EXHIBIT 10(m)
STOCK PURCHASE AGREEMENT
Dated as of October 24, 1997, by and among
United Rentals, Inc.
Coran Enterprises, Inc.
Monterey Bay Equipment Rentals, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. Shade
▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Trustees under the ▇▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇ ▇. Shade Trust Agreement dated September 14, 1982
▇▇▇▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇
TABLE OF CONTENTS
Page
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1. PURCHASE OF CORPORATIONS' STOCK................................... 1
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1.1 SHARES TO BE PURCHASED....................................... 1
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1.2 PURCHASE PRICE............................................... 1
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1.3 ADJUSTMENTS TO PURCHASE PRICE................................ 2
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1.4 HOLD BACK.................................................... 3
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1.5 EXCLUDED ASSETS.............................................. 4
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2. CLOSING TIME AND PLACE....................................... 5
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3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATIONS AND THE
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SHAREHOLDERS................................................. 5
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3.1 ORGANIZATION, STANDING AND QUALIFICATION..................... 5
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3.2 CAPITALIZATION............................................... 5
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3.3 ALL STOCK BEING ACQUIRED..................................... 5
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3.4 AUTHORITY FOR AGREEMENT...................................... 5
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3.5 NO BREACH OR DEFAULT......................................... 6
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3.6 SUBSIDIARIES................................................. 6
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3.7 FINANCIAL STATEMENTS......................................... 6
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3.8 LIABILITIES.................................................. 7
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3.9 [INTENTIONALLY OMITTED]...................................... 8
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3.10 PERMITS AND LICENSES........................................ 8
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3.11 CERTAIN RECEIVABLES......................................... 9
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3.12 FIXED ASSETS AND REAL PROPERTY.............................. 9
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3.13 ACQUISITION/DISPOSAL OF ASSETS.............................. 10
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3.14 CONTRACTS AND AGREEMENTS; ADVERSE RESTRICTIONS.............. 10
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3.15 INSURANCE................................................... 11
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3.16 PERSONNEL................................................... 11
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3.17 BENEFIT PLANS AND UNION CONTRACTS........................... 11
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3.18 TAXES....................................................... 13
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3.19 COPIES COMPLETE............................................. 14
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3.20 PRODUCT QUALITY, WARRANTY CLAIMS, PRODUCT LIABILITY......... 14
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3.21 NO CHANGE WITH RESPECT TO CORPORATION....................... 14
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3.22 CLOSING DATE DEBT; CLOSING DATE CURRENT ASSETS AND CLOSING
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DATE CURRENT LIABILITIES.................................... 16
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3.23 BANK ACCOUNTS............................................... 16
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3.24 COMPLIANCE WITH LAWS........................................ 16
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3.25 POWERS OF ATTORNEY.......................................... 17
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3.26 UNDERGROUND STORAGE TANKS................................... 17
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3.27 PATENTS, TRADEMARKS, TRADE NAMES, ETC....................... 18
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3.28 ASSETS, ETC., NECESSARY TO BUSINESS......................... 18
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3.29 CONDEMNATION................................................ 18
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3.30 MANUFACTURERS, SUPPLIERS AND CUSTOMERS...................... 18
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3.31 ABSENCE OF CERTAIN BUSINESS PRACTICES....................... 18
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3.32 RELATED PARTY TRANSACTIONS.................................. 19
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3.33 DISCLOSURE SCHEDULES........................................ 19
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3.34 NO MISLEADING STATEMENTS.................................... 19
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3.35 ACCURATE AND COMPLETE RECORDS............................... 19
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3.36 KNOWLEDGE................................................... 19
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3.37 BROKERS; FINDERS............................................ 20
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3.38 S CORPORATIONS.............................................. 20
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4. REPRESENTATIONS AND WARRANTIES OF UNITED.......................... 20
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4.1 EXISTENCE AND GOOD STANDING.................................. 20
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4.2 NO CONTRACTUAL RESTRICTIONS.................................. 20
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4.3 AUTHORIZATION OF AGREEMENT................................... 20
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4.4 NO MISLEADING STATEMENTS..................................... 20
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4.5 BROKERS; FINDERS............................................. 20
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4.6 DISCLOSURE SCHEDULES......................................... 21
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5. CLOSING DELIVERIES........................................... 21
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5.1 UNITED DELIVERIES............................................ 21
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5.2 SHAREHOLDERS DELIVERIES...................................... 21
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6. ADDITIONAL COVENANTS OF UNITED, THE CORPORATION AND THE
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SHAREHOLDERS...................................................... 22
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6.1 FURTHER ASSURANCES AND ADDITIONAL CONVEYANCES................ 22
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6.2 RELEASE OF GUARANTIES........................................ 22
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6.3 CONFIDENTIALITY.............................................. 22
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6.4 BROKERS AND FINDERS FEES..................................... 22
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6.5 TAXES........................................................ 22
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6.6 SHORT YEAR TAX RETURNS....................................... 23
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6.7 CERTAIN TAX MATTERS.......................................... 23
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6.8 SHAREHOLDERS' REPRESENTATIVE................................. 23
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6.9 GENERAL RELEASE BY SHAREHOLDERS.............................. 24
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7. INDEMNIFICATION................................................... 25
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7.1 INDEMNITY BY THE SHAREHOLDERS................................ 25
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7.2 LIMITATIONS ON SHAREHOLDERS' INDEMNITIES..................... 26
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7.3 NOTICE OF INDEMNITY CLAIM.................................... 27
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7.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS....... 28
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7.5 NO EXHAUSTION OF REMEDIES OR SUBROGATION; RIGHT OF SET OFF... 28
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8. OTHER POST-CLOSING COVENANTS OF THE SHAREHOLDERS AND UNITED.. 29
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8.1 RESTRICTIVE COVENANTS........................................ 29
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8.2 RIGHTS AND REMEDIES UPON BREACH.............................. 30
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9. GENERAL........................................................... 31
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9.1 ASSIGNMENT................................................... 31
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9.2 COUNTERPARTS................................................. 31
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9.3 NOTICES...................................................... 31
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9.4 ATTORNEYS' FEES.............................................. 32
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9.5 APPLICABLE LAW............................................... 32
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9.6 PAYMENT OF FEES AND EXPENSES................................. 32
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9.7 INCORPORATION BY REFERENCE................................... 33
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9.8 CAPTIONS..................................................... 33
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9.9 NUMBER AND GENDER OF WORDS; CORPORATION...................... 33
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9.10 ENTIRE AGREEMENT............................................. 33
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9.11 WAIVER....................................................... 33
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9.12 CONSTRUCTION................................................. 33
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10. ARBITRATION AND DISPUTE RESOLUTION................................ 33
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STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT, dated as of October 24, 1997, is entered into by
and among United Rentals, Inc., a Delaware corporation ("United"), Coran
Enterprises, Inc., a California corporation doing business as A-1 Rents
("Coran"), Monterey Bay Equipment Rentals, Inc., a California corporation
("Monterey") (Coran and Monterey are occasionally herein referred collectively
as the "Corporations" and individually as a "Corporation") and ▇▇▇▇▇ ▇. ▇▇▇▇▇
("▇▇▇▇▇"), ▇▇▇▇▇ ▇. Shade ("▇▇▇▇▇"), ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Trustees under the ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇. Shade Trust Agreement dated
September 14, 1982 (the "Trust"), ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇▇▇") and ▇▇▇▇▇ ▇▇▇▇▇
("▇▇▇▇▇") (the "Shareholders").
WHEREAS, Coran is engaged in the equipment and party supply rental business
in the Central Coast region of Northern California, and other related
activities;
WHEREAS, Monterey is engaged in the business of obtaining equipment and
party supplies for lease to Coran;
WHEREAS, the Trust owns of record, and ▇▇▇▇▇ and ▇▇▇▇▇ own beneficially,
all of the issued and outstanding capital stock of Coran (the "Coran Stock") in
the amount set forth on Schedule 3.2 hereto, and ▇▇▇▇▇▇▇ and ▇▇▇▇▇ own all of
the issued and outstanding capital stock of Monterey (the "Monterey Stock" and,
collectively with the Coran Stock, the "Corporations' Stock") in the amount set
forth on Schedule 3.2;
WHEREAS, United wishes to acquire from the Shareholders all of the issued
and outstanding capital stock of the Corporations;
WHEREAS, concurrent with the execution of this Agreement, Coran will enter
into four separate leases (the "Leases") of the premises at the four locations
where the Corporations do business;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto, each intending to be bound hereby, agree as
follows:
1. PURCHASE OF CORPORATIONS' STOCK
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1.1 SHARES TO BE PURCHASED. At the Closing (as hereinafter defined), the
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Shareholders sold and delivered to United all of the issued and outstanding
Corporations' Stock, being the number of shares of the Corporations set forth on
Schedule 3.2. At the Closing, United purchased the Corporations' Stock and in
exchange therefor will deliver to the Shareholders on October 27, 1997, or shall
deliver thereafter as provided by this Agreement the purchase price described in
Section 1.2 (the "Purchase Price").
1.2 PURCHASE PRICE. The Purchase Price is fifteen million two hundred
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thousand dollars ($15,200,000), subject to adjustment as provided in Section
1.3. The Purchase Price,
1
as so adjusted, less the Hold Back (as defined in Section 1.4), shall be paid in
cash by wire transfer to the accounts of the Shareholders as set forth on
Schedule 3.2 on October 27, 1997.
1.3 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price was or shall be
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adjusted as follows:
(a) ADJUSTMENT FOR CLOSING DATE DEBT. The Closing Date Debt was
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subtracted from the Purchase Price. The Closing Date Debt is set forth on
Schedule 1.3(a) and includes: (i) the amount of the aggregate debt
(excluding trade payables) of the Corporations outstanding on the Closing
Date to be repaid by United at or immediately after the Closing Date and
all prepayment penalties incurred or to be incurred by United in connection
with the repayment of any such debt; (ii) the amount of the aggregate debt
(excluding trade payables) of the Corporations outstanding on the Closing
Date which will remain outstanding obligations of the Corporations after
the Closing Date, including in each case all interest accrued through and
including the Closing Date; (iii) the aggregate amount of the present value
of all capitalized lease obligations (determined in accordance with
generally accepted accounting principals) of the Corporations and (iv) the
aggregate amount of the present value, discounted at the lease rate factor,
if known, inherent in the lease or, if the lease rate factor is not known,
at the rate charged to the Corporations by a third party lender in
connection with its most recent borrowing to finance equipment, of all
personal property lease obligations of the Corporations that are not
capitalized lease obligations. Schedule 1.3(a) includes wire transfer
instructions for creditors whose Closing Date Debt will be repaid by
United, and attached to Schedule 1.3(a) are pay-off letters or instructions
from such creditors.
(b) WORKING CAPITAL ADJUSTMENT. The amount by which the estimated
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Month-End Working Capital is greater or less than zero was added to or
subtracted from the Purchase Price, as the case may be. The estimated
Month-End Working Capital was determined by subtracting the estimated
Month-End Current Liabilities from the estimated Month-End Current Assets.
The estimated Month-End Closing Date Current Assets consist of the amount
of the estimated aggregate current assets of the Corporations as of October
31, 1997, plus the estimated accounts receivable of the Corporations earned
prior to October 31, 1997, and collectible (valued as set forth below) on
or after October 31, 1997 and minus the Inventory Value of the fuel and
merchandise set forth on Schedule 1.3(c). The estimated Month-End Current
Liabilities consist of the amount of the estimated aggregate current
liabilities (including all amounts payable to employees of the Corporations
with respect to bonuses or additional compensation payable on account of
the Equipment sold by such employees prior to October 31, 1997, and any
reserve for unpaid taxes, but excluding the current portion of long-term
debt to the extent such current portion is included in the Closing Date
Debt) and trade payables of the Corporations as of the October 31, 1997.
