Exhibit 10.13
STOCK PURCHASE AGREEMENT
by and among
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
And
The Lanoha Charitable Remainder Trust
And
National Christian Charitable Foundation
And
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family Trust
as "Sellers"
RSC Acquisition Corp.
as "Buyer"
Rental Service Corporation
as "Parent"
and
Rent-It- Center, Inc. d/b/a Center Rental and Sales, Inc.
as the "Company"
October 6, 1997
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS................................................................. 1
4
1.1. Defined Terms.
1.2. Other Defined Terms...................................................... 4
ARTICLE II. SALE AND TRANSFER OF SHARES
2.1. Transfer of Shares....................................................... 4
2.2. Purchase Price........................................................... 4
2.3. Employment and Non-competition Agreements................................ 4
2.4. Holdback................................................................. 4
2.5. Transfer Taxes and Fees.................................................. 4
2.6. Closing of Books; Benefits and Risks of Ownership........................ 4
ARTICLE III. CLOSING................................................................... 4
3.1. Closing.................................................................. 4
3.2. Conveyances at Closing................................................... 4
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ AND THE COMPANY.......... 4
4.1. Organization of the Company.............................................. 4
4.2. Authorization............................................................ 4
4.3. No Violation............................................................. 4
4.4. Capitalization........................................................... 4
4.5. Related Entities......................................................... 4
4.6. Equipment and Other Assets; Absence of Encumbrances...................... 4
4.7. Facilities............................................................... 4
4.8. Contracts and Commitments................................................ 4
4.9. Permits.................................................................. 4
4.10. Financial Statements.................................................... 4
4.11. Books and Records....................................................... 4
4.12. Litigation.............................................................. 4
4.13. Labor Matters........................................................... 4
4.14. Compliance with Law..................................................... 4
4.15. No Brokers.............................................................. 4
4.16. No Other Agreements to Sell the Company................................. 4
4.17. Proprietary Rights...................................................... 4
4.18. Tax Matters............................................................. 4
4.19. Accounts Receivable..................................................... 4
Page
4.20. Inventory............................................................... 4
4.21. Employees and Employee Benefits......................................... 4
4.22. Compliance With Environmental Laws...................................... 4
4.23. Liabilities............................................................. 4
4.24. Insurance............................................................... 4
4.25. Conduct of the Business................................................. 4
4.26. Knowledge............................................................... 4
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.......................... 4
5.1. Organization of Buyer and Parent......................................... 4
5.2. Authorization............................................................ 4
5.3. No Conflict or Violation................................................. 4
5.4. Consents and Approvals................................................... 4
ARTICLE VI. COVENANTS OF BUYER, THE COMPANY AND SELLER................................. 4
6.1. Further Assurances....................................................... 4
6.2. No Solicitation.......................................................... 4
6.3. Notification of Certain Matters.......................................... 4
6.4. Access to Information.................................................... 4
6.5. Conduct of Business...................................................... 4
6.6. Guarantee................................................................ 4
6.7. Environmental Assessments and Remediation................................ 4
6.8. Registration Rights...................................................... 4
6.9. Cooperation Regarding Dealerships........................................ 4
6.10. 1997 Tax Returns........................................................ 4
ARTICLE VII. CONDITIONS TO SELLERS' OBLIGATIONS........................................ 4
7.1. Representations, Warranties and Covenants................................ 4
7.2. No Proceedings, Litigation or Laws....................................... 4
7.3. Certificates.............................................................32
7.4. Other Conditions.........................................................32
7.5. Consents.................................................................32
ARTICLE VIII. CONDITIONS TO BUYER'S OBLIGATIONS........................................32
8.1. Representations, Warranties and Covenants................................32
8.2. Consents.................................................................33
8.3. No Proceedings or Litigation.............................................33
8.4. Opinion of Counsel.......................................................33
8.5. Certificates.............................................................35
ii
Page
8.6. Employment and Non-Competition Agreements............................... 35
8.7. Release of Encumbrances................................................. 35
8.8. Board Approval.......................................................... 35
8.9. Corporate Documents..................................................... 35
8.10. Schedules and Due Diligence Review..................................... 35
8.11. No Material Adverse Change............................................. 35
8.12. Other Transactions..................................................... 35
ARTICLE IX. CONSENTS TO ASSIGNMENT.................................................... 35
9.1. Consents to Assignment.................................................. 35
ARTICLE X. ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING............................. 36
10.1. Books and Records; Tax Examinations.................................... 36
10.2. Survival of Representations, Etc....................................... 36
10.3. Indemnifications....................................................... 37
10.4. Further Action......................................................... 40
ARTICLE XI. MISCELLANEOUS............................................................. 40
11.1. Termination............................................................ 40
11.2. Assignment............................................................. 41
11.3. Notices................................................................ 41
11.4. Choice of Law.......................................................... 42
11.5. Entire Agreement; Amendments and Waivers............................... 42
11.6. Multiple Counterparts.................................................. 42
11.7. Expenses............................................................... 42
11.8. Invalidity............................................................. 42
11.9. Titles................................................................. 43
11.10. Publicity; Confidentiality............................................ 43
11.11. Remedies.............................................................. 43
11.12. Arbitration........................................................... 43
11.13. Seller Representative................................................. 43
ARTICLE XII. SPECIAL PROVISIONS....................................................... 44
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ASSET PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of October 6, 1997 (the
"Agreement"), is by and among RSC Acquisition Corp., a Delaware corporation,
"Buyer"), Rental Service Corporation, a Delaware corporation ("Parent"), the
Lanoha Charitable Remainder Trust, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family Trust, National
Christian Charitable Foundation and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (each a "Seller" and
collectively, the "Sellers") and Rent-It-Center, Inc., a Colorado corporation
(herein "Center Rental" or the "Company").
RECITALS
--------
A. The Company is engaged in the business of equipment rentals and
sales, operating under the "Center Rental" name .
▇. ▇▇▇▇▇▇▇ own, of record and beneficially, all of the issued and
outstanding shares of capital stock of the Company (the "Shares").
C. Buyer desires to purchase from Sellers, and Sellers desire to sell
to Buyer, all of the Shares upon the terms and subject to the conditions of this
Agreement, whereupon Buyer will own all of the equity interests in the Company
(the "Purchase").
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
-----------
1.1 Defined Terms. As used herein, the terms below shall have the following
-------------
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.
"Affiliate" shall have the meaning set forth in the Exchange Act.
---------
"Agreement" shall have the meaning specified in the first paragraph of
---------
this Agreement.
"Ancillary Agreements" shall mean the Employment and Non-Competition
--------------------
Agreements to be entered into with ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇
Bonnettete, substantially in the forms attached hereto as exhibits and such
other agreements mutually agreed to be necessary or desirable to consummate the
transactions contemplated hereby.
"Assets" shall mean the assets of the Company as reflected on the
------
Balance Sheet dated August 31, 1997, and those assets acquired (less those
assets disposed of) in the ordinary course of Business since the Balance Sheet
Date.
"Balance Sheet" shall mean the balance sheet of the Company as of the
-------------
Balance Sheet Date.
"Balance Sheet Date" shall mean August 31, 1997.
------------------
"Books and Records" shall mean (a) all records and lists pertaining to
-----------------
the Business, customers, suppliers or personnel of the Company, (b) all product,
business and marketing plans of the Company and (c) all books, ledgers,
subledgers, trial balances, files, reports, plans, drawings and operating
records of every kind maintained by the Company.
"Business" shall mean the Company's equipment rental and sales
--------
business.
"Buyer" shall have the meaning specified in the first paragraph of
-----
this Agreement.
"Closing Date" shall mean November 28, 1997, or such later date before
------------
January 31, 1998 on which the parties otherwise agree.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
the rules and regulations thereunder.
"Commission" shall mean the Securities and Exchange Commission.
----------
"Company" shall have the meaning specified in the first paragraph of
-------
this Agreement.
"Contract" shall mean any agreement, contract, note, factoring
--------
agreement, loan, evidence of indebtedness, purchase order, letter of credit,
franchise agreement, lease, undertaking, covenant not to compete, employment
agreement, license, instrument, obligation or commitment to which the Company is
a party or is bound and which relates to the Business or Assets, whether oral or
written.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
-----------
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Effective Control Balance Sheet" shall mean the balance sheet of the
-------------------------------
Company at October 31, 1997.
2
"Equipment" shall mean all of the rental and non-rental furniture,
---------
fixtures, furnishings, machinery, automobiles, trucks, spare parts, tools,
supplies, shop equipment, equipment and other tangible personal property owned
by the Company.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended.
"Escrow Agent" shall mean the Chase/Mellon Trust Company or another
------------
entity designated by Buyer and the Seller Representative to act as escrow agent
under the Escrow Agreement.
"Escrow Agreement" shall mean that certain Escrow Agreement dated as
----------------
of the Closing Date by and among Buyer, Seller Representative and the Escrow
Agent, substantially in the form attached hereto as an Exhibit.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
"Excluded Stockholders" means National Christian Charitable Foundation
---------------------
("NCCF"), the Lanoha Charitable Remainder Trust and the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust.
"Facilities" shall mean the rental yards, stores, offices, maintenance
----------
and storage facilities, shops, warehouses, improvements and other structures,
together with all related fixtures and improvements, located at or on the Owned
Real Property or the Leased Real Property.
"Financial Statements" shall mean the Balance Sheet and the related
--------------------
statement of operations of the Company for the 10 month period ended on the
Balance Sheet Date.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
-------
of 1976, as amended.
"Inventory" shall mean all of the Company's inventory held for resale
---------
and all of the Company's new repair or replacement parts, supplies and packaging
items and similar items with respect to the Business, in each case wherever the
same may be located.
"Leased Real Property" shall mean all real property leased by the
--------------------
Company, including without limitation, all rights, easements and privileges
appertaining or relating thereto, all buildings, fixtures, and improvements
located thereon and all Facilities thereon, if any.
"Material Adverse Effect" or "Material Adverse Change" shall mean with
------------------------ -----------------------
respect to the Business or the Assets any significant and substantial adverse
effect or change in the condition (financial or other), business, results of
operations, prospects, assets, liabilities or operations of the Business or the
Assets or on the ability of the Sellers or the Company to consummate the
transactions contemplated hereby, or any event or condition which would, with
the passage of time, constitute a "Material Adverse Effect" or "Material Adverse
----------------------- ----------------
Change."
------
3
"Material", when used as an adjective, refers to something the
existence or absence of which, as the context requires, would have a Material
Adverse Effect.
"Owned Real Property" shall mean all real property owned in fee by the
-------------------
Company which is used in the conduct of the Business.
"Parent" shall mean Rental Service Corporation, a Delaware
------
corporation.
"Permits" shall mean all licenses, permits, franchises, approvals,
-------
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary or desirable for the past, present or anticipated conduct of, or
relating to the operation of, the Business.
"Related Entity" shall mean any corporation, partnership, trust or
--------------
other organization in which the Company or any of the Sellers (excluding NCCF)
has a material interest and shall include, without limitation, Lanoha Leasing
Limited Liability Company, Center Rental & Sales/Omaha, LLC, Zuni Rental
Enterprises L.L.C (such limited liability entities being called the "LLC's").
"Related Purchase Agreements" shall mean the asset purchase agreements
---------------------------
pursuant to which the Related Purchase Transaction is consummated.
"Related Purchase Transaction" shall mean the purchases by the Buyer
----------------------------
of substantially all of the assets of the LLC's.
"Rental and Non-Rental Asset Listing" shall mean the assets reflected
-----------------------------------
on the Balance Sheet and rental items that exist in the equipment inventory as
of August 31, 1997.
"Rental Ready" shall mean that all required maintenance has been
------------
performed and that the equipment does not require any repairs in excess of
$100,000 in the aggregate for the Company and all Related Entities.
"Representative" shall mean any officer, director, principal,
--------------
attorney, agent, employee or other representative.
"Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
and the rules and regulations promulgated thereunder.
"Sellers" shall have the meaning specified in the first paragraph of
-------
this Agreement.
"Shares" shall mean all of the issued and outstanding shares of
------
capital stock of the Company.
"Seller Representative" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇, whom Sellers have
---------------------
irrevocably made, constituted and appointed their agent pursuant to Section
11.13 hereof.
4
"Tax" shall mean any federal, state, local, foreign or other tax,
---
levy, impost, fee, assessment or other government charge, including without
limitation income, estimated income, business, occupation, franchise, property,
payroll, personal property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium, including without
limitation interest, penalties and additions in connection therewith.
"Year-End Balance Sheets" shall mean the balance sheet of the Company
-----------------------
at each of October 31, 1994, 1995, and 1996.
"Year-End Financial Statements" shall mean the Year End Balance Sheet
-----------------------------
dated as of October 31, 1994, 1995, and 1996, and the related statements of
operations of the Company for the fiscal years then ended.
1.2 Other Defined Terms.
--------------------
The following terms shall have the meanings defined for such terms in
the Sections set forth below:
Term Section
---- --------
Actions 4.12
Benefit Arrangement 4.21.1
Cash Purchase Price 2.2.1
Claim 10.3.4
Claim Notice 10.3.4
Closing 3.1
Consultant 6.7.1
Damages 10.3.1
Employee Plans 4.21.1
Environmental Laws 4.22.2
Environmental Assessments 6.7.1
ERISA Affiliate 4.21.1
GAAP 4.10
Hazardous Substance 4.22.1.3
Holdback Amount 2.4.1
Multiemployer Plan 4.21.1
PBGC 4.21.1
Pension Plan 4.21.1
Parent Common Stock 2.2.1
Proposed Acquisition Transaction 6.2
Proprietary Rights 4.17.1
Purchase Price 2.2.1
Release 4.22.1.2
Remediation Standard 6.7.2
Required Remediation 6.7.2
Seller Representative 11.13.1
5
Welfare Plan 4.21.1
ARTICLE II.
