of Ernst & Young LLP as the Company's independent auditors for the fiscal year ending December 31, 1999. For Abstain Against ---------- -------- ------- 64,959,340 78,050 224,841
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits:
Exhibit Number Description of Exhibit ------- ---------------------- 3(a) Amended and Restated Certificate of Incorporation of United Rentals, Inc., in effect as of the date hereof (incorporated by reference to exhibit 3.1 of United Rentals, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 1998). 3(b) Certificate of Amendment to the United Rentals, Inc. Certificate of Incorporation dated September 29, 1998 (incorporated by reference to Exhibit 4.2 to the United Rentals, Inc. Registration Statement on Form S-3, No. 333-70151). 3(c) By-laws of United Rentals, Inc., in effect as of the date hereof (incorporated by reference to exhibit 3.2 of United Rentals, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 1998). 3(d) Form of Certificate of Designation for Series A Perpetual Convertible Preferred Stock (incorporated by reference to Exhibit 4(k) to the United Rentals, Inc. Amendment No. 1 on Form S-3 to Registration Statement on Form S-1, No. 333-64463). 3(e) Amended and Restated Certificate of Incorporation of United Rentals (North America), Inc., in effect as of the date hereof (incorporated by reference to Exhibit 3.3 of the United Rentals (North America), Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 1998). 3(f) By-laws of United Rentals (North America), Inc., in effect as of the date hereof (incorporated by reference to Exhibit 3.4 of the United Rentals (North America), Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 1998).
37
Exhibit Number Description of Exhibit ------- ---------------------- 10(a) Commitment letter dated April 4, 1999 between United Rentals (North America), Inc. and Goldman Sachs Credit Partners L.P. (incorporated by reference to exhibit (b)(1) of United Rentals, Inc. Schedule 14D-1 dated April 5, 1999). 10(b) Preferred Stock Purchase Agreement, Series B Perpetual Convertible Preferred Stock dated June 28, 1999 between United Rentals, Inc., Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P., including form of Certificate of Designation for Series B Perpetual Convertible Preferred Stock and form of Amended and Restated Registration Rights Agreement (incorporated by reference to exhibits C, B and D of United Rentals, Inc. Proxy Statement on Schedule 14A dated July 22, 1999). 10(c)* Preferred Stock Purchase Agreement, Series B Perpetual Convertible Preferred Stock dated July 16, 1999 between United Rentals, Inc. and Chase Equity Associates, L.P. 10(d)* Term Loan Agreement dated as of July 15, 1999 among United Rentals, Inc., United Rentals (North America), Inc., various financial institutions, Goldman Sachs Credit Partners L.P., as Syndication Agent and Bank of America National Trust and Savings Association, as Administrative Agent. 10(e)* First Amendment dated as of August 12, 1999, to Term Loan Agreement dated as of July 15, 1999 among United Rentals, Inc., United Rentals (North America), Inc., various financial institutions, Goldman Sachs Credit Partners L.P., as syndication Agent and Bank of America National Trust and Savings Association, as administrative Agent. 10(f)* Second Amendment dated as of July 14, 1999, to Term Loan Agreement dated as of July 10, 1998 among United Rentals, Inc., United Rentals (North America), Inc., various financial institutions and Bank of America National Trust and Savings Association, as Agent. 10(g)* Second Amendment dated as of July 14, 1999, to Credit Agreement dated as of September 29, 1998, between United Rentals, Inc., United Rentals (North America), Inc., various financial institutions, Bank of America Canada, as Canadian agent, and Bank of America National Trust and Savings Association, as U.S. Agent. 27* Financial Data Schedule 27.1* Financial Data Schedule
- -------- *Filed herewith. (b)Reports on Form 8-K: none 38 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. United Rentals, Inc. Dated: August 12, 1999 /s/ Michael J. Nolan By: _________________________________ Michael J. Nolan Chief Financial Officer (Principal Financial Officer) Dated: August 12, 1999 /s/ Peter R. Borzilleri By: _________________________________ Peter R. Borzilleri Vice President, Corporate Controller (Chief Accounting Officer) United Rentals (North America), Inc. Dated: August 12, 1999 /s/ Michael J. Nolan By: _________________________________ Michael J. Nolan Chief Financial Officer (Principal Financial Officer) Dated: August 12, 1999 /s/ Peter R. Borzilleri By: _________________________________ Peter R. Borzilleri Vice President, Corporate Controller (Chief Accounting Officer) 39 EX-10.(C) 2 PREFERRED STOCK PURCHASE AGREEMENT, SERIES B EXHIBIT 10(c) UNITED RENTALS, INC. SERIES B PERPETUAL CONVERTIBLE PREFERRED STOCK, $.01 Par Value PREFERRED STOCK PURCHASE AGREEMENT July 16, 1999 United Rentals, Inc. Four Greenwich Office Park, Greenwich, CT 06830 July 16, 1999 To the Purchasers listed on the signature page Dear Sirs: United Rentals, Inc., a Delaware corporation (the "Company"), agrees with the entities who are signing this Agreement as Purchasers (together, the "Purchasers") as follows: 1. Authorization of Stock. The Company will authorize the issue and sale of 500,000 shares of its Series B Perpetual Convertible Preferred Stock, $.01 par value, to be designated as its "Series B Perpetual Convertible Preferred Stock" (the "Stock"), of which 450,000 shares are designated as Class B-1 Convertible Preferred Stock (the "B-1 Preferred Stock") and 50,000 shares are designated as Class B-2 Convertible Preferred Stock (the "B-2 Preferred Stock"). The relative rights, preferences and limitations of the Stock, including, without limitation, the right to convert Shares into shares of the Company's common stock, par value $.01 per share (the "Common Stock"), will be as set forth in the form of the Certificate of Designation of the Stock of the Company attached as Exhibit A hereto (the "Certificate of Designation"). Certain capitalized terms used in this Agreement are defined in Section 9; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement and references to a "section" are, unless otherwise specified, to one of the sections of this Agreement. 2. Sale and Purchase of Stock. The Company will issue and sell to the Purchasers and, subject to the terms and conditions of this Agreement, the Purchasers will purchase from the Company, at the Closing provided for in section 3, 5252 shares of B-1 Preferred Stock and 44,748 shares of B-2 Preferred Stock (collectively, the "Shares") at a purchase price of $1,000 per share. 3. Closing; Payment of Purchase Price. The sale of the Shares to be purchased by the Purchasers shall take place at the offices of O'Sullivan Graev & 2 Karabell, LLP at 10:00 a.m., New York City time, at a closing (the "Closing") on the later of (a) the first Business Day after the conditions to closing set forth in Section 4 (other than those to be satisfied at the Closing, which shall be satisfied or waived at the Closing) have been satisfied or waived by the party entitled to waive such condition) or (b) the first to occur of (i) the 163rd day after the date of this Agreement, (ii) the 10/th/ Business Day after the Company gives notice to Purchasers that the Company's Debt to Total Capitalization Ratio first equals or exceeds 0.6 , and (iii) the 10/th/ Business Day after the Company gives notice to Purchasers that the volume-weighted average of the closing price of the Company's Common Stock on the New York Stock Exchange for the preceding 20 trading days shall have exceeded $30.00 per share, or on such other Business Day thereafter or prior to such date as may be agreed upon by the Company and the Purchasers. The Company's Debt to Total Capitalization Ratio shall mean an amount determined by dividing (A) the sum of the Company's and its subsidiaries' funded debt, consisting of notes, capital leases, debentures (other than those issued to subsidiaries) and bank debt, less cash and cash equivalents, by (B) the total capitalization (funded debt, preferred stock of a subsidiary trust and stockholders' equity, less cash and cash equivalents) of the Company and its subsidiaries, all as set forth on a month end consolidated balance sheet of the Company prepared in accordance with generally accepted accounting principles. The names in which the Company will register the shares of the Stock to be purchased at the Closing are as set forth in Exhibit 1. At the Closing, the Company will deliver to the Purchasers the Shares to be purchased by the Purchasers in the form of such number of certificates representing such Shares as the Purchasers may reasonably request, dated the date of the Closing and registered in the names aforesaid, and the Purchasers jointly and severally shall deliver to the Company or its order immediately available funds in the amount of the purchase price for such Shares. If at the Closing the Company shall fail to tender to the Purchasers the Shares to be purchased by the Purchasers, as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to the Purchasers' reasonable satisfaction, the Purchasers shall, at their election, be relieved of all further obligations under this Agreement, without thereby waiving any other rights the Purchasers may have by reason of such failure or such nonfulfillment. If at the Closing, Purchasers shall fail to tender to the Company the purchase price for the Shares, as provided above in this Section 3, other than on account of any of the conditions specified in section 4 not having been fulfilled to the Purchasers' satisfaction or on account of the breach by the Company of any of its obligations under this Agreement, the Company shall, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any other rights the Company may have by reason of such failure. 3 4. Conditions to Closing. The Purchasers' obligation to purchase and pay for the Shares to be sold to the Purchasers at the Closing is subject to the fulfillment to their reasonable satisfaction, prior to or concurrently with the Closing, of the following conditions: 4.1. Representations and Warranties. The representations and warranties of the Company contained in this Agreement shall be in all material respects correct when made and at the time of the Closing, except as affected by the consummation of the transactions contemplated by this Agreement. 4.2. Performance; No Default. The Company shall have performed and complied in all material respects with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing. 4.3. Compliance Certificates. The Company shall have delivered to the Purchasers an Officers' Certificate, dated the date of the Closing, certifying that the conditions specified in sections 4.1 and 4.2 have been fulfilled. 4.4. Opinion of Counsel. The Purchasers shall have received the favorable opinions, dated the date of the Closing and reasonably satisfactory in substance and form to the Purchasers from Weil, Gotshal & Manges, counsel for the Company and , if necessary, local counsel for the Company, substantially in the form set forth in Exhibits B and C and covering such other matters incident to the transactions contemplated by this Agreement as the Purchasers or their counsel may reasonably request. 4.5. Certificate of Designation. The Certificate of Designation shall have been duly filed under the laws of the State of Delaware, and the Restated Certificate of Incorporation of the Company, as amended by the Certificate of Designation, shall be in full force and effect, and shall not have been otherwise amended or modified. 4.6. Registration Rights Agreement. The Purchasers shall have received a fully executed counterpart of the Registration Rights Agreement substantially in the form set out in Exhibit D (the "Registration Rights Agreement"), such agreement shall be in full force and effect and no term or condition thereof shall have been amended, modified or waived. 4.7. No Actions Pending. There shall be no suit, action, investigation, inquiry or other proceeding by any Governmental Authority or any other Person or any other legal or administrative proceeding pending or to the knowledge of 4 the Company threatened which questions the validity or legality of the transactions contemplated by this Agreement, or seeks damages in connection therewith. 4.8. Compliance with Securities Laws. The offering and sale by the Company, at or prior to the Closing, of the Shares pursuant to this Agreement shall have been made in compliance with all applicable requirements of federal and state securities laws and the Purchasers shall have received evidence thereof in form and substance reasonably satisfactory to the Purchasers. 4.9. Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be reasonably satisfactory to the Purchasers and their counsel, and the Purchasers and their counsel shall have received all such counterpart originals or certified or other copies of such documents as the Purchasers or their counsel may reasonably request. 4.10. Reservation of Common Stock. The shares of Common Stock initially issuable upon conversion of the Stock shall have been duly authorized and reserved for issuance upon conversion of the Stock. 4.11. Payment of Fees and Expenses. The Company shall have paid the Purchasers on or before the Closing (a) a fee equal to 1% of the purchase price of the Stock and (b) the costs and expenses provided for in Section 10 hereof, provided that the Purchasers shall have provided to the Company a statement of its estimated costs and expenses at least one Business Day prior to the Closing. 4.12. HSR Act. Any waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable to this Agreement and the transactions contemplated hereby shall have expired or been terminated. 5. Representations and Warranties. Except as disclosed in Exhibit E, the Company represents and warrants that: 5.1. Organization, Standing, etc. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into and perform all of its obligations under this Agreement and each of the Collateral Agreements to which it is a party, to issue and sell the Shares to be issued and sold at the Closing and to carry out the transactions contemplated hereby or thereby. 5 5.2. Subsidiaries. Exhibit E correctly lists as to each Subsidiary of the Company on the date of this Agreement (a) its name, (b) the jurisdiction of its incorporation and (c) the percentage of its issued and outstanding shares owned by the Company or by another Subsidiary of the Company (specifying such other Subsidiary), as the case may be. Each Subsidiary of the Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted. All the outstanding shares of capital stock of each Subsidiary of the Company are validly issued, fully paid and nonassessable, and all such shares indicated in Exhibit E as owned by the Company or by a Subsidiary of the Company are so owned beneficially and of record by the Company or by such Subsidiary, as the case may be, free and clear of any Lien except as indicated in Exhibit E. 5.3. Qualification. Each of the Company and its Subsidiaries is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction (other than the jurisdiction of its incorporation) in which the nature of its activities or the character of the properties it owns or leases makes such qualification necessary and in which the failure so to qualify would have a Material Adverse Effect. A "Material Adverse Effect" shall mean any effect that is materially adverse to the properties, business, results of operations or financial condition of the Company and its Subsidiaries taken as a whole. 5.4. Business; Financial Statements. The Company has delivered to the Purchasers complete and correct copies of the audited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 1998 and December 31, 1997, and the related audited supplemental consolidated statements of operations, stockholders' equity and cash flows of the Company and its Subsidiaries for the years ended December 31, 1998, 1997 and 1996. Such audited financial statements are hereinafter referred to as the "Financial Statements." The Financial Statements are accompanied by the report of Ernst & Young LLP, which state that the Financial Statements have been prepared in accordance with GAAP consistently applied throughout the periods involved (except as otherwise specified therein) and present fairly the financial position of the corporations to which they relate as of the respective dates specified and the results of their operations and changes in financial position for the respective periods specified, and that the audit by such accountants of the Financial Statements has been made in accordance with generally accepted auditing standards. The Company has also delivered to the Purchasers complete and correct copies of the unaudited consolidated balance sheet of the Company and its Subsidiaries as of March 31, 1999, and the related unaudited consolidated statement of operations, stockholders' equity and cash flows of the Company and its Subsidiaries for the three month period ended on such date. Such unaudited financial statements are hereinafter referred to as the "Unaudited Statements." The Unaudited Statements have been 6 prepared in accordance with GAAP consistently applied throughout the periods involved (except as otherwise specified therein) and present fairly the financial position of the Company and its Subsidiaries as of the respective dates specified, and the results of their operations and changes in cash flows for the respective periods specified. As of the date of this Agreement, the Purchasers are not aware that this representation is incorrect in any material respect. 5.5. Changes, etc. Since March 31, 1999, neither the Company nor any of the Subsidiaries has sustained any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree which would be material to the Company and the Subsidiaries taken as a whole, otherwise than as reserved for as disclosed in the Company's financials statements; and there has not been any change in the capital stock of the Company or increase in the long-term debt (other than accretion or scheduled repayments thereof) of the Company and the Subsidiaries taken as a whole, or any material adverse change which has had a Material Adverse Effect, in each case otherwise than as set forth on Exhibit E. 5.6. Capital Stock and Related Matters. At the time of the Closing and after giving effect to the transactions contemplated by this Agreement, the authorized capital stock of the Company will consist of (a) 500,000,000 shares of Common Stock, of which approximately 71,500,000 shares will be outstanding, (b) 300,000 shares of Series A Perpetual Convertible Preferred Stock, of which 300,000 shares are outstanding, (c) 450,000 shares of B-1 Preferred Stock, of which 105,252 shares will be outstanding, (d) 50,000 shares of B-2 Preferred Stock, of which 44, 748 shares will be outstanding and (e) 4,200,000 shares of Preferred Stock, undesignated as to terms, none of which are outstanding. The Company is obligated to issue Common Stock on conversion of debentures held by United Rentals Trust I, a business trust organized under Delaware law. The Common Stock and the Stock are hereinafter collectively referred to as "Capital Stock". All of the outstanding shares of Capital Stock are, and at the Closing will be, validly issued and outstanding, fully paid and non-assessable. Except as set forth above and on Exhibit E, the Company has no outstanding stock or securities convertible into or exchangeable for any shares of its Capital Stock, or any outstanding rights (either preemptive or other) to subscribe for or to purchase, or any outstanding options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any outstanding calls, commitments or claims of any character relating to, any Capital Stock or any stock or securities convertible into or exchangeable for any Capital Stock of the Company. Except as set forth on Exhibit E, the Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its Capital Stock or any convertible securities, rights or options of the type described in the preceding sentence. Neither the Company nor any of its Subsidiaries is a party to, or has knowledge of, any agreement (except as set forth on Exhibit E) restricting the 7 transfer of any shares of the Company's Capital Stock which would affect the transferability of the Common Stock issuable upon conversion of the Stock. 5.7. Tax Returns and Payments. The Company and each of the Subsidiaries have filed all necessary federal, state, local and foreign income, payroll, franchise and other tax returns (after giving effect to extensions) and have paid all taxes shown as due thereon (except where the failure to so file or pay would not, singly or in the aggregate, have a Material Adverse Effect), and there is no tax deficiency that has been, or to the knowledge of the Company is likely to be, asserted against the Company, any of the Subsidiaries or any of their properties or assets that would result in a Material Adverse Effect, except for taxes that are being contested in good faith by appropriate proceedings and with respect to which the Company has established adequate reserves in accordance with United States generally accepted accounting principles. 5.8. Indebtedness of the Company. Exhibit F correctly describes all secured and unsecured Indebtedness of the Company and its Subsidiaries (other than intercompany items) outstanding, or for which the Company or one of its Subsidiaries has commitments, which is individually in excess of $5,000,000 ("Significant Indebtedness") (excluding operating leases), on the date of this Agreement. The secured and unsecured Indebtedness of the Company and its Subsidiaries (other than intercompany items, and other than Significant Indebtedness) outstanding, or for which the Company or one of its Subsidiaries has commitments does not in the aggregate exceed $2,000,000,000 on the date of this agreement. Neither the Company nor any of its Subsidiaries is in default with respect to any Indebtedness or any instrument or agreement relating thereto, except for such defaults as would not, either in any case or in the aggregate, have a Material Adverse Effect. 5.9. Title to Properties; Liens. The Company and each of the Subsidiaries have good and marketable title to all real property (other than property which is leased) material to the conduct of the business of the Company and the Subsidiaries, taken as a whole, and good and marketable title to all personal property (other than property which is leased) material to the conduct of the business of the Company and the Subsidiaries, taken as a whole, in each case free and clear of all liens, encumbrances and defects except such as are described on Exhibit E or such as do not in the aggregate have a Material Adverse Effect; and any real property and buildings held under lease by the Company and the Subsidiaries, material to the conduct of the business of the Company and the Subsidiaries, taken as a whole, are held by them under valid, subsisting and enforceable leases with such exceptions as are described on Exhibit E and except for such other exceptions as do not have a Material Adverse Effect. 8 5.10. Litigation, etc. There is no action, proceeding or investigation pending or (to the knowledge of the Company) threatened (or any basis therefor known to the Company) which questions the validity of this Agreement, the Shares or any action taken or to be taken pursuant to this Agreement, the Shares or the Collateral Agreements. Other than as set forth on Exhibit E, there are no legal or governmental proceedings pending to which the Company or any of the Subsidiaries is a party or of which any property of the Company or the Subsidiaries is the subject, which if determined adversely to the Company or any of the Subsidiaries, would individually or in the aggregate have a Material Adverse Effect; and, to the Company's knowledge, no such proceedings which would in the aggregate have a Material Adverse Effect are threatened or contemplated by governmental authorities or threatened by others. 5.11. Compliance with Other Instruments, etc. Neither the Company nor any of its Subsidiaries is in violation of any term of its certificate or articles of incorporation or by-laws, and neither the Company nor any of its Subsidiaries is in violation of any term of any agreement or instrument to which it is a party or by which it is bound or any term of any applicable law, ordinance, rule or regulation of any Governmental Authority or any term of any applicable order, judgment or decree of any court, arbitrator or Governmental Authority, the consequences of which violation could reasonably be expected to have a Material Adverse Effect. The compliance by the Company with all of the provisions of this Agreement and the Registration Rights Agreement, the execution, delivery and performance by the Company of this Agreement and the Registration Rights Agreement, the issuance by the Company of the Common Stock upon the conversion of the Shares, and the compliance with the terms of the Certificate of Designation will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement (provided the consent of the Company's lending banks must be obtained before the Company makes an offer to purchase under Section 5 of the Certificate of Designation) or other agreement or instrument to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries is bound or to which any of the property or assets of the Company or any of the Subsidiaries is subject, or constitute a Repayment Event thereunder, nor will such actions result in any violation of the provisions of the certificate of incorporation or bylaws of the Company or any of the Subsidiaries or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of the Subsidiaries or any of their properties except in each case as would not, individually or in the aggregate have a Material Adverse Effect. Except as set forth on Exhibit E, the execution, delivery and performance by the Company of this Agreement and the transactions contemplated hereby will not subject the Company to or accelerate any obligation to make payments to any Person. 9 5.12. Governmental Consents, etc. Except as required under the HSR Act, no consent, approval or authorization of, or declaration or filing with, any Governmental Authority on the part of the Company is required for the valid execution and delivery of this Agreement, the valid offer, issue, sale and delivery of the Shares pursuant to this Agreement or the valid issue and delivery of shares of Common Stock issuable upon conversion of the Stock. Except for (a) the requirements of the HSR Act and applicable state securities or blue sky laws, and (b) consents, approvals, filings or notices that will be given or made at or prior to the time of the Closing, neither the Company nor any of its Subsidiaries is required to obtain any consent, approval or authorization of, or to make any declaration or filing with, any Governmental Authority as a condition to the valid execution, delivery or performance of any of the Collateral Agreements or the consummation of the transactions contemplated thereby. 5.13. Offering of Securities. Neither the Company nor any Person acting on its behalf has offered the Stock or any similar securities of the Company to, or solicited any offers to buy any thereof from, or otherwise approached or negotiated with respect thereto with, any Person or Persons other than the Purchasers in such manner as would subject the offering, issuance or sale of any of the Stock to the provisions of Section 5 of the Securities Act. Neither the Company nor any Person acting on behalf of the Company has taken or will take any action which would subject the offering, issuance or sale of any of the Stock to the provisions of Section 5 of the Securities Act. 5.14. Certain Fees. Except for the fee payable by the Company to Goldman Sachs & Co., the amount of which will be disclosed to the Purchasers in writing prior to the Closing, no broker's or finder's fees or commissions will be payable by the Company with respect to the transactions contemplated by this Agreement and the Collateral Agreements, and the Company hereby indemnifies the Purchasers against and agrees that it will hold the Purchasers harmless from any claim, demand or liability for broker's or finder's fees alleged to have been incurred at the instance of the Company or any Person acting on behalf of or at the request of the Company or any agent of the Company in connection with any of the transactions contemplated by this Agreement and the Collateral Agreements, and from any expenses, including reasonable legal fees, arising in connection with any such claim, demand or liability. 5.15. Investment Company Act. The Company is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 10 5.16. Disclosure. None of this Agreement, the Financial Statements, the Annual Report on Form 10K for the year ended December 31, 1998, any document filed by the Company with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") since the Annual Report on Form 10K for the year ended December 31, 1998, or the Unaudited Statements, contains (in each case, as of its date) any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they are made, not misleading. 5.17. Enforceability. This Agreement and the Registration Rights Agreement have been duly authorized and when validly executed and delivered by the Company (assuming the due authorization, execution and delivery thereof by the other parties thereto) will constitute the valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). 5.18. Integration. Neither the Company nor any affiliate (as such term is defined in Rule 501(b) under the Securities Act) has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Securities Act) which is or will be integrated with the sale of the Shares, in a manner that would require the registration of the Securities under the Securities Act. 5.19. Manipulation. Prior to the date hereof, neither the Company nor any of its affiliates has taken any action which is designed to or which has constituted or which might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company in connection with the sale of the Shares. 5.20. Acquired Companies. To the best knowledge of the Company, the representations and warranties made by each of the Acquired Companies (as defined in Section 9) and the selling stockholders in the respective agreements pursuant to which the Company or another Subsidiary acquired the Acquired Companies did not as of the respective dates thereof contain any inaccuracies that would, singly or in the aggregate, have a Material Adverse Effect. 5.21. Intellectual Property. The Company and the Subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or 11 procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") necessary to carry on the business now operated by them, and neither the Company nor any of the Subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of the Subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect. 5.22. Government Licenses. The Company and the Subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them, except where the failure to so possess such Government Licenses would not, singly or in the aggregate, have a Material Adverse Effect; the Company and the Subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have, singly or in the aggregate, a Material Adverse Effect; and neither the Company nor any of the Subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. 5.23. Environmental Laws. Except as described on Exhibit E or except as would not, singly or in the aggregate, result in a Material Adverse Effect: (a) neither the Company nor any of the Subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), (b) neither the Company nor any of the Subsidiaries is lacking any permits, authorizations and approvals required under any applicable Environmental Laws or are in violation of the requirements of such Environmental Laws, (c) there are no pending or, to the best 12 knowledge of the Company, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of the Subsidiaries and (d) to the knowledge of the Company there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company or any of the Subsidiaries relating to Hazardous Materials or any Environmental Laws. 5.24. Insurance. Neither the Company nor any Subsidiary has received notice from any insurer providing insurance coverage for the Company and the Subsidiaries or agent of such insurer that capital improvements or other expenditures will have to be made in order to continue present insurance coverage, except such as could not reasonably be expected, singularly or in the aggregate, to have a Material Adverse Effect. 5.25. Internal Controls. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management's general or specific authorization; (b) transactions are recorded as necessary (i) to permit preparation of financial statements in conformity with generally accepted accounting principles and (ii) to maintain accountability for assets; (c) access to assets is permitted only in accordance with management's general or specific authorization; and (d) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any material differences. Any exceptions to this representation would not render the representation in Section 5.4 incorrect in any material respect or have a Material Adverse Effect. 5.26. ERISA. Neither the Company nor any of the Subsidiaries has violated any provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules and regulations promulgated thereunder, except for such violations which, singly or in the aggregate, would not have a Material Adverse Effect. If any plan subject to ERISA is adopted, the execution and delivery of this Agreement and the sale of the Securities will not involve any non-exempt prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended. 5.27. Year 2000 Compliance. With such exceptions as would not have a Material Adverse Effect, the Company has been advised by its vendors (and has no reason to believe that such advice is not correct) that as of the date of this Agreement, all Date Data and Date-Sensitive Systems used by the Company and its Subsidiaries are Year 2000 Compliant. "Date-Sensitive System" means any software, microcode or hardware system or component, including any electronic or 13 electronically controlled system or component, that uses or processes any Date Data and that is installed, in development or on order by the Company or any of its subsidiaries for their internal use or for the use of third parties, or which the Company or any of its subsidiaries sell, lease, license, assign or otherwise provide to any third party. "Year 2000 Compliant" means (i) with respect to Date Data, that such data is in proper format and accurate for all dates, including for those before, on and after December 31, 1999 and (ii) with respect to Date-Sensitive Systems, that each such system accurately processes all Date Data, including for dates before, on and after December 31, 1999, without loss of any functionality or performance, including but not limited to calculating, comparing, sequencing, storing and displaying such Date Data (including all leap year considerations), when used as a stand-alone system or in combination with other software or hardware. 6. Investment Representations. The Purchasers understand that neither the Shares nor any Common Stock issuable upon conversion, if any, of the Shares has been registered under the Securities Act and that the certificates for the Shares and such Common Stock will bear a legend to that effect. The Purchasers also understand that the Shares are being offered and sold pursuant to an exemption from registration contained in the Securities Act, based in part upon their representations contained in this Agreement. The Purchasers hereby represent and warrant as follows: 6.1. Acquisition for Own Account. The Purchasers are acquiring the Shares for their own account for investment and not with a view toward distribution in a manner which would violate the Securities Act. 6.2. Ability to Protect Own Interests. The Purchasers represent that by reason of their business or financial experience, or the business and financial experience of their management, the Purchasers have the capacity to protect their own interests in connection with the transaction contemplated in this Agreement. The Purchasers are not a corporation formed for the specific purpose of consummating this transaction. 6.3. Accredited Investor. The Purchasers represent that they are an "accredited investor" as that term is defined in Regulation D promulgated under the Securities Act. 6.4. Access to Information. The Purchasers have been given access to all Company documents, records, and other information, have received physical delivery of all those which the Purchasers have requested, and have had adequate opportunity to ask questions of, and receive answers from, the Company's officers, employees, agents, accountants, and representatives concerning the Company's business, operations, financial condition, assets, liabilities, and all other matters relevant to its investment in the Shares. 14 6.5. No Brokers. Purchasers represent and warrant to the Company that no broker's or finder's fees or commissions will be payable by the Purchasers with respect to the transactions contemplated by this Agreement and the Collateral Agreements, and the Purchasers hereby jointly and severally indemnify and hold the Company harmless from any claim, demand or liability for broker's or finder's fees alleged to have been incurred at the instance of the Purchasers, their affiliates or agents or any Person acting on behalf of or at the request of the Purchasers, their affiliates or agents. 6.6. Compliance with Laws. Purchasers and their transferees will comply with all filing and other reporting obligations under all Requirements of Law which shall be applicable to Purchasers with respect to the Shares and to the Common Stock issuable or issued on conversion of the Shares. 7. Affirmative Covenants. The Company covenants that from and after the date of this Agreement through the Closing and thereafter (provided that the covenants in Sections 7.1 and 7.2 shall continue only so long as the Purchasers own at least 25,000 Shares or 1,000,000 shares of Common Stock which have been acquired upon conversion of any Shares): 7.1. Exchange Act and Securities Act Filings. The Company will deliver to the Purchasers, within three Business Days of their filing with the Securities and Exchange Commission, all documents filed by it with the Securities and Exchange Commission pursuant to the Securities Act or the Exchange Act, including exhibits thereto. 7.2. Certificates; Other Information. The Company will deliver to the Purchasers: (a) promptly upon receipt thereof, copies of all final reports submitted to the Company or any of its Subsidiaries by independent certified public accountants in connection with each annual or interim audit of the books of the Company or any of its Subsidiaries made by such accountants, including, without limitation, any final comment letter submitted by such accountants to management in connection with their annual audit; (b) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available generally by the Company to all of its security holders in their capacity as such or by any Subsidiary of the Company to its security holders; and (c) promptly upon their becoming available, copies of all financial statements and reports (other than financial information and reports which the Company reasonably deems confidential) which are sent or made available by the Company to all of its directors in their capacity as such. 15 7.3. Books and Records. The Company will, and will cause each of its Subsidiaries to keep proper books of record and account in which entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities 7.4. Notices. The Company will, within 48 hours of occurrence, give notice to the Purchasers: (a) of any (i) default or event of default under any instrument or other agreement of the Company or any of its Subsidiaries which default or event of default would have a Material Adverse Effect or (ii) litigation, investigation or proceeding which may exist at any time between the Company or any of its Subsidiaries and any Governmental Authority, which in any such case, if adversely determined, could reasonably be expected to have a Material Adverse Effect; and (b) of any litigation or proceeding affecting the Company or any of its Subsidiaries (i) in which the amount claimed is $2,000,000 or more and not covered by insurance or covered by reserves on the Company's balance sheet, or (ii) in which injunctive or similar relief is sought which if obtained could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this section 7.4 shall be accompanied by a statement of the chief executive officer or chief financial officer of the Company setting forth details of the occurrence referred to therein and stating what action the Company proposes to take with respect thereto. 7.5. Reservation of Common Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon conversion of the Stock, the number of shares of Common Stock from time to time issuable upon conversion of all shares of the Stock at the time outstanding. All shares of Common Stock issuable upon conversion of the Stock shall be duly authorized and, when issued upon such conversion, shall be validly issued, fully paid and non- assessable. 7.6. Availability of Information. The Company will comply with the reporting requirements of Sections 13 and 15(d) of the Exchange Act and will comply with all other public information reporting requirements of the Securities and Exchange Commission (including Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act) from time to time in effect and relating to the availability of an exemption from the Securities Act for the sale of any Restricted Securities. The Company will also reasonably cooperate with each holder of any Restricted Securities in supplying such information as may be necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Securities and Exchange Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Restricted Securities. 16 7.7. Public Announcements. Attached hereto is the text of the press releases which the parties shall issue publicly to announce the execution of this Agreement. 7.8. [omitted] 8. Registration, Transfer and Substitution of Certificates for Stock. 8.1. Stock Register; Ownership of Stock. (a) The Company will keep at its principal office a register in which the Company will provide for the registration of the stock and the registration of transfers or conversion of the Stock. The Company may treat the Person in whose name any of the Shares or shares issued upon conversion of any of the Stock are registered on such register as the owner thereof and the Company shall not be affected by any notice to the contrary. All references in this Agreement to a "holder" of any Shares or shares issued upon conversion of any of the Stock shall mean the Person in whose name such Shares or shares issued upon conversion of any of the Stock are at the time registered on such register. (b) Upon the surrender of any certificate for Stock, properly endorsed, for registration of transfer or for conversion at the office of the Company maintained pursuant to subdivision (a) of this section 8.1, the Company at its expense will (subject to compliance with section 8.2 hereof, if applicable) execute and deliver to or upon the order of the holder thereof (i) a new certificate or certificates for the same aggregate number of shares of Stock less the number of shares of Stock being converted, if any, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, and (ii) a certificate or certificates for the number of shares of Common Stock to be issued upon conversion of the shares of Stock so surrendered. 8.2. Replacement of Certificates. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any certificate representing shares of Stock or Common Stock issued upon the conversion of shares of Stock and, in the case of any such loss, theft or destruction of any certificate representing shares of Stock or Common Stock issued upon the conversion of shares of Stock held by a Person other than the Purchasers, upon delivery of indemnity reasonably satisfactory to the Company in form and amount or, in the case of any such mutilation, upon surrender of such certificate representing shares of Stock or Common Stock issued upon the conversion of shares of Stock for cancellation at the office of the Company maintained pursuant to subdivision (a) of section 8.1 hereof, the Company at its expense will execute and deliver, in lieu thereof, a new certificate representing shares of Stock or Common Stock of like tenor. 17 8.3. Restrictive Legends. Except as otherwise permitted by this section 8, each certificate for Stock (including each certificate for Stock issued upon the transfer of any certificate for Stock) shall be stamped or otherwise imprinted with a legend in substantially the following form: "The shares represented by this Certificate and any shares of Common Stock issuable upon conversion of any such shares have not been registered under the Securities Act of 1933 and may not be transferred in the absence of such registration or an exemption therefrom under such Act. Such shares and any such shares of Common Stock may be transferred only in compliance with the conditions specified in the Preferred Stock Purchase Agreement dated July 16, 1999 between United Rentals, Inc. (the "Company") and the purchasers identified therein. A complete and correct copy of such Agreement is available for inspection at the principal office of the Company and will be furnished without charge to the holder of such shares upon written request." Except as otherwise permitted by this section 8, each certificate for Common Stock issued upon the conversion of any of the Stock, and each certificate issued upon the transfer of any such Common Stock, shall be stamped or otherwise imprinted with a legend in substantially the following form: "The shares represented by this certificate have not been registered under the Securities Act of 1933 and may not be transferred in the absence of such registration or an exemption therefrom under such Act. Such shares may be transferred only in compliance with the conditions specified in the Preferred Stock Purchase Agreement dated July 16, 1999 between United Rentals, Inc. (the "Company") and the purchasers identified therein. A complete and correct copy of such Agreement is available for inspection at the principal office of the Company and will be furnished without charge to the holder of such shares upon written request." 