Exhibit 10.4
October 14, 1997
RSC Alabama, Inc.
RSC Industrial Corporation
RSC Xxxxx Inc.
RSC Rents, Inc.
The Air & Pump Company
Xxxxxx Xxxxx Equipment, Inc.
Rental Service Corporation
RSC Acquisition Corp.
RSC Holdings, Inc.
00000 Xxxxxx Xxxx, #000
Xxxxxxxxxx, Xxxxxxx 00000
RE: SECOND AMENDED AND RESTATED CREDIT AGREEMENT - $200,000,000 INCREASE IN
SENIOR SECURED REVOLVING CREDIT FACILITY
Gentlemen:
Reference is hereby made to that certain Amended and Restated Credit
Agreement dated as of September 24, 1996 (as amended by the First Amendment to
Amended and Restated Credit Agreement dated as of January 1, 1997, the Second
Amendment, Consent and Limited Waiver to Amended and Restated Credit Agreement
dated as of April 10, 1997, the Third Amendment, Consent and Limited Waiver to
Amended and Restated Credit Agreement dated as of May 22, 1997 and Fourth
Amendment to Amended and Restated Credit Agreement dated as of August 1, 1997,
the "Credit Agreement") among RSC Alabama, Inc. (formerly known as Acme Alabama,
Inc.), RSC Industrial Corporation (formerly known as Acme Xxxxx Inc.), RSC Xxxxx
Inc. (formerly known as Acme Xxxxx Inc.), RSC Rents, Inc. (formerly known as
Acme Rents, Inc.), The Air & Pump Company and Xxxxxx Xxxxx Equipment, Inc.
(collectively, the "Borrowers"), Rental Service Corporation, RSC Acquisition
Corp. and RSC Holdings, Inc. (collectively, the "Parent Guarantors"), each
financial institution identified on Annex I thereto (together with its
successors and permitted assigns pursuant to Section 12.8 thereof, a "Lender"),
the Issuing Bank and BT Commercial Corporation ("BTCC") acting as agent for the
Lenders and the Issuing Bank (in such capacity, together with any successor
agent appointed pursuant to Section 11.8 thereof, the "Agent"). Undefined
capitalized terms used herein shall have the meanings ascribed to such terms in
the Credit Agreement.
Rental Service Corporation et al.
October 14, 1997
Page 2
BTCC understands from discussions with representatives of the
Borrowers and the Parent Guarantors that the Borrowers and the Parent Guarantors
have requested a second amendment and restatement of the Credit Agreement (i)
increasing the total Commitments thereunder by $200,000,000 (such increase being
referred to as the "Incremental Commitment"), (ii) extending the Expiration Date
(as so extended, the "Extended Expiration Date") to the fifth anniversary of the
effective date of the Second Amended and Restated Credit Agreement (as defined
below), (iii) revising the Financial Covenants to levels to be agreed upon by
the Credit Parties, the Agent and the Lenders after the delivery of new
projections giving effect to the Second Amended and Restated Credit Agreement,
the New Term Facility (as defined below) and any Acquisitions which have been
disclosed to the Agent and which have been consummated or are to be consummated
on or before December 31, 1997, (iv) providing that the maximum aggregate amount
of Acquisitions that the Credit Parties may enter into from the effective date
of the Second Amended and Restated Credit Agreement until the Extended
Expiration Date shall be an amount equal to the sum of (A) $160,000,000
(excluding consideration consisting of the common stock of RSC), plus (B) net
----
cash proceeds received by RSC immediately and directly from the issuance of the
common stock of RSC during such period or from the issuance of unsecured
subordinated Indebtedness during such period on terms (including subordination
terms) and subject to conditions satisfactory to the Agent and the Lenders or
from any combination thereof, (v) revising the definitions of Applicable
Eurodollar Rate Margin and Applicable Prime Rate Margin to replace the Interest
Coverage Ratio tests therein with comparable tests based on the ratio of (A) the
aggregate amount of all Indebtedness of the Credit Parties outstanding as of any
Quarterly Determination Date occurring after the effective date of the Second
Amended and Restated Credit Agreement to (B) EBITDA, as determined as of such
Quarterly Determination Date, for the twelve-month period ending on such
Quarterly Determination Date (together with corresponding revisions to the form
of Compliance Certificate attached to the Credit Agreement as Exhibit O), (vi)
revising the definition of Borrowing Base to provide that the advance rate
against Eligible Rental Equipment shall be eighty-five percent (85%) from
January 1, 2000 through December 31, 2000 and eighty percent (80%) from January
1, 2001 through the Extended Expiration Date and (vii) permitting the Credit
Parties to enter into a $100,000,000 senior secured term loan (the "New Term
Facility"), as more particularly described in our commitment letter of even date
herewith to you with respect to the New Term Facility, on such terms and subject
to conditions satisfactory to the Agent and the Lenders all of which shall be
incorporated into the Second Amended and Restated Credit Agreement (it being
agreed and understood that any consent to the terms and conditions of the New
Term Facility shall not be indicative of a willingness on the part of BTCC or
any Lender to consent to the incurrence by the Credit Parties of any other debt
on similar terms). Such an amendment and restatement, containing such terms and
conditions acceptable to the Borrowers, the Parent Guarantors, the Agent and the
Lenders and being in form and substance acceptable to the Agent and the Lenders,
is referred to herein as the "Second Amended and Restated Credit Agreement."
