1
EXHIBIT 10.15
================================================================================
PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.
AND THE
SHAREHOLDERS
OF
NEWMANCO, INC.,
D/B/A A-1 RENTALS
AS OF MAY 22, 1997
================================================================================
2
TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Purchase Price; Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4. Closing; Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5. Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1. Representations and Warranties of the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2. Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.3. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4. Representations as to Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2. Operation and Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3. Acquisitions and Dispositions of Rental Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4. Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5. Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7. Conveyance of Shareholder Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.9. Closing Date Liabilities and Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.10. Certain Pre-Closing Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.8. Certain Post-Closing Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.9. Repurchase of Unpaid Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.10. Termination of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2. Conditions to Obligation of the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3
7.1. Indemnification Provisions for Benefit of the Buyer and the Company . . . . . . . . . . . . . . . . 22
7.2. Indemnification Provisions for Benefit of the Shareholders . . . . . . . . . . . . . . . . . . . . . 23
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.14. Shareholders' Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(ii)
4
Exhibits:
Exhibit 1.1(a)
Exhibit 1.1(b)
Exhibit 1.1(c)
Exhibit 1.1(d)
Exhibit 1.1(e)
Exhibit 1.1(f)
Exhibit 1.1(g)
Exhibit 1.1(h)
Exhibit 1.1(i)
Exhibit 1.1(j)
Exhibit 1.1(k)
Exhibit 1.1(l)
Exhibit 1.1(m)
Exhibit 3.1(a)(i)
Exhibit 3.1(a)(ii)
Exhibit 3.1(b)
Exhibit 3.1(c)(i)
Exhibit 3.1(d)(i)(A)
Exhibit 3.1(d)(i)(B)
Exhibit 3.1(d)(i)(C)
Exhibit 3.1(e)(i)
Exhibit 3.1(e)(ii)
Exhibit 3.1(f)(iii)
Exhibit 3.1(f)(v)
Exhibit 3.1(f)(vi)
Exhibit 3.1(g)(i)(A)
Exhibit 3.1(g)(i)(B)
Exhibit 3.1(g)(ii)
Exhibit 3.1(h)(i)
Exhibit 3.1(h)(ii)
Exhibit 3.1(i)(i)
Exhibit 3.1(i)(ii)
Exhibit 3.1(k)
Exhibit 3.1(l)
Exhibit 3.1(m)
Exhibit 3.1(o)(i)
Exhibit 3.1(o)(ii)
Exhibit 3.1(r)(ii)
Exhibit 3.1(r)(iii)
Exhibit 4.3
Exhibit 6.1(j)
Exhibit 6.2(e)
(iii)
5
This Purchase Agreement is entered into as of May 22, 1997
among RentX Industries, Inc., a Delaware corporation (the "Buyer"), and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (individually, a "Shareholder" and
collectively, the "Shareholders").
Recitals
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ owns all of the issued and outstanding
capital stock of Newmanco, Inc., d/b/a A-1 Rental Centers, a New Mexico
corporation (the "Company"). ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ is ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇'▇ spouse
and, under the community property laws of the State of New Mexico, may be
deemed to own an interest in such capital stock. The Shareholders desire to
sell, and the Buyer desires to purchase, all of the issued and outstanding
capital stock of the Company as provided in this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the
meanings designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set
forth in this Agreement, the Buyer agrees to purchase from the Shareholders,
and the Shareholders agree to sell to the Buyer, all the Shares free and clear
of any Encumbrance or Tax, for the consideration specified in Section 2.2. The
Buyer will have no obligation under this Agreement to purchase less than all of
the Shares.
2.2. Purchase Price; Payment.
(a) The purchase price for the Shares is $3,302,000,
increased for the New Rental Equipment Adjustment. At the Closing, the Buyer
will, by wire transfer or other delivery of immediately available funds, (i)
pay to the Shareholders (subject to Section 2.2(b)), $2,972,000, subject to
increase for the New Rental Equipment Adjustment (no deduction will be made at
the Closing for the estimated Pre-Closing Personal Property Tax Amount or for
the amount by which the estimated Pre-Closing Income Tax Amount exceeds the
estimated tax payments made by the Company in respect of the Pre-Closing Income
Tax Amount), and (ii) deposit $330,000 into the Escrow Accounts (and the
amounts paid and deposited to and in respect of the Shareholders will
constitute the full purchase price for the Shares). The amount deposited in
the Escrow Accounts will belong to the Shareholders, subject to the
Shareholders' indemnification obligations set forth in this Agreement, and will
be held, invested, administered and disbursed according to Section 7.1(b)
hereof and the Escrow Agreements. The purchase price will be payable to the
Shareholders in the following percentages:
Percentage of
Shareholder No of Shares Owned Purchase Price
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 10,000 100%
6
(b) At the Closing, the Buyer will deposit into a demand
deposit account in the names of the Buyer and the Shareholders' Agent, from the
amount otherwise payable to the Shareholders pursuant to Section 2.2(a)(i), an
amount equal to the Reserve Amount, and such funds shall initially constitute
the Liabilities Reserve. The funds on deposit in the Closing Date Liabilities
Reserve will belong to the Shareholders, subject to the provisions of this
Section 2.2(b). Following the Closing, the Closing Date Liabilities Reserve
will be applied to the payment of Reserved Shareholder Liabilities, by
disbursements from that account upon the joint signatures of a representative
of the Buyer and the Shareholders' Agent, as the Reserved Shareholder
Liabilities are ascertained. To the extent that the Buyer receives a ▇▇▇▇ or
invoice representing, or is otherwise aware of, any Reserved Shareholder
Liabilities, the Shareholders' Agent shall sign checks drawn on the Liabilities
Reserve to satisfy such Reserved Shareholder Liabilities promptly upon the
request of Buyer. Reserved Shareholder Liabilities representing accrued
vacation and other accrued employee benefits with respect to those persons who
are employees of the Company as of immediately prior to the Closing Date and
who become employees of the Buyer effective as of the Closing will be satisfied
by payment of the amount thereof to the Buyer as the Buyer provides such
benefits or makes cash payments in lieu thereof to employees. The
Shareholders' Agent will take all actions necessary to cause the Liabilities
Reserve to be applied to satisfy Reserved Shareholder Liabilities and, if the
Liabilities Reserve has been exhausted, the Shareholders will provide
additional funds as required to satisfy Reserved Shareholder Liabilities.
Nothing in this Agreement will be deemed to limit the joint and several
obligations of the Shareholders to pay the Reserved Shareholder Liabilities in
full. After all Reserved Shareholder Liabilities have been satisfied, any
excess Liabilities Reserve on deposit in the account created pursuant to this
Section 2.2(b) will be paid to the Shareholders. Any disputes concerning the
Liabilities Reserve will be settled by arbitration as provided in this
Agreement.
2.3. Sales Taxes, Etc. The Shareholders will pay all sales, use,
transfer, licensing, recording, stamp and other Taxes, fees and charges payable
in respect of or as a result of the sale and transfer of the Shares to the
Buyer pursuant to this Agreement.
2.4. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") is anticipated to take place on
May 22, 1997 (but in any event on or before June 30, 1997), commencing at 8:00
a.m. local time in Denver, Colorado, at the offices of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
L.L.C., and all transactions contemplated by this Agreement will be effective
at 12:00 a.m. local time in Las Cruces, New Mexico on the day of the Closing
(such effective time being the "Closing Date").
2.5. Deliveries at the Closing. At the Closing, (a) the
Shareholders will deliver, or cause to be delivered, to the Buyer the
certificates, instruments and documents referred to in Section 6.1, (b) the
Buyer will deliver to the Shareholders the certificates, instruments and
documents referred to in Section 6.2, (c) the Shareholders will deliver to the
Buyer stock certificates representing all the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank, free and clear of any
Encumbrances or Taxes and (d) the Buyer will pay and deposit the purchase price
in accordance with Section 2.2.
3. Representations and Warranties.
3.1. Representations and Warranties of the Shareholders. The
Shareholders jointly and severally represent and warrant to the Buyer that the
statements contained in this Section 3.1 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
-2-
7
(as though made then and as though the Closing Date were then substituted for
the date of this Agreement throughout this Section 3.1).
(a) Organization, Good Standing, Etc. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New Mexico, and is not required to be qualified or
authorized to do business as a foreign corporation in any jurisdiction. The
Company has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
The copies of the articles of incorporation (certified by the Secretary of
State of New Mexico) and the bylaws of the Company, both as amended to date,
which have been delivered to the Buyer by the Shareholders and are attached as
Exhibits 3.1(a)(i) and 3.1(a)(ii), respectively, are complete and correct, and
the Company is not in default under or in violation of any provision of its
articles of incorporation or bylaws. The minute books (which contain the
records of all meetings of or actions by the shareholders, the board of
directors, and any committees of the board of directors) and the stock
certificate books and the stock record books of the Company, copies of which
have been delivered to the Buyer by the Shareholders, are correct and complete.