8.4. Notice of Proposed Transfer; Opinions of Counsel. Prior to any transfer of any Restricted Securities which are not registered under an effective registration statement under the Securities Act, the holder thereof will give written notice to the Company of such holder's intention to effect such transfer and to comply in all other respects with this section 8.4. Each such notice shall describe the manner and circumstances of the proposed transfer and shall be accompanied by an opinion of counsel for such holder, which counsel and opinion shall each be reasonably satisfactory to the Company, that the proposed transfer may be effected without registration of such shares of Restricted Securities under the Securities Act. Such 18 holder shall thereupon be entitled to transfer such shares in accordance with the terms of the notice delivered by such holder to the Company. Each certificate representing such shares issued upon or in connection with such transfer shall bear the restrictive legends required by section 8.3, unless the related restrictions on transfer shall have ceased and terminated as to such shares pursuant to section 8.5 hereof. 8.5. Termination of Restrictions. The restrictions imposed by this section 8 upon the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities when such restrictions are no longer required in order to insure compliance with the Securities Act. Whenever such restrictions shall cease and terminate as to any Restricted Securities, the holder thereof shall be entitled to receive from the Company, without expense (other than applicable transfer taxes, if any), new certificates for such securities of like tenor not bearing the applicable legends required by section 8.3 hereof. 9. Definitions. 9.1. Certain Defined Terms. As used in this Agreement the following terms have the following respective meanings: Acquired Companies: The companies United Rentals, Inc. has acquired ------------------ since its formation in September 1997. Affiliate: With reference to any Person, a spouse of such Person, any --------- relative (by blood, adoption or marriage) of such Person within the second degree, any director, officer or employee of such Person, any other Person of which such Person is a member, director, officer or employee, and any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. Business Day: Any day except a Saturday, a Sunday, or any day on ------------ which banking institutions in New York, New York are required or authorized by law or other governmental action to be closed. Capital Stock: As defined in section 5.6 of this Agreement. ------------- Certificate of Designation: As defined in section 1 of this -------------------------- Agreement. Closing: As defined in section 3 of this Agreement. ------- Closing Date: The date of the Closing. ------------ 19 Code: The Internal Revenue Code of 1986, as amended from time to ---- time. Collateral Agreements: The Registration Rights Agreement and the --------------------- Certificate of Designation. Common Stock: As defined in section 1 of this Agreement. ------------ Company: As defined in the introduction to this Agreement. ------- Exchange Act: At any time, the Securities Exchange Act of 1934 as then ------------ in effect or any similar federal statute then in effect, and any reference to a particular section of such Act shall be deemed to include a reference to the comparable section, if any, in any such similar federal statute. Financial Statements: As defined in section 5.4 of this Agreement. -------------------- GAAP: Generally accepted accounting principles set forth in the ---- Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and in statements by the Financial Accounting Standards Board or in such other statement by such other entity as may be approved by a significant segment of the accounting profession; and the requisite that such principles be applied on a consistent basis shall mean that the accounting principles observed in a current period are comparable in all material respects to those applied in a preceding period. Governmental Authority: Any nation or government, any state or other ---------------------- political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. Indebtedness: With respect to any Person, at a particular time (a) ------------ all indebtedness of such Person for borrowed money or for the deferred purchase price of property, (b) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (c) all liabilities secured by any Lien on any property owned by such Person, to the extent attributable to such Person's interest in such property, even though such Person has not assumed or become liable for the payment thereof, and (d) lease obligations of such Person which, in accordance with GAAP, should be capitalized; but excluding trade and other accounts payable in the ordinary course of business in accordance with customary trade terms and which are not overdue for a period of more than 60 days or, if overdue for more than 60 days, as to which a dispute exists and adequate reserves in conformity with GAAP have been established on the books of such Person. The term "Indebtedness" shall not include amounts which have not been drawn under credit facilities, notwithstanding that such amounts when drawn will automatically be secured by an existing Lien. 20 Lien: Any mortgage, pledge, hypothecation, assignment, security ---- interest, lien, charge or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effects as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction). For the purposes of this Agreement, the Company or one of its Subsidiaries shall be deemed to be the owner of any property which it has placed in trust for the benefit of the holders of Indebtedness of the Company or its Subsidiaries which Indebtedness is deemed to be extinguished under GAAP but for which the Company or its Subsidiaries remain legally liable, and such trust shall be deemed to be a Lien. Majority in Interest: At any time, the holders of a majority, by -------------------- number of shares, of the outstanding Shares and the outstanding shares of Common Stock issued upon conversion of any Shares, such majority to be determined by reference to the number of shares of Common Stock into which all outstanding Shares are at the time convertible. Officers' Certificate: As to the Company, a certificate executed on --------------------- behalf of the Company by its Chief Executive Officer, and any one of its Vice Chairman, Chief Acquisition Officer, or Chief Financial Officer. Person: An individual, a partnership, a joint venture, a corporation, ------ a limited liability company, a trust, an unincorporated organization or a government or any department or agency thereof. Registration Rights Agreement: As defined in section 4.6 of this ----------------------------- Agreement. Repayment Event: Any event or condition which gives the holder of any --------------- note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of the Subsidiaries. Requirement of Law: As to any Person, the Certificate of ------------------ Incorporation and by-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. 21 Restricted Securities: All of the following: (a) any certificates for --------------------- Stock bearing the applicable legend or legends referred to in section 8.3 hereof, (b) any shares of Common Stock which have been issued upon the conversion of any of the Stock and which are evidenced by a certificate or certificates bearing the applicable legend or legends referred to in such section and (c) unless the context otherwise requires, any shares of Common Stock which are at the time issuable upon the conversion of Stock and which, when so issued, will be evidenced by a certificate or certificates bearing the applicable legend or legends referred to in such section. Securities Act: At any time, the Securities Act of 1933 as then in -------------- effect or any similar federal statute then in effect, and any reference to a particular section of such Act shall be deemed to include a reference to the comparable section, if any, in any such similar federal statute. Securities and Exchange Commission: The U.S. Securities and Exchange ---------------------------------- Commission, or any other federal agency at the time administering the Securities Act or the Exchange Act, whichever is the relevant statute for the particular purpose. Shares: As defined in section 1 of this Agreement. ------ Stock: As defined in section 1 of this Agreement. ----- Subsidiaries: With respect to any Person, any corporation with respect ------------ to which more than 50% of the outstanding shares of stock of each class having ordinary voting power (other than stock having such power only by reason of the happening of a contingency) is at the time owned by such Person or by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person. Any of the above-defined terms may, unless the context otherwise requires, be used in the singular or plural depending on the reference. 9.2. Accounting Terms. As used in this Agreement, and in any certificate, report or other document made or delivered pursuant to this Agreement, accounting terms not defined in section 9.1 and accounting terms partly defined in said section 9.1 to the extent not defined, shall have the respective meanings given to them under GAAP. 9.3. Other Provisions Regarding Definitions: (1) Unless otherwise defined therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate, report or other document made or delivered pursuant to this Agreement. 22 (1) The words "hereof", "herein", and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. 10. Expenses, etc. Whether or not the transactions contemplated by this Agreement shall be consummated, the Company will pay all of its expenses in connection with such transactions and in connection with any amendments or waivers (whether or not the same become effective) under or in respect of this Agreement or the Shares purchased by the Purchasers hereunder, including, without limitation: (a) the cost and expenses of reproducing this Agreement and the Shares purchased by the Purchasers, of furnishing all opinions of counsel for the Company (including any opinions requested by the Purchasers' special counsel as to any legal matter arising hereunder) and all certificates on behalf of the Company, and of the Company's performance of and compliance with all agreements and conditions contained herein to be performed or complied with by it; and (b) the cost (other than any applicable stock transfer taxes) of delivering to their principal office, insured to their satisfaction, the Shares sold to the Purchasers hereunder and any Shares delivered to the Purchasers upon any substitution of Shares pursuant to section 8 and of the Purchasers delivering any Shares, insured to their satisfaction, upon any such substitution. In addition, if the transactions contemplated hereby have been consummated, the Company shall pay 50% of the reasonably itemized out-of-pocket expenses incurred by the Purchasers in connection with such transactions (including the fees and disbursements of their counsel), provided that the Company's liability under this sentence shall not exceed $100,000. Reference is made to Section 5 of this Agreement for certain agreements among the parties regarding the fees, if any, of brokers and finders. 11. Adjustment of Terms. Notwithstanding the provisions of this Agreement and the Certificate of Designation for the Series B Preferred Stock, if the Company shall agree, on or before December 15, 1999, to issue to any person or persons (other than (a) in connection with the acquisition of a business or the acquisition of assets to be used in its business or (b) in a bona fide underwritten public offering) more than $50 million aggregate liquidation preference of a series of convertible preferred stock, then the Company shall give to Purchasers not less than 15 business days' prior notice of such proposed issuance, and the Purchasers shall be entitled at the closing of such issuance to exchange their shares of Series B Preferred Stock for shares of the newly issued convertible preferred stock, with the Series B Preferred Stock valued at its liquidation amount. 12. Survival of Representations and Warranties and Indemnification; Certain Limitations. The Company's indemnification obligations and all representations and warranties contained in this Agreement shall survive the execution and delivery of this Agreement, any investigation at any time made by the 23 Purchasers or on their behalf, and the purchase of the Shares by the Purchasers under this Agreement and any conversion of any of the Stock or any disposition of any shares of Common Stock issued upon conversion of any of the Stock; provided that all such representations and warranties (and the indemnities in respect thereof with respect to claims not made prior to such date) shall expire 120 days after the Closing, provided that the Company's indemnification obligations relating to the Company's obligations created under Section 11 shall expire April 15, 2000 after the Closing. No written (except as explicitly stated therein) or oral statements made by or on behalf of the Company, other than in this Agreement, the Collateral Agreements and the exhibits hereto and thereto, shall constitute representations or warranties within the meaning of this Agreement. In no event shall Purchasers be entitled to the remedy of rescission. 13. Amendments and Waivers. Any term of this Agreement may be amended or modified and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and (a) in the case of any such action prior to the Closing, the Purchasers; and (b) in the case of any other such action, a Majority in Interest. 14. Notices, etc. Except as otherwise provided in this Agreement, notices and other communications under this Agreement shall be in writing and shall be delivered, or mailed by first-class mail, postage pre-paid, addressed, (a) if to the Purchasers, at the address set forth at the beginning of this Agreement, or at such other address as the Purchasers shall have furnished to the Company in writing, or (b) if to any other holder of any Shares or shares of Common Stock into which any of the Shares have been converted, at such address as such other holder shall have furnished to the Company in writing, or, until any such other holder so furnishes to the Company an address, then to and at the address of the last holder of such Shares or shares of Common Stock into which such Shares have been converted who has furnished an address to the Company, or (c) if to the Company at the address of the Company set forth at the beginning of this Agreement, to the attention of its President, or at such other address, or to the attention of such other officer, as the Company shall have furnished to the Purchasers and each such other holder in writing. 15. Indemnification. (a) The Company shall indemnify, defend and hold harmless the Purchasers, their affiliates, partners, officers, employees and agents (each, an "Indemnified Person") from and against any and all losses, liabilities, damages, judgments, settlements and expenses (including interest and penalties recovered by a third party with respect thereto and reasonable attorneys' fees and expenses and reasonable accountants' fees and expenses incurred in the investigation or defense of any of the same or in asserting, preserving or enforcing any of rights hereunder), that arise out of: 24 (i) any breach by the Company of any of its representations, warranties or covenants contained in this Agreement or in the Registration Rights Agreement; or (ii) any litigation, investigation or proceeding instituted by any Governmental Agency or any other Person with respect to this Agreement or the collateral Agreements or the transactions contemplated hereby or thereby and requiring the Purchasers participation or involvement, excluding, however, any such litigation, investigation or proceeding which arises solely from the acts or omissions of Purchasers or their affiliates. (b) The Purchasers shall give the Company prompt notice of any third-party claim that may give rise to any indemnification obligation under this Section 14 and the Company shall (except as set forth below) have the right to assume and control the defense (at its expense) and settlement of any such claim through the Company's own counsel or through other counsel reasonably acceptable to the Purchasers. The Purchasers may retain additional counsel at their own expense. If, under applicable standards of professional conduct, a conflict with respect to any significant issue between the Purchasers and the Company exists in respect of such third-party claim, the Company shall not assume the defense of such claim and shall also pay the reasonable fees and expenses of one counsel selected by Purchasers in respect of such claim. Notwithstanding the foregoing, without the Purchasers' consent, the Company will not settle any action or proceeding which does not provide the Purchasers a full, unconditional release from all liability with respect to such claim by each claimant or plaintiff in a form acceptable to the Purchasers' counsel, nor will the Company consent to any injunctive or other non-monetary relief affecting any Indemnified Person. 16. Termination. This Agreement may be terminated (a) by the mutual written consent of the Purchasers and the Company at any time or (b) by the Purchasers or the Company if the Closing shall not have been consummated on or before February 15, 2000; provided, however, that the right to terminate this Agreement pursuant to (b) of this Section 16 shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure to consummate the transactions by such time. 17. Miscellaneous. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns and affiliates of the parties hereto, whether so expressed or not, and, in particular, shall inure to the benefit of and be enforceable by any holder or holders at the time of the Shares or shares of Common Stock into which any of the Shares have been converted; except as aforesaid, this Agreement shall not inure to the benefit of any third party. This Agreement embodies the entire agreement and understanding between the Purchasers and the Company and supersedes all prior agreements and understandings 25 relating to the subject matter hereof. This Agreement shall be construed and enforced in accordance with and governed by the law of the State of New York without regard to the principles regarding conflicts of laws. The headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 26 If the Purchasers are in agreement with the foregoing, please sign the form of agreement on the accompanying counterparts of this letter and return one of the same to the Company, whereupon this letter shall become a binding agreement between the Purchasers and the Company. Very truly yours, UNITED RENTALS, INC. By:_______________________ Title: The foregoing Agreement is hereby agreed to as of the date thereof. CHASE EQUITY ASSOCIATES, L.P. By: Chase Capital Partners, its General Partner By:______________________ Name: Title: General Partner xxxvii EXHIBIT D REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of ____ ___, 1999, among United Rentals, Inc., a Delaware corporation (the "Company"), Bradley S. Jacobs and the other undersigned parties hereto (the "Holders"). 1. Introduction. The Company is a party to the Stock Purchase Agreement ------------ (the "Stock Purchase Agreement") set forth in Exhibit A pursuant to which the Company has agreed, among other things, to issue to the Holders the number of shares of its Class B-1 Perpetual Convertible Preferred Stock, par value $.01 per share ("B-1 Preferred") and Class B-2 Perpetual Convertible Preferred Stock, par value $.01 per share ("B-2 Preferred" and collectively with the B-1 Preferred, the "Preferred Stock") which is set forth on such Exhibit. Pursuant to the terms of the Certificate of Designation with respect to the Preferred Stock (the "Certificate of Designation"), the Preferred Stock is convertible into shares of the Company's common stock, par value $.01 per share (the "Common Stock"). Certain capitalized terms used in this Agreement are defined in section 3 hereof; references to sections shall be to sections of this Agreement. 2. Registration under Securities Act, etc. --------------------------------------- 2.1 Registration on Request. ----------------------- (a) Request. At any time or from time to time, upon the written ------- request of one or more Initiating B-2 Holders, requesting that the Company effect the registration under the Securities Act of all or part of such Initiating B-2 Holders' Registrable Securities, and specifying the intended method of disposition thereof, the Company will promptly give written notice of such requested registration to all registered holders of Registrable Securities, and thereupon the Company will, subject to the terms of this Agreement, use its best efforts to effect the registration under the Securities Act of: (i) the Registrable Securities which the Company has been so requested to register by such Initiating B-2 Holders for disposition in accordance with the intended method of disposition stated in such request; (ii) all other Registrable Securities the holders of which shall have made a written request to the Company for registration thereof within 15 days after the giving of such written notice by the Company (which request shall specify the intended method of disposition of such Registrable Securities); and (iii) all shares of Common Stock which the Company or other holders of the Company's Common Stock having registration rights may 28 elect to register in connection with the offering of Registrable Securities pursuant to this section 2.1, all to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities and the additional shares of Common Stock, if any so to be registered; provided, that -------- the Company shall not be required to effect any registration requested by Initiating B-2 Holders pursuant to this section 2.1 (x) on more than one occasion and (y) unless the Holders have requested to sell at least 500,000 shares of Registrable Securities or shares of Registrable Securities to be sold have a fair market value (based upon the closing price of such Registrable Securities quoted on the securities exchange or over-the-counter quotation system on which such Registrable Securities are listed or quoted, as the case may be, on the trading day immediately preceding any request pursuant to this section 2.1) of at least $25 million. (b) Registration Statement Form. Registrations under this --------------------------- section 2.1 shall be on such appropriate registration form of the Commission as shall permit the disposition of such Registrable Securities in accordance with the intended method or methods of disposition specified in their request for such registration and as shall be permitted under the Securities Act; provided, -------- that such form shall not indicate that the securities to be registered thereunder are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act. (c) Expenses. The Company will pay all Registration Expenses in -------- connection with any registration requested pursuant to this section 2.1 by any Initiating B-2 Holders. All other expenses (including underwriting discounts and commissions and transfer taxes, if any) in connection with each other registration requested under this section 2.1 shall be allocated pro rata among --- ---- all Persons on whose behalf securities of the Company are included in such registration, on the basis of the respective amounts of the securities then being registered on their behalf. (d) Effective Registration Statement. A registration requested -------------------------------- pursuant to this section 2.1 shall not be deemed to have been effected (i) - unless a registration statement with respect thereto has become effective, provided that a registration which does not become effective after the Company - -------- has filed a registration statement with respect thereto solely by reason of the refusal to proceed of the Initiating B-2 Holders (other than a refusal to proceed based upon the written advice of counsel relating to a matter with respect to the Company) shall be deemed to have been effected by the Company at the request of such Initiating B-2 Holders unless the Initiating B-2 Holders shall have elected to pay all Registration Expenses in connection with such registration, (ii) if, after it has become effective, such registration becomes -- subject to any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason, other than by reason of some act or 29 omission by such Initiating B-2 Holders with respect thereto, (iii) if the --- conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied, other than by reason of some act or omission by such Initiating B- 2 Holders or (iv) if the sale of the securities is not consummated due to the lack of agreement between the Initiating B-2 Holders and the underwriters with respect to the underwriting discount on the securities to be sold. (e) Selection of Underwriters. If a requested registration ------------------------- pursuant to this section 2.1 involves an underwritten offering, the managing or lead underwriter shall be selected by the Company and shall be reasonably acceptable to the holders of at least a majority (by number of shares) of the Registrable Securities as to which registration has been requested, which shall not unreasonably withhold its acceptance of any such underwriters, and any co- managing and co-lead underwriters shall be selected by the Company. (f) Priority in Requested Registrations. If a requested registration pursuant to this section 2.1 involves an underwritten offering, and the managing underwriter shall advise the Company in writing (with a copy to each holder of Registrable Securities requesting registration) that, in its opinion, the number of securities requested to be included in such registration (including Common Stock of the Company or other Persons which are not Registrable Securities) exceeds the number which can be sold in such offering within a price range acceptable to the holders of a majority of the Registrable Securities requested to be included in such registration, the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, (i) first, Registrable Securities - requested to be included in such registration by the holder or holders of Registrable Securities, pro rata among such holders requesting such registration --- ---- on the basis of the number of such securities requested to be included by such holders, (ii) second, Common Stock the Company proposes to sell and (iii) third, -- --- Common Stock of the Company held by other Persons having registration rights proposed to be included in such registration by the holders thereof. Notwithstanding the foregoing, in connection with any requested registration pursuant to this section 2.1, the Company shall in all events be entitled to register and sell up to 25% of the total number of shares of Common Stock to be registered; provided, that if the Company registers and sells in excess of 33.3% -------- of the total number of shares of Common Stock to be registered, the request for registration pursuant to this section 2.1 shall not be deemed to have been effected. 2.2 Incidental Registration. ----------------------- (a) Right to Include Registrable Securities. If the Company at --------------------------------------- any time proposes to register any of its securities under the Securities Act (other than by a registration on Form S-4 or any successor form, Form S-8, or any successor form thereto, 30 relating to a stock option plan, stock purchase plan, managing directors' plan, savings or similar plan and other than pursuant to section 2.1), whether or not for sale for its own account, it will each such time give prompt written notice to all holders of Registrable Securities of its intention to do so and of such holders' rights under this section 2.2. Upon the written request of any such holder made within 10 Business Days after the receipt of any such notice (which request shall specify the number of Registrable Securities intended to be disposed of by such holder and the intended method of disposition thereof), the Company will, subject to the terms of this Agreement, use its best efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the holders thereof, to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered, by inclusion of such Registrable Securities in the registration statement which covers the securities which the Company proposes to register, provided that if, -------- at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each holder of Registrable Securities and, thereupon, (i) in the case of a determination not - to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any holder or holders of Registrable Securities entitled to do so to request that such registration be effected as a registration under section 2.1, and (ii) in the case of a determination to delay -- registering, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities. No registration effected under this section 2.2 shall relieve the Company of its obligation to effect any registration upon request under section 2.1, nor shall any such registration hereunder be deemed to have been effected pursuant to section 2.1. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this section 2.2. (b) Priority in Incidental Registrations. If the Company at any ------------------------------------ time proposes to register any of its securities under the Securities Act as contemplated by this section 2.2 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by any holder of Registrable Securities use its best efforts to arrange for such underwriters to include all the Registrable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters, provided that if -------- the managing underwriter of such underwritten offering shall inform the holders of the Registrable Securities requesting such registration and the holders of any Common Stock of the Company which shall have exercised, in respect of such underwritten offering, registration rights comparable to the rights under this section 31 2.2, by letter of its belief that inclusion in such underwritten distribution of all or a specified number of such Registrable Securities or of such other securities of the Company so requested to be included would interfere with the successful marketing of the securities so being registered (other than such Registrable Securities and other Common Stock of the Company so requested to be included) by the underwriters (such writing to state the basis of such belief and the approximate number of such Registrable Securities and shares of Common Stock so requested to be included which may be included in such underwritten offering without such effect), then the Company may, upon written notice to all holders of such Registrable Securities and of such other shares of Common Stock of the Company so requested to be included, exclude pro rata from such --- ---- underwritten offering (if and to the extent stated by such managing underwriter to be necessary to eliminate such effect) the number of such Registrable Securities and shares of such other Common Stock so requested to be included the registration of which shall have been requested by each holder of Registrable Securities and by the holders of such other Common Stock so that the resultant aggregate number of such Registrable Securities and of such other shares of Common Stock so requested to be included which are included in such underwritten offering shall be equal to the approximate number of shares stated in such managing underwriter's letter. 2.3 Registration Procedures. If and whenever the Company is required ----------------------- to use its best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in sections 2.1 and 2.2, the Company shall, as expeditiously as possible: (i) prepare and (in the case of a registration pursuant to section 2.1, such filing to be made within 45 days after the initial request of one or more Initiating B-2 Holders or in any event as soon thereafter as possible) file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act or the rules and regulations promulgated thereunder) and thereafter use its best efforts to cause such registration statement to become and remain effective, provided -------- however that the Company may discontinue any registration of its securities which are not Registrable Securities (and, under the circumstances specified in section 2.2(a), its securities which are Registrable Securities) at any time prior to the effective date of the registration statement relating thereto, provided further that before filing such -------- registration statement or any amendments thereto, the Company will furnish to the counsel selected by the holders of Registrable Securities which are to be included in such registration copies of all such documents proposed to be filed, which documents will be subject to the review, but not the prior approval, of such counsel; 32 (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until the earlier of such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement or (i) in the case of a registration pursuant to section 2.1, the expiration of 180 days after such registration statement becomes effective, or (ii) in the case of a registration pursuant to section 2.2, the expiration of 90 days after such registration statement becomes effective; (iii) furnish to each seller of Registrable Securities covered by such registration statement and each underwriter, if any, of the securities being sold by such seller such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller and underwriter, if any, may reasonably request; (iv) use its best efforts to register or qualify all Registrable Securities and other securities covered by such registration statement under such other securities laws or blue sky laws of such jurisdictions as any seller thereof and any underwriter of the securities being sold by such seller shall reasonably request, to keep such registrations or qualifications in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such seller and underwriter to consummate the disposition in such jurisdictions of the securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (iv) be obligated to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction; (v) use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; 33 (vi) furnish to each seller of Registrable Securities a signed counterpart, addressed to such seller and the underwriters, if any, of: (x) an opinion of counsel for the Company, dated the effective date of such registration statement (or, if such registration includes an underwritten public offering, an opinion dated the date of the closing under the underwriting agreement), reasonably satisfactory in form and substance to such seller, and (y) a "comfort" letter (or, in the case of any such Person which does not satisfy the conditions for receipt of a "comfort" letter specified in Statement on Auditing Standards No. 72, an "agreed upon procedures" letter), dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter of like kind dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Company's financial statements included in such registration statement, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities (with, in the case of an "agreed upon procedures" letter, such modifications or deletions as may be required under Statement on Auditing Standards No. 35) and, in the case of the accountants' letter, such other financial matters, and, in the case of the legal opinion, such other legal matters, as such seller (or the underwriters, if any) may reasonably request; (vii) notify the holders of Registrable Securities and the managing underwriter or underwriters, if any, promptly and confirm such advice in writing promptly thereafter: (a) when the registration statement, the prospectus or any prospectus supplement related thereto or post-effective amendment to the registration statement has been filed, and, with respect 34 to the registration statement or any post-effective amendment thereto, when the same has become effective; (b) of any request by the Commission for amendments or supplements to the registration statement or the prospectus or for additional information; (c) of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings by any Person for that purpose; (d) if at any time the representations and warranties of the Company made as contemplated by section 2.4 below cease to be true and correct; (e) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation or threat of any proceeding for such purpose; and (viii) notify each seller of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon the discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and at the request of any such seller promptly prepare and furnish to such seller and each underwriter, if any, a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (ix) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the registration statement at the earliest possible moment; (x) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its 35 security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder, and will furnish to each such seller at least five business days prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus and shall not file any thereof to which any such seller shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder; (xi) subject to the provisions of section 2.5, make available for inspection by a representative or representatives of the holders of Registrable Securities to be included in such registration statement, any underwriter participating in any disposition pursuant to the registration statement and any attorney or accountant retained by such selling holders or underwriter (each, an "Inspector"), all financial and other records, pertinent corporate documents and properties of the Company (the "Records"), and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such registration in order to permit a reasonable investigation within the meaning of Section 11 of the Securities Act; (xii) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement; (xiii) enter into such agreements and take such other actions as sellers of such Registrable Securities holding 51% of the shares so to be sold or any underwriter shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, including, without limitation, causing members of senior management of the Company to participate in customary "road-show" activities; (xiv) use its best efforts to list all Registrable Securities covered by such registration statement on any securities exchange on which any of the securities of the same class as the Registrable Securities are then listed; and 36 (xv) use its best efforts to provide a CUSIP number for the Registrable Securities, not later than the effective date of the registration statement. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing. The Company will not file any registration statement or amendment thereto or any prospectus or any supplement thereto (including such documents incorporated by reference and proposed to be filed after the initial filing of the registration statement) to which the holders of at least a majority of the Registrable Securities covered by such registration statement or the underwriter or underwriters, if any, shall reasonably object, provided that the Company may -------- file such document in a form required by law or upon the advice of its counsel. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in subdivision (viii) of this section 2.3, such holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (viii) of this section 2.3 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the period mentioned in paragraph (ii) of this section 2.3 shall be extended by the length of the period from and including the date when each seller of any Registrable Securities covered by such registration statement shall have received such notice to the date on which each such seller has received the copies of the supplemented or amended prospectus contemplated by paragraph (viii) of this section 2.3. If any such registration statement refers to any holder of Registrable Securities by name or otherwise as the holder of any securities of the Company, then such holder shall have the right to require (i) the insertion therein of - language, in form and substance satisfactory to such holder, to the effect that the holding by such holder of such securities is not to be construed as a recommendation by such holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such holder will assist in meeting any future financial requirements of the Company, or (ii) -- in the event that such reference to such holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force and a written opinion 37 from counsel to the holder to such effect is delivered to the Company, the deletion of the reference to such holder. 