Rental Service Corporation et al.
October 14, 1997
Page 3
Based upon our preliminary review of the information which the Credit
Parties have provided to us, BTCC, in its capacity as a Lender under the Credit
Agreement, is pleased to confirm that it is willing to provide the Incremental
Commitment upon the effectiveness of the Second Amended and Restated Credit
Agreement and also hereby commits to purchase (at no more than par value) from
one or more of the other Lenders, upon the effectiveness of the Second Amended
and Restated Credit Agreement, up to $100,000,000 in the aggregate of the
Commitments of such Lender or Lenders in the event any such Lender does not
desire to continue to provide financing to the Borrowers under the Second
Amended and Restated Credit Agreement (the "Backstop Commitment"). BTCC's
commitment to provide the Incremental Commitment and the Backstop Commitment is
also subject to the satisfaction of all the conditions set forth herein, in the
Fee Letter (as defined below) and in the Second Amended and Restated Credit
Agreement and review of the assets, liabilities (including existing contingent
liabilities), business and operations of the Credit Parties giving effect to the
Second Amended and Restated Credit Agreement. Further, BTCC and its counsel
have not yet completed due diligence efforts necessary to substantiate the
factual premises upon which the terms and conditions of this Commitment Letter
are based. BTCC's willingness to commit to provide the Incremental Commitment
and the Backstop Commitment is subject to its satisfactory completion of such
review and due diligence and its continuing satisfaction therewith.
BTCC, as Agent, will structure the Second Amended and Restated Credit
Agreement and use its best efforts to obtain approval thereof from the other
Lenders. The Credit Parties hereby agree to provide the Agent and the other
Lenders, promptly upon request, with all information deemed necessary by them to
evaluate the Incremental Commitment, the Backstop Commitment, the New Term
Facility and the terms of the Second Amended and Restated Credit Agreement,
including, without limitation, information and projections prepared by the
Credit Parties or their advisors relating to the transactions described herein,
all as reasonably requested by the Agent. Each of the Credit Parties further
agrees to use its reasonable best efforts to make the appropriate officers and
representatives thereof available to participate in information meetings for the
Lenders at times and places as the Agent may reasonably request.
Each of the Credit Parties represents and warrants that (a) all
information which has been or is hereafter made available to the Agent, any
Lender or any other financial institution which agrees to provide any portion of
the Incremental Commitment (a "New Lender") by any Credit Party or any of their
respective representatives in connection with the transactions contemplated
hereby is and will be complete and correct in all material respects for the
purposes prepared and does not and will not contain any untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements contained therein not materially misleading in light of the
circumstances under which such statements are made,
Rental Service Corporation et al.
October 14, 1997
Page 4
and (b) all financial projections that have been or will hereafter be prepared
by the Credit Parties and made available to the Agent, any Lender or any New
Lender have been or will be prepared in good faith based upon reasonable
assumptions, which assumptions shall be disclosed as part of such projections.
In arranging and structuring the Second Amended and Restated Credit Agreement,
the Incremental Commitment and the Backstop Commitment, the Agent may be using
and relying on such information and projections without independent verification
thereof.