The estimated Month-End Working Capital, the estimated Month-End Current
Assets and the estimated Month-End Current Liabilities are set forth on
Schedule 1.3(b).
(c) INVENTORY ADJUSTMENT. There was added to the Purchase Price the
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Inventory Value (as defined below) of the fuel and merchandise held for
sale (other than
2
Equipment held for sale included on Schedule 1.3(d)), which Inventory Value
and related fuel and merchandise is described on Schedule 1.3(c).
(d) EQUIPMENT ADJUSTMENT. There was added to the Purchase Price the
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market value, as determined by United and the Shareholders' Representative,
of the Equipment listed on Schedule 1.3(d), which Equipment was held for
sale (other than for occasional rental) by one of the Corporations or has
otherwise been set aside as being obsolete (the "Surplus Equipment"). The
Surplus Equipment will be sold within six months after the Closing Date and
the net proceeds of such sale shall be paid to the Shareholders.
1.4 HOLD BACK.
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(a) HOLD BACK. United will hold back from the Purchase Price the sum
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of Five Hundred Thousand dollars ($500,000) (the "Hold Back"), which amount
will be deposited by United with First Trust of California (the "Escrow
Agent") to be held pursuant to an Escrow Agreement (the "Escrow Agreement")
on October 27, 1997, for later distribution pending the determination of
the amount of the Inventory Adjustment and Working Capital Adjustment
pursuant to Sections 1.4(c) and 1.4(d), respectively. United and the
Shareholders' Representative will use reasonable efforts to complete the
Inventory Adjustment and the Working Capital Adjustment within 90 days
after the Closing Date, whereupon United shall notify the Shareholders'
Representative of the amount of such Adjustments. If there is no
disagreement between United and the Shareholders' Representative regarding
the Inventory Adjustment and the Working Capital Adjustment, United will
adjust the Hold Back by the amount of such Adjustments and United and the
Shareholders' Representative will instruct the Escrow Agent to release the
Hold Back, as adjusted, to the Shareholders 120 days after the Closing
Date. In the event of any disagreement between United and Shareholders'
Representative regarding the dollar amount of any such adjustment, United
shall nevertheless adjust the Hold Back by the amount of such Adjustments
not in dispute and United and the Shareholders' Representative will
instruct the Escrow Agent to release to the Shareholders any portion of the
Hold Back, as adjusted, that is not in dispute. Promptly upon resolution
of any such disagreement in accordance with the terms hereof, United shall
adjust the remaining portion of the Hold Back and United and the
Shareholders' Representative shall instruct the Escrow Agent to release to
the Shareholders any remaining portion of the Hold Back, as adjusted, to
which the Shareholders are entitled. Notwithstanding the foregoing, United
shall not be limited to the Hold Back as a sole remedy in the event that
any Purchase Price adjustment exceeds the Hold Back.
(b) INTENTIONALLY OMITTED.
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(c) INVENTORY VALUATION. The Purchase Price shall be adjusted (the
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"Inventory Adjustment") on a dollar-for-dollar basis pursuant to the
procedures set forth below by the amount, if any, by which the Inventory
Value of the fuel and Equipment included on Schedule 1.3(c) as of the
Closing Date is greater or less than the amount set forth on Schedule
1.3(c) plus or minus, as the case may be, the lesser of $10,000 or two
percent
3
(2%) of the Inventory Value. "Inventory Value" shall mean the lower of (x)
vendor cost as last received (excluding all freight and other charges) and
(y) market value (excluding any non-salable or obsolete merchandise, parts
or supplies) as of the Closing Date, as determined in accordance with
generally accepted accounting principles. Inventory Value shall be
determined pursuant to a physical inventory to be taken promptly following
the Closing Date, and shall be finalized within 90 days following the
Closing Date. Any disputes as to the physical condition, salability or
obsolescence of any item of Inventory will, if possible, be resolved by
United and the Shareholders' Representative while such physical inventory
is being taken. Any disputes regarding the foregoing not so resolved will
be resolved by arbitration in accordance with Section 10.
(d) WORKING CAPITAL ADJUSTMENT. The adjustment made to the Purchase
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Price wired on the Closing Date pursuant to Section 1.3(b) is based on
Schedule 1.3(b) as delivered at the Closing, which the parties understand
includes only an estimate of the Month-End Working Capital. Within 90 days
after the Closing Date, United will determine the actual Month-End Working
Capital as of October 31, 1997, and will advise the Shareholders'
Representative of such actual amount. If the Purchase Price increases,
United will promptly pay any additional amount due to the Shareholders
within 120 days after the Closing Date; if the Purchase Price declines,
United may deduct the amount by which the Purchase Price declines from the
Hold Back. To the extent the parties disagree on such amount, United and
the Shareholders' Representative will attempt to resolve such dispute and,
if they are unable to do so, such dispute shall be decided by arbitration
in accordance with Section 10. For purposes of valuing the accounts
receivable of the Corporations in determining Month-End Current Assets,
accounts receivable outstanding 120 days or more shall be valued at zero.
The Purchase Price shall also be reduced 120 days after the Closing, on a
dollar-for-dollar basis, by the value of all accounts receivable included
in Month-End Current Assets that have not been collected within 120 days
after the Closing Date, and shall be increased by the amount by which
accounts receivable on the Closing Date collected within 120 days after the
Closing Date exceed the value of the accounts receivable included in the
Month-End Current Assets. United will cause the Corporations to use
reasonable efforts to collect all such accounts receivable within 120 days
after the Closing Date. All such uncollected receivables shall then be
assigned by the Corporations to the Shareholders' Representative, who shall
hold and attempt to collect them for the benefit of the Shareholders. The
Corporations shall have no right to receive any of such collections.
Payments received within 120 days after the Closing Date on accounts
receivable for customers who generate accounts receivable before and after
the Closing Date shall be credited to the oldest receivables first until
the payments have been fully credited. The adjustments pursuant to this
Section 1.4(d) are herein called the "Working Capital Adjustment."
1.5 EXCLUDED ASSETS. The Assets of the Corporations listed on
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Schedule 1.5 (the "Excluded Assets") shall be distributed to the Shareholders
prior to the Closing, and United shall acquire no interest in or claim to any of
the Excluded Assets.
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2. CLOSING TIME AND PLACE
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The closing of the transactions contemplated herein (the "Closing") took
place simultaneous with the execution of this Agreement (the "Closing Date").
The Closing took place at the Law Offices of Groom & Cave LLP, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. At the Closing, United and the
Shareholders delivered to each other the documents, instruments and other items
described in Section 5 of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATIONS AND THE
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SHAREHOLDERS
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The Corporations and the Shareholders, jointly and severally, (i) represent
and warrant that each of the following representations and warranties is true as
of the Closing Date with respect to the Shareholders, Coran and Monterey, as the
case may be, and (ii) agree that such representations and warranties shall
survive the Closing.
3.1 ORGANIZATION, STANDING AND QUALIFICATION. Each Corporation is duly
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organized, validly existing and in good standing under the laws of the State of
California. Each Corporation has full corporate power and authority to own and
lease its properties and to carry on its business as now conducted. Neither
Corporation is required to be qualified or licensed to conduct business as a
foreign corporation in any other jurisdiction.
3.2 CAPITALIZATION. Schedule 3.2 sets forth, as of the Closing Date, the
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authorized and outstanding capital stock of Coran and Monterey, the name,
addresses and social security numbers or taxpayer identification numbers of the
record and beneficial owners thereof, and the number of shares so owned, and
wire transfer instructions for each Shareholder relating to the bank account to
which the Purchase Price should be sent. On the Closing Date, all of the issued
and outstanding shares of the capital stock of the Corporations were owned of
record and beneficially by the Shareholders, as set forth in Schedule 3.2, and
were free and clear of all liens, security interests, encumbrances and claims of
every kind. Each share of the capital stock of each Corporation is validly
authorized and issued, fully paid and nonassessable, and was not issued in
violation of any preemptive rights of any past or present shareholder of either
Corporation. No option, warrant, call, conversion right or commitment of any
kind (including any of the foregoing created in connection with any indebtedness
of a Corporation) exists which obligates either Corporation to issue any of its
authorized but unissued capital stock or other equity interest, or which
obligates any Shareholder to transfer any Corporations' Stock to any person.
3.3 ALL STOCK BEING ACQUIRED. The Coran Stock being acquired by United
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hereunder constitutes all of the outstanding capital stock of Coran. The
Monterey Stock being acquired by United hereunder constitutes all of the issued
and outstanding capital stock of Monterey.
3.4 AUTHORITY FOR AGREEMENT. Each Corporation and each of the
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Shareholders has full right, power and authority to enter into this Agreement
and to perform its or his obligations hereunder. The execution and delivery of
this Agreement by the Corporations has been duly authorized by their respective
Boards of Directors. This Agreement has been duly and validly
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executed and delivered by each Corporation and each of the Shareholders and,
subject to the due authorization, execution and delivery by United, constitutes
the legal, valid and binding obligation of each Corporation and each of the
Shareholders enforceable against each Corporation and each of the Shareholders
in accordance with its terms.
3.5 NO BREACH OR DEFAULT. Except as disclosed on Schedule 3.5, the
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execution and delivery by the Corporations and the Shareholders of this
Agreement, and the consummation by the Shareholders of the transactions
contemplated hereby, do not and will not:
(a) result in the breach of any of the terms or conditions of, or
constitute a default under, or allow for the acceleration or termination
of, in any manner release any party from any obligation under, require any
consent under, or will result in any lien, claim, or encumbrance on the
Corporations' Stock or the assets of either Corporation under, any
mortgage, lease, note, bond, indenture, or material contract, agreement,
license or other instrument or obligation of any kind or nature to which a
Corporation or any of the Shareholders is a party, or by which either
Corporation, or any of its assets, is or may be bound or affected; or
(b) violate any law or any order, writ, injunction or decree of any
court, administrative agency or governmental authority, or require the
approval, consent or permission of any governmental or regulatory
authority; or
(c) violate the Articles of Incorporation or Bylaws of either
Corporation.
3.6 SUBSIDIARIES. Schedule 3.6 lists as of the Closing Date any and all
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subsidiaries of either Corporation and any securities of any other corporation
or any securities or other interest in any other business entity owned by a
Corporation or any of its subsidiaries.
3.7 FINANCIAL STATEMENTS. The Corporations have delivered to United, as
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Schedule 3.7, copies of the following financial statements ("Financial
Statements"): financial statements for the fiscal year ended December 31, 1995
and 1966, compiled by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and unaudited interim Financial
Statements for the Corporations for the period ended August 31, 1997 (the
"Balance Sheet Date"). To the knowledge of the Corporations and the
Shareholders, the Financial Statements are true and correct and fairly present
(i) the financial position of each such Corporation as of the respective dates
of the balance sheets included in said statements, and (ii) the results of
operations for the respective periods indicated. To the knowledge of the
Corporations and the Shareholders, the Financial Statements have been prepared
in accordance with generally accepted accounting principles, applied
consistently with prior periods. Except to the extent reflected or reserved
against in a Corporation's balance sheet as of the Balance Sheet Sate, or as
disclosed on Schedule 3.7 or Schedule 3.8, neither Corporation had as of the
Balance Sheet Date, nor had, as of the Closing Date, any liabilities of any
nature, whether accrued, absolute, contingent or otherwise, including, without
limitation, tax liabilities due.