(b) Ownership and Capitalization. The authorized capital
stock of the Company consists of 100,000 shares of common stock, $.01 par
value. ▇▇. ▇▇▇▇▇▇▇ owns, beneficially (except for any community property
interest of ▇▇▇. ▇▇▇▇▇▇▇) and of record, free and clear of any Encumbrance or
Tax, the number of shares of the common stock, $.01 par value, of the Company
set forth opposite his name in Section 2.2(a), and the shares reflected in
Section 2.2(a) constitute all of the issued and outstanding capital stock of
the Company. All of the issued and outstanding shares of the Company's capital
stock have been duly authorized and validly issued, and are fully paid and
nonassessable, with no personal Liability attaching to the ownership thereof.
There is no authorized or outstanding stock or security convertible into or
exchangeable for, or any authorized or outstanding option, warrant or other
right to subscribe for or to purchase, or convert any obligation into, any
unissued shares of the Company's capital stock or any treasury stock, and the
Company has not agreed to issue any security so convertible or exchangeable or
any such option, warrant or other right. There are no authorized or
outstanding stock appreciation, phantom stock, profit participation or similar
rights with respect to the Company. There are no voting trusts, voting
agreements, proxies or other agreements or understanding with respect to any
capital stock of the Company. Except as set forth on Exhibit 3.1(b), all of
which the Shareholders shall cause to be terminated prior to the Closing, there
are no existing rights of first refusal, buy- sell arrangements, options,
warrants, rights, calls, or other commitments or restrictions of any character
relating to any of the Shares, except those restrictions on transfer imposed by
the Securities Act of 1993, as amended, and applicable state securities laws.
The Company has no subsidiaries and no interest in any other corporation,
partnership, limited partnership, limited liability company, association or
joint venture.
(c) Authority; No Violation. Each Shareholder and each
relative or affiliate of the Company or of a Shareholder who is party to any
Other Seller Agreement has full and absolute right, power, authority and legal
capacity to execute, deliver and perform this Agreement and all Other Seller
Agreements to which such Shareholder, relative or affiliate is a party, and
this Agreement constitutes, and the Other Seller Agreements will when executed
and delivered constitute, the legal, valid and binding obligations of, and
shall be enforceable in accordance with their respective terms against, each
such Shareholder, relative or affiliate who is a party thereto. The execution,
delivery and performance of this Agreement and the Other Seller Agreements and
the consummation of the transactions
-3-
8
contemplated hereby and thereby will not (A) violate any Legal Requirement to
which the Company, any Shareholder, or any relative or affiliate of the Company
or of any Shareholder who is a party to any Other Seller Agreement is subject
or any provision of the articles of incorporation or bylaws of the Company or
of any such affiliate, or (B) violate, with or without the giving of notice or
the lapse of time or both, or conflict with or result in the breach or
termination of any provision of, or constitute a default under, or give any
Person the right to accelerate any obligation under, or result in the creation
of any Encumbrance upon any properties, assets or business of the Company, of
any Shareholder, or of any such relative or affiliate pursuant to, any
indenture, mortgage, deed of trust, lien, lease, license, Permit, agreement,
instrument or other arrangement to which the Company, any Shareholder or any
such relative or affiliate is a party or by which the Company, any Shareholder,
or any such relative or affiliate or any of their respective assets and
properties is bound or subject. Except for notices that will be given and
consents that will be obtained by the Shareholders prior to the Closing (which
are set forth in Exhibit 3.1(c)(i)), neither the Company, any Shareholder, nor
any such relative or affiliate need give any notice to, make any filing with or
obtain any authorization, consent or approval of any Governmental Authority or
other Person in order for the parties to consummate the transactions
contemplated by this Agreement and the Other Seller Agreements.
(d) Financial Statements; Absence of Liabilities. (i)
The unaudited balance sheets of the Company as of September 30, 1994, 1995 and
1996, the related statements of income, shareholders' equity and cash flows for
the fiscal years then ended, the unaudited balance sheet of the Company as of
March 31, 1997(the latter being referred to as the "Latest Balance Sheet"), and
the related statements of income, shareholders' equity and cash flows for the
six-month period then ended, have been prepared in accordance with good
accounting practices and on a consistent basis, are in accordance with the
books and records of the Company (which books and records are complete and
correct), are accurate and fairly present the financial position and results of
operations of the Company as of such dates and for each of the periods
indicated, do not list book values for the assets that are in excess of their
fair market values, and, except as set forth on Exhibit 3.1(d)(i)(A), make full
and adequate provision for all Liabilities to which the Company is subject.
Copies of the financial statements described in the first sentence in this
Section are attached as Exhibit 3.1(d)(i)(B). The expenses itemized on Exhibit
3.1(d)(i)(C) and reflected in the Company's financial performance for the
12-month period ended September 30, 1996 will not be realized on an on-going
basis, and information sufficient to determine such financial performance for
such 12-month period has been provided by the Shareholders to the Buyer prior
to the date of this Agreement.
(ii) Since the date of the Latest Balance Sheet,
the Company has not incurred or become subject to any Liability other than
Liabilities incurred in the ordinary course of business. As of the Closing,
the Company will have no Liability (and there is no basis for the assertion of
any Liability), except for the Retained Liabilities.
(e) Absence of Certain Leases, Changes or Events. The
Company is not, except as set forth on Exhibit 3.1(e)(i), a party to or
otherwise bound by any contract or agreement that has a term of three or more
months pursuant to which the Company is obligated to furnish any equipment,
products or services, and no such contract or agreement has been prepaid with
respect to any period after the Closing Date. Since September 30, 1996, the
Company has not (i) incurred any debt, indebtedness or other Liability, except
current Liabilities incurred in the ordinary course of business; (ii) delayed
or postponed the payment of accounts payable or other Liabilities or
accelerated the collection of any receivable beyond stated, normal terms; (iii)
except as set forth on Exhibit 3.1(e)(ii),
-4-
9
sold or otherwise transferred any of its equipment or other assets or
properties; (iv) cancelled, compromised, settled, released, waived, written-off
or expensed any account or note receivable, right, debt or claim involving more
than $5,000 in the aggregate; (v) changed in any significant manner the way in
which it conducts its business; (vi) except as set forth on Exhibit 3.1(e)(ii),
made or granted any individual wage or salary increase in excess of 10% or
$1.00 per hour, any general wage or salary increase, or any additional benefits
of any kind or nature; (vii) except as otherwise expressly permitted by this
Section 3.1(e), (A) entered into any contracts or agreements, or made any
commitments, involving more than $5,000 individually or in the aggregate or (B)
accelerated, terminated, delayed, modified or cancelled any agreement,
contract, lease or license (or series of related agreements, contracts, leases
and licenses) involving more than $5,000 individually or in the aggregate;
(viii) except as set forth on Exhibit 3.1(e)(ii), suffered any adverse fact or
change, including, without limitation, to or in its business, assets, financial
condition, prospects or customer or supplier relationships; (ix) made any
payment or transfer to or for the benefit of any shareholder, officer or
director or any relative or affiliate thereof or permitted any Person,
including, without limitation, any shareholder, officer, director or employee
or any relative or affiliate thereof, to withdraw assets from the Company
(other than cash and other Excluded Assets distributed to the Shareholders as
set forth on Exhibit 3.1(e)(ii) and other than the payment to the Shareholders
of the proportionate monthly amount of their respective normal annualized
salaries due and payable during such period); (x) failed to make purchases of
new or used equipment necessary to maintain its rental/lease inventory at the
level which is reasonably necessary to maintain the revenue base experienced by
the Company during the 12 months preceding such date; (xi) decreased its lease
rate with respect to any equipment by 10% or more from the applicable lease
rate in effect on September 30, 1996 or rented or leased any equipment or sold
or otherwise transferred any inventory, equipment or services at below-normal
rental or lease rates or margins; (xii) suffered any other significant
occurrence, event, incident, action, failure to act or transaction outside the
ordinary course of business; or (xiii) agreed to incur, take, enter into, make
or permit any of the matters described in clauses (i) through (xii).
(f) Tax Matters.
(i) The Company has filed all Tax Returns that it
was required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Company (whether or not shown on any Tax
Return) have been paid. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no Encumbrances on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or other
third party.
(iii) To the best knowledge of the Shareholders,
there is no basis for any authority to assess any additional Taxes for any
period for which Tax Returns have been filed. There is no pending or
threatened dispute or claim concerning any Tax Liability of the Company.
Exhibit 3.1(f)(iii) lists all federal, state, local and foreign income Tax
Returns filed with respect to the Company for taxable periods ended on or after
September 30, 1990, indicates those Tax Returns that have been audited and
indicates those Tax Returns that currently are the subject of audit. The
-5-
10
Shareholders have delivered to Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies filed
or assessed against or agreed to by the Company since September 30, 1990.
(iv) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(v) Neither the Company nor any of its
shareholders has ever filed (A) an election pursuant to Section 1362 of the
Code that the Company be taxed as an "S" corporation, except as set forth on
Exhibit 3.1(f)(v), or (B) a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations. The Company has not made any payments,
is not obligated to make any payments and is not a party to any agreement that
under certain circumstances could obligate it to make any payments that will
not be deductible under Code Section 280G. The Company has not been a United
States real property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). The Company has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
The Company is not a party to any Tax allocation or sharing agreement. The
Company has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common parent of which was
the Company) and has no Liability for the Taxes of any Person (other than the
Company) under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract or
otherwise. The total adjusted basis of the Acquired Assets exceeds the sum of
the Company's Liabilities plus the amount of Liabilities to which the Acquired
Assets are subject.