SALE AND TRANSFER OF SHARES
---------------------------
2.1. Transfer of Shares.
------------------
Upon the terms and subject to the conditions contained herein, at the
Closing, Sellers will sell, convey, transfer, assign and deliver to Buyer, and
Buyer will acquire from Sellers, the Shares, for the consideration specified in
Section 2.2.1 less the Holdback Amount specified in Section 2.2.3.
2.2. Purchase Price.
---------------
2.2.1 At the Closing, upon the terms and subject to the conditions set
forth herein, Buyer shall pay to Sellers in consideration for the Shares, the
aggregate amount of (i) Forty-Eight Million Eight Hundred and Thirty-Six
Thousand Dollars ($48,836,000), subject to adjustment as set forth in Section
2.2.4 below (the "Cash Purchase Price") payable by wire transfer of immediately
available funds to accounts designated by Sellers in the amounts as set forth on
Schedule 2.2.1 and (ii) Three Hundred Ten Thousand One Hundred and Ninety-Eight
(310,198) shares of Common Stock, par value $.01 per share, of Parent (the
"Parent Common Stock"). The cash and shares referred to in clauses (i) and (ii)
are collectively called the "Purchase Price". Any shares of Parent Common Stock
paid to Sellers will be contributed by Parent to Buyer in a transaction intended
to qualify under Section 351 of the Code immediately prior to the delivery of
such Parent Common Stock to Sellers. The Cash Purchase Price, Parent Common
Stock and the Holdback Amount (as specified below), and any remittance to
Sellers of the Holdback Amount shall be allocated among the Sellers in
accordance with Schedule 2.2.1.
2.2.2. If between the date of this Agreement and the Closing Date, the
outstanding shares of Parent Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, stock dividend, stock combination,
exchange of shares or readjustment, the number of shares of Parent Common Stock
issued to Sellers pursuant to Section 2.2.1 shall be proportionately adjusted.
2.2.3 No fractional shares of Parent Common Stock shall be issued, but
in lieu thereof, each Seller who would otherwise be entitled to receive a
fraction of a share of Parent Common Stock shall receive from Buyer an amount of
cash equal to the product of the fraction of a share of Parent Common Stock to
which such holder would otherwise be entitled, multiplied by $23.24.
2.2.4. On October 25, 1997 (or such other date as the parties agree), the
Company will conduct, and Buyer shall observe, a physical inventory of the
Company's merchandise inventory, supplies inventory and rental inventory.
Sellers may participate in or have their representatives participate in or
observe such inventory. To the extent that the net book value of any Missing
Inventory is greater than $150,000, the Cash Purchase Price will be reduced
dollar for dollar by
6
the amount of such shortfall applicable to Inventory owned by the Company.
"Missing Inventory" means Inventory shown on the combined perpetual inventory
listing of the Company and the Related Entities at October 25, 1997 (or such
other date on which the applicable inventory is taken), which is missing or not
accounted for in the physical inventory. In addition, the Cash Purchase Price
will be reduced dollar for dollar to the extent shareholders' equity of the
Company at October 31, 1997, is less than $22,659,757 (excluding non-cash year-
end tax accruals).
2.3. Employment and Non-competition Agreements. Company shall enter into
------------------------------------------
Employment and Non-competition Agreements, in substantially the form attached
hereto as Exhibits with each of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇.
2.4. Holdback.
---------
2.4.1. The "Holdback Amount" shall be (subject to increase pursuant to
Section 6.7.3) Ten Million Dollars ($10,000,000) (which shall also serve as the
Holdback Amount in the Related Purchase Transaction) in cash which, at Closing,
shall be placed in escrow pursuant to the Escrow Agreement pending the Sellers'
indemnification obligations, if any, as set forth in Section 10.3, and any
remediation required under Section 6.7 hereof which is not resolved by the
Closing Date. The Escrow Agent will remit to Sellers the entire Holdback Amount,
net of any amount which Buyer is entitled under the provisions of Sections 6.7
and 10.3 hereof, when such amounts have been determined, all in accordance with
the provisions of the Escrow Agreement. In the event of any disagreement between
Buyer and Sellers regarding the dollar amount of any such indemnification or
remediation obligation, Buyer and Sellers shall submit such dispute to a third-
party arbitrator for binding arbitration pursuant to Section 11.12 of this
Agreement. Sellers will pay all costs of the escrow.
2.5 Transfer Taxes and Fees.
------------------------
Sellers shall be responsible for any documentary and transfer taxes and any
sales, use or other taxes imposed by reason of the transfer of Shares provided
hereunder and any deficiency, interest or penalty asserted with respect thereto.
Sellers shall pay the fees and costs of recording or filing all UCC termination
statements and other releases of Encumbrances.
2.6 Closing of Books; Benefits and Risks of Ownership. The transactions
--------------------------------------------------
contemplated by this Agreement shall be deemed effective as of November 1, 1997,
and all profits and losses of the Company from and after November 1, 1997, shall
be solely for the account of, and inure solely to the benefit or detriment of,
Buyer, except as otherwise set forth in this Agreement. The accounting books and
records of the Company will be closed as of the close of business on October 31,
1997. Sellers shall operate the Company subject to and pursuant to the
requirements of this Agreement by, from and after November 1, 1997, until such
time as this Agreement is terminated or closed. Without the consent of Buyer,
until the Closing Date, the Company or Sellers shall not repurchase, sell or
transfer any Shares, make or declare any dividends or make other distributions
to shareholders (other than a $6 per share dividend paid prior to October 31,
1997 up to an aggregate of $100,000) or otherwise take any action restricted
under this Agreement. If this transaction does not close for any reason on or
prior to January 31, 1998, and
7
is not extended by agreement of the parties, then the Company shall pay within
ten days to the Buyer profits accumulated during the period from November 1,
1997, to the date that the closing is deemed not to occur, but not later than
January 31, 1998. If this transaction does not close for any reason on or prior
to January 31, 1998 and is not extended by agreement of the parties, then the
Buyer shall within ten days pay to the Company all losses accumulated by the
Company during the period from November 1, 1997, to the date that the closing is
deemed not to occur, but not later than January 31, 1998.
2.7. Effective Control Balance Sheet. The Company will prepare the Effective
--------------------------------
Control Balance Sheet in accordance with GAAP, which Effective Control Balance
Sheet will fairly and accurately reflect the assets and liabilities of the
Company as of October 31, 1997.
ARTICLE III.
CLOSING
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3.1. Closing. The Closing of the transactions contemplated herein (the
-------
"Closing") shall be held on the Closing Date at a time and place as the parties
shall mutually agree.
3.2. Conveyances at Closing.
----------------------
3.2.1. Sellers' Delivery Obligations. To effect the sale and transfer
------------------------------
referred to in Section 2.1 hereof, Sellers will, at the Closing, execute and
deliver to Buyer:
3.2.1.1. certificates evidencing the Shares, free and clear of
any Encumbrances of any nature whatsoever, duly endorsed in blank for transfer
or accompanied by stock powers duly executed in blank;
3.2.1.2. all Ancillary Agreements required to be executed by any
of the Sellers;
3.2.1.3. all certificates, opinions of counsel and other
documents described in Article VIII; and
3.2.1.4. all Permits and any other third party consents required
for the valid transfer of the Shares as contemplated by this Agreement, or for
the continued operation of the Business following such transfer.
3.2.2. Buyer's Delivery Obligations. To effect the sale and transfer
-----------------------------
referred to in Section 2.1 hereof, Buyer will, at the Closing, execute and
deliver to Sellers:
3.2.2.1. all Ancillary Agreements required to be executed by
Buyer; and
3.2.2.2. all certificates, opinions of counsel and other
documents described in Article VII.
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3.2.2.3. the payment of the Purchase Price and repayment of the
Company's outstanding loan to Colorado National Bank.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY
---------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and the Company hereby jointly and severally represent and
warrant to Buyer and Parent as follows, which representations and warranties
are, as of the date hereof, and will be, as of the Closing Date, true and
correct:
4.1 Organization of the Company. The Company is a corporation duly organized,
----------------------------
validly existing and in good standing under the laws of the State of Colorado.
Copies of the Articles of Incorporation and Bylaws of the Company, and all
amendments thereto, heretofore or hereafter delivered to Buyer are accurate and
complete as of the date hereof. The Company is duly qualified or licensed to do
business as a foreign corporation in good standing in the states where
Facilities are located and in other states where this is legally required,
except where the failure to be so qualified would not have a Material Adverse
Effect.
4.2 Authorization. Each of the Sellers and the Company has full power and
--------------
authority (corporate or other) to enter into this Agreement and the Ancillary
Agreements, as the case may be, and to carry out the transactions contemplated
hereby and thereby, and the Company and each of the Sellers has taken all action
required by law, its charter documents, as the case may be, or otherwise to be
taken by it to authorize the execution, delivery and performance of this
Agreement and the Ancillary Agreements, as the case may be, and the consummation
of the transactions contemplated hereby and thereby. This Agreement and the
Ancillary Agreements, as the case may be, are the legal, valid and binding
obligations of each of the Sellers and the Company, enforceable against each of
them in accordance with their respective terms, subject to bankruptcy,
insolvency, moratorium and creditors' rights generally. A copy of the
resolutions of the Company's board of directors and stockholders authorizing
this Agreement and the related transactions is attached hereto as Schedule 4.2.
4.3 No Violation. None of the execution, delivery and performance of this
-------------
Agreement and the Ancillary Agreements nor the consummation of the transactions
contemplated hereby and thereby will (i) violate any provision of the Articles
of Incorporation or Bylaws of the Company, (ii) violate, result in a breach of,
conflict with, or constitute a default (or an event which, with the giving of
notice or lapse of time or both, would constitute a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of any note, bond,
mortgage, or indenture, contract, agreement, lease, sublease, license, permit,
franchise, distributorship agreement or other instrument or arrangement to which
any Seller or the Company is a party or by which any of the Shares or any of the
assets or properties of the Company or any Seller are bound or affected, which
violation, breach, conflict or default will have a Material Adverse Effect,
(iii) result in the creation or imposition of any Encumbrance upon any of the
Shares or any property or Assets of the Company or any Seller under any
agreement or commitment to which the Company or any Seller is a party or by
which
9
the Company or any Seller is bound or affected, or to which the property of the
Company or any Seller is subject, or (iv) violate, conflict with or result in
the breach of (or cause an event which could have a Material Adverse Effect as a
result of) any statute or law or any judgment, decree, order, regulation or rule
of any court or governmental authority to which any Seller, the Company, the
Business or any of the properties or Assets of any of the foregoing is subject,
which violation, breach or conflict would have a Material Adverse Effect. Except
as set forth on Schedule 4.3 or as required by the HSR Act, no action, consent,
approval or authorization by or filing with any person or entity, including,
without limitation, any governmental authority, is required in connection with
the execution, delivery and performance by each of the Sellers and the Company
of this Agreement and the Ancillary Agreements, as the case may be, or the
consummation by each of the Sellers and the Company of the transactions
respectively contemplated by each of them herein and therein, except consents,
the failure of which to obtain would not have a Material Adverse Effect.
4.4. Capitalization.
---------------
4.4.1 The authorized and the issued equity securities of the Company are
as set forth on Schedule 4.4. Sellers are and will be on the Closing Date the
record and beneficial owners and holders of the Shares as set forth on Schedule
4.4 (which schedule also sets forth the address of each such Seller and the
certificate numbers of the certificates representing the Shares), free and clear
of all Encumbrances (other than a legend indicating only that the Shares have
not been registered under the Securities Act).
4.4.2. There are no other shares of capital stock of the Company issued
and outstanding and no shares of treasury stock. All Shares are validly issued,
fully paid and nonassessable. None of the Shares was issued in violation of any
preemptive rights. There are no outstanding (i) securities convertible into or
exchangeable or exercisable for any of the Company's capital stock; (ii)
options, warrants, calls or other rights, including, without limitation, rights
to demand registration or to sell in connection with any registration by the
Company under the Securities Act, with respect to the issued capital stock of
the Company, or to purchase or subscribe to capital stock of the Company or
securities convertible into or exchangeable or exercisable for capital stock of
the Company; (iii) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance, sale, transfer, and/or
assignment of any capital stock of the Company, any such convertible or
exchangeable securities or any such options, warrants or rights; or (iv) Shares
pledged as collateral to secure any agreement or obligation. There are no
voting trust agreements or other contracts, agreements, arrangements,
commitments, plans, proxies or understandings restricting or otherwise relating
to any conveyance, voting or dividend rights with respect to the Shares. Upon
consummation of the transactions contemplated by this Agreement and registration
of the Shares in the name of Buyer in the stock records of the Company, the
Buyer will own all of the issued and outstanding equity securities of the
Company of every sort whatsoever, free and clear of all Encumbrances.
4.5. Related Entities.
-----------------
10
4.5.1. Schedule 4.5(a) sets forth a complete and accurate list of all of
the Related Entities, all of which are, directly or indirectly, wholly-owned by
any or all of the Sellers and/or ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇. Schedule 4.5(a)
also sets forth the jurisdiction of incorporation of each of the Related
Entities, each jurisdiction in which each such Related Entity is qualified to do
business, and the ownership interests thereof.
4.5.2. Schedule 4.5(b) sets forth a list of all agreements among the
Company, any of the Sellers and the Related Entities.
4.6. Equipment and Other Assets; Absence of Encumbrances. The Asset listing
----------------------------------------------------
attached as Schedule 4.6 sets forth the asset description and original cost of
all Equipment. Buyer shall have the right, prior to Closing, to inspect all of
the Assets (wherever located) that are reflected on the Balance Sheet. All
rental equipment is Rental Ready.