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3.8 LIABILITIES. Schedules 3.8(a), (b), (c) and (d), are accurate lists
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and descriptions of all liabilities of each Corporation required to be described
below in the format set forth below.
(a) Schedule 3.8(a) lists, as of the Closing Date, other than with
respect to trade payables and as of the end of the month prior to the
Closing Date with respect to trade payables, all indebtedness for money
borrowed and all other fixed and uncontested liabilities of any kind,
character and description (excluding all real and personal property
leasehold interests included in Schedule 3.8 (d)), whether reflected or not
reflected on the Financial Statements and whether accrued or absolute, and
states as to each such liability the amount of such liability and to whom
payable. From the date as of which trade payables are listed through the
Closing Date, trade payables have been incurred only in the ordinary course
of business consistent with comparable prior periods.
(b) Schedule 3.8(b) lists, as of the Closing Date, all claims, suits
and proceedings which are pending against either Corporation and, to the
knowledge of the Corporations and the Shareholders, all contingent
liabilities and all claims, suits and proceedings threatened or anticipated
against a Corporation. For each such liability, the following is provided
in Schedule 3.8(b):
(i) a summary description of such liability together with copies
of all material documents, reports and other records relating thereto;
(ii) all amounts claimed or relief sought with respect to such
liability and the identity of the claimant; and
(iii) without limitation of the foregoing, (A) the name of each
court, agency, bureau, board or body before which any such claim, suit
or proceeding is pending, (B) the date such claim, suit or proceeding
was instituted, (C) the parties to such claim, suit or proceeding, (D)
a description of the factual basis alleged to underlie such claim,
suit or proceeding, including the date or dates of all material
occurrences, (E) the amount claimed and other relief sought, and (F)
all material pleadings, briefs and other documents relating thereto to
the extent the same are in the possession or under the control of the
Corporations or the Shareholders.
(c) Schedule 3.8(c) lists, as of the Closing Date and to the extent
not otherwise included in Schedule 3.8(a), all liens and encumbrances
secured by or otherwise affecting any asset of a Corporation (including any
Corporate Property, as hereafter defined), including a description of the
nature of such lien or encumbrance, the amount secured if it secures a
liability, the nature of the obligation secured, and the party holding such
lien or encumbrance.
(d) Schedule 3.8(d) lists, as of the Closing Date and to the extent
not otherwise included in Schedules 3.8(a) and (c), all real and personal
property leasehold interests or to which a Corporation is a party as lessor
or lessee or, to the knowledge of
7
the Corporations or the Shareholders, affecting or relating to any
Corporate Property, including a description of the nature and principal
terms of such leasehold interest and the identity of the other party
thereto.
Except as described on Schedules 3.8(a), (b), (c) and (d), neither
Corporation nor any of the Shareholders has made any payment or committed to
make any payment since the Balance Sheet Date on or with respect to any of the
liabilities or obligations listed on Schedule 3.8(a), (b), (c) and (d) except,
in the case of liabilities and obligations listed on Schedule 3.8(a), (c) and
(d), periodic payments required to be made under the terms of the agreements or
instruments governing such obligations or liabilities.
3.9 [INTENTIONALLY OMITTED].
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3.10 PERMITS AND LICENSES.
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(a) Schedule 3.10(a) is a full and complete list, and includes copies,
of all material permits, licenses, titles (including motor vehicle titles
and current registrations), fuel permits, zoning and land use approvals and
authorizations, including, without limitation, any conditional or special
use approvals or zoning variances, occupancy permits, and any other similar
documents constituting a material authorization or entitlement or otherwise
material to the operation of the business of the Corporations (collectively
the "Governmental Permits") owned by, issued to, held by or otherwise
benefiting the Corporations or the Shareholders as of the Closing Date.
Any material conditions to the Governmental Permits to and, if applicable,
the expiration dates thereof, are also described in Schedule 3.10(a).
Schedule 3.10(a) also sets forth the name of any third party from whom the
Shareholders, either Corporation or United must obtain consent (the
"Required Governmental Consents") in order to effect a direct or indirect
transfer of the Governmental Permits required as a result of the
consummation of the transactions contemplated by this Agreement. Except as
set forth on Schedule 3.10(a), all of Governmental Permits enumerated and
listed on Schedule 3.10(a) are adequate for the operation of the business
of the Corporations and of each Corporate Property as presently operated
and are valid and in full force and effect. All of said Governmental
Permits and agreements have been duly obtained and are in full force and
effect, and there are no proceedings pending or, to the knowledge of the
Corporations or the Shareholders, threatened which may result in the
revocation, cancellation, suspension or adverse modification of any of the
same. Neither the Corporations nor any of the Shareholders has any
knowledge of any reason why all such Governmental Permits and agreements
will not remain in effect after consummation of the transactions
contemplated hereby.
(b) Schedule 3.10(b) lists, as of the Closing Date, each facility
owned, leased, operated or otherwise used by the Corporations, the
ownership, lease, operation or use of which is being transferred to,
assumed by or otherwise acquired directly or indirectly by United pursuant
to this Agreement (each, a "Facility" and collectively, the "Facilities").
Except as otherwise disclosed on Schedule 3.10(b):
8
(i) Each Facility is fully licensed, permitted and authorized to
carry on its current business under all applicable federal, state and
local statutes, orders, approvals, zoning or land use requirements,
rules and regulations and no Facility is a non-conforming use or
otherwise subject to any restrictions regarding reconstruction.
(ii) All activities and operations at each Facility are being and
have been conducted in compliance in all material respects with the
requirements, criteria, standards and conditions set forth in all
applicable federal, state and local statutes, orders, approvals,
permits, zoning or land use requirements and restrictions, variances,
licenses, rules and regulations.
(iii) Each Facility is located on real property owned or leased
by a Corporation (each a "Facility Property") and each Facility
Property owned by a Corporation is legally described on the surveys or
site plans attached to Schedule 3.10(b) (the "Facility Surveys/Site
Plans"), each of which when delivered will accurately depict the
respective Facility Property.
(iv) There are no circumstances, conditions or reasons which are
likely to be the basis for revocation or suspension of any Facility's
site assessments, permits, licenses, consents, authorizations, zoning
or land use permits, variances or approvals relating to any Facility
owned by a Corporation or owned by any of the Shareholders or an
Affiliate (as hereinafter defined) of any of the Shareholders and
leased to a Corporation, and to the knowledge of the Corporations and
the Shareholders there are no circumstances, conditions or reasons
which are likely to be the basis for revocation or suspension of any
site assessment, permits, licenses, consents, authorizations, zoning
or land use permits, variances or approvals relating to any Facility.
3.11 CERTAIN RECEIVABLES. Schedule 3.11 is an accurate list as of the
-------------------
Closing Date of the accounts and notes receivable of the Corporations from and
advances to employees, former employees, officers, directors, the Shareholders
and Affiliates of the foregoing. For purposes of this Agreement, the term
"Affiliate" means, with respect to any person, any person that directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with such person, and in the case of a Corporation
includes directors and officers, in the case of individuals includes the
individual's spouse, father, mother, grandfather, grandmother, brothers,
sisters, children and grandchildren and in the case of a trust includes the
grantors, trustees and beneficiaries of the trust.
3.12 FIXED ASSETS AND REAL PROPERTY.
------------------------------
(a) Schedule 3.12(a) lists, as of the Closing Date, substantially all
the fixed assets (other than real estate, inventory subject to the
Inventory Adjustment and Equipment included in the Rental Asset Listing) of
each Corporation, including, without limitation, identification of each
vehicle by description and serial number, identification of machinery,
equipment and general descriptions of parts, supplies and inventory. All
9
leases of fixed assets are in full force and effect and binding upon the
parties thereto; neither Corporation nor any other party to such leases is
in breach of any of the material provisions thereof.
(b) Each parcel of real property leased, owned or being purchased by
each Corporation as of the Closing Date (the "Corporate Property"),
including street address and, in the case of Corporate Property owned or
being purchased, the legal description thereof, is listed on Schedule
3.12(b) and attached to said Schedule 3.12(b) are copies of all leases,
deeds, outstanding mortgages, other encumbrances and any existing title
insurance policies relating to each Corporate Property, as well as a
current commitments for title insurance issued by a title insurance company
satisfactory to United with respect to each Corporate Property owned or
being purchased by a Corporation together with copies of all of the title
exceptions referred to in said commitments. All leases listed on Schedule
3.12(b) are and shall be in full force and effect and binding on the
parties thereto. Except as described on Schedule 3.12(b) there are and
shall be as of the Closing Date no material physical or mechanical defects
in or any Facility located on any Corporate Property and each such Facility
is in good condition and repair.
(c) Each Corporation has good, valid and marketable title to all
properties and assets, real, personal, and mixed, tangible and intangible,
actually used or necessary for the conduct of its business, free of any
encumbrance or charge of any kind except: (i) liens for current taxes not
yet due; (ii) minor imperfections of title and encumbrances, if any, that
are not substantial in amount, do not materially detract from the value of
the property subject thereto, do not materially impair the value of the
Corporations, and have arisen only in the ordinary course of business and
consistent with past practice; and (iii) the liens identified on Schedule
3.8(c) (collectively, the "Permitted Liens"). Except as described on
Schedule 3.12(b) there are and as of the Closing Date will be no leases,
occupancy agreements, options, rights of first refusal or any other
agreements or arrangements, either oral or written, that create or confer
in any person or entity the right to acquire, occupy or possess, now or in
the future, any Facility, any Corporate Property, or any portion thereof,
or create in or confer on any person or entity any right, title or interest
therein or in any portion thereof.
3.13 ACQUISITION/DISPOSAL OF ASSETS. Except as indicated on Schedule 3.13,
------------------------------
since the Balance Sheet Date, neither Corporation has acquired or sold or
otherwise disposed of any properties or assets which, singly or in the
aggregate, have a value in excess of $25,000, or which are material to the
operation of either Corporation's business as presently conducted, without the
prior written consent of United.
3.14 CONTRACTS AND AGREEMENTS; ADVERSE RESTRICTIONS.
----------------------------------------------
(a) Schedule 3.14(a) lists, as of the Closing Date, and includes
copies of, all material contracts and agreements (other than standard
rental agreements with customers, leases included with Schedule 3.12(b) and
documents included with Schedule 3.12(b)) to which either Corporation is a
party or by which it or any of its property is bound (including, but not
limited to, joint venture or partnership agreements, contracts with any
10
labor organizations, promissory notes, loan agreements, bonds, mortgages,
deeds of trust, liens, pledges, conditional sales contracts or other
security agreements). Except as disclosed on Schedule 3.14(a), all such
contracts and agreements included in Schedule 3.14(a) are in full force and
effect and binding upon the parties thereto. Except as described or cross
referenced on Schedule 3.14(a), neither Corporation nor, to any of the
Shareholders' knowledge, any other parties to such contracts and agreements
is in breach thereof, and none of the parties has threatened to breach any
of the material provisions thereof or notified a Corporation or any of the
Shareholders of a default thereunder, or exercised any options thereunder.
None of such contracts, agreements and licenses requires notice to, or
consent or approval of, any third party to any of the transactions
contemplated hereby, except such consents and approvals as are listed on
Schedule 3.14(a).
(b) Except as set forth on Schedule 3.14(b), there is no outstanding
judgment, order, writ, injunction or decree against a Corporation, the
result of which could materially adversely affect the Corporation or its
business or any of the Corporate Properties, nor has either Corporation
been notified that any such judgment, order, writ, injunction or decree has
been requested.