Each of the Credit Parties agrees that any and all information,
materials or analysis furnished to us, or developed by us, in connection with
the due diligence review described herein or in arranging and structuring the
Second Amended and Restated Credit Agreement, including, without limitation,
information bearing on the creditworthiness of any of the Credit Parties or
their Affiliates (collectively, "Information"), may be shared by us with the
other Lenders, the New Lenders and our Affiliates, including, without
limitation, Bankers Trust Company and BT Alex. Xxxxx Corporation (collectively
"BT Affiliates") provided that none of such Information shall be used in any
manner which would violate applicable law. Each of the Credit Parties also
confirms that it has no objection to discussions between our personnel and the
personnel of the other Lenders, the New Lenders or the BT Affiliates concerning
any Credit Party or any Affiliate of any Credit Party, the Information, the
proposed Second Amended and Restated Credit Agreement, or any other potential
transaction between any Credit Party, BTCC, any Lender, any New Lender or any BT
Affiliate.
In connection with the Second Amended and Restated Credit Agreement,
BTCC may, in its discretion, allocate to the Lenders and the New Lenders
portions of any fees payable to BTCC in connection with the Incremental
Commitment and the Second Amended and Restated Credit Agreement. Each of the
Credit Parties agrees that none of the Lenders nor any New Lender will receive
from any Credit Party or any of their respective Affiliates any compensation of
any kind for its participation in the Incremental Commitment except as expressly
provided for in this Commitment Letter or in the fee letter of even date
herewith (the "Fee Letter").
BTCC's commitment to provide the Incremental Commitment and the
Backstop Commitment is further subject to there not having occurred and being
continuing a material adverse change in financial, banking or capital market
conditions generally since the date hereof that, in the sole judgment of BTCC,
would substantially impair the subsequent marketability of the Incremental
Commitment or the Backstop Commitment. In addition, in the event that: (i)
prior to the execution and delivery of definitive documentation with respect to
the Second Amended and Restated Credit Agreement, BTCC becomes aware of
information, or an event occurs, which BTCC reasonably believes could have a
Material Adverse Effect or (ii) the Credit Parties do not, for any reason other
than a cancellation by BTCC of its
Rental Service Corporation et al.
October 14, 1997
Page 5
commitment pursuant to the foregoing clause (i), execute and deliver the
definitive documentation with respect to the Second Amended and Restated Credit
Agreement on or before November 30, 1997 or such other date as may be agreed
upon in writing by the parties hereto, then BTCC may, in its sole and absolute
discretion, terminate all of its obligations hereunder.
The commitment of BTCC hereunder is also subject to negotiation and
execution of the Second Amended and Restated Credit Agreement, amendments to the
other Credit Documents and other agreements, documents and instruments which the
Agent and the Lenders may reasonably request (the Second Amended and Restated
Credit Agreement and the other Credit Documents, as amended by such amendments
and such other agreements, documents and instruments, collectively, the "Amended
Credit Documents") in form and substance satisfactory to the Credit Parties, the
Agent, the Lenders and their respective counsel. Whether or not the Amended
Credit Documents are executed (including, without limitation, by reason of the
failure to receive approval of each Lender (other than BTCC)), each of the
Credit Parties agrees as follows:
(a) to promptly reimburse BTCC for all reasonable costs and expenses including,
without limitation, (i) the fees, disbursements and other reasonable
charges of attorneys and paralegals, (ii) reasonable out-of-pocket expenses
of BTCC personnel, (iii) other legal, appraisal, environmental, audit,
consulting, search and filing fees and expenses incurred by BTCC or any BT
Affiliate in connection with (x) the arrangement, structuring, negotiation,
preparation, review, execution, delivery, collection and enforcement of
this Commitment Letter, the Fee Letter and the Amended Credit Documents and
(y) the completion of the due diligence investigation described herein;
(b) to indemnify and hold harmless BTCC, each Lender and each of their
respective Affiliates, and each director, officer, agent, counsel and
employee thereof (each an "Indemnified Person") from and against all
losses, claims, damages, costs and other expenses ("Losses") to which any
of them may become subject arising out of or relating to this Commitment
Letter, the Amended Credit Documents, the New Term Facility or any other
transaction contemplated hereby or thereby except for any such Losses
caused by the gross negligence or willful misconduct of such Indemnified
Person, and to reimburse BTCC and each other Indemnified Person for any
reasonable expenses (including the fees, disbursements and other charges of
attorneys and paralegals) incurred in connection with the investigation of,
preparation for or defense of any actual or threatened claim, action or
proceeding arising therefrom (including any such costs of responding to
discovery requests or subpoenas), regardless of whether BTCC or such
Indemnified Person is a party thereto; and
Rental Service Corporation et al.