4.7. Facilities.
-----------
4.7.1. Real Property. The Company has no Owned Real Property. All of the
-------------
Leased Real Property is listed on Schedule 4.7. The Sellers and the Company have
delivered to Buyer an accurate copy of the Leases covering the Leased Real
Property. Neither the Company nor, to its knowledge, any lessor under the
Leases, is in breach or default of its obligations thereunder. The Company
enjoys peaceful and undisturbed possession of the Leased Real Property.
Except as set forth on Schedule 4.7, there are no leases,
subleases, licenses, occupancy agreements, options, rights, concessions or other
agreements or arrangements, written or oral, granting to any person the right to
purchase, use or occupy the Facilities or any portion thereof. The Facilities
are supplied with utilities and other services necessary for the operation of
the Business.
4.7.2. Improvements, Fixtures and Equipment. The Facilities and the
------------------------------------
improvements thereon, including without limitation all Equipment (including all
fixtures) and other tangible assets owned, leased or used by the Company at the
Facilities are insured to the extent and in a manner customary in the industry,
are in the reasonable business judgment of the Company sufficient for the
operation of the Business as presently conducted and are in conformity, in all
material respects, with all applicable laws, ordinances, orders, regulations and
other requirements currently in effect. None of the improvements is subject to
any commitment or other arrangement for their sale or use by any Affiliate of
the Company or third parties other than purchase options set forth in leases
identified on Schedule 4.7. Buyer shall have the right, prior to Closing, to
inspect all of the Facilities.
4.7.3. Conformity. All Facilities have received all material required
----------
approvals of governmental authorities (including without limitation Permits and
a certificate of occupancy or other similar certificate permitting lawful
occupancy of the Facilities) required in connection with the operation thereof.
4.8. Contracts and Commitments.
-------------------------
11
4.8.1. Contracts. Schedule 4.8 sets forth a complete and accurate list
---------
of all material Contracts of the following categories:
4.8.1.1. Contracts not made in the ordinary course of the Company's
conduct of the Business;
4.8.1.2. Employment contracts and severance agreements;
4.8.1.3. Supply, purchase, distribution, franchise, license, sales
or commission agreements related to the Business;
4.8.1.4. Contracts involving expenditures or liabilities, actual or
potential, in excess of $5,000 or otherwise material to the Business, and not
cancelable (without liability) within 30 calendar days;
4.8.1.5. Contracts or commitments relating to commission
arrangements with others;
4.8.1.6. Factoring agreements, promissory notes, loans, agreements,
evidences of indebtedness, letters of credit, guarantees, or other instruments
relating to an obligation to pay money, whether the Company shall be the
borrower, lender or guarantor thereunder or whereby any Equipment or Inventory
are pledged (excluding credit provided by the Company in the ordinary course of
the Business to its customers);
4.8.1.7. Leases of personal property not cancelable (without
liability) within 30 calendar days; and
4.8.1.8. Contracts containing covenants limiting the freedom of the
Company or any officer, director or shareholder of the Company to engage in any
line of business or compete with any person.
4.8.1.9. Sellers have either delivered to Buyer or have made
available to Buyer complete copies of all of the Contracts listed on Schedule
4.8, including all amendments and supplements thereto.
4.8.2. Absence of Breaches or Defaults. All of the material Contracts are
-------------------------------
valid and in full force and effect, subject to any repudiation claims of other
parties not known to Sellers. The Company has duly performed all of its material
obligations under the Contracts to the extent those obligations to perform have
accrued, and no material violation of, or material default or breach under any
Contracts by the Company or, to the best of Sellers' knowledge, any other party
has occurred and neither the Company nor, to Sellers' knowledge, any other party
has repudiated any provisions thereof. All of the material Contracts will be
enforceable by the Company after the Closing to the same extent as if the
transactions contemplated by this Agreement had not been consummated, subject to
compliance with applicable change of control provisions, all of which are
identified on Schedule 4.3.
12
4.9. Permits. The Company has all material Permits required to conduct the
-------
Business, except where the failure to obtain such Permits would not have a
Material Adverse Effect. All material Permits of the Company related to the
Business are valid and in full force and effect and are listed on Schedule 4.9.
4.10. Financial Statements. The Company has heretofore delivered to Buyer the
--------------------
Financial Statements and Year-End Financial Statements. Except as set forth on
Schedule 4.10, the Financial Statements and Year-End Financial Statements (a)
are in accordance with the underlying books and records of the Company, (b) have
been prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied throughout the periods covered thereby, excluding
any footnotes which may be required by GAAP, and (c) fairly and accurately
present the assets, liabilities (including all reserves) and financial position
of the Business and the business of the LLC's as of the respective dates thereof
and the results of operations and changes in cash flows for the periods then
ended (subject to normal year-end adjustments). Except as set forth on Schedule
4.10, at the Balance Sheet Date there were no liabilities of the Company, which,
in accordance with GAAP, should have been shown or reflected in the Financial
Statements or the notes thereto, which are not shown or reflected in the
Financial Statements or the notes thereto.
4.11. Books and Records. The Company has made and kept (and given Buyer access
-----------------
to) Books and Records and accounts, which, in reasonable detail, accurately and
fairly reflect the activities of the Company. The minute books of the Company
made available to Buyer accurately and adequately reflect all action previously
taken by the shareholders, board of directors and committees of the board of
directors of the Company. The stock book records of the Company made available
to Buyer are true, correct and complete, and accurately reflect all transactions
effected in the Company's stock through and including the date hereof.
4.12. Litigation. Except as set forth on Schedule 4.12, there is no action,
----------
order, writ, injunction, judgment or decree outstanding or any claim, suit,
litigation, proceeding, labor dispute, arbitral action, governmental audit or
investigation (collectively, "Actions") pending, or to the best of the Sellers'
or Company's knowledge, threatened or anticipated (a) against, related to or
affecting the Company or the Business or (b) seeking to delay, limit or enjoin
the transactions contemplated by this Agreement. The Company is not in default
with respect to or subject to any judgment, order, writ, injunction or decree of
any court or governmental agency, and there are no unsatisfied judgments against
the Company or the Business.
4.13. Labor Matters. The Company is not a party to any labor agreement with
-------------
respect to its employees with any labor organization, union, group or
association and none of the Company's employees are represented by employee
unions (or any other similar labor or employee organizations). The Company has
not experienced within the past five (5) years any attempt by organized labor or
its representatives to make the Company conform to demands of organized labor
relating to its employees or to enter into a binding agreement with organized
labor that would cover the employees of the Company.
13
4.14. Compliance with Law. The Company, the conduct of the Business and the
--------------------
operation of the Facilities have not materially violated and are in material
compliance with all laws, statutes, ordinances, regulations, rules and orders of
any foreign, federal, state or local government and any other governmental
department or agency, and any judgment, decision, decree or order of any court
or governmental agency, department or authority, including without limitation
Environmental Laws (as defined in Section 4.22.2), relating to the Assets,
Facilities or Business or operations of the Company, except where the violation
or failure to comply, individually or in the aggregate would not have a Material
Adverse Effect on the Facilities, Assets or Business. The Company and the
conduct of the Business and the operation of the Facilities are in material
conformity with all energy, public utility, zoning, building and health codes,
regulations and ordinances, the Americans with Disabilities Act, ERISA, OSHA and
Environmental Laws and all other foreign, federal, state, and local governmental
and regulatory requirements. The Company has not received any notice to the
effect that, or otherwise been advised that, it is not in compliance with any
such statutes, regulations, rules, judgments, decrees, orders, ordinances or
other laws, and the Company has no reason to anticipate that any existing
circumstances are likely to result in violations of any of the foregoing.
4.15. No Brokers. None of the Sellers, the Company or any of the Company's
----------
officers, directors, employees or Affiliates has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in an obligation on the part of the Company or Buyer to pay any finder's fee,
brokerage fees or commission or similar payment in connection with the
transactions contemplated hereby.
4.16. No Other Agreements to Sell the Company. None of the Sellers nor the
---------------------------------------
Company have any commitment or legal obligation, absolute or contingent, to any
other person or firm other than the Buyer to sell, assign, transfer or effect a
sale of any of the Shares or the Assets or to effect any merger, consolidation,
liquidation, dissolution or other reorganization of the Company, and no person
or entity has notified any Seller or the Company that it believes such a
commitment or legal obligation exists.
4.17. Proprietary Rights.
------------------
4.17.1. Proprietary Rights. Schedule 4.17 lists all of the Company's
------------------
material federal, state and foreign registrations of trademarks, service marks
and other marks, trade names or other trade rights, and all pending applications
for any such registrations, all other trademarks and other marks, trade names
and other trade rights or in which the Company has any interest whatsoever, and
all other trade secrets, if any, and other proprietary rights, whether or not
registered, and all computer software (including without limitation the tool
rental control software used by the Company) other than software generally
available to the public, created or used by or on behalf of the Company, in each
case relating to the Business (collectively, "Proprietary Rights"). The
Proprietary Rights listed in Schedule 4.17 are all those used by the Company in
connection with the Business other than software generally available to the
public.
4.1.7.2. Royalties and Licenses. No person has a right to receive a
----------------------
royalty or similar payment in respect of any material Proprietary Rights.
Except as set forth on Schedule 4.17.2 the
14
Company has no licenses granted, sold or otherwise transferred by or to it or
other agreements to which it is a party, relating in whole or in part to any of
the material Proprietary Rights.
4.1.7.3. Ownership and Protection of Proprietary Rights. Except as set
----------------------------------------------
forth on Schedule 4.17.3, the Company owns or licenses, and has the sole right
to use or (as it so elects) to sublicense, each of the Proprietary Rights, and
the Company is not a party to any litigation with respect to any of the
Proprietary Rights. The Company has not received any notice of invalidity or
infringement of any rights of others with respect to such Proprietary Rights.
The Company has taken all reasonable and prudent steps in the reasonable
business judgment of the Company to protect the Proprietary Rights from
infringement by any other firm, corporation, association or person. The
Company's use of the Proprietary Rights is not, to Sellers' knowledge,
infringing upon or otherwise violating the rights of any third party in or to
such Proprietary Rights, nor has such infringement been alleged by any third
party. All of the material Proprietary Rights are valid and enforceable rights
of the Company and will not cease to be valid and in full force and effect by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated by this Agreement.
4.1.8. Tax Matters.
-----------
4.1.8.1. Filing of Tax Returns. The Company has timely filed
---------------------
with the appropriate taxing authorities all returns (including without
limitation information returns and other material information) in respect of
Taxes required to be filed through the date hereof and will timely file any such
returns required. The returns and other information filed are complete and
accurate in all material respects. Except as specified in Schedule 4.18, since
October 31, 1990 neither the Company, nor any group of which the Company now or
was a member, has requested any extension of time within which to file returns
(including without limitation information returns) in respect of any taxes. The
Company has made available to Buyer complete and accurate copies of the
Company's federal, state and local income tax returns for its fiscal years ended
October 31, 1994, 1995 and 1996, and will deliver to Buyer copies of the
Company's federal, state and local tax returns for the twelve months ended
October 31, 1997 when completed and will deliver, upon Buyer's request, any
other Tax returns.
4.1.8.2. Payment of Taxes. All Taxes, in respect of taxable
----------------
periods ending on or before the date of the Effective Control Balance Sheet,
have been timely paid, or will be timely paid prior to such date, or will be
fully accrued for on the Effective Control Balance Sheet. Any unpaid Taxes
relating to periods ending on or before the date of the Effective Control
Balance Sheet (whether full or partial periods) that are not fully accrued for
on the Effective Control Balance Sheet will be subject to full indemnification
by Sellers in accordance with Section 10.3 hereof (without being limited as to
amount).
4.1.8.3. Audits, Investigations or Claims. Except as set forth in
--------------------------------
Schedule 4.18, the federal income tax returns and any required state tax returns
of the Company have been examined by the Internal Revenue Service and any
applicable state taxing authority for all periods from November 1, 1990, to and
including the Closing, and except to the extent shown therein, no deficiencies
for Taxes, have been assessed by any taxing or other governmental
15
authority against the Company. Except as set forth in Schedule 4.18, there are
no pending or, to the best of the Sellers' or Company's knowledge, threatened
audits, investigations or claims for or relating to any material additional
liability in respect of Taxes, and there are no matters under discussion with
any governmental authorities with respect to Taxes that in the reasonable
judgment of the Company, or its counsel, is likely to result in a material
additional liability for Taxes. Audits of federal, state, and local returns for
Taxes by the relevant taxing authorities have been completed for each period
subsequent to October 31, 1990 except as set forth in Schedule 4.18 and, except
as set forth therein, the Company has not been notified that any taxing
authority intends to audit a return for any period. Except as set forth in
Schedule 4.18, no extension of a statute of limitations relating to Taxes is in
effect with respect to the Company.
4.1.8.4. Lien. There are no liens for Taxes (other than as could be
----
asserted for current Taxes not yet due and payable) on the Assets.
4.19. Accounts Receivable. The accounts receivable reflected in the Balance
-------------------
Sheet represent bona fide claims of the Company against debtors for sales,
services performed or other charges arising on or before the date hereof, and
all the goods delivered and services performed which gave rise to said accounts
were delivered or performed in accordance with the applicable orders, Contracts
or customer requirements. All of such accounts receivable are collectible in the
ordinary course of business except to the extent of a bad debt reserve
representing the same percentage of accounts receivable of the Company at the
Closing Date as were reserved against on the Balance Sheet. The Company owns all
such accounts receivable, free and clear of all Encumbrances.
4.20. Inventory. All the Inventory (both rental and non-rental, supplies
---------
inventory and merchandise inventory) is located at the Facilities, except items
of rental equipment on lease to customers. There has been no material decrease
in the book value or fair value of the Inventory since the Balance Sheet Date,
except for sales of Inventory in the ordinary course of business. The values at
which the Inventory is shown on the Balance Sheet have been determined on the
average cost method in accordance with Federal tax regulations, consistently
applied throughout the periods covered by the Financial Statements. The
inventory is salable or rentable, as the case may be, in the ordinary course of
business consistent with past practice.