(vi) Exhibit 3.1(f)(vi) sets forth the following
information with respect to the Company as of the most recent practicable date
(as well as on an estimated pro forma basis as of the Closing giving effect to
the consummation of the transactions contemplated hereby): (A) the basis of
the Company in its assets; and (B) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax credit or
excess charitable contribution allocable to the Company.
(vii) If the Company has ever filed an election to
be taxed as an "S" corporation, all Taxes payable by all present and former
shareholders of the Company in respect of their shares of the Company's taxable
income have been paid.
(g) Assets and Properties.
(i) As of the date of this Agreement, the Company
owns all of the Acquired Assets (other than certain items of Shareholder
Property), free and clear of all Encumbrances (except for those Encumbrances
which the Company shall cause to be terminated as of the Closing and except for
Encumbrances securing Retained Liabilities arising under the agreements
described in items (j), (k), and (l) of Exhibit 1.1(j)). As of the Closing,
all of the Acquired Assets (including all of the Shareholder Property) will be
owned by the Company, free and clear of all Encumbrances (except for
Encumbrances securing Retained Liabilities arising under the agreements
described in items (j), (k) and (l) of Exhibit 1.1(j), provided that: (i) such
Retained Liabilities shall not exceed the cost to the Company (without
interest) of the items of equipment in the Company's inventory of new equipment
-6-
11
held for sale as of the Closing Date that were purchased pursuant to such
agreements; (ii) such Retained Liabilities shall not exceed in the aggregate
$29,914.00; and (iii) such Encumbrances shall not extend to any Acquired Assets
other than the items of equipment described in clause (i) of this proviso), and
the Company will have good and marketable title to all the Acquired Assets.
The Acquired Assets consist of (A) the tangible and intangible assets of the
Company (exclusive of the Excluded Assets) in existence as of June 30, 1996
(except as set forth on Exhibit 3.1(e)(ii) with respect to cash and other
Excluded Assets which were distributed to its shareholders and except for such
changes in merchandise inventory and in accounts receivable in the ordinary
course of business as are not in violation of Section 3.1(e) or Section 4.3),
increased by the New Rental Equipment acquired after June 30, 1996, and (B) all
tangible and intangible assets, including, without limitation, all
improvements, fixtures and fittings, owned by any Shareholder or relative or
affiliate thereof or of the Company which have been used in its business at any
time on or after June 30, 1996 (the "Shareholder Property"), including, without
limitation, the tangible and intangible assets set forth on Exhibit
3.1(g)(i)(A) owned by any Shareholder or relative or affiliate thereof.
Between June 30, 1996 and the day before the date of this Agreement, the
Company has purchased certain of the New Rental Equipment but has not otherwise
purchased, sold, traded, transferred or otherwise acquired or disposed of any
rental equipment (except as set forth on Exhibit 3.1(e)(ii)). In the case of
Acquired Assets consisting of the Company's rights under an arrangement with
the owner of equipment who makes such equipment available for rental by the
Company under a split rental or similar arrangement ("Consigned Equipment"),
such arrangement is in full force and effect and the owner of the Consigned
Equipment is not a relative or affiliate of the Company or any Shareholder.
The Acquired Assets are all of the tangible and intangible assets (other than
the Excluded Assets and the Premises) used by the Company in, or necessary for
the conduct of, its business. The Acquired Assets and the Consigned Equipment
encompass all equipment used by the Company to generate the income reflected in
the financial statements attached as Exhibit 3.1(d)(i)(B), other than Re-Rented
Equipment. The Company had no Consigned Equipment during the fiscal year ended
September 30, 1996. The total amount paid by the Company to use the Consigned
Equipment as part of its rental inventory during the six-month period ended
March 31, 1997, was $6,265.71, and the Company's share of the rentals from
Consigned Equipment during that six-month period was $1,787.55. Exhibit
3.1(g)(i)(B) lists all Consigned Equipment as of the date of this Agreement.
Since June 30, 1996, there has been no change in the amount or composition of
the Consigned Equipment, except as described on Exhibit 4.3. Except for items
rented or leased to customers, all of the tangible Acquired Assets and the
Consigned Equipment are located on the Premises. During the fiscal year ended
September 30, 1996 and the six-month period ended March 31, 1997, the Company's
total revenues from the rental of Re-Rented Equipment were $32,525.43 and
$25,226.06, respectively, and the total cost to the Company of renting
Re-Rented Equipment was $27,437.86 and $21,021.72, respectively.
(ii) The Premises constitute all of the real
property, buildings and improvements used by the Company in its business. The
Premises are supplied with utilities and other services necessary for the
operation thereof. Except as set forth on Exhibit 3.1(g)(ii), the Premises are
free from defects, have been maintained in accordance with normal industry
practice, are in good operating condition and repair and are suitable for the
purposes for which they presently are used. To the best knowledge of the
Shareholders, the Premises have received all approvals of Governmental
Authorities (including Permits) required in connection with the occupation and
operation thereof and have been occupied, operated and maintained in accordance
with applicable Legal Requirements. The Company has not received notice of
violation of any Legal Requirement or Permit relating to its operations or its
owned or leased properties.
-7-
12
(iii) No party to any lease with respect to any
Premises has repudiated any provision thereof, and there are no disputes, oral
agreements or forbearance programs in effect as to any such lease.
(h) Lists of Properties, Contracts and Other Data.
Attached as Exhibit 3.1(h)(ii) is a correct and complete list setting forth the
items identified on Exhibit 3.1(h)(i). True and complete copies of the items
referred to in Exhibit 3.1(h)(ii) have been delivered to the Buyer. All items
referred to in Exhibit 3.1(h)(ii) are valid, in full force and effect,
enforceable in accordance with their respective terms for the period stated
therein, and no party has repudiated any provision thereof and no action or
claim is pending or threatened to revoke, modify, terminate or render invalid
any of such items. Neither the Company nor any other party thereto is in
breach or default in performance of any of its respective obligations under,
and no event exists which, with the giving of notice or lapse of time or both,
would constitute a breach, default or event of default on the part of a party
to, any of the foregoing that is continuing unremedied.
-8-
13
(i) Litigation; Compliance with Applicable Laws and
Rights.
(i) There is no outstanding Order against, nor,
except as set forth on Exhibit 3.1(i)(i), is there any litigation, proceeding,
arbitration or investigation by any Governmental Authority or other Person
pending or threatened against, the Company, its properties or its business or
relating to the transactions contemplated by this Agreement, nor is there any
basis for any such action.
(ii) To the best knowledge of the Shareholders,
except as set forth on Exhibit 3.1(i)(ii), neither the Company nor the
Company's assets (including its Premises, facilities, machinery and equipment)
are in violation of any applicable Legal Requirement or Right. The Company has
not received notice from any Governmental Authority or other Person of any
violation or alleged violation of any Legal Requirement or Right, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or commenced or is pending or threatened
against the Company alleging any such violation.
(j) Accounts Receivable. The accounts receivable of the
Company reflected on its Latest Balance Sheet, and all accounts receivable
arising prior to the Closing Date, arose and will arise from bona fide
transactions by the Company in the ordinary course of business, are valid
receivables with trade customers subject to no setoffs or counterclaims, and
are current and collectible.
(k) Product Quality, Warranty and Liability. All
products and services sold, rented, leased, provided or delivered by the
Company to customers on or prior to the Closing Date conform to applicable
contractual commitments, express and implied warranties, product and service
specifications and quality standards, and the Company has no Liability and
there is no basis for any Liability for replacement or repair thereof or other
damages in connection therewith. No product or service sold, rented, leased,
provided or delivered by the Company to customers on or prior to the Closing is
subject to any guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions of sale, rent or lease. The Company has no
Liability and there is no basis for any Liability arising out of any injury to
a Person or property as a result of the ownership, possession, provision or use
of any product or service sold, rented, leased, provided or delivered by the
Company on or prior to the Closing Date. All product or service liability
claims that have been asserted against the Company since January 1, 1992,
whether covered by insurance or not and whether litigation has resulted or not,
other than those listed and summarized on Exhibit 3.1(i)(i), are listed and
summarized on Exhibit 3.1(k).
(l) Insurance. The Company has policies of insurance (i)
covering risk of loss on the Acquired Assets and Consigned Equipment, (ii)
covering products and services liability and liability for fire, property
damage, personal injury and workers' compensation coverage and (iii) for
business interruption, all, to the best knowledge of the Shareholders, with
responsible and financially sound insurance carriers in adequate amounts and in
compliance with governmental requirements and in accordance with good industry
practice. All such insurance policies are valid, in full force and effect and
enforceable in accordance with their respective terms and no party has
repudiated any provision thereof. All such policies will remain in full force
and effect until the Closing Date. Neither the Company nor any other party to
any such policy is in breach or default (including with respect to the payment
of premiums or the giving of notices) in the performance of any of their
respective obligations thereunder, and no event exists which, with the giving
of notice or the lapse of time or both, would
-9-
14
constitute a breach, default or event of default, or permit termination,
modification or acceleration under any such policy. There are no claims,
actions, proceedings or suits arising out of or based upon any of such policies
nor, to the best knowledge of the Shareholders, does any basis for any such
claim, action, suit or proceeding exist. All premiums have been paid on such
policies as of the date of this Agreement and will be paid on such policies
through the Closing Date. The Company has been covered during the five years
prior to the date of this Agreement by insurance in scope and amount customary
and reasonable for the businesses in which it has engaged during the
aforementioned period. All claims made during such five-year period with
respect to any insurance coverage of the Company, other than those described on
Exhibit 3.1(k), are set forth on Exhibit 3.1(l).
