April 30, 1997 EXHIBIT 10.6
Acme Alabama, Inc.
Acme Dixie Inc.
Acme Xxxxx Inc.
Acme 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: $100,000,000 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 and the Second
Amendment Consent and Limited Waiver to Amended and Restated Credit Agreement
dated as of April 10, 1997, the "Credit Agreement") among Acme Alabama, Inc.,
Acme Dixie Inc., Acme Xxxxx Inc., 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.
BTCC understands from discussions with representatives of the Borrowers and
the Parent Guarantors that the Borrowers and the Parent Guarantors have
requested an amendment to the Credit Agreement (i) increasing the total
Commitments thereunder by $100,000,000 (such increase being referred to as the
"Incremental Commitment"), (ii) reducing the rate at which the Unused Line Fee
accrues to 0.25% per annum, (iii) revising the definitions of Applicable
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Eurodollar Rate Margin, Applicable Prime Rate Margin and Interest Coverage
Ratio, as more particularly described on Annex I attached hereto and made
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April 30, 1997
Page 2
a part hereof (together with corresponding revisions to the form of Compliance
Certificate attached to the Credit Agreement as Exhibit O), (iv) reducing the
rate at which Letter of Credit Fees accrue after the occurrence of an Event of
Default to 4.00% per annum and (v) reducing the rate of interest payable after
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the occurrence of an Event of Default to (A) for all Obligations (other than
Eurodollar Rate Loans), a per annum rate equal to the Prime Lending Rate plus
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2.50% and (B) for Eurodollar Rate Loans, a per annum rate equal to the Adjusted
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Eurodollar Rate for the applicable Interest Period in effect for such Eurodollar
Rate Loans plus 4.00%. Such an amendment, containing the condition relating to
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the New Offering (as defined below) and such other 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 "Third Amendment."
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 Third Amendment, provided, that the
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effectiveness of the Third Amendment shall be subject to the satisfaction of the
condition, among others, that RSC shall have received at least $45,000,000 in
net cash proceeds from the issuance of RSC common stock or subordinated debt
securities convertible into equity securities of RSC, in each case on terms
(including subordination terms) and subject to conditions satisfactory to the
Agent and the Lenders (the "New Offering"). BTCC's commitment to provide the
Incremental Commitment is also subject to the satisfaction of all the conditions
set forth herein, in the Fee Letter (as defined below) and in the Third
Amendment and review of the assets, liabilities (including existing contingent
liabilities), business and operations of the Credit Parties giving effect to the
Third Amendment and the New Offering. 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 is
subject to its satisfactory completion of such review and due diligence and its
continuing satisfaction therewith.
BTCC, as Agent, will structure the Third Amendment 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 New Offering, the
Incremental Commitment, and the terms of the Third Amendment, 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.
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April 30, 1997
Page 3
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, 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 Third Amendment and the Incremental 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 Third
Amendment, 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
Securities 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 Third Amendment, or any other potential
transaction between any Credit Party or BTCC, any Lender, any New Lender or any
BT Affiliate.
In connection with the Third Amendment, 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 Third Amendment. 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 letter or in the fee letter of even
date herewith (the "Fee Letter").
BTCC's commitment to provide the Incremental 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. In addition, in the event that: (i)
prior to the execution and
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April 30, 1997
Page 4
delivery of definitive documentation with respect to the Third
Amendment, 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
commitment pursuant to the foregoing clause (i), execute and deliver the
definitive documentation with respect to the Third Amendment on or before June
30, 1997, 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 Third Amendment and other amendments to the Credit Documents
(the Credit Documents, as amended by such amendments, 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 (other than Affiliates of BTCC or any Lender who have
been engaged by the Company with respect to the New Offering), 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 Offering 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
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April 30, 1997
Page 5
(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 Offering, 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, 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 is 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 or appropriate to facilitate the
New Offering. 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.
Each of the Credit Parties hereby acknowledges and confirms that BTCC (i)
has not required, endorsed or recommended the initiation or consummation of the
New Offering, (ii) is not doing so by issuing this Commitment Letter and (iii)
has not made and is not making any representation to any Person with respect
thereto.
BTCC's commitment to provide the Incremental 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 and the Third Amendment. BTCC's commitment to provide the
Incremental Commitment pursuant to the terms of this Commitment Letter will
expire at 5:00 p.m. Los Angeles, California time on May 2, 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
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April 30, 1997
Page 6
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 June 30, 1997, unless extended by mutual agreement, if the Third
Amendment 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.