4.21. Employees and Employee Benefits.
-------------------------------
4.21.1. As used in this Section 4.21, the following terms have the
meanings set forth below.
"Benefit Arrangement" shall mean any employment, consulting,
-------------------
severance or other similar contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment providing for
insurance coverage (including without limitation any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits, life, health, disability or accident
benefits (including without limitation any "voluntary employees' beneficiary
association" as defined in Section 501(c)(9) of the Code providing for the same
or other benefits) or for deferred compensation, profit-sharing bonuses, stock
options, stock
16
appreciation rights, stock purchases or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (A) is not a Welfare
Plan, Pension Plan or Multiemployer Plan, (B) is entered into, maintained,
contributed to or required to be contributed to, as the case may be, by the
Company or an ERISA Affiliate or under which the Company or any ERISA Affiliate
may incur any liability, and (c) covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with such
entities).
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer
--------------
Plans, Pension Plans and Welfare Plans.
"ERISA Affiliate" shall mean any entity which is (or at any relevant
---------------
time was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, the Company as
defined in Section 414(b), (c), (m) or (o) of the Code, or under "common
control" with the Company, within the meaning of Section 4001(b)(1) of ERISA.
"Multiemployer Plan" shall mean any "multiemployer plan," as defined
------------------
in Section 4001(a)(3) of ERISA, (A) which the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to or was
required to contribute to, or under which the Company or any ERISA Affiliate may
incur any liability and (B) which covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with such
entities).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"Pension Plan" shall mean any "employee pension benefit plan" as
------------
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (A) the
Company or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, within the five years prior to the Closing Date,
maintained, administered, contributed to or was required to contribute to, or
under which the Company or any ERISA Affiliate may incur any liability; (B)
covers any employee or former employee of the Company or any ERISA Affiliate
(with respect to their relationship with such entities); and (C) is not a
Multiemployer Plan.
"Welfare Plan" shall mean any "employee welfare benefit plan" as
------------
defined in Section 3(1) of ERISA, which (A) the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which the Company or any ERISA Affiliate may incur any liability; (B) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities); and (C) is not a Multiemployer Plan.
4.21.2. Schedule 4.21(a): (i) contains a list of all current employees of
the Company, and their wage rates or salaries, as of the date of this Agreement,
and (ii) sets forth the dates of employment for such employees.
17
4.21.3. Disclosure; Delivery of Copies of Relevant Documents and Other
--------------------------------------------------------------
Information. Schedule 4.21(b) contains a complete list of Employee Plans. True
-----------
and complete copies of each of the following documents have been made available
by the Company to Buyer: (i) each Welfare Plan, Pension Plan and Multiemployer
Plan (and, if applicable, related trust agreements) and all amendments thereto,
all written interpretations thereof and written descriptions thereof which have
been distributed to the Company's employees and all annuity contracts or other
funding instruments; (ii) each Benefit Arrangement including written
interpretations thereof and written descriptions thereof which have been
distributed to the Company's employees (including descriptions of the number and
level of employees covered thereby) and a complete description of any Benefit
Arrangement which is not in writing; (iii) the most recent determination or
opinion letter issued by the Internal Revenue Service with respect to each
Pension Plan and each Welfare Plan; (iv) for the three most recent plan years,
Annual Reports on Form 5500 Series required to be filed with any governmental
agency for each Pension Plan and each Welfare Plan; (v) all actuarial reports
prepared for the last three plan years for each Pension Plan; (vi) a description
of complete age, salary, service and related data as of the last day of the last
plan year for employees and former employees of the Company; and (vii) a
description setting forth the amount of any liability of the company as of the
Closing Date for payments more than thirty (30) calendar days past due with
respect to each Welfare Plan.
4.21.4. Representations.
---------------
4.21.4.1. Pension Plans. Neither the Company nor any ERISA
-------------
Affiliate has or contributes to or maintains or has any obligation to make
payments to any Pension Plan. No Pension Plan is subject to the minimum funding
requirements of Title IV of ERISA or Section 412 of the Code. Neither the
Company nor any ERISA Affiliate is required to provide security to a Pension
Plan under Section 401(a)(29) of the Code. Each Pension Plan which is intended
to be qualified (and each related trust agreement, annuity contract or other
funding instrument) is qualified and tax-exempt under the provisions of Code
Sections 401(a) (or 403(a), as appropriate) and 501(a) and has been so qualified
during the period from its adoption to date. Neither the Company nor any ERISA
Affiliate has engaged in, or is a successor or parent corporation to an entity
that has engaged in, a transaction described in Section 4069 of ERISA. There has
been no "reportable event" (as defined in Section 4043(c) of ERISA and the PBGC
regulations under such Section) with respect to any Pension Plan and neither the
Company nor any ERISA Affiliate is subject to Section 4043(b) of ERISA.
4.21.4.2. Multiemployer Plans. Neither the Company nor any ERISA
--------------------
Affiliate has any Multiemployer Plans.
4.21.4.3. Welfare Plans. Except as disclosed on Schedule
-------------
4.21.4.3., none of the Company, any ERISA Affiliate or any Welfare Plan has any
present or future obligation to make any payment to, or with respect to any
present or former employee of the Company or any ERISA Affiliate pursuant to,
any retiree medical benefit plan, or other retiree Welfare Plan, and no
condition exists which would prevent the Company from amending or terminating
any such benefit plan or Welfare Plan. To the best of Sellers' and Company's
knowledge, each Welfare Plan which is a "group health plan," as defined in
Section 607(1) of ERISA, has been operated in
18
compliance with provisions of Part 6 of Title I, Subtitle B of ERISA and Section
4980B of the Code at all times.
4.21.4.4. Compliance with Law. Each Employee Plan has been
-------------------
maintained in compliance in all material respects with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
which are applicable to such Employee Plan, including without limitation ERISA
and the Code.
4.21.4.5. Employment at Will. The employment of all persons
------------------
presently employed or retained by the Company is terminable at will.
4.21.4.6. Unrelated Business Taxable Income. No Employee Plan
---------------------------------
(or trust or other funding vehicle pursuant thereto) is subject to any tax under
Code Section 511.
4.21.4.7. Deductibility of Payments. There is no contract,
-------------------------
agreement, plan or arrangement covering any employee or former employee of the
Company (with respect to its relationship with such entities) that, individually
or collectively, provides for the payment by the Company of any amount (i) that
is not deductible by the Company under Section 162(a)(1) or 404 of the Code,
whichever is applicable, (ii) for which the deduction by the Company would be
disallowed under Section 162(m) of the Code, or (iii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
4.21.4.8. Fiduciary Duties and Prohibited Transactions. Neither
--------------------------------------------
the Company nor any plan fiduciary of any Welfare Plan or Pension Plan has
engaged in any transaction in violation of Sections 404 or 406 of ERISA or any
"prohibited transaction," as defined in Section 4975(c)(1) of the Code, for
which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Code, or has otherwise violated the provisions of Part 4 of Title I,
Subtitle B of ERISA, except for any such violation which would not have a
Material Adverse Effect. To the best of Sellers' and Company's knowledge, the
Company has not knowingly participated in a violation of Part 4 of Title I,
Subtitle B of ERISA by any plan fiduciary of any Welfare Plan or Pension Plan
(or other employee benefit plan subject to ERISA) and has not been assessed any
civil penalty under Section 502(l) of ERISA.
4.21.4.9. Validity and Enforceability. Each Welfare Plan,
---------------------------
Pension Plan, related trust agreement, annuity contract or other funding
instrument and Benefit Arrangement is legally valid and binding and in full
force and effect.
4.21.4.10. Litigation. There is no action, order, writ,
----------
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, arbitral action, governmental audit or investigation relating to or
seeking benefits under any Employee Plan that is pending, or, to Sellers'
knowledge, threatened or anticipated against the Company, any ERISA Affiliate or
any Employee Plan.
4.21.4.11. No Amendments. Neither the Company nor any ERISA
-------------
Affiliate has any announced plan or legally binding commitment to create any
additional Employee Plans or to amend or modify any existing Employee Plan other
than required by the Code or ERISA..
19
4.21.4.12. No Other Material Liability. No event has occurred in
---------------------------
connection with which the Company or any ERISA Affiliate or any Employee Plan,
directly or indirectly, could be subject to any material liability (A) under any
statute, regulation or governmental order relating to any Employee Plans or (B)
pursuant to any obligation of the Company to indemnify any person against
liability incurred under any such statute, regulation or order as they relate to
the Employee Plans.
4.21.4.13. Unpaid Contributions. Neither the Company nor any
--------------------
ERISA Affiliate has any liability for unpaid contributions under Section 515 of
ERISA with respect to any Pension Plan or Welfare Plan. The Company has paid or
will pay by October 31, 1997, all employer matching contributions to its 401(k)
Plan through October 31, 1997.
4.21.4.14. Insurance Contracts. To the Sellers' knowledge,
-------------------
neither the Company nor any Employee Plan holds as an asset of any Employee Plan
any interest in any annuity contract, guaranteed investment contract or any
other investment or insurance contract issued by an insurance company that is
the subject of bankruptcy, conservatorship or rehabilitation proceedings.
4.21.4.15. No Acceleration or Creation of Rights. Neither the
-------------------------------------
execution and delivery of this Agreement by the Company nor the consummation of
the transactions contemplated hereby will result in the acceleration or creation
of any rights of any person to benefits under any Employee Plan (including,
without limitation, the acceleration of the vesting except by plan termination
or exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any Pension Plan except by plan termination or the acceleration or
creation of any rights under any severance, parachute or change in control
agreement).
4.22. Compliance With Environmental Laws.
----------------------------------
4.22.1. Definitions. The following terms, when used in this Section
-----------
4.22, shall have the following meanings. Unless the context otherwise requires,
any of these terms may be used in the singular or the plural depending on the
reference.
4.22.1.1. "Company". For purposes of this Section 4.22 only,
-------
the term "Company" shall include (i) all Related Entities of the Company,
including, without limitation the Sellers, (ii) all partnerships, joint ventures
and other entities or organizations in which the Company was at any time or is a
partner, joint venturer, member or participant and (iii) all predecessor or
former corporations, partnerships, joint ventures, organizations, businesses or
other entities, whether in existence as of the date hereof or at any time prior
to the date hereof, the assets or obligations of which have been acquired or
assumed by the Company or to which the Company has succeeded.
4.22.1.2. "Release" shall mean and include any spilling,
-------
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
migrating, leaching, dumping or disposing into the environment or the work place
of any Hazardous Substance, and otherwise as defined in any Environmental Law.
20
4.22.1.3. "Hazardous Substance" shall mean any quantity of
-------------------
asbestos in any form, urea formaldehyde, PCBs, radon gas, crude oil or any
fraction thereof, all forms of natural gas, petroleum products or by-products,
any radioactive substance, any toxic, infectious, reactive, corrosive, ignitable
or flammable chemical or chemical compound and any other hazardous substance,
material or waste (as defined in or for purposes of any Environmental Law),
whether solid, liquid or gas.
4.22.2. Compliance With Environmental and Zoning Law. Except as set
--------------------------------------------
forth on Schedule 4.22 and except as set forth in the environmental assessments
referred to in Section 6.7, the Facilities have been owned, leased, operated and
maintained in material compliance with all environmental laws, regulations and
requirements (collectively, "Environmental Laws"). There is no present or past
Environmental Condition in any way relating to the Business or Facilities.
"Environmental Condition" means the introduction into the soil, groundwater or
environment of the Facilities (through leak, spill, release, discharge, escape,
emission, dumping disposal or otherwise) of any pollution, including without
limitation any contaminant, irritant or pollutant or Hazardous Substance
(whether or not upon the property of the Business and whether or not such
pollution constituted at the time thereof a violation of any Environmental Law)
as a result of which either Sellers, the Company or Buyer has or may become
liable in any material respect to any person or federal, state or local
government or agency or by reason of which any of the Assets may suffer or be
subjected to any lien.
4.22.3. Facilities. Except as set forth in the environmental
----------
assessments referred to in Section 6.7 and in Schedule 4.22, the Facilities are,
and at all times have been, owned, leased and operated in material compliance
with all Environmental Laws and in a manner that will not give rise to any
liability under any Environmental Laws.
4.22.4. Permits. The Company has, and at all times has had, all
-------
material Permits required under any Environmental Law and the Facilities are,
and at all times have been, in material compliance with all such Permits subject
to the environmental assessments referred to in Section 6.7.
4.22.5. Permits Required. The consummation of any of the transactions
----------------
contemplated by this Agreement will not require an application for issuance,
renewal, transfer or extension of, or any other administrative action regarding,
any Permit required under any Environmental Law subject to the environmental
assessments referred to in Section 6.7.
4.22.6. Notice of Violation. Except as set forth on Schedule 4.22.6,
-------------------
the Company has not received any notice at any time since January 1, 1992 (or,
if the notice alleged material non-compliance, at any time whatsoever) that it
or the Facilities is or were claimed to be in violation of the provisions of any
Environmental Law or in non-compliance with the conditions of any Permit, and
there is no pending or, to Sellers' knowledge, threatened lawsuit, governmental
or other legal action to that effect.
4.22.7. Pending Actions. There is not now pending or, to Seller's best
---------------
knowledge, threatened, nor has there ever been, any Action against the Company,
nor, to the best of Sellers'
21
knowledge, is there any basis for any Action, under any Environmental Law or
otherwise with respect to any Release or mishandling of any Hazardous Substance.