(m) Pension and Employee Benefit Matters.
(i) Exhibit 3.1(m) lists each Employee Benefit
Plan that: (A) is subject to any provision of ERISA; (B) is maintained,
administered or contributed to by the Company; (C) covers any employee or
former employee of the Company; or (D) under which the Company has any
liability to make contributions or pay benefits. Copies of all such plans,
summary plan descriptions, annual reports, summary annual reports, PBGC-1s,
plan administrative records and financial records, correspondence and, if
applicable, related trust agreements, and all amendments and written
interpretations of such plans have been delivered by the Shareholders to the
Buyer and attached hereto as part of 3.1(m), together with the three most
recent annual reports (Form 5500 including Schedule B if applicable) prepared
in connection with each such plan required to file an annual report, and the
most recent actuarial valuation report prepared in connection with each such
plan for which an actuarial valuation report is required to be or has been
prepared, each of which is also attached hereto as part of 3.1(m). Such plans
are hereinafter referred to collectively as the "Company Employee Benefit
Plans."
(ii) Each Company Employee Benefit Plan has been
maintained and administered in substantial compliance with its terms and with
all Legal Requirements that are applicable to such Employee Benefit Plan.
(iii) The only Company Employee Benefit Plans that
individually or collectively would constitute Employee Pension Benefit Plans
are identified in Exhibit 3.1(m) as the "Retirement Plans."
(iv) The Retirement Plans that are subject to the
Plan Termination Insurance provisions of Title IV of ERISA are identified in
Exhibit 3.1(m) as the "Pension Plans". The Shareholders have provided the
Buyer with complete age, salary, service, employment status and related data as
of February 28, 1997 for employees and former employees covered under the
Pension Plans, and a copy of such information is attached hereto as part of
Exhibit 3.1(m).
(v) As of the most recent valuation date, the
fair market value of the assets of each Pension Plan (including for these
purposes any accrued but unpaid contributions) exceeded the present value of
all Benefit Liabilities as defined in ERISA Section 4001(a)(16) under each
Pension Plan determined on a termination basis using the assumptions that would
be applied by the PBGC for a plan terminating as of the Closing Date.
-10-
15
(vi) No "accumulated funding deficiency" (as
defined in Section 412 of the Code), has been incurred with respect to any
Pension Plan whether or not waived. Quarterly contributions under Code Section
412(m) have been made as required for each Pension Plan and no notice to the
PBGC has been required under Code 412(n).
(vii) None of the Shareholders nor any director or
officer (or employee responsible for employee benefit matters) of the Company
has knowledge of any "reportable event" (as defined in Section 4043 of ERISA),
and no event described in Section 4062, 4063 or 4041 of ERISA has occurred in
connection with any Pension Plan, other than a "reportable event" for which the
30-day notice requirement has been waived under regulations published by the
PBGC.
(viii) No condition exists and no event has occurred
that could constitute grounds for termination of any Pension Plan under Section
4042 of ERISA. The Company has not incurred any Liability under Title IV of
ERISA arising in connection with the termination of any plan covered or
previously covered by Title IV of ERISA.
(ix) Exhibit 3.1(m) lists each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
deferred compensation, profit sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation, reduced interest
or interest free loans, mortgages, relocation assistance or post- retirement
insurance, compensation or other benefits that: (A) is not an Employee Benefit
Plan; (B) is entered into, maintained or contributed to, by the Company; and
(C) covers any employee or former employee of the Company or any relative
thereof. Such contracts, plans and arrangements as are described in this
Section 3.1(m)(ix), are hereinafter referred to collectively as the "Benefit
Arrangements." Copies and descriptions (including descriptions of the number
and employment classifications of employees covered by each such Benefit
Arrangement) have been delivered by the Shareholders to the Buyer and attached
hereto as part of Exhibit 3.1(m). Each Benefit Arrangement has been maintained
and administered in substantial compliance with its terms and with the
requirements prescribed by any and all Legal Requirements that are applicable
to each such Benefit Arrangement.
(x) Except as set forth in any Company Employee
Benefit Plan or Benefit Arrangement identified in Exhibit 3.1(m) and except as
provided by Legal Requirement or any collective bargaining agreement or any
employment contract identified on Exhibit 3.1(m), the employment of all persons
presently employed or retained by the Company is terminable at will.
(xi) Except as expressly so identified in Exhibit
3.1(m), no Company Employee Benefit Plan is a "Multiemployer Plan."
(xii) No Company Employee Benefit Plan is
maintained in connection with any trust described in Section 501(c)(9) of the
Code. Any assets of any Employee Benefit Plan that are subject to the trust
requirement of ERISA Section 403 are held in trust in compliance with ERISA
Section 403.
(xiii) Each Retirement Plan that is intended to be
qualified within the meaning of Section 401(a) of the Code ("Qualified") is so
Qualified, has been so Qualified during the period
-11-
16
from its adoption to date, has been administered in a manner that would not
adversely affect its Qualified status and has receive a currently effective
determination letter (or a determination letter has been timely requested) from
the Internal Revenue Service that the Plan is (or continues to be) currently
Qualified for federal income tax purposes. The Shareholders have delivered to
the Buyer copies of such determination letters and any pending applications,
and copies thereof have been attached hereto as part of Exhibit 3.1(m). Each
trust in which Retirement Plan assets are held is exempt from tax pursuant to
Section 501(a) of the Code. The Company shall terminate its SARSEP prior to
the Closing Date.
(xiv) There have been no prohibited transactions
with respect to any Company Employee Benefit Plan. No "Fiduciary" (as defined
in Section 3(21) of ERISA) has any Liability for breach of fiduciary duty or
any other failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing or investigation with respect to the administration or the
investment of the assets of any Company Employee Benefit Plan (other than
routine claims for benefits) is pending or, to the best knowledge of the
Shareholders is threatened. None of the Shareholders has any knowledge of any
basis for any such action, suit, proceeding, hearing or investigation.
(xv) The Company does not maintain and has never
maintained nor contributes, or ever has contributed, or ever has been required
to contribute, to any Company Employee Benefit Plan providing health or medical
benefits for current or future retired or terminated employees, their spouses
or their dependents (other than in accordance with Code Section 4980B). No
condition exists that would prevent the Company from amending or terminating
any Company Employee Benefit Plan or Benefit Arrangement providing health or
medical benefits in respect of any active or retired employees of the Company.
(xvi) Each Company Employee Benefit Plan and
Benefit Arrangement has been maintained and administered in compliance with its
terms and with the requirements prescribed by any and all Legal Requirements,
including but not limited to ERISA and the Code, that are applicable to such
Plans. Nothing done or omitted to be done and no transaction or holding of any
asset under or in connection with any Company Employee Benefit Plan or Benefit
Arrangement has made or will make the Company or any officer or director of the
Company subject to any Liability under Title I of ERISA or any Liability for
any Tax under Section 4972 or Section 4975 through 4980B, inclusive, of the
Code.
(xvii) Any Company Employee Benefit Plan that is a
"group health plan" (as defined in Code Section 5000(b)(l)) has been
administered in accordance with the requirements of Part 6 of Subtitle B of
Title I of ERISA and Code Section 4980B and nothing done or omitted to be done
in connection with maintenance or administration of any Company Employee
Benefit Plan that is a "group health plan" has made or will make the Company
subject to any liability under Title I of ERISA, excise Tax Liability under
Code Section 4980B or has resulted or will result in any loss of income
exclusion for a participant under Code Sections 105(h) or 106.
(xviii) There is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G or 162(a)(l) of
the Code.
-12-
17
(xix) The Company has made, before the date of this
Agreement, all required contributions and premium payments under each
Retirement Plan, Company Employee Benefit Plan and Benefit Arrangement for all
completed fiscal years including contributions that may not by law have
otherwise been required to be made until the due date for filing the Tax Return
for any completed fiscal year. All contributions and payments accrued under
the Retirement Plans, determined in accordance with funding and accrual
practices in effect for the preceding plan year and as adjusted to the extent
required to include proportional accruals for service for the period ending on
the Closing Date will be discharged and paid on or prior to the Closing Date.
The employer and employee contributions to any Retirement Plan that is not a
Pension Plan for any payroll period completed on or before the Closing Date
will have been made on or before the Closing Date.
(xx) Except as disclosed in Exhibit 3.1(m), there
has not been with respect to the Company's active or retired employees, nor
will be, as of the Closing Date, any amendment to, written interpretation or
announcement (whether or not written) by the Company relating to, or change in
employee participation or coverage under, any Company Employee Benefit Plan or
Benefit Arrangement that would increase the expense of maintaining or funding
benefits under such Company Employee Benefit Plan or Benefit Arrangement above
the level of the expense incurred in respect thereof for the fiscal year ended
on December 31, 1996.