3.15 INSURANCE. Schedule 3.15 is a complete list and includes copies, as
---------
of the Closing Date, of all insurance policies in effect on the Closing Date or,
with respect to "occurrence" policies that were in effect, carried by the
Corporations in respect of the Facilities, the Corporate Properties or any other
property used by the Corporations specifying, for each policy, the name of the
insurer, the type of risks insured, the deductible and limits of coverage, and
the annual premium therefor. During the last five years, there has been no
lapse in any material insurance coverage of either Corporation. For each
insurer providing coverage for any of the contingent or other liabilities listed
on Schedule 3.8, except to the extent otherwise set forth in Schedule 3.8(b),
each such insurer, if required, has been properly and timely notified of such
liability, no reservation of rights letters have been received by a Corporation
and the insurer has assumed defense of each suit or legal proceeding.
3.16 PERSONNEL. Schedule 3.16 is a complete list, as of the Closing Date,
---------
of all officers, directors and employees (by type or classification) of each
Corporation and their respective rates of compensation, including (i) the
portions thereof attributable to bonuses, (ii) any other salary, bonus, stock
option, equity participation, or other compensation arrangement made with or
promised to any of them, and (iii) copies of all employment agreements with non-
union officers, directors and employees. Schedule 3.16 shall also lists the
driver's license number for each driver of the Corporations' motor vehicles who
is required to have a commercial, chauffeur's, or other special class of drivers
license in order to operate commercial or heavy vehicles used in the
Corporation's business.
3.17 BENEFIT PLANS AND UNION CONTRACTS.
---------------------------------
(a) Schedule 3.17(a) is a complete list as of the Closing Date, and
includes complete copies (or, in the case of oral arrangements,
descriptions), of all employee benefit plans and agreements (written or
oral) currently maintained or contributed to by
11
the Corporations, including employment agreements and any other agreements
containing "golden parachute" provisions, retirement plans, welfare benefit
plans and deferred compensation agreements, together with copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Closing Date. Except for the employee
benefit plans described on Schedule 3.17(a), the Corporations have no other
pension, retirement, welfare, profit sharing, deferred compensation, stock
option, employee stock purchase or other employee benefit plans or
arrangements with any party. Except as disclosed on Schedule 3.17(a), all
employee benefit plans listed on Schedule 3.17(a) are fully funded and in
substantial compliance with all applicable federal, state and local
statutes, ordinances and regulations. All such plans that are intended to
qualify under Section 401(a) of the Internal Revenue Code have been
determined by the Internal Revenue Service to be so qualified, and copies
of such determination letters are included as part of Schedule 3.17(a).
Except as disclosed on Schedule 3.17(a), all reports and other documents
required to be filed with any governmental agency or distributed to plan
participants or beneficiaries (including, but not limited to, actuarial
reports, audits or tax returns) have been timely filed or distributed, and
copies thereof are included as part of Schedule 3.17(a). All employee
benefit plans listed on such Schedule have been operated in accordance with
the terms and provisions of the plan documents and all related documents
and policies. The Corporations have not incurred any liability for excise
tax or penalty due to the Internal Revenue Service or U.S. Department of
Labor nor any liability to the Pension Benefit Guaranty Corporation for any
employee benefit plan, nor has a Corporation, nor party-in-interest or
disqualified person, engaged in any transaction or other activity which
would give rise to such liability. The Corporations have not participated
in or made contributions to any "multi-employer plan" as defined in the
Employee Retirement Income Security Act of 1974 ("ERISA"), nor would a
Corporation or any affiliate be subject to any withdrawal liability with
respect to such a plan if any such employer withdrew from such a plan
immediately prior to the Closing Date. No employee pension benefit plan is
under funded on a termination basis as of the date of this Agreement.
(b) Schedule 3.17(b) is a complete list, as of the Closing Date, and
includes complete copies of all union contracts and agreements between a
Corporation and any collective bargaining group. Each Corporation is in
compliance in all material respects with all applicable federal and state
laws respecting employment and employment practices, terms and conditions
of employment, wages and hours, and nondiscrimination in employment, and is
not engaged in any unfair labor practice. There is no charge pending or,
to the Corporations' or the Shareholders' knowledge, threatened, against a
Corporation before any court or agency and alleging unlawful discrimination
in employment practices and there is no charge of or proceeding with regard
to any unfair labor practice against it pending before the National Labor
Relations Board. There is no labor strike, dispute, slow down or stoppage
as of the Closing Date, existing or threatened against a Corporation; no
union organizational activity exists respecting employees of a Corporation
not currently subject to a collective bargaining agreement; the union
contracts or other agreements delivered as part of Schedule 3.17(b)
constitute all agreements with the unions or other collective bargaining
groups, and there are no other arrangements or established practices
relating to the employees covered by any
12
collective bargaining agreement; and Schedule 3.17(b) will contain as of
the date it is delivered a list of all arbitration or grievance proceedings
that have occurred since the Balance Sheet Date. No one has petitioned
within the last five years, and no one is now petitioning, for union
representation of any employees of a Corporation. The Corporations have
not experienced any labor strike, slow-down, work stoppage, labor
difficulty or other job action during the last five years.
(c) No payment made to any employee, officer, director or independent
contractor of a Corporation (the "Recipient") pursuant to any employment
contract, severance agreement or other arrangement (the "Golden Parachute
Payment") will be nondeductible by the Corporation because of the
application of Sections 280G and 4999 of the Code to the Golden Parachute
Payment, nor will a Corporation be required to compensate any Recipient
because of the imposition of an excise tax (including any interest or
penalties related thereto) on the Recipient by reason of Sections 280G and
4999 of the Code.
3.18 TAXES.
-----
(a) Each Corporation has timely filed all requisite federal, state,
local and other tax and information returns due for all fiscal periods
ended on or before the Closing Date. All such returns are accurate and
complete. Except as set forth on Schedule 3.18, there are no open years,
examinations in progress, extensions of any statute of limitations or
claims against a Corporation relating to federal, state, local or other
taxes (including penalties and interest) for any period or periods prior to
and including the Closing Date and no notice of any claim for taxes has
been received. Copies of (i) any tax examinations, (ii) extensions of
statutory limitations and (iii) the federal income, and state franchise,
income and sales tax returns of each Corporation for its last three fiscal
years are attached as part of Schedule 3.18. Copies of all other federal,
state, local and other tax and information returns for all prior years of
the Corporations' existence have been made available to United and are
among the records of the Corporations which will accrue to United at the
Closing. The Corporations have not been contacted by any federal, state or
local taxing authority regarding a prospective examination.
(b) Except as set forth on Schedule 3.18 (which schedule also includes
the amount due with respect to such Corporation) the Corporations have duly
paid all taxes and other related charges required to be paid prior to the
Closing Date. The reserves for taxes contained in the Financial Statements
of the Corporations are adequate to cover their tax liability as of the
Closing Date.
(c) Each of the Corporations has withheld all required amounts from
its employees for all pay periods in full and complete compliance with the
withholding provisions of applicable federal, state and local laws. All
required federal, state and local and other returns with respect to income
tax withholding, social security, and unemployment taxes have been duly
filed by the Corporations for all periods for which
13
returns are due, and the amounts shown on all such returns to be due and
payable have been paid in full.
3.19 COPIES COMPLETE. Except as disclosed on Schedule 3.19, the certified
---------------
copies of the Articles of Incorporation and Bylaws of the Corporations, both as
amended to the Closing Date, and the copies of all standard form rental
agreements, leases, instruments, agreements, licenses, permits, certificates or
other documents that have been delivered to United in connection with the
transactions contemplated hereby are complete and accurate as of the Closing
Date and are true and correct copies of the originals thereof. Except as
specifically disclosed on Schedule 3.19, the rights and benefits of the
Corporations will not be adversely affected by the transactions contemplated
hereby, and the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions thereof. None of such leases,
instruments, agreements, licenses, permits, site assessments, certificates or
other documents requires notice to, or consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby,
except such consents and approvals as are listed on Schedule 3.19 and which have
been given or obtained prior to the Closing.
3.20 PRODUCT QUALITY, WARRANTY CLAIMS, PRODUCT LIABILITY. All products and
---------------------------------------------------
services sold, rented, leased, provided or delivered by the Corporations to
customers on or prior to the Closing Date conform or will conform to applicable
contractual commitments, express and implied warranties, product and service
specifications and quality standards, and, to the knowledge of the Corporations
and the Shareholders, the Corporations have no liability (and there is no basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand against the Corporations giving rise to any
liability) for replacement or repair thereof or other damages in connection
therewith. No product or service sold, leased, rented, provided or delivered by
the Corporations to customers on or prior to the Closing Date is subject to any
guaranty, warranty or other indemnity beyond the applicable standard terms and
conditions of sale, rent or lease. Except as set forth on Schedule 3.20, the
Corporations have no liability (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against the Corporations which might give rise to any liability) arising
out of any injury to a person or property as a result of the ownership,
possession, provision or use of any Equipment, product or service sold, rented,
leased, provided or delivered by the Corporations on or prior to the Closing
Date. All product liability claims that have been asserted against the
Corporations since January 1, 1991, whether covered by insurance or not and
whether litigation has resulted or not, are listed and summarized on Schedule
3.20.
3.21 NO CHANGE WITH RESPECT TO CORPORATION. Except as set forth on
-------------------------------------
Schedule 3.21, since the Balance Sheet Date, the business of each Corporation
has been conducted only in the ordinary course there has been no change in the
condition (financial or otherwise) of the assets, liabilities or operations of
the Corporations other than changes in the ordinary course of business, none of
which either singly or in the aggregate has been materially adverse.
Specifically, and without limiting the generality of the foregoing, except as
set forth on Schedule 3.21, with respect to each Corporation, since the Balance
Sheet Date, there has not been:
14
(a) any change in its financial condition, assets, liabilities
(contingent or otherwise), income, operations or business which would have
a material adverse effect on the financial condition, assets, liabilities
(contingent or otherwise), income, operations or business of the
Corporation, taken as a whole;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting any material portion of its properties or
business;
(c) any change in or agreement to change (i) its shareholders, (ii)
ownership of its authorized capital or outstanding securities, or (iii) its
securities;
(d) any declaration or payment of, or any agreement to declare or pay,
any dividend or distribution in respect of its capital stock or any direct
or indirect redemption, purchase or other acquisition of any of its capital
stock;
(e) any increase or bonus or promised increase or bonus in the
compensation payable or to become payable by it, in excess of usual and
customary practices, to any of its directors, officers, employees or
agents, or any accrual or arrangement for or payment of any bonus or other
special compensation to any employee or any severance or termination pay
paid to any of its present or former officers or other key employees;
(f) any labor dispute or any other event or condition of any
character, materially adversely affecting its business or future prospects;
(g) any sale or transfer, or any agreement to sell or transfer, any of
its material assets, property or rights to any other person, including,
without limitation, the Shareholders and their Affiliates, other than in
the ordinary course of business;
(h) any cancellation, or agreement to cancel, any material
indebtedness or other material obligation owing to it, including, without
limitation, any indebtedness or obligation of any of the Shareholders or
any Affiliate thereof;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property
or rights or requiring consent of any party to the transfer and assignment
of any such assets, property or rights;
(j) any purchase or acquisition of, or any agreement, plan or
arrangement to purchase or acquire, any of its property, rights or assets
outside the ordinary course of its business;
(k) any waiver of any of its material rights or claims;
(l) any new or any amendment or termination of any existing material
contract, agreement, license, permit or other right to which it is a party;
15
(m) any decline in the stockholders equity of the Corporation to an
amount less than the stockholders equity of the Corporation as of the
Balance Sheet Date;
(n) any increase in the amount of indebtedness owed by the
Shareholders or their Affiliates to any person other than the Corporation
and secured by one or more Corporate Properties;
(o) any increase in the amount of aggregate indebtedness owed by the
Shareholders or their Affiliates to the Corporation; or
(p) any other transaction outside the ordinary course of its business.