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April 30, 1997
Page 7
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
2nd day of May, 1997
ACME ALABAMA, INC.
ACME DIXIE INC.
ACME XXXXX INC.
ACME RENTS, INC.
THE AIR & PUMP COMPANY
XXXXXX XXXXX EQUIPMENT, INC.
RENTAL SERVICE CORPORATION
RSC ACQUISITION CORP.
RSC HOLDINGS, INC.
By: /s/Xxxxxx X. Xxxxxxxx
___________________________
Xxxxxxx X. Xxxxxxxx
Senior Vice President
ANNEX I
TO
COMMITMENT LETTER
dated April 30, 1997
Revisions to Applicable Eurodollar Rate Margin
and Applicable Prime Rate Margin
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Interest on Prime Rate Loans will be payable at a per annum rate equal to the
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Prime Lending Rate plus a margin (the "Applicable Prime Rate Margin"). Interest
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on Eurodollar Rate Loans will be payable at a per annum rate equal to the
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Adjusted Eurodollar Rate plus a margin (the "Applicable Eurodollar Rate Margin"
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and, together with the Applicable Prime Rate Margin, the "Applicable Margins").
The Applicable Margins shall be calculated as follows:
(a) from the effective date of the Third Amendment until the first anniversary
of the Effective Date of the Credit Agreement, the Applicable Eurodollar
Rate Margin will be a per annum rate equal to 1.75% and the Applicable
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Prime Rate Margin will be a per annum rate equal to 0.25%; provided, that
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if the Interest Coverage Ratio for the then most recent Quarterly
Determination Date (as shown on the quarterly Compliance Certificate
delivered pursuant to Section 7.1(c) of the Credit Agreement) is within the
ranges set out below and no Default or Event of Default exists as of such
Quarterly Determination Date, the Applicable Margins shall be the per annum
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rates set out opposite the applicable range indicated below:
Applicable Applicable
Interest Eurodollar Prime Rate
Coverage Ratio Rate Margin Margin
----------------------------------------- ------------ ------------
Greater than 3.5:1 1.50% 0
and not more than
4.0:1
Greater than 4.0:1 1.25% (0.25%)
(b) from and after the first anniversary of the Effective Date of the Credit
Agreement, the Applicable Eurodollar Rate Margin will be a per annum rate
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equal to 2.00% and the Applicable Prime Rate Margin will be a per annum
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rate equal to 0.50%; provided, that if the Interest Coverage Ratio for the
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then most recent Quarterly Determination Date (as shown on the quarterly
Compliance Certificate delivered pursuant to Section 7.1(c) of the Credit
Agreement) is within the ranges set out below and no Default or Event of
Default exists as of such Quarterly Determination Date, the
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Applicable Margins shall be the per annum rates set out opposite
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the applicable range indicated below:
Applicable Applicable
Interest Eurodollar Prime Rate
Coverage Ratio Rate Margin Margin
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Greater than 3.0:1 1.75% 0.25%
and not more than
3.5:1
Greater than 3.5:1 1.50% 0
and not more than
4.0:1
Greater than 4.0:1 1.25% (0.25%)
In the event of the delivery of a Compliance Certificate showing an increase or
decrease in the Interest Coverage Ratio requiring a change in the Applicable
Margins, the change in the Applicable Margins shall be effective from the first
day of the calendar month immediately following receipt of the Compliance
Certificate (provided that the Compliance Certificate is received by the Agent
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no later than 3:00 P.M. New York City time at least one (1) Business Day prior
to the first day of such calendar month) until the next such date on which the
Applicable Margins are subject to change following the delivery of (or failure
to deliver) a Compliance Certificate showing an increase or decrease in the
Interest Coverage Ratio requiring a change in the Applicable Margins. The
failure to deliver any Compliance Certificate by the date required under the
Credit Agreement (after giving effect to any applicable grace period) shall
automatically cause the Applicable Margins to be the maximum per annum rates for
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the periods described in clauses (a) and (b) above, as applicable, effective as
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of the first day of the fiscal quarter immediately following the date on which
the delivery of the Compliance Certificate was otherwise required.
Solely for purposes of determining the Applicable Margins for periods ending
after the effective date of the Third Amendment, "Interest Coverage Ratio"
means, as of a Quarterly Determination Date, the ratio of (i) EBITA to (ii)
Interest Expense (other than non-cash Interest Expense on Indebtedness under the
Citicorp Purchase Agreement) for the six-month period ending on such Quarterly
Determination Date.
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