(xxi) The Buyer will have no obligation to employ
any employee of the Company or to continue any Company Employee Benefit Plan,
and will have no Liability under any plan or arrangement maintained by the
Company for the benefit of any employee. No condition exists that would
prevent the Company from terminating any Company Employee Benefit Plan, any
Retirement Plan or any Pension Plan prior to the Closing Date.
(xxii) Exhibit 3.1(m) sets forth the names of all
retired employees, if any, of the Company who are receiving or are entitled to
receive any payments which are not fully covered by any Employee Pension
Benefit Plan of the Company which is Qualified under Code Section 401(a), their
ages and the annual funded and unfunded benefits.
(n) Employees and Labor. The Company has not received
any notice, nor, to the best knowledge of the Shareholders, is there any reason
to believe that any executive or key employee of the Company or any group of
employees of the Company has any plans to terminate his, her or its employment
with the Company. No executive or key employee is subject to any agreement,
obligation, Order or other legal hindrance that impedes or might impede such
executive or key employee from devoting his or her full business time to the
affairs of the Company prior to the Closing Date and, if such person becomes an
employee of the Buyer, to the affairs of the Buyer after the Closing Date. The
Company will not be required to give any notice under the Worker Adjustment and
Retraining Notification Act, as amended, or any similar Legal Requirement as a
result of this Agreement, the Other Seller Agreements or the transactions
contemplated hereby or thereby. The Company does not have any labor relations
problems or disputes, nor has the Company experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. The
Company is not a party to or bound by any collective bargaining agreement,
there is no union or collective bargaining unit at the Company's facilities,
and no union organization effort has been threatened, initiated or is in
progress with respect to any employees of the Company.
-13-
18
(o) Customer and Supplier Relationships. Exhibit
3.1(o)(i) lists each customer that individually or with its affiliates
accounted for 2% or more of the Company's sales, rental or lease revenues
during either the fiscal year ended September 30, 1996 or the six-month period
ended March 31, 1997 (the "Principal Customers"). Exhibit 3.1(o)(ii) lists
each supplier that individually or with its affiliates accounted for 2% or more
of the Company's purchases of inventory or supplies during either the fiscal
year ended September 30, 1996 or the six-month period ended March 31, 1997 (the
"Principal Suppliers"). The Company has good commercial working relationships
with its Principal Customers and Principal Suppliers and since October 1, 1995,
no Principal Customer or Principal Supplier has cancelled or otherwise
terminated its relationship with the Company, materially decreased or limited
its purchases, rentals or leases from, or inventory or supplies supplied to,
the Company, or threatened to take any such action. The Shareholders have no
basis to anticipate any problems with the Company's customer, supplier or
business relationships. To the best knowledge of the Shareholders, no
Principal Customer or Principal Supplier has any plans to reduce its purchases,
rentals or leases from, or inventory or supplies supplied to, the Company below
levels prevailing during the fiscal year and six-month period specified above,
and the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not adversely affect the relationship of
the Company with any Principal Customer or Principal Supplier prior to the
Closing Date or of the Buyer with any Principal Customer or Principal Supplier
after the Closing Date.
(p) Resale Inventory. The resale inventory of the
Company consists of goods which, in the aggregate, are merchantable, are fit
for the purposes for which they were procured and are held by the Company, are
usable in the ordinary course of the Company's business and are not obsolete.
(q) Condition, Adequacy and Type of Equipment. The
rental/lease inventory of the Company consists of machinery, equipment and
other tangible personal property which are merchantable, are fit and suitable
for the purpose for which they were procured and are held by the Company,
useable in the ordinary course of the Company's business and are not obsolete.
All of the machinery, equipment and other tangible personal property included
in the Acquired Assets (including that held for rental, lease or sale), the
Consigned Equipment has been well maintained and is in good repair and good
operating condition. None of the machinery, equipment or other tangible
personal property included in the Acquired Assets (including that held for
rental, lease or sale), the Consigned Equipment is damaged or defective, the
Company has not experienced material problems or deficiencies with respect to
such machinery, equipment and other tangible personal property, and, to the
best knowledge of the Shareholders, there is no basis to anticipate any such
problems or deficiencies.
(r) Environmental Matters.
(i) The Company is conducting and at all times
has conducted its business and operations, and has occupied, used and operated
the Premises and all other real property and facilities presently or previously
owned, occupied, used or operated by the Company, in compliance with all
Environmental Obligations and so as not to give rise to Liability under any
Environmental Obligations or to any impact on the Company's business or
activities. The Shareholders do not have any knowledge of pending or proposed
changes to any Environmental Obligations which would require any changes in any
of the Company's Premises, facilities, equipment, operations or procedures or
affect the Company's business or its cost of conducting its business as now
conducted.
-14-
19
(ii) No conditions, circumstances or activities
have existed or currently exist, and neither the Company nor any Shareholder
has engaged in any acts or omissions, with respect to the Premises or any other
real properties, facilities or business presently or previously owned,
occupied, used or operated by the Company or any predecessor (including,
without limitation, off-site disposal or treatment of Hazardous Materials)
which could give rise to any Liability pursuant to any Environmental
Obligation. Exhibit 3.1(r)(ii) identifies all real properties and facilities,
including the addresses thereof, which have been owned, occupied, used or
operated by the Company or its predecessors at any time on or prior to the date
of this Agreement. There are no outstanding, pending or threatened Orders
against the Company or any Shareholder, nor are there any current, pending or
threatened investigations of any kind against the Company or any Shareholder,
concerning any Environmental Obligations. There are no actions, suits or
administrative, arbitral or other proceedings alleged, claimed, threatened,
pending against or affecting the Company or any Shareholder at law or in equity
with respect to any Environmental Obligations, and no Shareholder has any
knowledge of any existing grounds on which any such action, suit or proceedings
might be commenced.
(iii) Any chemicals and chemical compounds and
mixtures which are included among the assets of the Company are integral to and
required for the conduct of the Company's business, have not been and are not
intended to be discarded or abandoned, and are not waste or waste materials.
Except as set forth in the environmental studies attached as Exhibit
3.1(r)(iii) (collectively, the "Environmental Study"), the Company has not
generated, handled, used, transported or disposed of Hazardous Materials. All
waste materials which are generated as part of the business of the Company are
handled, stored, treated and disposed of in accordance with applicable Legal
Requirements and Environmental Obligations.
(iv) Except as set forth in the Environmental
Study, no underground or above ground storage tanks are or have been located on
the Premises or any other real properties or any facilities presently or
previously owned, occupied, used or operated by the Company or any predecessor.
Except as set forth in the Environmental Study, neither any of the Premises nor
any other real properties or facilities presently or previously owned,
occupied, used or operated by the Company or any predecessor has been used at
any time as a gasoline service station or any facility for storing, pumping,
dispensing or producing gasoline or any other petroleum products (other than
such storage, pumping and dispensing of fuels and lubricants as is incidental
to the Company's equipment rental/leasing business) or Hazardous Materials. No
building or other structure on any of the Premises contains asbestos-containing
materials. Except as set forth in the Environmental Study, there are not nor
have there been any incinerators, septic tanks, ▇▇▇▇▇ fields, cesspools or
▇▇▇▇▇ (including without limitation dry, drinking, industrial, agricultural and
monitoring ▇▇▇▇▇) on any of the Premises.
(s) Intellectual Property. The Company owns or has the
legal right to use and to transfer to the Buyer each item of Intellectual
Property required to be identified on Exhibit 3.1(h)(ii). The continued
operation of the business of the Company as currently conducted will not
interfere with, infringe upon, misappropriate or conflict with any Intellectual
Property rights of another Person. To the best knowledge of the Shareholders,
no other Person has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of the
Company or any Intellectual Property included in the Shareholder Property.
Neither the Company nor any owner of any Intellectual Property included in the
Shareholder Property has granted any license, sublicense or permission with
respect to any Intellectual Property owned or used in the Company's business.
-15-
20
(t) Disclosure. None of the documents or information
provided to the Buyer by the Company, any Shareholder or any agent or employee
thereof in the course of the Buyer's due diligence investigation and the
negotiation of this Agreement and Section 3.1 of this Agreement and the
disclosure Exhibits referred to therein, including the financial statements
referred to above in Section 3.1, contain any untrue statement of any material
fact or omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact which materially
adversely affects the business, prospects, condition, affairs or operations of
the Company or any of its properties or assets which has not been set forth in
this Agreement or such Exhibits, including such financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Shareholders acknowledge and agree that the fact that
they have made disclosures pursuant to Section 3.1 or otherwise of matters, or
did not have knowledge of matters, which result in Adverse Consequences to the
Buyer shall not relieve the Shareholders of their obligation pursuant to
Article 7 to indemnify and hold the Buyer harmless from all Adverse
Consequences.