2.4 Underwritten Offerings. ---------------------- (a) Requested Underwritten Offerings. If requested by the -------------------------------- underwriters for any underwritten offering by holders of Registrable Securities pursuant to a registration requested under section 2.1, the Company will enter into an underwriting agreement with such underwriters for such offering, such agreement to be satisfactory in substance and form to the Company, each such holder and the underwriters, and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of this type, including, without limitation, indemnities at least as broad as those provided in section 2.6. The holders of the Registrable Securities will cooperate with the Company in the negotiation of the underwriting agreement and will give consideration to the reasonable suggestions of the Company regarding the form thereof, provided that nothing herein contained shall diminish the -------- foregoing obligations of the Company. The holders of Registrable Securities to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registrable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registrable Securities. Any such holder of Registrable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations and warranties or agreements regarding such holder, such holder's Registrable Securities and such holder's intended method of distribution and any other representation required by law. (b) Incidental Underwritten Offerings. The holders of --------------------------------- Registrable Securities to be distributed by such underwriters shall be parties to the underwriting agreement between the Company and such underwriters and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registrable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registrable Securities. Any such holder of Registrable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, such holder's Registrable Securities and such holder's intended method of distribution and any other representation required by law. 38 (c) Holdback Agreements. ------------------- (i) So long as a holder of Registrable Securities and its Affiliates own Common Stock and/or Preferred Stock convertible into Common Stock exceeding 5% of the Common Stock of the Company outstanding (including Common Stock issuable upon conversion of the Preferred Stock) or such holder has designated a member of the board of directors of the Company pursuant to paragraph 6(ii) of the Certificate of Designation for the Series A Preferred Stock which director continues to serve on such board, such holder of Registrable Securities agrees, by acquisition of such Registrable Securities, (x) if so required by the managing underwriter, not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of any Common Stock or Registrable Securities not to be sold in an underwritten offering pursuant to section 2.1 or 2.2, during the 30 days prior to the anticipated consummation of such underwritten offering and 90 days after the applicable underwritten registration pursuant to section 2.1 or 2.2 has become effective, except as part of such underwritten registration and (y) in connection with any acquisition by or merger with the Company which is accounted for under generally accepted accounting principles as a pooling of interest, upon the request of the Company, not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of any Common Stock or Registrable Securities, for the period commencing 30 days before the effective date of such acquisition or merger until the publication of the Company's financial results covering a period of at least 30 days following such acquisition or merger which is sufficient in accordance with Accounting Series Release No. 135, or such shorter period if consistent with the requirements for pooling of interests accounting treatment. Notwithstanding clause (x) of the foregoing sentence and subject to clause (y), during any period described above, each holder of Registrable Securities subject to the foregoing sentence shall be entitled to sell securities in a private sale so long as the purchaser of such securities agrees to be bound by the restrictions set forth above to the same extent as the seller for the remainder of the applicable period. (ii) The Company agrees if so required by the managing underwriter (x) not to sell, make any short sale of, loan, grant any option - for the purchase of, effect any public sale or distribution of or otherwise dispose of its equity securities or securities convertible into or exchangeable or exercisable for any of such securities during the 30 days prior to and the 90 days after any underwritten registration pursuant to section 2.1 has become effective, except as part of such underwritten registration and except in connection with (A) a merger or acquisition by the Company in which securities of the Company are issued 39 directly to shareholders of the target entity or sellers of assets in exchange for shares of such target entity or such assets or (B) a stock option plan, stock purchase plan, managing directors' plan, savings or similar plan, or an acquisition of a business, merger or exchange of stock for stock, provided that no such agreement pursuant to this clause (x) -------- shall prevent the Company from fulfilling its obligations pursuant to section 2.1 or 2.2, subject to the provisions of section 2.7 and (y) to use - its reasonable best efforts to cause each director and executive officer of the Company and any holder (other than the Holders) of its equity securities or any securities convertible into or exchangeable or exercisable for any of such equity securities, in each case purchased from the Company at any time after the date of this Agreement (other than in a public offering and other than securities issued to employees who are not directors or executive officers of the Company pursuant to an employee benefit plan or similar arrangement) to agree not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of such securities during such period, it being understood that no action is required by the Company pursuant to this clause (y) until the managing underwriter requests. (d) Participation in Underwritten Offerings. No Person (other --------------------------------------- than the Company, which will be subject to and governed by the other terms and provisions of this Agreement) may participate in any underwritten offering hereunder unless such Person (i) agrees to sell such Person's securities on the - basis provided in any underwriting arrangements approved, subject to the terms and conditions hereof, by the holders of a majority of Registrable Securities to be included in such underwritten offering and (ii) completes and executes all -- questionnaires, indemnities, underwriting agreements and other documents (other than powers of attorney) required under the terms of such underwriting arrangements. Notwithstanding the foregoing, no underwriting agreement (or other agreement in connection with such offering) shall require any holder of Registrable Securities to make any representations or warranties to or agreements with the Company or the underwriters other than representations and warranties or agreements regarding such holder, such holder's Registrable Securities and such holder's intended method of distribution and any other representation required by law. 2.5 Preparation; Reasonable Investigation. In connection with the ------------------------------------- preparation and filing of each registration statement under the Securities Act pursuant to this Agreement, the Company will give the holders of Registrable Securities registered under such registration statement, their underwriters, if any, and their respective counsel and accountants, the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records (collectively, the "Records") and such opportunities to discuss the business of the Company with its officers and the independent public accountants who 40 have certified its financial statements as shall be necessary, in the opinion of such holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act; provided, that Records -------- which the Company determines, in good faith, to be confidential and which it notifies such holder, underwriter, counsel or accountant are confidential shall not be disclosed by such Person (other than to any holder of Registrable Securities) unless (a) such Records have become generally available to the public or (b) the disclosure of such Records may be may be necessary or, in the case of clause (z) below, appropriate (x) in compliance with any law, rule, regulation or order applicable to any such holder, underwriter, counsel or accountant, (y) in response to any subpoena or other legal process or (z) in connection with any litigation to which such holder, underwriter, counsel or accountant is a party, and such Person shall sign an agreement to such effect that shall be customary in form and reasonably acceptable to the Company. 2.6 Indemnification. --------------- (a) Indemnification by the Company. In the event of any ------------------------------ registration of any securities of the Company under the Securities Act pursuant to this Agreement, the Company will, and hereby does agree to, indemnify and hold harmless in the case of any registration statement filed pursuant to section 2.1 or 2.2, the holder of any Registrable Securities covered by such registration statement, its directors and officers, each Person, if any, who controls such holder within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such holder or any such director or officer or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of any preliminary prospectus, final prospectus or summary prospectus, in light of the circumstances under which they were made, not misleading, and the Company will reimburse such holder and each such director, officer, and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding, provided that the Company shall not be liable in any such case to -------- the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the 41 Company by or on behalf of such holder specifically for use therein. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, underwriter or controlling person and shall survive the transfer of such securities by such holder. (b) Indemnification by the Sellers. As a condition to including ------------------------------ any Registrable Securities in any registration statement filed pursuant to section 2.3, the Company shall have received from each seller of Registrable Securities a written undertaking satisfactory to it from the prospective seller of such Registrable Securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this section 2.6) the Company, each director of the Company, each officer of the Company and each other person, if any, who controls the Company within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Any such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by such seller. (c) Notices of Claims, etc. Promptly after receipt by an ---------------------- indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this section 2.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice -------- as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this section 2.6, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that the indemnifying party may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof. No indemnifying party shall, without the consent 42 of the indemnified party, consent to entry of any judgment or enter into any settlement of any such action which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. No indemnified party shall consent to entry of any judgment or enter into any settlement of any such action the defense of which has been assumed by an indemnifying party without the consent of such indemnifying party. (d) Other Indemnification. Indemnification similar to that --------------------- specified in the preceding subdivisions of this section 2.6 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority, other than the Securities Act. (e) Contribution. If the indemnification provided for in the ------------ preceding subdivisions of this section 2.6 is unavailable to an indemnified party in respect of any expense, loss, claim, damage or liability referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such expense, loss, claim, damage or liability (i) in such - proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the holder or other Person, as the case may be, on the other from the distribution of the Registrable Securities or (ii) if the -- allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the holder or other Person, as the case may be, on the other in connection with the statements or omissions which resulted in such expense, loss, damage or liability, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the holder or other Person, as the case may be, on the other in connection with the distribution of the Registrable Securities shall be deemed to be in the same proportion as the total net proceeds received by the Company from the initial sale of the Registrable Securities by the Company to the purchasers pursuant to the Stock Purchase Agreements bear to the gain, if any, realized by the selling holder or the underwriting discounts and commissions received by the underwriter, as the case may be. The relative fault of the Company on the one hand and of the holder or other Person, as the case may be, on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company, by the holder or by the other Person and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, provided that the foregoing -------- contribution agreement shall not inure to the benefit of any indemnified party if indemnification would be unavailable to such indemnified party by reason of the provisions contained in the first 43 sentence of subdivision (a) of this section 2.6, and in no event shall the obligation of any indemnifying party to contribute under this subdivision (e) exceed the amount that such indemnifying party would have been obligated to pay by way of indemnification if the indemnification provided for under subdivisions (a) or (b) of this section 2.6 had been available under the circumstances. The Company and the holders of Registrable Securities agree that it would not be just and equitable if contribution pursuant to this subdivision (e) were determined by pro rata allocation (even if the holders and any underwriters were --- ---- treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth in the preceding sentence and subdivision (C) of this section 2.6, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subdivision (e), no holder of Registrable Securities or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any such holder, the net - proceeds received by such holder from the sale of Registrable Securities or (ii) -- in the case of an underwriter, the total price at which the Registrable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 2.7 Suspension of Registration. Notwithstanding anything to the -------------------------- contrary contained herein, the Company will not be required to file any registration statement pursuant to section 2.1(a) or furnish any supplement to a prospectus pursuant to section 2.3(viii) during any of the following periods: (i) 30 days prior to the anticipated consummation of a public offering by the Company of its securities and 90 days subsequent to the consummation of such public offering where, in the good faith judgment of the managing underwriter or underwriters thereof, such filing or furnishing of such supplement would have an adverse effect on such offering, (ii) if such filing or furnishing of such supplement is prohibited by applicable law, (iii) if the filing of such registration statement or furnishing of such supplement would require the Company to disclose a material financing, acquisition or other corporate development, and the proper officers of the Company shall have determined in good faith that such disclosure is not in the best interest of the Company or (iv) during the period described in section 2.4(c)(ii), provided that the -------- Company may not delay the filing of any registration statement or 44 furnishing of such supplement pursuant to this section 2.7 for more than an aggregate of 135 days in any twelve-month period; and provided, further, that -------- ------- any such delay pursuant to this section 2.7 shall not in the aggregate exceed 135 days in any twelve-month period. Notwithstanding the foregoing, in the case of a public offering by any holder of the Company's capital stock (the "Selling Holder") pursuant to rights granted by the Company to such holder similar to section 2.1, no delay in the filing of a registration statement or the furnishing of a supplement pursuant to clause (i) of the immediately preceding sentence shall be for a time period longer than any similar time period for delay imposed on such Selling Holder pursuant to the agreement with the Company granting such Selling Holder registration rights. Upon the expiration of the period described in clause (iii) of the first sentence of this section 2.7, the Company shall give prompt notice to all holders of Registrable Securities and shall promptly file any registration statement requested to be filed pursuant to 2.1(a) and furnish any prospectus supplement required to be furnished pursuant to section 2.3(viii). 2.8 Other Agreements. The Company shall not enter into any agreement ---------------- or instrument which would conflict with or result in a breach or violation of any of the terms or provisions of this Agreement. In addition, the Company shall not enter into any agreement or instrument with any Person (other than any Holder or its Affiliates) which grant such Person rights similar to those in section 2.1 unless such agreement permits the holders of Registrable Securities to exercise their rights pursuant to section 2.2 hereof in connection with any registration statement filed pursuant to which such Person will sell securities of the Company. 3. Tag-Along Notice. Pursuant to that certain Amended and Restated ---------------- Registration Rights Agreement (the "Amended and Restated Registration Rights Agreement") dated as of _________, 1999 among the Company, Jacobs and Apollo, certain Tag-Along Rights (as defined in the Amended and Restated Registration Rights Agreement) were granted to Apollo. The Holders hereby acknowledge that they do not have any such Tag-Along Rights. The Company and Jacobs hereby agree to give copies of all notices sent to Apollo pursuant to Section 3 of the Amended and Restated Registration Rights Agreement to Chase. Unless otherwise specified herein, copies of all notices given by Jacobs pursuant to section 3.1(a) and 3.1(b) of the Amended and Restated Registration Rights Agreement shall be given by facsimile transmission to each of (i) Chris Behrens at (212) 662-3101 and (ii) Christopher Giordano at (212) 408-2420, or in each case such other facsimile number or to the attention of such other Person as Apollo shall have furnished to Jacobs. 4. Definitions. As used herein, unless the context otherwise requires, ----------- the following terms have the following respective meanings: 45 Affiliate: With respect to any entity, any other entity directly or --------- indirectly controlling or controlled by, or under direct or indirect common control with, such specified entity. For purposes of this definition, the term "control" means (i) the power to direct the management and policies of an entity, directly or through one or more intermediaries, whether through the ownership of voting securities, by contract or otherwise or (ii) without limiting the foregoing, the beneficial ownership of 50% or more of the voting power of the voting common equity of such entity (on a fully diluted basis). Apollo: Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, ------- L.P. and their Affiliates, collectively. Beneficial Ownership or Beneficially Owned: With respect to any -------------------- ------------------ person, any securities with respect to which such person is deemed to have "beneficial ownership" as defined in rule 13d-3 under the Securities Exchange Act of 1934, as amended. For purposes of this Agreement only, any holder of Preferred Stock shall be deemed to be the beneficial owner of any shares of Common Stock of the Company issuable upon conversion of such Preferred Stock. Business Day: Any day except a Saturday, Sunday or nationally ------------ recognized holiday in the State of New York, United States of America. Chase: Chase Equity Associates, L.P. and its Affiliates. ----- Commission: The Securities and Exchange Commission or any other ---------- Federal agency at the time administering the Securities Act. Common Stock: As defined in section 1. ------------ Company: As defined in the introductory paragraph of this Agreement. ------- Exchange Act: The Securities Exchange Act of 1934, or any similar ------------ Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934 shall include a reference to the comparable section, if any, of any such similar Federal statute. Holders: As defined in the introductory paragraph of this Agreement. ------- Holder's Counsel: A single counsel (if any) designated by the holders ---------------- of not less than 25% of the aggregate principal amount of the Registrable 46 Securities to be sold pursuant to section 2.1 or 2.2; provided, -------- however, that if more than one counsel is so designated, the Holder's ------- Counsel shall be the designee of the holders that are holding the greater percentage of the Registrable Securities. Initiating B-2 Holders: Any holder or holders of B-2 Preferred ---------------------- holding at least 50% of the B-2 Preferred issued and outstanding on the date hereof, and initiating a request pursuant to section 2.1 for the registration of all or part of such holder's or holders' B-2 Preferred; provided, that any shares of B-2 Preferred converted into shares of B-1 Preferred shall be deemed to be shares of B-2 Preferred for purposes of this definition. Jacobs: Bradley S. Jacobs. ------ Person: A corporation, an association, a partnership, an ------ organization, business, an individual, a governmental or political subdivision thereof or a governmental agency. Preferred Stock: As defined in section 1. --------------- Registrable Securities: The Common Stock or any other securities ---------------------- issuable upon conversion of the Preferred Stock issued pursuant to the Stock Purchase Agreement and any securities issued or issuable with respect to any such Common Stock by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise which the holders thereof are entitled to receive. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (a) a registration statement with respect - to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (b) they shall have been - distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, (c) they shall have been - otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force, or (d) they shall have ceased to be outstanding. - Registration Expenses: All expenses incident to the Company's --------------------- performance of or compliance with section 2, including, without limitation, (a) all Commission and any NASD registration and filing fees and expenses, (b) all fees and expenses in connection with the registration 47 or qualification of the Registrable Securities for offering and sale under the State securities and blue sky laws and, in the case of an underwritten offering, determination of their eligibility for investment under the laws of such jurisdictions as the managing underwriter or underwriters may designate, including reasonable fees and disbursements, if any, of counsel for the underwriters in connection with such registrations or qualifications and determination, (c) all expenses relating to the preparation, printing, distribution and reproduction of the registration statement required to be filed hereunder, each prospectus included therein or prepared for distribution pursuant hereto, each amendment or supplement to the foregoing, the expenses of preparing the Registrable Securities for delivery and the expenses of printing or producing any underwriting agreement(s) among underwriters and "Blue Sky" or legal investment memoranda, any selling agreements and all other documents in connection with the offering, sale or delivery of Registrable Securities to be disposed of, (d) messenger, telephone and delivery expenses of the Company, (e) fees and expenses of any transfer agent and registrar with respect to the Registrable Securities and any escrow agent or custodian, (f) internal expenses of the Company (including, without limitation, all salaries and expenses of the Company's officers and employees performing legal or accounting duties), (g) fees, disbursements and expenses of counsel and independent certified public accountants of the Company (including the expenses of any opinions or "cold comfort" letters required by or incident to such performance and compliance), (h) fees, disbursements and expenses of any "qualified independent underwriter" engaged for acting in such capacity, (i) fees, expenses and disbursements of any other persons retained by the Company, including special experts retained by the Company in connection with such registration, (k) all fees and expenses incurred in connection with the qualification of the shares of Common Stock constituting Registrable Securities for quotation on the Nasdaq National Market, any over-the-counter market, or the listing of such shares on any securities exchange and (l) in the case of an underwritten offering, the reasonable fees, disbursements and expenses of a single counsel retained by the Holders to represent them in connection with such offering (the selection of such counsel by such Holders to be made in the same manner as is provided in the definition of the terms "Holders' Counsel"). Securities Act: The Securities Act of 1933, or any similar Federal -------------- statute, and the rules and regulations of the Commission thereunder, all as of the same shall be in effect at the time. References to a particular section of the Securities Act of 1933 shall include a reference to the comparable section, if any, of any such similar Federal statute. 48 Stock Purchase Agreements: As defined in section 1. ------------------------- 5. Rules 144 and 144A. The Company shall timely file the reports ------------------ required to be filed by it under the Securities Act and the Exchange Act (including but not limited to the reports under sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder (or, if the Company is not required to file such reports, will, upon the request of any holder of Registrable Securities, make publicly available other information) and will take such further action as any holder of Registrable Securities or any broker facilitating such sale may reasonably request, all to the extent (i) required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 - under the Securities Act, as such Rule may be amended from time to time, or (b) - any similar rule or regulation hereafter adopted by the Commission. The Company shall also provide such information and otherwise use all reasonable commercial efforts to cooperate with any holder of Registrable Securities in connection with any other sale by such holder pursuant to another exemption under the Securities Act, in each case to the extent such information or other action by the Company may be necessary to effect such sale pursuant to the applicable exemption. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder any information to be delivered or filed in connection with the requirements of this Section 5. 6. Amendments and Waivers. This Agreement may be amended and the Company ---------------------- may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the holder or holders of 50% or more of the shares of Registrable Securities and, in the case of any such amendment, action or omission to act in respect of the first sentence of Section 5, the written consent of each holder affected thereby. Each holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any consent authorized by this section 6, whether or not such Registrable Securities shall have been marked to indicate such consent. 7. Nominees for Beneficial Owners. In the event that any Registrable ------------------------------ Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election, be treated as the holder of such Registrable Securities for purposes of any request or other action by any holder or holders of Registrable Securities pursuant to this Agreement or any determination of any number or percentage of shares of Registrable Securities held by any holder or holders of Registrable Securities contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Securities. 49 8. Notices. Except as otherwise provided in this Agreement, all notices, ------- requests and other communications to any Person provided for hereunder shall be in writing and shall be given to such Person (a) in the case of a party hereto - other than the Company, addressed to such party in the manner set forth in the applicable Stock Purchase Agreement or at such other address as such party shall have furnished to the Company in writing, or (b) in the case of any other holder - of Registrable Securities, at the address that such holder shall have furnished to the Company in writing, or, until any such other holder so furnishes to the Company an address, then to and at the address of the last holder of such Registrable Securities who has furnished an address to the Company, or (c) in - the case of the Company or Jacobs, at Four Greenwich Office Park, Greenwich, Connecticut 06830 to the attention of its Chief Executive Officer, with a copy to Oscar D. Folger at 521 Fifth Avenue, 24/th/ floor, New York, New York 10175, or at such other address, or to the attention of such other officer, as the Company shall have furnished to each holder of Registrable Securities at the time outstanding. Each such notice, request or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited - in the mails with first class postage prepaid, addressed as aforesaid or (ii) if -- given by any other means (including, without limitation, by air courier), when delivered at the address specified above, provided that any such notice, request -------- or communication to any holder of Registrable Securities shall not be effective until received. 9. Assignment. This Agreement shall be binding upon and inure to the ---------- benefit of and be enforceable by the parties hereto and their respective successors and assigns. In addition, the provisions of this Agreement which are for the benefit of the parties hereto other than the Company shall also be for the benefit of and enforceable by any subsequent holder of any Registrable Securities that acknowledges such assignment in writing and agrees to the terms hereof. 10. Descriptive Headings. The descriptive headings of the several -------------------- sections and paragraphs of this Agreement are inserted for reference only and shall not limit or otherwise affect the meaning hereof. 11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ------------- ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAW 12. Counterparts. This Agreement may be executed simultaneously in any ------------ number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. 13. Entire Agreement. This Agreement embodies the entire agreement and ---------------- understanding between the Company and each other party hereto relating to the subject 50 matter hereof and supersedes all prior agreements and understandings relating to such subject matter. This Agreement amends and restates the Prior Agreement in its entirety. 14. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH -------------------------- RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND APPELLATE COURTS FROM ANY THEREOF. THE COMPANY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF TO THE COMPANY BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THE COMPANY AT ITS ADDRESS SPECIFIED IN SECTION 7. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT ----- --- ---------- MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. 15. Severability. If any provision of this Agreement, or the application ------------ of such provisions to any Person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby. 51 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first above written. UNITED RENTALS, INC. By:____________________________ Name: Bradley S. Jacobs Title: Chief Executive Officer Holders: CHASE EQUITY ASSOCIATES, L.P. By: Chase Capital Partners, its general partner By:__________________________ Name: Title: General Partner 52 EX-10.(D) 3 TERM LOAN AGREEMENT DATED AS OF JULY 15, 1999 EXHIBIT 10(d) ================================================================================ TERM LOAN AGREEMENT dated as of July 15, 1999 among UNITED RENTALS, INC., UNITED RENTALS (NORTH AMERICA), INC., VARIOUS FINANCIAL INSTITUTIONS, GOLDMAN SACHS CREDIT PARTNERS L.P., as Syndication Agent, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent BANC OF AMERICA SECURITIES LLC Lead Arranger and Book Manager ================================================================================ TABLE OF CONTENTS Page|| SECTION 1 DEFINITIONS, ETC.................................................1 1.1 Definitions......................................................1 1.2 Other Interpretive Provisions...................................15 SECTION 2 LOANS; TRANCHES OF LOANS; BORROWING AND CONVERSION PROCEDURES......................................................16 2.1 Loans...........................................................16 2.1.1 Initial Loans.....................................16 2.1.2 Additional Loans..................................16 2.1.3 Tranches of Loans.................................16 2.2 Borrowing Procedure.............................................16 2.3 Conversion and Continuation Procedures..........................17 2.4 Pro Rata Treatment..............................................18 2.5 Commitments Several.............................................18 SECTION 3 NOTES EVIDENCING LOANS..........................................18 SECTION 4 INTEREST........................................................18 4.1 Interest Rates..................................................18 4.2 Interest Payment Dates..........................................18 4.3 Setting and Notice of Certain Rates.............................18 4.4 Computation of Interest.........................................19 SECTION 5 FEES............................................................19 5.1 Closing Fees....................................................19 5.2 Arrangement and Agent's Fees....................................20 SECTION 6 PREPAYMENTS....................................................20 SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.................20 7.1 Making of Payments..............................................20 7.2 Due Date Extension..............................................20 7.3 Setoff..........................................................21 7.4 Proration of Payments...........................................21 7.5 Taxes...........................................................21 -i- SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR TRANCHES.............................................................22 8.1 Increased Costs.................................................22 8.2 Basis for Determining Interest Rate Inadequate or Unfair........23 8.3 Changes in Law Rendering Eurodollar Lending Unlawful............24 8.4 Funding Losses..................................................24 8.5 Right of Lenders to Fund through Other Offices..................25 8.6 Discretion of Lenders as to Manner of Funding...................25 8.7 Mitigation of Circumstances; Replacement of Affected Lender.....25 8.8 Conclusiveness of Statements; Survival of Provisions............26 SECTION 9 WARRANTIES.........................................................26 9.1 Organization, etc...............................................26 9.2 Authorization; No Conflict......................................26 9.3 Validity and Binding Nature.....................................27 9.4 Information.....................................................27 9.5 No Material Adverse Change......................................27 9.6 Litigation and Contingent Liabilities...........................27 9.7 Ownership of Properties; Liens..................................28 9.8 Subsidiaries....................................................28 9.9 Pension and Welfare Plans.......................................28 9.10 Investment Company Act.........................................29 9.11 Public Utility Holding Company Act.............................29 9.12 Regulation U...................................................29 9.13 Taxes..........................................................29 9.14 Solvency, etc..................................................29 9.15 Environmental Matters..........................................29 9.16 Year 2000 Problem..............................................29 9.17 Senior Debt....................................................30 SECTION 10 COVENANTS.........................................................30 10.1 Reports, Certificates and Other Information....................30 10.1.1 Audit Report........................................30 10.1.2 Quarterly Reports...................................30 10.1.3 Compliance Certificates.............................30 10.1.4 Reports to SEC and to Shareholders..................31 10.1.5 Notice of Default, Litigation and ERISA Matters.....31 10.1.6 Subsidiaries........................................32 10.1.7 Management Reports..................................32 10.1.8 Projections.........................................32 10.1.9 Other Information...................................32 -ii- 10.2 Books, Records and Inspections.................................32 10.3 Insurance......................................................32 10.4 Compliance with Laws; Payment of Taxes and Liabilities.........33 10.5 Maintenance of Existence, etc..................................33 10.6 Financial Covenants............................................33 10.6.1 Maximum Leverage....................................33 10.6.2 Minimum Interest Coverage Ratio.....................33 10.6.3 Funded Debt to Cash Flow Ratio......................33 10.6.4 Senior Debt to Tangible Assets......................33 10.6.5 Senior Debt to Cash Flow Ratio......................33 10.7 Limitations on Debt............................................34 10.8 Liens..........................................................35 10.9 Asset Sales....................................................36 10.10 Restricted Payments...........................................36 10.11 Mergers, Consolidations, Amalgamations, Sales.................37 10.12 Modification of Certain Documents.............................38 10.13 Use of Proceeds...............................................38 10.14 Further Assurances............................................38 10.15 Transactions with Affiliates..................................39 10.16 Employee Benefit Plans........................................39 10.17 Environmental Laws............................................39 10.18 Unconditional Purchase Obligations............................39 10.19 Inconsistent Agreements.......................................39 10.20 Business Activities...........................................39 10.21 Advances and Other Investments................................40 10.22 Location of Assets............................................41 10.23 Activities of Parent..........................................41 SECTION 11 CONDITIONS OF LENDING.............................................41 11.1 Initial Loans..................................................41 11.1.1 Notes...............................................41 11.1.2 Resolutions.........................................42 11.1.3 Consents, etc.......................................42 11.1.4 Incumbency and Signature Certificates...............42 11.1.5 Opinions of Counsel for the Company.................42 11.1.6 Second Amendment to Credit Agreement................42 11.1.7 Second Amendment to Existing Loan Agreement.........42 11.1.8 Confirmation........................................42 11.1.9 Confirmatory Certificate............................42 11.1.10 Other..............................................42 11.2 Additional Loans...............................................42 -iii- 11.2.1 Notes...............................................43 11.2.2 Confirmatory Certificate............................43 11.2.3 Other...............................................43 11.3 All Loans......................................................43 SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT................................43 12.1 Events of Default..............................................43 12.1.1 Non-Payment of the Loans, etc.......................43 12.1.2 Non-Payment of Other Debt...........................43 12.1.3 Other Material Obligations..........................44 12.1.4 Bankruptcy, Insolvency, etc.........................44 12.1.5 Non-Compliance with Provisions of This Agreement....44 12.1.6 Warranties..........................................44 12.1.7 Pension Plans.......................................44 12.1.8 Judgments...........................................45 12.1.9 Invalidity of U.S. Guaranty, etc....................45 12.1.10 Invalidity of Collateral Documents, etc............45 12.1.11 Change in Control..................................45 12.1.12 Invalidity of Parent Guaranty, etc.................46 12.2 Effect of Event of Default.....................................46 SECTION 13 THE AGENT.........................................................46 13.1 Appointment and Authorization..................................46 13.2 Delegation of Duties...........................................46 13.3 Liability of Agent.............................................46 13.4 Reliance by Agents.............................................47 13.5 Notice of Default..............................................47 13.6 Credit Decision................................................48 13.7 Indemnification................................................48 13.8 Agent in Individual Capacity...................................49 13.9 Successor Agent; Assignment of Agency..........................49 13.10 Withholding Tax...............................................50 SECTION 14 GENERAL...........................................................52 14.1 Waiver; Amendments.............................................52 14.2 Confirmations..................................................52 14.3 Notices........................................................53 14.4 Computations...................................................53 14.5 Regulation U...................................................53 14.6 Costs, Expenses and Taxes......................................53 14.7 Judgment........................................................54 -iv- 14.8 Captions.......................................................54 14.9 Assignments; Participations....................................54 14.9.1 Assignments.........................................54 14.9.2 Participations......................................56 14.10 Governing Law.................................................56 14.11 Counterparts..................................................56 14.12 Successors and Assigns........................................57 14.13 Indemnification by the Company................................57 14.14 Forum Selection and Consent to Jurisdiction...................57 14.15 Waiver of Jury Trial..........................................58 14.16 Acknowledgments and Agreements regarding Intercreditor Agreement....................................58 || -v- SCHEDULE 1.1(A) Initial Lenders and Initial Percentages SCHEDULE 9.6(a) Litigation and Contingent Liabilities SCHEDULE 9.6(b) Contingent Payments SCHEDULE 9.7 Properties SCHEDULE 9.8 Subsidiaries SCHEDULE 9.15 Environmental Matters SCHEDULE 10.7(c) Existing Equipment Debt SCHEDULE 10.7(g) Other Existing Debt SCHEDULE 10.8 Existing Liens SCHEDULE 12.1.11 Key Executives SCHEDULE 14.3 Addresses for Notices EXHIBIT A Form of Note (Section 3.1) EXHIBIT B Form of Compliance Certificate (Section 10.1.4) EXHIBIT C Copy of Restated U.S. Guaranty (Section 1) EXHIBIT D Copy of Restated U.S. Security Agreement (Section 1) EXHIBIT E Copy of Restated Company Pledge Agreement (Section 1) EXHIBIT F Form of Subsidiary Pledge Agreement (Section 1) EXHIBIT G Form of Subordination Language (Section 1) EXHIBIT H Form of Assignment Agreement (Section 14.9) EXHIBIT I Copy of Intercreditor Agreement (Section 1) EXHIBIT J Form of Exemption Certificate (Section 13.10) -vi- EXHIBIT K Copy of Parent Guaranty (Section 1) EXHIBIT L Copy of Parent Pledge Agreement (Section 1) EXHIBIT M Form of Request for Additional Loan (Section 2.1.2) EXHIBIT N Form of Confirmation (Section 11.1.8) -vii- TERM LOAN AGREEMENT This TERM LOAN AGREEMENT dated as of July 15, 1999 (this "Agreement") is entered into among UNITED RENTALS, INC. ("Parent"), UNITED RENTALS (NORTH AMERICA), INC., a Delaware corporation (the "Company"), the financial institutions that are or may from time to time become parties hereto (together with their respective successors and assigns, the "Lenders"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (in its individual capacity, "BofA"), as administrative agent for the Lenders. WHEREAS, the Lenders have agreed to extend certain term loans to the Company and may from time to time extend additional loans to the Company. NOW, THEREFORE, in consideration of the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1 DEFINITIONS, ETC. 1.1 Definitions. When used herein the following terms shall have the following meanings (such definitions to be applicable to both the singular and plural forms of such terms): Acquisition Subsidiary means a Subsidiary of Parent organized solely for the purpose of acquiring the stock or assets of a Person as permitted by Section 10.11. Additional Loan - see Section 2.1.2. Affected Lender means any Lender that has given notice to the Company (which has not been rescinded) of (i) any obligation of the Company to pay any amount pursuant to Section 7.5 or 8.1 or (ii) the occurrence of any circumstances of the nature described in Section 8.2 or 8.3. Affiliate of any Person means (i) any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person and (ii) any officer or director of such Person. Agent means BofA in its capacity as administrative agent for the Lenders hereunder and any successor thereto in such capacity. Agent-Related Persons means the Agent and any successor thereto in such capacity hereunder, together with their respective Affiliates (including the Arranger) and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. 1 Agreement - see the Preamble. Arranger means Banc of America Securities LLC, a Delaware limited liability company. Assignment Agreement - see Section 14.9.1. Base Rate means at any time the greater of (a) the Federal Funds Rate plus 0.5% and (b) the Reference Rate. Base Rate Tranche means any Tranche which bears interest at or by reference to the Base Rate. BofA - see the Preamble. Business Day means any day on which BofA is open for commercial banking business in Charlotte, Chicago, New York and San Francisco and, in the case of a Business Day which relates to a Eurodollar Tranche, on which dealings are carried on in the applicable offshore U.S. Dollar interbank market. Canadian Subsidiary means any Subsidiary of the Company which is organized under the federal or provincial laws of Canada and which carries on its business primarily in Canada. Capital Lease means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property by such Person that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of such Person. Cash Equivalent Investment means, at any time, (a) any evidence of Debt, 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 (unless issued by a "Bank" under and as defined in the Credit Agreement or a Lender or its holding company for such a "Bank" or a Lender (any such Person a "Permitted Bank")) rated at least A-l by Standard & Poor's Ratings Group or P-l 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 any Permitted Bank or 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 U.S.