3.22 CLOSING DATE DEBT; CLOSING DATE CURRENT ASSETS AND CLOSING DATE
---------------------------------------------------------------
CURRENT LIABILITIES. Schedule 1.3(a) accurately sets forth the Closing Date
-------------------
Debt of the Corporations. Schedule 1.3(b) accurately sets forth the Closing
Date Current Assets and Closing Date Current Liabilities of the Corporations.
3.23 BANK ACCOUNTS. Schedule 3.23 is a complete and accurate list, as of
-------------
the Closing Date, of:
(a) the name of each bank in which each Corporation has accounts or
safe deposit boxes;
(b) the name(s) in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each person authorized to draw thereon or have access
thereto.
3.24 COMPLIANCE WITH LAWS. Except as disclosed on Schedule 3.24, each
--------------------
Corporation has materially complied with, and each Corporation is presently in
material compliance with, federal, state and local laws, ordinances, codes,
rules, regulations, Governmental Permits, orders, judgments, awards, decrees,
consent judgments, consent orders and requirements applicable to it
(collectively "Laws"), including, but not limited to, the Americans with
Disabilities Act, the Federal Occupational Safety and Health Act, and Laws
relating to the public health, safety or protection of the environment
(collectively, "Environmental Laws"). Except as disclosed on Schedule 3.24,
there has been no assertion by any party that a Corporation is in material
violation of any Laws. Specifically and without limiting the generality of the
foregoing, except as disclosed on Schedule 3.24: (i) except as permitted under
Environmental Laws, the Corporations have not processed, handled, transferred,
generated, treated, stored or disposed of any Hazardous Material (as defined
below), (ii) no Hazardous Material, other than that allowed under Environmental
Laws has been disposed of, or otherwise released on any Corporate Property, and
(iii) no Corporate Property has ever been subject to or received any notice of
any private, administrative or judicial action, or notice of any intended
private, administrative or judicial action relating to the presence or alleged
presence of Hazardous Material in, under, upon or emanating from any Corporate
Property or any real property now
16
or previously owned or leased by the Corporation. As used in this Agreement,
"Hazardous Material" shall mean the substances defined as "Hazardous Waste" in
40 CFR 261, and substances defined in any comparable California statute or
regulation; any substance the presence of which requires remediation pursuant to
any Environmental Laws.
3.25 POWERS OF ATTORNEY. The Corporations have not granted any power of
------------------
attorney (except routine powers of attorney relating to representation before
governmental agencies) or entered into any agency or similar agreement whereby a
third party may bind or commit either Corporation in any manner.
3.26 UNDERGROUND STORAGE TANKS. Except as set forth on Schedule 3.26, no
-------------------------
underground storage tanks containing petroleum products or wastes or other
hazardous substances regulated by 40 CFR 280 or Environmental Laws are currently
or have been located on any Corporate Property. Except as set forth on Schedule
3.26, no Corporation has ever owned or leased any real property not included in
the Corporate Property having any underground storage tanks containing petroleum
products or wastes or other hazardous substances regulated by 40 CFR 280. As to
each such underground storage tank ("UST") identified on Schedule 3.26, each
Corporation has provided to United, on Schedule 3.26:
(a) the location of the UST, information and material, including any
available drawings and photographs, showing the location, and whether the
Corporation currently owns or leases the property on which the UST is
located (and if the Corporation does not currently own or lease such
property, the dates on which it did and the current owner or lessee of such
property);
(b) the date of installation and specific use or uses of the UST;
(c) copies of tank and piping tightness tests and cathodic protection
tests and similar studies or reports for each UST;
(d) a copy of each notice to or from a governmental body or agency
relating to the UST;
(e) other material records with regard to the UST, including, without
limitation, repair records, financial assurance compliance records and
records of ownership; and
(f) to the extent not otherwise set forth pursuant to the above, a
summary description of instances, past or present, in which, to the
Corporations', or the Shareholders' knowledge, the UST failed to meet
applicable standards and regulations for tightness or otherwise and the
extent of such failure, and any other operational or environmental problems
with regard to the UST, including, without limitation, spills, including
spills in connection with delivery of materials to the UST, releases from
the UST and soil contamination.
17
Except to the extent set forth on Schedule 3.26, each Corporation has
complied with Environmental Laws regarding the installation, use, testing,
monitoring, operation and closure of any UST described on Schedule 3.26.
3.27 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Schedule 3.27 lists all
--------------------------------------
patents, tradenames, fictitious business names, trademarks, service marks, and
copyrights owned by the Corporations or which they are licensed to use (other
than licenses to use software for personal computer operating systems that were
provided when the computer was purchased and licenses to use software for
personal computers that are granted to retail purchasers of such software). No
patents, trade secrets, know-how, intellectual property, trademarks, trade
names, assumed names, copyrights, or designations used by a Corporation in its
business infringe on any patents, trademarks, or copyrights, or any other rights
of any person. Neither Corporation nor any of the Shareholders knows or has any
reason to believe that there are any claims of third parties to the use of any
such names or any similar name, or knows of or has any reason to believe that
there exists any basis for any such claim or claims.
3.28 ASSETS, ETC., NECESSARY TO BUSINESS. Each Corporation owns or leases
-----------------------------------
all properties and assets, real, personal, and mixed, tangible and intangible,
and, except as disclosed on Schedules 3.5, 3.10(a), 3.10(b), 3.14(a) and 3.19,
is a party to all Governmental Permits and other agreements necessary to permit
it to carry on its business as presently conducted. All of said Governmental
Permits and agreements have been duly obtained and, except as disclosed on
Schedules 3.5, 3.8(b), 3.10(a), 3.10(b) 3.14(a) and 3.19, are in full force and
effect and there are no proceedings pending or threatened which may result in
the revocation, cancellation, suspension or adverse modification of any of the
same. Neither of the Corporations nor any of the Shareholders has any knowledge
of any reason why all such Governmental Permits and agreements will not remain
in effect after consummation of the transactions contemplated hereby.
3.29 CONDEMNATION. No Corporate Property owned or leased by a Corporation
------------
is the subject of, or would be affected by, any pending condemnation or eminent
domain proceedings, and, to the knowledge of the Corporations and the
Shareholders, no such proceedings are threatened.
3.30 MANUFACTURERS, SUPPLIERS AND CUSTOMERS. The relations between each
--------------------------------------
Corporation and its customers are good. Neither Corporation nor any of the
Shareholders has knowledge of any fact (other than general economic and industry
conditions) which indicates that any of the manufacturers or suppliers supplying
products, components or materials to the Corporations intends to cease providing
such items to the Corporations, nor does either Corporation or any of the
Shareholders have knowledge of any fact (other than general economic and
industry conditions) which indicates that any of the customers of a Corporation
intends to terminate, limit or reduce its business relations with the
Corporation.
3.31 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Corporation nor any of
-------------------------------------
the Shareholders has directly or indirectly within the past five years given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to help or
hinder the business of a Corporation in connection with any actual or proposed
transaction which (a) might subject a Corporation to any damage or penalty
18
in any civil, criminal or governmental litigation or proceeding, (b) if not
given in the past, might have had an adverse effect on the financial condition,
business or results of operations of a Corporation, or (c) if not continued in
the future, might adversely affect the financial condition, business or
operations of the Corporations or which might subject a Corporation to suit or
penalty in any private or governmental litigation or proceeding.
3.32 RELATED PARTY TRANSACTIONS. Except as disclosed in the Financial
--------------------------
Statements, none of the Shareholders nor their Affiliates owns any direct or
indirect interest of any kind in, or controls or is a director, officer,
employee, shareholder or partner of, or consultant to or lender to or borrower
from or has the right to participate in the profits of, any Person which is a
competitor, supplier, customer, landlord, tenant, creditor or debtor of any
Corporation.
3.33 DISCLOSURE SCHEDULES. Any matter disclosed on any Schedule to this
--------------------
Agreement shall be deemed to have been disclosed on every other Schedule that
refers to such Schedule by cross reference so long as the nature of the matter
disclosed is obvious from a fair reading of the Schedule on which the matter is
disclosed.
3.34 NO MISLEADING STATEMENTS. The representations and warranties of the
------------------------
Corporations and the Shareholders contained in this Agreement, the Exhibits and
Schedules hereto and all other documents and information furnished to United and
its representatives pursuant hereto are complete and accurate in all material
respects and do not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements made not misleading.
3.35 ACCURATE AND COMPLETE RECORDS. The corporate minute books, stock
-----------------------------
ledgers, books, ledgers, financial records and other records of the
Corporations:
(a) have been made available to United and its agents at the
Corporations' offices or at the offices of United's attorneys or the
Corporations' attorneys;
(b) have been, in all material respects, maintained in accordance with
all applicable laws, rules and regulations; and
(c) are accurate and complete, reflect all material corporate
transactions required to be authorized by the Boards of Directors and/or
shareholders of the Corporations and do not contain or reflect any material
discrepancies.
3.36 KNOWLEDGE. Wherever reference is made in this Agreement to the
---------
"knowledge" of the Shareholders, such term means the actual knowledge of the
Shareholders or any knowledge which should have been obtained by the
Shareholders upon reasonable inquiry by a reasonable business person. Wherever
reference is made in this Agreement to the "knowledge" of a Corporation, such
term means the actual knowledge of any management employee, officer or director
of the Corporation or any knowledge which should have been obtained by any such
person upon reasonable inquiry by a reasonable business person.
19
3.37 BROKERS; FINDERS. Except as set forth on Schedule 3.37, no person has
----------------
acted directly or indirectly as a broker, finder or financial advisor for the
Corporations or the Shareholders in connection with the transactions
contemplated by this Agreement and no person is entitled to any broker's,
finder's, financial advisory or similar fee or payment in respect thereof based
in any way on any agreement, arrangement or understanding made by or on behalf
of the Corporations or the Shareholders.
3.38 S CORPORATIONS. The Corporations have both elected to be treated as S
--------------
Corporations within the meaning of the Federal Income Tax Code of 1986, as
amended. Such elections have been made for the years listed on Schedule 3.38.
4. REPRESENTATIONS AND WARRANTIES OF UNITED
----------------------------------------
United represents and warrants to the Shareholders that each of the
following representations and warranties is true as of the date of this
Agreement and will be true as of the Closing Date, and agrees that such
representations and warranties shall survive the Closing:
4.1 EXISTENCE AND GOOD STANDING. United is a Corporation duly organized,
---------------------------
validly existing and in good standing under the laws of the State of Delaware.
4.2 NO CONTRACTUAL RESTRICTIONS. No provisions exist in any article,
---------------------------
document or instrument to which United is a party or by which it is bound which
would be violated by consummation of the transactions contemplated by this
Agreement.
4.3 AUTHORIZATION OF AGREEMENT. This Agreement has been duly authorized,
--------------------------
executed and delivered by United and, subject to the due authorization,
execution and delivery by the Shareholders, constitutes a legal, valid and
binding obligation of United. United has full corporate power, legal right and
corporate authority to enter into and perform its obligations under this
Agreement and to carry on its business as presently conducted. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby and the fulfillment of and compliance with the terms and
conditions hereof do not and will not, after the giving of notice, or the lapse
of time or otherwise: (a) violate any provisions of any judicial or
administrative order, award, judgment or decree applicable to United; (b)
conflict with any of the provisions of the Certificate of Incorporation or
Bylaws of United; or (c) conflict with, result in a breach of or constitute a
default under any material agreement or instrument to which United is a party or
by which it is bound.