3.2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Shareholders that the statements contained in
this Section 3.2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. This Agreement and the Other Buyer
Agreements and the transactions contemplated hereby and thereby have been duly
approved by all requisite corporate action. The Buyer has full corporate power
and authority to execute, deliver and perform this Agreement and the Other
Buyer Agreements, and this Agreement constitutes, and the Other Buyer
Agreements will when executed and delivered constitute, the legal, valid and
binding obligations of the Buyer, and shall be enforceable in accordance with
their respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The execution,
delivery and performance of this Agreement and the Other Buyer Agreements, and
the consummation of the transactions contemplated hereby and thereby will not
(i) violate any Legal Requirement to which the Buyer is subject or any
provision of the certificate of incorporation or bylaws of the Buyer or (ii)
violate, with or without the giving of notice or the lapse of time or both, or
conflict with or result in the breach or termination of any provision of, or
constitute a default under, or give any Person the right to accelerate any
obligation under, or result in the creation of any Encumbrance upon any
properties, assets or business of the Buyer pursuant to, any indenture,
mortgage, deed of trust, lien, lease, license, agreement, instrument or other
arrangement to which the Buyer is a party or which the Buyer or any
-16-
21
of its assets and properties is bound or subject. Except for notices and
consents that will be given or obtained by the Buyer prior to the Closing, the
Buyer does not need to give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other
Person in order for the parties to consummate the transactions contemplated by
this Agreement.
3.3. Survival of Representations. The representations and
warranties contained in Sections 3.1 and 3.2 and the Liabilities of the parties
with respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for four years, except that the Liabilities of the
Shareholders with respect to the representations and warranties set forth in
Sections 3.1(a), 3.1(b), 3.1(c), 3.1(d)(ii), 3.1(f), 3.1(g), 3.1(m), 3.1(r),
3.1(s) and 3.1(t), and the Liabilities of the Buyer with respect to the
representations and warranties set forth in Sections 3.2(a) and 3.2(b), shall
survive without termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation (including, in the case of the
Shareholders, inquiry of the applicable employees of the Company), with due
diligence, to the best efforts of such party and be exercised always in a
reasonable manner and within reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its best efforts to
take all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the Shareholders will, and will cause the Company to, give any
notices, make any filings and obtain any consents, authorizations or approvals
needed to consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Shareholders will
not cause or permit the Company to engage in any practice, take any action or
enter into any transaction outside its ordinary course of business; provided,
however, that in no event will any action be taken or fail to be taken or any
transaction be entered into which would result in a breach of any
representation, warranty or covenant of any Shareholder. The Shareholders will
cause the Company to keep its business and properties, including its current
operations, physical facilities, working conditions and relationships with
customers, suppliers, lessors, licensors and employees, intact and, in
connection therewith, to continue to purchase new or used equipment necessary
to maintain its rental/lease inventory at the level specified in Section
3.1(e)(x).
4.3. Acquisitions and Dispositions of Rental Equipment. Exhibit
4.3 sets forth (a) all new rental equipment purchased or ordered by the Company
since July 15, 1996 (the "New Rental Equipment"), (b) all Consigned Equipment
added to the Company's rental inventory since June 30, 1996, and (c) all
Consigned Equipment removed from the Company's rental inventory since June 30,
1996. From the date of this Agreement through the Closing Date, the Company
may purchase New
-17-
22
Rental Equipment that has been ordered but not delivered as of the date of this
Agreement, but may not otherwise purchase, sell, trade, transfer, acquire or
dispose of any rental equipment, or change the amount or composition of the
Consigned Equipment, without the express prior written approval of an officer
of the Buyer.
4.4. Full Access. The Shareholders will cause the Company to
permit the Buyer and its agents to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Company, to all premises, properties, personnel, books, records (including
Tax records), contracts and documents of or pertaining to the Company.
4.5. Notice of Developments. The Shareholders will give prompt
written notice to the Buyer of any material development which occurs after the
date of this Agreement and affects the business, assets, Liabilities, financial
condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of the Company.
No such written notice, however, will be deemed to amend or supplement any
disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.6. Exclusivity. No Shareholder will, and the Shareholders will
not cause or permit the Company to, (a) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any portion of the assets
of, the Company (including any acquisition structured as a merger,
consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. No Shareholder will vote shares of
the Company's stock in favor of any such transaction. The Shareholders will
notify the Buyer immediately if the Person makes any proposal, offer, inquiry
or contact with respect to any of the foregoing.
4.7. Conveyance of Shareholder Property. Prior to the Closing
Date, the Shareholders shall convey, and shall cause each relative or affiliate
of the Company or of any Shareholder to convey, to the Company, free and clear
of any Encumbrance or Tax, all of each Shareholder's and each such relative's
or affiliate's right, title and interest to the Shareholder Property.
4.8. Announcements. Prior to the Closing, no party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties.
4.9. Closing Date Liabilities and Distribution. (a) Prior to the
Closing Date or concurrently with the Closing, the Shareholders shall pay, or
shall cause the Company to pay prior to the Closing Date as permitted by
Section 9.10, in full all known Closing Date Liabilities, the amount of which
is then ascertainable (including Seller Transaction Expenses as permitted
pursuant to Section 9.10). Following the Closing, the Shareholders shall
promptly pay in full all other Closing Date Liabilities. Effective as of
immediately prior to the Closing Date, the Shareholders hereby jointly and
severally assume all Closing Date Liabilities without further action by the
Shareholders, the Company or any other Person.
(b) Prior to the Closing Date, the Shareholders shall
cause the Company to distribute to the Shareholders the Excluded Assets (the
"Pre-Closing Date Distribution"). Any and all Taxes
-18-
23
attributable to such distribution of Excluded Assets and to any prior
distribution or dividend of assets, including, without limitation, any
recognition by the Company of taxable income or gain with respect to the
distribution or dividend of the Excluded Assets or any prior distribution or
dividend of assets, shall be paid in full by the Shareholders and neither the
Company nor the Buyer shall have any Liability with respect thereto.
5. Post-Closing Covenants. The parties agree as follows with respect to
the period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. No Shareholder will take any action at any time
that is designed or intended to have the effect of discouraging any customer,
supplier, lessor, licensor or other business associate of the Company from
establishing or continuing a business relationship with the Buyer after the
Closing.
5.3. Cooperation. In the event and for so long as any party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(a) any transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Company's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Section 7).
5.4. Confidentiality. The Shareholders will treat and hold as
confidential all Confidential Information concerning the Buyer, the Company's
business or the Acquired Assets, refrain from using any such Confidential
Information and deliver promptly to the Buyer or destroy, at the request and
option of the Buyer, all of such Confidential Information in its or their
possession.
5.5. Post-Closing Announcements. Following the Closing, no
Shareholder will issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the Buyer.
5.6. Financial Statements. The Seller and the Shareholders will,
upon request of the Buyer, cooperate with the Buyer to produce such historical
and on-going financial statements and audits as the Buyer may request, all at
the sole cost and expense of the Buyer.
5.7. Satisfaction of Liabilities.
-19-
24
(a) Promptly following the Closing, the Shareholders will
pay and perform all Closing Date Liabilities (to the extent not paid at or
prior to the Closing Date), all Taxes attributable to the transactions
contemplated by this Agreement and all accrued vacation and other accrued
employee benefits; provided, however, that accrued vacation and other accrued
employee benefits with respect to those persons who are employees of the
Company as of immediately prior to the Closing Date and who become employees of
the Buyer effective as of the Closing will be satisfied as set forth in Section
2.2(b).
(b) The Shareholders will pay to the Buyer an amount
equal to the portion of the personal property taxes of the Company attributable
to the period from January 1, 1997, to the Closing Date (the "Pre-Closing
Personal Property Tax Amount"). The Pre-Closing Personal Property Tax Amount
payable by the Shareholders will be determined by prorating personal property
taxes of the Company for 1997 in proportion to the number of days in the year
prior to the Closing Date compared to the number of days in the year remaining
after the date on which the Closing occurs. If the actual Pre-Closing Personal
Property Tax Amount exceeds the estimated Pre-Closing Personal Property Tax
Amount used for purposes of Section 2.2(a), the Shareholders shall pay such
excess amount to the Buyer within five days after their receipt of notice from
the Buyer stating the amount payable by them and a copy of the invoices from
Governmental Authorities relating thereto. If the estimated Pre-Closing
Personal Property Tax Amount used for purposes of Section 2.2(a) exceeds the
actual Pre-Closing Personal Property Tax Amount, the Buyer shall pay such
excess amount to the Shareholders within five days of receipt of the invoices
from Governmental Authorities relating thereto.
(c) The Shareholders, at their expense, promptly will
take or cause to be taken any action necessary to remedy any failure of the
Premises or the acquired business to comply at the Closing Date with any Legal
Requirement, upon receipt of notice from the Buyer at any time.
(d) The Shareholders shall pay to the Buyer an amount
equal to the federal and state income taxes of the Company relating to all
periods from the end of the last tax year for which the Company's federal and
state income Tax Returns have been filed to the Closing Date (the "Pre-Closing
Income Tax Amount"), to the extent that the Pre-Closing Income Tax Amount
exceeds the aggregate estimated tax payments made by the Company on or before
the Closing Date that would be applicable to the Taxes included in the
Pre-Closing Income Tax Amount. The Pre-Closing Income Tax Amount will be
determined by the Buyer in accordance with generally accepted accounting
principles but without regard to any net operating loss carryforward. If the
actual Pre-Closing Income Tax Amount exceeds the estimated Pre-Closing Income
Tax Amount used for purposes of Section 2.2(a), the Shareholders shall pay such
excess amount to the Buyer within five days after their receipt of notice from
the Buyer stating the amount payable, accompanied by a schedule reflecting the
calculation of the amount due. If the estimated Pre-Closing Income Tax Amount
used for purposes of Section 2.2(a) exceeds the actual Pre-Closing Income Tax
Amount, the Buyer shall pay such excess amount to the Shareholders within five
days after the Buyer and the Shareholders' Agent agree in writing on the amount
of such excess.