$500,000,000, (d) any repurchase agreement entered into with any Permitted Bank (or other 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 (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 Permitted Bank (or other commercial banking 2 institution) thereunder and (e) investments in short-term asset management accounts offered by any Permitted Bank for the purpose of investing in loans to any corporation (other than Parent or an Affiliate of Parent), state or municipality, in each case organized under the laws of any state of the United States or of the District of Columbia. Cash Flow means, as of the last day of any Fiscal Quarter, Consolidated Net Income for the period of four Fiscal Quarters ending on such day plus, to the extent deducted in determining such Consolidated Net Income, Interest Expense, income tax expense, depreciation and amortization for such period, all calculated on a pro forma basis in accordance with Article 11 of Regulation S-X of the SEC. Closing Date means the date the initial Loans are made hereunder. Code means the Internal Revenue Code of 1986. Collateral Agent means BofA in its capacity as Collateral Agent under the Intercreditor Agreement and any successor thereto in such capacity. Collateral Documents means the Company Pledge Agreement, each Subsidiary Pledge Agreement, the Parent Pledge Agreement, the U.S. Security Agreement, and any other agreement pursuant to which the Company, Parent or any Subsidiary grants a Lien on collateral to the Collateral Agent. Company - see the Preamble. Company Pledge Agreement means the Second Restated Company Pledge Agreement dated as of September 29, 1998 between the Company and the Collateral Agent, a copy of which is attached as Exhibit E. Computation Period means each period of four Fiscal Quarters ending on the last day of a Fiscal Quarter on or after the Closing Date. Consolidated Net Income means, with respect to Parent and its Subsidiaries for any period, the net income (or loss) of Parent and its Subsidiaries for such period, excluding any extraordinary gains during such period and any Pooling Charges booked during such period. Contingent Payment means any payment that has been (or is required to be) made under any of the following circumstances: (a) such payment is required to be made by Parent or any Subsidiary in connection with the purchase of any asset or business, where the obligation of Parent or the applicable 3 Subsidiary to make such payment (or the amount thereof) is contingent upon the financial or other performance of such asset or business on an ongoing basis (e.g., based on revenues or similar measures of performance); (b) such payment is required to be made by Parent or any Subsidiary in connection with the achievement of any particular business goal (excluding employee compensation and bonuses in the ordinary course of business); (c) such payment is required to be made by Parent or any Subsidiary under circumstances similar to those described in clause (a) or (b) or provides substantially the same economic incentive as would a payment described in clause (a) or (b); or (d) such payment is required to be made by Parent or any Subsidiary in connection with the purchase of any real estate, where the obligation to make such payment is contingent on any event or condition (other than customary closing conditions for a purchase of real estate). Controlled Group means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with Parent, are treated as a single employer under Section 414 of the Code or Section 4001 of ERISA. Credit Agreement means the Credit Agreement dated as of September 29, 1998 among the Company, Parent, UR Canada, various financial institutions, Bank of America Canada, as Canadian Agent, and BofA, as U.S. Agent, as amended or restated from time to time (including any amendment or restatement increasing the amount available thereunder) and any Successor Credit Agreement as defined in the Intercreditor Agreement. Debt of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, whether or not evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person as lessee under Capital Leases which have been or should be recorded as liabilities on a balance sheet of such Person, (c) all obligations of such Person to pay the deferred purchase price of property or services (including Contingent Payments and Holdbacks but excluding trade accounts payable in the ordinary course of business), (d) all indebtedness secured by a Lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person (it being understood that if such Person has not assumed or otherwise become personally liable for any such indebtedness, the amount of the Debt of such Person in connection therewith shall be limited to the lesser of the face amount of such indebtedness or the fair market value of all property of such Person securing such indebtedness), (e) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn) and banker's acceptances issued for the 4 account or upon the application of such Person, (f) all Hedging Obligations of such Person and (g) all Suretyship Liabilities of such Person. Dollar Equivalent means, at any time, (a) as to any amount denominated in U.S. Dollars, the amount thereof at such time, and (b) as to any amount denominated in any other currency, the equivalent amount in U.S. Dollars as determined by the Agent at such time on the basis of the Spot Rate for the purchase of U.S. Dollars with such currency. Environmental Claims means all claims, however asserted, by any governmental, regulatory or judicial authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment. Environmental Laws means all federal, state, provincial or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any governmental authority, in each case relating to environmental, health, safety and land use matters. ERISA means the Employee Retirement Income Security Act of 1974. Eurodollar Office means, with respect to any Lender, the office or offices of such Lender which shall be making or maintaining a Eurodollar Tranche of such Lender hereunder or, in the case of any Reference Lender, such office or offices through which such Reference Lender makes any determination for purposes of calculating the Eurodollar Rate. A Eurodollar Office of any Lender may be, at the option of such Lender, either a domestic or foreign office. Eurodollar Rate means, with respect to any Eurodollar Tranche for any Interest Period, the rate of interest per annum (rounded upward, if necessary, to the next 1/100th of 1%) determined by the Agent as follows: Eurodollar Rate = IBOR ------------------------------------ 1.00 - Eurodollar Reserve Percentage where, Eurodollar Reserve Percentage means, for any day for any Interest Period, a percentage (expressed as a decimal, rounded upward, if necessary, to an integral multiple of 1/100th of 1%) in effect on such day under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"); and 5 IBOR means the rate per annum determined by the Agent to be the arithmetic mean of the rates of interest per annum notified to the Agent by each Reference Lender as the rate of interest at which deposits in U.S. Dollars in immediately available funds are offered by the Eurodollar Office of such Reference Lender two Business Days prior to the beginning of such Interest Period to major banks in the interbank eurodollar market as at or about 10:00 a.m., Chicago time, for delivery on the first day of such Interest Period, for the number of days comprised therein and in an amount equal or comparable to the amount of the Eurodollar Loan of such Reference Lender for such Interest Period. Eurodollar Tranche means any Tranche which bears interest by reference to the Eurodollar Rate. Event of Default means any of the events described in Section 12.1. Exchange Act means the Securities Exchange Act of 1934. Existing Loan Agreement means the Term Loan Agreement dated as of July 10, 1998 among Parent, the Company (then known as United Rentals, Inc.), various financial institutions and BofA, as Agent. Federal Funds Rate means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor publication, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. Fiscal Quarter means a fiscal quarter of a Fiscal Year. Fiscal Year means the fiscal year of Parent and its Subsidiaries, which period shall be the 12-month period ending on December 31 of each year. References to a Fiscal Year with a number corresponding to any calendar year (e.g., "Fiscal Year 1998") refer to the Fiscal Year ending on December 31 of such calendar year. Foreign Subsidiary means each Subsidiary of Parent which is organized under the laws of any jurisdiction other than, and which is conducting the majority of its business outside of, the United States or any state thereof. 6 FRB means the Board of Governors of the Federal Reserve System, and any governmental authority succeeding to any of its principal functions. Funded Debt means (a) all Debt of Parent and its Subsidiaries and (b) to the extent not included in the definition of Debt, the aggregate outstanding investment or claim held at such time by purchasers, assignees or other transferees of (or of interests in) accounts receivable, lease receivables or other rights to payment of Parent and its Subsidiaries in connection with any Securitization Transaction (regardless of the accounting treatment of such Securitization Transaction), but excluding (i) contingent obligations in respect of undrawn letters of credit and Suretyship Liabilities (except to the extent constituting contingent obligations or Suretyship Liabilities in respect of Funded Debt of a Person other than Parent or any Subsidiary), (ii) Hedging Obligations, (iii) Debt of the Company to Subsidiaries and Debt of Subsidiaries to the Company or to other Subsidiaries and (iv) Debt (including guaranties thereof) in respect of the QuIPS Debentures and the QuIPS Preferred Securities. Funded Debt to Cash Flow Ratio means, as of the last day of any Fiscal Quarter, the ratio of (i) Funded Debt as of such day to (ii) Cash Flow as of such day. GAAP means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination. Group means a group of Tranches of the same Type and, in the case of Eurodollar Tranches, which have the same Interest Period. Hedging Obligations means, with respect to any Person, all liabilities of such Person under interest rate, currency, commodity and equity swap agreements, cap agreements and collar agreements, and all other agreements or arrangements designed to protect such Person against fluctuations in interest rates, currency exchange rates, commodity prices or equity prices. Holdback means an unsecured, non-interest-bearing obligation of Parent or any Subsidiary to pay a portion of the purchase price for any purchase or other acquisition permitted hereunder which matures within nine months of the date of such purchase or other acquisition. Immaterial Law means any provision of any Environmental Law the violation of which will not (a) violate any judgment, decree or order which is binding upon Parent or any Subsidiary, (b) result in or threaten any injury to public health or the environment or any material damage to the property of any Person or (c) result in any liability or expense (other than any de minimis liability or expense) for Parent or any Subsidiary; provided that no provision of any Environmental Law shall be an Immaterial Law if 7 the Agent has notified the Company that the Required Lenders have determined in good faith that such provision is material. Intercreditor Agreement means the Intercreditor Agreement dated as of September 29, 1998 among BofA, as Agent, BofA, as U.S. Agent for the banks under the Credit Agreement, BofA, as Agent for the lenders under the Existing Loan Agreement, and BofA, as Collateral Agent, a copy of which is attached as Exhibit I. Interest Coverage Ratio means the ratio of (a) Consolidated Net Income before deducting Interest Expense, income tax expense and Rentals for any Computation Period to (b) Interest Expense plus Rentals for such Computation Period. Interest Expense means for any period the sum, without duplication, of (a) the consolidated interest expense of Parent and its Subsidiaries for such period (including, without duplication, interest paid on the QuIPS Debentures, distributions on (but not redemptions of) the QuIPS Preferred Securities, imputed interest on Capital Leases and any interest which is capitalized but excluding amortization of deferred financing costs) and (b) consolidated yield or discount accrued during such period on the aggregate investment or claim held by purchasers, assignees or other transferees of, or of interests in, accounts receivable, lease receivables and other rights to payment of Parent and its Subsidiaries in connection with any Securitization Transaction (regardless of the accounting treatment of such Securitization Transaction). Interest Period means, as to any Eurodollar Tranche, the period commencing on the date such Tranche is borrowed or continued as, or converted into, a Eurodollar Tranche and ending on the date one, two, three or six months thereafter as selected by the Company pursuant to Section 2.2 or 2.3, as the case may be; provided that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the following Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (ii) any Interest Period that begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) the Company may not select any Interest Period which would extend beyond any date on which an installment of the Notes is scheduled to be paid pursuant to Section 3 if, after giving effect to such selection, the aggregate principal amount of all Eurodollar Tranches having Interest Periods ending after such date would exceed the 8 aggregate principal amount of the Notes scheduled to be outstanding after payment of such installment. Investment means, relative to any Person, (a) any loan or advance made by such Person to any other Person (excluding any commission, travel or similar advances made to directors, officers and employees of Parent or any of its Subsidiaries), (b) any Suretyship Liability of such Person, (c) any ownership or similar interest held by such Person in any other Person and (d) deposits and the like relating to prospective acquisitions of businesses (excluding deposits placed in escrow pursuant to bona fide arrangements that provide for the return of such deposits to Parent or the applicable Subsidiary in the event that the related transaction is not consummated for any reason by a date certain). Lender - see the Preamble. Lien means, with respect to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, charge, hypothecation or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise. Loan means, with respect to any Lender, such Lender's term loan to the Company hereunder (whether made as part of the initial term loans on the Closing Date or as an Additional Loan or a combination thereof); and Loans means all of the term loans made hereunder. Loan Documents means this Agreement, the Notes, the U.S. Guaranty, the Collateral Documents and the Parent Guaranty. Loan Party means Parent, the Company and each Subsidiary of the Company which is a party to any Loan Document. Margin Stock means any "margin stock" as defined in Regulation U of the FRB. Material Adverse Effect means (a) a material adverse change in, or a material adverse effect upon, the financial condition, operations, assets, business, properties or prospects of Parent and its Subsidiaries taken as a whole, or (b) a material adverse effect upon any substantial portion of the collateral under the Collateral Documents or upon the legality, validity, binding effect or enforceability against Parent, the Company or any Subsidiary of the Company of any Loan Document. Multiemployer Pension Plan means a multiemployer plan, as such term is defined in Section 4001(a)(3) of ERISA, and to which Parent or any member of the Controlled Group may have any liability. 9 Net Worth means the sum of (a) Parent's consolidated stockholders' equity (including preferred stock accounts) plus (b) to the extent, if any, not included in such stockholders' equity, the outstanding amount of the QuIPS Preferred Securities plus (c) the amount of the Pooling Charges. Note - see Section 3. Parent - see the Preamble. Parent Guaranty means the Restated Parent Guaranty dated as of September 29, 1998 executed by Parent, a copy of which is attached as Exhibit K. Parent Pledge Agreement means the Restated Parent Pledge Agreement dated as of September 29, 1998 between Parent and the Collateral Agent, a copy of which is attached as Exhibit L. PBGC means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. Pension Plan means a "pension plan", as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer Pension Plan), and to which Parent or any member of the Controlled Group may have any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. Percentage means, with respect to any Lender, the percentage specified opposite such Lender's name on Schedule 1.1(A), reduced (or increased) by the making of Additional Loans pursuant to Section 2.1.2 or by assignments pursuant to Section 14.9.1. Permitted Holders means (a) the executive managers of the Company as of the Closing Date and their respective estates, their respective spouses and former spouses, their lineal descendants, the legal representatives of any of the foregoing, the trustees of any bona fide trusts of which any of the foregoing are the sole beneficiaries, and any Person of which any of the foregoing "beneficially owns" (within the meaning of Rule 13d-3 under the Exchange Act) at least 51% of each class of equity interests of such Person; and (b) Richard D. Colburn and any of his estate, his spouse or any former spouse, his lineal descendants, the legal representatives of any of the foregoing, the trustees of any bona fide trusts of which any of the foregoing and/or one or more charitable organizations (as defined below) are the sole beneficiaries, any Person of which any of the foregoing "beneficially owns" (within the meaning of Rule 13d-3 under the Exchange Act) at least 51% of each class of the equity interests of such Person and any charitable organization to which any of the foregoing transfers 20% or more of the outstanding shares of common stock of Parent. For purposes of the foregoing, a "charitable 10 organization" is an organization to which a contribution is deductible for income tax purposes under the Code. Permitted Senior Secured Debt means any Debt arising under any term loan agreement among Parent, the Company, various financial institutions and BofA, as agent (other than this Agreement and the Existing Loan Agreement); provided that (i) such term loan agreement shall contain covenants and defaults which are no more restrictive for Parent and its Subsidiaries than the covenants and defaults contained in this Agreement, (ii) any such Debt shall mature no earlier than September 30, 2005 and shall have amortization of no more than 20% of the principal amount thereof prior to July 15, 2005, (iii) any such Debt shall constitute "Senior Indebtedness" as defined in each Subordinated Note Indenture and (iv) no such Debt shall have interest spreads greater than (x) if such Debt matures on or before December 31, 2005, the then-applicable interest rate spreads under the Existing Loan Agreement or (y) if such Debt matures after December 31, 2005, the then-applicable interest rate spreads hereunder. Person means any natural person, corporation, partnership, trust, limited liability company, association, governmental authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity. Pooling Charges means pooling charges and extraordinary items related to acquisitions booked by Parent in the third fiscal quarter of 1998 (including pooling charges and extraordinary items related to the U.S. Rentals Acquisition), but not more than $80,000,000. QuIPS Debentures means the 6 1/2% convertible subordinated debentures issued by Parent to the QuIPS Trust pursuant to the QuIPS Indenture. QuIPS Guarantees means (i) the Guarantee Agreement dated as of August 5, 1998 issued by Parent (then known as United Rentals Holdings, Inc.) relating to the common securities of the QuIPS Trust and (ii) the Guarantee Agreement dated as of August 5, 1998 between Parent (then known as United Rentals Holdings, Inc.) and The Bank of New York, as Trustee, relating to the QuIPS Preferred Securities. QuIPS Indenture means the Indenture dated as of August 5, 1998 between Parent (then known as United Rentals Holdings, Inc.) and The Bank of New York, as Trustee. QuIPS Preferred Securities means the 6 1/2% convertible quarterly income preferred securities issued by the QuIPS Trust pursuant to the QuIPS Purchase Agreement. QuIPS Purchase Agreement means the Purchase Agreement dated as of July 30, 1998 among the QuIPS Trust, Parent (then known as United Rentals Holdings, Inc.), the Company (then known as United Rentals, Inc.) and the purchasers named therein. 11 QuIPS Trust means United Rentals Trust I, a special purpose Delaware business trust established pursuant to the Amended and Restated Trust Agreement dated as of August 5, 1998 among Parent (then known as United Rentals Holdings, Inc.), The Bank of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the administrative trustees named therein. Reference Lenders means BofA and any other Lender designated by the Company and the Agent (which shall promptly notify each Lender of such designation) as a "Reference Lender". Reference Rate means, for any day, the rate of interest in effect for such day as publicly announced from time to time by BofA in San Francisco, California (or such other office in the United States of America as BofA shall specify from time to time), as its "reference rate." (The "reference rate" is a rate set by BofA based upon various factors, including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the reference rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. Related Fund means, with respect to any Lender which is a fund that invests in bank loans, any other fund that invests in bank loans and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. Rentals means the aggregate fixed amounts payable by Parent or any Subsidiary under any lease of (or other agreement conveying the right to use) any real or personal property by Parent or any Subsidiary, as lessee, other than (i) any Capital Lease or (ii) any lease with a remaining term of six months or less which is not renewable solely at the option of the lessee. Required Lenders means Lenders having Percentages aggregating 51% or more. SEC means the Securities and Exchange Commission. Securitization Transaction means any sale, assignment or other transfer by Parent or any Subsidiary of accounts receivable, lease receivables or other payment obligations owing to Parent or such Subsidiary or any interest in any of the foregoing, together in each case with any collections and other proceeds thereof, any collection or deposit accounts related thereto, and any collateral, guaranties 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. Seller Subordinated Debt means unsecured indebtedness of the Company that: 12 (a) is subordinated, substantially upon the terms set forth in Exhibit G or other terms that are more favorable to the Agent and the Lenders, in right of payment to the payment in full in cash of the Loans and all other amounts owed under the Loan Documents (whether or not matured or due and payable); and (b) represents all or part of the purchase price payable by the Company in connection with a transaction described in Section 10.11(c). Senior Debt means all Funded Debt of Parent and its Subsidiaries other than Subordinated Debt. Special Purpose Vehicle means a trust, bankruptcy remote entity or other special purpose entity which is a Subsidiary of Parent (or, if not a Subsidiary, the common equity of which is wholly-owned, directly or indirectly, by Parent) 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 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). Spot Rate for a currency means the rate quoted by BofA as the spot rate for the purchase by BofA of such currency with another currency in accordance with its customary procedures at approximately 10:00 a.m. (Chicago time) on the date on which the foreign exchange computation is made. Subordinated Debt means (a) the U.S.$200,000,000 of 9.50% unsecured senior subordinated notes due 2008 issued by the Company (then known as United Rentals, Inc.) on May 22, 1998 and the unsecured subordinated guarantees thereof provided for in the applicable Subordinated Note Indenture, (b) the U.S.$205,000,000 of 8.80% unsecured senior subordinated notes due 2008 issued by the Company on August 12, 1998 and the unsecured subordinated guarantees thereof provided for in the applicable Subordinated Note Indenture, (c) the U.S.$300,000,000 of 9.25% unsecured senior subordinated notes due 2009 issued by the Company on December 15, 1998 and the unsecured subordinated guarantees thereof provided for in the applicable Subordinated Note Indenture, (d) the U.S.$250,000,000 of 9.0% unsecured senior subordinated notes due 2009 issued by the Company on March 23, 1999 and the unsecured subordinated guarantees thereof provided for in the applicable Subordinated Note Indenture, (e) Seller Subordinated Debt and (f) any other unsecured Debt of the Company and unsecured guarantees thereof by any Subsidiary of the Company which (i) is owed to Persons other than officers, employees, directors or Affiliates of the Company, (ii) has no amortization prior to December 31, 2006 and (iii) has subordination terms (including subordination terms with respect to guarantees) which are not less favorable to the Lenders than those set forth in the Subordinated Note Indentures or are otherwise approved by the Required Lenders, such approval not to be unreasonably withheld. 13 Subordinated Note Indenture means each of (a) the Indenture dated as of May 22, 1998 among the Company (then known as United Rentals, Inc.), various Subsidiaries of the Company and State Street Bank and Trust Company, as Trustee, pursuant to which the Company issued U.S.$200,000,000 of Subordinated Debt, (b) the Indenture dated as August 12, 1998 among the Company, various Subsidiaries of the Company and State Street Bank and Trust Company, as Trustee, pursuant to which the Company issued U.S.$205,000,000 of Subordinated Debt, (c) the Indenture dated as of December 15, 1998 among the Company, various Subsidiaries of the Company and State Street Bank and Trust Company, as Trustee, pursuant to which the Company issued U.S.$300,000,000 of Subordinated Debt, and (d) the Indenture dated as of March 23, 1999 among the Company, various Subsidiaries of the Company and The Bank of New York, as Trustee, pursuant to which the Company issued U.S.$250,000,000 of Subordinated Debt. Subsidiary means, with respect to any Person, a corporation, limited liability company, partnership or other entity of which such Person and/or its other Subsidiaries own, directly or indirectly, more than 50% of the voting stock, membership interests or similar equity interests. Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to Subsidiaries of Parent. Subsidiary Pledge Agreement means each pledge agreement substantially in the form of Exhibit F issued by any Subsidiary. Suretyship Liability means, with respect to any Person, any liability of such Person with respect to any agreement, undertaking or arrangement by which such Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to or otherwise to invest in a debtor, or otherwise to assure a creditor against loss) any indebtedness, obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation in respect of any Suretyship Liability shall (subject to any limitation set forth therein) be deemed to be the principal amount of the debt, obligation or other liability supported thereby. Tangible Assets means at any time all assets of Parent and its Subsidiaries excluding all Intangible Assets. For purposes of the foregoing, "Intangible Assets" means goodwill, patents, trade names, trademarks, copyrights, franchises, experimental expense, organization expense and any other assets that are properly classified as intangible assets in accordance with GAAP. Tranche refers to a portion of a Loan bearing interest at a particular interest rate and, in the case of a portion bearing interest based on the Eurodollar Rate, having a particular Interest Period. Type of Tranche refers to the interest rate basis for a Tranche. The "Types" of Tranches are Base Rate Tranches and Eurodollar Tranches. 14 Unmatured Event of Default means any event that, if it continues uncured, will, with lapse of time or notice or both, constitute an Event of Default. UR Canada means United Rentals of Canada, Inc., an Ontario corporation. U.S. Dollar and the sign "U.S.$" mean lawful money of the United States of America. U.S. Guaranty means the Second Restated U.S. Guaranty dated as of September 29, 1998 executed by various Subsidiaries of the Company, a copy of which is attached as Exhibit C. U.S. Rentals means U.S. Rentals, Inc., a Delaware corporation. U.S. Rentals Acquisition means the acquisition of U.S. Rentals by Parent pursuant to the terms of the USR Merger Agreement. USR Merger Agreement means the Amended and Restated Agreement and Plan of Merger among U.S. Rentals, Parent and UR Acquisition Corporation dated as of August 31, 1998. U.S. Security Agreement means the Second Restated U.S. Security Agreement dated as of September 29, 1998 among Parent, the Company, various Subsidiaries of the Company and the Collateral Agent, a copy of which is attached as Exhibit D. U.S. Subsidiary means any Subsidiary of the Company other than a Foreign Subsidiary. Vendor Financing Arrangement means any financing arrangement provided by a Person (other than Parent or any Affiliate thereof) to any purchaser of equipment sold by Parent or any Subsidiary in the ordinary course of business, the terms of which provide for recourse against Parent and/or the applicable Subsidiary in the event of default by the purchaser. Welfare Plan means a "welfare plan", as such term is defined in Section 3(1) of ERISA. 1.2 Other Interpretive Provisions. (a) Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (b) (i) The term "including" is not limiting and means "including without limitation." (ii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." 15 (c) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such statute or regulation. (d) This Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. (e) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agent, the Company, the Lenders and the other parties thereto and are the products of all parties. Accordingly, they shall not be construed against the Agent or the Lenders merely because of the Agent's or Lenders' involvement in their preparation. SECTION 2 LOANS; TRANCHES OF LOANS; BORROWING AND CONVERSION PROCEDURES. 2.1 Loans. 2.1.1 Initial Loans. On and subject to the terms and conditions of this Agreement, each of the Lenders which is a party hereto on the Closing Date, severally and for itself alone, agrees to make a term loan to the Company on the Closing Date in such Lender's Percentage of U.S.$150,000,000. 2.1.2 Additional Loans. The Company may, from time to time prior to September 29, 2000, by means of a letter addressed to the Agent substantially in the form of Exhibit M, request that additional term loans ("Additional Loans") be made hereunder by any existing Lender or, with the prior written consent of the Agent, any other commercial bank or other Person; provided that (a) the aggregate amount of Additional Loans made on any day shall not be less than $5,000,000 and shall be an integral multiple of $1,000,000 and (b) in no event shall the aggregate principal amount of all Loans made hereunder (whether or not then outstanding) exceed $750,000,000 without the written consent of all Lenders. The Agent shall promptly notify the Company and the Lenders of the making of any Additional Loans and of the aggregate amount of the Loans and the Percentage of each Lender after giving effect thereto. The Company acknowledges that, in order to comply with Section 2.4, prepayment of all or portions of certain Loans may be required on the date of the making of any Additional Loan (and any such prepayment shall be subject to the provisions of Section 8.4). 2.1.3 Tranches of Loans. Each Loan may be divided into Tranches from time to time, provided that (i) not more than eight different Groups of Eurodollar Tranches shall be outstanding at any 16 one time and (ii) the aggregate principal amount of each Group of Eurodollar Tranches shall at all times (including after giving effect to any conversion or continuation) be at least U.S.$500,000. 2.2 Borrowing Procedure. The Company shall give written notice to the Agent of any proposed borrowing not later than 10:00 A.M., Chicago time, two Business Days prior to the proposed date of such borrowing (or such later time and date as the Agent and all applicable Lenders may agree). Such notice shall be effective upon receipt by the Agent and shall specify the date (which shall be a Business Day) of borrowing and, if applicable, the amount of and the initial Interest Period for each Group of Eurodollar Tranches to be outstanding after giving effect to such borrowing. Promptly upon receipt of such notice, the Agent shall advise each Lender thereof. Not later than 1:00 p.m., Chicago time, on the date of the proposed borrowing, each applicable Lender shall provide the Agent at the office specified by the Agent with immediately available funds in the amount of such Lender's pro rata share of such borrowing and, subject to the satisfaction of the applicable conditions precedent set forth in Section 11, the Agent shall pay over the proceeds of such borrowing to the Company on such date. 2.3 Conversion and Continuation Procedures. (a) Subject to Section 2.2, the Company may, upon irrevocable written notice to the Agent in accordance with clause (b) below: (i) elect, as of any Business Day, to convert any Group of Tranches (or any part thereof in an aggregate amount not less than U.S.$500,000) into Tranches of the other Type; or (ii) elect, as of the last day of the applicable Interest Period, to continue any Group of Eurodollar Tranches having Interest Periods expiring on such day (or any part thereof in an aggregate amount not less than U.S.$500,000) for a new Interest Period. (b) The Company shall give written or telephonic (followed immediately by written confirmation thereof) notice to the Agent of each proposed conversion or continuation not later than (i) in the case of conversion into Base Rate Tranches, 10:00 A.M., Chicago time, on the proposed date of such conversion; and (ii) in the case of conversion into or continuation of Eurodollar Tranches, 9:00 A.M., Chicago time, at least two Business Days prior to the proposed date of such conversion or continuation, specifying in each case: (1) the proposed date of conversion or continuation; (2) the aggregate amount of the Tranches to be converted or continued; (3) the Type of Tranches resulting from the proposed conversion or continuation; and 17 (4) in the case of conversion into, or continuation of, Eurodollar Tranches, the duration of the requested Interest Period therefor. (c) If upon the expiration of any Interest Period applicable to any Eurodollar Tranche, the Company has failed to select timely a new Interest Period to be applicable to such Eurodollar Tranche, the Company shall be deemed to have elected to convert such Eurodollar Tranche into a Base Rate Tranche effective on the last day of such Interest Period. (d) The Agent will promptly notify each Lender of its receipt of a notice of conversion or continuation pursuant to this Section 2.3 or, if no timely notice is provided by the Company, of the details of any automatic conversion. (e) Unless the Required Lenders otherwise consent, during the existence of an Event of Default or Unmatured Event of Default, the Company may not elect to have any portion of a Loan converted into or continued as a Eurodollar Tranche. 2.4 Pro Rata Treatment. Except as otherwise expressly provided herein, after giving effect to any borrowing, conversion, continuation or repayment, each Lender will have a pro rata share (according to its then-applicable Percentage) of all Types and Groups of Tranches. 2.5 Commitments Several. The failure of any Lender to make its pro rata share of any borrowing available on the requested borrowing date shall not relieve any other Lender of any obligation it may have to make its pro rata share of such borrowing available on such date, but no Lender shall be responsible for the failure of any other Lender to make such other Lender's pro rata share of such borrowing available on such date. SECTION 3 NOTES EVIDENCING LOANS. Each Lender's Loan shall be evidenced by a promissory note (each a "Note") substantially in the form set forth in Exhibit A, with appropriate insertions, payable to the order of such Lender in quarterly installments on the last day of each calendar quarter beginning on September 30, 2000 and continuing through June 30, 2006, with the first 23 installments each in an amount equal to 0.25% of the principal amount of such Lender's Loan and the final installment in an amount equal to 94.25% of the principal amount of such Lender's Loan. SECTION 4 INTEREST. 4.1 Interest Rates. The Company promises to pay interest on the unpaid principal amount of each Tranche of each Loan, as follows: (a) at all times while such Tranche is a Base Rate Tranche, at a rate per annum equal to the sum of the Base Rate from time to time in effect plus 0.625; and 18 (b) at all times while such Tranche is a Eurodollar Tranche, at a rate per annum equal to the sum of the Eurodollar Rate applicable to each Interest Period for such Tranche plus 2.5%; provided, however, that at any time an Event of Default exists, the interest rate applicable to each Tranche shall be increased by 2%. 4.2 Interest Payment Dates. Accrued interest on each Base Rate Tranche shall be payable in arrears on the last day of each calendar month and at maturity. Accrued interest on each Eurodollar Tranche shall be payable on the last day of each Interest Period for such Tranche (and, in the case of a Eurodollar Tranche with a six-month Interest Period, on the three-month anniversary of the first day of such Interest Period) and at maturity. After maturity, accrued interest on all Tranches shall be payable on demand. 4.3 Setting and Notice of Certain Rates. The applicable Eurodollar Rate for each Interest Period shall be determined by the Agent, and notice thereof shall be given by the Agent promptly to the Company and the Lenders. Each determination of the applicable Eurodollar Rate by the Agent shall be conclusive and binding upon the parties hereto, in the absence of demonstrable error. The Agent shall, upon written request of the Company or any Lender, deliver to the Company or such Lender a statement showing the computations used by the Agent in determining any applicable Eurodollar Rate. 4.4 Computation of Interest. (a) All computations of interest on Base Rate Tranches when the Base Rate is determined by the Reference Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Interest shall accrue during each period during which interest is computed from the first day thereof to the last day thereof. (b) If for any reason whatsoever a Reference Lender ceases to be a Lender hereunder, such Reference Lender shall thereupon cease to be a Reference Lender, and the Eurodollar Rate shall be determined on the basis of the rates as notified by the remaining Reference Lender(s). (c) Each of the Reference Lenders shall use its best efforts to furnish quotations of rates to the Agent as contemplated hereby. If any Reference Lender fails to supply such rates to the Agent upon its request, the Eurodollar Rate shall be determined on the basis of the quotations of the remaining Reference Lender(s). (d) Anything herein to the contrary notwithstanding, the obligations of the Company to any Lender hereunder shall be subject to the limitation that payments of interest 19 shall not be required for any period for which interest is computed hereunder to the extent (but only to the extent) that contracting for or receiving such payment by such Lender would be contrary to the provisions of any law applicable to such Lender limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Lender, and in such event the Company shall pay such Lender interest at the highest rate permitted by applicable law. (e) The applicable interest rate for each Base Rate Tranche shall change simultaneously with each change in the Base Rate. SECTION 5 FEES. 5.1 Closing Fees. On the Closing Date, the Company shall pay to the Agent for the account of each Lender which is a party hereto on such date a closing fee in the amount previously agreed to by the Company and such Lender. In addition, on the date of the making of any Additional Loan, the Company shall pay to each Lender which is increasing the amount of its Loan or becoming a party hereto a closing fee in the amount agreed to by the Company and such Lender. 5.2 Arrangement and Agent's Fees. The Company agrees to pay to the Arranger and the Agent such arrangement and agent's fees as are mutually agreed to from time to time by the Company, the Arranger and the Agent. SECTION 6 PREPAYMENTS. The Company may from time to time prepay the Loans, in whole or in part, without penalty. The Company shall give the Agent (which shall promptly advise each Lender) notice of any prepayment not later than 10:00 A.M., Chicago time, on the day of such prepayment, specifying the Tranches to be prepaid and the date and amount of prepayment. Each partial prepayment of Loans shall be in a principal amount of at least U.S.$500,000. Any prepayment of a Eurodollar Tranche on a day other than the last day of an Interest Period therefor shall be subject to Section 8.4. All prepayments shall be applied pro rata to the then-remaining installments of the Notes. SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES. 7.1 Making of Payments. (a) All payments of principal of or interest on the Notes shall be made by the Company to the Agent in immediately available funds at the office specified by the Agent not later than noon, Chicago time, on the date due; and funds received after that hour shall be deemed to have been received by the Agent on the next following Business Day. The Company hereby authorizes and instructs the Agent to charge any demand deposit account of the Company maintained with BofA for the amount of any such payment on the due date therefor, and (subject to there being a sufficient balance in such account for such purpose) the Agent agrees to do so, provided that the Agent's failure to so charge any such account shall in no way affect the obligation of the Company to 20 make any such payment. The Agent shall promptly remit to each Lender its share of all such payments received in collected funds by the Agent for the account of such Lender. (b) All payments under Section 8.1 shall be made by the Company directly to the Lender entitled thereto. (c) Unless the Agent receives notice from the Company prior to the date on which any payment is due to the Lenders that the Company will not make such payment in full as and when required, the Agent may assume that the Company has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Company has not made such payment in full to the Agent, each Lender shall repay to the Agent on demand the amount distributed to such Lender, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Lender until the date repaid. 7.2 Due Date Extension. If any payment of principal or interest with respect to any of the Loans falls due on a day which is not a Business Day, then such due date shall be extended to the immediately following Business Day (unless, in the case of a Eurodollar Tranche, such immediately following Business Day is the first Business Day of a calendar month, in which case such date shall be the immediately preceding Business Day) and, in the case of principal, additional interest shall accrue and be payable for the period of any such extension. 7.3 Setoff. The Company agrees that the Agent and each Lender have all rights of set-off and bankers' lien provided by applicable law, and in addition thereto, the Company agrees that at any time (a) any payment or other amount owing by the Company under this Agreement is then due to the Agent or any Lender or (b) any Unmatured Event of Default under Section 12.1.4 with respect to the Company or any Event of Default exists, the Agent and each Lender may apply to the payment of such payment or other amount (or, in the case of clause (b), to any obligations of the Company hereunder, whether or not then due) any and all balances, credits, deposits, accounts or moneys of the Company then or thereafter with the Agent or such Lender. 7.4 Proration of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise, but excluding any payment pursuant to Section 8.7 or 14.9) on account of principal of or interest on any Note in excess of its pro rata share of payments and other recoveries obtained by all Lenders on account of principal of and interest on the applicable Notes then held by them, such Lender shall purchase from the other Lenders such participation in the applicable Notes held by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such 21 purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery (but without interest). 7.5 Taxes. (a) All payments of principal of, and interest on, the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by any Lender's net income or receipts (all non- excluded items being called "Taxes"). If any withholding or deduction from any payment to be made by the Company hereunder (including any additional amount or amounts to be paid under this Section 7.5) is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Company will: (i) pay directly to the relevant authority the full amount required to be so withheld or deducted; (ii) promptly forward to the Agent an official receipt or other documentation satisfactory to the Agent evidencing such payment to such authority; and (iii) pay to the Agent for the account of the Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction been required. Moreover, if any Taxes are directly asserted against the Agent or any Lender with respect to any payment received by the Agent or such Lender hereunder, the Agent or such Lender may pay such Taxes and the Company will promptly pay such additional amounts (including any penalty, interest and expense) as is necessary in order that the net amount received by such Person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such Person would have received had such Taxes not been asserted. (b) If the Company fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Agent, for the account of the applicable Lender, the required receipts or other required documentary evidence, the Company shall indemnify such Lender for any incremental Taxes, interest or penalties that may become payable by any such Lender as a result of any such failure. For purposes of this Section 7.5, a distribution hereunder by the Agent to or for the account of any Lender shall be deemed a payment by the Company. (c) Upon the request from time to time of the Company or the Agent, each Lender that is organized under the laws of a jurisdiction other than the United States of America or any state thereof shall execute and deliver to the Company and the Agent one or more (as the Company or the Agent may reasonably request) United States Internal Revenue Service Forms 4224 or Forms 1001 or any 22 applicable successor form (including Form W-8ECI or W-8BEN) or such other forms or documents, appropriately completed, as may be applicable to establish the extent, if any, to which a payment by the Company to such Lender is exempt from withholding or deduction of Taxes. (e) The obligations of the Company under this Section 7.5 (i) are subject to the limitations set out in Section 14.9.1 and (ii) shall survive repayment of the Loans, cancellation of the Notes and any termination of this Agreement. SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR TRANCHES. 