4.22.8. Judgments. There are no consent decrees, judgments, judicial or
---------
administrative orders or agreements with, or liens by, any governmental
authority or quasi-governmental entity relating to any Environmental Law which
regulate, obligate, bind or in any way materially affect the Company or the
Facilities.
4.22.9. Hazardous Substances. Except as set forth on Schedule 4.22.9,
--------------------
there is not and has not been any Hazardous Substance used, generated, treated,
stored, transported, disposed of, handled or other placement of Hazardous
Substances on, under, about or from any Facility, except for quantities of any
such Hazardous Substances stored or otherwise held on, under or about any such
Facility in material compliance with all Environmental Laws and necessary for
the operation of the Business.
4.22.10. Handling of Hazardous Substances. The Company has at all times
--------------------------------
used, generated, treated, stored, transported, disposed of or otherwise handled
its Hazardous Substances in compliance in all material respects with all
Environmental Laws and in a manner that will not result in material liability of
the Company or Buyer under any Environmental Law.
4.22.11. Since August 31, 1997, (i) there has been no actual or
threatened Material Adverse Change or event that would result in a Material
Adverse Change, including without limitation the loss of any material customers;
(ii) there has not been any sale or other disposition of any of the Assets, or
any Encumbrance placed on the Assets, except in the ordinary course of business;
the Company has been operated in the ordinary course consistent with past
practice so as to preserve the Business intact, to keep available to the
business the service of Company's employees and to preserve the Business and the
goodwill of the Company's suppliers, customers, distributors and others having
business relations with it; and (iv) except as set forth on Schedule 4.22.11,
Seller has not purchased or entered into any agreement to purchase any item,
other than in the ordinary course of business consistent with past practices,
having a cost in excess of $5,000.
4.22.12. Except as set forth on Schedule 4.22.12 and except for
compliance with HSR Act, no notice to, declaration, filing or registration with,
or authorization or consent or approval of, or Permit from, any governmental or
regulatory body or authority or any other person or entity is required to be
made or obtained by Sellers or the Company in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby.
4.22.13. Storage Tank. To Sellers' knowledge, Schedule 4.22, together
------------
with the Environmental Assessments to be delivered, sets out the past and
present underground and above ground tanks at the Facilities.
4.22.14. Environmental Audits or Assessments. True, complete and correct
-----------------------------------
copies of the written reports, if any, and all parts thereof, including any
drafts of such reports if such drafts are in the possession or control of the
Company, of all environmental audits or assessments
22
(including tank closure reports) which have been conducted at any Facility
within the past five years, either by the Company or any attorney, environmental
consultant or engineer engaged by the Company or Sellers for such purpose, will
be delivered to Buyer and a list of all such reports, audits and assessments and
any other similar report, audit or assessment not in the possession or control
of the Company and of which the Company or Sellers have knowledge is included on
Schedule 4.22.
4.22.15. Indemnification Agreements. Except for all Facility leases and
--------------------------
facility access agreements and Contracts, the Company is not a party, whether as
a direct signatory or as successor, assign or third party beneficiary, or
otherwise bound, to any Contract under which the Company is obligated by or
entitled to the benefits of, directly or indirectly, any representation,
warranty, indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions.
4.22.16. Releases or Waivers. The Company has not released any other
-------------------
person from any claim under any Environmental Law or waived any rights
concerning any Environmental Condition.
4.22.17. Notices, Warnings and Records. The Company has given all
-----------------------------
notices and warnings, made all reports, and has kept and maintained all records
required by and in compliance with all Environmental Laws, except where the
failure to do so would have a Material Adverse Effect.
4.23. Liabilities. Except as set forth on Schedule 4.23, the Company has no
-----------
material liabilities or obligations (absolute, accrued, contingent or otherwise)
except (i) liabilities which are reflected on the Balance Sheet, (ii)
liabilities incurred in the ordinary course of the Business and consistent with
past practice since the Balance Sheet Date, and (iii) liabilities arising under
Contracts identified in Schedule 4.8 to which the Company is a party.
4.24. Insurance
---------
4.22.1. Schedule 4.24 describes all currently in force policies of
insurance and all policies for the year ended October 31, 1996 (including the
insurer, type of insurance and period of coverage) to which the Company or any
Related Entity is a party or under which the Company, any Related Entity or any
employee, officer or director of the Company or any Related Entity (in his or
her capacity as such) is or has been insured. All such policies will continue
in full force and effect following the Closing. Incurrence policies shall be
deemed to be in force regardless of when they were issued.
4.24.2. [RESERVED.]
4.24.3. The Company and any Related Entity have paid all accumulated
premiums due, or have accrued same as a liability and has otherwise performed
substantially all of its material respective obligations, under each such
current insurance policy.
23
4.25 Conduct of the Business. Except as set forth in Schedule 4.25, since
-----------------------
the Balance Sheet Date, the Company has conducted its operations in the ordinary
course of the Business and substantially in accordance with past practice, and
has not taken any action that, if taken after the date hereof, would violate
Section 6.5.
4.26 Knowledge. Sellers' "knowledge" or "best knowledge" or similar words
---------
includes the actual knowledge of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and
such knowledge that such individuals obtained or would have obtained after
inquiry to determine the relevant fact at the branch manager level, after a
review of the Company files maintained at or above the branch manager level and
after inquiry of personnel responsible for inputting information into those
files..
Sellers, except NCCF, hereby severally, but not jointly, represent and
warrant to Buyer and Parent as follows, which representations and warranties
are, as of the date hereof, and will be, as of the Closing Date, true and
correct:
4.27 Each Seller owns, and upon consummation of the transactions
contemplated by this Agreement, the Buyer will own and have good and marketable
title to, all of the issued and outstanding equity securities of the Company
indicated to be owned by such Seller on Schedule 4.27 to this Agreement, free
and clear of all Encumbrances. Each of the Sellers has full power and authority
(corporate or other) to enter into this Agreement, and to carry out the
transactions contemplated hereby and thereby, and the Company and each of the
Sellers has taken all action required by law, its charter documents, or
otherwise to be taken by it to authorize the execution, delivery and performance
of this Agreement, and the consummation of the transactions contemplated hereby
and thereby. This Agreement is the legal, valid and binding obligation of each
of the Sellers, enforceable against each of them in accordance with its terms.
Sellers hereby severally, but not jointly, represent and warrant to
Buyer and Parent as follows, which representations and warranties are, as of the
date hereof, and will be, as of the Closing Date, true and correct:
4.28 Each Seller confirms that it is acquiring the Parent Common Stock for its
own account as principal, for investment purposes only, and not with a view to,
or for, resale or distribution thereof, and no other person has or will have a
direct or indirect beneficial interest in such Parent Common Stock.
4.29 Each Seller understands that the offering and sale of the Parent Common
Stock is intended to be a transaction by an issuer not involving any public
offering exempt from registration under the Securities Act by virtue of Section
4(2) of the Securities Act and the rules and regulations of the Commission
thereunder.
4.30 Each Seller who will be receiving Parent Common Stock represents that it
is an "accredited investor" as such term is defined in Rule 501 under the
Securities Act.
4.31 Each Seller understands and acknowledges that there are substantial
risks of loss of investment involved in an investment in the Parent Common
Stock, and that the investment in
24
the Parent Common Stock is an illiquid investment subject to transfer
restrictions, and Sellers represent and warrant that they have the financial
ability to bear the economic risk of such investment.
4.32 Each Seller who will be receiving Parent Common Stock has such knowledge
and experience in financial and business matters, including investments of the
type represented by the Parent Common Stock, as to be capable of evaluating the
merits of investment in therein.
4.33 Each Seller has been furnished with a copy of the recent periodic
reports filed by Parent with the Commission and any documents that may have been
made available otherwise or upon its request, has carefully read and understands
such materials and has evaluated the risks of an acquisition of the Parent
Common Stock and the parties acknowledge that each Seller is relying upon the
fact that all such information is true and correct in all material respects and
does not contain any omissions of material facts necessary to make the facts
stated therein, as of their dates, not misleading.
4.34 Each Seller has been given the opportunity to ask questions of, and
receive answers from, representatives of Parent in order for it to evaluate the
merits and risks of investment in the Parent Common Stock.
4.35 No Seller has been furnished with or has relied upon any oral or written
representation, warranty or information in connection with the offering of the
Parent Common Stock except for that set forth in this Agreement and in Parent's
Prospectus, 10K and Parent's Annual Report.
4.36 The stock certificates evidencing the Parent Common Stock to be
delivered pursuant to this Agreement will bear a legend indicating that the
securities have not been registered and are subject to restrictions on transfer
and the holdback and registration rights set forth herein.
NCCF hereby represents and warrants to Buyer and Parent as follows,
which representations and warranties are, as of the date hereof, and will be, as
of the Closing Date, true and correct:
4.37 NCCF acquired all of the issued and outstanding equity securities of the
Company indicated to be owned by NCCF on Schedule 4.27 to this Agreement without
knowledge of any Encumbrance or adverse claim, and NCCF has no knowledge of any
Encumbrances upon the equity securities owned by it and has, to its knowledge,
good and marketable title thereto. No Encumbrances have been placed upon or
suffered to exist upon such securities during the time in which NCCF has owned
such securities. NCCF has full power and authority to enter into this Agreement,
and to carry out the transactions contemplated hereby and thereby, and NCCF has
taken all action required by law, its charter documents, or otherwise to be
taken by it to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby and
thereby. This Agreement is the legal, valid and binding obligation of NCCF,
enforceable against NCCF in accordance with its terms, except as limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally or by equitable principles (whether
considered in an action at law or in
25
equity) and (ii) limitations imposed by federal or applicable state law or
equitable principles upon the availability of specific performance, injunctive
relief or other equitable remedies.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
--------------------------------------------------
Buyer and Parent hereby represent and warrant to Sellers as follows,
which representations and warranties are, as of the date hereof, and will be, as
of the Closing Date, true and correct:
5.1. Organization of Buyer and Parent. Buyer is a corporation duly organized,
--------------------------------
validly existing and in good standing under the laws of the State of Delaware.
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
5.2. Authorization. Except as provided in Section 8.8, each of Buyer and
-------------
Parent has all requisite corporate power and authority, and has taken all
corporate action necessary, to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to consummate the transactions
contemplated hereby and thereby and to perform its respective obligations
hereunder and thereunder. This Agreement has been duly executed and delivered by
Buyer and Parent and is, and (following their execution and delivery by Buyer,
Parent, the Company, the Seller Representative or the Sellers, as applicable,
each of the Ancillary Agreements will be) a legal, valid and binding obligation
of Buyer or Parent, as applicable, enforceable against Buyer or Parent, as
applicable, in accordance with its terms.
5.3. No Conflict or Violation. Neither the execution, delivery or performance
------------------------
of this Agreement or the Ancillary Agreements nor the consummation of the
transactions contemplated hereby or thereby, nor compliance by Buyer or Parent
with any of the provisions hereof or thereof, will (a) violate or conflict with
any provision of the Certificate of Incorporation or Bylaws of Buyer or Parent,
or (b) violate any statute, rule, regulation, ordinance, code, order, judgment,
ruling, writ, injunction, decree, award or agreement binding upon Buyer or
Parent.
5.4. Consents and Approvals. No notice to, declaration, filing or registration
----------------------
with, or authorization, consent or approval of, or permit from, any governmental
or regulatory body or authority, or any other person or entity, is required to
be made or obtained by Buyer or Parent in connection with the execution,
delivery and performance of this Agreement or the Ancillary Agreements and the
consummation of the transactions contemplated hereby or thereby, except (a) as
may be required by Buyer to operate the Business after the Closing, (b) as has
been obtained on or prior to the date hereof or (c) as set forth in Schedule
5.4.
ARTICLE VI.
COVENANTS OF BUYER, THE COMPANY AND SELLER
------------------------------------------
Buyer, the Company and Sellers each covenant with the others as
follows:
26
6.1. Further Assurances. Upon the terms and subject to the conditions
------------------
contained herein, each of the parties hereto agrees, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing, including using their respective best efforts (A)
to obtain all necessary waivers, consents and approvals from third parties;
provided, however, that no party shall be required to make any payments,
commence litigation or agree to modifications of the terms of Contracts or
Leases in order to obtain any such waivers, consents or approvals, (B) to obtain
all necessary Permits as are required to be obtained under any federal, state,
local or foreign law or regulations, (C) to effect all necessary registrations
and filings, including without limitation required filings under the HSR Act and
all other submissions of information requested by governmental authorities, and
(D) to fulfill all conditions to this Agreement.
6.2. No Solicitation. From the date hereof through the Closing or the earlier
---------------
termination of this Agreement, each of the Company and the Sellers shall not,
and shall cause their Representatives (including without limitation investment
bankers, attorneys and accountants) not to, directly or indirectly, enter into,
solicit, initiate or continue any discussions or negotiations with, or encourage
or respond to any inquiries or proposals by, or participate in any negotiations
with, or provide any information to, or otherwise cooperate in any other way
with, any corporation, partnership, person or other entity or group, other than
Buyer and its Representatives, concerning any sale of all or a portion of the
Assets, the Shares or the Business, or any merger, consolidation, liquidation,
dissolution or similar transaction involving the Company (each such transaction
collectively being referred to herein as a "Proposed Acquisition Transaction").
The Company and the Sellers shall not, directly or indirectly, through any
Representative or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from any person or entity relating to any Proposed
Acquisition Transaction or participate in any negotiations regarding, or furnish
to any other person any information with respect to the other party for the
purposes of, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other person to seek
or effect a Proposed Acquisition Transaction. The Company and the Sellers each
hereby severally represent that it is not now engaged in discussions or
negotiations with any party (other than Buyer) with respect to any of the
foregoing. The Company or Sellers shall promptly notify Buyer (orally and in
writing) of any offer, inquiry or contact with any person with respect to a
Proposed Acquisition Transaction, including the terms thereof and the identity
of the prospective purchaser or soliciting party.