(e) The Buyer will pay and perform, as and when due
(except to the extent the validity thereof or the liability therefor is being
contested by the Buyer), the Retained Liabilities.
5.8. Certain Post-Closing Environmental Matters. The Shareholders
shall, within 60 days of the Closing, take or cause to be taken, in compliance
with applicable Environmental Obligations, the
-20-
25
following actions: (a) all contaminated soil around and under the site upon
which the two underground storage tanks were formerly located at the
Alamogordo, New Mexico Premises, as noted in the Environmental Study, shall be
removed and disposed of and replaced with clean soil, all to the satisfaction
of the Buyer; (b) the equipment washing area located at the Alamogordo, New
Mexico Premises, as noted in the Environmental Study, shall be upgraded and
connected to the city sewer system, all to the satisfaction of the Buyer; and
(c) all sediment from the equipment washing sump which has been disposed of on
the Silver City, New Mexico Premises, as noted in the Environmental Study,
shall be removed and disposed of, all to the satisfaction of the Buyer. The
Shareholders shall take such actions at their expense. Nothing in this Section
5.8 shall relieve any Shareholder from any obligation or Liability under
Section 7 of this Agreement, obligate the Buyer to take any action or impose
any Liability on the Buyer.
5.9. Repurchase of Unpaid Receivables. The Shareholders jointly
and severally guarantee that all Closing Accounts Receivable which are less
than 90 days old on the Closing Date will be fully paid to the Buyer in
accordance with their terms at their recorded amounts not later than 120 days
from the Closing Date. Upon demand by the Buyer at any time after 120 days
from the Closing Date, the Shareholders shall jointly and severally pay to the
Buyer the full amount of any unpaid Closing Accounts Receivables which are the
subject of such demand. Upon such payment to the Buyer, the Closing Accounts
Receivable which are so paid for by the Shareholders shall, without further
action of any party, become the property of the Shareholders, without recourse
to the Company.
5.10. Termination of Obligations. Effective as of the Closing Date,
neither the Company nor the Buyer shall have any Liability to any Shareholder
or any relative or affiliate thereof or of the Company, except as otherwise
provided in this Agreement, and the Other Buyer Agreements. Effective as of
the Closing Date, the Shareholders shall not have any Liability to the Company
or the Buyer, except as otherwise provided in this Agreement, and the Other
Seller Agreements.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions contemplated by this Agreement is subject
to satisfaction of the following conditions:
(a) each Shareholder's representations and warranties
shall be correct and complete at and as of the Closing Date and the Closing and
any written notices delivered to the Buyer pursuant to Section 4.5 and the
subject matter thereof shall be satisfactory to the Buyer;
(b) the Shareholders shall have performed and complied
with all of their covenants hereunder through the Closing;
(c) the Shareholders shall have given, or shall have
caused the Company to give, all notices and procured, or shall have caused the
Company to procure, all of the third-party consents, authorizations and
approvals required to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the
-21-
26
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect adversely the right of the Buyer to own the Shares
or the Acquired Assets and conduct the business represented by the Acquired
Assets, and no such Order shall be in effect;
(e) there shall have been no adverse change in the
Company, the Acquired Assets or the Company's business between the date of
execution of this Agreement and the Closing;
(f) the Shareholders shall have delivered to the Buyer
(i) a certificate to the effect that each of the conditions specified above in
Sections 6.1(a) through (e) is satisfied in all respects, and (ii) a good
standing certificate, dated within 10 days of the Closing, from the Secretary
of State of the State of the Company's jurisdiction of incorporation and each
other state in which the Company is qualified or authorized to do business as a
foreign corporation.
(g) the Buyer shall have completed its due diligence with
respect to the Company, the Company's business and the Acquired Assets with
results satisfactory to the Buyer.
(h) the Other Seller Agreements shall have been executed
and delivered by the Shareholders, as applicable;
(i) the Premises Leases shall have been executed and
delivered by the parties thereto and the owners of the real property underlying
the Premises Leases, and each Person having an Encumbrance on such property,
shall have executed and delivered estoppel, nondisturbance and landlord waiver
agreements relating thereto satisfactory to the Buyer;
(j) the Buyer shall have received from counsel to the
Shareholders an opinion in form and substance as set forth in Exhibit 6.1(j)
addressed to the Buyer and its debt and equity financing sources and dated as
of the Closing;
(k) financing necessary for the consummation of the
transactions contemplated hereby and the operation of the acquired business
shall be available to the Buyer on terms and conditions satisfactory to the
Buyer;
(l) a "Phase I" environmental study of each of the
properties comprising the Premises, and such additional environmental testing
as the Buyer shall request, shall have been completed at the Shareholders'
expense and supplied to the Buyer, and the contents and results thereof shall
be satisfactory to the Buyer;
(m) the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the Company;
(n) stock certificates representing the Shares, duly
endorsed in blank or accompanied by stock powers duly executed in blank, shall
have been delivered by the Shareholders to the Buyer;
(o) the Shareholders shall have delivered to the Buyer
possession and control of the Company and the Acquired Assets, including,
without limitation, all stock certificate books, minute books, corporate seals,
and all other corporate and financial records of the Company;
-22-
27
(p) the Shareholders shall have delivered, or caused the
Company to deliver, to the Buyer such other instruments, certificates and
documents as are reasonably requested by the Buyer in order to consummate the
transactions contemplated by this Agreement, all in form and substance
reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Shareholders. The obligation
of the Shareholders to consummate the transactions contemplated by this
Agreement is subject to satisfaction of the following conditions:
(a) the Buyer's representations and warranties shall be
correct and complete at and as of the Closing Date and the Closing;
(b) the Buyer shall have performed and complied with all
of its covenants hereunder through the Closing Date;
(c) the Buyer shall have delivered to the Shareholders a
certificate to the effect that each of the conditions specified above in
Sections 6.2(a) and (b) is satisfied in all respects;
(d) the Other Buyer Agreements shall have been executed
and delivered by the Buyer;
(e) the Shareholders shall have received from counsel to
the Buyer an opinion in form and substance as set forth in Exhibit 6.2(e),
addressed to the Shareholders and dated as of the Closing; and
(f) the Buyer shall have paid and deposited the purchase
price for the Shares pursuant to Section 2.2.
The Shareholders' Agent may waive any condition specified in this Section 6.2
at or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer and the
Company.
(a) If any Shareholder breaches (or if any Person other
than the Buyer alleges facts that, if true, would mean any Shareholder has
breached) any of the representations or warranties of any Shareholder contained
herein and the Buyer gives notice thereof to the Shareholders' Agent within the
Survival Period, or if any Shareholder breaches (or if any Person other than
the Buyer alleges facts that, if true, would mean any Shareholder has breached)
any covenants of any Shareholder contained herein or any representations,
warranties or covenants of any Shareholder contained in any Other Seller
Agreement and the Buyer gives notice thereof to the Shareholders' Agent, then
the Shareholders agree to jointly and severally indemnify and hold harmless the
Buyer from and against any Adverse Consequences the Buyer may suffer resulting
from, arising out of, relating to or caused by any of the foregoing regardless
of whether the Adverse Consequences are suffered during or after the Survival
-23-
28
Period. In determining whether there has been a breach of any representation
or warranty contained in Section 3.1 and in determining for purposes of the
preceding sentence the amount of Adverse Consequences suffered by the Buyer,
such representations and warranties shall not be qualified (other than by (A)
the reference to "knowledge" set forth in the last sentence of Section 3.1(o)
and (B) the references to "material" set forth in Section 3.1(t)) by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. The Shareholders also agree to jointly and severally
indemnify and hold harmless the Buyer from and against any Adverse Consequences
the Buyer may suffer which result from, arise out of, relate to or are caused
by (i) any Liability of the Company or any Shareholder not included in the
Retained Liabilities (including, without limitation, those concerning Hazardous
Materials or the failure prior to the Closing Date of the Company, any
Shareholder or any predecessor to comply with any Environmental Obligation or
other Legal Requirement), (ii) any condition, circumstance or activity existing
prior to the Closing Date on, in or under any of the Premises which relates to
any Environmental Obligation or any act or omission of the Company, any
Shareholder or any predecessor with respect to, or any event or circumstance
related to, the Company's, any Shareholder's or any predecessor's ownership,
occupation, use or operation of any of the Acquired Assets, the Excluded
Assets, the Premises or any other assets or properties or the conduct of its or
their business, regardless, in the case of (i) or (ii), of (A) whether or not
such Liability, act, omission, event, circumstance or matter was known or
disclosed to the Buyer, was disclosed on any Exhibit hereto or is a matter with
respect to which any Shareholder did or did not have knowledge, (B) when such
Liability, act, omission, event, circumstance or matter occurred, existed,
occurs or exists and (C) whether a claim with respect thereto was asserted
before or is asserted after the Closing Date, and (iii) any Liability resulting
from any failure of the parties to comply with any applicable bulk sales or
transfer Legal Requirement in connection with the transactions contemplated by
this Agreement. If any dispute arises concerning whether any indemnification
is owing which cannot be resolved by negotiation among the parties within 30
days of notice of claim for indemnification from the party claiming
indemnification to the party against whom such claim is asserted, the dispute
will be resolved by arbitration pursuant to this Agreement.