October 14, 1997
Page 6
(c) that neither the Agent nor any Lender shall be liable under this Commitment
Letter or the Amended Credit Documents or any other transaction
contemplated hereby or thereby or in respect of any act, omission or event
relating to the Amended Credit Documents or the New Term Facility, on any
theory of liability, for any punitive, special, indirect or consequential
damages.
The contents of this Commitment Letter and the Fee Letter are
confidential. None of the Credit Parties will show, circulate or otherwise
disclose them or their contents to any other Person (other than Brentwood
Associates, Affiliates of Brentwood Associates and the officers, directors,
employees, attorneys and advisors of the respective Credit Parties, on a
confidential basis, as necessary, in connection with the evaluation of the terms
and conditions set forth herein and therein, who shall agree to maintain their
confidentiality) without our prior written consent; and none of the Credit
Parties will file any of them or disclose their contents in any filing with any
Governmental Authority, unless prior to the filing the Credit Parties have
formally accepted this Commitment Letter and the Fee Letter, as provided herein.
This Commitment Letter and the Fee Letter may not be assigned by any Credit
Party without the prior written consent of the Agent and the Lenders, and the
undertakings by BTCC herein and therein are made solely for the benefit of the
Credit Parties and may not be relied upon or enforced by any other Person. If
the Commitment Letter and the Fee Letter are not accepted by the Credit Parties,
the Credit Parties will immediately return to us the originals and copies of the
Commitment Letter and the Fee Letter and any summaries thereof which the Credit
Parties or their respective advisors may have created. If the Commitment Letter
and Fee Letter are accepted by the Credit Parties and the Credit Parties have
complied with the terms hereof and thereof, RSC and the Credit Parties may
thereafter disclose the information contained in only the Commitment Letter as
they deem required by law. Prior to acceptance, any disclosure by any Credit
Party in violation hereof shall be deemed to constitute the Credit Parties'
acceptance of this Commitment Letter and the Fee Letter.
BTCC's commitment to provide the Incremental Commitment and the
Backstop Commitment on the terms and conditions set forth in this Commitment
Letter is specifically contingent upon the execution and delivery of this
Commitment Letter and the Fee Letter and the satisfaction of all of the other
conditions referred to as conditions to the Incremental Commitment, the Backstop
Commitment and the Second Amended and Restated Credit Agreement. BTCC's
commitment to provide the Incremental Commitment and the Backstop Commitment
pursuant to the terms of this Commitment Letter will expire at 5:00 p.m. Los
Angeles, California time on October 17, 1997, unless on or before that time this
Commitment Letter and the Fee Letter have been duly executed and delivered to
BTCC. In addition and in any event, BTCC's commitment hereunder will expire (i)
if any fees or other amounts payable to BTCC hereunder, under the Fee Letter or
the Credit Documents are not paid when due and (ii) on November 30, 1997 or such
other date as may be agreed upon in writing by the parties
Rental Service Corporation et al.
October 14, 1997
Page 7
hereto, if the Second Amended and Restated Credit Agreement shall not have been
executed by the Credit Parties, the Agent and the Lenders by that date.
This Commitment Letter may be executed in counterparts which, when
taken together, shall constitute an original. This Commitment Letter shall be
governed by and construed in accordance with the laws of the State of New York.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
Rental Service Corporation et al.
October 14, 1997
Page 8
Please indicate your acceptance of and agreement to the foregoing by
signing and returning the enclosed copies of this Commitment Letter and the Fee
Letter to BT Commercial Corporation, 000 X. Xxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxxxxx, XX 00000 Attention: Xxxxxx X. Xxxxxxxx.
Very truly yours,
BT COMMERCIAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxx
Senior Vice President
Accepted and agreed this
14th day of October, 1997
RSC ALABAMA, INC.
RSC INDUSTRIAL CORPORATION
RSC XXXXX INC.
RSC RENTS, INC.
THE AIR & PUMP COMPANY
XXXXXX XXXXX EQUIPMENT, INC.
RENTAL SERVICE CORPORATION
RSC ACQUISITION CORP.
RSC HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President &
Chief Financial Officer