6.3. Notification of Certain Matters. From the date hereof through the
-------------------------------
Closing, Buyer or Parent shall give prompt notice to Sellers and the Company of
(a) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty of the Buyer or
Parent contained in this Agreement or in any exhibit or schedule hereto to be
untrue or inaccurate in any material respect and (b) any failure of Buyer or
Parent to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by
27
it under this Agreement or any exhibit or schedule hereto; provided, however,
that such disclosure shall not be deemed to cure any breach of a representation,
warranty, covenant or agreement or to satisfy any condition.
From the date hereof through the Closing, Sellers (except for the
Excluded Stockholders, other than with respect to their respective
representations, warranties and covenants) and the Company shall give prompt
notice to Buyer or Parent of (a) the occurrence, or failure to occur, of any
event which occurrence or failure would be likely to cause any representation or
warranty of the Sellers or Company contained in this Agreement or in any
exhibit or schedule hereto to be untrue or inaccurate in any material respect
and (b) any failure of Sellers or Company to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or any exhibit or schedule hereto; provided, however, that such
disclosure shall not be deemed to cure any breach of a representation, warranty,
covenant or agreement or to satisfy any condition.
6.4. Access to Information. From the date hereof through the Closing, the
---------------------
Company shall, and shall cause its Representatives to, afford the
Representatives of Buyer and its Affiliates complete access at all reasonable
times to the Assets and the Facilities for the purpose of inspecting and
conducting appropriate tests upon the same, and to the officers, employees,
agents, attorneys, accountants, properties, Books and Records and Contracts of
the Company, and shall furnish Buyer and its Representatives all financial,
operating and other data and information as Buyer or its Affiliates, through
their respective Representatives, may reasonably request, including but not
limited to data relating to operating procedures, workers' compensation history,
legal, tax and environmental, zoning and other legal compliance.
6.5. Conduct of Business. From the date hereof through the Closing, the Sellers
-------------------
(except the Excluded Stockholders) shall, except as contemplated by this
Agreement or as consented to by Buyer in writing, operate the Business in the
ordinary course of the Business and substantially in accordance with past
practice and will not take any action inconsistent with this Agreement or with
the consummation of the Closing. Without limiting the generality of the
foregoing, the Company shall not, except as specifically contemplated by this
Agreement or as consented to in writing by Buyer:
6.5.1. issue or repurchase any shares of capital stock or warrants,
options or other rights to acquire any such shares;
6.5.2. enter into, extend, materially modify, terminate or renew any
Contract;
6.5.3. purchase or enter into any agreement to purchase any item of
Inventory or Equipment;
6.5.4. make any material increase in compensation or benefits payable
to any employee of the Company, or adopt any new employee benefit plan or
policy;
6.5.5. sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any of the Assets, or any interests therein;
28
6.5.6. accelerate the collection of accounts receivable, extend the
payment of accounts payable, or reduce inventories in a manner inconsistent with
the ordinary course of the Business's operation; or
6.5.7. fail to pay its accounts payable and any debts owed or
obligations due by it, or pay or discharge when due any liabilities.
6.6. Guarantee. Through but not after the Closing, Parent hereby
---------
guarantees the covenants and obligations of Buyer required to be performed by it
hereunder.
6.7. Environmental Assessments and Remediation.
-----------------------------------------
6.7.1. Buyer will retain an environmental consultant (the
"Consultant") to perform Phase 1 (and, at Buyer's option, Phase 2) environmental
assessments with respect to each of the Facilities. Upon its availability,
Consultant will deliver such assessments to Buyer and the Company. In the event
any such assessment recommends the performance of additional investigation
(including, without limitation, Phase 2 environmental assessments), such
additional investigation shall, if requested by Buyer, be undertaken promptly
and delivered to each of the Company and Buyer. The environmental assessments
and investigations undertaken pursuant to this Section 6.7.1 are collectively
referred to herein as the "Environmental Assessments." Buyer shall be solely
responsible for the cost of the Environmental Assessments.
6.7.2. In the event any of the Environmental Assessments reveals any
remediation work which must be completed in order to bring the Facilities into
compliance with applicable Environmental Laws or eliminate any potential
environmental liability, the Consultant shall be directed to prepare and to
deliver to each of the Company and Buyer a written report setting forth in
reasonable detail the scope of required remediation and an estimate of the cost
of completing such remediation. For the purposes of Section 6.7, "required
remediation" shall mean any action necessary to (i) comply with any governmental
order, (ii) comply with any Environmental Law effective at the Closing or (iii)
eliminate a potential environmental liability which has the reasonable
probability of ripening into, with the passage of time, the violation of any
Environmental Law (the "Remediation Standard"), as applicable to the Facilities
or the operation thereof by the Company as of the Closing Date.
6.7.3. Within 60 days of completion of the Consultant's report referred
to in Section 6.7.2, the Company shall engage a reliable environmental
engineering firm reasonably acceptable to Buyer to perform any required
remediation, as well as to remove any underground storage tanks on property
leased from Related Entities and perform all required remediation in connection
therewith. The Company and the Seller Representative shall use their respective
best efforts to cause such required remediation to be completed on or before the
Closing Date, and the Company shall bear all costs of such required remediation;
Buyer may, in its sole discretion, authorize Sellers to defer any portion of the
required remediation which the Company and its contractors are unable to
complete prior to Closing, in which case Sellers, other than the Excluded
Stockholders, shall cause the portion of the required remediation so deferred to
be completed as promptly as practicable, but in no event later than 180 days
following Closing, at the Sellers', other than the Excluded Stockholders, sole
expense (which may be satisfied from the
29
Holdback Amount pursuant to the Escrow Agreement or from the funds held back by
Buyer as set forth in Section 6.7.4). In the event of such deferral, Buyer will
provide reasonable access to Sellers and their agents to complete such
remediation and shall otherwise reasonably cooperate at Sellers' expense in such
remediation. Buyer may monitor the performance of the required remediation and
application of the Remediation Standard, and at its election may cause the
Consultant to review the performance of the required remediation. If Buyer
directs the Consultant to undertake such review, the required remediation shall
be deemed completed only upon certification of its completion by the Consultant.
If, however, there is a dispute as to the performance of the required
remediation or the application of the Remediation Standard, any such dispute
shall be settled by a mutually agreed-upon environmental expert not otherwise
involved in the required remediation, whose determination shall be final and
binding on the parties. The estimated costs of the required remediation not
completed by Closing will be withheld and retained by Buyer outside of escrow.
Notwithstanding the foregoing, by December 31, 1997, Sellers. other than the
Excluded Stockholders, will begin to cause the underground storage tanks located
on property leased by the Company from Related Entities to be removed and any
required remediation to be completed in connection therewith.
6.7.4. The Holdback Amount shall secure, among other things, the
completion by Sellers of any required remediation which has not been resolved by
the Closing Date pursuant to this Section 6.7. Upon the completion of the
required remediation, certification of such completion by the Consultant or
mutually agreed-upon third party expert, and payment by Sellers of all expenses
of such remediation and certification, all in accordance with the standards set
forth in this Section 6.7, no further claims may be made against the Holdback
Amount on account of Sellers' obligations under this Section 6.7. However, if
such required remediation has not been completed by Sellers due to their failure
to timely perform and to continue performance of required remediation, and so
certified on or prior to the date which is no later than 180 days following the
Closing Date, Buyer shall be entitled to engage its own environmental
engineering firm to complete such required remediation, and to distribute such
portion of the Holdback Amount as is necessary to pay the fees and costs of such
firm, or other costs incurred, in completing such required remediation.
6.8. Registration Rights.
--------------------
6.8.1. In the event that, at any time prior to the first anniversary of
the Closing Date, Parent files a registration statement under the Securities Act
covering shares of Parent Common Stock, other than a registration statement on
Form S-4 or Form S-8, or a registration statement filed pursuant to "demand" or
similar contractual registration rights of any other stockholders of Parent,
then Sellers shall have the right to include in such registration statement (on
a "piggyback" basis) any or all of their shares of Parent Common Stock on the
same terms and conditions (including pro rata cutbacks) as all other selling
stockholders in such registration, and to receive the benefit of any
representations, indemnities, opinions or comfort letters given by the Parent
(or its counsel or underwriters) to any underwriter in connection with such
registration, provided, however, that if the managing underwriter or
underwriters in the registered offering advise the Parent that the inclusion in
the offering of shares of Parent Common Stock owned by Sellers would have a
Material Adverse Effect on the marketability or price of the offering, then
30
the number of shares of Parent Common Stock to be included by Sellers shall be
reduced on a pro rata basis in proportion to the number of shares of Parent
Common Stock requested to be included by each Seller and by any other
stockholder of the Company.
6.8.2. Anything herein to the contrary notwithstanding, in the event
that the Parent files a registration statement with respect to an underwritten
public offering under the Securities Act in which any class of Parent Common
Stock is offered, no Seller shall effect any public sale or distribution (except
pursuant to said registration statement) of any of the shares of Parent Common
Stock (which shares, for purposes of this Section 6.8.2, shall include any and
all voting securities received by such Seller as a stock dividend, stock split
or other recapitalization or similar distribution on or in the respect of the
shares of Parent Common Stock) or any of Parent's other equity securities, or of
any securities convertible into or exchangeable for such securities, during the
period following delivery of notice to Sellers which begins ten (10) days before
the filing of such registration statement with the Securities and Exchange
Commission and ends ninety (90) days after such registration statement has
become effective or ten (10) days after it has been withdrawn. After January 4,
2001, this Section 6.8.2 shall cease to apply.
6.9. Cooperation Regarding Dealerships. Sellers, other than the Excluded
---------------------------------
Stockholders, and the Company will cooperate with Buyer and use their reasonable
best efforts to assist Buyer in obtaining the transfer of all dealerships and
dealership agreements of the Company and each Related Entity, including any
required due to change of control provisions.
6.10 1997 Tax Returns. Sellers other than the Excluded Stockholders will
----------------
prepare or cause to be prepared, executed and timely filed all income tax
returns for the Company's fiscal year ended October 31, 1997. The Company will
provide access to its books and records to facilitate such preparation. The
Company will have the opportunity to review such return for at least 15 days
prior to filing, and the Seller will not file any return to which the Company
reasonably objects. The Sellers, other than the Excluded Stockholders, will
reimburse and indemnify the Company for all taxes due with respect to such
returns in excess of estimated tax payments made by the Company through August
31, 1997. In addition, as set forth elsewhere herein, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ will be
responsible for any additional income taxes or assessments or claims asserted by
any Tax authority and will fully indemnify the Company with respect thereto.
ARTICLE VII.
CONDITIONS TO SELLERS' OBLIGATIONS
----------------------------------
Except as otherwise provided herein, the obligations of Sellers to
consummate the transactions provided for hereby are subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions, any of
which may be waived by Sellers:
7.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Buyer and Parent contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Buyer and
Parent shall have
31
performed and satisfied all agreements and covenants required hereby to be
performed by them prior to or on the Closing Date.
7.2. No Proceedings, Litigation or Laws. No Action by any governmental
----------------------------------
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to materially damage Sellers if the
transactions contemplated hereunder are consummated. The waiting period under
the HSR Act shall have expired or been terminated, and there shall not be any
statute, rule or regulation that makes the purchase and sale of the Shares,
Business or the Assets contemplated hereby illegal or otherwise prohibited.
32
7.3. Certificates. Buyer and Parent shall furnish Sellers with such
------------
certificates of their officers and others to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by
Sellers. Seller shall have received an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ in form
reasonably satisfactory to Seller Representative.
7.4. Other Conditions. By October 31, 1997, ▇▇▇▇ ▇▇▇▇▇▇ and Buyer shall
----------------
have both approved the form of his employment agreement in writing; Buyer's
board of directors shall have approved the transactions contemplated by this
Agreement; Buyer shall have delivered a letter from the agent bank for its
revolving credit facility indicating that the transaction has been approved; and
Buyer shall have completed its due diligence review and delivered notice to
Sellers that it is satisfied with its due diligence review of the Company. If
the above conditions are not timely satisfied, then Sellers shall have the
option to terminate this Agreement.
7.5. Consents. All Permits and waivers necessary for the consummation by
--------
Sellers of the transactions contemplated hereby and required to be obtained by
Buyer or Parent shall have been obtained.
7.6. Other Transactions. The Related Purchase Transaction shall have been
------------------
consummated.
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to consummate the transactions provided for hereby
are subject, to the satisfaction, on or prior to the Closing Date, of each of
the following conditions, any of which may be waived by Buyer:
8.1. Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Sellers and the Company contained in this Agreement shall be true
and correct in all material respects at and as of the date of this Agreement and
at and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Sellers
and the Company shall have performed and satisfied all agreements and covenants
required hereby to be performed by them prior to or on the Closing Date.
33
8.2. Consents. All Permits and waivers necessary for the consummation
--------
by Buyer and Parent of the transactions contemplated hereby and for the
continued operation of the Business after the Closing (including, without
limitation, all required waivers of Parent's lenders and all required waivers of
the Company's vendors under supplier agreements other than as set forth on
Schedule 8.2) shall have been obtained. Company will use its reasonable best
efforts to obtain oral or written consents from customers as may be reasonably
requested by Buyer to continue doing business with the Company from and after
the date of this Agreement.
8.2. No Proceedings or Litigation. No Action by any governmental authority or
----------------------------
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Buyer materially if the transactions
contemplated hereby are consummated, including without limitation any Material
Adverse Effect on the right or ability of the Company to own, operate, possess
or transfer the Assets after the Closing. The waiting period under the HSR Act
shall have expired or been terminated, and there shall not be any statute, rule
or regulation that makes the purchase and sale of the Business or the Assets
contemplated hereby illegal or otherwise prohibited.