4.4 NO MISLEADING STATEMENTS. The representations and warranties of
------------------------
United contained in this Agreement, the Exhibits and Schedules hereto and all
other documents and information furnished to the Shareholders pursuant hereto
are materially complete and accurate, and do not include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements made not misleading as of the Closing Date.
4.5 BROKERS; FINDERS. No person has acted directly or indirectly as a
----------------
broker, finder or financial advisor for United in connection with the
transactions contemplated by this Agreement and no person is entitled to any
broker's, finder's, financial advisory or similar fee
20
or payment in respect thereof based in any way on any agreement, arrangement or
understanding made by or on behalf of United.
4.6 DISCLOSURE SCHEDULES. Any matter disclosed by United on any Schedule
--------------------
to this Agreement shall be deemed to have been disclosed on every other Schedule
that refers to such Schedule by cross reference so long as the nature disclosed
is obvious from a fair reading of the Schedule on which the matter is disclosed.
5. CLOSING DELIVERIES
------------------
At the Closing, the respective parties made the deliveries indicated:
5.1 UNITED DELIVERIES.
-----------------
(a) United delivered to the Shareholders the portion of the Purchase
Price (including the Note) required to be delivered on the Closing Date
pursuant to Section 1.2, and delivered the Hold Back to the Escrow Agent.
(b) United executed and delivered a Consulting Agreement with ▇▇▇▇▇
▇▇▇▇▇.
(c) United executed and delivered Employment Agreements with Corey,
Randall, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇.
(d) Coran executed and delivered the Leases.
5.2 SHAREHOLDERS DELIVERIES.
-----------------------
(a) The Shareholders delivered to United the certificates representing
the outstanding Corporations' Stock free and clear of all liens, security
interests, claims and encumbrances, accompanied by stock powers duly
executed in blank.
(b) The Shareholders delivered to United an opinion of counsel for the
Shareholders, dated as of the Closing Date.
(c) The Lessor executed and delivered the Leases.
(d) The Corporations delivered to United evidence satisfactory to
United showing that all written employment contracts and all oral
employment contracts other than those that are terminable "at will" without
payment of severance (other than normal severance benefits approved by
United) or other benefits with non-union employees of the Corporation
(including, without limitation, stock options or other rights to obtain
equity in the Corporation) have been terminated, effective on or before the
Closing Date.
(e) The Shareholders caused each officer and director of the
Corporations to deliver a resignation as an officer and/or director of each
Corporation together with a
21
general release releasing the Corporations from all obligations under any
indemnification agreements, the charter documents of the Corporations, or
otherwise, arising out of or relating to this Agreement or the consummation
of the transactions contemplated thereby, other than obligations arising
after the Closing Date under this Agreement
6. ADDITIONAL COVENANTS OF UNITED, THE CORPORATION AND THE SHAREHOLDERS
--------------------------------------------------------------------
6.1 FURTHER ASSURANCES AND ADDITIONAL CONVEYANCES. Following the Closing,
---------------------------------------------
the Shareholders and United shall each deliver or cause to be delivered at such
times and places as shall be reasonably agreed upon such additional instruments
as United or the Shareholders may reasonably request for the purpose of carrying
out this Agreement. The Shareholders will cooperate with United and/or the
Corporations on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings or
disputes of any nature with respect to matters pertaining to all periods prior
to the Closing Date.
6.2 RELEASE OF GUARANTIES. United shall use reasonable efforts to obtain
---------------------
the termination and release promptly after the Closing Date of the personal
guaranties of the Shareholders listed on Schedule 6.2 or otherwise given by the
Shareholders with respect to obligations of the Corporations, all of which
relate to indebtedness or other financial obligations of the Corporations
included in the Financial Statements as of the Balance Sheet Date. United shall
defend and indemnify the Shareholders and hold them harmless from and against
all losses, expenses or claims by third parties to enforce or collect
indebtedness owed by the Corporations as of the Closing Date which is personally
guaranteed by the Shareholders pursuant to such guaranties. The Shareholders
shall cooperate with United in obtaining such releases.
6.3 CONFIDENTIALITY. Neither of the Corporations nor any of the
---------------
Shareholders shall disclose or make any public announcements of the transactions
contemplated by this Agreement without the prior written consent of United,
unless required to make such disclosure or announcement by law, in which event
the party making the disclosure or announcement shall notify United at least 24
hours before such disclosure or announcement is expected to be made.
6.4 BROKERS AND FINDERS FEES. Each party shall pay and be responsible for
------------------------
any broker's, finder's or financial advisory fee incurred by such party in
connection with the transactions contemplated by this Agreement.
6.5 TAXES. United shall reasonably cooperate, at the expense of the
-----
Shareholders, with the Shareholders with respect to any matters involving the
Shareholders arising out of the Shareholders' ownership of the Corporations
prior to the Closing, including matters relating to tax returns and any tax
audits, appeals, claims or litigation with respect to such tax returns or the
preparation of such tax returns. In connection therewith, United shall make
available to the Shareholders such files, documents, books and records of the
Corporations for inspection and copying as may be reasonably requested by the
Shareholders and shall cooperate with the Shareholders with respect to retaining
information and documents which relate to such matters.
22
6.6 SHORT YEAR TAX RETURNS. After the Closing Date, the Shareholders
----------------------
shall prepare at their sole cost and expense, all short year federal, state,
county, local and foreign tax returns required by law for the period beginning
with the first day of each Corporation's fiscal year in which the Closing occurs
and ending with the Closing Date. Each such return shall be prepared in a
financially responsible and conservative manner and shall be delivered to United
together with all necessary supporting schedules within 90 days following the
Closing Date for its approval (but such approval shall not relieve the
Shareholders of their responsibility for the taxes (including without limitation
any taxes arising as a result of the conversion of the Corporations from a cash
to an accrual basis of reporting) assessed under these returns). The
Shareholders shall be responsible for the payment of all taxes shown to be due
or that may come to be due on such returns and, at the time of the delivery of
the returns, shall contemporaneously deliver to United checks payable to the
respective taxing authorities in amounts equal to that shown as being due on the
returns. United shall sign tax returns and cause such returns to be timely
filed with the appropriate authorities. The Shareholders shall be entitled to
receive all refunds shown on said returns and any such refunds received by the
Corporations or United shall be remitted to the Shareholders.
6.7 CERTAIN TAX MATTERS. The Shareholders acknowledge that United will
-------------------
make an election under Section 338(h)(10) of the Internal Revenue Code of 1986,
as amended (the "Code") no later than December 31, 1997. When such election is
made by United:
(a) United shall be authorized to complete Form 8023-A;
(b) The Shareholders shall sign such completed Form 8023-A on United's
request;
(c) United and the Shareholders shall agree upon the allocation of the
Purchase Price among the assets (including intangible assets) of the
Corporations.
6.8 SHAREHOLDERS' REPRESENTATIVE.
----------------------------
(a) In order to administer efficiently the rights and obligations
of the Shareholders under this Agreement, the Shareholders hereby designate
and appoint ▇▇▇▇▇ as the Shareholders' Representative, to serve as the
Shareholders' agent and attorney-in-fact for the limited purposes set forth
in this Agreement.
(b) Each of the Shareholders hereby appoints the Shareholders'
Representative as such Shareholder's agent, proxy and attorney-in-fact,
with full power of substitution, for all purposes set forth in this
Agreement, including, without limitation, the full power and authority on
such Shareholder's behalf (i) to consummate the transactions contemplated
by this Agreement, (ii) to disburse any funds received hereunder to the
Shareholders, (iii) to execute and deliver on behalf of each Shareholder
any amendment or waiver under this Agreement, and to agree to resolution of
all Adjustments pursuant to Section 1.4 or 10, and of all Claims hereunder,
(iv) to retain legal counsel and other professional services, at the
expense of the Shareholders, in connection with the performance by the
Shareholders' Representative of this Agreement,
23
and (v) to do each and every act and exercise any and all rights which such
Shareholder or Shareholders are permitted or required to do or exercise
under this Agreement and the other agreements, documents and certificates
executed in connection herewith. Each of the Shareholders agrees that such
agency and proxy are coupled with an interest, are therefore irrevocable
without the consent of the Shareholders' Representative and shall survive
the death, bankruptcy or other incapacity of any Shareholder.
(c) Each of the Shareholders hereby agrees that any amendment or
waiver under this Agreement, and any action taken on behalf of the
Shareholders to enforce the rights of the Shareholders under this
Agreement, and any action taken with respect to any Adjustment or Claim
(including any action taken to object to, defend, compromise or agree to
the payment of such Adjustment or Claim), shall be effective if approved in
writing by the Shareholders' Representative and the holders of a majority
of the Corporations' Stock (including any Corporations' Stock held by the
Shareholders' Representative), or, in the case of any amendment or waiver
made or given or action taken after the Closing, if so approved by persons
who were the holders of a majority of the Corporations' Stock immediately
prior to the Closing, and that each and every action so taken shall be
binding and conclusive on every Shareholder, whether or not such
Shareholder had notice of, or approved, such amendment or waiver.
(d) ▇▇▇▇▇ shall serve as the Shareholders' Representative until
he resigns or is otherwise unable or unwilling to serve. In the event that
a Shareholders' Representative resigns from such position or is otherwise
unable or unwilling to serve, the remaining Shareholders shall select, by
the vote of the holders of a majority of the Corporations' Stock
immediately prior to the Closing, a successor representative to fill such
vacancy, shall provide prompt written notice to United of such change and
such substituted representative shall then be deemed to be the
Shareholders' Representative for all purposes of this Agreement.
6.9 GENERAL RELEASE BY SHAREHOLDERS. Each Shareholder hereby fully
-------------------------------
releases and discharges each Corporation and its directors, officers, agents and
employees from all rights, claims and actions, known or unknown, of any kind
whatsoever, which such Shareholder now has or may hereafter have against each
Corporation and its directors, officers, agents and employees, arising out of or
relating to events arising prior to or on the Closing Date, except (a) as may be
described in written contracts disclosed in Schedule 6.9 and expressly described
and specifically excepted from this release in Schedule 6.9, (b) in the case of
Shareholders who are employees of the Corporations, compensation for current
periods expressly described and excepted from such releases, and (c) for the
obligations of each Corporation arising after the Closing Date under this
Agreement. Specifically, but not by way of limitation, each Shareholder waives
any right of indemnification, contribution or other recourse against each
Corporation which it now has or may hereafter have against each Corporation with
respect to representations, warranties or covenants made in this Agreement by
each Corporation.
Each Shareholder hereby waives and relinquishes all rights and
benefits afforded by Section 1542 of the California Civil Code, which states as
follows:
24
"A general release does not extend to claims to which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
Each Shareholder understands and acknowledges the significance and consequence
of this waiver of Section 1542 and nevertheless elects to, and does, release
those claims described in this Section 6.9, known or unknown, that it may have
now or in the future arising out of or relating to any event arising on or prior
to the date of this Agreement.