8.1 Increased Costs. (a) If, after the date hereof, the adoption of or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any Eurodollar Office of such Lender) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency (A) shall subject any Lender (or any Eurodollar Office of such Lender) to any tax, duty or other charge with respect to its Eurodollar Tranches, its Note or its obligation to maintain Eurodollar Tranches, or shall change the basis of taxation of payments to any Lender of the principal of or interest on its Eurodollar Tranches or any other amounts due under this Agreement in respect of its Eurodollar Tranches or its obligation to maintain Eurodollar Tranches (except for changes in the rate of tax on the overall net income of such Lender or its Eurodollar Office imposed by the jurisdiction in which such Lender's principal executive office or Eurodollar Office is located); or (B) shall impose, modify or deem applicable any reserve (including any reserve imposed by the FRB, but excluding any reserve included in the determination of interest rates pursuant to Section 4), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by any Lender (or any Eurodollar Office of such Lender); or (C) shall impose on any Lender (or its Eurodollar Office) any other condition affecting its Eurodollar Tranches, its Note or its obligation to maintain Eurodollar Tranches; and the result of any of the foregoing is to increase the cost to (or, in the case of Regulation D of the FRB, to impose a cost on) such Lender (or any Eurodollar Office of such Lender) of making, maintaining or participating in any Eurodollar Tranche, or to reduce the amount of any sum received or receivable by such Lender (or its Eurodollar Office) under this Agreement or under its Note with 23 respect thereto, then within 10 days after demand by such Lender (which demand shall be accompanied by a statement setting forth the basis for such demand, a copy of which shall be furnished to the Agent), the Company shall pay directly to such Lender such additional amount as will compensate such Lender for such increased cost or such reduction. (b) If any Lender shall reasonably determine that the adoption or phase-in of or any change in any applicable law, rule or regulation regarding capital adequacy, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or any Person controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's or such controlling Person's capital as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such controlling Person could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such controlling Person's policies with respect to capital adequacy) by an amount deemed by such Lender or such controlling Person to be material, then from time to time, within 10 days after demand by such Lender (which demand shall be accompanied by a statement setting forth the basis for such demand, a copy of which shall be furnished to the Agent), the Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling Person for such reduction. 8.2 Basis for Determining Interest Rate Inadequate or Unfair. If with respect to any Interest Period: (a) none of the Reference Lenders are being offered deposits in U.S. Dollars (in the applicable amounts) in the interbank Eurodollar market for such Interest Period, or the Agent otherwise reasonably determines (which determination shall be binding and conclusive on the Company) that by reason of circumstances affecting the interbank Eurodollar market adequate and reasonable means do not exist for ascertaining the Eurodollar Rate; or (b) Lenders having an aggregate Percentage of 30% or more advise the Agent that the Eurodollar Rate, as determined by the Agent, will not adequately and fairly reflect the cost to such Lenders of maintaining or funding their Eurodollar Tranches for such Interest Period (taking into account any amount to which such Lenders may be entitled under Section 8.1) or that the maintaining or funding of Eurodollar Tranches has become impracticable as a result of an event occurring after the date of this Agreement which in the opinion of such Lenders materially affects such Tranches; then the Agent shall promptly notify the Company and the Lenders thereof and, so long as such circumstances shall continue, (i) no Lender shall be under any obligation to convert into Eurodollar 24 Tranches and (ii) on the last day of the current Interest Period for each Eurodollar Tranche, such Tranche shall, unless then repaid in full, automatically convert to a Base Rate Tranche. 8.3 Changes in Law Rendering Eurodollar Lending Unlawful. If any change in (including the adoption of any new) applicable laws or regulations, or any change in the interpretation of applicable laws or regulations by any governmental or other regulatory body charged with the administration thereof, should make it (or in the good faith judgment of any Lender cause a substantial question as to whether it is) unlawful for any Lender to make, maintain or fund any Eurodollar Tranche, then such Lender shall promptly notify the Company and the Agent and, so long as such circumstances shall continue, (a) such Lender shall have no obligation to make or convert into Eurodollar Tranches (but shall make or maintain Base Rate Tranches concurrently with the making of or conversion into Eurodollar Tranches by the Lenders which are not so affected, in each case in an amount equal to such Lender's pro rata share of all Eurodollar Tranches which would be made or converted into at such time in the absence of such circumstances) and (b) on the last day of the current Interest Period for each Eurodollar Tranche of such Lender (or, in any event, on such earlier date as may be required by the relevant law, regulation or interpretation), such Eurodollar Tranche shall, unless then repaid in full, automatically convert to a Base Rate Tranche. Each Base Rate Tranche maintained by a Lender which, but for the circumstances described in the foregoing sentence, would be a Eurodollar Tranche (an "Affected Tranche") shall remain outstanding for the same period as the Group of Eurodollar Tranches of which such Affected Tranche would be a part absent such circumstances. 8.4 Funding Losses. The Company hereby agrees that upon demand by any Lender (which demand shall be accompanied by a statement setting forth the basis for the amount being claimed, a copy of which shall be furnished to the Agent), the Company will indemnify such Lender against any net loss or expense which such Lender may sustain or incur (including any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain any Eurodollar Tranche), as reasonably determined by such Lender, as a result of (a) any payment, prepayment or conversion of any Eurodollar Tranche of such Lender on a date other than the last day of an Interest Period for such Tranche (including any conversion pursuant to Section 8.3) or (b) any failure of the Company to borrow, convert into, continue or prepay any Eurodollar Tranche on a date specified therefor in a notice of borrowing, conversion, continuation or prepayment pursuant to this Agreement. For this purpose, all notices to the Agent pursuant to this Agreement shall be deemed to be irrevocable. 8.5 Right of Lenders to Fund through Other Offices. Each Lender may, if it so elects, fulfill its commitment as to any Eurodollar Tranche by causing a foreign branch or affiliate of such Lender to maintain or fund such Tranche, provided that in such event for the purposes of this Agreement such Tranche shall be deemed to have been maintained and funded by such Lender and the obligation of the Company to repay such Lender's Loan shall nevertheless be to such Lender and shall be deemed held by it, to the extent of such Loan, for the account of such branch or affiliate. 25 8.6 Discretion of Lenders as to Manner of Funding. Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of its Loan in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Lender had actually funded and maintained each Eurodollar Tranche during each Interest Period for such Tranche through the purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the IBOR (as defined in the definition of Eurodollar Rate) for such Interest Period. 8.7 Mitigation of Circumstances; Replacement of Affected Lender. (a) Each Lender shall promptly notify the Company and the Agent of any event of which it has knowledge which will result in, and will use reasonable commercial efforts available to it (and not, in such Lender's good faith judgment, otherwise disadvantageous to such Lender) to mitigate or avoid, (i) any obligation of the Company to pay any amount pursuant to Section 7.5 or 8.1 or (ii) the occurrence of any circumstances of the nature described in Section 8.2 or 8.3, and, if any Lender has given notice of any event described in clause (i) or (ii) above and thereafter such event ceases to exist, such Lender shall promptly so notify the Company and the Agent. Without limiting the foregoing, each Lender will designate a different funding office if such designation will avoid (or reduce the cost to the Company of) any event described in clause (i) or (ii) of the preceding sentence and such designation will not, in such Lender's sole judgment, be otherwise disadvantageous to such Lender. (b) At any time any Lender is an Affected Lender, the Company may replace such Affected Lender as a party to this Agreement with one or more other bank(s) or financial institution(s) reasonably satisfactory to the Agent (and upon notice from the Company such Affected Lender shall assign pursuant to an Assignment Agreement, and without recourse or warranty, its Loan, its Note and all of its other rights and obligations hereunder to such replacement bank(s) or other financial institution(s) for a purchase price equal to the sum of the principal amount of the Loan so assigned, all accrued and unpaid interest thereon, any amounts payable under Section 8.4 as a result of such Lender receiving payment of any Eurodollar Tranche prior to the end of an Interest Period therefor and all other obligations owed to such Affected Lender hereunder). 8.8 Conclusiveness of Statements; Survival of Provisions. Determinations and statements of any Lender pursuant to Section 8.1, 8.2, 8.3 or 8.4 shall be conclusive absent demonstrable error. Lenders may use reasonable averaging and attribution methods in determining compensation under Sections 8.1 and 8.4, and the provisions of such Sections shall survive repayment of the Loans, cancellation of the Notes and any termination of this Agreement. SECTION 9 WARRANTIES. To induce the Agent and the Lenders to enter into this Agreement and to induce the Lenders to make the Loans hereunder, Parent and the Company warrant to the Agent and the Lenders that: 26 9.1 Organization, etc. Each of Parent and the Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; each of Parent, the Company and each other Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; and each of Parent, the Company and each other Subsidiary is duly qualified to do business in each jurisdiction where the nature of its business makes such qualification necessary (except in those instances in which the failure to be qualified or in good standing does not have a Material Adverse Effect) and has full power and authority to own its property and conduct its business as presently conducted by it. 9.2 Authorization; No Conflict. The execution and delivery by Parent and the Company of this Agreement and each other Loan Document to which it is a party, the borrowings hereunder, the execution and delivery by each other Loan Party of each Loan Document to which it is a party and the performance by Parent, the Company and each other Loan Party of its obligations under each Loan Document to which it is a party are within the corporate powers of Parent, the Company and each other Loan Party, have been duly authorized by all necessary corporate action (including any necessary shareholder action) on the part of Parent, the Company and each other Loan Party, have received all necessary governmental approval (if any shall be required), and do not and will not (a) violate any provision of law or any order, decree or judgment of any court or other government agency which is binding on Parent, the Company, any other Loan Party or any other Subsidiary, (b) contravene or conflict with, or result in a breach of, any provision of the Certificate or Articles of Incorporation, By- Laws or other organizational documents of Parent, the Company, any other Loan Party or any other Subsidiary or of any agreement, indenture, instrument or other document which is binding on Parent, the Company, any other Loan Party or any other Subsidiary or (c) result in, or require, the creation or imposition of any Lien on any property of Parent, the Company, any other Loan Party or any other Subsidiary (other than Liens arising under the Loan Documents). 9.3 Validity and Binding Nature. Each of this Agreement and each other Loan Document to which the Company is a party is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms; and each Loan Document to which any other Loan Party is a party is, or upon the execution and delivery thereof by such Loan Party will be, the legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms. 9.4 Information. All information heretofore or contemporaneously herewith furnished in writing by Parent or any Subsidiary to any Lender for purposes of or in connection with this Agreement and the transactions contemplated hereby is, and all written information hereafter furnished by or on behalf of Parent or any Subsidiary to any Lender pursuant hereto or in connection herewith will be, true and accurate in every material respect on the date as of which such information is dated or certified, and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading in light of the circumstances under which made (it being recognized by the Agent and the Lenders that any projections and forecasts provided by Parent or any 27 Subsidiary are based on good faith estimates and assumptions believed by Parent or such Subsidiary to be reasonable as of the date of the applicable projections or assumptions and that actual results during the period or periods covered by any such projections and forecasts may differ from projected or forecasted results). 9.5 No Material Adverse Change. (a) The audited consolidated financial statements of the Company and its Subsidiaries at December 31, 1998 and the unaudited consolidated financial statements of the Company and its Subsidiaries at March 31, 1999, copies of each of which have been delivered to each Lender, have been prepared in accordance with generally accepted accounting principles (subject, in the case of the unaudited statements, to the absence of footnotes and to normal year-end adjustments) and present fairly the consolidated financial condition of the Company and its Subsidiaries taken as a whole as at such dates and the results of their operations for the periods then ended. (b) Since December 31, 1998, there has been no material adverse change in the financial condition, operations, assets, business, properties or prospects of the Company and its Subsidiaries taken as a whole. 9.6 Litigation and Contingent Liabilities. (a) No litigation (including derivative actions), arbitration proceeding, labor controversy or governmental investigation or proceeding is pending or, to Parent's knowledge, threatened against Parent or any Subsidiary which might reasonably be expected to have a Material Adverse Effect, except as set forth in Schedule 9.6(a). Other than any liability incident to such litigation or proceedings, neither Parent nor any Subsidiary has any material contingent liabilities not listed in Schedule 9.6(a) or 9.6(b). (b) Schedule 9.6(b) sets out descriptions of all arrangements existing on the Closing Date pursuant to which the Company or any Subsidiary may be required to pay any Contingent Payment. 9.7 Ownership of Properties; Liens. Except as set forth on Schedule 9.7, each of Parent and each Subsidiary owns good and marketable title to all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges and material claims (including material infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 10.8. 9.8 Subsidiaries. As of the Closing Date, the Company has no Subsidiaries except those listed in Schedule 9.8. 28 9.9 Pension and Welfare Plans. (a) During the twelve-consecutive-month period prior to the date of the execution and delivery of this Agreement, (i) no steps have been taken to terminate any Pension Plan and (ii) no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which could result in the incurrence by Parent of any material liability, fine or penalty. Parent has no contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Subtitle B of Title I of ERISA. (b) All contributions (if any) have been made to any Multiemployer Pension Plan that are required to be made by Parent or any other member of the Controlled Group under the terms of such Multiemployer Pension Plan or of any collective bargaining agreement or by applicable law; neither Parent nor any member of the Controlled Group has withdrawn or partially withdrawn from any Multiemployer Pension Plan, incurred any withdrawal liability with respect to any Multiemployer Pension Plan, or received notice of any claim or demand for withdrawal liability or partial withdrawal liability from any Multiemployer Pension Plan, and no condition has occurred which, if continued, might result in a withdrawal or partial withdrawal from any Multiemployer Pension Plan; and neither Parent nor any member of the Controlled Group has received any notice that any Multiemployer Pension Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, that any Multiemployer Pension Plan is or has been funded at a rate less than that required under Section 412 of the Code, that any Multiemployer Pension Plan is or may be terminated, or that any Multiemployer Pension Plan is or may become insolvent. (c) All contributions required under applicable law have been made in respect of all pension plans of UR Canada and each of its Subsidiaries and each such pension plan is fully funded on an ongoing and termination basis. 9.10 Investment Company Act. Neither Parent nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940. 9.11 Public Utility Holding Company Act. Neither Parent nor any Subsidiary is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935. 9.12 Regulation U. The Company is not engaged principally, or as one of its important activities, in the business of purchasing or carrying Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock. 29 9.13 Taxes. Each of Parent and each Subsidiary has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. 9.14 Solvency, etc. On the Closing Date (or, in the case of any Person which becomes a Loan Party after the Closing Date, on the date such Person becomes a Loan Party), (a) each of the Company's and each other Loan Party's assets will exceed its liabilities and (b) each of the Company and each other Loan Party will be solvent, will be able to pay its debts as they mature, will own property with fair saleable value greater than the amount required to pay its debts and will have capital sufficient to carry on its business as then constituted. 9.15 Environmental Matters. Parent conducts in the ordinary course of business a review of the effect of existing Environmental Laws and existing Environmental Claims on its business, operations and properties, and as a result thereof Parent has reasonably concluded that, except as specifically disclosed in Schedule 9.15, such Environmental Laws and Environmental Claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.16 Year 2000 Problem. Parent and its Subsidiaries have reviewed the areas within their business and operations which could be adversely affected by, and have developed or are developing a program to address on a timely basis, the "Year 2000 Problem" (that is, the risk that computer applications used by Parent and its Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999). Based on such review and program, Parent reasonably believes that the "Year 2000 Problem" will not have a Material Adverse Effect. 9.17 Senior Debt. The obligations of the Company hereunder constitute "Senior Indebtedness" as such term is defined in each Subordinated Note Indenture. SECTION 10 COVENANTS. Until all obligations of the Company hereunder or in connection herewith are paid in full, Parent agrees that, unless at any time the Required Lenders shall otherwise expressly consent in writing, it will: 10.1 Reports, Certificates and Other Information. Furnish to the Agent and each Lender: 10.1.1 Audit Report. Promptly when available and in any event within 90 days after the close of each Fiscal Year: (a) a copy of the annual audit report of Parent and its Subsidiaries for such Fiscal Year, including therein a consolidated balance sheet of Parent and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of Parent and its Subsidiaries for 30 such Fiscal Year certified without qualification by Ernst & Young or other independent auditors of recognized standing selected by Parent and reasonably acceptable to the Required Lenders, together with a written statement from such accountants to the effect that in making the examination necessary for the signing of such annual audit report by such accountants, they have not become aware of any Event of Default or Unmatured Event of Default that has occurred and is continuing or, if they have become aware of any such event, describing it in reasonable detail; (b) consolidating balance sheets of Parent and its Subsidiaries as of the end of such Fiscal Year and consolidating statements of earnings for Parent and its Subsidiaries for such Fiscal Year, certified by the Chief Financial Officer or the Vice President, Finance of Parent; and (c) commencing with Fiscal Year 1999, a copy of an annual agreed-upon procedures report on the equipment fleet of the Company and its Subsidiaries for such Fiscal Year as performed by the Company's independent auditors. 10.1.2 Quarterly Reports. Promptly when available and in any event within 45 days after the end of each Fiscal Quarter (except the last Fiscal Quarter) of each Fiscal Year, a consolidated balance sheet of Parent and its Subsidiaries as of the end of such Fiscal Quarter, together with consolidated statements of earnings and cash flow for such Fiscal Quarter and for the period beginning with the first day of such Fiscal Year and ending on the last day of such Fiscal Quarter, certified by the Chief Financial Officer or the Vice President, Finance of Parent. 10.1.3 Compliance Certificates. Contemporaneously with the furnishing of a copy of each annual audit report pursuant to Section 10.1.1 and of each set of quarterly statements pursuant to Section 10.1.2, (a) a duly completed compliance certificate in the form of Exhibit B, with appropriate insertions, dated the date of such annual report or such quarterly statements and signed by the Chief Financial Officer or the Vice President, Finance of Parent, containing a computation of each of the financial ratios and restrictions set forth in Section 10.6 and to the effect that such officer has not become aware of any Event of Default or Unmatured Event of Default that has occurred and is continuing or, if there is any such event, describing it and the steps, if any, being taken to cure it; and (b) an updated organizational chart listing all Subsidiaries and the locations of their businesses. 10.1.4 Reports to SEC and to Shareholders. Promptly upon the filing or sending thereof, copies of all regular, periodic or special reports of Parent or any Subsidiary filed with the SEC (excluding exhibits thereto, provided that Parent shall promptly deliver any such exhibit to the Agent or any Lender upon request therefor); copies of all registration statements of Parent or any Subsidiary filed with the SEC (other than on Form S-8); and copies of all proxy statements or other communications made to security holders generally concerning material developments in the business of Parent or any Subsidiary. 10.1.5 Notice of Default, Litigation and ERISA Matters. Immediately upon becoming aware of any of the following, written notice describing the same and the steps being taken by Parent or the Subsidiary affected thereby with respect thereto: 31 (a) the occurrence of an Event of Default or an Unmatured Event of Default; (b) any litigation, arbitration or governmental investigation or proceeding not previously disclosed by Parent to the Lenders which has been instituted or, to the knowledge of Parent, is threatened against Parent or any Subsidiary or to which any of the properties of any thereof is subject which, if adversely determined, might reasonably be expected to have a Material Adverse Effect; (c) the institution of any steps by any member of the Controlled Group or any other Person to terminate any Pension Plan, or the failure of any member of the Controlled Group to make a required contribution to any Pension Plan (if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA) or to any Multiemployer Pension Plan, or the taking of any action with respect to a Pension Plan which could result in the requirement that Parent furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan or Multiemployer Pension Plan which could result in the incurrence by any member of the Controlled Group of any material liability, fine or penalty (including any claim or demand for withdrawal liability or partial withdrawal from any Multiemployer Pension Plan), or any material increase in the contingent liability of Parent with respect to any post-retirement Welfare Plan benefit, or any notice that any Multiemployer Pension Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of an excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code, that any such plan is or may be terminated, or that any such plan is or may become insolvent; (d) any cancellation (without replacement) or material change in any insurance maintained by Parent or any Subsidiary; (e) any event (including any violation of any Environmental Law or the assertion of any Environmental Claim) which might reasonably be expected to have a Material Adverse Effect; or (f) any setoff, claims (including Environmental Claims), withholdings or other defenses to which any of the collateral granted under any Collateral Document, or the Lenders' rights with respect to any such collateral, are subject. 10.1.6 Subsidiaries. Promptly upon any change in the list of its Subsidiaries, a written report of such change. 10.1.7 Management Reports. Promptly upon the request of the Agent or any Lender, copies of all detailed financial and management reports submitted to Parent by independent auditors in connection with each annual or interim audit made by such auditors of the books of Parent. 32 10.1.8 Projections. As soon as practicable and in any event within 60 days after the commencement of each Fiscal Year, financial projections for Parent and its Subsidiaries for such Fiscal Year prepared in a manner consistent with those projections delivered by the Company to the Lenders prior to the Closing Date or otherwise in a manner satisfactory to the Agent. 10.1.9 Other Information. From time to time such other information concerning Parent and its Subsidiaries as any Lender or the Agent may reasonably request. 10.2 Books, Records and Inspections. Keep, and cause each Subsidiary to keep, its books and records in accordance with sound business practices sufficient to allow the preparation of financial statements in accordance with GAAP; permit, and cause each Subsidiary to permit, any Lender or the Agent or any representative thereof to inspect the properties and operations of Parent and of such Subsidiary; and permit, and cause each Subsidiary to permit, at any reasonable time and with reasonable notice (or at any time without notice if an Event of Default exists), any Lender or the Agent or any representative thereof to visit any or all of its offices, to discuss its financial matters with its officers and its independent auditors (and Parent hereby authorizes such independent auditors to discuss such financial matters with any Lender or the Agent or any representative thereof whether or not any representative of Parent or any Subsidiary is present), and to examine (and, at the expense of Parent or the applicable Subsidiary, photocopy extracts from) any of its books or other corporate records. 10.3 Insurance. Maintain, and cause each Subsidiary to maintain, with responsible insurance companies, such insurance as may be required by any law or governmental regulation or court decree or order applicable to it and such other insurance, to such extent and against such hazards and liabilities, as is customarily maintained by companies similarly situated; and, upon request of the Agent or any Lender, furnish to the Agent or such Lender a certificate setting forth in reasonable detail the nature and extent of all insurance maintained by Parent and its Subsidiaries. 10.4 Compliance with Laws; Payment of Taxes and Liabilities. (a) Comply, and cause each Subsidiary to comply, in all material respects with all applicable laws (including Environmental Laws), rules, regulations, decrees, orders, judgments, licenses and permits; and (b) pay, and cause each Subsidiary to pay, prior to delinquency, all taxes and other governmental charges against it or any of its property, as well as claims of any kind which, if unpaid, might become a Lien on any of its property; provided, however, that the foregoing shall not require Parent or any Subsidiary to pay any such tax or charge so long as it shall contest the validity thereof in good faith by appropriate proceedings and shall set aside on its books adequate reserves with respect thereto in accordance with GAAP. 10.5 Maintenance of Existence, etc. Maintain and preserve, and (subject to Section 10.11) cause each Subsidiary to maintain and preserve, (a) its existence and good standing in the jurisdiction of its incorporation and (b) its qualification and good standing as a foreign corporation in each jurisdiction 33 where the nature of its business makes such qualification necessary (except in those instances in which the failure to be qualified or in good standing does not have a Material Adverse Effect). 10.6 Financial Covenants. 10.6.1 Maximum Leverage. Not permit the ratio of (i) Funded Debt to (ii) Funded Debt plus Net Worth to exceed 0.65 to 1.0 at any time. 10.6.2 Minimum Interest Coverage Ratio. Not permit the Interest Coverage Ratio for any Computation Period to be less than the applicable ratio set forth below: Computation Interest Period Ending: Coverage Ratio Prior to 12/31/99 1.75 to 1.0 3/31/00 and thereafter 2.00 to 1.0. 10.6.3 Funded Debt to Cash Flow Ratio. Not permit the Funded Debt to Cash Flow Ratio as of the last day of any Fiscal Quarter to exceed 4.5 to 1.0. 10.6.4 Senior Debt to Tangible Assets. Not permit the ratio of (i) Senior Debt to (ii) the sum of Tangible Assets plus the outstanding amount of accounts receivable, lease receivables and other payment obligations which are not included on Parent's consolidated balance sheet but would be so included if not sold pursuant to a Securitization Transaction to exceed 1.0 to 1.0 at any time. 10.6.5 Senior Debt to Cash Flow Ratio. Not permit the ratio of (i) Senior Debt to (ii) Cash Flow as of the last day of any Fiscal Quarter to exceed 3.0 to 1.0. 10.7 Limitations on Debt. Not, and not permit any Subsidiary to, create, incur, assume or suffer to exist any Debt, except: (a) obligations hereunder, under the other Loan Documents, under the Credit Agreement, under the Existing Loan Agreement and under the other "Loan Documents" as defined in each of the Credit Agreement and the Existing Loan Agreement; (b) unsecured Debt of Parent, the Company and Subsidiaries of the Company (excluding Contingent Payments and Seller Subordinated Debt); provided that no Subsidiary shall incur any such Debt if, after giving effect thereto, the aggregate amount of all then-outstanding Debt of Subsidiaries of the Company permitted solely by this clause (b) would exceed 10% of Net Worth; 34 (c) Debt of Parent or any Subsidiary in respect of Capital Leases or arising in connection with the acquisition of equipment (including Debt assumed in connection with an asset purchase permitted by Section 10.11, or incurred pursuant to a Capital Lease or in connection with the acquisition of equipment by a Person before it became a Subsidiary in connection with a stock purchase permitted by Section 10.11, in each case so long as such Debt is not incurred in contemplation of such purchase), and refinancings of any such Debt so long as the terms applicable to such refinanced Debt are no less favorable to Parent or the applicable Subsidiary than the terms in effect immediately prior to such refinancing, provided that the aggregate amount of all such Debt at any time outstanding shall not exceed a Dollar Equivalent amount equal to U.S.$150,000,000; (d) Debt of Subsidiaries owed to the Company or Parent; provided that the aggregate amount of all such Debt of Foreign Subsidiaries owed to the Company and Parent shall not at any time exceed 15% of the consolidated assets of Parent and its Subsidiaries; (e) unsecured Debt of the Company to Subsidiaries of the Company, of Parent to the Company and Subsidiaries of the Company and of any Special Purpose Vehicle to any Subsidiary of the Company; (f) Subordinated Debt; provided that (i) the aggregate principal amount of all Seller Subordinated Debt at any time outstanding shall not exceed a Dollar Equivalent amount of U.S.$50,000,000 and (ii) the Company shall not issue or incur any Debt described in clause (f) of the definition of Subordinated Debt (x) at any time that an Event of Default or Unmatured Event of Default exists or would result therefrom and (y) unless the Company has delivered to the Agent (which shall promptly deliver a copy thereof to each Lender) a certificate in reasonable detail demonstrating that, after giving effect to such issuance or incurrence, Parent will be in pro forma compliance with all financial covenants set forth in this Section 10; (g) other Debt of the Company or any Subsidiary, not of a type described in clause (c), outstanding on the date hereof and listed in Schedule 10.7(g); (h) Contingent Payments, provided that Parent shall not, and shall not permit any Subsidiary to, incur any obligation to make Contingent Payments the maximum possible amount of which exceeds a Dollar Equivalent amount of U.S.$50,000,000 in the aggregate for all Contingent Payments at any time outstanding; (i) the QuIPS Debentures, the QuIPS Preferred Securities and the QuIPS Guarantees; (j) Permitted Senior Secured Debt and guarantees thereof, provided that the sum of the principal of all Loans plus the aggregate principal amount of all Permitted Senior Secured Debt shall not at any time exceed U.S.$750,000,000; 35 (k) Guarantees by Parent of the obligations of the Company or any Subsidiary; provided that any such guaranty of Debt is subordinated to the obligations of Parent under the Parent Guaranty at least to the extent set forth in Exhibit G or otherwise in a manner reasonably satisfactory to the Required Lenders; (l) unsecured recourse obligations of Parent or any Subsidiary in respect of Vendor Financing Arrangements; (m) Hedging Obligations incurred for purposes of protection from price, interest rate or currency fluctuations posed by bona fide debt, contract or purchase order obligations or from changes in the price of Parent's stock; and (n) Debt in connection with Securitization Transactions; provided that the aggregate principal amount of all such Debt shall not at any time exceed U.S.$150,000,000. For purposes of clause (h) above, a Contingent Payment shall be deemed to be "outstanding" from the time that Parent or any Subsidiary enters into the agreement containing the obligation to make such Contingent Payment until such time as either such Contingent Payment has been made in full or it has become certain that such Contingent Payment will never have to be made. 10.8 Liens. Not, and not permit any Subsidiary to, create or permit to exist any Lien on any of its real or personal properties, assets or rights of whatsoever nature (whether now owned or hereafter acquired), except: (a) Liens for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and, in each case, for which it maintains adequate reserves; (b) Liens arising in the ordinary course of business (such as (i) Liens of carriers, warehousemen, mechanics and materialmen and other similar Liens imposed by law and (ii) Liens incurred in connection with worker's compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA) or in connection with surety bonds, bids, performance bonds and similar obligations) for sums not overdue or being contested in good faith by appropriate proceedings and not involving any deposits or advances or borrowed money or the deferred purchase price of property or services, and, in each case, for which it maintains adequate reserves; (c) Liens identified in Schedule 10.8; (d) Liens securing Debt permitted by clause (c) of Section 10.7 (and attaching only to the property being leased (in the case of Capital Leases) or the purchase price for which was or is 36 being financed by such Debt (in the case of other Debt) and the proceeds (including insurance proceeds) of any disposition or loss of such property); (e) attachments, appeal bonds, judgments and other similar Liens, for sums not exceeding a Dollar Equivalent amount of U.S.$1,000,000 arising in connection with court proceedings, provided the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings; (f) easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens not interfering in any material respect with the ordinary conduct of the business of the Company or any Subsidiary; (g) Liens in favor of the Collateral Agent arising under the Loan Documents and Liens securing Debt permitted by clauses (a) and (j) of Section 10.7; and (h) Liens arising in connection with Securitization Transactions; provided that the aggregate investment or claim held at any time by all purchasers, assignees or other transferees of (or of interests in) accounts receivable, lease receivables and other rights to payment in all Securitization Transactions shall not exceed $150,000,000. 10.9 Asset Sales. Not make, or permit any Subsidiary to make, any sale or other disposition of assets which would require the Company to make, or offer to make, or give any notice of, any prepayment of Subordinated Debt (other than Seller Subordinated Debt). 10.10 Restricted Payments. Not, and not permit any Subsidiary to, (a) declare or pay any dividends on any of its capital stock (other than stock dividends), (b) purchase or redeem any such stock or any warrants, units, options or other rights in respect of such stock, (c) make any other distribution to shareholders, (d) prepay, purchase, defease or redeem any Subordinated Debt, (e) make any payment of principal of or interest on, or acquire, redeem or otherwise retire, or make any other distribution in respect of, any of the QuIPS Debentures or the QuIPS Preferred Securities or (f) set aside funds for any of the foregoing; provided that (i) any Subsidiary of the Company may declare and pay dividends to the Company or to any other wholly- owned Subsidiary of the Company; (ii) the Company may declare and pay dividends to Parent to the extent necessary to enable Parent to pay the taxes and accounting, legal, payroll, benefits and corporate overhead expenses (including all SEC and stock exchange fees and expenses) of Parent, any Acquisition Subsidiary, the QuIPS Trust and any Special Purpose Vehicle and payables described in Section 10.23; (iii) the QuIPS Trust may make a distribution of Parent's common stock pursuant to the terms of the QuIPS Preferred Securities or the QuIPS Debentures; (iv) so long as no Event of Default or Unmatured Event of Default exists or would result therefrom, (A) Parent may make payments on the QuIPS Debentures and permit the QuIPS Trust to make corresponding distributions on the QuIPS Preferred Securities in accordance with the terms set forth in the QuIPS Indenture and (B) the Company may declare and pay dividends to Parent 37 in the amount necessary for Parent to make such payments; (v) so long as no Event of Default or Unmatured Event of Default exists or would result therefrom, the Company may declare and pay dividends to Parent in the amount necessary for Parent to consummate any acquisition permitted by Section 10.11 (provided that Parent shall immediately use the proceeds of such dividend to make such acquisition) or to make distributions permitted by clause (vi); and (vi) so long as (x) no Event of Default or Unmatured Event of Default exists or would result therefrom and (y) the aggregate amount of all purchases of stock, warrants or units made by Parent (or, prior to August 5, 1998, the Company) since October 1, 1997 does not exceed U.S.$12,000,000, Parent may purchase its common stock or warrants, or units issued in respect thereof, from time to time on terms consistent with those set forth under the heading "Certain Agreements Relating to the Outstanding Securities" in the Company's Private Placement Memorandum dated September 12, 1997. Nothing in this Section 10.10 shall prohibit Parent from permitting the cashless exercise of any options or warrants for stock of Parent. 10.11 Mergers, Consolidations, Amalgamations, Sales. Not, and not permit any Subsidiary to, be a party to any merger, consolidation or amalgamation, or purchase or otherwise acquire all or substantially all of the assets or any stock of any class of, or any partnership or joint venture interest in, any other Person, or, except in the ordinary course of its business (including sales of equipment consistent with industry practice), sell, transfer, convey or lease all or any substantial part of its assets, or sell or assign with or without recourse any receivables, except for (a) any such merger or consolidation, amalgamation, sale, transfer, conveyance, lease or assignment of or by any wholly-owned Subsidiary of the Company into the Company or into, with or to any other wholly-owned Subsidiary of the Company; (b) any such purchase or other acquisition by the Company or any wholly-owned Subsidiary of the Company of the assets or stock of any wholly-owned Subsidiary of the Company; (c) any such purchase or other acquisition (including pursuant to a merger) by Parent, an Acquisition Subsidiary, the Company or any wholly-owned Subsidiary of the Company of the assets or stock of any other Person where (1) such assets (in the case of an asset purchase) are for use, or such Person (in the case of a stock purchase) is engaged, solely in the equipment rental and related businesses; (2) immediately before and after giving effect to such purchase or acquisition, no Event of Default or Unmatured Event of Default shall have occurred and be continuing; (3) the board of directors of such Person has not announced that it will oppose such acquisition and has not commenced any litigation which alleges that such acquisition violates or will violate any requirement of law or any contractual obligation of such Person; and (4) in the case of any such purchase or other acquisition by Parent or any Acquisition Subsidiary, Parent immediately contributes the acquired stock or assets to the Company or merges the acquired company or the Acquisition Subsidiary into the Company or with or into any wholly-owned Subsidiary of the Company; (d) the sale, assignment or other transfer of accounts receivable, lease receivables or other rights to payment pursuant to any Securitization Transaction; provided that the aggregate investment or claim held at any time by all purchasers, assignees or other transferees of (or of interests in) such receivables or other rights to payment shall not exceed $150,000,000; and (e) sales and dispositions of assets (including the stock of Subsidiaries), in addition to sales and other dispositions permitted by clause (d), so long as the net book value of all 38 assets sold or otherwise disposed of in any Fiscal Year does not exceed 5% of the net book value of the consolidated assets of Parent and its Subsidiaries as of the last day of the preceding Fiscal Year. 10.12 Modification of Certain Documents. Not permit the Certificate or Articles of Incorporation, By-Laws or other organizational documents of Parent or any Subsidiary, or any Subordinated Note Indenture or any other document evidencing or setting forth the terms applicable to any Subordinated Debt, to be amended or modified in any way which might reasonably be expected to materially adversely affect the interests of the Lenders. 