8.3. Opinion of Counsel. The Company shall have delivered to Buyer an opinion
------------------
of Graft, Thomson and Toedte, P.C., counsel to the Company and the Sellers,
dated as of the Closing Date, in form and substance reasonably satisfactory to
Buyer, to the effect that:
8.4.1. Incorporation. Company has been duly incorporated and is validly
-------------
existing and in good standing under the laws of the State of Colorado and is in
good standing as a foreign corporation in each state in which it owns or leases
property or operates a Facility;
8.4.2. Corporate Power and Authority. The Company has the necessary
-----------------------------
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby and to own, lease and operate the Assets and its
other properties and to conduct the Business as presently conducted;
8.4.3. Corporate Action. The execution, delivery and performance of
----------------
this Agreement and the Ancillary Agreements to which the Company is a party have
been duly authorized by all necessary corporate action of the Company, and this
Agreement and the Ancillary Agreements have been duly executed and delivered by
the Company or the Sellers, as applicable ;
8.4.4. Obligation of the Company or Sellers. This Agreement and each
------------------------------------
Ancillary Agreement constitutes a legally valid and binding obligation of the
Company or the Sellers, as applicable, enforceable against the Company or the
Sellers in accordance with its terms, except as limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally or by equitable principles (whether considered in an
action at law or in equity), (ii) limitations imposed by federal or applicable
state law or equitable principles upon the availability of specific performance,
injunctive relief or other equitable remedies, or (iii) other customary
limitations reasonably satisfactory to Buyer's counsel;
8.4.5. No Breach. Neither the execution and delivery of this Agreement
---------
or the Ancillary Agreements by the Company or the Sellers, as applicable, nor
the consummation of the
34
transactions contemplated hereby or thereby will (i) violate or conflict with
any provision of the Articles of Incorporation or Bylaws of the Company, or of
the charter documents or other organizational instrument of any Seller that is
not a natural person, (ii) breach, or cause a default under, any term or
provision of any material contract listed on a schedule to such opinion to which
contract the Company or the Sellers are a party or by which the Assets are
bound, or (iii) violate any judgment, decree, injunction, writ or order
applicable to the Company or the Sellers;
8.4.6. No Permits Required. No Permit of, or filing with, any
-------------------
governmental authority or, to the best knowledge of such counsel, any other
person, is required for the execution and delivery of this Agreement or the
Ancillary Agreements by the Company or the Sellers, as applicable, or the
consummation by the Company or the Sellers of the transactions contemplated
hereby or thereby, except as set forth in this Agreement or the schedules or
exhibits hereto;
8.4.7. No Actions Pending. Except as set forth in this Agreement or the
------------------
schedules hereto, to the best knowledge of such counsel, no Action is pending or
threatened (i) against the Company or the Business, (ii) against any of the
officers or directors of the Company as such, (iii) in which the Company is a
plaintiff, or (iv) which questions the validity or legality of the transactions
contemplated hereby;
8.4.8. No Violation of Law. To the best knowledge of such counsel,
-------------------
neither the execution and delivery of this Agreement or the Ancillary Agreements
by the Company or the Sellers, as applicable, nor the consummation of the
transactions contemplated hereby or thereby will violate or result in a failure
to comply with any statute, law, ordinance, regulation, rule or order of any
federal, state or local government or any other governmental department or
agency, or any judgment, decree or order of any court, applicable to the
Company, the Sellers or the Business; and, to the best knowledge of such
counsel, the Company has all licenses, franchises and other authority required
to conduct the Business as it is now being conducted;
8.4.9. Title to Shares. The authorized capital stock of the Company
---------------
consists of common stock, and the issued and outstanding common of the Company
consists solely of the Shares, all of which are owned of record and beneficially
by the Sellers, free and clear of all Encumbrances. To the knowledge of such
counsel, there are no outstanding warrants, options or other rights to acquire,
or securities convertible into or exercisable or exchangeable for, shares of
capital stock of the Company, nor any commitments or agreements by the Company
to issue any such rights or securities or shares of capital stock. Upon Closing,
Buyer will acquire good and valid title to all of the Shares, free and clear of
all Encumbrances.
8.4.10. Other Opinions. Such other opinions as any lender to Buyer may
--------------
reasonably request. In rendering such opinions, such counsel may rely as to
factual matters upon certificates and assurances of public officials, Sellers,
and officers of the Company. In addition, such opinions may be subject to such
additional qualifications and exceptions as are reasonably acceptable to counsel
to Buyer.
8.4.11. Schedules. At or prior to Closing, the Sellers shall attach all
---------
Schedules to this Agreement and the Buyer shall have the opportunity to review
and approve such Schedules, such approval to not be unreasonably withheld. The
Company will deliver all schedules within ten
35
days after execution of this Agreement, and Buyer will have five days to
disapprove such schedules, failing which they will be deemed a part of this
Agreement.
8.5. Certificates. Sellers and the Company shall furnish Buyer with such
------------
certificates of Sellers, the officers of the Company and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by Buyer.
8.6. Employment and Non-Competition Agreements. Buyer or a subsidiary of Buyer
-----------------------------------------
shall have entered into an Employment and Non-Competition Agreement with ▇▇.
▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇▇ in the forms attached.
8.7. Release of Encumbrances. The Company shall have filed (where necessary)
-----------------------
and delivered to Buyer all documents necessary to release the Assets from all
Encumbrances which documents shall be in a form reasonably satisfactory to
Buyer's counsel.
8.8. Board Approval. The Board of Directors of Parent shall have approved the
--------------
execution, delivery and performance of this Agreement.
8.9. Corporate Documents. Buyer shall have received from the Company
-------------------
resolutions adopted by its board of directors approving this Agreement and the
Ancillary Agreements to which it will be a party, and the transactions
contemplated hereby and thereby.
8.10. Schedules and Due Diligence Review. Buyer and its Representatives shall
----------------------------------
be provided the opportunity to have conducted a due diligence review of the
Company's Books and Records, Financial Statements, and other records and
accounts of the Business, and Sellers shall have delivered to Buyer all
Schedules required by this Agreement. Buyer shall be satisfied in its sole
discretion with its due diligence findings, and the contents of the Schedules;
if Buyer is not so satisfied in its sole discretion, it may terminate this
Agreement. The parties shall have drafted and agreed on any other agreement
required pursuant to this Agreement to be executed at Closing.
8.11. No Material Adverse Change. There shall have been no material adverse
--------------------------
change or development in the Company's business.
8.12. Other Transactions. The Related Purchase Transaction shall have been
------------------
consummated.
ARTICLE IX.
CONSENTS TO ASSIGNMENT
----------------------
9.1. Consents to Assignment. Anything in this Agreement to the contrary
----------------------
notwithstanding, this Agreement shall not constitute an agreement to assign or
to effect a change of control with respect to any Contract, lease, license,
sales order, purchase order or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment or change of
control thereof, without the consent of a third party thereto, would constitute
a breach thereof or in any way adversely affect the rights of Buyer thereunder.
If such consent is not obtained, or if an
36
attempted assignment or change of control thereof would be ineffective or would
affect the rights thereunder so that Buyer would not receive all such rights,
the Company will cooperate with Buyer, in all reasonable respects, to provide to
Buyer the benefits under any such Contract, lease, license, sales order,
purchase order, claim or right including without limitation enforcement for the
benefit of Buyer of any and all rights of the Company against a third party
thereto arising out of the breach or cancellation by such third party or
otherwise.
ARTICLE X.
ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING
----------------------------------------------
10.1. Books and Records; Tax Examinations.
-----------------------------------
10.1.1. Books and Records. Each party agrees that it will cooperate
-----------------
with and make available to the other party, during normal business hours, all
Books and Records, information and employees (without substantial disruption of
employment) retained and remaining in existence after the Closing which are
necessary or useful in connection with any tax inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any such
Books and Records, information or employees for any reasonable business purpose.
10.1.2. Cooperation and Records Retention. Sellers and Buyer shall (i)
---------------------------------
each provide the other with such assistance as may reasonably be requested by
any of them in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain for the period of all
applicable statues of limitation and provide the other with any records or other
information that may be relevant to such return, audit or examination,
proceeding or determination, and (iii) each provide the other with any final
determination of any such audit or examination, proceeding, or determination
that affects any amount required to be shown on any tax return of the other for
any period. This covenant will survive the Closing.
10.2. Survival of Representations, Etc. All statements contained in any
--------------------------------
certificate, schedule, exhibit, instrument or conveyance delivered by or on
behalf of the parties pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the parties hereunder. The representations, warranties, covenants
and agreements of Sellers, the Company, Parent and Buyer contained herein shall
survive the consummation of the transactions contemplated hereby and the Closing
Date, without regard to any investigation made by any of the parties hereto. All
such representations and warranties and all claims and causes of action with
respect thereto (other than the provisions of Sections 4.4, 4.16, 4.18, 4.21 and
4.22, representations and warranties giving rise to Uncapped Claims and this
Section 10.2, and all claims and causes of action with respect thereto) shall
terminate upon expiration of three years after the Closing Date. The
representations and warranties in Sections 4.18, 4.21 and 4.22 shall survive
until the expiration of the applicable statute of limitations (with extensions)
with respect to the matters addressed in such sections. The termination of the
representations and warranties provided herein shall not affect the rights
37
of a party in respect of any Claim made by such party in a writing received by
the other party prior to the expiration of the applicable survival period
provided herein.
10.3. Indemnifications
----------------
10.3.1. By Sellers. All Sellers, severally, including (i) NCCF (but
----------
only with respect to a breach of its own representations and warranties in
Article IV, notwithstanding anything to the contrary contained herein) and (ii)
the Excluded Stockholders, excluding NCCF for this purpose (but only as to the
Uncapped Items), shall indemnify, defend, save and hold harmless Buyer, its
Affiliates (including the Company from and after the Closing), and its and their
respective Representatives, from and against any and all uninsured claims,
damages, costs, losses (including without limitation diminution in value),
Taxes, liabilities, judgments, penalties, fines, obligations, lawsuits,
deficiencies, demands and expenses (whether or not arising out of third-party
claims), including without limitation interest, penalties, costs of mitigation,
losses in connection with any Environmental Law (including without limitation
any clean-up or remedial action), lost profits and other losses resulting from
any shutdown or curtailment of operations, damages to the environment,
attorneys' fees, experts' fees and all amounts paid in investigation, defense or
settlement of any of the foregoing (herein, "Damages"), incurred in connection
with, arising out of, resulting from or incident to (i) any breach of any
representation or warranty, or the inaccuracy of any representation or warranty,
made by the Company or Sellers in or pursuant to this Agreement; (ii) any breach
of any covenant or agreement made by the Company or Sellers in or pursuant to
this Agreement; (iii) any liability arising under any Environmental Law on
account of the conduct of the Company or any Seller or prior owners or users of
the Facilities or other persons, or on account of the operation of the Business
or the Facilities, or related to any Environmental Condition existing, in each
case on or at any time prior to the Closing Date; (iv) any liability for Taxes
in respect of taxable periods ending on or before October 31, 1997; or (v) any
other liability arising out of events prior to the Closing Date which has not
been adequately reflected for, accounted for or reserved against on the
Effective Control Balance Sheet. The Excluded Stockholders, other than NCCF,
shall indemnify without limit as to time or amount and otherwise to the same
extent as Sellers with respect to the "Uncapped Items" set forth below. NCCF
shall indemnify without limit as to time or amount and otherwise to the same
extent as Sellers but only with respect to a breach of its representations and
warranties in Article IV. Without limiting the generality of the foregoing, the
indemnification provided herein, insofar as it relates to any Environmental Law
or Environmental Condition, shall specifically cover costs incurred in
connection with any investigation of site conditions (excepting the cost of the
Environmental Assessments) or any clean-up, remedial, removal or restoration
work required by any federal, state or local governmental agency or political
subdivision or by the provisions of Section 6.7 hereof. Damages (except under
Sections 4.4, 4.16, 4.18, 4.21 and 4.22 or caused by the fraud of Sellers)
(collectively the "Uncapped Items") are limited by the terms of Article XII of
this Agreement. Except with respect to the Uncapped Items for which there is no
time limit and no monetary limit, the time and maximum aggregate dollar amount
of any indemnity or other obligation of Sellers under both this Agreement and
all Related Purchase Agreements is limited to (and Sellers shall not be
responsible for damages in excess of) (i) for any claims made during the first
full year after the Closing, $10,000,000, (ii) for any claims made during the
second full year after the Closing, $8,000,000 and (iii) for any claims
38
made during the third full year after the Closing, $5,000,000, except that
indemnification obligations related to Environmental Conditions which become
obligations of Buyer during the term of the lease of the applicable property (or
within 15 years of the Closing, if sooner) and are demonstrated by Buyer on the
basis of a preponderance of the evidence not to have been caused by Buyer shall
not be subject to such time or monetary limitations, but shall be subject to an
additional monetary limitation of $5,000,000 in excess of the amount initially
placed in escrow pursuant to the Escrow Agreement. This indemnification
obligation of up to $5,000,000 will continue to apply even after the three-year
period of the escrow has ended, but will terminate upon any actual assignment by
Buyer of the applicable lease to an unrelated third-party.
10.3.2. By Parent and Buyer. Parent and Buyer shall indemnify and save
-------------------
and hold harmless Sellers, their Affiliates and their Representatives from and
against any and all Damages incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any representation or warranty,
or the inaccuracy of any representation or warranty, made by Parent or Buyer in
or pursuant to this Agreement; or (ii) any breach of any covenant or agreement
made by Parent or Buyer in or pursuant to this Agreement, and (iii) any
liability arising after November 1, 1997 arising out of or related to the
Buyer's ownership or operation of the Company.