(b) Amounts needed to cover any indemnification claims
resolved in favor of the Buyer against any Shareholder during the Escrow Period
will be paid to the Buyer first out of the funds escrowed pursuant to the
Escrow Agreements, along with interest from the date of the Closing at the rate
applicable to the escrowed funds. The Shareholders will have joint and several
Liability for any additional amounts needed to cover such claims, which amounts
will be paid directly to the Buyer. At the end of the Escrow Period amounts
that may be needed to cover pending indemnification claims made by the Buyer
(such amounts to be determined by the Buyer based upon the reasonable exercise
of its business judgment) will be retained in the Escrow Accounts until such
claims are resolved, and any excess on deposit therein, including any accrued
interest, will be paid to the Shareholders. Nothing in this Section 7.1(b)
will be construed to limit the Buyer's right to indemnification to amounts on
deposit in the Escrow Account. The Buyer and the Shareholders' Agent shall
jointly give instructions to the Escrow Agents to carry out the intent of this
Section 7.1(b). Any disputes concerning the escrowed funds will be settled by
arbitration as provided in this Agreement. The Buyer, on the one hand, and the
Shareholders jointly and severally, on the other hand, shall each be
responsible for one-half of the fees, charges and expenses payable to the
Escrow Agents pursuant to paragraph a. of Article 2 of the Escrow Agreements
and, except as otherwise determined pursuant to Section 9.11 of this Agreement,
one- half of any amounts payable pursuant to paragraph b. of such Article 2.
Buyer shall have complete discretion to determine the Escrow Agreement under
which any claim is made.
-24-
29
7.2. Indemnification Provisions for Benefit of the Shareholders.
If the Buyer breaches (or if any Person other than a Shareholder alleges facts
that, if true, would mean the Buyer has breached) any of its representations or
warranties contained herein and the Shareholders' Agent gives notice of a claim
for indemnification against the Buyer within the Survival Period, or if the
Buyer breaches (or if any Person other than a Shareholder alleges facts that,
if true, would mean the Buyer has breached) any of its covenants contained
herein or any of its representations, warranties or covenants contained in any
Other Buyer Agreement and the Shareholders' Agent gives notice thereof to the
Buyer, then the Buyer agrees to indemnify and hold harmless the Shareholders
from and against any Adverse Consequences the Shareholders may suffer which
result from, arise out of, relate to, or are caused by the breach or alleged
breach, regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. In determining whether there has been a breach of
any representation or warranty contained in Section 3.2 and in determining the
amount of Adverse Consequences suffered by the Shareholders for purposes of
this Section, such representations and warranties shall not be qualified by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within 30 days of notice of claim for indemnification from the party
claiming indemnification to the party against whom such claim is asserted, the
dispute will be resolved by arbitration pursuant to this Agreement.
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement
(including, without limitation, any Governmental Authority) notifies any party
(the "Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other party (the
"Indemnifying Party"), then the Indemnified Party will notify each Indemnifying
Party thereof in writing within 15 days after receiving such notice. No delay
on the part of the Indemnified Party in notifying any Indemnifying Party will
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its
sole cost and expense, to defend the Indemnified Party against the Third Party
Claim with counsel of its choice satisfactory to the Indemnified Party so long
as (i) the Indemnifying Party notifies the Indemnified Party in writing within
10 days after the Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to or caused by the Third Party
Claim, (ii) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (iii) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (iv) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not assume control of the defense
or settlement of any Third Party Claim in the manner described above, it will
be bound by the results obtained by the Indemnified Party with respect to the
Third Party Claim.
-25-
30
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.3(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b)
above is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to or caused by the
Third Party Claim to the fullest extent provided in this Section 7.
7.4. Right of Offset. The Buyer will have the right to offset any
Adverse Consequences it may suffer against any amounts payable pursuant to this
Agreement or any Other Seller Agreement to any Shareholder or any relative or
affiliate of any Shareholder at or after the Closing.
7.5. Other Remedies. The foregoing indemnification provisions are
in addition to, and not in derogation of, any statutory, equitable or common
law remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the Buyer and the Shareholders' Agent may terminate
this Agreement by mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving
written notice to the Shareholders' Agent at any time prior to the Closing (i)
in the event any Shareholder has breached any representation, warranty or
covenant contained in this Agreement in any material way, the Buyer has
notified the Shareholders' Agent of the breach, and the breach has not been
cured within 10 days after the notice of breach or (ii) if the Closing has not
occurred on or before June 30, 1997 because of the failure of any condition
precedent to the Buyer's obligations to consummate the Closing (unless the
failure results primarily from the Buyer breaching any representation, warranty
or covenant contained in this Agreement in any material way); or
(c) the Shareholders' Agent may terminate this Agreement
by giving written notice to the Buyer at any time prior to the Closing (i) if
the Buyer has breached any representation, warranty or covenant contained in
this Agreement in any material way, the Shareholders' Agent has notified the
-26-
31
Buyer of the breach, and the breach has not been cured within 10 days after the
notice of breach or (ii) if the Closing has not occurred on or before June 30,
1997 because of the failure of any condition precedent to the Shareholders'
obligations to consummate the Closing (unless the failure results primarily
from any Shareholder breaching any representation, warranty or covenant
contained in this Agreement in any material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party
will treat and hold as confidential all Confidential Information concerning the
other parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer
any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
9.3. Succession and Assignment. This Agreement will be binding
upon and inure to the benefit of the parties and their respective successors
and permitted assigns. No Shareholder may assign this Agreement or any of his
or her rights, interests or obligations hereunder without the prior written
approval of the Buyer. The Buyer may assign its rights and obligations
hereunder as permitted by law, including, without limitation, to any debt or
equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the
execution of a counterpart of this Agreement.
9.5. Headings. The section headings contained in this Agreement
are inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
-27-
32
If to the
Shareholders: Copy to:
Addressed to the
Shareholders' Agent at:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇ III, Esq.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Modrall, Sperling, ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Buyer: Copy to:
RentX Industries, Inc. ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.7. Governing Law. This Agreement will be governed by and
construed in accordance with the domestic laws of the State of Colorado without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Colorado or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the Buyer
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no waiver will be effective unless set forth in writing and
signed by the party against whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a)
the Buyer shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
-28-
33
hereby and (b) the Shareholders will bear all costs and expenses (including,
without limitation, all legal, accounting and tax related fees and expenses,
all fees, commissions, expenses and other amounts payable to any broker, finder
or agent and the costs of any environmental study and additional environmental
testing contemplated by Section 6.1) incurred by the Company prior to the
Closing or by any Shareholder either before or after the date of this Agreement
in connection with this Agreement or the transactions contemplated hereby
(collectively, "Seller Transaction Expenses"); provided, however, that prior to
the Closing Date the Company may use any cash that would otherwise be an
Excluded Asset to pay Seller Transaction Expenses.
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY, BY SIGNING
THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING
THE RIGHT TO JURY TRIAL. The arbitration will be conducted only in Denver,
Colorado, before a single arbitrator selected by the parties or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators, one
selected by the Buyer, one selected by the Shareholders' Agent and the third
selected by the other two arbitrators. The arbitrators shall have full
authority to order specific performance and award damages and other relief
available under this Agreement or applicable law, but shall have no authority
to add to, detract from, change or amend the terms of this Agreement or
existing law. All arbitration proceedings, including settlements and awards,
shall be confidential. The decision of the arbitrators will be final and
binding, and judgment on the award by the arbitrators may be entered in any
court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE
WILL BE SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Shareholders' Agent. Each Shareholder hereby authorizes and
appoints the Shareholders' Agent as its, his or her exclusive agent and
attorney-in-fact to act on behalf of each of them with respect to all matters
which are the subject of this Agreement, including, without limitation, (a)
receiving or giving all notices, instructions, other communications, consents
or agreements that may
-29-
34
be necessary, required or given hereunder and (b) asserting, settling,
compromising, or defending, or determining not to assert, settle, compromise or
defend, (i) any claims which any Shareholder may assert, or have the right to
assert, against the Buyer, or (ii) any claims which the Buyer may assert, or
have the right to assert, against any Shareholder. The Shareholders' Agent
hereby accepts such authorization and appointment. Upon the receipt of written
evidence satisfactory to the Buyer to the effect that the Shareholders' Agent
has been substituted as agent of the Shareholders by reason of his death,
disability or resignation, the Buyer shall be entitled to rely on such
substituted agent to the same extent as they were theretofore entitled to rely
upon the Shareholders' Agent with respect to the matters covered by this
Section 9.14. No Shareholder shall act with respect to any of the matters
which are the subject of this Agreement except through the Shareholders' Agent.
The Shareholders acknowledge and agree that the Buyer may deal exclusively with
the Shareholders' Agent in respect of such matters, that the enforceability of
this Section 9.14 is material to the Buyer, and that the Buyer has relied upon
the enforceability of this Section 9.14 in entering into this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
-30-
35
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Title: Vice President
---------------------------------
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
[SIGNATURE PAGE TO PURCHASE AGREEMENT.]
-31-