10.13 Use of Proceeds. Use the proceeds of the Loans solely to finance the Company's working capital, for acquisitions permitted by Section 10.11, for capital expenditures and for other general corporate purposes (including repayment of existing Debt); and not use or permit any proceeds of any Loan to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of "purchasing or carrying" any Margin Stock. 10.14 Further Assurances. Take, and cause each Subsidiary to take, such actions as are necessary or as the Agent or the Required Lenders may reasonably request from time to time (including the execution and delivery of guaranties, security agreements, pledge agreements, financing statements and other documents, the filing or recording of any of the foregoing, and the delivery of stock certificates and other collateral with respect to which perfection is obtained by possession) to ensure that (i) the obligations of the Company hereunder and under the other Loan Documents are secured by substantially all of the assets (other than real property and the Company's interest in any Special Purpose Vehicle) of the Company and guaranteed by Parent by execution of the Parent Guaranty and by all of the U.S. Subsidiaries (including, promptly upon the acquisition or creation thereof, any U.S. Subsidiary acquired or created after the date hereof) by execution of a counterpart of the U.S. Guaranty (provided that neither the QuIPS Trust nor any Special Purpose Vehicle shall have any obligation to execute the U.S. Guaranty), (ii) the obligations of Parent under the Parent Guaranty are secured by substantially all of the assets of Parent (other than Parent's interest in the QuIPS Trust or any Special Purpose Vehicle), and (iii) the obligations of each U.S. Subsidiary (other than the QuIPS Trust and any Special Purpose Vehicle) under the U.S. Guaranty are secured by substantially all of the assets (other than real property and such U.S. Subsidiary's interest in any Special Purpose Vehicle) of such U.S. Subsidiary. In addition, upon the occurrence of any Event of Default or Unmatured Event of Default and the request of Lenders having Percentages aggregating 80% or more, the Company will cause each Canadian Subsidiary to guaranty all of the obligations of the Company hereunder and to take all actions necessary so that the obligations of such Canadian Subsidiary under such guaranty are secured by substantially all of the assets (other than real property) of such Canadian Subsidiary (it being understood that, at the request of the Company at any time thereafter when no Event of Default or Unmatured Event of Default exists, such guaranties and collateral security shall be released). 10.15 Transactions with Affiliates. Not, and not permit any Subsidiary to, enter into, or cause, suffer or permit to exist any transaction, arrangement or contract with any of its other Affiliates (other 39 than Parent, the Company and Subsidiaries of the Company) which is on terms which are less favorable than are obtainable from any Person which is not one of its Affiliates; provided that Parent may enter into transactions with Acquisition Subsidiaries or the QuIPS Trust, and Parent or any Subsidiary may enter into transactions with any Special Purpose Vehicle in connection with any Securitization Transaction, to the extent permitted by the terms of this Agreement. 10.16 Employee Benefit Plans. Maintain, and cause each Subsidiary to maintain, each Pension Plan and each Canadian pension plan in substantial compliance with all applicable requirements of law and regulations. 10.17 Environmental Laws. Conduct, and cause each Subsidiary to conduct, its operations and keep and maintain its property in compliance with all Environmental Laws (other than Immaterial Laws). 10.18 Unconditional Purchase Obligations. Not, and not permit any Subsidiary to, enter into or be a party to any contract for the purchase of materials, supplies or other property or services, if such contract requires that payment be made by it regardless of whether or not delivery is ever made of such materials, supplies or other property or services; provided that the foregoing shall not prohibit Parent or any Subsidiary from entering into options for the purchase of particular assets or businesses. 10.19 Inconsistent Agreements. Not, and not permit any Subsidiary to, enter into any agreement containing any provision which (a) would be violated or breached by the performance by Parent or any Subsidiary of any of its obligations hereunder or under any other Loan Document or (b) would prohibit Parent, the Company or any Subsidiary of the Company (other than any Special Purpose Vehicle) from granting to the Collateral Agent, for the benefit of the Lenders, a Lien on any of its assets. 10.20 Business Activities. Not, and not permit any Subsidiary (other than the QuIPS Trust and any Special Purpose Vehicle) to, engage in any line of business other than the equipment rental business and businesses reasonably related thereto. 10.21 Advances and Other Investments. Not, and not permit any Subsidiary to, make, incur, assume or suffer to exist any Investment in any other Person, except (without duplication) the following: (a) equity Investments existing on the Closing Date in wholly-owned Subsidiaries of the Company identified in Schedule 9.8; (b) equity Investments in Subsidiaries of the Company acquired after the Closing Date in transactions permitted as acquisitions of stock or assets pursuant to Section 10.11; 40 (c) in the ordinary course of business, contributions by the Company to the capital of any of its Subsidiaries, or by any such Subsidiary to the capital of any of its Subsidiaries; (d) in the ordinary course of business, Investments by the Company in any Subsidiary of the Company or by any of the Subsidiaries of the Company in the Company, by way of intercompany loans, advances or guaranties, all to the extent permitted by Section 10.7; (e) Suretyship Liabilities permitted by Section 10.7; (f) good faith deposits made in connection with prospective acquisitions of stock or assets permitted by Section 10.11; (g) loans to officers and employees not exceeding (i) a Dollar Equivalent amount of U.S.$100,000 in the aggregate to any single individual or (ii) a Dollar Equivalent amount of U.S.$300,000 in the aggregate for all such individuals; (h) Investments by Parent in the Company, in Subsidiaries of the Company and, subject to the provisions of Section 10.11, in Acquisition Subsidiaries; (i) other Investments by Parent permitted by Section 10.23; (j) Cash Equivalent Investments; and (k) Investments by Parent or any Subsidiary in any Special Purpose Vehicle; provided that the aggregate amount of all such Investments made in cash shall not exceed $5,000,000; provided that (x) any Investment which when made complies with the requirements of the definition of the term "Cash Equivalent Investment" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; (y) no Investment otherwise permitted by clause (b), (c), (d), (e), (f), (g) or (k) shall be permitted to be made if, immediately before or after giving effect thereto, any Event of Default or Unmatured Event of Default shall have occurred and be continuing; and (z) the aggregate principal amount of Investments by the Company in Foreign Subsidiaries pursuant to clauses (b), (c), (d), (e), and (f) plus, without duplication, the aggregate amount of all "Canadian Loans" under and as defined in the Credit Agreement shall not at any time exceed 15% of the consolidated assets of Parent and its Subsidiaries. 10.22 Location of Assets. Not permit at any time more than 15% of the consolidated assets of Parent and its Subsidiaries to be owned by Foreign Subsidiaries. 10.23 Activities of Parent. Not engage in any business other than ownership of the Company, Acquisition Subsidiaries, the QuIPS Trust and any Special Purpose Vehicle and activities reasonably 41 related thereto (including the incurrence of Debt permitted by Section 10.7, the incurrence of unsecured trade obligations in respect of goods to be delivered to and properties to be used by, and services (including management and consulting services) to be performed for the benefit of, and unsecured lease obligations incurred for the benefit of, Subsidiaries and the incurrence of payroll and benefit expenses). Without limiting the foregoing, Parent will not (a) incur any Debt other than the QuIPS Debentures, the QuIPS Preferred Securities, the Parent Guaranty, the QuIPS Guarantees, Debt permitted by Section 10.7 and guarantees of the obligations of the Company or any other Subsidiary (provided that any such guaranty of Debt is subordinated to the obligations of Parent under the Parent Guaranty at least to the extent set forth in Exhibit G or otherwise in a manner reasonably satisfactory to the Required Lenders), (b) make any Investments other than (i) Investments in the Company and its Subsidiaries, (ii) Investments in Acquisition Subsidiaries, (iii) Investments in the QuIPS Trust existing on the date hereof and (iv) Investments in any Special Purpose Vehicle, (c) grant any Liens on any of its assets (other than pursuant to the U.S. Security Agreement or as expressly permitted under this Agreement) or (d) permit any amendment to or modification of the QuIPS Debentures, the QuIPS Preferred Securities or the QuIPS Indenture which, in any such case, is adverse to the interests of the Lenders. SECTION 11 CONDITIONS OF LENDING. 11.1 Initial Loans. The obligation of the Lenders to make the initial Loans is (in addition to the conditions precedent set forth in Section 11.3) subject to the conditions precedent that the Agent shall have received (a) all amounts which are then due and payable pursuant to Section 5 and (to the extent billed) Section 14.6 and (b) all of the following, each duly executed and dated the Closing Date (or such earlier date as shall be satisfactory to the Agent), in form and substance satisfactory to the Agent, and each (except for the Notes, of which only the originals shall be signed) in sufficient number of signed counterparts to provide one for each Lender: 11.1.1 Notes. A Note for each Lender which is a party hereto on the Closing Date. 11.1.2 Resolutions. Certified copies of resolutions of the Board of Directors of each of Parent and the Company authorizing or ratifying the execution, delivery and performance by such entity of this Agreement and, in the case of the Company, the Notes. 11.1.3 Consents, etc. Certified copies of all documents evidencing any necessary corporate action, consents and governmental approvals (if any) required for the execution, delivery and performance by Parent and the Company of the documents referred to in this Section 11, as applicable. 11.1.4 Incumbency and Signature Certificates. A certificate of the Secretary or an Assistant Secretary of each of Parent and the Company certifying the names of the officer or officers of such entity authorized to sign this Agreement and, in the case of the Company, the Notes, together with a sample of the true signature of each such officer (it being understood that the Agent and each Lender 42 may conclusively rely on each such certificate until formally advised by a like certificate of any changes therein). 11.1.5 Opinions of Counsel for the Company. The opinions of (a) Weil, Gotshal & Manges LLP, special counsel to Parent and the Company, and (b) Oscar D. Folger, counsel to Parent and the Company. 11.1.6 Second Amendment to Credit Agreement. A Second Amendment to the Credit Agreement in form and substance satisfactory to the Agent, executed by Parent, the Company and the "Required Banks" as defined in the Credit Agreement. 11.1.7 Second Amendment to Existing Loan Agreement. A Second Amendment to the Existing Loan Agreement in form and substance satisfactory to the Agent, executed by Parent, the Company and the "Required Lenders" as defined in the Existing Loan Agreement. 11.1.8 Confirmation. A Confirmation, substantially in the form of Exhibit N, signed by Parent, the Company and each other Loan Party confirming the effectiveness of the U.S. Guaranty, the Parent Guaranty and each Collateral Document and that the Agent and the Lenders are entitled to the benefits of such documents. 11.1.9 Confirmatory Certificate. A certificate of a duly-authorized officer of Parent as to the matters set forth in Section 11.3. 11.1.10 Other. Such other documents as the Agent or any Lender may reasonably request. 11.2 Additional Loans. The right of the Company to borrow any Additional Loan is (in addition to the conditions precedent set forth in Section 11.3) subject to the conditions precedent that the Agent shall have received all of the following, each duly executed and dated the date of such Additional Loans (or such earlier date as shall be satisfactory to the Agent), in form and substance satisfactory to the Agent, and each (except for any Note, of which only the original shall be signed) in sufficient number of signed counterparts to provide one for each Lender which is increasing the amount of its Loan or becoming a party hereto: 11.2.1 Notes. A Note for each new Lender and a replacement Note for each existing Lender which is making an Additional Loan. 11.2.2 Confirmatory Certificate. A certificate of a duly-authorized officer of Parent as to the matters set forth in Section 11.3. 43 11.2.3 Other. Such other documents as the Agent or any Lender may reasonably request (including copies or updates of any of the documents referred to in Section 11.1.2, 11.1.3, 11.1.4, 11.1.5, or 11.1.8). 11.3 All Loans. The obligation of the Lenders to make the initial Loans and the right of the Company to borrow any Additional Loans is (in addition to the conditions precedent set forth in Section 11.1.1 or 11.1.2, as applicable) subject to the conditions precedent that (a) the representations and warranties of Parent, the Company and each other Subsidiary set forth in this Agreement and the other Loan Documents shall be true and correct in all material respects with the same effect as if then made; and (b) no Event of Default or Unmatured Event of Default shall have then occurred and be continuing. SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT. 12.1 Events of Default. Each of the following shall constitute an Event of Default: 12.1.1 Non-Payment of the Loans, etc. Default in the payment when due of the principal of any Loan; or default, and continuance thereof for five days, in the payment when due of any interest or other amount payable by the Company hereunder or under any other Loan Document. 12.1.2 Non-Payment of Other Debt. Any default shall occur under the terms applicable to any Debt of Parent or any Subsidiary (excluding Holdbacks) in an aggregate amount (for all such Debt so affected) exceeding a Dollar Equivalent amount of U.S.$15,000,000 and such default shall (a) consist of the failure to pay such Debt when due (subject to any applicable grace period), whether by acceleration or otherwise, or (b) accelerate the maturity of such Debt or permit the holder or holders thereof, or any trustee or agent for such holder or holders, to cause such Debt to become due and payable prior to its expressed maturity; or any default of the type referred to in clause (a) or (b) above shall occur under the terms of any Holdback owed by Parent or any Subsidiary in an aggregate amount (for all Holdbacks so affected) exceeding a Dollar Equivalent amount of U.S.$15,000,000, provided that no amount payable in respect of any Holdback shall be deemed to be in default to the extent that the obligation to pay such amount is being contested by Parent or the applicable Subsidiary in good faith and by appropriate proceedings and appropriate reserves have been set aside in respect of such amount; or any event of default, default, liquidation event or similar event shall occur or exist relating to any Securitization Transaction if the effect of such event is to cause or permit (subject to any applicable grace period) an aggregate cash amount exceeding a Dollar Equivalent amount of U.S. $15,000,000 to become immediately due and payable by Parent or any Subsidiary under such Securitization Transaction. 12.1.3 Other Material Obligations. Default in the payment when due, or in the performance or observance of, any material obligation of, or condition agreed to by, Parent or any Subsidiary with respect to any material purchase or lease of goods or services where such default, singly or in the 44 aggregate with other such defaults might reasonably be expected to have a Material Adverse Effect (except only to the extent that the existence of any such default is being contested by Parent or such Subsidiary in good faith and by appropriate proceedings and appropriate reserves have been made in respect of such default). 12.1.4 Bankruptcy, Insolvency, etc. Parent or any Subsidiary becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; or Parent or any Subsidiary applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other custodian for Parent or such Subsidiary or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for Parent or any Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding (except the voluntary dissolution, not under any bankruptcy or insolvency law, of any Subsidiary of the Company), is commenced in respect of Parent or any Subsidiary, and if such case or proceeding is not commenced by Parent or such Subsidiary, an order for relief is entered, it is consented to or acquiesced in by Parent or such Subsidiary, or remains for 60 days undismissed; or Parent or any Subsidiary takes any corporate action to authorize, or in furtherance of, any of the foregoing. 12.1.5 Non-Compliance with Provisions of This Agreement. (a) Failure by Parent to comply with or to perform any covenant set forth in Sections 10.5 through 10.13, 10.15 or 10.16; or (b) failure by Parent or the Company to comply with or to perform any other provision of this Agreement (and not constituting an Event of Default under any of the other provisions of this Section 12) and continuance of such failure described in this clause (b) for 30 days (or, in the case of Section 10.14, five Business Days) after notice thereof to the Company from the Agent or any Lender. 12.1.6 Warranties. Any warranty made or deemed made by the Company herein is breached or is false or misleading in any material respect, or any schedule, certificate, financial statement, report, notice or other writing furnished by Parent or the Company to the Agent or any Lender in connection herewith is false or misleading in any material respect on the date as of which the facts therein set forth are (or are deemed) stated or certified. 12.1.7 Pension Plans. (i) Institution of any steps by Parent or any other Person to terminate a Pension Plan if as a result of such termination Parent could be required to make a contribution to such Pension Plan, or could incur a liability or obligation to such Pension Plan, in excess of U.S.$15,000,000; (ii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; or (iii) there shall occur any withdrawal or partial withdrawal from a Multiemployer Pension Plan and the withdrawal liability (without unaccrued interest) to Multiemployer Pension Plans as a result of such withdrawal (including any outstanding withdrawal 45 liability that Parent and the Controlled Group have incurred on the date of such withdrawal) exceeds U.S.$15,000,000. 12.1.8 Judgments. Final judgments which exceed an aggregate Dollar Equivalent amount of U.S.$15,000,000 shall be rendered against Parent or any Subsidiary and shall not have been paid, discharged or vacated or had execution thereof stayed pending appeal within 30 days after entry or filing of such judgments. 12.1.9 Invalidity of U.S. Guaranty, etc. The U.S. Guaranty shall cease to be in full force and effect with respect to any applicable Subsidiary, any applicable Subsidiary shall fail (subject to any applicable grace period) to comply with or to perform any applicable provision of the U.S. Guaranty, or any applicable Subsidiary (or any Person by, through or on behalf of such Subsidiary) shall contest in any manner the validity, binding nature or enforceability of the U.S. Guaranty with respect to such Subsidiary. 12.1.10 Invalidity of Collateral Documents, etc. Any Collateral Document shall cease to be in full force and effect with respect to Parent, the Company or any applicable Subsidiary, Parent, the Company or any applicable Subsidiary shall fail (subject to any applicable grace period) to comply with or to perform any applicable provision of any Collateral Document to which such entity is a party, or Parent, the Company or any applicable Subsidiary (or any Person by, through or on behalf of Parent, the Company or such Subsidiary) shall contest in any manner the validity, binding nature or enforceability of any Collateral Document. 12.1.11 Change in Control. (a) Any Person or group of Persons (within the meaning of Section 13 or 14 of the Exchange Act, but excluding Permitted Holders) shall acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of the outstanding shares of common stock of Parent; (b) during any 24-month period, individuals who at the beginning of such period constituted Parent's Board of Directors (together with any new directors whose election by Parent's Board of Directors or whose nomination for election by Parent's shareholders was approved by a vote of at least two-thirds of the directors who either were directors at beginning of such period or whose election or nomination was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Parent; (c) a period of 30 consecutive days shall have elapsed during which any two of the individuals named in Schedule 12.1.11 shall have ceased to hold executive offices with Parent at least equal in seniority to their present offices, as set out in such Schedule 12.1.11, excluding any such individual who has been replaced by another individual or individuals reasonably satisfactory to the Required Lenders (it being understood that any such replacement individual shall be deemed added to Schedule 12.1.11 on the date of approval thereof by the Required Lenders); (d) any "Change of Control" shall occur under, and as defined in, any Subordinated Note Indenture; or (e) the Company shall cease to be a direct, wholly-owned Subsidiary of Parent. 46 12.1.12 Invalidity of Parent Guaranty, etc. The Parent Guaranty shall cease to be in full force and effect, Parent shall fail (subject to any applicable grace period) to comply with or to perform any provision of the Parent Guaranty, or Parent (or any Person by, through or on behalf of Parent) shall contest in any manner the validity, binding nature or enforceability of the Parent Guaranty. 12.2 Effect of Event of Default. If any Event of Default described in Section 12.1.4 shall occur, the Notes and all other obligations hereunder shall become immediately due and payable, all without presentment, demand, protest or notice of any kind; and, if any other Event of Default shall occur and be continuing, the Agent (upon written request of the Required Lenders) shall declare all Notes and all other obligations hereunder to be due and payable, whereupon the Notes and all other obligations hereunder shall become immediately due and payable, all without presentment, demand, protest or notice of any kind. The Agent shall promptly advise the Company of any such declaration, but failure to do so shall not impair the effect of such declaration. Notwithstanding the foregoing, the effect as an Event of Default of any event described in Section 12.1.1 or Section 12.1.4 may be waived by the written concurrence of all of the Lenders, and the effect as an Event of Default of any other event described in this Section 12 may be waived by the written concurrence of the Required Lenders. SECTION 13 THE AGENT. 13.1 Appointment and Authorization. Each Lender hereby irrevocably (subject to Section 13.9) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. 13.2 Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 13.3 Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, 47 report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company or any of the Company's Subsidiaries or Affiliates. 13.4 Reliance by Agents. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if required, all Lenders) as it deems appropriate and, if it so requests, confirmation from the Lenders of their obligation to indemnify the Agent against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or, if required, all Lenders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. 13.5 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default or Unmatured Event of Default except with respect to defaults in the payment of principal, interest or fees required to be paid to the Agent for the account of the Lenders, unless the Agent shall have received written notice from a Lender or the Company referring to this Agreement, describing such Event of Default or Unmatured Event of Default and stating that such notice is a "notice of default." If the Agent receives such a notice, the Agent will promptly notify the Lenders of its receipt thereof. The Agent shall take such action with respect to such Event of Default or Unmatured Event of Default as may be requested by the Required Lenders (or, if required, all Lenders) in accordance with Section 12; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default or Unmatured Event of Default as it shall deem advisable or in the best interest of the Lenders. 13.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereafter taken, including any review of the affairs of the Company or any Subsidiary or Affiliate of the Company, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender 48 represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company or any Subsidiary or Affiliate of the Company, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Agent, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial or other condition or creditworthiness of the Company or any Subsidiary or Affiliate of the Company which may come into the possession of any of the Agent-Related Persons. 13.7 Indemnification. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), pro rata, from and against any and all Indemnified Liabilities; provided, however, that no Lender shall be liable for any payment to any Agent-Related Person of any portion of the Indemnified Liabilities resulting from such Person's gross negligence or willful misconduct. Without limitation of the foregoing (but subject to the proviso to the foregoing sentence), each Lender shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including reasonable fees of attorneys for the Agent (including the allocable costs of internal legal services and all disbursements of internal counsel)) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive repayment of the Loans, cancellation of the Notes, any foreclosure under, or any modification, release or discharge of, any or all of the Collateral Documents, any termination of this Agreement and the resignation or replacement of the Agent. For the purposes of this Section 13.7, "Indemnified Liabilities" shall mean: any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including reasonable fees of attorneys for the Agent (including the allocable costs of internal legal services and all disbursements of internal counsel)) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or the replacement of any Lender) be imposed on, incurred by or asserted 49 against any Agent-Related Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including (a) any case, action or proceeding before any court or other governmental authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. federal, state or foreign law, including the Bankruptcy Code, and including any appellate proceeding) related to or arising out of this Agreement or any other Loan Document, whether or not any Agent-Related Person, any Lender or any of their respective officers, directors, employees, counsel, agents or attorneys-in-fact is a party thereto. 13.8 Agent in Individual Capacity. BofA and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Company and its Subsidiaries and Affiliates as though BofA were not the Agent, and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, BofA or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Affiliate) and acknowledge that BofA and its Affiliates shall be under no obligation to provide such information to them. With respect to its Loans (if any), BofA and its Affiliates shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though BofA were not the Agent, and the term "Lender" includes BofA and its Affiliates, to the extent applicable, in their individual capacities. 13.9 Successor Agent; Assignment of Agency. The Agent may, and at the request of the Required Lenders shall, resign as Agent upon 30 days' notice to the Lenders. If the Agent resigns under this Agreement, the Required Lenders shall, with (so long as no Event of Default exists) the consent of the Company (which shall not be unreasonably withheld or delayed), appoint from among the Lenders a successor Agent for the Lenders. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and the Company, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent, and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 13 and Sections 14.6 and 14.13 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement. If no successor agent has accepted appointment as the Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. 50 13.10 Withholding Tax. (a) If any Lender is a "foreign corporation, partnership or trust" within the meaning of the Code and such Lender claims exemption from, or a reduction of, U.S. withholding tax under Section 1441 or 1442 of the Code, such Lender agrees to deliver to the Agent: (i) if such Lender claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed Internal Revenue Service ("IRS") Forms 1001 and W-8 or any applicable successor form (including Form W-8BEN) before the payment of any interest in the first calendar year and before the payment of any interest in each third succeeding calendar year during which interest may be paid under this Agreement; (ii) if such Lender claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, two properly completed and executed copies of IRS Form 4224 or any applicable successor form (including Form W-8ECI) before the payment of any interest is due in the first taxable year of such Lender and in each succeeding taxable year of such Lender during which interest may be paid under this Agreement, and IRS Form W-9; (iii) if such Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either IRS Form 1001 or 4224 or any applicable successor form (including Form W-8BEN or W-8ECI), (A) a certificate substantially in the form of Exhibit J and (B) two properly completed and signed copies of IRS Form W-8 certifying that such Lender is entitled to an exemption from United States withholding tax with respect to payments of interest to be made under this Agreement; and (iv) such other form or forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. Any such Lender agrees to promptly notify the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction. (b) If any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form 1001 or any applicable successor form (including Form W-8BEN) and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the obligations of the Company to 51 such Lender, such Lender agrees to notify the Agent of the percentage amount in which it is no longer the beneficial owner of such obligations of the Company hereunder. To the extent of such percentage amount, the Agent will treat such Lender's IRS Form 1001 (or applicable successor form) as no longer valid. (c) If any Lender claiming exemption from United States withholding tax by filing IRS Form 4224 or any applicable successor form (including Form W-8ECI) with the Agent grants a participation in all or part of the obligations of the Company to such Lender hereunder, such Lender agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code. (d) If any Lender is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (a) of this Section are not delivered to the Agent, then the Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax. (e) If the IRS or any other governmental authority of the United States or any other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because such Lender failed to notify the Agent of a change in circumstances which rendered an exemption from, or reduction of, withholding tax ineffective), such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on any amount payable to the Agent under this Section, together with all costs and expenses (including reasonable fees of attorneys for the Agent (including the allocable costs of internal legal services and all disbursements of internal counsel)). The obligations of the Lenders under this subsection shall survive the repayment of the Loans, cancellation of the Notes, any termination of this Agreement and the resignation or replacement of the Agent. (f) If any Lender claims exemption from, or reduction of, withholding tax under the Code by providing IRS Form W-8 and a certificate in the form of Exhibit J and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the obligations of the Company to such Lender, such Lender agrees to notify the Agent and the Company of the percentage amount in which it is no longer the beneficial owner of obligations of the Company to such Lender. To the extent of such percentage amount, the Agent and the Company will treat such Lender's IRS Form W-8 and certificate in the form of Exhibit J as no longer valid. 52 13.11 Other Agents. None of the Lenders identified on the signature pages of this Agreement or otherwise herein, or in any amendment hereof or other document related hereto, as being the "Syndication Agent", the "Documentation Agent" or a "Co-Agent" (collectively, the "Other Agents") shall have any right, power, obligation, liability, responsibility or duty under this Agreement in such capacity other than those applicable to all Lenders. Each Lender acknowledges that it has not relied, and will not rely, on any of the Other Agents in deciding to enter into this Agreement or in taking or refraining from taking any action hereunder or pursuant hereto. SECTION 14 GENERAL. 14.1 Waiver; Amendments. No delay on the part of the Agent or any Lender in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude any other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the Notes shall in any event be effective unless the same shall be in writing and signed and delivered by Lenders having an aggregate Percentage of not less than the aggregate Percentage expressly designated herein with respect thereto or, in the absence of such designation as to any provision of this Agreement or the Notes, by the Required Lenders, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment, modification, waiver or consent shall change the Percentage of any Lender without the consent of such Lender. No amendment, modification, waiver or consent shall (i) extend the date for payment of any principal of or interest on the Loans or any fees payable hereunder, (ii) reduce the principal amount of any Loan, the rate of interest thereon or any fees payable hereunder, (iii) release the U.S. Guaranty (other than with respect to a Person which ceases to be a Subsidiary as a result of a transaction permitted hereunder) or the Parent Guaranty or all or substantially all of the collateral granted under the Collateral Documents or (iv) reduce the aggregate Percentage required to effect an amendment, modification, waiver or consent without, in each case, the consent of all Lenders. No provision of Section 13 or any other provision of this Agreement affecting the Agent in its capacity as such shall be amended, modified or waived without the written consent of the Agent. 14.2 Confirmations. The Company and each Lender agree from time to time, upon written request received by it from the other, to confirm to the other in writing (with a copy of each such confirmation to the Agent) the aggregate unpaid principal amount of the Loan then outstanding under the applicable Note. 14.3 Notices. Except as otherwise provided in Section 2.3, all notices hereunder shall be in writing (including facsimile transmission) and shall be sent to the applicable party at its address shown on Schedule 14.3 or at such other address as such party may, by written notice received by the other parties, have designated as its address for such purpose. Notices sent by facsimile transmission shall be deemed to have been given when sent; notices sent by mail shall be deemed to have been given three 53 Business Days after the date when sent by registered or certified mail, postage prepaid; and notices sent by hand delivery or overnight courier service shall be deemed to have been given when received. For purposes of Section 2.3, the Agent shall be entitled to rely on telephonic instructions from any person that the Agent in good faith believes is an authorized officer or employee of the Company, and the Company shall hold the Agent and each other Lender harmless from any loss, cost or expense resulting from any such reliance. 14.4 Computations. Where the character or amount of any asset or liability or item of income or expense is required to be determined, or any consolidation or other accounting computation is required to be made, for the purpose of this Agreement, such determination or calculation shall, to the extent applicable and except as otherwise specified in this Agreement, be made in accordance with GAAP, consistently applied; provided that if Parent notifies the Agent that Parent wishes to amend any covenant in Section 10 to eliminate or to take into account the effect of any change in GAAP on the operation of such covenant (or if the Agent notifies Parent that the Required Lenders wish to amend Section 10 for such purpose), then Parent's compliance with such covenant shall be determined on the basis of GAAP as in effect immediately before the relevant change in GAAP became effective until either such notice is withdrawn or such covenant is amended in a manner satisfactory to Parent and the Required Lenders. 14.5 Regulation U. Each Lender represents that it in good faith is not relying, either directly or indirectly, upon any Margin Stock as collateral security for the extension or maintenance by it of any credit provided for in this Agreement. 14.6 Costs, Expenses and Taxes. The Company agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Agent (including the reasonable fees and charges of counsel for the Agent and of local counsel, if any, who may be retained by said counsel) in connection with the preparation, execution, delivery and administration of this Agreement, the other Loan Documents and all other documents provided for herein or delivered or to be delivered hereunder or in connection herewith (including any amendment, supplement or waiver to any Loan Document), and all reasonable out-of-pocket costs and expenses (including reasonable attorneys' fees, court costs and other legal expenses and allocated costs of staff counsel) incurred by the Agent and each Lender after an Event of Default in connection with the enforcement of this Agreement, the other Loan Documents or any such other documents. In addition, the Company agrees to pay, and to save the Agent and the Lenders harmless from all liability for, (a) any stamp or other taxes (excluding income taxes and franchise taxes based on net income) which may be payable in connection with the execution and delivery of this Agreement, the borrowings hereunder, the issuance of the Notes or the execution and delivery of any other Loan Document or any other document provided for herein or delivered or to be delivered hereunder or in connection herewith and (b) any fees of Parent's auditors in connection with any reasonable exercise by the Agent and the Lenders of their rights pursuant to Section 10.2. All obligations provided for in this Section 14.6 shall survive repayment of the Loans, cancellation of the Notes and any termination of this Agreement. 54 14.7 Judgment. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or under any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of the Company in respect of any such sum due from it to the Agent or any Lender hereunder or under any other Loan Document shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the "Agreement Currency"), be discharged only to the extent that on the Business Day following receipt by the Agent or such Lender of any sum adjudged to be so due in the Judgment Currency, the Agent or such Lender may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Agent or such Lender in the Agreement Currency, the Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Agent or such Lender against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Agent or such Lender in such currency, the Agent or such Lender agrees to return the amount of any excess to the Company (or to any other Person who may be entitled thereto under applicable law). 14.8 Captions. Section captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement. 14.9 Assignments; Participations. 14.9.1 Assignments. Any Lender may, with the prior written consents of the Company and the Agent (which consents shall not be unreasonably delayed or withheld), at any time assign and delegate to one or more Related Funds (provided that no written consent of the Company or the Agent shall be required in connection with any assignment and delegation by a Lender to a Related Fund), commercial banks or other Persons (any Person to whom such an assignment and delegation is to be made being herein called an "Assignee") all or any fraction of such Lender's Loan in a minimum aggregate amount equal to the lesser of (i) the amount of the assigning Lender's Loan and (ii) U.S.$1,000,000; provided, however, that (a) no assignment and delegation may be made to any Person if, at the time of such assignment and delegation, the Company would be obligated to pay any greater amount under Section 7.5 or Section 8 to the Assignee than the Company is then obligated to pay to the assigning Lender under such Sections (and if any assignment is made in violation of the foregoing, the Company will not be required to pay the incremental amounts); and (b) the Company and the Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee until the date when all of the following conditions shall have been met: (x) five Business Days (or such lesser period of time as the Agent and the assigning Lender shall agree) shall have passed after written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such 55 Assignee, shall have been given to the Company and the Agent by such assigning Lender and the Assignee, (y) the assigning Lender and the Assignee shall have executed and delivered to the Company and the Agent an assignment agreement substantially in the form of Exhibit H (an "Assignment Agreement"), together with any documents required to be delivered thereunder, which Assignment Agreement shall have been accepted by the Agent, and (z) the assigning Lender or the Assignee shall have paid the Agent a processing fee of U.S.$3,500. From and after the date on which the conditions described above have been met, (x) such Assignee shall be deemed automatically to have become a party hereto and, to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder, and (y) the assigning Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it pursuant to such Assignment Agreement, shall be released from its obligations hereunder. Within five Business Days after the effectiveness of any assignment and delegation, the Company shall execute and deliver to the Agent (for delivery to the Assignee and the Assignor, as applicable) a new Note in the amount of the Assignee's Loan and, if the assigning Lender continues to have a Loan hereunder, a replacement Note in the amount of the assigning Lender's Loan. Each such Note shall be dated the effective date of such assignment. The assigning Lender shall mark the predecessor Note "exchanged" and deliver such Note to the Company. Any attempted assignment and delegation not made in accordance with this Section 14.9.1 shall be null and void. The Company designates the Agent as its agent for maintaining a book entry record of ownership identifying the Lenders, their respective addresses and the amount of the respective Loans and Notes which they own. The foregoing provisions are intended to comply with the registration requirements in Treasury Regulation Section 5f.103-1 so that the Loans and Notes are considered to be in "registered form" pursuant to such regulation. Notwithstanding the foregoing provisions of this Section 14.9.1 or any other provision of this Agreement, any Lender may at any time assign all or any portion of its Loan and its Note to a Federal Reserve Bank (but no such assignment shall release any Lender from any of its obligations hereunder). 