10.3.3. Cooperation. The indemnified party shall cooperate in all
-----------
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with each
other in any notifications to insurers.
10.3.4. Defense of Claims. If a claim for Damages (a "Claim") is to be
-----------------
made by a party entitled to indemnification hereunder against the indemnifying
party, the party claiming such indemnification shall, subject to Section 10.2,
give written notice (a "Claim Notice") to the indemnifying party as soon as
practicable after the party entitled to indemnification becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 10.3. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within fifteen (15) calendar
days after the service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
its own choice (which shall be reasonably acceptable to the indemnified party)
to handle and defend the same, at the indemnifying party's cost, risk and
expense unless the named parties to such action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party has been
advised in writing by counsel that there may be one or more legal
39
defenses available to such indemnified party that are different from or
additional to those available to the indemnifying party, and (iii) to compromise
or settle such claim, which compromise or settlement shall be made only with the
written consent of both the indemnifying and the indemnified party, such consent
not to be unreasonably withheld; provided, however, if the remediation or
resolution of any such Claim will occur on or at any Facility or is reasonably
expected to have a material adverse effect on the indemnified party's business
operations, then, notwithstanding the foregoing, the indemnified party shall be
entitled to control such resolution, including without limitation to take
control of the defense and investigation of such lawsuit or action, to employ
and engage attorneys of its own choice to handle and defend the same, at the
indemnifying party's cost, risk and expense, and to compromise or settle such
Claim with the consent of the Indemnifying Party. If the indemnifying party
fails to assume the defense of such claim within fifteen (15) calendar days
after receipt of the Claim Notice, the indemnified party against which such
claim has been asserted will (upon delivering notice to such effect to the
indemnifying party) have the right to undertake, at the indemnifying party's
cost and expense, the defense, compromise or settlement of such claim on behalf
of and for the account and risk of the indemnifying party. In the event the
indemnified party assumes the defense of the claim, the indemnified party will
keep the indemnifying party reasonably informed of the progress of any such
defense, compromise or settlement. The indemnifying party shall be liable for
any settlement of any action effected with its consent pursuant to and in
accordance with this Section 10.3 and for any final judgment (subject to any
right of appeal), and the indemnifying party agrees to indemnify and hold
harmless an indemnified party from and against any Damages by reason of such
settlement or judgment.
10.3.5. Buyer's Right to Distribution of Holdback Amount. Buyer and its
------------------------------------------------
Affiliates and Representatives may at their election collect any amount due from
Sellers (other than the Excluded Stockholders) pursuant to Sellers'
indemnification obligations under this Section 10.3 by distribution of an
applicable portion of the Holdback Amount in accordance with the terms of the
Escrow Agreement. Recovery against any of the Excluded Stockholders shall be
made by direct claim against each of them.
10.3.6. Limitations. Neither Buyer or Parent on the one hand, nor
-----------
Sellers on other hand, shall be liable to the other under this Section 10.3 for
any Damages until the amount otherwise due the party being indemnified,
including all amounts due under this Agreement and all Related Purchase
Agreements, exceeds $100,000 in the aggregate, in which case such indemnifying
party will be liable to the indemnified party for all such amounts in excess of
the first $100,000. Notwithstanding the preceding sentence, this limitation
shall not apply with respect to Damages arising out of a breach of a
representation or warranty contained in Sections 4.4, 4.16, 4.18, 4.21 or 4.22
or giving rise to an Uncapped Claim due to fraud on the part of a Seller.
10.3.7. Liability and Remedies, etc. Except as set forth below, no
---------------------------
individual Representative of any party (other than ▇▇. ▇▇▇▇▇▇) shall be
personally liable for any Damages under the provisions contained in this Section
10.3. Nothing herein shall relieve either party of any liability to make any
payment expressly required to be made by such party pursuant to this Agreement.
The term "Damages" as used in this Section 10.3 is not limited to matters
asserted
40
by third parties against Sellers or Buyer, but includes Damages incurred or
sustained by an indemnified party in the absence of third party claims. Payments
by an indemnified party of amounts for which such party is indemnified hereunder
shall not be a condition precedent to recovery.
10.4. Further Action. At and after the Closing, Sellers shall take all actions
--------------
reasonably necessary to effect the conveyance of the Shares to Buyer free and
clear of all Encumbrances and otherwise required by Buyer's lenders.
ARTICLE XI.
MISCELLANEOUS
-------------
11.1. Termination.
-----------
11.1.1. Termination. This Agreement may be terminated at any time
-----------
prior to Closing:
11.1.1.1. By mutual written consent of Buyer and the Seller
Representative;
11.1.1.2. By Seller as provided in Section 7.4, and, except as is
provided in Section 7.4, by Buyer or Sellers if the Closing shall not have
occurred on or before January 31, 1998; provided, however, that this provision
shall not be available to Buyer if Sellers have the right to terminate this
Agreement under Section 11.1.1.4, and this provision shall not be available to
Sellers if Buyer has the right to terminate this Agreement under Section
11.1.1.3;
11.1.1.3. By Buyer if there is a material breach of any representation
or warranty set forth in Article IV hereof or any covenant or agreement to be
complied with or performed by Sellers or the Company pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VIII to be
satisfied (and such condition is not waived in writing by Buyer) on or prior to
the Closing Date, or the occurrence of any event which results or would result
in the failure of a condition set forth in Article VIII to be satisfied on or
prior to the Closing Date, provided that Buyer may not terminate this Agreement
prior to the Closing if Sellers or the Company have not had an adequate
opportunity to cure such failure; or
11.1.1.4. By Sellers if there is a material breach of any
representation or warranty set forth in Article V hereof or of any covenant or
agreement to be complied with or performed by Buyer pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VII to be
satisfied (and such condition is not waived in writing by Sellers) on or prior
to the Closing Date, or the occurrence of any event which results or would
result in the failure of a condition set forth in Article VII to be satisfied on
or prior to the Closing Date; provided that Sellers may not terminate this
--------
Agreement prior to the Closing Date if Buyer has not had an adequate opportunity
to cure such failure.
11.1.2. In the Event of Termination. In the event of termination of
---------------------------
this Agreement:
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11.1.2.1. Each party will redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same.
11.2. Assignment. Neither this Agreement nor any of the rights or obligations
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hereunder may be assigned by any party without the prior written consent of the
other parties; except that Parent or Buyer may, without such consent, assign all
such rights to any lender as collateral security, and Buyer may assign all such
rights and obligations to a wholly-owned subsidiary or subsidiaries of Parent or
Buyer (or a partnership controlled by Parent or Buyer) which shall assume all
obligations and liabilities of Buyer under this Agreement. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, and no
other person shall have any right, benefit or obligation under this Agreement as
a third party beneficiary or otherwise.
11.3. Notices. All notices, requests, demands and other communications which are
-------
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given when received if personally delivered; when
transmitted with electronic confirmation of receipt; if transmitted by telecopy,
electronic or digital transmission method; the day after it is sent, if sent for
next day delivery to a domestic address by recognized overnight delivery service
(e.g., Federal Express); and upon receipt, if sent by certified or registered
mail, return receipt requested. In each case notice shall be sent to:
If to Sellers c/o the Seller Representative:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ Graft, Esq.
Graft, Thomson & Toedte, P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FAX: ▇▇▇ ▇▇▇-▇▇▇▇
If to Parent or Buyer, addressed to:
Rental Service Corporation
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
FAX: ▇▇▇-▇▇▇-▇▇▇▇
42
With a copy to:
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
11.4. Choice of Law. This Agreement shall be construed, interpreted and the
-------------
rights of the parties determined in accordance with the laws of the State of
Delaware (without reference to the choice of law provisions thereof), except
with respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
11.5. Entire Agreement; Amendments and Waivers.
----------------------------------------
This Agreement, together with all exhibits and schedules hereto and
the Ancillary Agreements, constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
11.6. Multiple Counterparts. This Agreement may be executed in one or more
---------------------
counterparts and by fax, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.7. Expenses. Except as otherwise specified in this Agreement, each party
--------
hereto shall pay its own legal, accounting, out of pocket and other expenses
incident to this Agreement and to any action taken by such party in preparation
for carrying this Agreement into effect (treating the Company as a Seller for
this purpose), except that the Company may pay all of its legal and accounting
expenses incurred prior to September 22, 1997.
11.8. Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
43
11.9. Titles. The titles, captions or headings of the Articles, Sections
------
and subsections herein are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of this
Agreement.
11.10. Publicity; Confidentiality. None of Parent, Buyer, Sellers, the Company
--------------------------
or their respective Affiliates or Representatives shall issue any press release
or make any public statement regarding, or disclose to any third party (except
as required by law or legal process, and except to each party's lenders if such
lenders so require) any of the terms of, the transactions contemplated hereby,
without prior written approval of the other party, provided that Parent, Buyers,
Sellers and the Company may, if they mutually agree, issue or make an
appropriate press release or public announcement after the Closing Date. Buyer
and Parent will use reasonable efforts, consistent with their legal obligations,
to consult with the Seller Representative regarding any proposed press release.
In the event that this Agreement is terminated prior to Closing, Buyer agrees to
return to Sellers and the Company all correspondence and documents furnished by
Sellers or the Company's Representatives, and agrees not to disclose or use for
its own purposes any confidential or proprietary information of Sellers that has
been furnished to it by Sellers or the Company's Representatives.
44
11.11. Remedies. All rights and remedies of the parties hereto are set forth
--------
specifically in this Agreement and the attachments hereto.
11.12. Arbitration. Any controversy arising after the Closing out of or
-----------
relating to this Agreement (including, without limitation, pursuant to Section
10.3, but excluding for purposes of this Section 11.12, the employment and non-
competition agreements attached as Exhibits hereto), or relating to the breach
hereof, shall be settled by arbitration in Denver, Colorado, in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect (except as otherwise expressly provided in this Agreement), except that
disputes related to the preparation of financial statements shall be arbitrated
by a mutually agreeable Big 6 accounting firm. The award rendered by the
arbitrator(s) shall be final and judgment upon the award rendered by the
arbitrator(s) may be entered upon it in any court having jurisdiction thereof.
The arbitrator(s) shall possess the powers to issue mandatory orders and
restraining orders in connection with such arbitration. The expenses of the
arbitration shall be borne by the losing party unless otherwise allocated by the
arbitrator(s). The agreement to arbitrate shall be specifically enforceable
under the prevailing arbitration law. During the continuance of any arbitration
proceedings, the parties shall continue to perform their respective obligations
under this Agreement.
11.13. Seller Representative.
---------------------
11.13.1. The Sellers irrevocably make, constitute and appoint ▇▇▇▇▇
▇▇▇▇▇▇ as their agent (the "Seller Representative") and authorize and empower
him to fulfill the role of Seller Representative hereunder and under the Escrow
Agreement. In the event of the resignation, death or incapacity of a Seller
Representative, his successor shall be appointed within 14 days of his death or
incapacity by mutual agreement of the remaining Sellers, and such successor
either shall be a Seller or shall otherwise be acceptable to Buyer. If the
Sellers fail to appoint a successor within such 21-day period, then Buyer shall
have the right to appoint the successor from among the Sellers. The choice of a
successor Seller Representative appointed in any manner permitted above shall be
final and binding upon all of the Sellers. The decisions and actions of any
successor Seller Representative shall be, for all purposes, those of a Seller
Representative as if originally named herein.
11.13.2. Each Seller has made, constituted and appointed and by the
execution of this Agreement hereby irrevocably makes, constitutes and appoints
the Seller Representative as such person's true and lawful attorney in fact and
agent, for such person and in such person's name, (I) to execute and perform the
Escrow Agreement on behalf of each Seller, (ii) to receive all notices and
communications directed to such Seller under this Agreement or the Escrow
Agreement and to take any action (or to determine to take no action) with
respect thereto, as he may deem appropriate as effectively as such Seller could
act for himself or herself, including without limitation, the settlement or
compromise of any dispute or controversy, and (iii) to execute and deliver all
instruments and documents of every kind incident to the foregoing to all intents
and purposes and with the same effect as such Seller could do personally, and
each such Seller hereby ratifies and confirms as his or her own act, all that
the Seller Representative shall do or cause to be done pursuant to the
provisions hereof.
45
11.13.3. The incapacity of any Seller shall not terminate the authority
and agency of the Seller Representative.
ARTICLE XIII.
SPECIAL PROVISIONS
------------------
12.1. These special provisions shall control where inconsistent with any other
term or provision of this Agreement and these special provisions are a material
inducement to Sellers to enter into this Contract.
12.2. The Buyer acknowledges that Sellers have made no representations,
warranties, covenants or agreements or provided other inducements that are not
specifically set forth in this Agreement or the Ancillary Agreements and the
documents related to the asset purchases from the Related Entities. The Buyer
has been provided open and complete access to all books, records, facilities,
equipment, rolling stock, furniture, fixtures, inventory, books, tax returns,
records, minute books, contracts and other data relating to the Company, its
facilities, assets, real property and other tangible and intangible assets.
12.2.1. For purposes of this Agreement, "fraud" shall mean (I) judicial
finding of fraud from which all appeals have been exhausted or have expired,
(ii) an arbitrator's finding of fraud from which all appeals have bee exhausted
or have expired, or (iii) the parties have mutually agreed in writing as to the
existence of fraud.
46
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
RENT-IT-CENTER, INC. RSC ACQUISITION CORP.
(the "Company") ("Buyer")
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------ ----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Its: Chief Executive Officer Its: Chief Executive Officer
SELLER STOCKHOLDERS RENTAL SERVICE CORPORATION
("Sellers") ("Parent")
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------- Its: Chief Executive Officer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
THE ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ FAMILY TRUST
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
THE LANOHA CHARITABLE REMAINDER TRUST
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
NATIONAL CHRISTIAN CHARITABLE FOUNDATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Officer/Director
47