7. INDEMNIFICATION
---------------
7.1 INDEMNITY BY THE SHAREHOLDERS. The Shareholders, jointly and
-----------------------------
severally, subject to the limitations set forth in Section 7.2, covenant and
agree that they will indemnify and hold harmless United, the Corporations and
their respective directors, officers and agents and their respective successors
and assigns (collectively the "United Indemnitees"), from and after the date of
this Agreement, against any and all losses, damages, assessments, fines,
penalties, adjustments, liabilities, claims, deficiencies, costs, expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation), expenditures, including, without limitation, any
"Environmental Site Losses" (as such term is hereinafter defined) identified by
a United Indemnitee in a Claims Notice (as defined in Section 7.3(a)), or
asserted by a United Indemnitee in litigation commenced against the Shareholders
provided that in either case any such Claims Notice shall be given or the
--------
litigation commenced prior to the expiration of the periods set forth in Section
7.2(c) (irrespective of the date of discovery), with respect to each of the
following contingencies (all, the "Indemnity Events"):
(a) Any misrepresentation, breach of warranty, or nonfulfillment of
any agreement or covenant on the part of the Shareholders or the
Corporations pursuant to the terms of this Agreement or any
misrepresentation in or omission from any Exhibit, Schedule, list,
certificate, or other instrument furnished or to be furnished to United
pursuant to the terms of this Agreement, regardless of whether, in the case
of a breach of a representation or a warranty, United relied on the truth
of such representation or warranty or had any knowledge of any breach
thereof.
(b) "Environmental Site Losses," which shall mean any and all losses,
damages (including exemplary damages and penalties), liabilities, claims,
deficiencies, costs, expenses, and expenditures (including, without
limitation, expenses in connection with site evaluations, risk assessments
and feasibility studies) arising out of or required by an interim or final
judicial or administrative decree, judgment, injunction, mandate, interim
or final permit condition or restriction, cease and desist order, abatement
order, compliance order, consent order, clean-up order, exhumation order,
reclamation order or any other remedial action that is required to be
undertaken under federal, state or local law in respect of operating
activities on or affecting any Facility, any UST or any other environmental
site prior to the Closing Date, including, but not limited to (i) any
actual or alleged violation of any law or regulation respecting the
protection of the environment, or any other law or regulation respecting
the protection of the air, water and land
25
occurring prior to the Closing Date and (ii) any remedies or violations,
whether by a private or public action, alleged or sought to be assessed as
a consequence, directly or indirectly, of any Release of pollutants
(including odors) or Hazardous Materials from any Facility, any UST or any
other environmental site resulting from activities thereat occurring prior
to the Closing Date, whether such Release is into the air, water (including
groundwater) or land and whether such Release arose before, during or after
the Closing Date, provided that with respect to any such activities
occurring at an environmental site that is not a Facility or UST, the
Shareholders had knowledge of such activities on or prior to the Closing
Date. The term "Release" as used herein means any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing into the ambient environment.
(c) the cost of tearing down and removing from any Facility any
structure constructed thereon by the Corporations (i) in violation of
applicable building regulations or codes, (ii) without required building or
other permits or (iii) in violation of applicable zoning regulations and
requirements, and all fines and penalties arising from such violations or
failure to obtain permits, provided that the Shareholders shall have no
liability with respect to construction of replacement structures;
(d) any liability arising from the matters described on Schedule
3.8(b);
(e) Any liability arising from remedial action required with respect
to the UST's described on Schedule 3.26;
(f) All actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation)
incident to any of the foregoing.
7.2 LIMITATIONS ON SHAREHOLDERS' INDEMNITIES.
----------------------------------------
(a) The obligations of the Shareholders to indemnify the United
Indemnities as provided in Section 7.1 shall be equal to the amount by
which the cumulative amount of all such liabilities, claims, damages
deficiencies, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses, expenditures and Environmental Site Losses
with respect to any or all Indemnity Events exceed $250,000 (the "General
Deductible Amount"); provided, that the amount of any obligation of
--------
indemnity arising pursuant to Section 7.1(a) with respect to any
representation, warranty or covenant contained in Sections 3.1 through 3.5;
3.12(c), 3.18 and 6.7 hereof and pursuant to section 7.1(c), 7.1(d) and
7.1(e) and shall not be subject to the General Deductible Amount and the
amount of any indemnity obligation arising pursuant to Section 7.1(a) with
respect to any representation, warranty or covenant contained in Section
3.9 or 3.22 with respect to Claims based on the Inventory Value and the
Equipment included on the Rental Asset Listing shall be subject to the
applicable amounts set forth in Sections 1.4(b) and 1.4(c) in lieu of the
General Deductible Amount.
26
(b) The maximum amount which United can recover as a result of one or
more Indemnity Events pursuant to the provisions hereof for Claims shall
not in the aggregate exceed $7,500,000, provided that the amount of any
obligation of indemnity arising pursuant to Section 7.1(a) with respect to
any representation, warranty or covenant contained in Sections 3.1 through
3.5, 3.12(c), 3.18, 3.24 and 8.1 hereof shall not be subject to such
maximum, and the maximum amount that United can recover from ▇▇▇▇▇ or
▇▇▇▇▇▇▇ shall not exceed the portion of the Purchase Price received by
them.
(c) The obligations of the Shareholders under Section 7.1 shall
expire, unless a Claims Notice is given or litigation is commenced, on or
prior to the following applicable dates: (i) with respect to Claims
arising under Sections 3.1 through 3.5, 3.12(c), 3.18 and 3.24, and
pursuant to Section 7.1(b), the applicable statute of limitations; (ii)
with respect to all other Claims, the second anniversary of the Closing
Date.
7.3 NOTICE OF INDEMNITY CLAIM.
-------------------------
(a) In the event that any claim ("Claim") is hereafter asserted
against or arises with respect to any United Indemnitee as to which such
Indemnitee may be entitled to indemnification hereunder, the United
Indemnitee shall notify the Shareholders (collectively, the "Indemnifying
Party") in writing thereof (the "Claims Notice") within 60 days after (i)
receipt of written notice of commencement of any third party litigation
against such United Indemnitee, (ii) receipt by such United Indemnitee of
written notice of any third party claim pursuant to an invoice, notice of
claim or assessment, against such United Indemnitee, or (iii) such United
Indemnitee becomes aware of the existence of any other event in respect of
which indemnification may be sought from the Indemnifying Party (including,
without limitation, any inaccuracy of any representation or warranty or
breach of any covenant). The Claims Notice shall describe the Claim and
the specific facts and circumstances in reasonable detail, and shall
indicate the amount, if known, or an estimate, if possible, of the losses
that have been or may be incurred or suffered by the United Indemnitee.
(b) The Indemnifying Party may elect to defend any Claim for money
damages where the cumulative total of all Claims (including such Claims) do
not exceed the limit set forth in Section 7.2 at the time the Claim is
made, by the Indemnifying Party's own counsel; provided, however, the
Indemnifying Party may assume and undertake the defense of such a third
party Claim only upon written agreement by the Indemnifying Party that the
Indemnifying Party is obligated to fully indemnify the United Indemnitee
with respect to such action. The United Indemnitee may participate, at the
United Indemnitee's own expense, in the defense of any Claim assumed by the
Indemnifying Party. Without the written approval of the United Indemnitee,
which approval shall not be unreasonably withheld, the Indemnifying Party
shall not agree to any compromise of a Claim defended by the Indemnifying
Party.
(c) If, within 30 days of the Indemnifying Party's receipt of a Claims
Notice, the Indemnifying Party shall not have provided the written
agreement required by Section
27
7.3(b) and elected to defend the Claims, the United Indemnitee shall have
the right to assume control of the defense and/or compromise of such Claim,
and the costs and expenses of such defense, including reasonable attorneys'
fees, shall be added to the Claim. The Indemnifying Party shall promptly,
and in any event within 30 days reimburse the United Indemnitee for the
costs of defending the Claim, including attorneys' fees and expenses.
(d) The party assuming the defense of any Claim shall keep the other
party reasonably informed at all times of the progress and development of
its or their defense of and compromise efforts with respect to such Claim
and shall furnish the other party with copies of all relevant pleadings,
correspondence and other papers. In addition, the parties to this
Agreement shall cooperate with each other and make available to each other
and their representatives all available relevant records or other materials
required by them for their use in defending, compromising or contesting any
Claim. The failure to timely deliver a Claims Notice or otherwise notify
the Indemnifying Party of the commencement of such actions in accordance
with this Section 7.3 shall not relieve the Indemnifying Party from the
obligation to indemnify hereunder but only to the extent that the
Indemnifying Party establishes by competent evidence that it has been
prejudiced thereby.
(e) In the event both the United Indemnitee and the Indemnifying Party
are named as defendants in an action or proceeding initiated by a third
party, they shall both be represented by the same counsel (on whom they
shall agree), unless such counsel, the United Indemnitee, or the
Indemnifying Party shall determine that such counsel has a conflict of
interest in representing both the United Indemnitee and the Indemnifying
Party in the same action or proceeding and the United Indemnitee and the
Indemnifying Party do not waive such conflict to the satisfaction of such
counsel.
7.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
------------------------------------------------------
representations and warranties of the parties contained in this Agreement and in
any certificate, Exhibit or Schedule delivered pursuant hereto, or in any other
writing delivered pursuant to the provisions of this Agreement (the
"Representations and Warranties") and the liability of the party making such
Representations and Warranties for breaches thereof shall survive the
consummation of the transactions contemplated hereby. The parties hereto in
executing and delivering and in carrying out the provisions of this Agreement
are relying solely on the representations, warranties, Schedules, Exhibits,
agreements and covenants contained in this Agreement, or in any writing or
document delivered pursuant to the provisions of this Agreement, and not upon
any representation, warranty, agreement, promise or information, written or
oral, made by any persons other than as specifically set forth herein or
therein.
7.5 NO EXHAUSTION OF REMEDIES OR SUBROGATION; RIGHT OF SET OFF. The
----------------------------------------------------------
Shareholders waive any right to require any United Indemnitee to (i) proceed
against the Corporations; (ii) proceed against any other person; or (iii) pursue
any other remedy whatsoever in the power of any United Indemnitee. United may,
but shall not be obligated to, set off against any and all payments due
Shareholders pursuant to the Hold Back, any amount to which any United
Indemnitee is entitled to be indemnified hereunder with respect to any Indemnity
28
Event. Such right of set off shall be separate and apart from any and all other
rights and remedies that the Indemnities may have against Shareholders or their
successors.
8. OTHER POST-CLOSING COVENANTS OF THE SHAREHOLDERS AND UNITED
-----------------------------------------------------------
8.1 RESTRICTIVE COVENANTS. The Shareholders and their Affiliates
---------------------
acknowledge that (i) United, as the purchaser of the Corporations' Stock, is and
will be engaged in the same business as the Corporations (the "Business"); (ii)
the Shareholders and their Affiliates are intimately familiar with the Business;
(iii) the Business is currently conducted in the State of California and United
intends to continue the Business in California and intends, by acquisition or
otherwise, to expand the Business into other geographic areas of California
where it is not presently conducted; (iv) the Shareholders and their Affiliates
have had access to trade secrets of, and confidential information concerning,
the Business; (v) the agreements and covenants contained in this Section 8.1 are
essential to protect the Business and the goodwill being acquired; and (vi) the
Shareholders and their Affiliates have the means to support themselves and their
dependents other than by engaging in a business substantially similar to the
Business and the provisions of this Section 8 will not impair such ability. The
Shareholders covenant and agree as set forth in (a), (b) and (c) below with
respect to each Corporation:
(a) NON-COMPETE. For a period commencing on the Closing Date and
-----------
terminating five years thereafter (the "Restricted Period"), neither the
Shareholders nor any of their Affiliates shall, anywhere in the counties of
Monterey, Santa ▇▇▇▇, San ▇▇▇▇▇▇, Santa ▇▇▇▇▇, Alameda, San Mateo and San
Francisco, California where United or one of its subsidiaries owns or
operates a business similar to the Business (the "Restricted Counties"),
directly or indirectly, acting individually or as the owner, shareholder,
partner, or employee of any entity, (i) engage in the operation of any
equipment rental, sales or leasing business; (ii) enter the employ of, or
render any personal services to or for the benefit of, or assist in or
facilitate the solicitation of customers for, or receive remuneration in
the form of salary, commissions or otherwise from, any business engaged in
such activities; or (iii) receive or purchase a financial interest in, make
a loan to, or make a gift in support of, any such business in any capacity,
including, without limitation, as a sole proprietor, partner, shareholder,
officer, director, principal, agent, trustee or lender; provided, however,
that any of the Shareholders may own, directly or indirectly, solely as an
investment, securities of any business traded on any national securities
exchange or NASDAQ, provided none of the Shareholders is a controlling
person of, or a member of a group which controls, such business and further
provided that the Shareholders do not, in the aggregate, directly or
indirectly, own 2% or more of any class of securities of such business.