14.9.2 Participations. Any Lender may at any time sell to one or more commercial banks or other Persons participating interests in such Lender's Loan, the Note held by such Lender or any other interest of such Lender hereunder (any Person purchasing any such participating interest being called a "Participant"). In the event of a sale by a Lender of a participating interest to a Participant, (x) such Lender shall remain the holder of its Note for all purposes of this Agreement, (y) the Company and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights 56 and obligations hereunder and (z) all amounts payable by the Company shall be determined as if such Lender had not sold such participation and shall be paid directly to such Lender. No Participant shall have any direct or indirect voting rights hereunder except with respect to any of the events described in the fourth sentence of Section 14.1. Each Lender agrees to incorporate the requirements of the preceding sentence into each participation agreement which such Lender enters into with any Participant. The Company agrees that if amounts outstanding under this Agreement and the Notes are due and payable (as a result of acceleration or otherwise), each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement or such Note; provided that such right of setoff shall be subject to the obligation of each Participant to share with the Lenders, and the Lenders agree to share with each Participant, as provided in Section 7.4. The Company also agrees that each Participant shall be entitled to the benefits of Section 7.5 and Section 8 as if it were a Lender (provided that no Participant shall receive any greater compensation pursuant to Section 7.5 or Section 8 than would have been paid to the participating Lender if no participation had been sold). Each Lender which sells a participation will maintain a book entry record of ownership identifying the Participant and the amount of such participation owned by such Participant. Such book entry record of ownership shall be maintained by the Lender as agent for the Company and the Agent. This provision is intended to comply with the registration requirements in Treasury Regulation Section 5f.103- 1 so that the Loans and Notes are considered to be in "registered form" pursuant to such regulation. 14.10 Governing Law. This Agreement and each Note shall be a contract made under and governed by the internal laws of the State of Illinois. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. All obligations of the Company and rights of the Agent and the Lenders expressed herein or in any other Loan Document shall be in addition to and not in limitation of those provided by applicable law. 14.11 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same agreement. 14.12 Successors and Assigns. This Agreement shall be binding upon the Company, the Lenders and the Agent and their respective successors and assigns, and shall inure to the benefit of the Company, the Lenders and the Agent and the successors and assigns of the Lenders and the Agent. The Company may not assign its rights or obligations hereunder without the prior written consent of all Lenders. 57 14.13 Indemnification by the Company. (a) In consideration of the execution and delivery of this Agreement by the Agent and the Lenders and the agreement to make the Loans hereunder, the Company hereby agrees to indemnify and exonerate the Agent, each Lender and each of the officers, directors, investment advisors, trustees, employees, Affiliates and agents of the Agent and each Lender (each a "Lender Party") against, and hold each Lender Party free and harmless from, any and all actions, causes of action, suits, losses, liabilities, damages and expenses, including reasonable attorneys' fees and charges and allocated costs of staff counsel (collectively, for purposes of this Section 14.13, called the "Indemnified Liabilities"), incurred by the Lender Parties or any of them as a result of, or arising out of, or relating to (i) any tender offer, merger, amalgamation purchase of stock, purchase of assets or other similar transaction financed or proposed to be financed in whole or in part, directly or indirectly, with the proceeds of the Loans, (ii) the use, handling, release, emission, discharge, transportation, storage, treatment or disposal of any hazardous substance at any property owned or leased by the Company or any Subsidiary, (iii) any violation of any Environmental Laws with respect to conditions at any property owned or leased by the Company or any Subsidiary or the operations conducted thereon, (iv) the investigation, cleanup or remediation of offsite locations at which the Company or any Subsidiary or their respective predecessors are alleged to have directly or indirectly disposed of hazardous substances or (v) the execution, delivery, performance or enforcement of this Agreement or any other Loan Document by any of the Lender Parties, except for any such Indemnified Liabilities arising on account of any such Lender Party's gross negligence or willful misconduct. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. Nothing set forth above shall be construed to relieve any Lender Party from any obligation it may have under this Agreement. (b) All obligations provided for in this Section 14.13 shall survive repayment of the Loans, cancellation of the Notes, any foreclosure under, or any modification, release or discharge of, any or all of the Collateral Documents and any termination of this Agreement. 14.14 Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT 58 COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE COMPANY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 14.15 Waiver of Jury Trial. THE COMPANY, THE AGENT AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 14.16 Acknowledgments and Agreements regarding Intercreditor Agreement. Each Lender hereby acknowledges that (a) in addition to acting as Agent hereunder, BofA acts as "U.S. Agent" under the Credit Agreement, as "Agent" under the Existing Loan Agreement and as "Collateral Agent" under the Intercreditor Agreement; and (b) this Agreement constitutes the "Permitted Senior Secured Debt Agreement" as defined in the Intercreditor Agreement, the obligations hereunder constitute "Permitted Senior Secured Debt Obligations" as defined in the Intercreditor Agreement, each of the Lenders constitutes a "Permitted Creditor" as defined in the Intercreditor Agreement and the Required Lenders constitute the "Required Permitted Creditors" as defined in the Intercreditor Agreement. Each of the Lenders agrees that (i) the Agent may act on its behalf under the Intercreditor Agreement and may grant any consent, or take or omit to take any other action, thereunder on behalf of the Lenders at the direction or with the consent of the Required Lenders (unless, pursuant to the express terms of this Agreement or the Intercreditor Agreement, such consent, action or inaction may only be granted or 59 taken the direction or consent of all Lenders) and (ii) the Collateral Agent may act on behalf of such Lender as set forth in the Intercreditor Agreement. Without limiting clause (ii) of the foregoing sentence, the Lenders irrevocably authorize the Collateral Agent, at its option and in its discretion, to release any Lien granted to or held by the Collateral Agent under any Collateral Document (i) upon payment in full of all Loans and all other obligations of the Company hereunder; (ii) covering property sold or to be sold or disposed of as part of or in connection with any disposition permitted hereunder; or (iii) subject to Section 14.1, if approved, authorized or ratified in writing by the Required Lenders. Upon request by the Collateral Agent at any time, the Lenders will confirm in writing the Collateral Agent's authority to release particular types or items of collateral pursuant to this Section 14.16. 60 Delivered at Chicago, Illinois, as of the day and year first above written. UNITED RENTALS, INC. By ___________________________________________ Chief Financial Officer UNITED RENTALS (NORTH AMERICA), INC. By ___________________________________________ Chief Financial Officer BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By ___________________________________________ Title BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Lender By ___________________________________________ Title GOLDMAN SACHS CREDIT PARTNERS, L.P., as Syndication Agent and as a Lender EX-10.(E) 4 FIRST AMENDMENT TO TERM LOAN AGREEMENT Exhibit 10(e) FIRST AMENDMENT THIS FIRST AMENDMENT dated as of August 12, 1999 (this "Amendment") is to --------- the Term Loan Agreement (the "Term Loan Agreement") dated as of July 15, 1999 ------------------- among UNITED RENTALS (NORTH AMERICA), INC. (the "Company"), UNITED RENTALS, INC. ------- ("Parent"), various financial institutions and BANK OF AMERICA, N.A. (f/k/a Bank ------ of America National Trust and Savings Association), as Administrative Agent (in such capacity, the "Agent"). Unless otherwise defined herein, capitalized terms ----- used herein have the respective meanings set forth in the Term Loan Agreement. WHEREAS, the Company, Parent, the Agent, Bank of America, N.A. ("BofA") and ---- Goldman Sachs Credit Partners L.P. ("Goldman Sachs") have entered into the Term ------------- Loan Agreement; and WHEREAS, the parties hereto desire to amend the Term Loan Agreement to (a) add the parties listed on the signatures hereof under the heading "New Lenders" (collectively the "New Lenders") as "Lenders" thereunder and (b) make certain ----------- other changes as hereinafter set forth; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto agree as follows: SECTION 1 AMENDMENT. Effective on (and subject to the occurrence of) the --------- First Amendment Effective Date (as defined below), the Term Loan Agreement shall be amended as set forth below. 1.1 Section 14.9.1. Section 14.9.1 is amended by (a) inserting the --------------- following language after the word "withheld" at the end of the first parenthetical clause therein: "and shall not be required for any assignment and delegation to (a) another Lender or (B) a Related Fund" and (b) deleting the second parenthetical therein (which begins with the language "(provided that no -------- written consent"). 1.2 Schedule 1.1(A) Schedule 1.1(A) is amended in its entirety by --------------- substituting the Schedule 1.1(A) attached hereto therefor. --------------- 1.3 Schedule 14.3. Schedule 14.3 is amended in its entirety by ------------- substituting the Schedule 14.3 attached hereto therefor. ------------- SECTION 2 REPRESENTATIONS AND WARRANTIES. Each of Parent and the Company ------------------------------ represents and warrants to the Agent and the Lenders that (a) the representations and warranties made in Section 9 of the Term Loan Agreement are true and correct on and as of the First Amendment Effective Date with the same effect as if made on and as of the First Amendment Effective Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they were true and correct as of such earlier date); (b) no Event of Default or Unmatured Event of Default exists or will result from the execution of this Amendment; (c) no event or circumstance has occurred since the Closing Date that has resulted, or would reasonably be expected to result, in a Material Adverse Effect; (d) the execution and delivery by Parent and the Company of this Amendment, the execution and delivery by the Company of the New Notes (as defined below), the performance by Parent and the Company of their respective obligations under the Term Loan Agreement as amended hereby (as so amended, the "Amended Agreement") and the performance by the Company of the New ----------------- Notes (i) are within the corporate powers of Parent and the Company, (ii) have been duly authorized by all necessary corporate action on the part of Parent and the Company, (iii) have received all necessary governmental approval and (iv) do not and will not contravene or conflict with any provision of law or of the charter or by-laws of Parent or the Company or of any indenture, loan agreement or other contract, or any order or decree, which is binding upon Parent or the Company; and (e) each of the Amended Agreement and each New Note is the legal, valid and binding obligation of Parent and the Company, as applicable, enforceable against Parent and the Company, as applicable, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. SECTION 3 EFFECTIVENESS. The amendments set forth in Section 1 above shall ------------- --------- become effective, as of the day and year first above written, on such date (the "First Amendment Effective Date") when the Agent shall have received, (a) a ------------------------------ counterpart of this Amendment executed by each of the parties -2- hereto (or, in the case of any party from which the Agent has not received a counterpart hereof, facsimile confirmation of the execution of a counterpart hereof by such party) and (b) each of the following documents, each in form and substance satisfactory to the Agent: 3.1 Notes. New Notes, substantially in the form of Exhibit A to the Term ----- Loan Agreement, payable to the order of each of the Lenders (collectively, the "New Notes"). - ---------- 3.2 Other Documents. Such other documents as the Agent or any Lender may --------------- reasonably request in connection with Parent's and the Company's authorization, execution and delivery of this Amendment. SECTION 4 ADDITION OF LENDERS. On the First Amendment Effective Date, ------------------- each New Lender shall become a "Lender" under and for all purposes of the Amended Agreement, shall be bound by the Amended Agreement, and shall be entitled to the benefits of the Amended Agreement and each other Loan Document, and each Lender (including BofA and Goldman Sachs) shall have a Term Loan in the amount, and a Percentage, as set forth on Schedule 1.1(A) hereto. To facilitate --------------- the foregoing, each New Lender agrees that on the First Amendment Effective Date, it will remit to the Agent funds in an amount equal to its Term Loan, and the Agent agrees to immediately (i) remit a portion of such funds to BofA and Goldman Sachs, in such amounts as are necessary to reduce the Term Loans of BofA and Goldman Sachs to the amounts set forth opposite their names on Schedule -------- 1.1(A) hereto and (ii) to remit the balance of such funds to the Company. Each - ------ New Lender agrees that all interest and fees accrued under the Term Loan Agreement prior to the First Amendment Effective Date are the property of BofA and Goldman Sachs. By their signatures below each of BofA and Goldman Sachs confirms that it has not sold or otherwise encumbered its rights under the Term Loan Agreement or its interest in any Loans prior to the syndication thereof pursuant to this Amendment. SECTION 5 MISCELLANEOUS. ------------- 5.1 Continuing Effectiveness, etc. As herein amended, the Term Loan ------------------------------ Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects. After the First Amendment Effective Date, all references in the Term -3- Loan Agreement, the Notes, each other Loan Document and any similar document to the "Term Loan Agreement" or similar terms shall refer to the Amended Agreement. 5.2 Counterparts. This Amendment may be executed in any number of ------------ counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original but all such counterparts shall together constitute one and the same Amendment. 5.3 Expenses. The Company agrees to pay the reasonable costs and expenses -------- of the Agent (including attorney costs) in connection with the preparation, execution and delivery of this Amendment. 5.4 Governing Law. This Amendment shall be a contract made under and ------------- governed by the internal laws of the State of Illinois. 5.5 Successors and Assigns. This Amendment shall be binding upon Parent, ---------------------- the Company, the Lenders and the Agent and their respective successors and assigns, and shall inure to the benefit of Parent, the Company, the Lenders and the Agent and the successors and assigns of the Lenders and the Agent. -4- Delivered at New York, New York, as of the day and year first above written. UNITED RENTALS, INC. By__________________________ Title_____________________ UNITED RENTALS (NORTH AMERICA), INC. By__________________________ Title_____________________ BANK OF AMERICA, N.A., as Administrative Agent By__________________________ Title_____________________ BANK OF AMERICA, N.A., as a Lender By_________________________ Title____________________ GOLDMAN SACHS CREDIT PARTNERS, L.P., as Syndication Agent and as a Lender -5- By_________________________ Title____________________ "NEW LENDERS": ----------- DEUTSCHE BANK AG, New York and/or Cayman Islands Branch By_________________________ Title____________________ NORTH AMERICAN SENIOR FLOATING RATE FUND By:CypressTree Investment Company, Inc., as Portfolio Manager By_________________________ Title____________________ CYPRESSTREE SENIOR FLOATING RATE FUND By: CypressTree Investment Management Company, Inc., as Portfolio Manager By_________________________ Title____________________ -6- KZH CYPRESSTREE - 1 LLC By_________________________ Title____________________ -7- CYPRESSTREE INSTITUTIONAL FUND, LLC By:CypressTree Investment Management Company, Inc., as Portfolio Manager By_________________________ Title____________________ FLOATING RATE PORTFOLIO By_________________________ Title____________________ GENERAL ELECTRIC CAPITAL CORPORATION By_________________________ Title____________________ HARRIS TRUST AND SAVINGS BANK By_________________________ Title____________________ -8- IKB DEUTSCHE INDUSTRIEBANK AG LUXEMBOURG BRANCH By_________________________ Title____________________ METROPOLITAN LIFE INSURANCE COMPANY By_________________________ Title____________________ MONY LIFE INSURANCE COMPANY By_________________________ Title____________________ PARIBAS CAPITAL FUNDING LLC By_________________________ Title____________________ -9- JACKSON NATIONAL LIFE INSURANCE COMPANY By_________________________ Title____________________ TYLER TRADING, INC. By_________________________ Title____________________ THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By_________________________ Title____________________ UNION BANK OF CALIFORNIA, N.A. By_________________________ Title____________________ -10- COMERICA BANK By_________________________ Title____________________ BANK OF NOVA SCOTIA By_________________________ Title____________________ THE FUJI BANK, LIMITED By_________________________ Title____________________ HELLER FINANCIAL INC. By_________________________ Title____________________ -11- FREMONT INVESTMENT AND LOAN By_________________________ Title____________________ CONTINENTAL ASSURANCE COMPANY Separate Account (E) By: TCW Asset Management Company as Attorney-in-Fact By_________________________ Title____________________ By_________________________ Title____________________ UNITED OF OMAHA LIFE INSURANCE COMPANY By:TCW Asset Management Company, its Investment Advisor By_________________________ Title____________________ By_________________________ Title____________________ -12- SEQUILS I, LTD. By_________________________ Title____________________ By_________________________ Title____________________ KZH CRESCENT-2 LLC By_________________________ Title____________________ KZH CRESCENT LLC By_________________________ Title____________________ -13- EX-10.(F) 5 SECOND AMENDMENT TO TERM LOAN AGREEMENT Exhibit 10(f) SECOND AMENDMENT TO TERM LOAN AGREEMENT --------------------------------------- THIS SECOND AMENDMENT TO TERM LOAN AGREEMENT dated as of July 14, 1999 (this "Amendment") amends the Term Loan Agreement dated as of July 10, 1998 (as --------- previously amended, the "Term Loan Agreement") among United Rentals, Inc. ------------------- ("Parent"), United Rentals (North America), Inc. (the "Company"), various - -------- ------- financial institutions and Bank of America National Trust and Savings Association, as Agent (the "Agent"). Terms defined in the Term Loan Agreement ----- are, unless otherwise defined herein or the context otherwise requires, used herein as defined therein. WHEREAS, the parties hereto desire to amend the Term Loan Agreement as set forth herein; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1 Amendments. Effective on (and subject to the occurrence of) the ---------- Amendment Effective Date (as defined below), the Term Loan Agreement shall be amended as set forth in this Section 1. --------- 1.1 Deletion of Definitions. The definitions of "Fixed Rate Margin" and ----------------------- "Floating Rate Margin" are deleted from Section 1.1. 1.2 Definition of Business Day. The definition of "Business Day" in -------------------------- Section 1.1 is amended by inserting "Charlotte," immediately before "Chicago" therein. 1.3 Definition of Credit Agreement. The definition of Credit Agreement in ------------------------------ Section 1.1 is amended in its entirety to read as follows: Credit Agreement means the Credit Agreement dated as of September 29, ---------------- 1998 among the Company, Parent, UR Canada, various financial institutions, Bank of America Canada, as Canadian Agent, and BofA, as U.S. Agent, as amended or restated from time to time (including any amendment or restatement increasing the amount available thereunder) and any Successor Credit Agreement as defined in the Intercreditor Agreement. 1.4 Definition of Eurodollar Office. The definition of "Eurodollar ------------------------------- Office" in Section 1.1 is amended in its entirety to read as follows: Eurodollar Office means, with respect to any Lender, the office or ----------------- offices of such Lender which shall be making or maintaining a Eurodollar Tranche of such Lender hereunder or, in the case of any Reference Lender, such office or offices through which such Reference Lender makes any determination for purposes of calculating the Eurodollar Rate. A Eurodollar Office of any Lender may be, at the option of such Lender, either a domestic or foreign office. 1.5 Definition of Funded Debt. The definition of "Funded Debt" in Section ------------------------- 1.1 is amended in its entirety to read as follows: Funded Debt means (a) all Debt of Parent and its Subsidiaries and ----------- (b) to the extent not included in the definition of Debt, the aggregate outstanding investment or claim held at such time by purchasers, assignees or other transferees of (or of interests in) accounts receivable, lease receivables or other rights to payment of Parent and its Subsidiaries in connection with any Securitization Transaction (regardless of the accounting treatment of such Securitization Transaction), but excluding (i) contingent obligations in respect of undrawn letters of credit and Suretyship Liabilities (except to the extent constituting contingent obligations or Suretyship Liabilities in respect of Funded Debt of a Person other than Parent or any Subsidiary), (ii) Hedging Obligations, (iii) Debt of the Company to Subsidiaries and Debt of Subsidiaries to the Company or to other Subsidiaries and (iv) Debt (including guaranties thereof) in respect of the QuIPS Debentures and the QuIPS Preferred Securities. 1.6 Definition of Interest Expense. The definition of "Interest Expense" ------------------------------ in Section 1.1 is amended in its entirety to read as follows: Interest Expense means for any period the sum, without duplication, of ---------------- (a) the consolidated interest expense of Parent and its Subsidiaries for such period (including, without duplication, interest paid on the QuIPS Debentures, distributions on (but not redemptions of) the QuIPS Preferred Securities, imputed interest on Capital Leases and any interest which is capitalized but excluding amortization of deferred financing costs) and (b) consolidated yield or discount accrued during such period on the aggregate investment or claim held by purchasers, assignees or other transferees of, or of interests in, accounts receivable, lease receivables and other rights to payment of Parent and its Subsidiaries in connection with any Securitization Transaction (regardless of the accounting treatment of such Securitization Transaction). 1.7 Definition of Investment. The definition of "Investment" in Section ------------------------ 1.1 is amended by deleting "the Company" therein and substituting "Parent" therefor. 1.8 Definition of Permitted Senior Secured Debt. The definition of ------------------------------------------- "Permitted Senior Secured Debt" in Section 1.1 is amended in its entirety to read as follows: 2 Permitted Senior Secured Debt means any Debt arising under (a) the ----------------------------- Term Loan Agreement dated as of July 15, 1999 among Parent, the Company, various financial institutions and BofA, as Agent; and (b) any other term loan agreement (other than this Agreement) among Parent, the Company, various financial institutions and BofA, as agent; provided that (i) any -------- such other term loan agreement shall contain covenants and defaults which are no more restrictive for Parent and its Subsidiaries than the covenants and defaults contained in this Agreement, (ii) any such Debt shall mature no earlier than September 30, 2005 and shall have amortization of no more than 20% of the principal amount thereof prior to July 15, 2005, (iii) any such Debt shall constitute "Senior Indebtedness" as defined in each Subordinated Note Indenture and (iv) no Debt under any such other term loan agreement shall have interest rate spreads greater than (x) if such Debt matures on or before December 31, 2005, the then-applicable interest rate spreads under this Agreement, or (y) if such Debt matures after December 31, 2005, the then-applicable interest rate spreads under the Term Loan Agreement referred to in clause (a) above. ---------- 1.9 Definition of Reference Rate. The definition of "Reference Rate" in ---------------------------- Section 1.1 is amended by inserting the following immediately after "California" in the second line thereof: "(or such other office in the United States of America as BofA shall specify from time to time)". 1.10 Definition of Seller Subordinated Debt. The definition of "Seller -------------------------------------- Subordinated Debt" in Section 1.1 is amended by deleting the reference to "Section 10.11(d)" therein and substituting "Section 10.11(c)" therefor. - ----------------- ---------------- 1.11 Definition of Subordinated Debt. The definition of "Subordinated ------------------------------- Debt" in Section 1.1 is amended in its entirety to read as follows: Subordinated Debt means (a) the U.S.$200,000,000 of 9.50% unsecured ----------------- senior subordinated notes due 2008 issued by the Company (then known as United Rentals, Inc.) on May 22, 1998 and the unsecured subordinated guarantees thereof provided for in the applicable Subordinated Note Indenture, (b) the U.S.$205,000,000 of 8.80% unsecured senior subordinated notes due 2008 issued by the Company on August 12, 1998 and the unsecured subordinated guarantees thereof provided for in the applicable Subordinated Note Indenture, (c) the U.S.$300,000,000 of 9.25% unsecured senior subordinated notes due 2009 issued by the Company on December 15, 1998 and the unsecured subordinated guarantees thereof provided for in the applicable Subordinated Note Indenture, (d) the U.S.$250,000,000 of 9.0% unsecured senior subordinated notes due 2009 issued by the Company on March 23, 1999 and the unsecured subordinated guarantees thereof provided for in the applicable Subordinated Note Indenture, (e) Seller Subordinated Debt and (f) any other unsecured Debt of the Company and unsecured guarantees thereof by any Subsidiary of the Company which (i) is owed to Persons other than officers, 3 employees, directors or Affiliates of the Company, (ii) has no amortization prior to December 31, 2006 and (iii) has subordination terms (including subordination terms with respect to guarantees) which are not less favorable to the Lenders than those set forth in the Subordinated Note Indentures or are otherwise approved by the Required Lenders, such approval not to be unreasonably withheld. 1.12 Definition of Subordinated Note Indenture. The definition of ----------------------------------------- "Subordinated Note Indenture" in Section 1.1 is amended in its entirety to read as follows: Subordinated Note Indenture means each of (a) the Indenture dated as --------------------------- of May 22, 1998 among the Company (then known as United Rentals, Inc.), various Subsidiaries of the Company and State Street Bank and Trust Company, as Trustee, pursuant to which the Company issued U.S.$200,000,000 of Subordinated Debt, (b) the Indenture dated as August 12, 1998 among the Company, various Subsidiaries of the Company and State Street Bank and Trust Company, as Trustee, pursuant to which the Company issued U.S.$205,000,000 of Subordinated Debt, (c) the Indenture dated as of December 15, 1998 among the Company, various Subsidiaries of the Company and State Street Bank and Trust Company, as Trustee, pursuant to which the Company issued U.S.$300,000,000 of Subordinated Debt, and (d) the Indenture dated as of March 23, 1999 among the Company, various Subsidiaries of the Company and The Bank of New York, as Trustee, pursuant to which the Company issued U.S.$250,000,000 of Subordinated Debt. 1.13 Definition of Vendor Financing Arrangement. The definition of ------------------------------------------ "Vendor Financing Arrangement" in Section 1.1 is amended by deleting the references to "the Company" therein and substituting "Parent" therefor. 1.14 Addition of Definitions. The following definitions are added to ----------------------- Section 1.1 in appropriate alphabetical sequence: Securitization Transaction means any sale, assignment or other -------------------------- transfer by Parent or any Subsidiary of accounts receivable, lease receivables or other payment obligations owing to Parent or such Subsidiary or any interest in any of the foregoing, together in each case with any collections and other proceeds thereof, any collection or deposit accounts related thereto, and any collateral, guaranties 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. Special Purpose Vehicle means a trust, bankruptcy remote entity or ----------------------- other special purpose entity which is a Subsidiary of Parent (or, if not a Subsidiary, the common equity of which is wholly-owned, directly or indirectly, by Parent) and which is formed for the 4 purpose of, and engages in no material business other than, acting as an issuer or a depositor in a 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). 1.15 Amendment of Interest Rates. Section 4.1 is amended by (a) deleting --------------------------- the language "the Floating Rate Margin from time to time in effect" from clause (a) thereof and substituting "0.375%" therefor; and (b) deleting the language "the Fixed Rate Margin from time to time in effect" from clause (b) thereof and substituting "2.25%" therefor. 1.16 Amendment to Section 8.2. Clause (a) of Section 8.2 is amended by ------------------------ inserting "U.S." immediately before "Dollars" in the first line thereof. 1.17 Amendment to Section 10.6.4. Section 10.6.4 is amended in its --------------------------- entirety to read as follows: 10.6.4 Senior Debt to Tangible Assets. Not permit the ratio of (i) ------------------------------ Senior Debt to (ii) the sum of Tangible Assets plus the outstanding amount of accounts receivable, lease receivables and other payment obligations which are not included on Parent's consolidated balance sheet but would be so included if not sold pursuant to a Securitization Transaction to exceed 1.0 to 1.0 at any time. 1.18 Amendment to Section 10.7. Section 10.7 is amended in its entirety to ------------------------- read as follows: 10.7 Limitations on Debt. Not, and not permit any Subsidiary to, ------------------- create, incur, assume or suffer to exist any Debt, except: (a) obligations hereunder, under the other Loan Documents, under the Credit Agreement and under the other "Loan Documents" as defined in the Credit Agreement; (b) unsecured Debt of Parent, the Company and Subsidiaries of the Company (excluding Contingent Payments and Seller Subordinated Debt); provided that no Subsidiary shall incur any such Debt if, after giving -------- effect thereto, the aggregate amount of all then-outstanding Debt of Subsidiaries of the Company permitted solely by this clause (b) would ---------- exceed 10% of Net Worth; (c) Debt of Parent or any Subsidiary in respect of Capital Leases or arising in connection with the acquisition of equipment (including Debt assumed in connection with an asset purchase permitted by Section ------- 10.11, ----- 5 or incurred pursuant to a Capital Lease or in connection with the acquisition of equipment by a Person before it became a Subsidiary in connection with a stock purchase permitted by Section 10.11, in ------------- each case so long as such Debt is not incurred in contemplation of such purchase), and refinancings of any such Debt so long as the terms applicable to such refinanced Debt are no less favorable to Parent or the applicable Subsidiary than the terms in effect immediately prior to such refinancing, provided that the aggregate amount of all such -------- Debt at any time outstanding shall not exceed a Dollar Equivalent amount equal to U.S.$150,000,000; (d) Debt of Subsidiaries owed to the Company or Parent; provided that -------- the aggregate amount of all such Debt of Foreign Subsidiaries owed to the Company and Parent shall not at any time exceed 15% of the consolidated assets of Parent and its Subsidiaries; (e) unsecured Debt of the Company to Subsidiaries of the Company, of Parent to the Company and Subsidiaries of the Company and of any Special Purpose Vehicle to any Subsidiary of the Company; (f) Subordinated Debt; provided that (i) the aggregate principal -------- amount of all Seller Subordinated Debt at any time outstanding shall not exceed a Dollar Equivalent amount of U.S.$50,000,000 and (ii) the Company shall not issue or incur any Debt described in clause (f) of ---------- the definition of Subordinated Debt (x) at any time that an Event of Default or Unmatured Event of Default exists or would result therefrom and (y) unless the Company has delivered to the Agent (which shall promptly deliver a copy thereof to each Lender) a certificate in reasonable detail demonstrating that, after giving effect to such issuance or incurrence, Parent will be in pro forma compliance with all financial covenants set forth in this Section 10; ---------- (g) other Debt of the Company or any Subsidiary, not of a type described in clause (c), outstanding on the date hereof and listed in ---------- Schedule 10.7(g); ---------------- (h) Contingent Payments, provided that Parent shall not, and shall not -------- permit any Subsidiary to, incur any obligation to make Contingent Payments the maximum possible amount of which exceeds a Dollar Equivalent amount of U.S.$50,000,000 in the aggregate for all Contingent Payments at any time outstanding; 6 (i) the QuIPS Debentures, the QuIPS Preferred Securities and the QuIPS Guarantees; (j) Permitted Senior Secured Debt and guarantees thereof, provided -------- that the aggregate principal amount of all Permitted Senior Secured Debt shall not at any time exceed U.S.$750,000,000; (k) Guarantees by Parent of the obligations of the Company or any Subsidiary; provided that any such guaranty of Debt is subordinated to the obligations of Parent under the Parent Guaranty at least to the extent set forth in Exhibit G or otherwise in a manner reasonably --------- satisfactory to the Required Lenders; (l) unsecured recourse obligations of Parent or any Subsidiary in respect of Vendor Financing Arrangements; (m) Hedging Obligations incurred for purposes of protection from price, interest rate or currency fluctuations posed by bona fide debt, contract or purchase order obligations or from changes in the price of Parent's stock; and (n) Debt in connection with Securitization Transactions; provided that -------- the aggregate principal amount of all such Debt shall not at any time exceed U.S.$150,000,000. For purposes of clause (h) above, a Contingent Payment shall be deemed ---------- to be "outstanding" from the time that Parent or any Subsidiary enters into the agreement containing the obligation to make such Contingent Payment until such time as either such Contingent Payment has been made in full or it has become certain that such Contingent Payment will never have to be made. 1.19 Amendment to Section 10.8. Section 10.8 is amended by (a) immediately ------------------------- following the last reference to "Debt" in clause (d) thereof adding the following "and the proceeds (including insurance proceeds) of any disposition or loss of such property", (b) deleting the word "and" immediately after the semicolon in clause (f) thereof, (c) deleting the period at the end of clause (g) thereof and substituting a semicolon and the word "and" therefor and (d) adding the following new clause (h): (h) Liens arising in connection with Securitization Transactions; provided that the aggregate investment or claim held at any time by -------- all purchasers, assignees or other transferees of (or of interests in) accounts 7 receivable, lease receivables and other rights to payment in all Securitization Transactions shall not exceed $150,000,000. 1.20 Amendment to Section 10.10. Section 10.10 is amended by (a) deleting -------------------------- the word "its" in clause (f)(ii) thereof and substituting the word "the" therefor, (b) adding the following immediately after the parenthetical in clause (f)(ii) thereof: "of Parent, any Acquisition Subsidiary, the QuIPS Trust and any Special Purpose Vehicle" and (c) adding the following sentence to the end of such section: "Nothing in this Section 10.10 shall prohibit Parent from permitting the cashless exercise of any options or warrants for stock of Parent." 1.21 Amendment to Section 10.11. Section 10.11 is amended in its entirety -------------------------- to read as follows: 10.11 Mergers, Consolidations, Amalgamations, Sales. Not, and not --------------------------------------------- permit any Subsidiary to, be a party to any merger, consolidation or amalgamation, or purchase or otherwise acquire all or substantially all of the assets or any stock of any class of, or any partnership or joint venture interest in, any other Person, or, except in the ordinary course of its business (including sales of equipment consistent with industry practice), sell, transfer, convey or lease all or any substantial part of its assets, or sell or assign with or without recourse any receivables, except for (a) any such merger or consolidation, amalgamation, sale, transfer, conveyance, lease or assignment of or by any wholly-owned Subsidiary of the Company into the Company or into, with or to any other wholly-owned Subsidiary of the Company; (b) any such purchase or other acquisition by the Company or any wholly-owned Subsidiary of the Company of the assets or stock of any wholly-owned Subsidiary of the Company; (c) any such purchase or other acquisition (including pursuant to a merger) by Parent, an Acquisition Subsidiary, the Company or any wholly-owned Subsidiary of the Company of the assets or stock of any other Person where (1) such assets (in the case of an asset purchase) are for use, or such Person (in the case of a stock purchase) is engaged, solely in the equipment rental and related businesses; (2) immediately before and after giving effect to such purchase or acquisition, no Event of Default or Unmatured Event of Default shall have occurred and be continuing; (3) the board of directors of such Person has not announced that it will oppose such acquisition and has not commenced any litigation which alleges that such acquisition violates or will violate any requirement of law or any contractual obligation of such Person; and (4) in the case of any such purchase or other acquisition by Parent or any Acquisition Subsidiary, Parent immediately contributes the acquired stock or assets to the Company or merges the acquired company or the Acquisition Subsidiary into the Company or with or into any wholly-owned Subsidiary of the Company; (d) the sale, assignment or other transfer of accounts receivable, lease receivables or other 8 rights to payment pursuant to any Securitization Transaction; provided that -------- the aggregate investment or claim held at any time by all purchasers, assignees or other transferees of (or of interests in) such receivables or other rights to payment shall not exceed $150,000,000; and (e) sales and dispositions of assets (including the stock of Subsidiaries), in addition to sales and other dispositions permitted by clause (d), so long as the net --------- book value of all assets sold or otherwise disposed of in any Fiscal Year does not exceed 5% of the net book value of the consolidated assets of Parent and its Subsidiaries as of the last day of the preceding Fiscal Year. 1.22 Amendment to Section 10.14. Section 10.14 is amended in its entirety -------------------------- to read as follows: 10.14 Further Assurances. Take, and cause each Subsidiary to take, ------------------ such actions as are necessary or as the Agent or the Required Lenders may reasonably request from time to time (including the execution and delivery of guaranties, security agreements, pledge agreements, financing statements and other documents, the filing or recording of any of the foregoing, and the delivery of stock certificates and other collateral with respect to which perfection is obtained by possession) to ensure that (i) the obligations of the Company hereunder and under the other Loan Documents are secured by substantially all of the assets (other than real property and the Company's interest in any Special Purpose Vehicle) of the Company and guaranteed by Parent by execution of the Parent Guaranty and by all of the U.S. Subsidiaries (including, promptly upon the acquisition or creation thereof, any U.S. Subsidiary acquired or created after the date hereof) by execution of a counterpart of the U.S. Guaranty (provided that neither the QuIPS Trust nor any Special Purpose Vehicle shall have any obligation to execute the U.S. Guaranty), (ii) the obligations of Parent under the Parent Guaranty are secured by substantially all of the assets of Parent (other than Parent's interest in the QuIPS Trust or any Special Purpose Vehicle), and (iii) the obligations of each U.S. Subsidiary (other than the QuIPS Trust and any Special Purpose Vehicle) under the U.S. Guaranty are secured by substantially all of the assets (other than real property and such U.S. Subsidiary's interest in any Special Purpose Vehicle) of such U.S. Subsidiary. In addition, upon the occurrence of any Event of Default or Unmatured Event of Default and the request of Lenders having Percentages aggregating 80% or more, the Company will cause each Canadian Subsidiary to guaranty all of the obligations of the Company hereunder and to take all actions necessary so that the obligations of such Canadian Subsidiary under such guaranty are secured by substantially all of the assets (other than real property) of such Canadian Subsidiary (it being understood that, at the request of the Company at 9 any time thereafter when no Event of Default or Unmatured Event of Default exists, such guaranties and collateral security shall be released). 1.23 Amendment to Section 10.15. Section 10.15 is amended in its entirety -------------------------- to read as follows: 10.15 Transactions with Affiliates. Not, and not permit any ---------------------------- Subsidiary to, enter into, or cause, suffer or permit to exist any transaction, arrangement or contract with any of its other Affiliates (other than Parent, the Company and Subsidiaries of the Company) which is on terms which are less favorable than are obtainable from any Person which is not one of its Affiliates; provided that Parent may enter into transactions with Acquisition Subsidiaries or the QuIPS Trust, and Parent or any Subsidiary may enter into transactions with any Special Purpose Vehicle in connection with any Securitization Transaction, to the extent permitted by the terms of this Agreement. 1.24 Amendment to Section 10.18. Section 10.18 is amended by deleting the -------------------------- reference to "the Company" therein and substituting "Parent" therefor. 1.25 Amendment to Section 10.19. Section 10.19 is amended by adding -------------------------- "(other than any Special Purpose Vehicle)" immediately after the second reference to "the Company" in clause (b) thereof. 1.26 Amendment to Section 10.20. Section 10.20 is amended by adding -------------------------- "(other than the QuIPS Trust and any Special Purpose Vehicle)" immediately after the reference to "Subsidiary" therein. 1.27 Amendment to Section 10.21. Section 10.21 is amended by (a) inserting -------------------------- ", in Subsidiaries of the Company" immediately after the reference to "Company" in clause (h) thereof, (b) deleting the word "and" at the end of clause (i) thereof, (c) adding the word "and" at the end of clause (j) thereof, (c) adding the following new clause (k): (k) Investments by Parent or any Subsidiary in any Special Purpose Vehicle; provided that the aggregate amount of all such Investments -------- made in cash shall not exceed $5,000,000; and (d) deleting the language "or (g)" in clause (y) of the proviso thereto and - substituting ", (g) or (k)" therefor. - - 1.28 Amendment to Section 10.23. Section 10.23 is amended in its entirety -------------------------- to read as follows: 10 10.23 Activities of Parent. Not engage in any business other than -------------------- ownership of the Company, Acquisition Subsidiaries, the QuIPS Trust and any Special Purpose Vehicle and activities reasonably related thereto (including the incurrence of Debt permitted by Section 10.7, the incurrence ------------ of unsecured trade obligations in respect of goods to be delivered to and properties to be used by, and services (including management and consulting services) to be performed for the benefit of, and unsecured lease obligations incurred for the benefit of, Subsidiaries and the incurrence of payroll and benefit expenses). Without limiting the foregoing, Parent will not (a) incur any Debt other than the QuIPS Debentures, the QuIPS Preferred Securities, the Parent Guaranty, the QuIPS Guarantees, Debt permitted by Section 10.7 and guarantees of the obligations of the Company or any other ------------ Subsidiary (provided that any such guaranty of Debt is subordinated to the obligations of Parent under the Parent Guaranty at least to the extent set forth in Exhibit G or otherwise in a manner reasonably satisfactory to the --------- Required Lenders), (b) make any Investments other than (i) Investments in the Company and its Subsidiaries, (ii) Investments in Acquisition Subsidiaries, (iii) Investments in the QuIPS Trust existing on the date hereof and (iv) Investments in any Special Purpose Vehicle, (c) grant any Liens on any of its assets (other than pursuant to the U.S. Security Agreement or as permitted under this Agreement) or (d) permit any amendment to or modification of the QuIPS Debentures, the QuIPS Preferred Securities or the QuIPS Indenture which, in any such case, is adverse to the interests of the Lenders. 