(b) CONFIDENTIAL INFORMATION. During the Restricted Period and
------------------------
thereafter, the Shareholders and their Affiliates shall keep secret and
retain in strictest confidence, and shall not use for the benefit of
themselves or others, all data and information relating to the Business
("Confidential Information"), including without limitation, know-how, trade
secrets, customer lists, supplier lists, details of contracts, pricing
policies, operational methods, marketing plans or strategies, bidding
information, practices,
29
policies or procedures, product development techniques or plans, and
technical processes; provided, however, that the term "Confidential
Information" shall not include information that (i) is or becomes generally
available to the public other than as a result of disclosure by the
Shareholders, or (ii) is general knowledge in the equipment rental, sales
and leasing business and not specifically related to the Business.
(c) PROPERTY OF THE BUSINESS. All memoranda, notes, lists, records
------------------------
and other documents or papers (and all copies thereof) relating to the
Business, including such items stored in computer memories, on microfiche
or by any other means, made or compiled by or on behalf of the Shareholders
or the Corporations or made available to them relating to the Business, but
excluding any materials (other than the minute books of the Corporations)
maintained by any attorneys for the Corporations or the Shareholders prior
to the Closing, are and shall be the property of United and have been
delivered or will be delivered or made available to United at the Closing.
(d) NON-SOLICITATION. Without the consent of United, which may be
----------------
granted or withheld by United in its discretion, the Shareholders and their
Affiliates shall not solicit any employees of the Corporations to leave the
employ of the Corporations and join the Shareholders or any Affiliate in
any business endeavor owned or pursued by the Shareholders.
(e) NO DISPARAGEMENT. From and after the Closing Date, none of the
----------------
Shareholders shall, in any way to any customer or employee of the
Corporations or United, denigrate or derogate United or any of its
subsidiaries, or any officer, director or employee, or any product or
service or procedure of any such company whether or not such denigrating or
derogatory statements shall be true and are based on acts or omissions
which are learned by the Shareholders from and after the date hereof or on
acts or omissions which occur from and after the date hereof, or otherwise.
A statement shall be deemed denigrating or derogatory to any person if it
adversely affects the regard or esteem in which such person or entity is
held by such person. Without limiting the generality of the foregoing,
none of the Shareholders shall, directly or indirectly in any way in
respect of any such company or any such directors or officers, communicate
with, or take any action which is adverse to the position of any such
company with any customer or employee of the Corporations or United. This
paragraph does not apply to the extent that testimony is required by legal
process, provided that United has received not less than five days' prior
written notice of such proposed testimony.
8.2 RIGHTS AND REMEDIES UPON BREACH. If the Shareholders or any Affiliate
-------------------------------
breaches, or threatens to commit a breach of, any of the provisions of Section
8.1 herein (the "Restrictive Covenants"), United shall have the following rights
and remedies, each of which rights and remedies shall be independent of the
others and severally enforceable, and each of which is in addition to, and not
in lieu of, any other rights and remedies available to United at law or in
equity:
(a) SPECIFIC PERFORMANCE. The right and remedy to have the
--------------------
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed
30
that any breach or threatened breach of the Restrictive Covenants would
cause irreparable injury to United and that money damages would not provide
an adequate remedy to United. Accordingly, in addition to any other rights
or remedies, United shall be entitled to injunctive relief to enforce the
terms of the Restrictive Covenants and to restrain the Shareholders from
any violation thereof.
(b) ACCOUNTING. The right and remedy to require the Shareholders to
----------
account for and pay over to United all compensation, profits, monies,
accruals, increments or other benefits derived or received by the
Shareholders as the result of any transactions constituting a breach of the
Restrictive Covenants.
(c) SEVERABILITY OF COVENANTS. The Shareholders acknowledge and agree
-------------------------
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any
of the Restrictive Covenants, or any part thereof, is invalid or
unenforceable, the remainder of the Restrictive Covenants shall not thereby
be affected and shall be given full effect, without regard to the invalid
portions.
(d) BLUE-PENCILING. If any court determines that any of the
--------------
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographic scope of such provision, such court shall reduce the
duration or scope of such provision, as the case may be, to the extent
necessary to render it enforceable and, in its reduced form, such provision
shall then be enforced.
(e) ENFORCEABILITY IN JURISDICTION. United and the Shareholders
------------------------------
intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of Santa ▇▇▇▇▇ County, California, and of the
County in California (other than San Francisco County) where United's
regional office is located at the time such action is brought, or, if
United has no such regional office at such time, of any other county in
California (other than San Francisco County) where United or one of its
subsidiaries transacts business.
9. GENERAL
-------
9.1 ASSIGNMENT. This Agreement shall be binding upon and shall inure to
----------
the benefit of the parties hereto, the successors or assigns of United and the
heirs, legal representatives or assigns of the Shareholders; provided, however,
that any such assignment shall be subject to the terms of this Agreement and
shall not relieve the assignor of its or his responsibilities under this
Agreement.
9.2 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
9.3 NOTICES. All notices, requests, demands and other communications
-------
hereunder shall be deemed to have been duly given if in writing and either
delivered personally, sent by
31
facsimile transmission or by air courier service, or mailed by postage prepaid
registered or certified U.S. mail, return receipt requested, to the addresses
designated below or such other addresses as may be designated in writing by
notice given hereunder, and shall be effective upon personal delivery or
facsimile transmission thereof or upon delivery by registered or certified U.S.
mail or one business day following deposit with an air courier service:
If to the Shareholders: at their respective addresses set
forth on Schedule 3.2
With a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Groom & Cave LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇. ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to United: United Rentals, Inc.
Four ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Shartsis, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9.4 ATTORNEYS' FEES. In the event of any dispute or controversy between
---------------
United on the one hand and the Corporations or the Shareholders on the other
hand relating to the interpretation of this Agreement or to the transactions
contemplated hereby, the prevailing party shall be entitled to recover from the
other party reasonable attorneys' fees and expenses incurred by the prevailing
party. Such award shall include post-judgment attorney's fees and costs.
9.5 APPLICABLE LAW. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of California without regard to its
conflict of laws provisions.
9.6 PAYMENT OF FEES AND EXPENSES. Whether or not the transactions herein
----------------------------
contemplated shall be consummated, each party hereto will pay its own fees,
expenses and
32
disbursements incurred in connection herewith and all other costs and expenses
incurred in the performance and compliance with all conditions to be performed
hereunder (including, in the case of the Shareholders, any such fees, expenses
and disbursements paid or accrued by, or charged to, the Corporations).
9.7 INCORPORATION BY REFERENCE. All Schedules and Exhibits attached
--------------------------
hereto are incorporated herein by reference as though fully set forth at each
point referred to in this Agreement.
9.8 CAPTIONS. The captions in this Agreement are for convenience only and
--------
shall not be considered a part hereof or affect the construction or
interpretation of any provisions of this Agreement.
9.9 NUMBER AND GENDER OF WORDS; CORPORATION. Whenever the singular number
---------------------------------------
is used herein, the same shall include the plural where appropriate, and shall
apply to all of such number, and to each of them, jointly and severally, and
words of any gender shall include each other gender where appropriate.
9.10 ENTIRE AGREEMENT. This Agreement (including the Schedules and
----------------
Exhibits hereto) and the other documents delivered pursuant hereto constitute
the entire Agreement and understanding between the Corporations, the
Shareholders and United and supersedes any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement may be
modified or amended only by a written instrument executed by the Corporations,
the Shareholders and United acting through its officers, thereunto duly
authorized by its Board of Directors.
9.11 WAIVER. No waiver by any party hereto at any time of any breach of,
------
or compliance with, any condition or provision of this Agreement to be performed
by any other party hereto may be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or at any prior or subsequent time.
9.12 CONSTRUCTION. The language in all parts of this Agreement must be in
------------
all cases construed simply according to its fair meaning and not strictly for or
against any party. Unless expressly set forth otherwise, all references herein
to a "day" are deemed to be a reference to a calendar day. All references to
"business day" mean any day of the year other than a Saturday, Sunday or a
public or bank holiday in Connecticut or California. Unless expressly stated
otherwise, cross-references herein refer to provisions within this Agreement and
are not references to the overall transaction or to any other document. In the
event of any conflict between the terms and provisions of the Leases and the
terms and provisions of this Agreement, this Agreement shall control.
10. ARBITRATION AND DISPUTE RESOLUTION. THE PARTIES WAIVE THEIR RIGHT TO
----------------------------------
SEEK REMEDIES IN COURT, INCLUDING ANY RIGHT TO A JURY TRIAL, WITH RESPECT TO ANY
DISPUTE CONCERNING DETERMINATION OF THE ADJUSTMENTS TO THE PURCHASE PRICE UNDER
SECTIONS 1.3 AND 1.4 ONLY. The parties agree that in the event United and the
Shareholders are unable to resolve a dispute concerning determination of the
Adjustments to the Purchase Price,
33
such dispute shall be resolved exclusively by arbitration to be conducted only
in Santa Clara, California in accordance with the rules of the Judicial
Arbitration and Mediation Service ("JAMS") applying the laws of California. The
parties agree that such arbitration shall be conducted by a retired judge who is
experienced in dispute resolution regarding business acquisitions and accounting
matters, that discovery shall not be permitted except as required by the rules
of JAMS, that the arbitration award shall not include factual findings or
conclusions of law, and that no punitive damages shall be awarded. The parties
understand that any party's right to appeal or to seek modification of any
ruling or award of the arbitrator is severely limited. Any award rendered by
the arbitrator shall be final and binding, and judgment may be entered on it in
any court of competent jurisdiction as otherwise provided by law. The preceding
portion of this Section does not apply to any dispute relating to any other
provision of the Agreement, or to any other aspect of the transactions
contemplated herein, and such other disputes may be resolved by the parties by
any means available, including without limitation court action and a jury trial.
The parties expressly do not waive any right to pursue any remedy available with
respect to any dispute other than one concerning determination of the
Adjustments to the Purchase Price under Sections 1.3 and 1.4, and expressly do
not waive the right to trial with respect any other dispute.
34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
persons thereunto duly authorized as of the date first above written.
CORAN: Coran Enterprises, Inc.
By: __________________________________
President
MONTEREY: Monterey Bay Equipment Rentals, Inc.
By: __________________________________
President
THE SHAREHOLDERS: ▇▇▇▇▇ ▇. ▇▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
TRUSTEES UNDER THE ▇▇▇▇▇ ▇. ▇▇▇▇▇ AND
▇▇▇▇▇ ▇. SHADE TRUST AGREEMENT DATED
SEPTEMBER 14, 1982
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee
--------------------------------------
▇▇▇▇▇ ▇. Shade, Trustee
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇. Shade
--------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
35
UNITED: UNITED RENTALS, INC.
By: __________________________________
▇▇▇▇ ▇▇▇▇▇, Vice Chairman and
Chief Acquisition Officer
36