1.29 Amendment to Section 12.1.2. Section 12.1.2 is amended by adding the ---------------------------- following immediately before the period at the end thereof: ; or any event of default, default, liquidation event or similar event shall occur or exist relating to any Securitization Transaction if the effect of such event is to cause or permit (subject to any applicable grace period) an aggregate cash amount exceeding a Dollar Equivalent amount of U.S. $15,000,000 to become immediately due and payable by Parent or any Subsidiary under such Securitization Transaction 1.30 Amendment to Section 12.1.11. Section 12.1.11 is amended by deleting ---------------------------- the word "either" in clause (d) thereof and substituting the word "any" therefor. 1.31 Tax Forms. The parenthetical clause "(or any applicable --------- successor form)" is added in the following places: (a) after "Forms 1001 and W- 8" in subsection 13.10(a)(i); (b) after "Form 4224" in subsection 13.10(a)(ii); (c) after "Form 1001 or 4224" in subsection 13.10(a)(iii); (d) after "Form 1001" twice in subsection 13.10(b); and (e) after "Form 4224" in Section 13.10(c). 11 1.32 Deletion of Schedule 1.1(B). Schedule 1.1(B) is deleted in its --------------------------- entirety. SECTION 2 Representations and Warranties. Parent and the Company ------------------------------ represent and warrant to the Agent and the Lenders that (a) each of the representations and warranties made by Parent in Section 9 (excluding Section ------- 9.8) of the Term Loan Agreement, as amended hereby (as so amended, the "Amended - --- ------- Agreement"), is true and correct as of the date hereof, with the same effect as - --------- if made on such date, (b) the execution and delivery hereof by Parent and the Company, and the performance by Parent and the Company of their respective obligations under the Amended Agreement and each other Loan Document to which such entity is a party, (i) are within the powers of Parent and the Company, (ii) have been duly authorized by all necessary corporate action on the part of Parent and the Company, (iii) have received all necessary governmental approvals and (iv) do not and will not contravene or conflict with (A) any provision of law or the certificate of incorporation or by-laws or other organizational documents of Parent or the Company or (B) any agreement, judgment, injunction, order, decree or other instrument binding upon Parent, the Company or any other Subsidiary of Parent, (c) the Amended Agreement and each other Loan Document to which Parent or the Company is a party is the legal, valid and binding obligation of Parent and the Company (as applicable), enforceable against Parent and the Company (as applicable) in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies and (d) no Event of Default or Unmatured Event of Default has occurred or is continuing. SECTION 3 Effectiveness. The amendments set forth in Section 1 above ------------- --------- shall become effective on the date (the "Amendment Effective Date") when the ------------------------ Agent shall have received all of the following, in form and substance satisfactory to the Agent: (i) Counterparts hereof executed by the Company, Parent, the Required Lenders and the Agent. (ii) Certified copies of resolutions of the Board of Directors of the Company authorizing or ratifying the execution and delivery by the Company of this Amendment and the performance by the Company of its obligations under the Amended Agreement; and certified copies of resolutions of the Board of Directors of Parent authorizing or ratifying the execution and delivery by Parent of this Amendment and the performance by Parent of its obligations under the Amended Agreement. (iii) A certificate of the Secretary or an Assistant Secretary of each of Parent and the Company certifying the names of the officer or officers of such entity authorized to sign this Amendment, together with a sample of the true signature of each such officer. 12 (iv) The opinions of (a) Weil, Gotshal & Manges LLP, special counsel to Parent and the Company, and (b) Oscar D. Folger, counsel to Parent and the Company. (v) A Confirmation substantially in the form of Exhibit A signed by each --------- Loan Party. SECTION 4 Miscellaneous. ------------- 4.1 Continuing Effectiveness, etc. As herein amended, the Term Loan ------------------------------ Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects. After the Amendment Effective Date, all references in the Term Loan Agreement and the other Loan Documents to the "Term Loan Agreement" or similar terms shall refer to the Amended Agreement. 4.2 Counterparts. This Amendment may be executed in any number of ------------ counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original but all such counterparts shall together constitute one and the same agreement. 4.3 Expenses. The Company agrees to pay all reasonable expenses of the -------- Agent, including reasonable fees and charges of counsel for the Agent, in connection with the preparation, execution and delivery of this Amendment. 4.4 Governing Law. This Amendment shall be construed in accordance with ------------- and governed by the substantive laws of the State of Illinois applicable to contracts made and to be performed entirely within such State. 4.5 Successors and Assigns. This Amendment shall be binding upon Parent, ---------------------- the Company, the Lenders and the Agent and their respective successors and assigns, and shall inure to the benefit of Parent, the Company, the Lenders and the Agent and the respective successors and assigns of the Lenders and the Agent. 13 Delivered at Chicago, Illinois, as of the day and year first above written. UNITED RENTALS, INC. By___________________________ Chief Financial Officer UNITED RENTALS (NORTH AMERICA), INC. By___________________________ Chief Financial Officer BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By______________________________ Title___________________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Lender By______________________________ Title___________________________ ALLSTATE INSURANCE COMPANY By______________________________ Title___________________________ By______________________________ S-1 Title___________________________ ALLSTATE LIFE INSURANCE COMPANY By______________________________ Title___________________________ By______________________________ Title___________________________ BANKBOSTON, N.A. By______________________________ Title___________________________ THE BANK OF NEW YORK By______________________________ Title___________________________ THE BANK OF NOVA SCOTIA By______________________________ Title___________________________ COMERICA BANK By______________________________ Title___________________________ S-2 CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC. As: Attorney-in-Fact and on behalf of First Allmerica Financial Life Insurance Company as Portfolio Manager By______________________________ Title___________________________ CYPRESSTREE INVESTMENT FUND, LLC By: CypressTree Investment Management Company, Inc., its Managing Member By______________________________ Title___________________________ KZH CYPRESSTREE-1 LLC By______________________________ Title___________________________ CYPRESSTREE INVESTMENT PARTNERS II, LTD. By: CypressTree Investment Management Company, Inc., as its Portfolio Manager By______________________________ Title___________________________ DEUTSCHE BANK AG, New York Branch and/or Cayman Islands Branch S-3 By______________________________ Title___________________________ ALLFIRST BANK By______________________________ Title___________________________ KZH CNC LLC By______________________________ Title___________________________ KZH ING-2 LLC By______________________________ Title___________________________ METROPOLITAN LIFE INSURANCE COMPANY By______________________________ Title___________________________ MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST By______________________________ Title___________________________ S-4 THE TRAVELERS INSURANCE COMPANY By______________________________ Title___________________________ CANADIAN IMPERIAL BANK OF COMMERCE By______________________________ Title___________________________ SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By______________________________ Title___________________________ S-5 OXFORD STRATEGIC INCOME FUND By: Eaton Vance Management, as Investment Advisor By______________________________ Title___________________________ EATON VANCE SENIOR INCOME TRUST By: Eaton Vance Management, as Investment Advisor By______________________________ Title___________________________ TORONTO DOMINION (TEXAS), INC. By______________________________ Title___________________________ S-6 FIRST DOMINION FUNDING I By______________________________ Title___________________________ S-7 EX-10.(G) 6 SECOND AMENDEMENT TO CREDIT AGREEMENT Exhibit 10(g) SECOND AMENDMENT ---------------- THIS SECOND AMENDMENT dated as of July 14, 1999 (this "Amendment") amends the Credit Agreement dated as of September 29, 1998 (as previously amended, the "Credit Agreement") among United Rentals (North America), Inc. (the "Company"), United Rentals, Inc. ("Parent"), United Rentals of Canada, Inc., various financial institutions, Bank of America Canada, as Canadian Agent, and Bank of America National Trust and Savings Association, as U.S. Agent. Terms defined in the Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used herein as defined therein. WHEREAS, the parties hereto desire to amend the Credit Agreement as set forth herein; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1 Amendments. Effective on (and subject to the occurrence of) the ---------- Amendment Effective Date (as defined below), the Credit Agreement shall be amended as set forth in this Section 1. --------- 1.1 Definition of Business Day. The definition of "Business Day" in -------------------------- Section 1.1 is amended by inserting "Charlotte," immediately before "Chicago" therein. 1.2 Definition of Funded Debt. The definition of "Funded Debt" in Section ------------------------- 1.1 is amended in its entirety to read as follows: Funded Debt means (a) all Debt of Parent and its Subsidiaries and ----------- (b) to the extent not included in the definition of Debt, the aggregate outstanding investment or claim held at such time by purchasers, assignees or other transferees of (or of interests in) receivables or other rights to payment of Parent and its Subsidiaries in connection with any Securitization Transaction (regardless of the accounting treatment of such Securitization Transaction), but excluding (i) contingent obligations in respect of undrawn letters of credit and Suretyship Liabilities (except to the extent constituting contingent obligations or Suretyship Liabilities in respect of Funded Debt of a Person other than Parent or any Subsidiary), (ii) Hedging Obligations, (iii) Debt of the Company to Subsidiaries and Debt of Subsidiaries to the Company or to other Subsidiaries and (iv) Debt (including guaranties thereof) in respect of the QuIPS Debentures and the QuIPS Preferred Securities. 1.3 Definition of Interest Expense. The definition of "Interest ------------------------------ Expense" in Section 1.1 is amended in its entirety to read as follows: Interest Expense means for any period the sum, without duplication, of ---------------- (a) the consolidated interest expense of Parent and its Subsidiaries for such period (including, without duplication, interest paid on the QuIPS Debentures, distributions on (but not redemptions of) the QuIPS Preferred Securities, imputed interest on Capital Leases and any interest which is capitalized but excluding amortization of deferred financing costs) and (b) consolidated yield or discount accrued during such period on the aggregate investment or claim held by purchasers, assignees or other transferees of, or of interests in, accounts receivable, lease receivables and other rights to payment of Parent and its Subsidiaries in connection with any Securitization Transaction (regardless of the accounting treatment of such Securitization Transaction). 1.4 Definition of Investment. The definition of "Investment" in Section ------------------------ 1.1 is amended by deleting "the Company" therein and substituting "Parent" therefor. 1.5 Definition of Permitted Senior Secured Debt. The definition of ------------------------------------------- "Permitted Senior Secured Debt" in Section 1.1 is amended in its entirety to read as follows: Permitted Senior Secured Debt means any Debt arising under (a) the ----------------------------- Term Loan Agreement dated as of July 15, 1999 among Parent, the Company, various financial institutions and BofA, as Agent; and (b) any other term loan agreement (other than the Term Loan Agreement as defined herein) among Parent, the Company, various financial institutions and BofA, as agent; provided that (i) any such other term loan agreement shall contain -------- covenants and defaults which are no more restrictive for Parent and its Subsidiaries than the covenants and defaults contained in this Agreement, (ii) any such Debt shall mature no earlier than September 30, 2005 and shall have amortization of no more than 20% of the principal amount thereof prior to July 15, 2005, (iii) any such Debt shall constitute "Senior Indebtedness" as defined in each Subordinated Note Indenture and (iv) no Debt under any such other term loan agreement shall have interest rate spreads greater than (x) if such Debt matures on or before December 31, 2005, the then-applicable interest rate spreads under the Term Loan Agreement (as defined herein) or (y) if such Debt matures after December 31, 2005, the then-applicable interest rate spreads under the Term Loan Agreement referred to in clause (a) above. ---------- 1.6 Definition of Reference Rate. The definition of "Reference Rate" in ---------------------------- Section 1.1 is amended by inserting the following immediately after "California" in the second line thereof: "(or such other office in the United States of America as BofA shall specify from time to time)". 1.7 Definition of Seller Subordinated Debt. The definition of "Seller -------------------------------------- Subordinated Debt" in Section 1.1 is amended by deleting the reference to "Section 10.11(d)" therein and substituting "Section 10.11(c)" therefor. - ----------------- ---------------- 1.8 Definition of Subordinated Debt. The definition of "Subordinated ------------------------------- Debt" in Section 1.1 is amended in its entirety to read as follows: 2 Subordinated Debt means (a) the U.S.$200,000,000 of 9.50% unsecured ----------------- senior subordinated notes due 2008 issued by the Company (then known as United Rentals, Inc.) on May 22, 1998 and the unsecured subordinated guarantees thereof provided for in the applicable Subordinated Note Indenture, (b) the U.S.$205,000,000 of 8.80% unsecured senior subordinated notes due 2008 issued by the Company on August 12, 1998 and the unsecured subordinated guarantees thereof provided for in the applicable Subordinated Note Indenture, (c) the U.S.$300,000,000 of 9.25% unsecured senior subordinated notes due 2009 issued by the Company on December 15, 1998 and the unsecured subordinated guarantees thereof provided for in the applicable Subordinated Note Indenture, (d) the U.S.$250,000,000 of 9.0% unsecured senior subordinated notes due 2009 issued by the Company on March 23, 1999 and the unsecured subordinated guarantees thereof provided for in the applicable Subordinated Note Indenture, (e) Seller Subordinated Debt and (f) any other unsecured Debt of the Company and unsecured guarantees thereof by any Subsidiary of the Company which (i) is owed to Persons other than officers, employees, directors or Affiliates of the Company, (ii) has no amortization prior to December 31, 2006 and (iii) has subordination terms (including subordination terms with respect to guarantees) which are not less favorable to the Banks than those set forth in the Subordinated Note Indentures or are otherwise approved by the Required Banks, such approval not to be unreasonably withheld. 1.9 Definition of Subordinated Note Indenture. The definition of ----------------------------------------- "Subordinated Note Indenture" in Section 1.1 is amended in its entirety to read as follows: Subordinated Note Indenture means each of (a) the Indenture dated as --------------------------- of May 22, 1998 among the Company (then known as United Rentals, Inc.), various Subsidiaries of the Company and State Street Bank and Trust Company, as Trustee, pursuant to which the Company issued U.S.$200,000,000 of Subordinated Debt, (b) the Indenture dated as August 12, 1998 among the Company, various Subsidiaries of the Company and State Street Bank and Trust Company, as Trustee, pursuant to which the Company issued U.S.$205,000,000 of Subordinated Debt, (c) the Indenture dated as of December 15, 1998 among the Company, various Subsidiaries of the Company and State Street Bank and Trust Company, as Trustee, pursuant to which the Company issued U.S.$300,000,000 of Subordinated Debt, and (d) the Indenture dated as of March 23, 1999 among the Company, various Subsidiaries of the Company and The Bank of New York, as Trustee, pursuant to which the Company issued U.S.$250,000,000 of Subordinated Debt. 1.10 Definition of Vendor Financing Arrangement. The definition of "Vendor ------------------------------------------ Financing Arrangement" in Section 1.1 is amended by deleting the references to "the Company" therein and substituting "Parent" therefor. 3 1.11 Addition of Definitions. The following definitions are added to ----------------------- Section 1.1 in appropriate alphabetical sequence: Securitization Transaction means any sale, assignment or other -------------------------- transfer by Parent or any Subsidiary of accounts receivable, lease receivables or other payment obligations owing to Parent or such Subsidiary or any interest in any of the foregoing, together in each case with any collections and other proceeds thereof, any collection or deposit accounts related thereto, and any collateral, guaranties 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. Special Purpose Vehicle means a trust, bankruptcy remote entity or ----------------------- other special purpose entity which is a Subsidiary of Parent (or, if not a Subsidiary, the common equity of which is wholly-owned, directly or indirectly, by Parent) 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 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). 1.12 Amendment to Section 10.6.4. Section 10.6.4 is amended in its --------------------------- entirety to read as follows: 10.6.4 Senior Debt to Tangible Assets. Not permit the ratio of (i) ------------------------------ Senior Debt to (ii) the sum of Tangible Assets plus the outstanding amount of accounts receivable, lease receivables and other payment obligations which are not included on Parent's consolidated balance sheet but would be so included if not sold pursuant to a Securitization Transaction to exceed 1.0 to 1.0 at any time. 1.13 Amendment to Section 10.7. Section 10.7 is amended in its entirety to ------------------------- read as follows: 10.7 Limitations on Debt. Not, and not permit any Subsidiary to, ------------------- create, incur, assume or suffer to exist any Debt, except: (a) obligations hereunder, under the other Loan Documents, under the Term Loan Agreement and under the other "Loan Documents" as defined in the Term Loan Agreement; (b) unsecured Debt of Parent, the Company and Subsidiaries of the Company (excluding Contingent Payments and Seller Subordinated Debt); provided that no Subsidiary shall incur any such Debt if, after giving -------- effect thereto, the aggregate amount of all then-outstanding Debt of Subsidiaries 4 of the Company permitted solely by this clause (b) would ---------- exceed 10% of Net Worth; (c) Debt of Parent or any Subsidiary in respect of Capital Leases or arising in connection with the acquisition of equipment (including Debt assumed in connection with an asset purchase permitted by Section ------- 10.11, or incurred pursuant to a Capital Lease or in connection with ----- the acquisition of equipment by a Person before it became a Subsidiary in connection with a stock purchase permitted by Section 10.11, in ------------- each case so long as such Debt is not incurred in contemplation of such purchase), and refinancings of any such Debt so long as the terms applicable to such refinanced Debt are no less favorable to Parent or the applicable Subsidiary than the terms in effect immediately prior to such refinancing, provided that the aggregate amount of all such -------- Debt at any time outstanding shall not exceed a Dollar Equivalent amount equal to U.S.$150,000,000; (d) Debt of Subsidiaries owed to the Company or Parent; provided that -------- the aggregate amount of all such Debt of Foreign Subsidiaries owed to the Company and Parent shall not at any time exceed 15% of the consolidated assets of Parent and its Subsidiaries; (e) unsecured Debt of the Company to Subsidiaries of the Company, of Parent to the Company and Subsidiaries of the Company and of any Special Purpose Vehicle to any Subsidiary of the Company; (f) Subordinated Debt; provided that (i) the aggregate principal -------- amount of all Seller Subordinated Debt at any time outstanding shall not exceed a Dollar Equivalent amount of U.S.$50,000,000 and (ii) the Company shall not issue or incur any Debt described in clause (f) of ---------- the definition of Subordinated Debt (x) at any time that an Event of Default or Unmatured Event of Default exists or would result therefrom and (y) unless the Company has delivered to the U.S. Agent (which shall promptly deliver a copy thereof to each U.S. Bank) a certificate in reasonable detail demonstrating that, after giving effect to such issuance or incurrence, Parent will be in pro forma compliance with all financial covenants set forth in this Section 10; ---------- (g) other Debt of the Company or any Subsidiary, not of a type described in clause (c), outstanding on the date hereof and listed in ---------- Schedule 10.7(g); ---------------- 5 (h) Contingent Payments, provided that Parent shall not, and shall not -------- permit any Subsidiary to, incur any obligation to make Contingent Payments the maximum possible amount of which exceeds a Dollar Equivalent amount of U.S.$50,000,000 in the aggregate for all Contingent Payments at any time outstanding; (i) the QuIPS Debentures, the QuIPS Preferred Securities and the QuIPS Guarantees; (j) Permitted Senior Secured Debt and guarantees thereof, provided -------- that the aggregate principal amount of all Permitted Senior Secured Debt shall not at any time exceed U.S.$750,000,000; (k) Guarantees by Parent of the obligations of the Company or any Subsidiary; provided that any such guaranty of Debt is subordinated to the obligations of Parent under the Parent Guaranty at least to the extent set forth in Exhibit G or otherwise in a manner reasonably --------- satisfactory to the Required Banks; (l) unsecured recourse obligations of Parent or any Subsidiary in respect of Vendor Financing Arrangements; (m) Hedging Obligations incurred for purposes of protection from price, interest rate or currency fluctuations posed by bona fide debt, contract or purchase order obligations or from changes in the price of Parent's stock; and (n) Debt in connection with Securitization Transactions; provided that -------- the aggregate principal amount of all such Debt shall not at any time exceed U.S.$150,000,000. For purposes of clause (h) above, a Contingent Payment shall be deemed ---------- to be "outstanding" from the time that Parent or any Subsidiary enters into the agreement containing the obligation to make such Contingent Payment until such time as either such Contingent Payment has been made in full or it has become certain that such Contingent Payment will never have to be made. 1.14 Amendment to Section 10.8. Section 10.8 is amended by (a) immediately ------------------------- following the last reference to "Debt" in clause (d) thereof adding the following "and the proceeds (including insurance proceeds) of any disposition or loss of such property", (b) deleting the word "and" immediately after the semicolon in clause (f) thereof, (c) deleting the period at the end of 6 clause (g) thereof and substituting a semicolon and the word "and" therefor and (d) adding the following new clause (h): (h) Liens arising in connection with Securitization Transactions; provided that the aggregate investment or claim held at any time by -------- all purchasers, assignees or other transferees of (or of interests in) accounts receivable, lease receivables and other rights to payment in all Securitization Transactions shall not exceed $150,000,000. 1.15 Amendment to Section 10.10. Section 10.10 is amended by (a) deleting -------------------------- the word "its" in clause (f)(ii) thereof and substituting the word "the" therefor, (b) adding the following immediately after the parenthetical in clause (f)(ii) thereof: "of Parent, any Acquisition Subsidiary, the QuIPS Trust and any Special Purpose Vehicle" and (c) adding the following sentence to the end of such section: "Nothing in this Section 10.10 shall prohibit Parent from permitting the cashless exercise of any options or warrants for stock of Parent." 1.16 Amendment to Section 10.11. Section 10.11 is amended in its entirety -------------------------- to read as follows: 10.11 Mergers, Consolidations, Amalgamations, Sales. Not, and not --------------------------------------------- permit any Subsidiary to, be a party to any merger, consolidation or amalgamation, or purchase or otherwise acquire all or substantially all of the assets or any stock of any class of, or any partnership or joint venture interest in, any other Person, or, except in the ordinary course of its business (including sales of equipment consistent with industry practice), sell, transfer, convey or lease all or any substantial part of its assets, or sell or assign with or without recourse any receivables, except for (a) any such merger or consolidation, amalgamation, sale, transfer, conveyance, lease or assignment of or by any wholly-owned Subsidiary of the Company into the Company or into, with or to any other wholly-owned Subsidiary of the Company; (b) any such purchase or other acquisition by the Company or any wholly-owned Subsidiary of the Company of the assets or stock of any wholly-owned Subsidiary of the Company; (c) any such purchase or other acquisition (including pursuant to a merger) by Parent, an Acquisition Subsidiary, the Company or any wholly-owned Subsidiary of the Company of the assets or stock of any other Person where (1) such assets (in the case of an asset purchase) are for use, or such Person (in the case of a stock purchase) is engaged, solely in the equipment rental and related businesses; (2) immediately before and after giving effect to such purchase or acquisition, no Event of Default or Unmatured Event of Default shall have occurred and be continuing; (3) the board of directors of such Person has not announced that it will oppose such acquisition and has not commenced any litigation which alleges that such acquisition violates or will violate 7 any requirement of law or any contractual obligation of such Person; (4) in the case of any such purchase or other acquisition by Parent or any Acquisition Subsidiary, Parent immediately contributes the acquired stock or assets to the Company or merges the acquired company or the Acquisition Subsidiary into the Company or with or into any wholly-owned Subsidiary of the Company; and (5) either (i) the aggregate consideration to be paid by Parent and its Subsidiaries (including any Debt assumed or issued in connection therewith, the amount thereof to be calculated in accordance with GAAP, but excluding any capital stock of or other equity interest in Parent which is part of such consideration) in connection with such purchase or other acquisition (or any series of related acquisitions) is less than a Dollar Equivalent amount of U.S.$150,000,000 or (ii) (x) Parent is in pro forma compliance with all the financial ratios and restrictions set forth in Section 10.6 and (y) the Required Banks have consented to such ------------ purchase or acquisition; (d) the sale, assignment or other transfer of accounts receivable, lease receivables or other rights to payment pursuant to any Securitization Transaction; provided that the aggregate investment or claim held at any time by all purchasers, assignees or other transferees of (or of interests in) such receivables or other rights to payment shall not exceed $150,000,000; and (e) sales and dispositions of assets (including the stock of Subsidiaries), in addition to sales and other dispositions permitted by clause (d), so long as the net book value of all assets sold or otherwise disposed of in any Fiscal Year does not exceed 5% of the net book value of the consolidated assets of Parent and its Subsidiaries as of the last day of the preceding Fiscal Year. 1.17 Amendment to Section 10.14. Section 10.14 is amended in its entirety -------------------------- to read as follows: 10.14 Further Assurances. Take, and cause each Subsidiary to take, ------------------ such actions as are necessary or as either Agent or the Required Banks may reasonably request from time to time (including the execution and delivery of guaranties, security agreements, pledge agreements, financing statements and other documents, the filing or recording of any of the foregoing, and the delivery of stock certificates and other collateral with respect to which perfection is obtained by possession) to ensure that (i) the obligations of the Company hereunder and under the other Loan Documents are secured by substantially all of the assets (other than real property and the Company's interest in any Special Purpose Vehicle) of the Company and guaranteed by Parent by execution of the Parent Guaranty and by all of the U.S. Subsidiaries (including, promptly upon the acquisition or creation thereof, any U.S. Subsidiary acquired or created after the date hereof) by execution of a counterpart of the U.S. Guaranty (provided that neither the QuIPS Trust nor any Special Purpose Vehicle shall have any obligation to execute the 8 U.S. Guaranty), (ii) the obligations of Parent under the Parent Guaranty are secured by substantially all of the assets of Parent (other than Parent's interest in the QuIPS Trust or any Special Purpose Vehicle), (iii) the obligations of each U.S. Subsidiary (other than the QuIPS Trust and any Special Purpose Vehicle) under the U.S. Guaranty are secured by substantially all of the assets (other than real property and such U.S. Subsidiary's interest in any Special Purpose Vehicle) of such U.S. Subsidiary, (iv) the obligations of UR Canada hereunder and under the other Loan Documents are secured by substantially all of the assets (other than real property) of UR Canada and guaranteed by all of the Canadian Subsidiaries (including, promptly upon the acquisition or creation thereof, any Canadian Subsidiary acquired or created after the date hereof) by execution of a Canadian Guaranty and (v) the obligations of each Canadian Subsidiary under its Canadian Guaranty are secured by substantially all assets (other than real property) of such Canadian Subsidiary. In addition, upon the occurrence of any Event of Default or Unmatured Event of Default and the request of U.S. Banks having Percentages aggregating 80% or more, the Company will cause each Canadian Subsidiary to guaranty all of the obligations of the Company hereunder and to take all actions necessary so that the obligations of such Canadian Subsidiary under such guaranty are secured by substantially all of the assets (other than real property) of such Canadian Subsidiary (it being understood that, at the request of the Company at any time thereafter when no Event of Default or Unmatured Event of Default exists, such guaranties and collateral security shall be released). 1.18 Amendment to Section 10.15. Section 10.15 is amended in its entirety -------------------------- to read as follows: 10.15 Transactions with Affiliates. Not, and not permit any ---------------------------- Subsidiary to, enter into, or cause, suffer or permit to exist any transaction, arrangement or contract with any of its other Affiliates (other than Parent, the Company and Subsidiaries of the Company) which is on terms which are less favorable than are obtainable from any Person which is not one of its Affiliates; provided that Parent may enter into transactions with Acquisition Subsidiaries or the QuIPS Trust, and Parent or any Subsidiary may enter into transactions with any Special Purpose Vehicle in connection with any Securitization Transaction, to the extent permitted by the terms of this Agreement. 1.19 Amendment to Section 10.18. Section 10.18 is amended by deleting the -------------------------- reference to "the Company" therein and substituting "Parent" therefor. 9 1.20 Amendment to Section 10.19. Section 10.19 is amended by adding -------------------------- "(other than any Special Purpose Vehicle)" immediately after the second reference to "the Company" in clause (b) thereof. 1.21 Amendment to Section 10.20. Section 10.20 is amended by adding -------------------------- "(other than the QuIPS Trust and any Special Purpose Vehicle)" immediately after the reference to "Subsidiary" therein. 1.22 Amendment to Section 10.21. Section 10.21 is amended by (a) inserting -------------------------- ", in Subsidiaries of the Company" immediately after the reference to "Company" in clause (h) thereof, (b) deleting the word "and" at the end of clause (i) thereof, (c) adding the word "and" at the end of clause (j) thereof, (c) adding the following new clause (k): (k) Investments by Parent or any Subsidiary in any Special Purpose Vehicle; provided that the aggregate amount of all such Investments -------- made in cash shall not exceed $5,000,000; and (d) deleting the language "or (g)" in clause (y) of the proviso thereto and - substituting ", (g) or (k)" therefor. - - 1.23 Amendment to Section 10.23. Section 10.23 is amended in its entirety -------------------------- to read as follows: 10.23 Activities of Parent. Not engage in any business other than -------------------- ownership of the Company, Acquisition Subsidiaries, the QuIPS Trust and any Special Purpose Vehicle and activities reasonably related thereto (including the incurrence of Debt permitted by Section 10.7, the incurrence ------------ of unsecured trade obligations in respect of goods to be delivered to and properties to be used by, and services (including management and consulting services) to be performed for the benefit of, and unsecured lease obligations incurred for the benefit of, Subsidiaries and the incurrence of payroll and benefit expenses). Without limiting the foregoing, Parent will not (a) incur any Debt other than the QuIPS Debentures, the QuIPS Preferred Securities, the Parent Guaranty, the QuIPS Guarantees, Debt permitted by Section 10.7 and guarantees of the obligations of the Company or any other ------------ Subsidiary (provided that any such guaranty of Debt is subordinated to the obligations of Parent under the Parent Guaranty at least to the extent set forth in Exhibit G or otherwise in a manner reasonably satisfactory to the --------- Required Banks), (b) make any Investments other than (i) Investments in the Company and its Subsidiaries, (ii) Investments in Acquisition Subsidiaries, (iii) Investments in the QuIPS Trust existing on the date hereof and (iv) Investments in any Special Purpose Vehicle, (c) grant any Liens on any of its assets (other than pursuant to 10 the U.S. Security Agreement or as permitted under this Agreement) or (d) permit any amendment to or modification of the QuIPS Debentures, the QuIPS Preferred Securities, either QuIPS Guarantee or the QuIPS Indenture which, in any such case, is adverse to the interests of the Banks. 1.24 Amendment to Section 12.1.2. Section 12.1.2 is amended by adding the ---------------------------- following immediately before the period at the end thereof: ; or any event of default, default, liquidation event or similar event shall occur or exist relating to any Securitization Transaction if the effect of such event is to cause or permit (subject to any applicable grace period) an aggregate cash amount exceeding a Dollar Equivalent amount of U.S. $15,000,000 to become immediately due and payable by Parent or any Subsidiary under such Securitization Transaction 1.25 Amendment to Section 12.1.11. Section 12.1.11 is amended by deleting ---------------------------- the word "either" in clause (d) thereof and substituting the word "any" therefor. 1.26 Tax Forms. The parenthetical clause "(or any applicable successor --------- form)" is added in the following places: (a) after "Forms 1001 and W-8" in subsection 13.10(a)(i); (b) after "Form 4224" in subsection 13.10(a)(ii); (c) after "Form 1001" twice in subsection 13.10(b); and (d) after "Form 4224" in Section 13.10(c). SECTION 2 Representations and Warranties. Parent and the Company ------------------------------ represent and warrant to the Agents and the Banks that (a) each of the representations and warranties made by Parent and the Company in Section 9 (excluding Section 9.8) of the Credit Agreement, as amended hereby (as so amended, the "Amended Agreement"), is true and correct as of the date hereof, with the same effect as if made on such date, (b) the execution and delivery hereof by Parent and the Company, and the performance by Parent and the Company of their respective obligations under the Amended Agreement and each other Loan Document to which such entity is a party, (i) are within the powers of Parent and the Company, (ii) have been duly authorized by all necessary corporate action on the part of Parent and the Company, (iii) have received all necessary governmental approvals and (iv) do not and will not contravene or conflict with (A) any provision of law or the certificate of incorporation or by-laws or other organizational documents of Parent or the Company or (B) any agreement, judgment, injunction, order, decree or other instrument binding upon Parent, the Company or any other Subsidiary of Parent, (c) the Amended Agreement and each other Loan Document to which Parent or the Company is a party is the legal, valid and binding obligation of Parent and the Company (as applicable), enforceable against Parent and the Company (as applicable) in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies and (d) no Event of Default or Unmatured Event of Default has occurred or is continuing. 11 SECTION 3 Effectiveness. The amendments set forth in Section 1 above ------------- --------- shall become effective on the date (the "Amendment Effective Date") when the U.S. Agent shall have received (a) for the account of each U.S. Bank which delivers to the U.S. Agent an executed signature page hereto not later than 3:00 p.m. (Chicago time) on July 14, 1999, the amendment fee in the amount previously agreed to between the Company and such Bank and (b) all of the following, in form and substance satisfactory to the U.S. Agent: (i) Counterparts hereof executed by the Company, Parent, the Required Banks and the U.S. Agent. (ii) Certified copies of resolutions of the Board of Directors of the Company authorizing or ratifying the execution and delivery by the Company of this Amendment and the performance by the Company of its obligations under the Amended Agreement; and certified copies of resolutions of the Board of Directors of Parent authorizing or ratifying the execution and delivery by Parent of this Amendment and the performance by Parent of its obligations under the Amended Agreement. (iii) A certificate of the Secretary or an Assistant Secretary of each of Parent and the Company certifying the names of the officer or officers of such entity authorized to sign this Amendment, together with a sample of the true signature of each such officer. (iv) The opinions of (a) Weil, Gotshal & Manges LLP, special counsel to Parent and the Company, and (b) Oscar D. Folger, counsel to Parent and the Company. (v) A Confirmation substantially in the form of Exhibit A signed by each --------- Loan Party. SECTION 4 Miscellaneous. ------------- 4.1 Continuing Effectiveness, etc. As herein amended, the Credit Agreement ------------------------------ shall remain in full force and effect and is hereby ratified and confirmed in all respects. After the Amendment Effective Date, all references in the Credit Agreement and the other Loan Documents to the "Credit Agreement" or similar terms shall refer to the Amended Agreement. 4.2 Counterparts. This Amendment may be executed in any number of ------------ counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original but all such counterparts shall together constitute one and the same agreement. 4.3 Expenses. The Company agrees to pay all reasonable expenses of the -------- U.S. Agent, including reasonable fees and charges of counsel for the U.S. Agent, in connection with the preparation, execution and delivery of this Amendment. 12 4.4 Governing Law. This Amendment shall be construed in accordance with ------------- and governed by the substantive laws of the State of Illinois applicable to contracts made and to be performed entirely within such State. 4.5 Successors and Assigns. This Amendment shall be binding upon Parent, ---------------------- the Company, the Banks and the Agents and their respective successors and assigns, and shall inure to the benefit of Parent, the Company, the Banks and the Agents and the respective successors and assigns of the Banks and the Agents. 13 Delivered at Chicago, Illinois, as of the day and year first above written. UNITED RENTALS, INC. By_____________________________ Chief Financial Officer UNITED RENTALS (NORTH AMERICA), INC. By_____________________________ Chief Financial Officer BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as U.S. Agent By_____________________________ Title__________________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a U.S. Bank, as Issuing Bank and as Swing Line Bank By_____________________________ Title__________________________ THE BANK OF NEW YORK, as a U.S. Bank By_____________________________ Title__________________________ S-1 CREDIT LYONNAIS NEW YORK BRANCH, as a U.S. Bank By_____________________________ Title__________________________ DEUTSCHE BANK AG, New York Branch and/or Cayman Islands Branch, as a U.S. Bank By_____________________________ Title__________________________ By_____________________________ Title__________________________ ALLFIRST BANK, as a U.S. Bank By_____________________________ Title__________________________ SUMMIT BANK, as a U.S. Bank By_____________________________ Title__________________________ NATIONAL CITY BANK, as a U.S. Bank By_____________________________ Title__________________________ S-2 BANKBOSTON, N.A., as a U.S. Bank By_____________________________ Title__________________________ COMERICA BANK, as a U.S. Bank By_____________________________ Title__________________________ FLEET BANK, N.A., as a U.S. Bank By_____________________________ Title__________________________ HARRIS TRUST AND SAVINGS BANK, as a U.S. Bank By_____________________________ Title__________________________ THE BANK OF NOVA SCOTIA, as a U.S. Bank By_____________________________ Title__________________________ UNION BANK OF CALIFORNIA, N.A., as a U.S. Bank By_____________________________ S-3 Title_____________________________ CIBC INC., as a U.S. Bank By_____________________________ Title__________________________ LASALLE BANK NATIONAL ASSOCIATION, as a U.S. Bank By_____________________________ Title__________________________ CITICORP DEL-LEASE, INC., as a U.S. Bank By_____________________________ Title__________________________ ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG-NEW YORK, as a U.S. Bank By_____________________________ Title__________________________ THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, New York Branch, as a U.S. Bank By_____________________________ Title__________________________ S-4 CITY NATIONAL BANK, as a U.S. Bank By_____________________________ Title__________________________ FUJI BANK, LIMITED, as a U.S. Bank By_____________________________ Title__________________________ BANKERS TRUST COMPANY, as a U.S. Bank By_____________________________ Title__________________________ S-5 WELLS FARGO BANK, N.A., as a U.S. Bank By_____________________________ Title__________________________ S-6 EX-27 7 FINANCIAL DATA SCHEDULE
5 0001067701 UNITED RENTALS INC 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 19828 0 400373 44781 149267 0 2357984 486813 3891954 0 1947876 300000 3 716 1141023 3891954 895971 895971 174703 577916 9224 14220 51306 71394 29283 42111 0 0 0 42111 0.60 0.46
EX-27.1 8 FINANCIAL DATA SCHEDULE
5 0001047166 UNITED RENTALS (NORTH AMERICA) INC 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 37309 0 400373 44781 149267 0 2312086 479086 3846182 0 1947876 0 0 0 1430370 3846182 895971 895971 174703 577916 8982 14220 51306 83049 33960 49089 0 0 0 49089 0 0
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